Steel Connect, Inc. (the "Company") (NASDAQ: STCN) today
announced financial results for its third quarter ended April 30,
2024.
Results of Operations
During the current quarter, the Company booked a $71.5 million
non-cash accounting adjustment to net income as a result of a
release of a portion of its valuation allowance for certain
pre-existing Company deferred tax assets. The release resulted in a
one-time non-cash adjustment to income tax benefit of $71.5 million
for the quarter ended April 30, 2024. This adjustment to net income
has no cash impact and is not expected to reoccur.
Due to the previously disclosed application of pushdown
accounting, 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 April
30,
Three Months Ended April
30,
Nine Months Ended April
30,
Nine Months Ended April
30,
2024
2023
2024
2023
(in thousands)
Net revenue
$
43,855
$
46,142
$
128,240
$
148,283
Net income
71,660
3,029
81,442
7,460
Adjusted EBITDA*
$
4,451
$
5,233
$
11,908
$
17,145
Adjusted EBITDA margin*
10.1
%
11.3
%
9.3
%
11.6
%
Net cash provided by operating
activities
8,767
(588
)
15,428
9,000
Additions to property and equipment
(1,211
)
(445
)
(2,911
)
(1,311
)
Free cash flow*
$
7,556
$
(1,033
)
$
12,517
$
7,689
*
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 Third Quarter and Nine Months Ended April
30, 2024 and 2023
Successor
Predecessor
Successor
Predecessor
Three Months Ended April
30,
Three Months Ended April
30,
Nine Months Ended April
30,
Nine Months Ended April
30,
(unaudited in
thousands)
2024
2023
Fav (Unfav) ($)
2024
2023
Fav (Unfav) ($)
Net revenue
$
43,855
$
46,142
$
(2,287
)
$
128,240
$
148,283
$
(20,043
)
Cost of revenue
(30,838
)
(33,218
)
2,380
(92,402
)
(108,031
)
15,629
Gross profit
13,017
12,924
93
35,838
40,252
(4,414
)
Gross profit percentage
29.7
%
28.0
%
—
27.9
%
27.1
%
—
Selling, general and administrative
(9,144
)
(12,619
)
3,475
(26,670
)
(33,463
)
6,793
Amortization
(893
)
—
(893
)
(2,661
)
—
(2,661
)
Interest expense
(243
)
(914
)
671
(739
)
(2,588
)
1,849
Other gains, net
1,123
4,489
(3,366
)
8,739
4,889
3,850
Total costs and expenses
(39,995
)
(42,262
)
2,267
(113,733
)
(139,193
)
25,460
Income before income taxes
3,860
3,880
(20
)
14,507
9,090
5,417
Income tax benefit (expense)
67,800
(851
)
68,651
66,935
(1,630
)
68,565
Net income
$
71,660
$
3,029
$
68,631
$
81,442
$
7,460
$
73,982
Net Revenue
Net revenue for the third quarter decreased $2.3 million, or
5.0%, as compared to the same period in the prior fiscal year. This
decrease in net revenue was primarily driven by lower volumes and
loss of programs associated with existing clients in the computing
and consumer electronics markets, offset partially by new business
revenue with a client in the consumer electronics market.
Net revenue for the nine months ended April 30, 2024 decreased
$20.0 million, or 13.5%, as compared to the nine months ended April
30, 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 with a client in the consumer electronics market.
Fluctuations in foreign currency exchange rates had an
insignificant impact on net revenues for the three and nine month
periods ended April 30, 2024 and 2023.
Cost of Revenue
Total cost of revenue decreased by $2.4 million, or 7.2%, for
the third quarter, as compared to the same period in the prior
fiscal year. This was primarily driven by a decrease in cost of
materials procured on behalf of our clients of $2.3 million as a
result of lower sales volumes associated with existing clients in
the computing and consumer electronics markets.
Total cost of revenue decreased by $15.6 million, or 14.5%, for
the nine months ended April 30, 2024, as compared to the nine
months ended April 30, 2023. This was primarily driven by a
decrease in cost of materials procured on behalf of our clients of
$15.1 million as a result of lower sales volumes associated with
existing clients in the computing and consumer electronics markets,
along with a decrease in payroll, benefits and labor in support of
customers in the consumer electronics market. Fluctuations in
foreign currency exchange rates had an insignificant impact on cost
of revenues for the three and nine month periods ended April 30,
2024 and 2023.
Gross Profit Margin
Gross profit remained relatively flat in the third quarter as
compared to the same period in the prior fiscal year. Gross profit
percentage increased 170 basis points to 29.7% from 28.0% in the
third quarter as compared to the same period in the prior fiscal
year, primarily due to a decrease in cost of materials as discussed
above.
Gross profit decreased $4.4 million or 11.0% in the nine months
ended April 30, 2024 as compared to the nine months ended April 30,
2023, primarily driven by lower sales volume discussed above. The
gross profit percentage increased 80 basis points to 27.9% from
27.1%, primarily due to changes in customer sales mix. Fluctuations
in foreign currency exchange rates had an insignificant impact on
the Company's gross margin for the three and nine month periods
ended April 30, 2024 and 2023.
Selling, General and Administrative
Selling, general and administrative ("SG&A") expenses during
the third quarter decreased by approximately $3.5 million, or
27.5%, as compared to the same period in the prior fiscal year due
to Corporate-level activity, driven by a decrease in legal fees and
board fees, partially offset by an increase in expenses related to
mergers and acquisitions activity.
SG&A expenses decreased by approximately $6.8 million, or
20.3%, during the nine months ended April 30, 2024 as compared to
the nine months ended April 30, 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 nine months ended April 30,
2023 that did not reoccur during the nine months ended April 30,
2024. Corporate-level activity decreased by $6.0 million, primarily
due to a decrease in legal and other professional fees, offset
partially by an increase in expenses related to mergers and
acquisitions activity. Fluctuations in foreign currency exchange
rates did not have a significant impact on SG&A expenses for
the three and nine month periods ended April 30, 2024 and 2023.
Amortization Expense
Amortization expense of $0.9 million and $2.7 million for the
three and nine months ended April 30, 2024, respectively, was
driven by the recognition of intangible assets in connection with
the application of pushdown accounting discussed above.
Interest Expense
Interest expense during the three and nine months ended April
30, 2024 decreased $0.7 million and $1.8 million, respectively, as
compared to the three and nine months ended April 30, 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 in connection with the application
of pushdown accounting discussed above.
Other Gains, 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 $1.1 million to Other gains, net for the
three months ended April 30, 2024, driven by $3.7 million interest
income, primarily due to interest earned on money market funds,
offset by $2.1 million of net realized and unrealized losses
recognized on investments, and $0.6 million in foreign exchange
losses. The Company recorded $4.5 million to Other gains, net, for
the three months ended April 30, 2023 primarily due to: (1) $1.9
million gain from proceeds received from the sale of an investment,
(2) $1.4 million gain due to settlement with a client, (3) $0.5
million interest income, and (4) $0.3 million foreign exchange
gains.
The Company recorded $8.7 million to Other gains, net for the
nine months ended April 30, 2024, due to $10.4 million interest
income primarily earned on money market funds. This activity was
partially offset by $1.5 million of net realized and unrealized
losses recognized on investments, and $0.4 million unrealized
losses recognized as a result of the fair value remeasurement of
the SPHG Note. The Company recorded $4.9 million to Other gains,
net, for the nine months ended April 30, 2023, primarily due to:
(1) $1.9 million gain from proceeds received from the sale of an
investment, (2) $1.4 million gain due to settlement with a client,
(3) $0.9 million interest income, and (4) $0.8 million sublease
income. These gains were partially offset by $0.5 million foreign
exchange losses.
Income Tax Benefit (Expense)
During the third quarter, the Company recorded income tax
benefit of approximately $67.8 million as compared to $0.9 million
income tax expense for the same period in the prior fiscal year.
During the nine months ended April 30, 2024, the Company recorded
income tax benefit of approximately $66.9 million as compared to
$1.6 million income tax expense for the nine months ended April 30,
2023. The favorable change in income tax for both periods is due to
the Company's release of a portion of its valuation allowance for
certain pre-existing Company deferred tax assets. The release
resulted in a one-time non-cash adjustment to income tax benefit of
$71.5 million for the three and nine months ended April 30,
2024.
Net Income
Net income for the third quarter increased $68.6 million as
compared to the same period in the prior fiscal year, and increased
$74.0 million for the nine months ended April 30, 2024 as compared
to the nine months ended April 30, 2023. The increase in net income
for both periods is due primarily to the one-time non-cash,
significant income tax benefit accounting adjustment booked during
the third quarter of 2024.
Additions to Property and Equipment (Capital
Expenditures)
Capital expenditures for the third quarter totaled $1.2 million,
or 2.8% of net revenue, as compared to $0.4 million, or 1.0% of net
revenue, for the same period in the prior fiscal year.
Capital expenditures for the nine months ended April 30, 2024
totaled $2.9 million, or 2.3% of net revenue, as compared to $1.3
million, or 0.9% of net revenue, for the nine months ended April
30, 2023.
Adjusted EBITDA
Adjusted EBITDA decreased $0.8 million, or 14.9%, for the third
quarter as compared to the same period in the prior fiscal year,
primarily due to lower strategic consulting and other related
professional fees.
Adjusted EBITDA decreased $5.2 million, or 30.5%, for the nine
months ended April 30, 2024 as compared to the nine months ended
April 30, 2023, primarily due to lower strategic consulting and
other related professional fees.
Liquidity and Capital Resources
As of April 30, 2024, the Company had cash and cash equivalents
of $269.2 million and ModusLink had readily available borrowing
capacity of $11.9 million under its revolving credit facility with
Umpqua Bank.
As of April 30, 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
April 30, 2024
July 31, 2023
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
269,237
$
121,372
Accounts receivable, trade, net
31,873
28,616
Inventories, net
7,474
8,569
Funds held for clients
3,139
2,031
Prepaid expenses and other current
assets
2,727
158,686
Total current assets
314,450
319,274
Property and equipment, net
5,153
3,698
Operating lease right-of-use assets
22,907
27,098
Investments
14,293
—
Other intangible assets, net
31,929
34,589
Goodwill
22,785
22,785
Deferred tax assets
71,065
317
Other assets
2,880
3,420
Total assets
$
485,462
$
411,181
LIABILITIES, CONTINGENTLY
REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
27,494
$
26,514
Accrued expenses
23,057
26,774
Funds held for clients
3,031
1,949
Current lease obligations
8,890
7,973
Convertible note payable
12,903
—
Other current liabilities
4,333
4,544
Total current liabilities
79,708
67,754
Convertible note payable
—
12,461
Long-term lease obligations
14,444
19,161
Other long-term liabilities
4,997
5,442
Total long-term liabilities
19,441
37,064
Total liabilities
99,149
104,818
Contingently redeemable preferred
stock
237,733
237,739
Total stockholders' equity
148,580
68,624
Total liabilities, contingently redeemable
preferred stock and stockholders' equity
$
485,462
$
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
April 30,
Three Months Ended
April 30,
Nine Months Ended April
30,
Nine Months Ended April
30,
2024
2023
2024
2023
Net revenue
$
43,855
$
46,142
$
128,240
$
148,283
Cost of revenue
30,838
33,218
92,402
108,031
Gross profit
13,017
12,924
35,838
40,252
Operating expenses:
Selling, general and administrative
9,144
12,619
26,670
33,463
Amortization
893
—
2,661
—
Total operating expenses
10,037
12,619
29,331
33,463
Operating income
2,980
305
6,507
6,789
Other income (expense):
Interest income
3,656
452
10,374
928
Interest expense
(243
)
(914
)
(739
)
(2,588
)
Other gains, net
(2,533
)
4,037
(1,635
)
3,961
Total other income
880
3,575
8,000
2,301
Income before income taxes
3,860
3,880
14,507
9,090
Income tax (benefit) expense
(67,800
)
851
(66,935
)
1,630
Net income
71,660
3,029
81,442
7,460
Less: Preferred dividends on Series C
redeemable preferred stock
(531
)
(519
)
(1,604
)
(1,593
)
Net income available to common
stockholders
$
71,129
$
2,510
$
79,838
$
5,867
Net income per common shares -
basic
$
2.73
$
0.39
$
3.07
$
0.91
Net income per common shares -
diluted
$
2.51
$
0.36
$
2.88
$
0.89
Weighted-average number of common
shares outstanding - basic
6,224
6,461
6,211
6,449
Weighted-average number of common
shares outstanding - diluted
28,599
8,431
28,580
8,417
Steel Connect, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(unaudited)
Successor
Predecessor
Nine Months Ended April
30,
Nine Months Ended April
30,
2024
2023
Cash flows from operating activities:
Net income
$
81,442
$
7,460
Adjustments to reconcile net income to
cash flows from operating activities:
Depreciation
1,324
1,427
Amortization of finite-lived intangible
assets
2,661
—
Amortization of deferred financing
costs
—
36
Accretion of debt discount
—
1,688
Share-based compensation
459
529
Deferred taxes
(71,550
)
—
Non-cash lease expense
6,838
6,760
Bad debt expense
—
1,136
Other losses (gains), net
1,635
(3,962
)
Changes in operating assets and
liabilities:
Accounts receivable, net
(3,632
)
2,933
Inventories, net
808
1,440
Prepaid expenses and other current
assets
1,363
(1,237
)
Accounts payable and accrued expenses
(1,725
)
(3,886
)
Refundable and accrued income taxes,
net
(117
)
(829
)
Other assets and liabilities
(4,078
)
(4,495
)
Net cash provided by operating
activities
15,428
9,000
Cash flows from investing activities:
Purchases of investments
(18,869
)
—
Proceeds from sales of investments
157,599
1,881
Additions of property and equipment
(2,911
)
(1,311
)
Proceeds from the disposition of property
and equipment
—
166
Net cash provided by investing
activities
135,819
736
Cash flows from financing activities:
Preferred dividend payments
(1,604
)
(1,593
)
Payment of deferred financing costs
—
(149
)
Repayments on debt
—
(1,000
)
Repayments on capital lease
obligations
—
(38
)
Net cash used in financing activities
(1,604
)
(2,780
)
Net effect of exchange rate changes on
cash, cash equivalents and restricted cash
(670
)
895
Net increase in cash, cash equivalents and
restricted cash
148,973
7,851
Cash, cash equivalents and restricted
cash, beginning of period
123,403
58,045
Cash, cash equivalents and restricted
cash, end of period
$
272,376
$
65,896
Cash and cash equivalents, end of
period
$
269,237
$
62,738
Restricted cash for funds held for
clients, end of period
3,139
3,158
Cash, cash equivalents and restricted
cash, end of period
$
272,376
$
65,896
Steel Connect, Inc. and
Subsidiaries
Segment Data
(in thousands)
(unaudited)
Successor
Predecessor
Successor
Predecessor
Three Months Ended
April 30,
Three Months Ended
April 30,
Nine Months Ended April
30,
Nine Months Ended April
30,
2024
2023
2024
2023
(Unaudited)
Net revenue:
Supply Chain
$
43,855
$
46,142
$
128,240
$
148,283
Total segment net revenue
43,855
46,142
128,240
148,283
Operating income:
Supply Chain
4,448
5,249
10,187
16,488
Total segment operating income
4,448
5,249
10,187
16,488
Corporate-level activity
(1,468
)
(4,944
)
(3,680
)
(9,699
)
Total operating income
2,980
305
6,507
6,789
Total other income, net
880
3,575
8,000
2,301
Income before income taxes
$
3,860
$
3,880
$
14,507
$
9,090
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
April 30,
Three Months Ended
April 30,
Nine Months Ended April
30,
Nine Months Ended April
30,
2024
2023
2024
2023
Net income
$
71,660
$
3,029
$
81,442
$
7,460
Interest income
(3,656
)
(452
)
(10,374
)
(928
)
Interest expense
243
914
739
2,588
Income tax expense
(67,800
)
851
(66,935
)
1,630
Depreciation
439
502
1,324
1,427
Amortization
893
—
2,661
—
EBITDA
1,779
4,844
8,857
12,177
Strategic consulting and other related
professional fees
—
3,786
—
4,617
Executive severance and employee
retention
—
—
—
(150
)
Restructuring and restructuring-related
expense
8
97
132
97
Share-based compensation
162
174
459
529
Loss (gain) on sale of long-lived
assets
—
(145
)
—
(129
)
Unrealized foreign exchange losses
(gains), net
517
(167
)
835
3,561
Other non-cash losses (gains), net
1,985
(3,356
)
1,625
(3,557
)
Adjusted EBITDA
$
4,451
$
5,233
$
11,908
$
17,145
Net revenue
$
43,855
$
46,142
$
128,240
$
148,283
Adjusted EBITDA margin
10.1
%
11.3
%
9.3
%
11.6
%
Free Cash Flow Reconciliation:
Successor
Predecessor
Successor
Predecessor
Three Months Ended
April 30,
Three Months Ended
April 30,
Nine Months Ended April
30,
Nine Months Ended April
30,
2024
2023
2024
2023
Net cash provided by operating
activities
$
8,767
$
(588
)
$
15,428
$
9,000
Additions to property and equipment
(1,211
)
(445
)
(2,911
)
(1,311
)
Free cash flow
$
7,556
$
(1,033
)
$
12,517
$
7,689
Net Cash (Debt) Reconciliation:
Successor
April 30, 2024
July 31, 2023
Total debt, net
(12,903
)
(12,461
)
Cash and cash equivalents
269,237
121,372
Net cash
$
256,334
$
108,911
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 Cash (Debt), all of
which are non-GAAP financial measures, to assess its performance.
EBITDA represents earnings (losses) before interest income,
interest expense, income tax expense (benefit), depreciation, and
amortization. We define Adjusted EBITDA as net income (loss)
excluding net charges related to interest income, interest expense,
income tax expense (benefit), depreciation, amortization, 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. The Company defines Free Cash Flow as net cash
provided by (used in) operating activities less additions to
property and equipment, and defines Net Cash (Debt) as the sum of
total debt, excluding reductions for unamortized discounts and
issuance costs, less cash and cash equivalents.
We believe that providing these non-GAAP measurements to
investors is useful, as these measures provide important
supplemental information of our performance to investors and permit
investors and management to evaluate the operating performance of
our business. These measures provide useful supplemental
information to management and investors regarding our operating
results as they exclude certain items whose fluctuation from
period-to-period do not necessarily correspond to changes in the
operating results of our business. We use EBITDA and Adjusted
EBITDA in internal forecasts and models when establishing internal
operating budgets, supplementing the financial results and
forecasts reported to our Board of Directors, determining a
component of certain incentive compensation for executive officers
and other key employees based on operating performance, determining
compliance with certain covenants in the Company's credit
facilities, and evaluating short-term and long-term operating
trends in our core business. We use Free Cash Flow to conduct and
evaluate our business because, although it is similar to cash flow
from operations, we believe it is a useful measure of cash flows
since purchases of property and equipment are a necessary component
of ongoing operations, and similar to the use of Net Cash (Debt),
assists management with its capital planning and financing
considerations.
We believe that these non-GAAP financial measures assist in
providing an enhanced understanding of our underlying operational
measures to manage our core businesses, to evaluate performance
compared to prior periods and the marketplace, and to establish
operational goals. Further, we believe that these non-GAAP
financial adjustments are useful to investors because they allow
investors to evaluate the effectiveness of the methodology and
information used by management in our financial and operational
decision-making. These non-GAAP financial measures should not be
considered in isolation or as a substitute for financial
information provided in accordance with U.S. GAAP. These non-GAAP
financial measures may not be computed in the same manner as
similarly titled measures used by other companies.
Some of the limitations of EBITDA and Adjusted EBITDA
include:
- EBITDA and Adjusted EBITDA do not reflect changes in, or cash
requirements for, our working capital needs;
- EBITDA and Adjusted EBITDA do not reflect our interest expense,
or the cash requirements necessary to service interest or principal
payments, on our debt;
- EBITDA and Adjusted EBITDA do not reflect our tax expense or
the cash requirements to pay our taxes;
- EBITDA and Adjusted EBITDA do not reflect historical capital
expenditures or future requirements for capital expenditures or
contractual commitments;
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future, and EBITDA and Adjusted EBITDA do not
reflect any cash requirements for such replacements; and
- other companies in our industry may calculate EBITDA and
Adjusted EBITDA differently, limiting their usefulness as
comparative measures.
In addition, Net Cash (Debt) assumes the Company's cash and cash
equivalents can be used to reduce outstanding debt without
restriction, while Free Cash Flow has limitations due to the fact
that it does not represent the residual cash flow available for
discretionary expenditures and excludes the Company's remaining
investing activities and financing activities, including the
requirement for principal payments on the Company's outstanding
indebtedness.
See reconciliations of these non-GAAP measures to the most
directly comparable GAAP measures included in the financial tables
of this release.
Net Operating Loss Carryforwards
The Company's Restated Certificate of Incorporation (the
“Protective Amendment”) and Amended Tax Benefits Preservation Plan
(the “Tax Plan”) includes provisions designed to protect the tax
benefits of the Company's net operating loss carryforwards by
preventing certain transfers of our securities that could result in
an "ownership change" (as defined under Section 382 of the Internal
Revenue Code). The Protective Amendment generally restricts any
direct or indirect transfer if the effect would be to (i) increase
the direct, indirect or constructive ownership of any stockholder
from less than 4.99 percent to 4.99 percent or more of the shares
of common stock then outstanding or (ii) increase the direct,
indirect or constructive ownership of any stockholder owning or
deemed to own 4.99 percent or more of the shares of common stock
then outstanding. Pursuant to the Protective Amendment, any direct
or indirect transfer attempted in violation of the Protective
Amendment would be void as of the date of the prohibited transfer
as to the purported transferee (or, in the case of an indirect
transfer, the ownership of the direct owner of the shares would
terminate simultaneously with the transfer), and the purported
transferee (or in the case of any indirect transfer, the direct
owner) would not be recognized as the owner of the shares owned in
violation of the Protective Amendment (the "excess stock") for any
purpose, including for purposes of voting and receiving dividends
or other distributions in respect of such shares, or in the case of
options, receiving shares in respect of their exercise. Pursuant to
the Tax Plan and subject to certain exceptions, if a stockholder
(or group) becomes a 4.99-percent stockholder after adoption of the
Tax Plan, certain rights attached to each outstanding share of our
common stock would generally become exercisable and entitle
stockholders (other than the new 4.99-percent stockholder or group)
to purchase additional shares of the Company at a significant
discount, resulting in substantial dilution in the economic
interest and voting power of the new 4.99-percent stockholder (or
group). In addition, under certain circumstances in which the
Company is acquired in a merger or other business combination after
a non-exempt stockholder (or group) becomes a new 4.99-percent
stockholder, each holder of a right (other than the new
4.99-percent stockholder or group) would then be entitled to
purchase shares of the acquiring company's common stock at a
discount. For further discussion of the Company's tax benefits
preservation plan, please see the Company's filings with the
SEC.
Forward-Looking Statements
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Statements in this release that are not historical facts are hereby
identified as "forward-looking statements" for the purpose of the
safe harbor provided by Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. All statements other than statements of historical
fact, including without limitation, those with respect to the
Company's goals, plans, expectations and strategies set forth
herein are forward-looking statements. The following important
factors and uncertainties, among others, could cause actual results
to differ materially from those described in these forward-looking
statements: changes in the Company’s relationships with significant
clients; fluctuations in demand for our products and services; the
Company’s ability to achieve and sustain operating profitability;
demand variability from clients without minimum purchase
requirements; general economic conditions and public health crises;
intense competition in the Company’s business; risks relating to
impairment, misappropriation, theft and credit-related issues with
respect to funds held for the Company’s clients; a decrease in our
key business sectors or a reduction in consumer demand; our ability
to maintain adequate inventory levels; our ability to raise or
access capital in the future; difficulties increasing operating
efficiencies and effecting cost savings; loss of essential
employees or an inability to recruit and retain personnel; the
Company's ability to execute on its business strategy and to
achieve anticipated synergies and benefits from business
acquisitions; risks inherent with conducting international
operations, including the Company’s operations in Mainland China;
the risk of damage, misappropriation or loss of the physical or
intellectual property of the Company’s clients; disruptions in or
breaches of the Company’s technology systems; failure to settle
disputes and litigation on terms favorable to the Company; the
Company's ability to preserve and monetize its net operating
losses; changes in tax rates, laws or regulations; the vast
majority of the voting power of our capital stock is owned and
controlled by Steel Partners Holdings, L.P.; potential conflicts of
interest arising from the interests of the members of the Company’s
board of directors in Steel Holdings and its affiliates; risks
related to the reverse/forward stock split; potential restrictions
imposed by its indebtedness; and potential adverse effects from
changes in interest rates. For a detailed discussion of cautionary
statements and risks that may affect the Company's future results
of operations and financial results, please refer to the Company's
filings with the SEC, including, but not limited to, the risk
factors in the Company's Annual Report on Form 10-K filed with the
SEC on November 8, 2023. These filings are available on the
Company's Investor Relations website under the "SEC Filings"
tab.
All forward-looking statements are necessarily only estimates of
future results, and there can be no assurance that actual results
will not differ materially from expectations, and, therefore, you
are cautioned not to place undue reliance on such statements.
Further, any forward-looking statement speaks only as of the date
on which it is made, and we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after
the date on which the statement is made or to reflect the
occurrence of unanticipated events.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240605358330/en/
Jennifer Golembeske 914-461-1276
investorrelations@steelconnectinc.com
Steel Connect (NASDAQ:STCN)
Gráfica de Acción Histórica
De Dic 2024 a Ene 2025
Steel Connect (NASDAQ:STCN)
Gráfica de Acción Histórica
De Ene 2024 a Ene 2025
