- Earnings call transcript Q3 2022

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Operator

Greetings, ladies and gentlemen and welcome to Star Equity Holdings Third Quarter 2022 Results Conference Call. Please be advised that the discussions 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 and also third quarter 10-Q, which we expect to file on Monday, November 14, 2022 for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligation to update forward-looking statements as a result of new information, future events or otherwise. are on EBITDA, management income adjusted earnings share, that financial reference and note not per including measures measures, EBITDA, which also this U.S. will call, non-GAAP adjusted recognized Please under financial all adjusted net GAAP.

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

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

Rick Coleman

morning Maria. results XXXX today us our for you, for joining and quarter Thank call. third conference thanks Good

our both of at businesses decrease XX% profitability On Gross to year. last profit Officer, consolidated Chief significant in quarter construction division XX.X% in substantially our am was Dave operating I third increased discipline Executive with pleased today overall basis, revenue, predominantly division. this healthcare the we by grew and profit versus Healthcare driven our quarter. in an by Jeff strong On gross Construction Financial Eberwein; despite Noble. progress and me the Chairman, call and report are a

tightness continue Healthcare quarter quarter point activity, by our technologist EBITDA began and quarter study margin and to second by hopeful scanning we utilization. applicants from Both million the were our to allow decreased in decreased the effect adjusted $X which market division by due Late provide staffing service on delivered impacted we Despite third Healthcare revenue improvement compared nuclear and year, in will percentage strong our quarter, XX.X% gross more continued patient labor primarily see to the XX.X%. division are to results of improvements our the X modest the last relief Our organizational of to in restructuring. cost controls hours. of medicine in of availability reduction labor-driven the

to Our Construction of revenue primarily division which on prior due a decreased certain the recognition the revenue positive impact XX% by had in projects, timing quarter.

the projects, project contract substantially allowed revenue improved Despite percentage to recognized XX.X% timing be accelerated in operations due margin completed terms for continue expect quarter, last division a large in a variations project was to that to due performance to higher risk a recognition, the we price second particularly of England New quarterly margin profit for Similar on target. and gross quarter improved and pilot Specifically, against Construction large commodity to August. our over performing increased gross time pricing, XX% mitigation. of to successfully our

QX, our our our expected strategy for In revenue for for XX.X% Equity’s segment consolidated segment X showing and Construction total playing is that Construction diversification indicate of revenue. accounted out results XXXX, balanced of Star as QX Our first accounted and of months geographic XX.X% results. the industrial and

divisions acquisitions ability new sector. a for be operating to our optimistic Finally, and existing about we identify and bolt-ons overall or to either continue about into as entry our of future the portfolio performance integrate business

operating more third financial call turn CFO, provide will I highlights. on Dave, to Noble, quarter additional our and the results please go detail Now, Dave to our over ahead. provide

Dave Noble

Rick Thank morning. good you, and

of performance first address me the Let underlying division. the strong Healthcare

in softer bit external to a the due market. conditions was revenue labor mentioned, Rick As

prior X-month margin of year-to-date higher XXXX, was QX gross than at in margin in is XX.X% gross XX.X% the While XX.X%. versus QX period

single a QX case, for million legal for large XXXX. million in of $X.X adjusted the in was costs, EBITDA QX non-GAAP mostly $X.X versus Healthcare Excluding

Healthcare numbers versus public EBITDA expenses. X before XXXX, adjusted non-GAAP segment-level $X.X was allocating of For million These are XXXX. of $X.X company the numbers first million months any first for X in months the

project, division. a strong quarter Let business, timing versus a the QX recognition me $XX.X turnaround in revenue next Additionally, but impact. performance of our projects The delays EdgeBuilder on fully the for we have of touch revenue our experienced to mentioned, construction QX decrease quarterly year-over-year XXXX. XX% expect Construction of million $XX.X KBS was million at positive large fourth as project some those Rick to relates

outlook and quite remained year-to-date Our QX strong. results

Construction of QX. XXXX. XXXX, profit revenues months $XX.X just QX gross XX.X% $X.X prior first was the represents growth a versus million million of in margin the year-to-date. in of For gross the X a Construction in This versus million year revenues were $X.X XX.X% $XX.X or million months X.X% first for X in

X negative levels $X.X months first a of both $X.X months due pricing and X commercial the of building XXXX, volatility. management were was on significant increased in better materials the X.X% negative or risk increases the XXXX. as in For around projects a million gross margin percentages as XX.X% versus residential million The to Construction margin first gross or price well

pipeline Our construction backlog remained and sales strong. both

QX $X.X income of continuing $X.X million million to XXXX. XXXX. million from a to in net positive was continuing of million Equity in XXXX. QX in QX adjusted XX.X% X SG& was by primarily us QX of consolidated operations $X.X Star increase turn in severance Health. by loss of adjusted net Let versus loss from compared in million operations compares the of QX This adjusted driven Digirad million In costs QX. in continuing $X.X favorably $X.X A in QX the of by million net a Star to now and million very line, QX to litigation from Equity’s The At secondarily XXXX, retention-related $X. XXXX. was and with one-time the Non-GAAP results. expenses increased had associated $X.X loss a compared negative at net a bottom Non-GAAP $X.X restructuring EBITDA in operations

first XXXX. in by X of improvement adjusted XXXX, successful X our adjusted first consolidated XXXX months the was X in the of XXXX. non-GAAP a in was $X.X X in in the million net used activities XXXX first turnaround X a first segment net XXXX. adjusted versus $X.X are cash division EBITDA million the months EBITDA negative substantial numbers expenses. X cash million of public to a months months million company $X.X allocating a in million $X.X million was negative non-GAAP These positive any months month swung This At EBITDA operational $X.X of of $X.X driven versus used months Construction first from of of first in by operating the first a For level, the where of before –

XXXX, equivalents sheet cash our million, $X.X strong, on liquidity XX, balances balance and September remains of million. credit combined balance and our outstanding while the on cash our sheet stood As was $XX.X facilities interest-bearing at

turn I’ll the Now to Rick back call comments. for additional some

Rick Coleman

detail, comment Dave. I earlier. was want mentioned the to Thanks, Dave the We litigation believe into litigation Without completely strongly on merit. going without

fourth million day payment, dismissed against documents the that settlement Our happy defense $X by action to litigation of the settlement to quarter’s the agreement of expenses, was this I’m first report but on The cost the including be trial. and contributed the with final completed over we insignificant. was to underway of expect quarter. litigation, any costs cost should the expected quarter and The in the fourth continuing less trial settlement be associated well anticipated relatively are than

Now the I’ll questions. back to operator the turn any call for

Operator

[Operator proceed you. Theodore comes with O’Neill question. your Thank question Hills Research. Instructions] first Please Our from with Litchfield

Theodore O’Neill

help about out, is in understand that first question I you some the us My Thanks But an guess, very projects? I idea about much. construction delays project you going had construction probably QX. for to could that pipeline give are

Dave Noble

this or for for next the the rest mean you year both? year Do of Sure. pipeline or

Theodore O’Neill

XX months? next the For

Dave Noble

Well, housing up family. respect a the headwinds obviously, probably is ways market better is new there What demand. has rates single better. for up held say secondarily, would that’s – out. quite that than held relatively to Northeast I held multifamilies with some and multifamily, the interest in has And up economy But

focusing strong we where we’re where we’re headwinds, impact we and seeing think So in market. some be there’ll are really less the but

So would relative demand. continue see our but positioned early be some well softness, year production next to schedules weather year, year prior we could we’re to into good any this year through there this think and full expect that. But I and we to

Theodore O’Neill

the remarks very in you severance the fourth anything also Does costs, or quarter. this also there more your is did that the in it – the that quarter? include be mention in retention, And see will that and litigation be won’t Okay. if quarter, it like won’t we fourth

Rick Coleman

two anticipate one No, people significant we be or may don’t nothing here retention. significant. There severance or and there, but any

Theodore O’Neill

Okay. Thank you very much.

Operator

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

Tate Sullivan

revenue say review, for the to previously the in and that in revenue, details increase did construction project decline happened please? revenue, And the you a quarter project the to Thank finished that versus XQ? the recognized just you. And in in quarter-over-quarter going backlog you recognition, Theodore had question you construction – too, completion decline you on gave I on you in timing back the did XQ, mean

Rick Coleman

schedule. large Yes. was on accelerated earlier Tate to normal, some allowed an would The an have. of contract revenue were aspects than many It incredibly otherwise terms us we thanks. There than project recognize different that were project. so

Tate Sullivan

that part in XQ you. specific? a you one restructuring Thank And was in then of healthcare Okay. that also what the mentioned ‘XX. business, Is just

Rick Coleman

all was in that, healthcare very realignment team departure associated group. we the point, restructuring the some and had reduction personnel previous that Subsequent it. costs of the That’s That Yes. of at to some the with CEO this associated is division effectively. with operating out settled and

Tate Sullivan

– or Great. probably healthcare it or some XX%. that moving And for it still Do above in still – margin be maybe it’s please? – changes you a think there, it forward. events can you after XQ, strategic profile then low-XX% profit Will business margin can still gross the comes remind those

Rick Coleman

think I but I the to and XX%, in think downs are mentioned call, target there on still I be quarter-to-quarter. we above ups some may remain as

Tate Sullivan

that then construction, healthcare you. or whether you versus was in related litigation Thank And Okay. also to mentioned the too?

Jeff Eberwein

was That related. healthcare

Tate Sullivan

if capital a both? comment working on mostly I last then one the one Is increased And I row. too. two segment, or have noticed three quarter, it for Construction related that David, quarters or has is that Okay. management for four the mean to or in quarters could cameras inventory quarters, you

Dave Noble

of in really bit builds little it’s mean the construction just fourth for backlog. camera a some driven the yes, by is that quarter. I But Yes.

a side into as have that pushed especially EdgeBuilder mentioned, we on lot been We the projects, the quarter. fourth have of

an So, accumulation satisfy pipeline. really it’s of that to inventory

Tate Sullivan

Thank you both.

Operator

It at I further closing this would floor there like to comments. Coleman no back Rick turn over questions time. the for appears to are that now

Rick Coleman

Thank you, operator.

Before to shareholders performance and for employees for their concluding our continuing thank this all of call, want dedication, I our support. your strong just and

and discuss might have. additional call your We are take any questions always available to you

So, please us. don’t hesitate contact to

We support. continued the will you. with share and months. to story investors existing feedback And as potential always, Thank appreciate our and continue in and weeks coming your we

Operator

This teleconference. concludes today’s

lines at You may this time. disconnect for Thank your your you participation.

Star Equity (STRR) 11 Nov 222022 Q3 Earnings call transcript