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ALJ Regional Holdings, Inc. Announces Earnings For The Third Quarter Ended June 30, 2019

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NEW YORK, Aug. 12, 2019 /PRNewswire/ -- ALJ Regional Holdings, Inc. (NASDAQ:ALJJ) ("ALJ") announced results today for its third quarter ended June 30, 2019. 

ALJ is a holding company, whose primary assets are its subsidiaries Faneuil, Inc. ("Faneuil"), Floors-N-More, LLC, d/b/a Carpets N' More ("Carpets"), and Phoenix Color Corp. ("Phoenix").  Faneuil is a leading provider of call center services, back office operations, staffing services, and toll collection services to commercial and governmental 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, and cabinets.  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.

Investment Highlights – Three and Nine Months Ended June 30, 2019

Consolidated Results for ALJ

  • ALJ recognized consolidated net revenue of $84.2 million for the three months ended June 30, 2019, a decrease of $5.4 million, or 6.1%, compared to $89.7 million for the three months ended June 30, 2018. The decrease was primarily driven by lower sales volumes in cabinets, flooring, and countertops at Carpets. ALJ recognized consolidated net revenue of $88.0 million for the three months ended March 31, 2019.
  • ALJ recognized a net loss of $7.2 million and loss per share of $0.19 (diluted) for the three months ended June 30, 2019, compared to net loss of $2.9 million and loss per share of $0.08 (diluted) for the three months ended June 30, 2018. The increased net loss was driven by reduced net revenues and a $3.6 million non-cash deferred tax expense, somewhat offset by reduced selling, general and administrative expenses that reflect the completion of combining manufacturing facilities at Phoenix, process improvements and cost reductions at Carpets, and a $2.9 million litigation loss at Faneuil during the three months ended June 30, 2018. ALJ recognized net income of $0.4 million and income per share of $0.01 (diluted) for the three months ended March 31, 2019.
  • ALJ recognized adjusted EBITDA of $5.2 million for the three months ended June 30, 2019, a decrease of $4.4 million, or 46.1%, compared to $9.6 million for the three months ended June 30, 2018. The decrease was driven by the wind-down of existing customer contracts and timing delays related to the startup of recently awarded contracts at Faneuil, unfavorable product mix and planned lower sales volumes for packaging and books at Phoenix, and reduced revenues at Carpets, somewhat offset by process improvements and cost reductions at Carpets. ALJ recognized adjusted EBITDA of $8.7 million for the three months ended March 31, 2019.
  • ALJ recognized consolidated net revenue of $266.0 million for the nine months ended June 30, 2019, a decrease of $13.7 million, or 4.9%, compared to $279.7 million for the nine months ended June 30, 2018. The decrease was driven by lower sales volumes in cabinets, flooring, and countertops at Carpets, offset in part by new customer contracts at Faneuil.
  • ALJ recognized a net loss of $6.1 million and a loss per share of $0.16 (diluted) for the nine months ended June 30, 2019, compared to a net loss of $8.6 million and a loss per share of $0.23 (diluted) for the nine months ended June 30, 2018. The decreased net loss was driven by reduced selling, general and administrative expenses that reflect the completion of combining manufacturing facilities at Phoenix, process improvements and cost reductions at Carpets, and a $2.9 million litigation loss at Faneuil during the nine months ended June 30, 2018, somewhat offset by reduced net revenues and a $3.6 million non-cash deferred tax expense during the nine months ended June 30, 2019.
  • ALJ recognized adjusted EBITDA of $22.5 million for the nine months ended June 30, 2019, a decrease of $1.3 million, or 5.3%, compared to $23.8 million for the nine months ended June 30, 2018. The decrease was driven by the wind-down of existing customer contracts and timing delays related to the startup of recently awarded contracts at Faneuil, product mix and planned lower sales volumes for packaging at Phoenix, and increased headcount at ALJ corporate, offset in part by process improvements and cost reductions at Carpets.
  • ALJ estimates consolidated net revenue for the three months ending September 30, 2019 to be in the range of $78.5 million to $87.2 million, compared to $90.1 million for the three months ended September 30, 2018.

Jess Ravich, Chief Executive Officer of ALJ, said, "As we stated in our July 31 press release, results for the third fiscal quarter of 2019 were lower than prior year at both Faneuil and Phoenix.  We have already taken steps to improve overall profitability, which has already shown results and will be fully implemented over the next two quarters.  Our overall thesis remains unchanged, to invest in businesses with strong management teams that have the ability to increase adjusted EBITDA and free cash flow to maximize shareholder value.  ALJ will continue to look for acquisition targets that fit this profile."



Three Months Ended
June 30,









Amounts in thousands, except per share amounts


2019



2018



$ Change



% Change



(unaudited)



(unaudited)









Net revenue


$

84,225



$

89,660



$

(5,435)




(6.1%)

Costs and expenses:
















Cost of revenue



67,030




67,778




(748)




(1.1%)

Selling, general and administrative expense



18,037




21,058




(3,021)




(14.3%)

Disposal of assets and other gain



2




59




(57)




NM

Total operating expenses



85,069




88,895




(3,826)




(4.3%)

Operating (loss) income



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