Steel Connect Reports Fourth Quarter Fiscal 2022 Financial Results

Fourth Quarter 2022 Results

  • Net revenue from continuing operations totaled $53.0 million, as compared to $47.7 million in the prior year.
  • Net income from continuing operations was $2.9 million, as compared to net loss from continuing operations of $0.4 million in the prior year.
  • Net income attributable to common stockholders was $0.8 million, as compared to net loss attributable to common stockholders of $11.6 million in the prior year.
  • Adjusted EBITDA* was $4.7 million, as compared to $(2.5) million in the prior year.
  • Net cash provided by operating activities was $2.1 million.
  • Free Cash Flow* totaled $1.8 million.
  • Total debt, net of unamortized discounts and issuance costs, was $11.0 million; Net Debt* totaled $(38.2) million.

Fiscal Year 2022 Financial Results

  • Net revenue from continuing operations totaled $203.3 million, as compared to $226.3 million in the prior year.
  • Net loss from continuing operations was $9.3 million, as compared to net loss from continuing operations of $11.8 million in the prior year.
  • Net loss attributable to common stockholders was $13.1 million as compared to net loss attributable to common stockholders of $46.5 million in the prior year.
  • Adjusted EBITDA* was $8.0 million, as compared to $6.3 million in the prior year.
  • Net cash used in operating activities was $3.1 million.
  • Free Cash Flow* totaled $(4.6) million.

SMYRNA, Tenn.–(BUSINESS WIRE)–Steel Connect, Inc. (the “Company”) (NASDAQ: STCN) today announced financial results for its fourth quarter and fiscal year ended July 31, 2022.

Results of Operations

The financial information and discussion that follows below are for the Company’s operations.

 

 

Three Months Ended

July 31,

 

Fiscal Year Ended

July 31,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

(in thousands)

Net revenue

 

$

53,049

 

 

$

47,705

 

 

$

203,272

 

 

$

226,256

 

Net income (loss) from continuing operations

 

 

2,909

 

 

 

(354

)

 

 

(9,256

)

 

 

(11,835

)

Net income (loss) attributable to common stockholders

 

$

767

 

 

$

(11,552

)

 

$

(13,097

)

 

$

(46,520

)

Adjusted EBITDA*

 

$

4,696

 

 

$

(2,491

)

 

$

8,012

 

 

$

6,308

 

Adjusted EBITDA margin*

 

 

8.9

%

 

 

(5.2

)%

 

 

3.9

%

 

 

2.8

%

Net cash provided by (used in) operating activities

 

$

2,133

 

 

$

(3,147

)

 

$

(3,134

)

 

$

(8,110

)

Additions to property and equipment

 

 

(343

)

 

 

(315

)

 

 

(1,485

)

 

 

(1,217

)

Free cash flow*

 

$

1,790

 

 

$

(3,462

)

 

$

(4,619

)

 

$

(9,327

)

*

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.

Results of Operations

Comparison of the Fourth Quarter and Fiscal Year Ended July 31, 2022 and 2021

 

Three Months Ended

July 31,

 

 

 

 

 

2022

 

2021

 

Fav (Unfav) ($)

 

% Change

 

(unaudited, $ in thousands)

 

 

 

 

Net revenue

$53,049

 

$47,705

 

$5,344

 

11.2%

Cost of revenue

(41,064)

 

(39,290)

 

(1,774)

 

(4.5)%

Gross profit

11,985

 

8,415

 

3,570

 

42.4%

Gross profit margin

22.6%

 

17.6%

 

 

5.0%

Selling, general and administrative

(11,474)

 

(12,521)

 

1,047

 

8.4%

Interest expense

(761)

 

(702)

 

(59)

 

(8.4)%

Other gains, net

2,477

 

5,167

 

(2,690)

 

(52.1)%

Total costs and expenses

(50,822)

 

(47,346)

 

(3,476)

 

(7.3)%

Income from continuing operations before income taxes

2,227

 

359

 

1,868

 

520.3%

Income tax (benefit) expense

(682)

 

713

 

1,395

 

195.7%

Net income (loss) from continuing operations

$2,909

 

$(354)

 

$3,263

 

921.8%

 

Fiscal Year Ended

July 31,

 

 

 

 

 

2022

 

2021

 

Fav (Unfav) ($)

 

% Change

 

(unaudited, $ in thousands)

 

 

 

 

Net revenue

$203,272

 

$226,256

 

(22,984)

 

(10.2)%

Cost of revenue

(161,736)

 

(178,552)

 

16,816

 

9.4%

Gross profit

41,536

 

47,704

 

(6,168)

 

(12.9)%

Gross profit margin

20.4%

 

21.1%

 

 

(0.7)%

Selling, general and administrative

(40,373)

 

(49,274)

 

8,901

 

18.1%

Interest expense

(3,120)

 

(2,615)

 

(505)

 

(19.3)%

Other gains, net

4,089

 

1,187

 

2,902

 

244.5%

Total costs and expenses

(201,140)

 

(229,254)

 

28,114

 

12.3%

Income (loss) from continuing operations before income taxes

2,132

 

(2,998)

 

5,130

 

171.1%

Income tax (benefit) expense

11,388

 

8,837

 

(2,551)

 

(28.9)%

Net loss from continuing operations

$(9,256)

 

$(11,835)

 

$2,579

 

21.8%

Net Revenue

Net revenue from continuing operations for the fourth quarter increased $5.3 million, or 11.2%, as compared to the same period in the prior year. This increase in net revenue was primarily driven by higher volume associated with clients in the computing and consumer electronics markets. Fluctuations in foreign currency exchange rates had an insignificant impact on the Supply Chain segment’s net revenues for the fourth quarter, as compared to the same period in the prior year.

Net revenue from continuing operations for the year ended July 31, 2022 decreased $23.0 million, or 10.2%, as compared to the same period in the prior year, primarily due to lower volume associated with clients in the computing and consumer electronics markets, which have been negatively impacted by global market shortage of semiconductor and other electrical component supplies. Fluctuations in foreign currency exchange rates had an insignificant impact on the Supply Chain segment’s net revenues for the fiscal year ended July 31, 2022, as compared to the prior fiscal year.

Cost of Revenue

Cost of revenue from continuing operations for the fourth quarter increased $1.8 million, or 4.5%, as compared to the same period in the prior year, primarily due to increased material and labor costs from higher sales volume. The Company’s gross margin percentage increased by 495 basis points to 22.6%, as compared to 17.6% for the same period in the prior year, primarily due to higher revenues driven by higher volumes. Fluctuations in foreign currency exchange rates had an insignificant impact on the Supply Chain segment’s cost of revenue for the fourth quarter, as compared to the same period in the prior year.

Cost of revenue from continuing operations for the fiscal year ended July 31, 2022 decreased $16.8 million, or 9.4%, as compared to the same period in the prior year, primarily due to decreased material and labor costs from lower sales volume associated with clients in the computing and consumer electronics markets. The Company’s gross margin percentage decreased by 70 basis points to 20.4%, as compared to 21.1% for the same period in the prior year, primarily due to lower revenues and higher labor costs. Fluctuations in foreign currency exchange rates had an insignificant impact on the Supply Chain segment’s cost of revenue for the fiscal year ended July 31, 2022, as compared to the prior fiscal year.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expenses for the fourth quarter decreased $1.0 million, or 8.4%, as compared to the same period in the prior year. The decrease in SG&A expenses is primarily due to lower costs associated with the information technology function for the Supply Chain segment. Fluctuations in foreign currency exchange rates had an insignificant impact on SG&A expenses for the fourth quarter, as compared to the same period in the prior year.

SG&A expenses for the fiscal year ended July 31, 2022 decreased by approximately $8.9 million or 18.1%, as compared to the same period in the prior year. Supply Chain’s SG&A expenses decreased by $10.7 million primarily due to lower costs associated with the information technology function for the Supply Chain segment. Corporate-level activity increased by $1.8 million, primarily due to an increase in legal fees. Fluctuations in foreign currency exchange rates had an insignificant impact on SG&A expenses for the fiscal year ended July 31, 2022, as compared to the prior fiscal year.

Interest Expense

Total interest expense for the fourth quarter did not change significantly as compared to the same period in the prior year.

Total interest expense for the year ended July 31, 2022 increased by approximately $0.5 million primarily due to higher interest expense related to accretion of the discount on the Company’s outstanding 7.50% Convertible Note due March 1, 2024.

Other Gains, Net

Other gains, net for the fourth quarter were approximately $2.5 million. Other gains, net included gains of $0.9 million from the derecognition of accrued pricing liabilities in the Supply Chain segment, as well as net realized and unrealized foreign exchange gains of $1.3 million in the Supply Chain segment. Other gains, net for the three months ended July 31, 2021 were approximately $5.2 million, which included gains of $3.2 million from the derecognition of accrued pricing liabilities in the Supply Chain segment, and $1.7 million in net realized and unrealized foreign exchange gains in the Supply Chain segment.

Other gains, net for the fiscal year ended July 31, 2022 were approximately $4.1 million. Other gains, net, primarily included gains of $0.9 million from the derecognition of accrued pricing liabilities in the Supply Chain segment, as well as net realized and unrealized foreign exchange gains of $2.4 million and sublease income of $0.7 million in the Supply Chain segment. Other gains, net for the fiscal year ended July 31, 2021 were approximately $1.2 million. Other gains, net included gains of $3.2 million from the derecognition of accrued pricing liabilities in the Supply Chain segment, partially offset by $1.9 million in net realized and unrealized foreign exchange losses in the Supply Chain segment.

Income Tax (Benefit) Expense

Income tax benefit for the fourth quarter was $0.7 million, as compared to an expense of $0.7 million for the same period in the prior year. Income tax expense for the fiscal year ended July 31, 2022 increased $2.6 million, or 28.9%, as compared to the same period in the prior year. The decrease in income tax expense for the three months ended July 31, 2022 was primarily due to the change to the valuation allowance as a result of the IWCO Direct disposal. The increase in income tax expenses for the year ended July 31, 2022 is primarily due to the income tax expense associated with an increase in the valuation allowance recorded on deferred tax assets as a result of the IWCO Direct disposal.

Net Income (Loss) From Continuing Operations

Net income from continuing operations for the fourth quarter increased $3.3 million, as compared to net loss from continuing operations for the same period in the prior year. The increase in net income from continuing operations is primarily due to the increase in operating income due to higher sales.

Net loss from continuing operations for the year ended July 31, 2022 decreased $2.6 million, as compared to the same period in the prior year. The decrease in net loss from continuing operations is primarily due an increase in foreign exchange gains and an increase in operating income, partially offset by an increase in income taxes.

Additions to Property and Equipment (Capital Expenditures)

Capital expenditures for the fourth quarter totaled $0.3 million, or 0.6% of net revenue, as compared to $0.3 million, or 0.7% of net revenue, for the same period in the prior year. Capital expenditures increased to $1.5 million, or 0.7% of net revenue for the fiscal year ended July 31, 2022, from $1.2 million, or 0.5% of net revenue, for the same period in the prior year.

Adjusted EBITDA

Adjusted EBITDA increased $7.2 million, or 288.5%, for the fourth quarter as compared to the same period in the prior year, primarily due to an increase in net income from continuing operations of $3.3 million, and a decrease in foreign exchange net gains and other non-cash gains of $2.4 million and $1.6 million, respectively.

Adjusted EBITDA increased $1.7 million, or 27.0%, for the fiscal year ended July 31, 2022, as compared to the same period in the prior year, primarily due to a decrease in net loss from continuing operations of $2.6 million, increases in income taxes expense and professional fees of $2.6 million and $1.0 million, respectively, and a decrease in other non-cash gains of $1.5 million, partially offset by an increase in unrealized foreign exchange gains of $5.7 million for the full fiscal year.

Liquidity and Capital Resources

As of July 31, 2022, the Company had cash and cash equivalents of $53.1 million and ModusLink had readily available borrowing capacity of $11.9 million under its revolving credit facility with Umpqua Bank.

As of July 31, 2022, total debt outstanding, net of unamortized discounts and issuance costs, was $11.0 million, which was comprised of $14.9 million outstanding on the 7.50% Convertible Senior Note due March 1, 2024, less associated unamortized discounts and issuance costs.

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)

 

 

July 31, 2022

 

July 31, 2021

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

53,142

 

 

$

58,117

Accounts receivable, trade, net

 

40,083

 

 

 

36,547

Inventories, net

 

8,151

 

 

 

9,043

Funds held for clients

 

4,903

 

 

 

8,212

Prepaid expenses and other current assets

 

3,551

 

 

 

4,958

Current assets of discontinued operations

 

 

 

 

96,522

Total current assets

 

109,830

 

 

 

213,399

Property and equipment, net

 

3,534

 

 

 

4,616

Operating lease right-of-use assets

 

19,655

 

 

 

18,253

Other assets

 

4,730

 

 

 

5,692

Long-term assets of discontinued operations

 

 

 

 

434,421

Total assets

$

137,749

 

 

$

676,381

 

 

 

 

LIABILITIES, CONTINGENTLY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

30,553

 

 

$

29,829

Accrued expenses

 

28,396

 

 

 

32,653

Funds held for clients

 

4,903

 

 

 

8,212

Current lease obligations

 

6,466

 

 

 

9,630

Other current liabilities

 

13,482

 

 

 

14,277

Current liabilities of discontinued operations

 

 

 

 

123,392

Total current liabilities

 

83,800

 

 

 

217,993

Convertible note payable

 

11,047

 

 

 

9,343

Long-term lease obligations

 

12,945

 

 

 

8,719

Other long-term liabilities

 

3,983

 

 

 

3,863

Long-term liabilities of discontinued operations

 

 

 

 

395,071

Total long-term liabilities

 

27,975

 

 

 

416,996

Total liabilities

 

111,775

 

 

 

634,989

 

 

 

 

Contingently redeemable preferred stock

 

35,180

 

 

 

35,180

 

 

 

 

Total stockholders’ (deficit) equity

 

(9,206

)

 

 

6,212

 

 

 

 

Total liabilities, contingently redeemable preferred stock and stockholders’ equity

$

137,749

 

 

$

676,381

 

Steel Connect, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

 

 

Three Months Ended

July 31,

 

Fiscal Year Ended

July 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net revenue

$

53,049

 

 

$

47,705

 

 

$

203,272

 

 

$

226,256

 

Cost of revenue

 

41,064

 

 

 

39,290

 

 

 

161,736

 

 

 

178,552

 

Gross profit

 

11,985

 

 

 

8,415

 

 

 

41,536

 

 

 

47,704

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative

 

11,474

 

 

 

12,521

 

 

 

40,373

 

 

 

49,274

 

Total operating expenses

 

11,474

 

 

 

12,521

 

 

 

40,373

 

 

 

49,274

 

Operating income (loss)

 

511

 

 

 

(4,106

)

 

 

1,163

 

 

 

(1,570

)

Other income (expense):

 

 

 

 

 

 

 

Interest income

 

50

 

 

 

1

 

 

 

58

 

 

 

11

 

Interest expense

 

(761

)

 

 

(702

)

 

 

(3,120

)

 

 

(2,615

)

Other gains, net

 

2,427

 

 

 

5,166

 

 

 

4,031

 

 

 

1,176

 

Total other income (expense)

 

1,716

 

 

 

4,465

 

 

 

969

 

 

 

(1,428

)

Income (loss) from continuing operations before income taxes

 

2,227

 

 

 

359

 

 

 

2,132

 

 

 

(2,998

)

Income tax (benefit) expense

 

(682

)

 

 

713

 

 

 

11,388

 

 

 

8,837

 

Net income (loss) from continuing operations

 

2,909

 

 

 

(354

)

 

 

(9,256

)

 

 

(11,835

)

Net loss from discontinued operations

 

(1,605

)

 

 

(10,661

)

 

 

(1,712

)

 

 

(32,556

)

Net income (loss)

 

1,304

 

 

 

(11,015

)

 

 

(10,968

)

 

 

(44,391

)

Less: Preferred dividends on redeemable preferred stock

 

(537

)

 

 

(537

)

 

 

(2,129

)

 

 

(2,129

)

Net income (loss) attributable to common stockholders

$

767

 

 

$

(11,552

)

 

$

(13,097

)

 

$

(46,520

)

 

 

 

 

 

 

 

 

Net income (loss) per common unit – basic

 

 

 

 

 

 

 

Continuing operations

$

0.04

 

 

$

(0.01

)

 

$

(0.19

)

 

$

(0.23

)

Discontinued operations

 

(0.03

)

 

 

(0.17

)

 

 

(0.03

)

 

 

(0.52

)

Net income (loss) attributable to common unitholders

$

0.01

 

 

$

(0.18

)

 

$

(0.22

)

 

$

(0.75

)

 

 

 

 

 

 

 

 

Net income (loss) per common unit – diluted

 

 

 

 

 

 

 

Continuing operations

$

0.04

 

 

$

(0.01

)

 

$

(0.19

)

 

$

(0.23

)

Discontinued operations

 

(0.03

)

 

 

(0.17

)

 

 

(0.03

)

 

 

(0.52

)

Net income (loss) attributable to common unitholders

$

0.01

 

 

$

(0.18

)

 

$

(0.22

)

 

$

(0.75

)

 

 

 

 

 

 

 

 

Weighted-average number of common units outstanding – basic

 

59,945

 

 

 

62,321

 

 

 

59,964

 

 

 

62,142

 

Weighted-average number of common units outstanding – diluted

 

60,319

 

 

 

62,321

 

 

 

59,964

 

 

 

62,142

 

 

Steel Connect, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

Fiscal Year Ended

July 31,

 

 

2022

 

 

 

2021

 

Cash flows from operating activities:

 

 

 

Net loss

$

(10,968

)

 

$

(44,391

)

Loss from discontinued operations, net of tax

 

1,712

 

 

 

32,556

 

Loss from continuing operations

 

(9,256

)

 

 

(11,835

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation

 

2,220

 

 

 

3,403

 

Amortization of deferred financing costs

 

102

 

 

 

137

 

Accretion of debt discount

 

1,704

 

 

 

1,289

 

Share-based compensation

 

701

 

 

 

591

 

Deferred taxes

 

9,041

 

 

 

7,230

 

Non-cash lease expense

 

9,425

 

 

 

9,953

 

Other (gains) losses, net

 

(4,087

)

 

 

439

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net

 

(5,256

)

 

 

13,548

 

Inventories, net

 

323

 

 

 

1,628

 

Prepaid expenses and other current assets

 

1,065

 

 

 

(484

)

Accounts payable and accrued expenses

 

801

 

 

 

(18,726

)

Refundable and accrued income taxes, net

 

(471

)

 

 

15,667

 

Other assets and liabilities

 

(9,446

)

 

 

(30,950

)

Net cash used in operating activities

 

(3,134

)

 

 

(8,110

)

Cash flows from investing activities:

 

 

 

Additions to property and equipment

 

(1,485

)

 

 

(1,217

)

Proceeds from the disposition of property and equipment

 

 

 

 

182

 

Net cash used in investing activities

 

(1,485

)

 

 

(1,035

)

Cash flows from financing activities:

 

 

 

Payments of preferred dividends

 

(2,129

)

 

 

(2,129

)

Payment of deferred financing costs

 

(95

)

 

 

Repayments on capital lease obligations

 

(73

)

 

 

(70

)

Proceeds from issuance of common stock

 

 

 

 

4

 

Net cash used in financing activities

 

(2,297

)

 

 

(2,195

)

Net effect of exchange rate changes on cash and cash equivalents

 

(1,368

)

 

 

597

 

Net increase in cash, cash equivalents and restricted cash

 

(8,284

)

 

 

(10,743

)

Cash, cash equivalents and restricted cash, beginning of period

 

66,329

 

 

 

77,072

 

Cash, cash equivalents and restricted cash, end of period

$

58,045

 

 

$

66,329

 

 

 

 

 

Cash flows from discontinued operations:

 

 

 

Operating activities

$

(6,738

)

 

$

31,176

 

Investing activities

 

625

 

 

 

(2,291

)

Financing activities

 

4,230

 

 

 

(7,642

)

Net cash (used in) provided by discontinued operations

$

(1,883

)

 

$

21,243

 

 

Steel Connect, Inc. and Subsidiaries

Segment Data

(in thousands)

 

 

Three Months Ended

July 31,

 

Fiscal Year Ended

July 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

(Unaudited)

 

 

 

 

Net revenue:

 

 

 

 

 

 

 

Supply Chain

$

53,049

 

 

$

47,705

 

 

$

203,272

 

 

$

226,256

 

 

$

53,049

 

 

$

47,705

 

 

$

203,272

 

 

$

226,256

 

Operating income (loss):

 

 

 

 

 

 

 

Supply Chain

 

5,424

 

 

 

(2,745

)

 

 

11,318

 

 

 

6,827

 

Total segment operating income (loss)

 

5,424

 

 

 

(2,745

)

 

 

11,318

 

 

 

6,827

 

Corporate-level activity

 

(4,913

)

 

 

(1,361

)

 

 

(10,155

)

 

 

(8,397

)

Total operating income (loss)

 

511

 

 

 

(4,106

)

 

 

1,163

 

 

 

(1,570

)

Total other income (expense)

 

1,716

 

 

 

4,465

 

 

 

969

 

 

 

(1,428

)

Income (loss) before income taxes

$

2,227

 

 

$

359

 

 

$

2,132

 

 

$

(2,998

)

 

Steel Connect, Inc. and Subsidiaries

Reconciliation of Non-GAAP Measures to GAAP Measures

(in thousands)

(unaudited)

 

EBITDA and Adjusted EBITDA Reconciliations:

 

 

Three Months Ended

July 31,

 

Fiscal Year Ended

July 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net income (loss) from continuing operations

$

2,909

 

 

$

(354

)

 

$

(9,256

)

 

$

(11,835

)

 

 

 

 

 

 

 

 

Interest income

 

(50

)

 

 

(1

)

 

 

(59

)

 

 

(11

)

Interest expense

 

761

 

 

 

702

 

 

 

3,120

 

 

 

2,615

 

Income tax (benefit) expense

 

(682

)

 

 

713

 

 

 

11,388

 

 

 

8,837

 

Depreciation

 

522

 

 

 

783

 

 

 

2,220

 

 

 

3,403

 

EBITDA

 

3,460

 

 

 

1,843

 

 

 

7,413

 

 

 

3,009

 

 

 

 

 

 

 

 

 

Strategic consulting and other related professional fees

 

1,834

 

 

 

164

 

 

 

2,343

 

 

 

1,294

 

Executive severance and employee retention

 

81

 

 

 

 

 

 

495

 

 

 

 

Restructuring and restructuring-related expense

 

539

 

 

 

837

 

 

 

1,513

 

 

 

1,755

 

Share-based compensation

 

182

 

 

 

153

 

 

 

701

 

 

 

596

 

Loss on sale of long-lived assets

 

 

 

 

(110

)

 

 

3

 

 

 

(113

)

Impairment of long-lived assets

 

 

 

 

19

 

 

 

 

 

 

19

 

Unrealized foreign exchange (gains) losses, net

 

(626

)

 

 

(3,065

)

 

 

(3,557

)

 

 

2,118

 

Other non-cash (gains) losses, net

 

(774

)

 

 

(2,332

)

 

 

(899

)

 

 

(2,370

)

Adjusted EBITDA

$

4,696

 

 

$

(2,491

)

 

$

8,012

 

 

$

6,308

 

 

 

 

 

 

 

 

 

Net revenue

$

53,049

 

 

$

47,705

 

 

$

203,272

 

 

$

226,256

 

Adjusted EBITDA margin

 

8.9

%

 

 

(5.2

)%

 

 

3.9

%

 

 

2.8

%

Free Cash Flow Reconciliation:

 

Three Months Ended

July 31,

 

Fiscal Year Ended

July 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net cash provided by (used in) operating activities

$

2,133

 

 

$

(3,147

)

 

$

(3,134

)

 

$

(8,110

)

Additions to property and equipment

 

(343

)

 

 

(315

)

 

 

(1,485

)

 

 

(1,217

)

Free cash flow

$

1,790

 

 

$

(3,462

)

 

$

(4,619

)

 

$

(9,327

)

Net Debt Reconciliation:

 

July 31,

2022

 

July 31,

2021

Total debt, net

$

10,968

 

 

$

9,147

 

Unamortized discounts and issuance costs

 

3,972

 

 

 

5,793

 

Cash and cash equivalents

 

(53,142

)

 

 

(58,117

)

Net debt

$

(38,202

)

 

$

(43,177

)

Note Regarding Use of Non-GAAP Financial Measurements

In addition to the financial measures prepared in accordance with generally accepted accounting principles, the Company uses EBITDA, Adjusted EBITDA, Free Cash Flow and Net Debt, all of which are non-GAAP financial measures, to assess its performance. EBITDA represents earnings (loss) from continuing operations before interest income, interest expense, income tax expense, depreciation and amortization of intangible assets. We define Adjusted EBITDA as net income (loss) from continuing operations excluding net charges related to interest income, interest expense, income tax expense (benefit), depreciation, strategic consulting and other related professional fees, executive severance and employee retention, restructuring and restructuring-related expense, share-based compensation, (gain) loss on sale of long-lived assets, impairment of long-lived assets, unrealized foreign exchange (gains) losses, net, and other non-cash (gains) losses, net.

Contacts

Investor Relations Contact

Jennifer Golembeske

914-461-1276

investorrelations@steelconnectinc.com

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