STRR - Earnings call transcript Q3 2021 | Star Equity Holdings, Inc.

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Operator

Greetings, ladies and gentlemen, and welcome to the Star Equity Holdings, Inc.

Third Quarter 2021 Results Conference Call.

Some discussions made today may include forward-looking statements. Actual results could differ materially from the statements made today. Please refer to Star’s most recent 10-K and 10-Q filings for a complete description of risk factors that could affect these projections and assumptions. obligations information, forward-looking future no result as assumes new of events Company to statements update a The or otherwise. that measures, EBITDA, recognized under note to which are adjusted also on measures, management share, call Please not financial may earnings non-GAAP per financial net including adjusted adjusted U.S. all EBITDA, income or this reference GAAP.

issued required SEC rules measures measures their to reconciled GAAP by and financial financial As most our in this release earnings are regulations, these morning. comparable non-GAAP

website also a receive like Star XXX-XXX-XXXX its Shortly didn’t If at replay Chairman now Eberwein, live the would call, a is this of available the be after Cati my of or XXX-XXX-XXXX. you release via Jeff Equity. and www.starequity.com. Lena call Group website. being copy on one, and press call, pleasure The representative, at please the internet at It Equity will after broadcasted Investor Executive Star the Also, may on of Company’s contact be Relations introduce is to Star’s access the

Jeff Eberwein

Thank and all today us joining quarter thank conference our you, third morning for for XXXX you results Good operator. call.

call with Digirad and and are the year more to Noble, revenue XX% Matt me Molchan, with increasing Health; our Officer In quarter. CEO versus Chief prior continued Chief of Financial QX Officer. rebound to today David Operating XXXX, the division On Healthcare normal levels,

higher KBS output Our higher Construction EdgeBuilder, both material of to mitigate pricing revenue at implemented raw due grew to increases impact the division XX% about and and we costs.

and of of to improve in operations. continue levels percentage versus Construction the is expected improve pricing in did to improve it to steps below XXXX fourth margin remained it our normal gross the quarter increase taken due at and Although the we’ve XXXX, first half to QX, division

the million asset year our the XXXX. from to million $X.X end sheet XXXX, sales improved a $XX.X completed end ago net balance substantially the reducing of at at QX QX we of by debt With

better discussed, positioned into fund business Matt, that, go internal I’ll to Matt With our division our growth CEO, ahead. have pursue a high-return be previously investments bolt-ons could Construction now for Molchan. it and to we Healthcare please over entry sector. or We’re either or new acquisitions, which turn Healthcare

Matt Molchan

and in initial percentage XX.X%, we and imaging imaging increased camera increased Thanks, our impact the In primarily by which to our same respectively, new and QX percentage same Gross now $X division operating QX significant the capacity. third the the In The XXXX quarter. and margin was costs revenue services in in to due year. quarter. for quarter diagnostic improvement and COVID-XX. gross diagnostic X.X% for a increase Jeff. increased the did margin $X.X the third in to profit third to margin from Revenue was sales, of compared is period to for year’s This $XX.X and downturn XX.X% division XX.X% the COVID-XX to decrease last recovered services year increase mix percentage contracts. XX.X%, prior in was XXXX hospitals respectively, physician of diagnostic diagnostic practices year the due XX.X% from largely in quarter. by the over full service last in several and Healthcare Revenue the increased $XX.X are is were and by period good The prior the of profit of is pandemic-related million quarter million from period indication reporting increase mainly at XX.X% third million year. million XXXX compared compared over The the gross see to recovering in business, revenue $XX.X related and gross million diagnostic prior XXXX revenue and in material an the gross of services. services, margin is

David CFO ahead. turning additional to Noble, I’m our who the go the and quarter. COO, third call will for please Now, provide Dave, highlights financial

David Noble

Matt, morning. and good you, Thank

I’ll to our on briefly the I’ll the performance Construction of then discuss division. Firstly, consolidated move results.

for compared the year-over-year division million. the which margin both, projects in businesses. implementing residential was was price was $X.X due decrease prices both in percentages about of prior input The Gross effects production to work year to Third return raw mentioned, revenue gradually higher in This division increase, the on quarter The levels. a a and some in margin do increase third in in XX.X% was materials at year. beginning the the in higher XX% past percentage half, basis of levels a Construction margin the We due and Construction historic affected pricing to to of quarter our the rapid adverse both, quarter. by in commercial lingering $XX.X in first which quarter X.X% rise Despite to last third quarter. significant more Construction compares increases, gross KBS our on costs division Jeff levels the end our in increased this reached the contracted and the year, produced normal call. of million gross is as of to expect third revenues EdgeBuilder

Turning to results. companywide

million as was by due XXXX. headcount, and This increase we increased a senior both corporate part team fees. at in million service of headcount the bolstered experienced and additional expenses we $X.X administrative higher million as at result Also, KBS SG&A $X.X commissions IT a $X.X due to in increase sales EdgeBuilder. outside and our XXXX, and $X.X to million increased to Construction QX QX increase For in compared businesses

to the in to an continuing from of quarter from to was of last net We million million third adjusted continuing raw results Non-GAAP The $X.X to incurred during on or operations compared impact $X.X $X.X share quarter $X.XX loss bottom rapid of an adjusted third same continued compared third $X the XXXX. division. from consolidated the largest was from Moving of operations or of million the rise This Healthcare continuing business. half, of in negative quarter loss XXXX a the lingering third in in by net loss net EBITDA impacted share, EBITDA in period quarter. the adjusted for line operations net to loss construction million single year. million of the quarter per compared $X.XX the the $X.X materials in a losses which per quarter, partially for third negative adjusted first on the be cost driver offset of last of of million the COGS Non-GAAP our side the a increase in $X.X was year.

third XXXX, compared quarter XXXX. operating the to of an operating of million of third cash outflow For registered cash in we the $X.X $X.X an quarter million, outflow

As outstanding on credit of balance $XX September XXXX the was million. our facilities XX,

at in debt, Our we equivalents, to at been million overall to taking net and was XXXX. XX, $X.X the able debt of debt $X.X hold cash year-over-year. September end overall September reduce position, cash in compares XXXX. million into the This of end We’ve the account net significantly million $XX.X our

I’d questions. to operator for to the Now, call back turn like the

Operator

the Maxim first Group. Thank Instructions] with line comes question. proceed Sullivan Tate from your with Please question you. Our of [Operator

Tate Sullivan

-- those I just with million from mixed out most for buildings, in talk you XXXX. about Army’s wins the of Construction If all. facilities compared have both so wins are of now? $XX you used speak for U.S. from worked those the backlog, of through and Can to day I business key nine months start think it first revenue the contract Construction the $X may million Good to, you. Thank with Hi. the division, was

David Noble

but Those we Yes. that all referring signed two did contracts of fully this are delivered on XXXX you’re those in projects. into to year, we lead

We within little have But the [ph] to we essentially, next still of up very on a contracts. we Tachi, wrap but that couple of work doing onsite we’ve bit delivered expect are those that at weeks.

Tate Sullivan

or the Were in did are customers that upsize they any -- phases to or potentially ability contracts, all those or you deals, repeat did have as there going forward? well those were too, complete those

David Noble

mean, repeat on. projects definitely they large manager, working about that hope all we is to a are them other going will forward. completed. very But were I construction they’re talking and Tachi phases we Well, be

If give then government contract XXXX did this in work, during we during which announced the you increase from end, did additional complete and they year. remember that the and an towards us produce they that awarded

Jeff Eberwein

Jeff. have a And we One strong, we’re say projects lot is thing I’d about Tate, this is are of and really excited in other that is demand our works. the

our strong. So, really, even completed, those are remain pipeline backlog though and projects our sales really

excited. So, speaks that’s decline makes When you with other what a like to get large us have our backlog constant, will backlog demand. risk that has a that, those and those produced stayed your as there’s project we’ve you replaced which strong projects projects,

Tate Sullivan

million. can a $XX at decrease talk construction some -- strategic to or Was or inventory, little not June slightly to on from prices, And about opportunities. like of decreased higher as you And look to in bit it that I that Great. and million I of project to -- backlog $XX inventory should indicative should decline inventory purchase some saw not with for construction of weight with that I sounds in a due that that?

David Noble

No.

see We just collecting. we some piece of wouldn’t had increased our since Construction. not reasons. for Healthcare We’ve likely materials AR and accumulated It’s I the that June. from for come is collecting. In the bit fact, levels decrease of and division that the Yes, at that’s have in through business -- completed that more that we’re some and to look price not of in I peak materials couple projects a we’re down across higher the has also large Construction a but

reasons, that those business indicator But two come And not for of so, levels. an that’s down. is

piece. business operating are levels elevated at the across We

Tate Sullivan

difference can connected background sales? service remind a And contract sale signing imaging there, when between processes? service they give more the just moving camera please? too. to completely you Can Are separate Healthcare, me the on made a was on your -- sales remind comments, medical you you I little contracts versus a thought to and

David Noble

Yes. detail I’ll into that. let on Yes. get Matt

Matt Molchan

Yes.

diagnostic to to different camera. to that where providing as So, use our provide services sold we post-warranty a divisions, support on different offices out doctors’ camera the service The are two there and is business compared business a right? go

was and we call those my mobile and contracts. what in of types to related services comment So, of our more the bringing diagnostic imaging growth,

Operator

question. proceed Litchfield your Our from the O’Neill Research. next question line Please of comes with with Theodore Hills

Theodore O’Neill

this, significant hearing I’ve until some that in explore shortages here, on because to as more. high-end off customers labor well the their side New talked continuing to size And also small some a customers. projects residential several pushing about spring. builders in up bit England but want of I the little construction to have a some going materials. I of I’m got So, and see sample any prices and they’re hearing materials from construction And as here

seeing end in from issue, you’re And to going we’re to with the whether up are can think, issues? you just wait on issue spring? clients granularity on give you’re you happens going potential the us that the they’re if also what where Thanks. they’re But, that or spring hearing construction seeing see more side having I now. in the little same the and material a labor --

David Noble

a That’s Yes. lot.

Let me if that. see start attack to can I

time labor We some getting factory for same alternatives. Maine at comes to the not a side labor been every On plant cetera, fewer things. on-site operate to force the the of issue, that crews same has challenging but labor enough challenging on-site that construction framing, where and on we I’m et the labor for a job. day do there’s in is not does probably have saying times, and

actually need it’s much little new but to a we maybe so, when And would too issue. right? us we force that ago, of participants -- we when say have still able on I is benefit a labor workforce, not it’s conventional to to a the the year think today a so, been that are short And has build an side, tougher than get I to. labor

So, thing. that’s one

areas. are some material On the disruptions, chain the supply sort side, value-added there especially of in

have just which some and schedule cabinets challenges not in our to But, lead production So, getting we example, time. problem we’re for getting a them. we having longer on adjust They times, to have windows, meet. see

the materials peak mid-June. commodity those So, -- are bit up year come we’ve from they’ve the and quite over they’re seen a last the prices prices still But, on in probably side, down gone up.

But things of So, what one a lot that’s of benefit I’d hand. do. we on say, labor, in

of terms as pipeline projects, our ever as large is it’s In been.

I of right? we is play, see So, there’s may haven’t although things projects two home that. some at postponed, mean, seen modular the the But, growing. entire market you in new get market share

that. seeing not we’re So,

we’re during that haven’t as things, that large number where you’re of down felt COVID been. and what strong potential and we some but as really saw have Our is projects pipeline We it’s suggesting. people of we pursuing, were delaying a slowing

Operator

question proceed Waldo next Adam question. Please comes your of LLC. line Our with Lismore from with the Partners,

Adam Waldo

Good for hear you me day, Jeff, questions. hope okay? Dave can taking and Matt. Thanks very my much I

David Noble

Yes, we can.

Jeff Eberwein

Yes.

Adam Waldo

great. Okay,

you. Look, whole stating risk some structure, the just moderately the when and X% obviously getting free the progress we thank XX%. here obvious. a you Construction were in to We ago. lynchpin talked third last the being of a the So, XX%, of improving at made generative business the under enterprise quarter, cash flow gross the And margin margin year around quarter, back

could And margins can that XXXX the structure seeing on here range gross is last October you you’re as the business? the you you in like fourth do XX% get Construction on far confident of quarter? early As margin fourth remain sort quarter looking in so quarter, to target, gross comment the thought monthly XX% what that to close for you back by you were the

David Noble

can’t Yes. continuing we more levels. to we much approach margins normal about Well, gross October, confident say are that obviously, are but

have that priced projects spiked. were had We backlog where prices we materials our through worked before

don’t it later. can loss-making and project are that might in it four deal the now. and a right produced And we -- a pipeline be might have believe sign we months any as or you then So, five we projects imagine,

normal continue do we margins for we’re approach in to two more materials we’re that so, which But, doing. now some reasons. upfront, And cases, levels unless to going exposed those buy are we feel

Our production down, have to a seen come And of not higher, costs if also, slightly levels pricing. we lot spread fixed a better. have fact, with And increases. number So, right? able having we’re any, our on actually we of implemented are price in pushback, materials

think don’t businesses good actually construction have two we’re we quarter. do in And forget, we very that a division. to So, going have fourth

of One complex a business. Maine in them is quite does that is modular, which

without is Midwest The we’re other those some to those it’s more segment, seeing And each in one are into tougher much a bit fast differences too complex. back we getting of them one to get of because And the terms in projects wall been because report larger recovers. profitability panels. and little KBS how detail as businesses probably

general. And so, we’re second very, favorably half respond very EdgeBuilder seeing in in the

we better better. can are division, turning anything continue feel going a to quarter fourth yes, the general we feel the was quarter the that pretty third that third by confident things point in quite So, mean, a and that to reasonable for will get I than happen, but be Construction we think time.

Adam Waldo

fashion That’s let’s as Yes, to of needed? receivable in accounts structure call this pretty some a know Dave let’s or it is factoring small have so working whether don’t because for you’re that sort Main for factoring little you bit But, call balance. it Street have a in some for too really helpful. you your receivables helpful securitize, place could but Dave. capital have Jeff. or really that’s a I perspective, Do sized really good you question

David Noble

We we what have revolving have do do is -- asset-based two facilities. credit we

We KBS, million one have which $X at line. a is

from to anywhere $X million bit on now our borrowing AR a million typically is right that, We’re maybe little up. because more $X

So, nonbank we New of against a Gerber lender. AR do borrow York. with Finance essentially It’s

million $X the million, it $X million have a also It $X to over we increased but Midwest. in EdgeBuilder facility. was We at

up our on that’s borrow We’re turned little $X a that that those to they little slightly But, we not because, allow do said, and a us actually lower quicker. to a a supplement, million. and also less facilities, borrowing inventory bit with as at rate have against I

us facilities scale that of down allow and feel So, kind to that. levels have we like business as up two necessitate good we

Jeff Eberwein

And are as cheaper factoring AR revolving feel press then, a and like healthcare had the that’s all has collateral. way And the that said, our we very Dave shows X%. business, rate, But, on be. And the National below than those lending balances that a Sterling facilities, finance it’s rate. line to there’s the asset-based would and Bank. we a credit is interest one with business attractive in the And been release table a so

Adam Waldo

really to That Executive Dave preferred as at Jeff. a of the it are reasonable to I moderate part pay continuing of Construction sequentially, Final Thank helpful. currency? looking you, Jeff, into here component margin Chairman. things Is the stock level in of the of we’ll that we key preferred especially quarter. was dividend dividend is both, acquisition is think, quarters. capital the and the terms the stock potential that here Obviously, be for you’ve go business XXXX, really, for better last reinstated stack one Board as improving a the at couple fourth as pace think structure future even

Jeff Eberwein

Yes.

not the the was the think see that levels paying significantly forward more assumption. But, do cash now policy, it income that positive flow. into fourth wouldn’t started a quarter preferred looking we and thing have do. and Construction Construction we’re returning to And prudent perform in the that to wasn’t And Board if a business sets in we’ve Board The business I normal reasonable that’s invested XXXX, on that to business. generate and seeing comfortable the positive management. dividends stock

Adam Waldo

And of Well, start for XXXX. much. strong luck a thank very to best you

Jeff Eberwein

Thank you.

Operator

line with your Instructions] [Operator of Please Our question. question the Capital. next Jeff Diamond Kobylarz Bridge comes from with proceed

Jeff Kobylarz

seeing what investments on Jeff, you from elaborate Hi. the Good said, those results and about you about investing Can good in morning. just Curious what segment that. Construction been? have

Jeff Eberwein

that with a to vision rate more getting merged margins business and having last thesis, the that, revenue, the we business. it for capital was did -- have the revenue, And less also reason XX% reasons of offering $XX in business. fund growth one was that to a EBITDA the something doubling up growth, million Construction of maybe it in like we a million and investing that year the $XX fund the equity the and in had was of really vision we injected When primary the the was Construction working like doing Sure. to in than we together the the goal

backlog. business. a also of added the marketing And match added grow the significant to that grown in it was so, the needed a And to capital also was manage production level. side of or sales the amount sales business, pipeline, grown and a working higher our talent we’ve of help lot investment personnel management our We’ve

think talked we that on revenue period We So, a through Those this that price to from, increased think, XXX in as demand. revenue taken significantly weren’t of really the while to strong seeing XX% raw X,XXX But, more Dave raw year-over-year. our go stuck, with prices to us have we’re increases the prices the have material we lumber material, And of backlog, lows work with have side such planning short really kind growing about to year. I time. And commodity declined. items, six-month speaks for a at the which system. the it’s

business so, that strongly. see Company. to going be do the growth think that’s recovering engine do We And we for important an

So, that’s benefits the talked seeing about meant investments in the segment. we’ve I made that when what I of

Jeff Kobylarz

Sure.

you And KBS, week output say the Okay. very hope or volume target. for Thank kind XX% clear. I the X% was can what to of per think That’s so? you. at

David Noble

Yes.

And which, certain hard, challenge hired variable part chain management part times in we’ve it yet, said, is of line. lead makes the us get longer to as lengthening there supply an lead operational the times and which right, that it’s are help We’re internally, and some disruption, items certain assembly other items there. that is the not of Jeff because to

last higher think levels the been and of of of which more X% for ahead higher sort that it’s average, higher ASPs that. the is on our we still higher the we processes ASPs are some internally. higher have in revenues and margin higher original -- to of year. our we’re also although of that weeks believe pursuing the we’ll reasons. pricing well, all in because as budget we’ve for But they’re challenges So, we’re I external the They’re climbed are has the improve because is higher. two get But, at raised business, it. part few than abate level somewhere And the

to more So, not we but in units, doing complex be yes, we’re units. where we’re want

into for are So, in a same, units units. the charge units. right? more complex more We more sense, no two goes can complex So, labor

a of value the We’re focus the off like given more taking X.X what in a lot line million. We week. sort on is numbers the

doesn’t some to about same it say off much, that other if lot right? at boxes we it metrics, every it week, the so, labor the yes, what a looking that We’re value that’s that. -- I X XX, more right? like So, doesn’t but the matters, force factory matter or would line because And bring really

So, growth we’re of we’re work amount and happy and revenue there types the the doing. with of that production the

profitable, are yes. on We focused making more it

Jeff Kobylarz

Sure. -- if the the in and changed XXXX. Healthcare one have now the wondering just profitability then, to comparison give versus segment with give way on can you by about the Any accounting also all And businesses a Healthcare the perspective there? I’m your assets. sale some of you the Healthcare side, of

Jeff Eberwein

I of corporate cost what line, corporate separated is Healthcare that with Yes, We’ve -- on corporate confusing the associated returned we’ve public revenue the the the more company side. normal levels to kind and might between And say Jeff. be business. is this on the would

in think about were have in it we business And it to this that levels, basis, a is So, back million XX%. the QX. to in expect year, which That’s I -- profit to. be gross XX%-plus But pro and has XXXX, when $XX range, about where we was referring pre-COVID million QX, was revenue what could that’s $XX is a returned think and you’re forma in on about where we a quarter. a that

Matt, to to we what anything know add to kind that’s don’t you if So, have be view I levels. normal that? of

Matt Molchan

bit a from back revenue No. margin. side mean, as bit of a of said, the gross I Jeff would little in say the I have a you’re of little -- downturn services on. we’re a and in -- on terms rightly spot

labor due very onetimers especially that’s really and of Some up that’s over out when but and and to all in saw strong, whatnot. they’re what and are like But, XXXX to you camera costs similar take everything sales XXXX, back that. the we helping us

Jeff Kobylarz

Okay.

the from those EBITDA for continuing and $X.X -- the in the what two And of corporate by were you -- quarter. So, two to businesses in can million I say $X.X XXXX like division, before the in third businesses quarter -- second the is million it’s now, XXXX? -- just the it’s know fourth -- in

just So, kind comparison. I wanted to get of some just

David Noble

Yes. not saying difficult Jeff that is in XXXX, what corporate. that but have were and include is Health does was we differences Star Like corporate Digirad those separations. Equity $X.X what -- there is didn’t that was after million

So, be but apples-to-apples, those very XXXX. makes difficult would divisions, kind DI compare it and for DIS that’s it to XXXX of versus similar two what

Jeff Kobylarz

then, really think acquisition, in can stand, an be Do closer? And you months, just you are Okay. lastly, are X just announce you next getting you about you right sometime the you just and wait patient one? acquisitions. or the the just Jeff, for to any where may going say

Jeff Eberwein

and a at the our good benefit internal same at growing, opportunities. we are being growth we to do in a of have looking adding things. it’s do some Both market of pretty anything. No, don’t Yes. We question. see businesses feel forced and the time, from But, lot

lot to we we legs type maybe as over enough bolt-on said from spread public that’s as several did reduce to more And acquired, or focused on but add benefit base. a acquisition want them two that costs well of two. big one like think something likely the that’s of all on quantify stool. the that we be us, distracted the public stool. real can really of you a opportunities being with with for And looking to combining us those business benefit with projects, business the so, the benefits operations can of really at the growth and the think companies segments, And running don’t a we And do I our Healthcare, one, by obviously likely small Construction Construction other acquisitions. there’s the business Construction either costs a like public more bigger management to very combining joining the to company becoming growth involved them XXX% a is are team But of would more lot of business we day reduce companies, company. internal the and all way, you with at the looking in significant most all business, a another And the organic or another things standalone bolt-on things, much we companies also the we aren’t maximizing would the or time, corporate of want over company really that that’s another of acquisitions, another and these with hard by a leg be

Operator

of it looks like Jeff call the session. Eberwein And we to turn the for I’ll the reached Instructions] closing remarks. [Operator now have end question-and-answer over

Jeff Eberwein

Thank you, operator.

always to David, your the note that Matt just concluding are I call, questions. available want Before to I take and

have So, more of appreciate any email, do And we your all support. you send and questions. us call or a us feedback stockholders our your if an give and

your today. So, thank time you for

Operator

concludes lines this today’s you And time. and at may you conference, participation. your disconnect this for Thank your

Jeff Eberwein

Thank you.

Star Equity (STRR) 12 Nov 212021 Q3 Earnings call transcript