ALJ Regional Holdings, Inc Announces Earnings For The Fourth Quarter And Year Ended September 30, 2019.

NEW YORK: ALJ Regional Holdings, Inc. (NASDAQ: ALJJ) ("ALJ") announced results today for its fourth quarter and year ended September 30, 2019.

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 and Year Ended September 30, 2019

Consolidated Results for ALJ

ALJ recognized consolidated net revenue of $89.0 million for the three months ended September 30, 2019, a decrease of $1.1 million, or 1.2%, compared to $90.1 million for the three months ended September 30, 2018. The decrease was primarily driven by planned lower sales volumes at Carpets and lower volumes in components and packaging at Phoenix, largely offset by new contracts at Faneuil. ALJ recognized consolidated net revenue of $84.2 million for the three months ended June 30, 2019.

ALJ recognized a net loss of $9.9 million and loss per share of $0.24 (diluted) for the three months ended September 30, 2019, compared to net income of $1.2 million and earnings per share (EPS) of $0.03 (diluted) for the three months ended September 30, 2018. The majority of the loss was due to a non-cash deferred tax expense of $5.9 million and a non-cash write-off of intangible assets of $0.7 million. In addition, three contracts at Faneuil generated significant net losses during the quarter (the "Three Contracts"). 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.

ALJ recognized adjusted EBITDA of $5.2 million for the three months ended September 30, 2019, a decrease of $4.2 million, or 44.5%, compared to $9.3 million for the three months ended September 30, 2018. The main causes of the decrease were negative adjusted EBITDA associated with the Three Contracts, the wind-down of existing customer contracts, compliance costs related to the implementation of the new revenue recognition accounting standard, and higher overall employee benefits costs 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 $5.2 million for the three months ended June 30, 2019.

ALJ recognized consolidated net revenue of $355.0 million for the year ended September 30, 2019, a decrease of $14.8 million, or 4.0%, compared to $369.8 million for the year ended September 30, 2018 due to lower planned volumes at Carpets and lower volume in components and packaging at Phoenix, offset by increases in business activity at Faneuil.

ALJ recognized a net loss of $16.0 million and loss per share of $0.41 (diluted) for the year ended September 30, 2019, compared to net loss of $7.3 million and loss per share of $0.19 (diluted) for the year ended September 30, 2018. As explained above, a large part of the loss was due to a non-cash charges incurred in the three months ended September 30, 2019.

ALJ recognized adjusted EBITDA of $27.7 million for the year ended September 30, 2019, a decrease of $5.4 million, or 16.3%, compared to $33.1 million for the year ended September 30, 2018.

ALJ estimates consolidated net revenue for the three months ending December 31, 2019 to be in the range of $87.8 million to $96.8 million, compared to $93.8 million for the three months ended December 31, 2018.

Jess Ravich, Chief Executive Officer of ALJ, said, "Results for the quarter and the year ended September 30, 2019 were very disappointing. Management has already taken several steps to ensure that over the next few quarters this trend will reverse. Specifically, in connection with the Three Contracts, management has already exercised an early termination provision with regard to one of those contracts and negotiated amendments with regard to the other two contracts to provide market rates of return. Management has also instituted a thorough review of all current contracts and prospective contracts at Faneuil to ensure that they will generate our target adjusted EBITDA margin. In addition, we are determined to reduce capex at the Company by over 65% in fiscal 2020 versus fiscal 2019. Although we are dramatically reducing our capex spend, we will be growing our revenues and profits at Faneuil by reassigning resources and utilizing state and city initiatives to subsidize a new call center in New Mexico. On December 6th we announced $0.5 million in incentives under the Local Economic Development Act, and on December 13th we were awarded over $2.0 million in incentives from the Job Training Incentive Program in connection with our new 700 seat call center in Albuquerque. The above changes will allow us to convert a higher percentage of our generated cash into funds that will deleverage our balance sheet. It is our intention in fiscal 2020 to have our leverage be below 3.0x."

Three Months Ended

September 30,

Amounts in $000s, except share and per share amounts

2019

2018

$ Change

% Change

Net revenue

$

88,992

$

90,057

$

(1,065)

(1.2)

%

Costs and expenses:

Cost of revenue

69,858

68,945

913

1.3

%

Selling, general, and administrative expense

19,865

17,238

2,627

15.2

%

Impairment of intangible assets

746

--

746

NM

Disposal of assets and other gain, net

5

(104)

109

NM

Total operating expenses

90,474

86,079

4,395

5.1

%

Operating (loss) income

(1,482)

3,978

(5,460)

(137.3)

%

Other (expense) income:

Interest expense, net

(2,570)

(2,579)

9

0.3

%

Total other expense, net

(2,570)

(2,579)

9

0.3

%

Income before income taxes

(4,052)

1,399

(5,451)

NM

Provision for income taxes

(5,854)

(177)

(5,677)

NM

Net (loss) income

$

(9,906)

$

1,222

$

(11,128)

NM

Basic (loss) earnings per share of common stock

$

(0.24)

$

0.03

Diluted (loss) earnings per share of common stock

...