STRR - Earnings call transcript Q2 2022 | Star Equity Holdings, Inc.

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Operator

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

Second Quarter 2022 Results Conference Call. Please be advised that the discussion on today's call may include forward-looking statements. Such forward-looking statements involve certain risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. Please refer to Star Equity's most recent 10-K and 10-Q filings for a more complete discussion of risk factors that could affect these projections and assumptions. obligation information, forward-looking future no result as assumes new of events company to statements update a The or otherwise. that including adjusted financial measures note non-GAAP all are earnings also on recognized are management which call Please all which will per financial share, measures income under EBITDA, net EBITDA, not -- adjusted and adjusted this reference US GAAP.

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

may did please you copy is or Equity's available the to the my www.starequity.com. Equity replay live be -- If XXX-XXX-XXXX. via call, Star Lena you. receive It not of after be introduce, will at Star Coleman, this also Executive accessed one XXX-XXX-XXXX Group representative website. Also earnings a at broadcast now like over at Shortly would call company's Cati Officer after website release the Equity being of of its a Chief at Equity. pleasure contact Thank and Rick Investor Relations the the the call, Internet on Star is and

begin. may You

Rick Coleman

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

due shortage medicine from fewer X.X% basis decrease in revenue XX% by are $XX.X scanning driven a as Healthcare Jeff days margins. revenue Noble. Chief On million, a Financial XXXX, increase, our On division revenue compared On well our Officer, gross the to technologists. Executive to the with Eberwein; as call decreased of by of a David to operational a and a second today Chairman, national and improvement significant quarter in nuclear performance the our segment [Technical as total Difficulty] predominantly

and However, sold. a improved points products both by increased X.X mix X.X% gross XX.X% better profit services due to to by the gross for of quarter percentage margin and

to KBS at mitigation. commercial We believe Gross that of implemented improved construction due XX.X% margin grew and gross toward substantially shows of commodity and our to due increased we to operations goal improved impact pricing, Our mitigate costs. XX%. projects second over this by revenue margin performance quarter progress continued materials division the pricing generating Construction quarter's large increases price a raw risk higher

January existing growth leaves new cash strengthened investments our well-positioned Finally, equity our business either which acquisitions, position, be divisions strong offering into pursue entry which to high-return or fund a for remains sector. could our internal and bolt-ons and to us

CFO highlight Now and I'll turn our to the division results. please additional Dave, consolidated Noble, second Construction quarter call David financial ahead. over to go

David Noble

Rick, and you, good Thank morning.

versus was multifamily offset around well as higher in building increase. on QX the year-over-year as Let better levels by total business results. QX and XX.X% XX.X% me in as modular positive major million projects gross scale residential significantly was a even our pricing for increase turnaround The Construction revenues. QX, margin XXXX negative in management of our segment consolidated percentage to modular was XX.X% In volatility. versus margin materials construction increased both it revenues commercial was KBS of commercial business. $XX.X to $XX.X for price division division mainly specifically first terms Equity's Construction due XX.X% to Star of margin. touch in million Gross costs Construction The projects a in in again our gross QX a of increase the and was much in accounted a The input XXXX. performance financial the driven of risk modular higher for revenue was at driver our

strong. very sales backlog and pipeline construction Our remained

secondarily driven primarily by Equity XX% severance now This the costs Let's and versus QX XXXX. XXXX, related Health change these with increase onetime to Star to business. results. increased SG&A associated by Digirad both consolidated expense turn executive was management the litigation QX of In by

a revenue SG&A in As QX percentage XXXX QX of in as XXXX. increased a XX.X% to slightly of result, of XX.X% revenues versus

line of EBITDA and increased QX, where consolidated to a improvement net XXXX. million a compared of $X.X division, QX due substantial for QX continuing XXXX. of million net Star bottom very in million $X.X Moving $X.X EBITDA negative net a continuing of continuing $X.X in of non-GAAP loss on million of operational million QX of This adjusted million XXXX. was Non-GAAP operations from million. had adjusted We to QX Equity. improvement EBITDA from loss to negative adjusted loss adjusted bottom net was to in operations line XXXX Construction income in Non-GAAP This in compares operations to in QX a $X.X a $X.X positive $X.X to in year. positive this QX from turnaround results a segment QX in million, positive to in adjusted from favorably a the compared swung a our $X.X

Importantly for consolidated QX of a positive in million negative a XXXX. operating $X.X QX versus million was $X.X flow cash

XXXX, our $X.X was were while million, our $XX.X debt As credit outstanding very cash balance interest-bearing with an overall million. our net balance position million of The and us at facilities of liquidity XX, leaving stood strong. June negative balance $XX.X in

turn for the to any like to call operator over questions. the Operator? I'd Now,

Operator

Hills comes question line Thank [indiscernible] from Research. of first with Litchfield Our you. Instructions] [Operator the

Unidentified Analyst

Thank you. Yes.

First of at all these congratulations tough times.

up been gross construction putting margins? improvements results. target? margins. first have the is are you limit for making Do upper tremendous in have specific you guys You construction steady My is a What question

Rick Coleman

the quarter, beginning sorry. and contracts, new we're tools leadership in business that we think examining the the today really is a second the or that business. means from to beginning what materials, I to Rick. reengineering approach of that under ago brought at and of the an don't is And that first don't is, top-down taken we've processes a to This limit year started over upper that continuing identified we've using. rather think I'm that -- quarter This sorry. I

right if you feel today want continue We they're feel the improvement. to Dave, to all we place I to and know just got don't move forward. steady team I set right steady making business an making don't to we've the add like the I We taking upper limit. to that, but want want improvement. think in steps like we're So

David Noble

Yeah.

think we well that's over that that we limit I that. I mean even wouldn't But said, Rick. would I We right, XX% of real Rick are at I no used the as look to sort upper number. to something do -- there projects margin. certain there's to mid-XXs. XXs benchmark a are as see suggest XX% like into gross

more passive But space. we're margins gross to driving the of sort the complex Some up in and very especially energy-efficient been definitely of work, successful. push we've

there's Our what couple much of this year. some year in ASPs over just the so last ago. increase or a double years, are Obviously, material down of although they've prices they been for were coming

the set but projects in and are of upper So higher. an projects I target, some wouldn't are mid-XXs them good

Unidentified Analyst

Okay. of Great. And And dynamics you revenue. for in are of my other so your the second from a the in shortage a health medicine shortfalls the Is the remarks different in decrease for question if what technologists care there? this reason prepared noted nuclear personnel? in areas specialty is shortage health care

Rick Coleman

that now with on-site course, to care I – what and industry. retiring. really on were market graduate. medicine we're next get to other think, offered moving the students us. things medicine That's self-correct in hours mostly COVID medicine the that mostly weren't affecting just common starting time the technicians the or that clinical But technicians able feel is improvement the techs, some didn't nuclear to will nuclear months. program, that in across like behind And created health to see there we nuclear regard are of get necessary to in positions, of XX think to during a XX the of some specifically pandemic availability elements fully same technology months shortage to of techs colleges the the during us, lot older But

Unidentified Analyst

Great. Thank you.

Operator

with comes Group. Please with Our question. Tate Sullivan Maxim question next line the your from proceed of

Tate Sullivan

in the camera is quarter, you. it or for following the medicine the the Thank morning. more were because margin, on Rick imply technicians higher business sales, technician medicine Good health please? up margins nuclear care lower nuclear that does

Rick Coleman

We've were our the technicians scanning to that that mix. higher in The we – do. addition mainly work due to No. a product margins got

also we've range course And are a of some new, of them selling of some are got We them cameras. sell cameras of that refurbished. we

so of quarter depending significantly. the a cameras pipeline And mix on that, through in margin come can the the affect

Tate Sullivan

in seeing modular trends construction, then the Okay. construction modular other you're stronger the construction there areas that construction New for for modular England please? Thank in for New modular you. in – considerations demand special or England And with are US on your business, is than

Rick Coleman

some that you done want Do you've on work Dave, comment one? to that. on

David Noble

modular the on mean, I starts, share up that secular of different. any it's it that, higher know is don't modular a I single-family taking both Yeah. is and multifamily. a side, housing trend

New different multifamily scale is that, in in know do way. strong don't modulars. England the I that a that, have especially know we commercial position, relatively So I

We projects, the able from our Cape the down are and the Boston to better those provides lot same area some product. which really and New have in that on island. based to England. Canada We New projects we're be nobody those in England but a given else proximity in tend There's competition do or to Pennsylvania, service

really are in both housing trends in feel is as you that housing and starts we is residential, in are can are that modular diversified. within governments rentals of very single-family about do rising And our the into bit. such papers think, multifamily like starts. strong getting day And now. have our is secular every right the a the and everybody I percentage We a also, homes So aggressively and as, space wondering obviously, I a interest we of some read homes, up rates involved We starter that, storage. take off encouraging pushed said, housing that but second multifamily and business favor big housing, there have coming

factors we've our we positive given think expertise. So some and very location got our

Tate Sullivan

with work or you energy than that, to will earlier housing it. modular can efficiency talk you how it energy David better and on-site affordable efficiency with the it the Nantucket element in efficiency construction? – win projects complete? help about future be is And – then, then of Is that housing terms affordable in might energy And project, integrating construction mentioned and that you

David Noble

building do are have every in you're factory, do a that controlled Yeah. them. project the going I a on are those to or whether important servicing a an real I both driven the quality energy-efficient site business. I same and you efficient do have an project, efficiency energy a can necessarily, factory, environment. municipal energy Often in element to those Servicing workplace to that Not very strength better when type right? but affordable projects housing that you two building would to is public or of but but projects housing suggest it's are work, mean, and it those is of our be themes, themes think, element able every

Rick Coleman

And with themselves present mining as I develop -- would say, deliver. are more to and being for Dave, distinct very our them pipelines for those business. able reputation opportunities We're of obviously we a those each

Tate Sullivan

and from I flow the And cash it of backing Okay. KBS well? I you the Thank Can requirements as quarters may. on what are? great David, in in a you if for couple mean, a financials But did the into it looks quarter, increase. mostly is the remind like it, CapEx more CapEx operations then us just in couple number. $X.X million next

David Noble

fingertips, -- and my around particularly, add I $X business We a CapEx group care I here at don't there in I have component. health year, the a but that as believe major million do leases spend mean CapEx. number is $X million about a on we not but whole, cash the

a are We the whole. business relatively across capital-light

huge a factor. not that's So

Tate Sullivan

accounting Okay. go think please? to preferred is the to for if that And XQ that And equity preferred just the was a that? change recategorized you treatment last into going XQ the from I over

David Noble

not a to that the vote owners a we the provision so provision. redeemed in Yes. a to have that preferred that only and case could that of preferred decide can the control control of or that of that provision elect the preferred. allowed We There change of change us redeem Board in changed that change whether was to a had that in

current So that -- effectively, of it's the treatment receives really on based preferred. equity it form

that equity. dropped stockholders' just we So into

Tate Sullivan

you, All Okay. thank Thank and David. Rick you, you right. Thank all.

David Noble

Thank you.

Operator

with Instructions] your from the Waldo Lismore [Operator of proceed Partners. Adam line comes next question Please Our with question.

Adam Waldo

Hi. me very taking Good you Dave. questions. wonder -- if Thanks my Rick and I okay? can day, for much hear

Rick Coleman

Yes we can.

Adam Waldo

Okay.

the give So, speak pipeline at you to of can the can new look division quantification like the principal what quarter? you as And to the business pipeline end business side? us backlog on new some both and

David Noble

businesses Sure particularly? which

Adam Waldo

business, construction you're in helpful. business I'm would interested provide that particularly Well, as directional any side able but on be to extent the care quantification the that well health to the

David Noble

side I'll of Sure. take on the construction things.

So have a And the two in really that Construction They is called pipeline. we the first KBS. have business in modular companies very division. one Maine strong

sort in identified I the think of of range $XX it's opportunities. million-ish

homes I homes and before, single-family second remain mentioned we starter regular multifamily scale as, homes, as have very we As homes they then strong. both have the those energy-efficient Both of business. pipelines well call it commercial

early In our year. next fact, into schedule production is booking

So ASPs of very like all been terms we've of rest the production the we're at high up full in for year experiencing year. and

such, so held there. and we of Obviously, So rates look that for business very remains really has with slowdown interest the up that far in signs coming business but robust.

of real capacity. I think was there a shortage

take for So it slow down if bit. a things to even quite that a will around while turn

side other or remain the Builder as as Minneapolis Edge business sort in wall strong. of retail that's the well focused Both professionally a On of lumberyard on those businesses panel both business. lumberyard

wall a would the multi-family market into the done and were as pipeline very with as quarter delayed serve second third housing the be we we ever segment but Midwest panels. projects the it's been, be in remains to strong the hoping panel that our that in continues quarter, side, had wall upper there On as a that's strong got we few that

very, very time. point at Those optimistic. this in cautiously we're So remain businesses strong

Adam Waldo

Oh, sorry.

Rick Coleman

I’m ahead. Go sorry.

Adam Waldo

sorry. I’m No,

Rick Coleman

the true for is say Healthcare to same our going just was business. I

But We $X.XX us and true down existing is scanning a our on a ramping have forward purchasing decision. is business some and operating allow of of is the the is the us do and in slowed customers in opportunities year. that pipeline, it's strong through deferred methodology of during business The million to bit because a remainder now terms big change are COVID their who perhaps behalf strong is carrying least typically same our scanning pipeline a have a different, healthcare and to office at their bit up camera considering a doctor's continuing.

Adam Waldo

commentary you visibility able both even quarter? comfortable the division each positive revenues good better backlog are or pipeline you the business around given posted for during the in into through to being divisions, that perhaps than end somewhat new out similar year So second of have post you the

Rick Coleman

We're that of for we the business revenues, say the the very remainder comfortable to the feel would not but forecast going with do I year. the health backlog and the of

Adam Waldo

then you've And the line time in you. respect hedging feel to trying or XX% the for you Thank business, do on do structures. to the exceed lot construction helpful. reasonably margin your the pricing meet for is consolidated margin on on side construction somewhat Very target reasonable a with done you Obviously things side what -- gross think businesses? plus intermediate-term of

David Noble

would a I essentially but on the Yeah. in So pricing pipeline. our at the in What already. side projects that. there are don't There's any KBS is not little we still margin sure gross business, other I'm lumpiness margin, much we're how I say I we that We're are mean have say on lower can projects mean, there. right? target the we

and quickly As when that some our are have that year work caught dramatically prices don't gross be margin commodity different. ramped we got of sub-par projects they year-over-year last results but we up to projects I had completed. We any mentioned, were

level. at sorry currently target the was everything everything are the say -- everything everything gross in line target So margin pipeline -- production level. I we forward, going gross at margin is on our our going that's pricing current to And

Adam Waldo

Terrific.

the business obviously, profile the How finally of cash continuing half classify about be had the the of flow down that as so expense year? year end the second you they most expenses of How you've, onetime as year? we those that litigation through of blow free expect half in nature. in on you should do to the the do first the the impacting long for continue tail think litigation And a

Rick Coleman

question. we Yeah, have that's same that --

last been of the quite one It's that literally waiting expensive end over determination. have judge's of case. years on for We tail we're a the couple

forecast hopeful So soon. one. we're that it's we'll very difficult be But to over

Adam Waldo

Okay. That's Thank fair. you.

based like my you guesstimate the part? the that quarter free everything posted operating second know similar sounds each seeing it in a be flow possibly is cash than on now, second and half should we net-net the -- a was So flow year what on you better in cash that free reasonable to or of little in that quarter even

Rick Coleman

Certainly our hope well. as

Adam Waldo

very Thanks Terrific. much.

Operator

to in hand remarks. the to further I'd call for queue. management questions are the closing like no There back

Rick Coleman

Thank you operator.

like call. investors weeks we'll to to contact story we're that continue always Please coming I'd have. us share with to and and in might And any don't discuss additional existing note your concluding, take you to available Before our to potential questions the months. hesitate

of shareholders feedback As we Thank always, continued all and and support. you. appreciate your our

Operator

today's for Ladies and conclude does teleconference. Thank you your this participation. gentlemen,

at lines this your disconnect may have wonderful time and day. You a

Star Equity (STRR) 12 Aug 222022 Q2 Earnings call transcript