ALJ Regional Holdings, Inc. Announces Earnings For The Second Quarter Ended March 31, 2021
ALJ Regional Holdings, Inc. (NASDAQ: ALJJ) reported strong financial performance for Q2 2021, with consolidated net revenue of $114.6 million, a 34.1% increase from the previous year. The company achieved a net income of $0.7 million, reversing a significant loss of $59.2 million in Q2 2020. Adjusted EBITDA rose 90.7% to $8.9 million, reflecting improved operations at Faneuil and Phoenix. For Q3 2021, ALJ projects net revenue between $90.5 million and $96.5 million, indicating ongoing business momentum.
- Consolidated net revenue increased by 34.1% to $114.6 million in Q2 2021.
- Net income improved to $0.7 million from a loss of $59.2 million year-over-year.
- Adjusted EBITDA rose 90.7% to $8.9 million, driven by operational enhancements at Faneuil and Phoenix.
- Projected Q3 net revenue of $90.5 million to $96.5 million, an increase from $86.1 million in Q3 2020.
- Faneuil experienced a loss of $2.2 million in Q2 2021 due to operational challenges related to COVID-19.
- Contract backlog decreased from $673.7 million in December 2020 to $586.6 million in March 2021.
NEW YORK, May 12, 2021 /PRNewswire/ -- ALJ Regional Holdings, Inc. (NASDAQ: ALJJ) ("ALJ") announced results today for its second quarter ended March 31, 2021.
ALJ is a holding company, whose wholly owned subsidiaries during the second quarter included 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 governmental and 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, 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.
ALJ completed the sale of Carpets in February 2021. As such, Carpets' results of operations are excluded from continuing operations presented below and are presented as discontinued operations.
Investment Highlights – Three and Six Months Ended March 31, 2021
Consolidated Results for ALJ
- ALJ recognized consolidated net revenue of
$114.6 million for the three months ended March 31, 2021, an increase of$29.1 million , or34.1% , compared to$85.5 million for the three months ended March 31, 2020. The increase was driven by the start of production for new contracts and increased volume for existing contracts at Faneuil and improved volumes for trade components and books at Phoenix. ALJ recognized consolidated net revenue of$111.1 million for the three months ended December 31, 2020.
- ALJ recognized a net income from continuing operations of
$0.7 million and earnings per share from continuing operations of$0.02 (diluted) for the three months ended March 31, 2021, compared to a net loss from continuing operations of$59.2 million and loss per share from continuing operations of$1.40 for the three months ended March 31, 2020, respectively. Net loss from continuing operations for the three months ended March 31, 2020 reflects a$56.5 million non-cash and non-recurring impairment of goodwill. Excluding such impairment of goodwill, ALJ recognized a net loss from continuing operations of$2.7 million and loss per share from continuing operations of$0.06 (diluted) for the three months ended March 31, 2020. The improvement in net income is due to higher business activity at Faneuil and Phoenix. ALJ recognized a net loss from continuing operations of$1.9 million and loss per share of$0.04 (diluted) for the three months ended December 31, 2020.
- ALJ recognized adjusted EBITDA from continuing operations of
$8.9 million for the three months ended March 31, 2021, an increase of$4.2 million , or90.7% , compared to$4.7 million for the three months ended March 31, 2020. The increase was driven by the start of new contracts and operational improvements at existing contracts for Faneuil and higher volumes from trade components and books as well as lower overall expenses at Phoenix. ALJ recognized adjusted EBITDA from continuing operations of$6.4 million for the three months ended December 31, 2020.
- ALJ recognized consolidated net revenue of
$225.7 million for the six months ended March 31, 2021, an increase of$59.6 million , or35.8% , compared to$166.2 million for the six months ended March 31, 2020. The increase was driven by the start of production for new contracts and increased volume for existing contracts at Faneuil and improved volumes for trade components and books at Phoenix.
- ALJ recognized a net loss from continuing operations of
$1.1 million and loss per share from continuing operations of$0.03 (diluted) for the six months ended March 31, 2021, compared to net loss from continuing operations of$63.2 million and loss per share from continuing operations of$1.50 (diluted) for the six months ended March 31, 2020. Net loss from continuing operations for the six months ended March 31, 2020 reflects a$56.5 million non-cash and non-recurring impairment of goodwill. Excluding such impairment of goodwill, ALJ recognized a net loss from continuing operations of$6.7 million and loss per share from continuing operations of$0.16 (diluted) for the six months ended March 31, 2020. The improvement in net loss is due to higher business activity at Faneuil and Phoenix.
- ALJ recognized adjusted EBITDA from continuing operations of
$15.3 million for the six months ended March 31, 2021, an increase of$7.2 million , or89.3% , compared to$8.1 million for the six months ended March 31, 2020. The increase was driven by the start of new contracts and operational improvements at existing contracts for Faneuil and higher volumes from trade components and books at Phoenix.
- ALJ estimates consolidated net revenue for the three months ending June 30, 2021 to be in the range of
$90.5 million to$96.5 million , compared to$86.1 million for the three months ended June 30, 2020.
Jess Ravich, Chief Executive Officer of ALJ, said, "Results for the quarter were well above prior year as Faneuil continued to benefit from state unemployment contracts, strong operating performance at new and existing contracts, and corporate efficiency improvements. We anticipate that results from state unemployment contracts will reduce over time as the economy improves. Faneuil results were impacted by a loss of
Phoenix results benefited from increased trade components and books as the market continues to recover, we have also started to see some initial green shoots in education components. Over the long term, we anticipate Faneuil and Phoenix to continue to improve their operating performance, which will increase shareholder value."
Three Months Ended March 31, | ||||||||||||
Amounts in thousands, except per share amounts | 2021 | 2020 | $ Change | |||||||||
(unaudited) | (unaudited) | |||||||||||
Net revenue | $ | 114,588 | $ | 85,478 | $ | 29,110 | ||||||
Costs and expenses: | ||||||||||||
Cost of revenue | 93,484 | 70,300 | 23,184 | |||||||||
Selling, general, and administrative expense | 17,800 | 16,296 | 1,504 | |||||||||
Impairment of goodwill | — | 56,492 | (56,492) | |||||||||
Loss on disposal of assets, net | 64 | — | 64 | |||||||||
Total operating expenses | 111,348 | 143,088 | (31,740) | |||||||||
Operating income (loss) | 3,240 | (57,610) | 60,850 | |||||||||
Other (expense) income: | ||||||||||||
Interest expense, net | (2,451) | (2,844) | 393 | |||||||||
Total other expense, net | (2,451) | (2,844) | 393 | |||||||||
Income (loss) from continuing operations before income taxes | 789 | (60,454) | 61,243 | |||||||||
(Provision for) benefit from income taxes | (44) | 1,297 | (1,341) | |||||||||
Net income (loss) from continuing operations | 745 | (59,157) | 59,902 | |||||||||
Net loss from discontinued operations, net of income taxes | (860) | (2,641) | 1,781 | |||||||||
Net loss | $ | (115) | $ | (61,798) | $ | 61,683 | ||||||
Income (loss) per share of common stock–basic and diluted: | ||||||||||||
Continuing operations | $ | 0.02 | $ | (1.40) | ||||||||
Discontinued operations | $ | (0.02) | $ | (0.06) | ||||||||
Net loss per share (1) | $ | — | $ | (1.47) | ||||||||
Weighted average shares of common stock outstanding: | ||||||||||||
Basic | 42,321 | 42,173 | ||||||||||
Diluted | 54,458 | 42,173 | ||||||||||
__________________________________________________ | ||||||||||||
(1) Amounts may not add due to rounding. | ||||||||||||
Six Months Ended March 31, | ||||||||||||
Amounts in thousands, except per share amounts | 2021 | 2020 | $ Change | |||||||||
(unaudited) | (unaudited) | |||||||||||
Net revenue | $ | 225,725 | $ | 166,169 | $ | 59,556 | ||||||
Costs and expenses: | ||||||||||||
Cost of revenue | 186,643 | 138,235 | 48,408 | |||||||||
Selling, general, and administrative expense | 34,854 | 30,701 | 4,153 | |||||||||
Impairment of goodwill | — | 56,492 | (56,492) | |||||||||
(Gain) loss on disposal of assets, net | (2) | 2 | (4) | |||||||||
Total operating expenses | 221,495 | 225,430 | (3,935) | |||||||||
Operating income (loss) | 4,230 | (59,261) | 63,491 | |||||||||
Other (expense) income: | ||||||||||||
Interest expense, net | (5,033) | (5,408) | 375 | |||||||||
Interest from legal settlement | — | 200 | (200) | |||||||||
Total other expense, net | (5,033) | (5,208) | 175 | |||||||||
Loss from continuing operations before income taxes | (803) | (64,469) | 63,666 | |||||||||
(Provision for) benefit from income taxes | (336) | 1,257 | (1,593) | |||||||||
Net loss from continuing operations | (1,139) | (63,212) | 62,073 | |||||||||
Net loss from discontinued operations, net of income taxes | (1,063) | (2,863) | 1,800 | |||||||||
Net loss | $ | (2,202) | $ | (66,075) | $ | 63,873 | ||||||
Loss per share of common stock–basic and diluted: | ||||||||||||
Continuing operations | $ | (0.03) | $ | (1.50) | ||||||||
Discontinued operations | $ | (0.03) | $ | (0.07) | ||||||||
Net loss per share (1) | $ | (0.05) | $ | (1.57) | ||||||||
Weighted average shares of common stock outstanding–basic and diluted: | 42,319 | 42,173 | ||||||||||
__________________________________________________ | ||||||||||||
(1) Amounts may not add due to rounding. | ||||||||||||
Results for Faneuil
Anna Van Buren, CEO of Faneuil, stated, "Results for the second quarter exceeded expectations for revenue and adjusted EBITDA mainly due to new long-term contracts in both healthcare and transportation. Faneuil continues to assist with client operations related to the pandemic by supporting unemployment and vaccination scheduling programs. The one transactional program that experienced high losses in the first fiscal quarter continues to show improvement towards resolution."
Faneuil recognized net revenue of
Faneuil segment adjusted EBITDA was
Faneuil recognized net revenue of
Faneuil segment adjusted EBITDA was
Faneuil estimates its net revenue for the three months ending June 30, 2021 to be in the range of
Faneuil's contract backlog expected to be realized within the next twelve months as of March 31, 2021 was
Results for Phoenix
Marc Reisch, CEO of Phoenix, stated, "The
Phoenix recognized net revenue of
Phoenix recognized segment adjusted EBITDA of
Phoenix recognized net revenue of
Phoenix recognized segment adjusted EBITDA of
Phoenix estimates its net revenue for the three months ending June 30, 2021 to be in the range of
Phoenix's contract backlog expected to be realized within the next twelve months as of March 31, 2021 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 and other gain, 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) income, the most directly comparable GAAP measure, to consolidated adjusted EBITDA:
Three Months Ended March 31, | ||||||||||||
Amounts in thousands | 2021 | 2020 | $ Change | |||||||||
(unaudited) | (unaudited) | |||||||||||
Net loss | $ | (115) | $ | (61,798) | $ | 61,683 | ||||||
Depreciation and amortization | 4,936 | 4,777 | 159 | |||||||||
Interest expense, net | 2,451 | 2,844 | (393) | |||||||||
Net loss from discontinued operations, | 860 | 2,641 | (1,781) | |||||||||
Bank fees accreted to term loans | 300 | — | 300 | |||||||||
Restructuring and cost reduction | 212 | 475 | (263) | |||||||||
Loan amendment expenses | 89 | 239 | (150) | |||||||||
Loss on disposal of assets, net | 64 | — | 64 | |||||||||
Provision for (benefit from) income taxes | 44 | (1,297) | 1,341 | |||||||||
Stock-based compensation | 37 | 111 | (74) | |||||||||
Impairment of goodwill | — | 56,492 | (56,492) | |||||||||
Fair value of warrants issued in | — | 122 | (122) | |||||||||
Acquisition-related expenses | — | 50 | (50) | |||||||||
Consolidated adjusted EBITDA - continuing operations | $ | 8,878 | $ | 4,656 | $ | 4,222 | ||||||
Six Months Ended March 31, | ||||||||||||
Amounts in thousands | 2021 | 2020 | $ Change | |||||||||
(unaudited) | (unaudited) | |||||||||||
Net loss | $ | (2,202) | $ | (66,075) | $ | 63,873 | ||||||
Depreciation and amortization | 9,968 | 9,876 | 92 | |||||||||
Interest expense, net | 5,033 | 5,408 | (375) | |||||||||
Net loss from discontinued operations, | 1,063 | 2,863 | (1,800) | |||||||||
Bank fees accreted to term loans | 600 | — | 600 | |||||||||
Provision for (benefit from) income taxes | 336 | (1,257) | 1,593 | |||||||||
Restructuring and cost reduction | 261 | 789 | (528) | |||||||||
Loan amendment expenses | 177 | 414 | (237) | |||||||||
Stock-based compensation | 85 | 223 | (138) | |||||||||
(Gain) loss on disposal of assets, net | (2) | 2 | (4) | |||||||||
Impairment of goodwill | — | 56,492 | (56,492) | |||||||||
Fair value of warrants issued in | — | 716 | (716) | |||||||||
Acquisition-related expenses | — | 99 | (99) | |||||||||
Interest from legal settlement | — | (200) | 200 | |||||||||
Recovery of litigation loss | — | (1,256) | 1,256 | |||||||||
Consolidated adjusted EBITDA - continuing operations | $ | 15,319 | $ | 8,094 | $ | 7,225 | ||||||
Supplemental Consolidated Financial Information - Segment Net Revenue, Segment Adjusted EBITDA, and Debt | ||||||||||||||||
Three Months Ended March 31, | ||||||||||||||||
Amounts in thousands | 2021 | 2020 | $ Change | % Change | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Segment Net Revenue | ||||||||||||||||
Faneuil | $ | 84,424 | $ | 58,825 | $ | 25,599 | 43.5 | % | ||||||||
Phoenix | 30,164 | 26,653 | 3,511 | 13.2 | % | |||||||||||
Total Segment Net Revenue | $ | 114,588 | $ | 85,478 | $ | 29,110 | 34.1 | % | ||||||||
Three Months Ended March 31, | ||||||||||||||||
Amounts in thousands | 2021 | 2020 | $ Change | % Change | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Segment Adjusted EBITDA | ||||||||||||||||
Faneuil | $ | 5,004 | $ | 1,372 | $ | 3,632 | 264.7 | % | ||||||||
Phoenix | 5,252 | 4,178 | 1,074 | 25.7 | % | |||||||||||
Corporate | (1,378) | (894) | (484) | (54.1) | % | |||||||||||
Total Segment Adjusted EBITDA | $ | 8,878 | $ | 4,656 | $ | 4,222 | 90.7 | % | ||||||||
Six Months Ended March 31, | ||||||||||||||||
Amounts in thousands | 2021 | 2020 | $ Change | % Change | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Segment Net Revenue | ||||||||||||||||
Faneuil | $ | 170,393 | $ | 117,392 | $ | 53,001 | 45.1 | % | ||||||||
Phoenix Color | 55,332 | 48,777 | 6,555 | 13.4 | % | |||||||||||
Total Segment Net Revenue | $ | 225,725 | $ | 166,169 | $ | 59,556 | 35.8 | % | ||||||||
Six Months Ended March 31, | ||||||||||||||||
Amounts in thousands | 2021 | 2020 | $ Change | % Change | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Segment Adjusted EBITDA | ||||||||||||||||
Faneuil | $ | 8,641 | $ | 3,025 | $ | 5,616 | 185.7 | % | ||||||||
Phoenix Color | 9,298 | 7,018 | 2,280 | 32.5 | % | |||||||||||
Corporate | (2,620) | (1,949) | (671) | (34.4) | % | |||||||||||
Total Segment Adjusted EBITDA | $ | 15,319 | $ | 8,094 | $ | 7,225 | 89.3 | % | ||||||||
As of March 31, 2021 and September 30, 2020, consolidated debt and consolidated net debt were comprised of the following (exclusive of deferred financing costs):
March 31, | September 30, | |||||||
Amounts in thousands | 2021 | 2020 | ||||||
(unaudited) | ||||||||
Term loan payable | $ | 77,753 | $ | 80,733 | ||||
Line of credit | 12,097 | 14,417 | ||||||
Equipment financing agreements | 4,404 | 3,610 | ||||||
Finance leases | 3,912 | 5,337 | ||||||
Total debt | 98,166 | 104,097 | ||||||
Cash | 4,566 | 6,050 | ||||||
Net debt | $ | 93,600 | $ | 98,047 | ||||
As of March 31, 2021, ALJ was in compliance with all debt covenants.
Financial Covenants Compliance | ||||||
March 31, 2021 | ||||||
(actual*) | (required) | |||||
Leverage Ratio | 2.79 | < 5.00 | ||||
Fixed Charges Ratio | 1.21 | > 0.75 | ||||
________________________________ |
* 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, and (ii) 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 second quarter ended March 31, 2021 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, operational improvements implemented by Carpets, and other statements including the words "will" 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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