Earnings call transcript Q1 2023

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Operator

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

First Quarter 2023 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 for a more complete description 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 under U.S. note non-GAAP are all earnings also on not management which call, Please recognized measures will per financial share, measures, income EBITDA, net EBITDA, GAAP. financial adjusted and adjusted this reference

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

at receive not would the please XXX-XXX-XXXX did is If website Equity this be of Star Please note, and call this XXX-XXX-XXXX. contact will recorded. a company's being representative, www.starequity.com. website. copy at Group you Equity's Internet earnings release being is Relations Also, the a like live accessed over the via event broadcast after on the Equity Cati Investor also one call, the replay of the Shortly available or call, at Lena after its Star be and may

It Coleman, Star Chief is ahead. Executive introduce Rick to Please go of Equity. Officer my pleasure now

Richard Coleman

Good Gary. for conference you joining you, first quarter Thank everyone. XXXX We our call. morning, appreciate us

Noble. Eberwein; call are the today Officer, Executive Dave Chairman, Chief On me Financial Jeff with and

well XXXX began a that to and with It's quarter the a future. the us I'm culminated transformational division, has has the May been update of performance. the and our In X. for Healthcare in completed effort results on quarter on reinvigoration report business first to pleasure you and our overall sale of early This in strong especially positioned team we our proud

strong continued control. disciplined improvement as and This and first to expense $X.X our better exceeded pleased EBITDA $X.X quarter top quarter a line driven those our the at division. assumed was expectations. pricing versus due to start efficiency well strong plan I'm that bottom as achieved exceptional XXXX, teams in Construction million growth year, by to adjusted of first We million report primarily operating and of last operational Our

roughly improved points versus on prior reflecting our was Healthcare services margin our flat the X.X quarter, percentage revenue and products reorganization. gross from year Although stemming higher-margin division XXXX to XX.X%, focus again by

significantly and positioned sale accretive other balance of strategic Digirad are as our strengthened well well sheet acquisitions to Health, With we've opportunities. pursue the as

In first Healthcare I'll prior versus focus helped the gross by services quarter, on Healthcare business profitability quarter. higher unprofitable on focusing decreased Discontinuing our division first division. revenue drive our the initiatives X.X% year and higher profit. and X.X%

and these Star labor deliver results behalf contributions market team, Our for years of their the continuing valuable and we're equity wish will all as I TTG's Digirad On them Healthcare to and created was despite from the employees believe division over partners. a headwinds. strong the partnership the business, synergies under in leadership. continue We able the Equity stronger, best more management scale to excited thank result this

in the increased XXXX, input the for building management touch our around was me materials last businesses. next both XX.X% results margin management margin better versus due to QX was and gross risk the primary volatility. revenue output driver to same increase of revenue better The improvements the EdgeBuilder Increased $XX.X in and relative KBS period percentage changing price as versus as gross percentage Let XX.X% in at pricing well million Construction costs QX to X.X% Construction $XX.X division. of our million was year. on

housing, expect exciting our to sustainable robust and heading that future workforce unique specialized we KBS working pipeline growth. the large, uncertainty the into areas macroeconomic and housing. educational environmentally in position will the with on growth in is Construction buildings relatively some serve. we markets school at and the in a we're a across particular businesses player we're Despite fuel summer, experiencing business construction of a dormitories space Both affordable and continue our of small continued have initiatives new

to Now Dave, I'll over turn ahead. call additional first our consolidated go quarter Dave the Noble, CFO, provide financial highlights. to

David Noble

Thank good morning. and you, Rick,

consolidated QX to QX control good results. demonstrates decreased in decreased SG&A Equity's our effective meaningfully of on embedded now of SG&A leverage This Let's In versus particularly to revenue by a and XXXX. XX.X% X% of the businesses, financial in in Construction operating side. of QX XXXX, XX.X% turn XXXX. Star both percentage as QX cost versus

QX bottom QX Equity. $X.X was positive the also adjusted of XXXX. $X.X XXXX. net We in loss from QX favorably a compares adjusted positive in to a compared million to million. Star on of an $X.X of million net of generated line continuing million Moving net for $X.X loss net This income Non-GAAP income of a results QX in to in operations

bottom increased line $X.X substantial Non-GAAP The focused our in XXXX. in $X.X at adjusted million EBITDA to continued improvement our QX turnaround from by adjusted in of just QX EBITDA was from primarily it million in driven began materialize mid-XXXX. million non-GAAP XXXX. adjusted generating KBS, upward of extended QX in at where year, particularly to QX this division, Construction up $X.X EBITDA million in trend, its Construction $X.X consolidated

AR was of QX cash versus strong QX positive performance Construction XXXX. experienced driven also our $X.X by million at for monetization operating of XXXX division. QX was we a strong in operating QX's million in buildup of positive a cash and both Consolidating negative the flow $X.X flow a

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

This X, sale morning, paid Healthcare the off our of of with division eCapital. term and following debt. May filing in loan we we was entirety also of revolver and the the X outstanding a debt our with form Bank interest-bearing on our with have of disclosed that revolvers Webster this the XX-Q Along a

XXX% We debt-free. now are

million. financial last $XX.X disclosed forma week pro via balance Our filed cash forma pro at statements X-K/A our

X. completely associated with on on the to of able gain accumulated operating substantial that like May note offset also losses its gains company use sale with that to I sale the federal was Digirad the we realized would to Health net

to to call like Rick some back over remarks. the I'd additional turn Now for

Richard Coleman

Thanks, Digirad a business. The sale change Dave. certainly major to our was

Our been team work months, continued confidence closing exceptional diligently had in to planning several us both growth. our performance for with want done and and that's this deal overlook businesses. for potential leadership, the I but towards disciplined strong execution, working been give along don't in the Construction Strong

as Board will at bolt-ons We our In growth or and as Investments activity including division. as our thoughtfully on expanding elements acquisitions, weeks, Construction Equity they initiatives assess shareholders the could sectors These into to new the and provide prioritize coming continue and team occur. entries plan be to of the management Star these strategy. updates well business other

to call the the for operator turn now questions. I'll over

Operator

Instructions]. [Operator

Our with Litchfield is Theodore question from Hills Research. first O'Neill

Theodore O'Neill

here on first Congratulations good the and about division. Healthcare quarter question is sale My KBS. the of the

a buildings. the sort seen some had of And making the right -- in outlook like for problem have you that Can that you've comment looks here now. I So buildings of having states and a that universal on area? a and seekers that lot asylum success shelters supporting emergency are

Richard Coleman

Yes.

getting who reputation couple short-term have workforce are of would different consider of like a me say for we're I a among through number a educational things needs types housing specialized. primarily I of that sectors mentioned, that. very word are affordable Those them. and Let local that But governments and mouth as of just there institutions,

So got reputation and we've quality strength a flexibility. growing a and for growing

like we good growth. a So positioning pretty business feel we've and strengthening the done of job for it

Theodore O'Neill

interest business? that the sort on can construction on acquisition you And time is Construction going soon? too environment, last rate plenty me, the companies in seeing a were comment of of it Or Because rising of any the had verge yet? you opportunity Are there seems to Okay. it under. struggling we

Richard Coleman

see are of I of struggling. to think that from But it's specialized industry there number companies a that build businesses still. family-owned and them pretty and a nature. -- things and it's of are too that There trusses to soon everything a fragmented windows cabinets are lot

are of good in our stream business could All potential future. us business input but part the are partners become of for today part of those our and

Operator

The from next Maxim Sullivan with Tate Instructions]. [Operator the question is Group.

Tate Sullivan

on maybe can that on a least months mentioned conditions And industry terms And talk was the imaging about I Digirad, point X a couple the the timing sale this sale, medical particularly led you working you to general in in Can the think the you of the sale? if longer. in high or valuations, comment. at of of

Richard Coleman

I'll for say, first the you of all, question. thank

of planning to possibility the strengthen available things division, were looked us plan business thought the it the that the into initiatives of realized of towards we We the owner. had more continued Healthcare hard a and working a the and about underway as and though The were not and do we account to to number we the we that began operating XXXX were sell year growing price. at the Our did during take doing any the discussions opportunities sale the approached scale we business. it, more benefits at would selling we

little forward but very than we position. a It that be moved bit result. we're took the to longer we with honest, So expected, from pleased

Tate Sullivan

combined it's And then will your dividends? what and in investment? in it of I like, that Or equity company? that? for any you TTG. interest history David, look will and the -- TTG And interest terms of the there how the Will in is How account retaining combined be you company, retained some believe of getting might

Richard Coleman

want yes. Dave, do Go David, that to address you ahead, one?

David Noble

with Yes. don't they -- is combined that The equity is Digirad distributions. sort interest retained X% X% TTG. existing company the The range. combining to company will anticipate We a private the any in called platform of acquirer who had, company be an

company So will over few then they this it. sell years, attempt the next I and expect to would grow

Jeffrey Eberwein

Tate. Jeff, is This

it now under account cost So is to our plan for method. right the

a the similar we'd I would us just note And a of add to which long a together synergies income with in. just was companies The putting Digirad. retain the did to balance So was a X time, and and interest recognize together made sit X TTG, lot for this business well and business and to on stake. together, business our they there's as sheet fit further it equity would supplier really a the so that comes happy interest Digirad the

And or this in portfolio something late -- And is XXXX. in took the minus X typical for say firm plus is a their position PE would in what TTG years. all holding period this they the

firms the for you so on years what this we'll equity because a position probably there private sale a that's will that, at And be and then few ultimately do the debt our And which if we do. would pari liked hold is the thing and equity with the point, another of that be it's about would And passu our be deal. monetized. back structure PE paid firm, math

Tate Sullivan

-- at looking may. financial overhead? does noted that time I'm pro Will go of overhead of it attribute I forecasting Digirad for you Or that away separate Digirad? about take adjustments. it overhead of out Or I right overhead in if will follow-up, terms some correctly, that time million, transaction terms implied one in can $XX how work might it to to out forma in And the The statements. terms away your expenses? some to take is if

Jeffrey Eberwein

know transaction. Jeff. employee but don't I is single Yes. exact went -- I of the number, every the don't Digirad this know with

should things. transition immediate. with still helping it be they're to some going services some agreement. think going I So with them We're to be a There's be things, helping pretty us

X business not in XXX% QX. the as minimal I messy be after for QX operations. and noise will something think, will financial, be show especially we past we it's because get discontinued like but that own will up So it weeks, separated the

Tate Sullivan

Okay.

one I if may. more, And sorry,

gross in -- X the this For Is go previous XQ XX% margins, remainder that this might margins. lumber? good the profit -- a profit we quarter of in of in XX% year? current Or another in going quarter How gross quarters that Construction pricing terms a 'XX and should does at on look Construction of margins row forward? Construction, benefit your the strategy pricing hedging for your or reflect

Jeffrey Eberwein

don't Why Dave? you take that one,

David Noble

Well, speak I'll first. Yes.

type the we're sense in dramatically that a the up increased projects terms pursuing. pricing tiered fundamental change we've and So it business that in of really in probably that of is

a of every hedging the but We So the to at I is our to hedge a modules for build of you're actually business. hedge see helps. the EdgeBuilder can't of what side only half at reasons. purchase of KBS. XX% only the don't at lumber, piece the of quarter, part about number We business, KBS inputs, promise we hedgeable going definitely smaller that's But

levels. able not we strategy. say are the control. generally So really hedging higher the it's seen lumber is while months also, just And cost our best I'd last X pricing to maintain prices you've declined But have in

So say around. better business I'd just in management all

Jeffrey Eberwein

this is made too this the is add we've sales Jeff. would in the purposely investment And teams. we and I that --

both businesses softness become done if for put on about year sales big and niche more verticals a of marketing before. education And have but project in We're education percentage in we've new map to market, seen vertical tiny space. build the the college we're the at We that's like our something investing finding you a And much get really X and in the things a construction think That England, $X a not last is the smaller teeny project. the total. been dormitories it's We got New player. side, really definitely residential million into. us market. on to Construction We've the the

like. the education that this in could And million for is It They're that reference or helpful and project People can even And be the vertical time very client done. verticals. that, recent was to announced, go on looks still there The other like Vermont. we and it final It's product project getting first in what helpful see was budget. positive on whether happy. and us. a have more it's $X visit things that one

is better positioned us projects So has best somewhere, always getting participate. team building of the much something finding a and our somebody done and to job

Operator

I like turn any to would our This question-and-answer closing back remarks. concludes the conference Rick session. for Coleman to over

Richard Coleman

Thanks, Gary.

months. hesitate discuss us. Before have. of to share I to you. to take and all potential with as coming and existing we your we're note investors appreciate We'll our and in weeks don't story just you And your any feedback continued shareholders contact to call and questions continue might always always, concluding support. the our the want Please call, Thank and to that available

Operator

concluded. now you today's has Thank attending for conference The presentation.

now You disconnect. may

Star Equity (STRR) 15 May 232023 Q1 Earnings call transcript