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ALJ Regional Holdings, Inc. Announces Earnings For The Third Quarter Ended June 30, 2018

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ALJ Regional Holdings, Inc. Announces Earnings For The Third Quarter Ended June 30, 2018

PR Newswire

NEW YORK, Aug. 14, 2018 /PRNewswire/ -- ALJ Regional Holdings, Inc. (NASDAQ:ALJJ) ("ALJ") announced results today for its third quarter ended June 30, 2018. 

ALJ is a holding company, whose primary assets are its subsidiaries Faneuil, Inc. (including the customer management outsourcing business acquired from Vertex Business Services LLC, "Faneuil"), Floors-N-More, LLC, dba Carpets N' More ("Carpets"), and Phoenix Color Corp. (including the acquired printing components business, "Phoenix").  Faneuil is a leading provider of call center services, back office operations, staffing services, and toll collection services to government and regulated commercial clients across the United States. Carpets is one of the largest floor covering retailers in Las Vegas, Nevada, and a provider of multiple products for the commercial, retail and home builder markets including all types of flooring, countertops, cabinets, window coverings and garage/closet organizers, with three retail locations, as well as a stone and solid surface fabrication facility. Phoenix is a leading manufacturer of book components, educational materials and related products producing value-added components, heavily illustrated books and specialty commercial products using a broad spectrum of materials and decorative technologies.

Our financial statements reflect the operations of Faneuil, Carpets and Phoenix throughout all periods presented, Faneuil's customer management outsourcing business ("CMO Business") since May 26, 2017, and Phoenix's acquisition of certain assets and liabilities ("Printing Components Business") from Moore-Langen Printing Company, a division of LSC Communications, Inc., since October 2, 2017.

Investment Highlights – Three and Nine months ended June 30, 2018

Consolidated Results for ALJ

  • ALJ recognized consolidated net revenue of $89.7 million for the three months ended June 30, 2018, an increase of $6.2 million, or 7.4%, compared to $83.5 million for the three months ended June 30, 2017 driven by the acquisitions of the CMO Business by Faneuil and the Printing Components Business by Phoenix, which together accounted for $8.2 million of the total net revenue increase. Excluding the impact of acquisitions, total net revenue decreased $2.0 million, or 2.4%, due to slightly lower volumes at each subsidiary. ALJ recognized consolidated net revenue of $95.1 million for the three months ended March 31, 2018.
  • ALJ recognized a net loss of $2.9 million and a loss per share of $0.08 (diluted) for the three months ended June 30, 2018, compared to net income of $1.0 million and earnings per share (EPS) of $0.03 (diluted) for the three months ended June 30, 2017. Increased net revenue was offset by restructuring expenses to combine manufacturing facilities at Phoenix, higher start-up costs of certain contracts, a non-cash litigation loss at Faneuil, and increased depreciation and amortization expenses related to acquisitions. ALJ recognized a net loss of $0.3 million and loss per share of $0.01 (diluted) for the three months ended March 31, 2018.
  • ALJ recognized adjusted EBITDA of $9.6 million for the three months ended June 30, 2018, an increase of $1.3 million, or 16.3%, compared to $8.2 million for the three months ended June 30, 2017. The increase was driven by the Printing Components Business acquisition by Phoenix partially offset by higher labor, material, and customer service costs at Carpets, and planned volume reductions in packaging at Phoenix. ALJ recognized adjusted EBITDA of $7.6 million for the three months ended March 31, 2018.
  • ALJ recognized consolidated net revenue of $279.7 million for the nine months ended June 30, 2018, an increase of $39.3 million, or 16.4%, compared to $240.4 million for the nine months ended June 30, 2017 due to the acquisitions of the CMO Business by Faneuil and the Printing Components Business by Phoenix, which together accounted for $33.3 million of the total net revenue increase, and increases in business activity in the Faneuil and Carpets segments. Excluding the impact of acquisitions, total net revenue increased $6.1 million, or 2.6%.
  • ALJ recognized a net loss of $8.6 million and loss per share of $0.23 (diluted) for the nine months ended June 30, 2018, compared to net income of $1.9 million and earnings per share (EPS) of $0.05 (diluted) for the nine months ended June 30, 2017. Increased net revenue was offset by restructuring expenses to combine manufacturing facilities at Phoenix, a non-cash litigation loss at Faneuil, higher start-up costs of certain contracts, higher selling, general and administrative costs due to increased depreciation and amortization expenses related to acquisitions, and increased provision for income taxes to reflect a one-time, non-cash deferred income tax expense of $4.1 million as a result of the Tax Cuts and Jobs Act of 2017. Excluding such deferred income tax expense, ALJ recognized net loss of $4.5 million and loss per share of $0.12 (diluted) for the nine months ended June 30, 2018.
  • ALJ recognized adjusted EBITDA of $23.8 million for the nine months ended June 30, 2018, an increase of $0.7 million, or 2.8%, compared to $23.1 million for the nine months ended June 30, 2017. The increase was driven by the Printing Components Business acquisition by Phoenix partially offset by higher labor, material, and customer service costs at Carpets, and planned volume reductions in packaging at Phoenix.
  • ALJ estimates consolidated net revenue for the three months ending September 30, 2018 to be in the range of $80.0 million to $89.0 million, compared to $86.3 million for the three months ended September 30, 2017.

Jess Ravich, Executive Chairman of ALJ said, "We remain committed to our strategic goal of consistently increasing adjusted EBITDA and improving our adjusted EBITDA margins over the long-term to increase shareholder value.  All three segments had a good third quarter, which allowed us to reduce our leverage ratio to just over 3 times.  Deleveraging the Company remains one of our major goals."   

Amounts in $000's, except per share amounts

Three Months Ended
June 30,








2018


2017


$ Change


% Change


(unaudited)


(unaudited)







Net revenue

$

89,660


$

83,473


$

6,187


7.4%

Costs and expenses:












Cost of revenue


67,778



63,505



4,273


6.7%

Selling, general, and administrative expense


21,058



16,431



4,627


28.2%

Loss (gain) on disposal of assets, net


59



(4)



63


NM

Total operating expenses


88,895



79,932



8,963


11.2%

Operating income


765



3,541



(2,776)


(78.4%)

Other (expense) income:






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