ALJ Regional Holdings, Inc. Announces Earnings For The First Quarter Ended December 31, 2020
ALJ Regional Holdings, Inc. (NASDAQ: ALJJ) reported first-quarter results for the period ending December 31, 2020. The company achieved net revenue of $119.8 million, up 32.5% from $90.5 million in Q1 2019, driven by new contracts at Faneuil and increased sales at Phoenix. However, ALJ recorded a net loss of $2.1 million, an improvement from the $4.3 million loss in the prior year. Adjusted EBITDA rose to $6.3 million, marking an 88.0% increase year-over-year. The company anticipates revenues for Q2 2021 to range between $104.0 million and $111.0 million.
- Net revenue increased by $29.4 million, or 32.5%, year-over-year to $119.8 million.
- Adjusted EBITDA rose by $3.0 million, or 88.0%, to $6.3 million compared to the same period last year.
- Faneuil's net revenue surged by 46.8% to $86.0 million, driven by new contracts.
- Phoenix's net revenue increased by 13.8% to $25.2 million, highlighting recovery in component sales.
- Contract backlog at Faneuil reached $673.7 million, up from $614.3 million a year ago.
- ALJ reported a net loss of $2.1 million, despite improvements from the previous year.
- Lower volumes at Carpets led to a revenue decline of 11.1%, totaling $8.7 million.
- Faneuil experienced a $5.2 million loss due to a transitioning contract to a remote workforce.
NEW YORK, Feb. 11, 2021 /PRNewswire/ -- ALJ Regional Holdings, Inc. (NASDAQ: ALJJ) ("ALJ") announced results today for its first quarter ended December 31, 2020.
ALJ is a holding company, whose wholly owned subsidiaries are 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 Months Ended December 31, 2020
Consolidated Results for ALJ
- ALJ recognized net revenue of
$119.8 million for the three months ended December 31, 2020, an increase of$29.4 million , or32.5% , compared to$90.5 million for the three months ended December 31, 2019. The increase was driven by new state unemployment contracts and contract implementation and production at Faneuil and increased component sales primarily related to trade at Phoenix, offset somewhat by lower volumes at Carpets. ALJ recognized net revenue of$107.3 million for the three months ended September 30, 2020. - ALJ recognized a net loss of
$2.1 million and loss per share of$0.05 (diluted) for the three months ended December 31, 2020, compared to a net loss of$4.3 million and loss per share of$0.10 (diluted) for the three months ended December 31, 2019. Most of the improvement was due to the increased margin from new state unemployment contracts and implementation activities at Faneuil and improved volumes in trade components at Phoenix, offset somewhat by lower volumes at Carpets. ALJ recognized net income of$1.1 million and earnings per share of$0.02 (diluted) for the three months ended September 30, 2020. - ALJ recognized adjusted EBITDA of
$6.3 million for the three months ended December 31, 2020, an increase of$3.0 million , or88.0% , compared to$3.4 million for the three months ended December 31, 2019. The increase was a result of new state unemployment contracts, implementation activities, and the start of production for new contracts at Faneuil, increased component sales primarily related to trade at Phoenix, offset somewhat by lower volumes at Carpets. ALJ recognized adjusted EBITDA of$8.8 million for the three months ended September 30, 2020. - ALJ estimates net revenue for the three months ending March 31, 2021 to be in the range of
$104.0 million to$111.0 million , compared to$96.0 million for the three months ended March 31, 2020.
Jess Ravich, Chief Executive Officer of ALJ, said, "Results for the quarter were higher than prior year as volume at Phoenix for trade components continues to recover and Faneuil continues to benefit from state unemployment contracts. Our quarterly results were impacted by a loss of
Three Months Ended | ||||||||||||
Amounts in thousands, except per share amounts | 2020 | 2019 | $ Change | |||||||||
(unaudited) | (unaudited) | |||||||||||
Net revenue | $ | 119,830 | $ | 90,465 | $ | 29,365 | ||||||
Costs and expenses: | ||||||||||||
Cost of revenue | 100,421 | 75,726 | 24,695 | |||||||||
Selling, general, and administrative expense | 18,688 | 16,610 | 2,078 | |||||||||
(Gain) loss on disposal of assets, net | (67) | 2 | (69) | |||||||||
Total operating expenses | 119,042 | 92,338 | 26,704 | |||||||||
Operating income (loss) | 788 | (1,873) | 2,661 | |||||||||
Other (expense) income: | ||||||||||||
Interest expense, net | (2,582) | (2,564) | (18) | |||||||||
Interest from legal settlement | — | 200 | (200) | |||||||||
Total other expense, net | (2,582) | (2,364) | (218) | |||||||||
Loss before income taxes | (1,794) | (4,237) | 2,443 | |||||||||
Provision for income taxes | (293) | (40) | (253) | |||||||||
Net loss | $ | (2,087) | $ | (4,277) | $ | 2,190 | ||||||
Loss per share of common stock–basic and diluted | $ | (0.05) | $ | (0.10) | ||||||||
Weighted average shares of common stock outstanding– basic and diluted | 42,318 | 42,173 | ||||||||||
Results for Faneuil
Anna Van Buren, CEO of Faneuil, stated, "Our first quarter revenue and adjusted EBITDA were up over the same prior year period due in part to several new contracts in transportation and healthcare. Highlights of the quarter included a successful open enrollment period with operations continuing in a mostly at-home environment and the implementation of two large transportation contracts. During the period, one transactional project experienced significant losses due to unexpected increases in staff. A current mitigation strategy is on target for resolution of this issue."
Faneuil recognized net revenue of
Faneuil segment adjusted EBITDA was
Faneuil estimates its net revenue for the three months ending March 31, 2021 to be in the range of
Faneuil's contract backlog expected to be realized within the next twelve months as of December 31, 2020 was
Results for Carpets
Steve Chesin, CEO of Carpets stated, "Our results continue to be impacted by unfavorable customer mix and lower than expected upgrades from customers. We continue our commitment to providing the highest level of customer service."
Carpets recognized net revenue of
Carpets recognized segment adjusted EBITDA loss of
Carpets estimates its net revenue for the three months ending March 31, 2021 to be in the range of
Carpets total backlog, which is expected to be fully realized within the next 12 months, as of December 31, 2020 was
Results for Phoenix
Marc Reisch, CEO of Phoenix, stated, "The
Phoenix recognized net revenue of
Phoenix recognized segment adjusted EBITDA of
Phoenix estimates its net revenue for the three months ending March 31, 2021 to be in the range of
Phoenix's contract backlog expected to be realized within the next twelve months as of December 31, 2020 was
Non-GAAP Financial Measures
In our earnings releases, prepared remarks, conference calls, presentations, and webcasts, we may present certain adjusted financial measures that are not calculated according to generally accepted accounting principles in the United States ("GAAP"). These non-GAAP financial measures are designed to complement the GAAP financial information presented in this release because management believes they present information regarding ALJ that is useful to investors. The non-GAAP financial measures presented should not be considered in isolation from, or as a substitute for, the comparable GAAP financial measure.
We present adjusted EBITDA because we believe it is frequently used by analysts, investors, and other interested parties in the evaluation of our company. ALJ defines segment adjusted EBITDA as segment net income (loss) before depreciation and amortization expense, interest expense, litigation loss, recovery of litigation loss, restructuring and cost reduction initiatives, loan amendment expenses, fair value of warrants issued in connection with loan amendments, stock-based compensation, acquisition-related expenses, (loss) gain on disposal of assets, net, provision for income taxes, and other non-recurring items. Adjusted EBITDA measures are not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure for comparison. Below are reconciliations of our net loss, the most directly comparable GAAP measure, to consolidated adjusted EBITDA:
Three Months Ended | ||||||||||||
Amounts in thousands | 2020 | 2019 | $ Change | |||||||||
(unaudited) | (unaudited) | |||||||||||
Net loss | $ | (2,087) | $ | (4,277) | $ | 2,190 | ||||||
Depreciation and amortization | 5,157 | 5,242 | (85) | |||||||||
Interest expense | 2,582 | 2,564 | 18 | |||||||||
Bank fees accreted to term loans | 300 | — | 300 | |||||||||
Provision for income taxes | 293 | 40 | 253 | |||||||||
Loan amendment expenses | 88 | 769 | (681) | |||||||||
Stock-based compensation | 48 | 112 | (64) | |||||||||
Restructuring and cost reduction initiatives | 4 | 315 | (311) | |||||||||
Acquisition-related expense | — | 49 | (49) | |||||||||
Recovery of litigation loss | — | (1,256) | 1,256 | |||||||||
Interest from legal settlement | — | (200) | 200 | |||||||||
(Gain) loss on disposal of assets, net | (67) | 2 | (69) | |||||||||
Consolidated Adjusted EBITDA | $ | 6,318 | $ | 3,360 | $ | 2,958 | ||||||
Supplemental Consolidated Financial Information - Segment Net Revenue, Segment Adjusted EBITDA, and Debt | ||||||||||||||||
Three Months Ended | ||||||||||||||||
Amounts in thousands | 2020 | 2019 | $ Change | % Change | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Segment Net Revenue | ||||||||||||||||
Faneuil | $ | 85,969 | $ | 58,567 | $ | 27,402 | 46.8 | % | ||||||||
Carpets | 8,693 | 9,774 | (1,081) | (11.1) | % | |||||||||||
Phoenix Color | 25,168 | 22,124 | 3,044 | 13.8 | % | |||||||||||
Total Segment Net Revenue | $ | 119,830 | $ | 90,465 | $ | 29,365 | 32.5 | % | ||||||||
Three Months Ended | ||||||||||||||||
Amounts in thousands | 2020 | 2019 | $ Change | % Change | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Segment Adjusted EBITDA | ||||||||||||||||
Faneuil | $ | 3,637 | $ | 1,653 | $ | 1,984 | 120.0 | % | ||||||||
Carpets | (125) | (78) | (47) | (60.3) | % | |||||||||||
Phoenix Color | 4,047 | 2,840 | 1,207 | 42.5 | % | |||||||||||
Corporate | (1,241) | (1,055) | (186) | (17.6) | % | |||||||||||
Total Segment Adjusted EBITDA | $ | 6,318 | $ | 3,360 | $ | 2,958 | 88.0 | % | ||||||||
As of December 31, 2020 and September 30, 2020, consolidated total debt and consolidated net debt were comprised of the following (exclusive of deferred financing costs):
December 31, | September 30, | |||||||
Amounts in thousands | 2020 | 2020 | ||||||
(unaudited) | ||||||||
Term loan payable | $ | 79,242 | $ | 80,733 | ||||
Line of credit | 13,880 | 14,417 | ||||||
Equipment financing agreements | 3,595 | 3,610 | ||||||
Finance leases | 4,562 | 5,337 | ||||||
Total debt | 101,279 | 104,097 | ||||||
Cash | 2,580 | 6,050 | ||||||
Net debt | $ | 98,699 | $ | 98,047 | ||||
As of December 31, 2021, ALJ was in compliance with all debt covenants.
Financial Covenants Compliance | ||||||
December 31, 2020 | ||||||
(actual*) | (required) | |||||
Leverage Ratio | 3.35 | < 5.75 | ||||
Fixed Charges Ratio | 1.09 | > 0.70 | ||||
* | As defined by ALJ's debt agreement. |
About ALJ Regional Holdings, Inc.
ALJ Regional Holdings, Inc. is the parent company of (i) Faneuil, Inc., 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, (ii) Floors-N-More, LLC, d/b/a Carpets N' More, 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, and (iii) Phoenix Color Corp., 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.
Forward-Looking Statements
ALJ's first quarter ended December 31, 2020 earnings release and related communications contain forward-looking statements within the meaning of federal securities laws. Such statements include information regarding our expectations, impact of COVID-19, goals or intentions regarding the future, including but not limited to statements about our financial projections and business growth, our plans to reduce capital expenditures and deleverage our balance sheet, our ability to achieve target adjusted EBITDA margins on customer contracts, the impact of new customer contracts for Faneuil, the impact of new Faneuil contracts on Faneuil's financial results and other statements including the words "will," "anticipate," and "expect" and similar expressions. You should not place undue reliance on these statements, as they involve certain risks and uncertainties, and actual results or performance may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially are discussed in our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission and available through EDGAR on the SEC's website at www.sec.gov. All forward-looking statements in this release are made as of the date hereof and we assume no obligation to update any forward-looking statement.
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SOURCE ALJ Regional Holdings, Inc.
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