Second Quarter 2024 Results
- Net revenue totaled $43.0 million, as compared to $50.8 million in the same period of the prior fiscal year.
- Net income was $5.3 million, as compared to a net loss of $0.5 million in the same period of the prior fiscal year.
- Net income available to common stockholders was $4.8 million, as compared to a net loss available to common stockholders of $1.1 million in the same period of the prior fiscal year.
- Adjusted EBITDA* was $3.7 million, as compared to $4.6 million in the same period of the prior fiscal year.
- Net cash provided by operating activities was $0.1 million.
- Free Cash Flow* totaled $(1.1) million.
- Total debt was $12.9 million; Net Cash* totaled $263.5 million.
Six-Month Fiscal Year-to-Date Financial Results
- Net revenue totaled $84.4 million, as compared to $102.1 million in the same period of the prior fiscal year.
- Net income was $9.8 million, as compared to $4.4 million in the same period of the prior fiscal year.
- Net income available to common stockholders was $8.7 million, as compared to $3.4 million in the same period of the prior fiscal year.
- Adjusted EBITDA* was $7.5 million, as compared to $11.9 million in the same period of the prior fiscal year.
- Net cash provided by operating activities was $6.7 million.
- Free Cash Flow* totaled $5.0 million.
* See reconciliations of these non-GAAP measurements to the most directly comparable GAAP measures included in the financial tables. See also «Note Regarding Use of Non-GAAP Financial Measurements» below for the definitions of these non-GAAP measures.
NEW YORK–(BUSINESS WIRE)–Steel Connect, Inc. (the «Company») (NASDAQ: STCN) today announced financial results for its second quarter ended January 31, 2024.
Results of Operations
The financial information and discussion that follows below are for the Company’s operations.
Due to the application of pushdown accounting in connection with the exchange transaction («Exchange Transaction») on May 1, 2023 with Steel Partners Holdings L.P. (“Steel Partners”), the Company’s consolidated financial statements include a black line division between the two distinct periods to indicate the application of two different bases of accounting, which may not be comparable, between the periods presented. The pre-exchange period through April 30, 2023, is referred to as the «Predecessor» period. The post-exchange period, May 1, 2023, and onward, includes the impact of pushdown accounting and is referred to as the «Successor» period.
As it relates to the results of operations, while the Successor period and the Predecessor period are distinct reporting periods, the effects of the change of control for financial statement purposes did not have a material impact on the comparability of our results of operations between the periods, unless otherwise noted related to the impact from pushdown accounting.
|
Successor |
Predecessor |
Successor |
Predecessor |
||||||||||||||
|
Three Months Ended January 31, |
Three Months Ended January 31, |
Six Months Ended January 31, |
Six Months Ended January 31, |
||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||||
|
(in thousands) |
|||||||||||||||||
Net revenue |
$ |
43,045 |
|
$ |
50,781 |
|
$ |
84,386 |
|
$ |
102,140 |
|
||||||
Net income (loss) |
|
5,346 |
|
|
(526 |
) |
|
9,782 |
|
|
4,431 |
|
||||||
Net income (loss) available to common stockholders |
$ |
4,809 |
|
$ |
(1,063 |
) |
$ |
8,709 |
|
$ |
3,357 |
|
||||||
Adjusted EBITDA* |
$ |
3,701 |
|
$ |
4,631 |
|
$ |
7,458 |
|
$ |
11,912 |
|
||||||
Adjusted EBITDA margin* |
|
8.6 |
% |
|
9.1 |
% |
|
8.8 |
% |
|
11.7 |
% |
||||||
Net cash provided by operating activities |
|
78 |
|
|
1,336 |
|
|
6,661 |
|
|
9,588 |
|
||||||
Additions to property and equipment |
|
(1,148 |
) |
|
(318 |
) |
|
(1,700 |
) |
|
(866 |
) |
||||||
Free cash flow* |
$ |
(1,070 |
) |
$ |
1,018 |
|
$ |
4,961 |
|
$ |
8,722 |
|
* |
See reconciliations of these non-GAAP measurements to the most directly comparable GAAP measures included in the financial tables. See also «Note Regarding Use of Non-GAAP Financial Measurements» below for the definitions of these non-GAAP measures. |
Comparison of the Second Quarter and Six Months Ended January 31, 2024 and 2023
|
Successor |
|
|
Predecessor |
|
|
|
Successor |
|
|
Predecessor |
|
|
||||||||||||
|
Three Months Ended January 31, |
|
|
Three Months Ended January 31, |
|
|
|
Six Months Ended January 31, |
|
|
Six Months Ended January 31, |
|
|
||||||||||||
|
(unaudited in thousands) |
||||||||||||||||||||||||
|
|
2024 |
|
|
|
|
2023 |
|
|
Fav (Unfav) ($) |
|
|
2024 |
|
|
|
|
2023 |
|
|
Fav (Unfav) ($) |
||||
Net revenue |
$ |
43,045 |
|
|
|
$ |
50,781 |
|
|
$ |
(7,736 |
) |
|
$ |
84,386 |
|
|
|
$ |
102,140 |
|
|
$ |
(17,754 |
) |
Cost of revenue |
|
(31,698 |
) |
|
|
|
(37,719 |
) |
|
|
6,021 |
|
|
|
(61,564 |
) |
|
|
|
(74,813 |
) |
|
|
13,249 |
|
Gross profit |
|
11,347 |
|
|
|
|
13,062 |
|
|
|
(1,715 |
) |
|
|
22,822 |
|
|
|
|
27,327 |
|
|
|
(4,505 |
) |
Gross profit percentage |
|
26.4 |
% |
|
|
|
25.7 |
% |
|
|
— |
|
|
|
27.0 |
% |
|
|
|
26.8 |
% |
|
|
— |
|
Selling, general and administrative |
|
(8,732 |
) |
|
|
|
(10,459 |
) |
|
|
1,727 |
|
|
|
(17,527 |
) |
|
|
|
(20,845 |
) |
|
|
3,318 |
|
Amortization |
|
(893 |
) |
|
|
|
— |
|
|
|
(893 |
) |
|
|
(1,768 |
) |
|
|
|
— |
|
|
|
(1,768 |
) |
Interest expense |
|
(249 |
) |
|
|
|
(848 |
) |
|
|
599 |
|
|
|
(496 |
) |
|
|
|
(1,674 |
) |
|
|
1,178 |
|
Other gains (losses), net |
|
4,067 |
|
|
|
|
(2,627 |
) |
|
|
6,694 |
|
|
|
7,616 |
|
|
|
|
402 |
|
|
|
7,214 |
|
Total costs and expenses |
|
(37,505 |
) |
|
|
|
(51,653 |
) |
|
|
14,148 |
|
|
|
(73,739 |
) |
|
|
|
(96,930 |
) |
|
|
23,191 |
|
Income (loss) before income taxes |
|
5,540 |
|
|
|
|
(872 |
) |
|
|
6,412 |
|
|
|
10,647 |
|
|
|
|
5,210 |
|
|
|
5,437 |
|
Income tax (expense) benefit |
|
(194 |
) |
|
|
|
346 |
|
|
|
(540 |
) |
|
|
(865 |
) |
|
|
|
(779 |
) |
|
|
(86 |
) |
Net income (loss) |
$ |
5,346 |
|
|
|
$ |
(526 |
) |
|
$ |
5,872 |
|
|
$ |
9,782 |
|
|
|
$ |
4,431 |
|
|
$ |
5,351 |
|
Net Revenue
Net revenue for the second quarter decreased $7.7 million, or 15.2%, as compared to the same period in the prior fiscal year. This decrease in net revenue was primarily driven by lower volumes associated with existing clients in the computing and consumer electronics markets, offset partially by new business revenue and new program starts with clients in the consumer electronics market.
Net revenue for the six months ended January 31, 2024 decreased $17.8 million, or 17.4%, as compared to the six months ended January 31, 2023. This decrease in net revenue was primarily driven by lower volumes associated with existing clients in the computing and consumer electronics markets, partially offset by new business revenue and new program starts with clients in the consumer electronics market. Fluctuations in foreign currency exchange rates had an insignificant impact on net revenues for the three and six month periods ended January 31, 2024 and 2023, respectively.
Cost of Revenue
Total cost of revenue decreased by $6.0 million or 16.0% for the second quarter, as compared to the same period in the prior fiscal year. This was primarily driven by a decrease in materials procured on behalf of our clients of $6.9 million as a result of lower sales volumes associated with existing clients in the computing and consumer electronics markets. The decrease in cost of materials was partially offset by increases in labor costs for new business revenue in the consumer electronics market.
Total cost of revenue decreased by $13.2 million or 17.7% for the six months ended January 31, 2024, as compared to the six months ended January 31, 2023. This was primarily driven by a decrease in materials procured on behalf of our clients of $12.8 million as a result of lower sales volumes associated with clients in the computing and consumer electronics markets. Fluctuations in foreign currency exchange rates had an insignificant impact on cost of revenues for the three and six month periods ended January 31, 2024 and 2023, respectively.
Gross Profit Margin
Gross profit decreased $1.7 million or 13.1% in the second quarter as compared to the same period in the prior fiscal year primarily due to the lower sales volume discussed above. Gross profit percentage increased 70 basis points to 26.4% from 25.7% in the second quarter as compared to the same period in the prior fiscal year, primarily due to changes in customer sales mix.
Gross profit decreased $4.5 million or 16.5% in the six months ended January 31, 2024 as compared to the six months ended January 31, 2023, primarily driven by lower sales volume discussed above. The gross profit percentage remained relatively unchanged from the prior period. Fluctuations in foreign currency exchange rates had an insignificant impact on the Company’s gross margin for the three and six month periods ended January 31, 2024 and 2023, respectively.
Selling, General and Administrative
Selling, general and administrative («SG&A») expenses during the second quarter decreased by approximately $1.7 million or 16.5% as compared to the same period in the prior fiscal year due to Corporate-level activity, which decreased by $1.4 million primarily due to a decrease in legal and other professional fees.
SG&A expenses decreased by approximately $3.3 million or 15.9% during the six months ended January 31, 2024 as compared to the six months ended January 31, 2023. SG&A expenses for ModusLink Corporation («Supply Chain») decreased by $0.8 million primarily due to bad debt expense recorded for a client in the consumer products industry during the six months ended January 31, 2023 that did not reoccur during the six months ended January 31, 2024. Corporate-level activity decreased by $2.5 million, primarily due to a decrease in legal and other professional fees. Fluctuations in foreign currency exchange rates did not have a significant impact on SG&A expenses for the three and six month periods ended January 31, 2024 and 2023, respectively.
Amortization Expense
Amortization expense of $0.9 million and $1.8 million for the three and six months ended January 31, 2024, respectively, was driven by the recognition of intangible assets in connection with the application of pushdown accounting as a result of the Exchange Transaction. As the Exchange Transaction closed on May 1, 2023, there was no activity for the three and six month periods ended January 31, 2023.
Interest Expense
Interest expense during the three and six months ended January 31, 2024 decreased $0.6 million and $1.2 million, respectively, as compared to the three and six months ended January 31, 2023, primarily due to the cessation of the amortization of the discount on the 7.50% Convertible Senior Note due September 1, 2024 (the “SPHG Note”) as of May 1, 2023, the date of the Exchange Transaction.
Other Gains (Losses), Net
Other gains, net are primarily composed of investment gains (losses), fair value remeasurement gains (losses), foreign exchange gains (losses), interest income, and sublease income.
The Company recorded $4.1 million to Other gains, net for the three months ended January 31, 2024, primarily due to: (1) $3.5 million interest income earned on money market funds and (2) $1.0 million of net realized and unrealized gains recognized on investments in equity securities. This activity was partially offset by $0.6 million in unrealized losses recognized as a result of the fair value remeasurement of the SPHG Note at January 31, 2024. The Company recorded $2.6 million to Other losses, net, for the three months ended January 31, 2023 primarily due to $3.3 million in foreign exchange net losses.
The Company recorded $7.6 million to Other gains, net for the six months ended January 31, 2024, primarily due to: (1) $6.7 million interest income earned on money market funds and (2) $0.6 million of net realized and unrealized gains recognized on investments in equity securities. This activity was offset partially by $0.4 million unrealized losses recognized as a result of the fair value remeasurement of the SPHG Note. The Company recorded $0.4 million to Other gains, net, for the six months ended January 31, 2023, primarily due to (1) $0.6 million sublease income and (2) $0.5 million interest income earned on money market funds. This activity was offset partially by $0.8 million foreign exchange net losses.
Income Tax (Expense) Benefit
During the second quarter, the Company recorded income tax expense of approximately $0.2 million as compared to a $0.3 million income tax benefit for the same period in the prior fiscal year. The change in income tax expense is primarily due to higher taxable income in foreign jurisdictions, as compared to the prior fiscal year.
During the six months ended January 31, 2024, the Company recorded income tax expense of approximately $0.9 million as compared to $0.8 million for the six months ended January 31, 2023. The increase in income tax expense is primarily due to higher taxable income in foreign jurisdictions for the six months ended January 31, 2024 as compared to the six months ended January 31, 2023.
Net Income
Net income for the second quarter increased $5.9 million, as compared to the same period in the prior fiscal year. The increase in net income is largely driven by the $6.7 million favorable change in activity recorded to Other gains (losses), net. Refer to above explanations for further details.
Net income for the six months ended January 31, 2024 increased $5.4 million, as compared to the six months ended January 31, 2023. The increase in net income is primarily due to the $7.2 million favorable change in activity recorded in Other gains, net. Lower SG&A expenses also contributed to the increase in net income, offset partially by lower gross profits. Refer to above explanations for further details.
Additions to Property and Equipment (Capital Expenditures)
Capital expenditures for the second quarter totaled $1.1 million, or 2.7% of net revenue, as compared to $0.3 million, or 0.6% of net revenue, for the same period in the prior fiscal year.
Capital expenditures for the six months ended January 31, 2024 totaled $1.7 million, or 2.0% of net revenue, as compared to $0.9 million, or 0.8% of net revenue, for the six months ended January 31, 2023.
Adjusted EBITDA
Adjusted EBITDA decreased $0.9 million, or 20.1%, for the second quarter as compared to the same period in the prior fiscal year, primarily due to lower operational net income.
Adjusted EBITDA decreased $4.5 million, or 37.4%, for the six months ended January 31, 2024 as compared to the six months ended January 31, 2023, primarily due to due to lower operational net income.
Liquidity and Capital Resources
As of January 31, 2024, the Company had cash and cash equivalents of $276.4 million and ModusLink had readily available borrowing capacity of $11.9 million under its revolving credit facility with Umpqua Bank.
As of January 31, 2024, the fair value of outstanding debt was $12.9 million, which was comprised of $12.9 million principal outstanding on the SPHG Note.
About Steel Connect, Inc.
Steel Connect, Inc. is a holding company whose wholly-owned subsidiary, ModusLink Corporation, serves the supply chain management market.
ModusLink is an end-to-end global supply chain solutions and e-commerce provider serving clients in markets such as consumer electronics, communications, computing, medical devices, software and retail. ModusLink designs and executes critical elements in its clients’ global supply chains to improve speed to market, product customization, flexibility, cost, quality and service. These benefits are delivered through a combination of industry expertise, innovative service solutions, and integrated operations, proven business processes, an expansive global footprint and world-class technology. ModusLink also produces and licenses an entitlement management solution powered by its enterprise-class Poetic software, which offers a complete solution for activation, provisioning, entitlement subscription, and data collection from physical goods (connected products) and digital products. ModusLink has an integrated network of strategically located facilities in various countries, including numerous sites throughout North America, Europe and Asia.
– Financial Tables Follow –
Steel Connect, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands) |
|||||
|
Successor |
||||
|
January 31, 2024 |
|
July 31, 2023 |
||
|
(unaudited) |
|
|
||
ASSETS |
|
|
|
||
Current assets: |
|
|
|
||
Cash and cash equivalents |
$ |
276,422 |
|
$ |
121,372 |
Accounts receivable, trade, net |
|
29,179 |
|
|
28,616 |
Inventories, net |
|
7,742 |
|
|
8,569 |
Funds held for clients |
|
2,479 |
|
|
2,031 |
Prepaid expenses and other current assets |
|
5,550 |
|
|
158,686 |
Total current assets |
|
321,372 |
|
|
319,274 |
Property and equipment, net |
|
4,433 |
|
|
3,698 |
Operating lease right-of-use assets |
|
24,813 |
|
|
27,098 |
Investments |
|
3,174 |
|
|
— |
Other intangible assets, net |
|
32,821 |
|
|
34,589 |
Goodwill |
|
22,785 |
|
|
22,785 |
Other assets |
|
3,317 |
|
|
3,737 |
Total assets |
$ |
412,715 |
|
$ |
411,181 |
|
|
|
|
||
LIABILITIES, CONTINGENTLY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY |
|
|
|
||
Current liabilities: |
|
|
|
||
Accounts payable |
$ |
25,463 |
|
$ |
26,514 |
Accrued expenses |
|
21,936 |
|
|
26,774 |
Funds held for clients |
|
2,445 |
|
|
1,949 |
Current lease obligations |
|
9,027 |
|
|
7,973 |
Convertible note payable |
|
12,903 |
|
|
— |
Other current liabilities |
|
3,843 |
|
|
4,544 |
Total current liabilities |
|
75,617 |
|
|
67,754 |
Convertible note payable |
|
— |
|
|
12,461 |
Long-term lease obligations |
|
16,135 |
|
|
19,161 |
Other long-term liabilities |
|
5,867 |
|
|
5,442 |
Total long-term liabilities |
|
22,002 |
|
|
37,064 |
Total liabilities |
|
97,619 |
|
|
104,818 |
|
|
|
|
||
Contingently redeemable preferred stock |
|
237,739 |
|
|
237,739 |
|
|
|
|
||
Total stockholders’ equity |
|
77,357 |
|
|
68,624 |
Total liabilities, contingently redeemable preferred stock and stockholders’ equity |
$ |
412,715 |
|
$ |
411,181 |
Steel Connect, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (in thousands, except per share amounts) (unaudited) |
|||||||||||||||||
|
Successor |
|
|
Predecessor |
|
Successor |
|
|
Predecessor |
||||||||
|
Three Months Ended January 31, |
|
|
Three Months Ended January 31, |
|
Six Months Ended January 31, |
|
|
Six Months Ended January 31, |
||||||||
|
|
2024 |
|
|
|
|
2023 |
|
|
|
2024 |
|
|
|
|
2023 |
|
Net revenue |
$ |
43,045 |
|
|
|
$ |
50,781 |
|
|
$ |
84,386 |
|
|
|
$ |
102,140 |
|
Cost of revenue |
|
31,698 |
|
|
|
|
37,719 |
|
|
|
61,564 |
|
|
|
|
74,813 |
|
Gross profit |
|
11,347 |
|
|
|
|
13,062 |
|
|
|
22,822 |
|
|
|
|
27,327 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative |
|
8,732 |
|
|
|
|
10,459 |
|
|
|
17,527 |
|
|
|
|
20,845 |
|
Amortization |
|
893 |
|
|
|
|
— |
|
|
|
1,768 |
|
|
|
|
— |
|
Total operating expenses |
|
9,625 |
|
|
|
|
10,459 |
|
|
|
19,295 |
|
|
|
|
20,845 |
|
Operating income |
|
1,722 |
|
|
|
|
2,603 |
|
|
|
3,527 |
|
|
|
|
6,482 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
||||||||
Interest income |
|
3,499 |
|
|
|
|
332 |
|
|
|
6,718 |
|
|
|
|
476 |
|
Interest expense |
|
(249 |
) |
|
|
|
(848 |
) |
|
|
(496 |
) |
|
|
|
(1,674 |
) |
Other gains (losses), net |
|
568 |
|
|
|
|
(2,959 |
) |
|
|
898 |
|
|
|
|
(74 |
) |
Total other income (loss) |
|
3,818 |
|
|
|
|
(3,475 |
) |
|
|
7,120 |
|
|
|
|
(1,272 |
) |
Income (loss) before income taxes |
|
5,540 |
|
|
|
|
(872 |
) |
|
|
10,647 |
|
|
|
|
5,210 |
|
Income tax expense (benefit) |
|
194 |
|
|
|
|
(346 |
) |
|
|
865 |
|
|
|
|
779 |
|
Net income (loss) |
|
5,346 |
|
|
|
|
(526 |
) |
|
|
9,782 |
|
|
|
|
4,431 |
|
Less: Preferred dividends on Series C redeemable preferred stock |
|
(537 |
) |
|
|
|
(537 |
) |
|
|
(1,073 |
) |
|
|
|
(1,074 |
) |
Net income (loss) available to common stockholders |
$ |
4,809 |
|
|
|
$ |
(1,063 |
) |
|
$ |
8,709 |
|
|
|
$ |
3,357 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per common shares – basic |
$ |
0.18 |
|
|
|
$ |
(0.16 |
) |
|
$ |
0.33 |
|
|
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per common shares – diluted |
$ |
0.18 |
|
|
|
$ |
(0.16 |
) |
|
$ |
0.33 |
|
|
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average number of common shares outstanding – basic |
|
6,211 |
|
|
|
|
6,448 |
|
|
|
6,205 |
|
|
|
|
6,442 |
|
Weighted-average number of common shares outstanding – diluted |
|
26,083 |
|
|
|
|
6,448 |
|
|
|
26,075 |
|
|
|
|
6,496 |
|
Steel Connect, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) |
||||||||
|
Successor |
|
|
Predecessor |
||||
|
Six Months Ended January 31, |
|
|
Six Months Ended January 31, |
||||
|
|
2024 |
|
|
|
|
2023 |
|
Cash flows from operating activities: |
|
|
|
|
||||
Net income |
$ |
9,782 |
|
|
|
$ |
4,431 |
|
Adjustments to reconcile net income to cash flows from operating activities: |
|
|
|
|
||||
Depreciation |
|
885 |
|
|
|
|
924 |
|
Amortization of finite-lived intangible assets |
|
1,768 |
|
|
|
|
— |
|
Amortization of deferred financing costs |
|
— |
|
|
|
|
24 |
|
Accretion of debt discount |
|
— |
|
|
|
|
1,056 |
|
Share-based compensation |
|
297 |
|
|
|
|
355 |
|
Non-cash lease expense |
|
4,479 |
|
|
|
|
4,488 |
|
Bad debt expense |
|
— |
|
|
|
|
964 |
|
Other (gains) losses, net |
|
(898 |
) |
|
|
|
74 |
|
Changes in operating assets and liabilities: |
|
|
|
|
||||
Accounts receivable, net |
|
(802 |
) |
|
|
|
2,734 |
|
Inventories, net |
|
640 |
|
|
|
|
(493 |
) |
Prepaid expenses and other current assets |
|
(1,449 |
) |
|
|
|
(1,536 |
) |
Accounts payable and accrued expenses |
|
(4,868 |
) |
|
|
|
(1,016 |
) |
Refundable and accrued income taxes, net |
|
(510 |
) |
|
|
|
(845 |
) |
Other assets and liabilities |
|
(2,663 |
) |
|
|
|
(1,572 |
) |
Net cash provided by operating activities |
|
6,661 |
|
|
|
|
9,588 |
|
Cash flows from investing activities: |
|
|
|
|
||||
Purchases of investments |
|
(5,519 |
) |
|
|
|
— |
|
Proceeds from sales of investments |
|
157,468 |
|
|
|
|
— |
|
Additions of property and equipment |
|
(1,700 |
) |
|
|
|
(866 |
) |
Proceeds from the disposition of property and equipment |
|
— |
|
|
|
|
16 |
|
Net cash provided by (used in) investing activities |
|
150,249 |
|
|
|
|
(850 |
) |
Cash flows from financing activities: |
|
|
|
|
||||
Preferred dividend payments |
|
(1,073 |
) |
|
|
|
(1,074 |
) |
Repayments on capital lease obligations |
|
— |
|
|
|
|
(38 |
) |
Net cash used in financing activities |
|
(1,073 |
) |
|
|
|
(1,112 |
) |
Net effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
(339 |
) |
|
|
|
1,110 |
|
Net increase in cash, cash equivalents and restricted cash |
|
155,498 |
|
|
|
|
8,736 |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
123,403 |
|
|
|
|
58,045 |
|
Cash, cash equivalents and restricted cash, end of period |
$ |
278,901 |
|
|
|
$ |
66,781 |
|
|
|
|
|
|
||||
Cash and cash equivalents, end of period |
$ |
276,422 |
|
|
|
$ |
62,427 |
|
Restricted cash for funds held for clients, end of period |
|
2,479 |
|
|
|
|
4,354 |
|
Cash, cash equivalents and restricted cash, end of period |
$ |
278,901 |
|
|
|
$ |
66,781 |
|
Steel Connect, Inc. and Subsidiaries Segment Data (in thousands) (unaudited) |
|||||||||||||||||
|
Successor |
|
|
Predecessor |
|
Successor |
|
|
Predecessor |
||||||||
|
Three Months Ended January 31, |
|
|
Three Months Ended January 31, |
|
Six Months Ended January 31, |
|
|
Six Months Ended January 31, |
||||||||
|
|
2024 |
|
|
|
|
2023 |
|
|
|
2024 |
|
|
|
|
2023 |
|
|
(Unaudited) |
||||||||||||||||
Net revenue: |
|
|
|
|
|
|
|
|
|
||||||||
Supply Chain |
$ |
43,045 |
|
|
|
$ |
50,781 |
|
|
$ |
84,386 |
|
|
|
$ |
102,140 |
|
Total segment net revenue |
|
43,045 |
|
|
|
|
50,781 |
|
|
|
84,386 |
|
|
|
|
102,140 |
|
Operating income: |
|
|
|
|
|
|
|
|
|
||||||||
Supply Chain |
|
3,065 |
|
|
|
|
5,388 |
|
|
|
5,740 |
|
|
|
|
11,238 |
|
Total segment operating income |
|
3,065 |
|
|
|
|
5,388 |
|
|
|
5,740 |
|
|
|
|
11,238 |
|
Corporate-level activity |
|
(1,343 |
) |
|
|
|
(2,785 |
) |
|
|
(2,213 |
) |
|
|
|
(4,756 |
) |
Total operating income |
|
1,722 |
|
|
|
|
2,603 |
|
|
|
3,527 |
|
|
|
|
6,482 |
|
Total other income (expense), net |
|
3,818 |
|
|
|
|
(3,475 |
) |
|
|
7,120 |
|
|
|
|
(1,272 |
) |
Income (loss) before income taxes |
$ |
5,540 |
|
|
|
$ |
(872 |
) |
|
$ |
10,647 |
|
|
|
$ |
5,210 |
|
Steel Connect, Inc. and Subsidiaries Reconciliation of Non-GAAP Measures to GAAP Measures (in thousands) (unaudited) |
|||||||||||||||||
EBITDA and Adjusted EBITDA Reconciliations: |
|||||||||||||||||
|
Successor |
|
|
Predecessor |
|
Successor |
|
|
Predecessor |
||||||||
|
Three Months Ended January 31, |
|
|
Three Months Ended January 31, |
|
Six Months Ended January 31, |
|
|
Six Months Ended January 31, |
||||||||
|
|
2024 |
|
|
|
|
2023 |
|
|
|
2024 |
|
|
|
|
2023 |
|
Net income (loss) |
$ |
5,346 |
|
|
|
$ |
(526 |
) |
|
$ |
9,782 |
|
|
|
$ |
4,431 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest income |
|
(3,499 |
) |
|
|
|
(332 |
) |
|
|
(6,718 |
) |
|
|
|
(476 |
) |
Interest expense |
|
249 |
|
|
|
|
848 |
|
|
|
496 |
|
|
|
|
1,674 |
|
Income tax expense (benefit) |
|
194 |
|
|
|
|
(346 |
) |
|
|
865 |
|
|
|
|
779 |
|
Depreciation |
|
450 |
|
|
|
|
465 |
|
|
|
885 |
|
|
|
|
924 |
|
Amortization |
|
893 |
|
|
|
|
— |
|
|
|
1,768 |
|
|
|
|
— |
|
EBITDA |
|
3,633 |
|
|
|
|
109 |
|
|
|
7,078 |
|
|
|
|
7,332 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Strategic consulting and other related professional fees |
|
— |
|
|
|
|
181 |
|
|
|
— |
|
|
|
|
832 |
|
Executive severance and employee retention |
|
— |
|
|
|
|
(34 |
) |
|
|
— |
|
|
|
|
(150 |
) |
Restructuring and restructuring-related expense |
|
125 |
|
|
|
|
— |
|
|
|
125 |
|
|
|
|
— |
|
Share-based compensation |
|
160 |
|
|
|
|
178 |
|
|
|
297 |
|
|
|
|
355 |
|
Loss on sale of long-lived assets |
|
1 |
|
|
|
|
— |
|
|
|
1 |
|
|
|
|
16 |
|
Unrealized foreign exchange losses, net |
|
366 |
|
|
|
|
4,240 |
|
|
|
317 |
|
|
|
|
3,728 |
|
Other non-cash gains, net |
|
(584 |
) |
|
|
|
(43 |
) |
|
|
(360 |
) |
|
|
|
(201 |
) |
Adjusted EBITDA |
$ |
3,701 |
|
|
|
$ |
4,631 |
|
$ |
7,458 |
|
|
$ |
11,912 |
|
||
|
|
|
|
|
|
|
|
|
|
||||||||
Net revenue |
$ |
43,045 |
|
|
|
$ |
50,781 |
|
$ |
84,386 |
|
|
$ |
102,140 |
|
||
Adjusted EBITDA margin |
|
8.6 |
% |
|
|
|
9.1 |
% |
|
|
8.8 |
% |
|
|
|
11.7 |
% |
Free Cash Flow Reconciliation: |
|||||||||||||||||
|
Successor |
|
|
Predecessor |
|
Successor |
|
|
Predecessor |
||||||||
|
Three Months Ended January 31, |
|
|
Three Months Ended January 31, |
|
Six Months Ended January 31, |
|
|
Six Months Ended January 31, |
||||||||
|
2024 |
|
|
2023 |
|
2024 |
|
|
2023 |
||||||||
Net cash provided by operating activities |
$ |
78 |
|
|
|
$ |
1,336 |
|
|
$ |
6,661 |
|
|
|
$ |
9,588 |
|
Additions to property and equipment |
|
(1,148 |
) |
|
|
|
(318 |
) |
|
|
(1,700 |
) |
|
|
|
(866 |
) |
Free cash flow |
$ |
(1,070 |
) |
|
|
$ |
1,018 |
|
|
$ |
4,961 |
|
|
|
$ |
8,722 |
|
Contacts
Investor Relations Contact
Jennifer Golembeske
914-461-1276
investorrelations@steelconnectinc.com