ALJ Regional Holdings, Inc. Announces Earnings For The Fourth Quarter And Fiscal Year Ended September 30, 2016

NEW YORK, Dec. 22, 2016 /PRNewswire/ -- ALJ Regional Holdings, Inc. (NASDAQ: ALJJ) ("ALJ") announced today results for its quarter and fiscal year ended September 30, 2016.

Results for Fiscal Year Ended September 30, 2016

ALJ is a holding company, whose primary assets are its subsidiaries Faneuil, Inc. ("Faneuil"), Floors-N-More, LLC, dba Carpets N' More ("Carpets"), and Phoenix Color Corp. (including the recently acquired Color Optics packaging division, "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 five 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 and Carpets throughout all periods presented, Phoenix from August 9, 2015, and Color Optics from July 18, 2016.

Investment Highlights

Consolidated Results for ALJ for Fourth Quarter and Full Fiscal Year

• ALJ recognized consolidated revenue of $72.4 million for the three months ended September 30, 2016 compared to $58.2 million for the three months ended September 30, 2015 and $64.9 million for the three months ended June 30, 2016.
• ALJ posted net income of $8.8 million and earnings per share (EPS) of $0.24 (diluted) for the three months ended September 30, 2016 compared to net income of $6.4 million and EPS of $0.18 (diluted) for the three months ended September 30, 2015 and net income of $1.4 million and EPS of $0.04 (diluted) for the three months ended June 30, 2016.
• ALJ recognized adjusted EBITDA of $8.2 million for the three months ended September 30, 2016 compared to $7.0 million for the three months ended September 30, 2015 and $7.8 million for the three months ended June 30, 2016.
• ALJ recognized consolidated revenue of $268.4 million for the year ended September 30, 2016 compared to $210.0 million for the year ended September 30, 2015.
• ALJ posted net income of $10.9 million and EPS of $0.30 (diluted) for the year ended September 30, 2016 compared to $11.9 million and EPS of $0.35 (diluted) for the year ended September 30, 2015.
• ALJ recognized adjusted EBITDA of $28.8 million for the year ended September 30, 2016 compared to $19.0 million for the year ended September 30, 2015.
• ALJ recognized an income tax benefit of $6.2 million for the year ended September 30, 2016 compared to $5.5 million for the year ended September 30, 2015.
• ALJ's non-cash stock based compensation for the year ended September 30, 2016 was $0.8 million, compared to $1.5 million for the year ended September 30, 2015.

Results for Faneuil for Fourth Quarter and Full Fiscal Year

• Faneuil recognized revenue of $32.0 million for the three months ended September 30, 2016 compared to $30.3 million for the three months ended September 30, 2015 and $32.1 million for the three months ended June 30, 2016.
• Faneuil recognized adjusted EBITDA of $2.7 million for the three months ended September 30, 2016 compared to $2.5 million for the three months ended September 30, 2015 and $2.9 million for the three months ended June 30, 2016.
• Faneuil recognized revenue of $131.8 million for the year ended September 30, 2016 compared to $149.6 million for the year ended September 30, 2015.
• Faneuil recognized adjusted EBITDA of $10.7 million for the year ended September 30, 2016 compared to $15.1 million for the year ended September 30, 2015.
• Faneuil's contract backlog expected to be realized within the next twelve months as of September 30, 2016 was $89.2 million, as compared to $84.1 million as of September 30, 2015.  Faneuil's total contract backlog as of September 30, 2016 was $247.8 million as compared to $287.6 million as of September 30, 2015.
• Faneuil estimates its revenue for the three months ending December 31, 2016 to be in the range of $34.4 million to $38.1 million, compared to $33.8 million for the three months ending December 31, 2015 and $32.0 million for the three months ended September 30, 2016.

Results for Carpets for Fourth Quarter and Full Fiscal Year

• Carpets recognized revenue of $15.0 million for the three months ended September 30, 2016 compared to $12.1 million for the three months ended September 30, 2015 and $12.6 million for the three months ended June 30, 2016.
• Carpets recognized adjusted EBITDA of $0.2 million for the three months ended September 30, 2016 compared to $0.2 million for the three months ended September 30, 2015 and $0.6 million for the three months ended June 30, 2016.
• Carpets recognized revenue of $50.6 million for the year ended September 30, 2016 compared to $44.6 million for the year ended September 30, 2015.
• Carpets recognized adjusted EBITDA of $0.7 million for the year ended September 30, 2016, compared to $0.3 million for the year ended September 30, 2015.
• Carpets' contract backlog expected to be realized within the next twelve months as of September 30, 2016 was $32.5 million as compared to $21.1 million as of September 30, 2015.  Carpet's total contract backlog as of September 30, 2016 was $71.9 million as compared to $41.0 million as of September 30, 2015.
• Carpets estimates its revenue for the three months ending December 31, 2016 to be in the range of $13.5 million to $15.0 million, compared to $11.7 million for the three months ending December 31, 2015 and $15.0 million for the three months ended September 30, 2016.

Results for Phoenix for Fourth Quarter and Full Fiscal Year

• Phoenix recognized revenue of $25.5 million for the three months ended September 30, 2016 compared to $15.8 million for 52 days ended September 30, 2015 and $20.2 million for the three months ended June 30, 2016.
• Phoenix recognized adjusted EBITDA of $5.7 million for the three months ended September 30, 2016 compared to $4.7 million for 52 days ended September 30, 2015 and $4.8 million for the three months ended June 30, 2016.
• Phoenix recognized revenue of $85.9 million for the year ended September 30, 2016.   Phoenix was acquired on August 9, 2015 and therefore no comparable numbers for prior periods are presented.
• Phoenix recognized adjusted EBITDA of $19.5 million for the year ended September 30, 2016.  Phoenix was acquired on August 9, 2015 and therefore no comparable numbers for prior periods are presented.
• Phoenix's contract backlog expected to be realized within the next twelve months as of September 30, 2016 was $52.0 million as compared to $23.5 million as of September 30, 2015.  Phoenix's total contract backlog as of September 30, 2016 was $147.7 million as compared to $41.3 million as of September 30, 2015.
• Phoenix estimates its revenue for the three months ending December 31, 2016 to be in the range of $22.1 million to $24.5 million, compared to $19.3 million for the three months ending December 31, 2015 and $25.5 million for the three months ended September 30, 2016.

Anna Van Buren, Faneuil's CEO stated, "Faneuil experienced multiple new business successes in the fourth quarter, strengthening our position in both transportation and healthcare.  We experienced continued growth in our healthcare sector as we secured a new multi-year contract with Access Health in Connecticut, which began their implementation in the fourth quarter of this fiscal year.  Additionally, we secured our two other healthcare customers, the first with a new contract award with optional extension periods and the second with a two year extension."

She went on further to say, "In transportation, Faneuil continues to expand our capabilities and client partners.   Our recent win to design and install a toll collection system for the Del Rio International Bridge connecting the U.S. and Mexico is one such example."

Steve Chesin, Carpets CEO, said, "We have been awarded 100% of the flooring, cabinets, and countertops installations for the largest home builder in Las Vegas and have been awarded several communities for the fourth largest home builder in the valley."  He went on further to say, "We have now secured the top four home builders in Las Vegas and expect these additional home builders to provide us growth in the coming year.  With the additional machinery and streamlined operations, we expect to achieve significantly higher EBITDA margins in fiscal 2017."

Marc Reisch, Executive Chairman of Phoenix Color stated, "Fiscal 2016 was a very productive year for Phoenix Color.  The company successfully renewed or extended multi-year agreements with five of its largest customers.  Fourth quarter results were again negatively impacted by lower pricing related to these agreements, however, in Fiscal 2017, we expect higher sales volume from these customers beginning in the second quarter to significantly offset the impact of lower pricing.  In addition, the acquisition of Color Optics in the fourth quarter is an excellent business extension for Phoenix into packaging solutions.  We expect to begin to realize the earnings benefit from the Color Optics acquisition in the second quarter of Fiscal 2017."

Non-GAAP Financial Measures

In this release, we 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 define adjusted EBITDA as net income before interest income and expense, income taxes, non-cash stock based compensation, gain/loss on the sale of assets, non-recurring fees associated with ALJ's uplisting to the NASDAQ, non-recurring acquisition fees associated with Phoenix and Color Optics, and depreciation and amortization. We present adjusted EBITDA because we believe it is used frequently by analysts, investors and other interested parties in the evaluation of our company.  Adjusted EBITDA measures are not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure for comparison.  A reconciliation of our adjusted EBITDA to operating income, the most directly comparable GAAP measure, can be obtained by subtracting depreciation and amortization, non-cash stock based compensation, non-recurring fees associated with ALJ's uplisting to the NASDAQ, and non-recurring acquisition fees associated with Phoenix and Color Optics from ALJ adjusted EBITDA.  A reconciliation of Faneuil's, Carpets' and Phoenix's adjusted EBITDA to operating income, the most directly comparable GAAP measure, can be obtained by subtracting depreciation and amortization and non-cash stock based compensation from consolidated operating income.  Following is a reconciliation of consolidated operating income to consolidated adjusted EBITDA (in thousands):

Executive Chairman and Chairman of the Board adopts Rule 10b5-1 Plan on Behalf of Affiliate

As previously announced, Jess Ravich, Executive Chairman and Chairman of the Board of ALJ adopted a pre-arranged stock trading plan, dated September 13, 2016 (the "10b5-1 Plan"), in accordance with guidelines specified under Rule 10b5-1 of the Securities and Exchange Act of 1934 and ALJ's policies regarding stock transactions. The 10b5-1 Plan was adopted on behalf of the Exemption Trust under the Ravich Revocable Trust of 1989 (the "Trust"), a trust whose beneficiaries are Mr. Ravich's heirs. No shares are being sold under the 10b5-1 Plan to which Mr. Ravich is the pecuniary beneficiary.

The 10b5-1 Plan was adopted to enable the Trust to sell a portion of its ALJ common stock over time as part of the Trust's long-term strategy for asset diversification. As of September 13, 2016, ALJ common stock accounted for over 90% of the Trust's assets. Utilizing this type of trading plan, the Trust can gradually diversify its investment portfolio, spreading stock trades out over an extended period of time and reducing market impact. In addition, as a result of being established well in advance of a potential trade, the 10b5-1 Plan helps avoid concerns as to whether Mr. Ravich or the Trust had material, non-public information when a decision is made to sell stock. The transactions under the 10b5-1 Plan have been and will continue to be disclosed publicly through Form 4 filings with the Securities and Exchange Commission. Although the proceeds of the sales are not being received by Mr. Ravich, the sales are nevertheless attributed to Mr. Ravich pursuant to the beneficial ownership rules under the Exchange Act.

As of November 30, 2016, Mr. Ravich and his affiliates (including the Trust) held 14,051,183 shares of ALJ common stock, which represented in total approximately 39.1% of ALJ's outstanding capital stock. As of November 30, 2016, the Trust has sold 235,000 shares and intends to sell an additional 765,000 shares (1,000,000 shares in total) of ALJ common stock under the 10b5-1 Plan in increments of up to 5,000 shares per day. If all sales under the 10b5-1 Plan are conducted, approximately 20% of the shares owned by the Trust will be sold, and the vast majority of the Trust's assets would remain shares of ALJ's common stock. Mr. Ravich and his affiliates (including the Trust) would collectively retain approximately 93% of their holdings of ALJ stock and 37.1% of the outstanding shares of ALJ, based on the outstanding shares of ALJ as of September 13, 2016.

John Scheel Elected as Vice Chairman of the Board of Directors of ALJ Regional Holdings, Inc.

On December 16, 2016, John Scheel was elected by the Board of Directors as Vice Chairman of the Board of Directors of ALJ Regional Holdings, Inc.  Mr. Scheel was the former President and CEO of ALJ Regional Holdings from August 2006 through February 2013.

About ALJ Regional Holdings, Inc.

ALJ Regional Holdings, Inc.  is the parent company of Faneuil, Inc., a leading provider of outsourcing and co-sourced services to both commercial and government entities in the healthcare, utility, toll and transportation industries, Floors-N-More, LLC, dba Carpets N' More, one of the largest floor covering retailers in Las Vegas and a provider of multiple finishing products for commercial, retail and home builder markets including all types of flooring, countertops, cabinets, window coverings and garage/closet organizers, with 5 retail locations and 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.

This press release contains forward-looking statements. Such statements include information regarding our expectations, goals or intentions regarding the future, including but not limited to statements about our financial projections, business growth 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 Form 10-K 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.