Steel Connect Reports 22.1% Revenue Growth to $50.5 Million, Net Income Declines

Steel Connect, Inc. reported a significant increase in financial performance for the three months ended October 31, 2024, with net revenue reaching $50.5 million, a 22.1% increase from $41.3 million in the same period last year. The company achieved a gross profit of $17.2 million, up 50.2% from $11.5 million, resulting in a gross profit margin of 34.1%, compared to 27.8% in the prior year. However, net income decreased to $2.4 million from $4.4 million, primarily due to a substantial decline in other income, which shifted from a gain of $3.5 million to a loss of $3.2 million.

The company's operational metrics showed a notable increase in customer engagement, particularly in the computing and consumer electronics sectors, which contributed to the revenue growth. The cost of revenue rose to $33.3 million, reflecting higher material costs and labor expenses associated with increased sales volume. Selling, general, and administrative expenses also increased to $9.8 million, driven by higher corporate-level activity and legal fees.

In terms of strategic developments, Steel Connect executed a significant transaction with Steel Partners Holdings in May 2023, exchanging marketable securities for 3.5 million shares of Series E Convertible Preferred Stock. This transaction resulted in Steel Partners owning approximately 91% of Steel Connect's outstanding capital stock. Additionally, the company is preparing for a potential short-form merger with Steel Holdings, which could lead to the delisting of its common stock from NASDAQ.

The company’s balance sheet as of October 31, 2024, showed total assets of $476.8 million, a decrease from $485.6 million at the end of the previous fiscal year. Cash and cash equivalents were reported at $233.9 million, down from $248.6 million. The company’s liquidity position remains strong, with available borrowing capacity under its credit agreement with Umpqua Bank amounting to $11.9 million. Steel Connect anticipates that it has sufficient resources to meet its operational needs for at least the next twelve months.

Looking ahead, Steel Connect aims to leverage its strategic position and operational improvements to enhance profitability and market share. The company is focused on diversifying its client base and expanding its service offerings in the supply chain management sector, while also navigating the complexities of its ongoing legal matters and potential corporate restructuring.