Earnings call transcript Q2 2023

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Operator

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

Second 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 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

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

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

Rick Coleman

everyone. Good call. our conference for quarter Thank second you, us joining results Thanks for XXXX operator. morning

On Financial the Dave me phone Chair, Officer, Noble. and our are Jeffrey Executive Eberwein; with Chief today

transformative was strengthened truly our which significantly as operated sheet. a for which shareholder division, to performance. the of you and you with our million. divestiture second division and Healthcare report on our. completed This on Healthcare our of impact balance quarter the pleasure today previously positive a We It's It's Digirad Health created our to be gratifying $XX sale value especially update on transaction, announced dramatic immediate its

new much next position leaving within balance growth, our division. business of bolt-on stage us and the thoughtfully to a execute Investments We ended in and $XX.X cash explore our to the zero ability second of acquisitions, new opportunities including on with debt, stronger a quarter

million in no company In estate. TTG notes portfolio in $X equity real a $X.X also million $X the to Imaging million successor Solutions, addition, an cash million have we public of equity Digirad, $XX.X and debt, of and $X position million receivable,

in our this and of to growing is valuable All addition Construction businesses.

while decreased in XXXX, the revenue while XX.X% percentage of XX.X% was year. second lower the to to The addition project period, same to versus Despite the in execution XXXX, shortfall which, ability impacted driver more and costs. gross year last quality to million levels increased period management's quarter doubled uncertainty. in last margin division's by input rates for gross versus Second million versus same macroeconomic and the was to controlling interest margin XX% quarter than period in percentage primary due pricing $XX.X of maintain revenue the timing, $X.X

in continue as remain well good ability a a healthy results line We delivering to sales significant confident as backlog. on project based division's

project vary from to results. with recognition As and revenue not investors expense much and and construction-related can greatly we business, project single to period too quarter-to-quarter read any into

at in Year-to-date, by division. XX.X% headwinds position. space large, for year as gives six and and our versus maintain months of target us mid-XXs increased select Despite gross our percentage sustainable our higher across and the or reliable we first gross Construction economic markets a a margin profit the reputation unique the high-quality Construction the

and in the expanding continuing growing affordable target Our housing. in and reputation workforce dormitories sustainable to geographies environmentally school buildings and serve educational is we strong opportunities housing, and and

backlog. we year, Heading into grow maintain the second expect half our to or of the

manufacturing with continue our our addition, management clients relationships our improve strengthen In processes and to our of teams all and partnerships.

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

Dave Noble

you, and morning. good Thank Rick,

which our the relate X, to results as our note part include mentioned, Health results. business is financial continuing investments. as due that historical Construction to turn reported of of comparisons sale and all Rick and discontinued now operations, operations. I now May Let's consolidated Healthcare like to Star Digirad on Equity only would to

was versus activity as XXXX, at XXXX. QX Health our XX.X% division. QX transaction-related increased of to were SG&A This to due costs due as sale well In the Digirad

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

of $X.X decreased adjusted $X.X QX from in negative from EBITDA Construction a Non-GAAP QX of year, QX from in positive this generated XXXX. $X.X QX XXXX. non-GAAP EBITDA operations adjusted in down in $X.X million negative to continuing of XXXX a million million of million

year-to-date For adjusted XXXX. of improved in continuing to $XX,XXX the $X.X loss loss of from non-GAAP a from a operations half the period, of million EBITDA first

driven of sale negative by for QX Consolidated working costs XXXX. transactions a related in as from positive was cash million the flow million changes. investments-related Digirad, expenses operations well $X.X as QX of continuing for capital-related versus was $X.X This increased a

For prior the a million from period. operations positive year-to-date year to positive was $X.X a $X.X flow period, consolidated million continuing compared cash in the

XX, our liquidity balance consolidated As sheet XXXX, were and June strong. of

As $XX.X QX. a zero was of of balance the remaining cash a million our debt our at cash at result stood end business, of mentioned had May Healthcare interest-bearing on X, -- sale the as and we

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

Rick Coleman

a shareholders. change impressive this worked Thanks, months on Steve. an several to business. with team diligently our monumental The for for Digirad The result our sale was

However, overlook I don't the work that's exceptional done our in of to being both businesses. want Construction

continue potential growth. us Star team are and business to assess as and our Board additional look management our confidence details and and plans of more and with performance Equity planning value The we'll creating fully along strategy. for sharing evolve. development focused the on steps to targeted shareholder for forward leadership, Strong prioritize disciplined in the next gives with initiatives, We growth shareholders strong continued execution,

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

Operator

go question with Tate Instructions] Our from Sullivan [Operator first Group. comes Maxim Please ahead.

Tate Sullivan

is. $XX more detail stock less on was from that the million where was some Healthcare share your on sale that mean, loss from a book looking gain I operations you since or or I give on you little I the per operations, quarter of mean start your with a in it $X. quarter, value from mean on to all in the just And value please there? business? above can preferred realized a you the Digirad in equity of discontinued sold an of mean income income I operations the

Dave Noble

The Tate. $XX was Thanks, million of the sale gain actual Yes. sale the Digirad. from for

that in the sellers that, $X of realized, sold portion value also million the have to and of we Digirad of entity terms we $X now. million cash in In equity

but So cleaned and of really realize in up we may not no of up balance sheet, lot value. believe platform be the a we we debt a that cash. reflected stock a for with tremendous price, completely our set amount growth we It

Rick Coleman

Rick. I add has this excited really felt is the shareholder. hard We Tate, to plan equity. and Yes, be that would going we a we're TTG for the in forward, that strategic believe

Tate Sullivan

you capital cash at division You of the available? on around have it morning that $XX in XXXX. that invested Internally, you you've multiple look a outlaid realized business? the slide do that have through mean, that to your presentation million in you going on figure a as back of through Healthcare I Or the value do this roughly --

Dave Noble

to we Tate, try have We that can you, that don't put We certainly together but don't. for available.

Tate Sullivan

through? value to that your the not I I $XX And it suffice standing current in up or current how profits what But out that. you grow portfolio I'm say, mean, okay, the -- million I'll lay investment can to how is through you -- many of many portfolio? figure or is have unrealized then are gains disclosed as X/XX, cash And --

Jeffrey Eberwein

Tate, this is Jeff.

-- under mark GAAP, yes, every market portfolio investment on investment the we that the on to quarter. So

the going all what's as we our investor value just the that's that's So, as June, match based marketplace end what's sheet to soon securities. on filed will on XX-Q morning the deck for in well of this the be those that's balance at and the in published that

in assets. -- a it's footnote, level one of kind So, all it's the

Tate Sullivan

have then And available expand KBS about you to estate before talked for you Okay. some Are real available for footprint. I'll do any real look the -- you that. potentially estate given appraised that it books, now I'm higher is as I value for much looking well. than your Because before us and estate you've figure a real think just the on sale?

Dave Noble

Yes. Yes.

So the we just that's estate the of we around appraisals million, $X real most and that but these the recent appraisals, I two think recent are retained. factories old appraisals for are the

-- the we We believe that's of a we didn't and factory the third have value did useful But remaining we point above facilities booked, we any see is that one. smallest two of those significantly three. the that the quarter market was where it sell during

operational to in in We're in two throughput have other we factors. a we have upside of is would significant do that first that believe two business. what the to Point those we're able one. factory one similar the And

So significant with we we upside factories the own. that have

Jeffrey Eberwein

this credit party, there's the that's have or for our actual and appraised investor what's One to you think until what's is the may you different not of don't be is value, but actually Tate, market about. kind helpful, sell know may Jeff, numbers Then to three go real which a and XXXX, you by that our was have value, deck. was was our book lines, you that's in And done that done then third which in and value. estate?

sold third factory it was just approximately that $X.X was this appraised million. about, if the And its for so value. talking we is That Dave helpful,

you'll And gain financials of then at adjusted a like EBITDA the if table, you or see look $XXX,XXX.

a book you the gives what of that value sense So was.

think value value of than the we is appraised is the the we're and so higher least market value those the higher. book And saying assets value, appraised at

Tate Sullivan

sounds XX%. historically, -- said maintain seems gross four a I Is type well is business target like of than have last case? then you in the projects. visibility on me quarters. recently? profit the the of It consistently that still this for level that backlog -- based Construction of above on think still margin what gross like XX% the for profit you Is you good the a that last greater can margin And it

Rick Coleman

Yes.

Our target remains mid-XXs or higher.

Operator

ahead. from Litchfield next Please Our comes with Research. go Theodore question O'Neil Hills

Theodore O'Neill

current kind revenue that? Rick, could ago current probably guidance on for the quarter it around between if year any the little the quarter's you the out. going sense Or going Is a and quarter I'll us be variable a it of give does to vary level? use

Rick Coleman

the business. of challenges the Construction of one different. Every is quarter that's Yes,

much a projects. projects, of smaller quarter of think impacts smaller our very financials you And large of with of quarter number that quarter projects. we that being a large a a one as can If have than a had differently number portfolio

-- a different fall into they may sometimes and revenues we that the if project our have profits quarter the So our had don't portfolio.

Jeffrey Eberwein

way and years, production Jeff. the of gotten recent has typically And four-quarter would million be to lumpier million than if around revenue mean, got that lot year. there's our add, we at -- look recognition steady $XX we different revenue trajectory you lot should or flow control fairly recognize I a just I the average look year's projects. a you a a revenue scrutiny Theo, when have causes this just And rules of And recognition do results, revenue to it. rolling at the we a nice is last by It's business think is on $XX of to a in production. it growth

workforce that that. it take part of we going about. can the we there's we but in is built, environmentally-friendly to for Factory on products with themes cyclical of lot talked be a share, a great business, construction a lot have emphasis and course, housing of think and Of a think, we're housing, growth we've

quarter's think read we not to growth be what characteristics would too much And cyclical in there's caution one a revenue. just secular into So, we can any people some business.

quarter multiply lot you If at one it would just if a than volatility a and like you four-quarter any more you took get you look xX, average.

Theodore O'Neill

And you the enough. what are Fair disclosing is? backlog Okay.

Rick Coleman

No.

in details the disclosed really haven't We backlog. the

Theodore O'Neill

annually? disclosed that just get not it it what not is, quarterly? Is Does

Rick Coleman

to for kind Well, we've greater. Fairly a indicator we filed pretty that's now. our in have or of $XX every morning. or information win deck That's our some consistent year of That a doesn't projects, but had going of this that we're those one been million we two to mean a consistently, investor pipeline backlog. sales leading

sales guess pipeline the our I pretty that we're been trying And point to consistent. on just make has that is

just And Our been recognition pretty backlog the revenues is not revenue of has rules. quarterly the consistent. consistent because what's

business and have isn't as ups liked. revenue quarterly lumpy the our as So, downs would nearly

Operator

question with next [Mark comes Please Our Roth] Aegis. from ahead. go

Unidentified Analyst

perplexed little the wouldn't back price a as stock I'm you Yes. being stock. where guys some buying just be to is,

Jeffrey Eberwein

depends you activity. Yes. in might there open tighter stock going on This We you is It what relative buying as on. at the is The look a undervalued And think been Jeff. that's if to is. last think we quarter's dramatically all But often it window as toolkit. the NAV. has significant isn't have tool

we having back historically. as need company. have a We also more focus stock bought mass micro critical cap, to And a as on just

Board So the growing is time talk stock focus do about way our thinks is share those the all and and and repurchases, we about agree things value things those one that. per to

Operator

North [indiscernible] Our First. Please ahead. next question from with comes go

Unidentified Analyst

view of I micro of attractive to buying look of scale a and the need last that your maybe up your just you make a how you hurdle up. back then understand this IRR some as get currency guys that at your on work versus question. might to thought investments cap roll follow do how And kind to -- equity your there? shares? of currency compared it, with get or kind as for I internal some maybe How how stories some rate potential to and on your Is you

Jeffrey Eberwein

lot there. The Yes, is means that as Jeff in it things again. end. to primary a This else is and value share of per everything growing focus

whether CapEx going We more think definitely in any has a return. a division to have investment a getting investment it's our scale when or return. higher adds high we make is so we stock in value. And Construction And back buying think other investments,

private You you of size. the definitely tend as a businesses see up correlation in to go between to size. multiples Multiples get and market strong

in business to be which if is get theory, are we than which the of one let's of get a on business that We higher business. like just to million $XX the sell And to more that unless make was why we and $XXX double just a an to what $XX willing business. the not that in for so were say, we've acquisitions. to And million doing return But revenue. could that revenue reasons We So multiple was for $XXX today, bigger. Construction didn't example, getting revenue decision million see was $XX at made The Healthcare capital. our million million trying we're the to it attractive instead about bigger million. think $XX would could is at were we we path sell didn't aggressively

got got the we merge decision note that and made equity entity. So, business, in cash, to sellers it new another with also got

term, sell buy the driven long the and value term. all the things, by rate So we and long I for us our think internal it's per return over share don't maximizing expectation see things of with over goal of

Operator

Instructions] next is follow-up Tate [Operator Group. from a with Sullivan Maxim ahead. go Our question Please

Tate Sullivan

a you've include the revenue it capacity capacity facility. flexing Construction number Is just Or in does you or of labor? up it a the before think about opening talked the please? have capacity other not mentioned revenue I before, matter unit

Rick Coleman

Yes, Tate.

able related cabinetry On hours potentially be other other producing existing production that into then associated things building continue it with of in factory alternatives top and a and looking additional at get open would partner that we related we our and way. or that, into But we expressed extend modules, other we're the shift would work as to do be currently the or factory think, as step, the number of revenue. expand different businesses, factory. to to with that So expand growth, get could to companies manufacturing I we be add another first additional our

Dave Noble

the about revenue add our than to thing we that double total we only more half of believe construction The modular today. Yes. is revenue, would which I is have facilities

Rick Coleman

additional capacity got our XX% current probably You've plan. in XX% to

Tate Sullivan

Okay.

Rick Coleman

factory. into expand the to other having Without

Operator

Coleman today's call back will for the session. remarks. to closing over Rick now turn concludes I That question-and-answer

Rick Coleman

Thank you, operator.

call questions the we're concluding note want I discuss any take always to available might that your to call, and Before additional you have.

existing So you. your contact and continued and appreciate the We'll continue And and always, in hesitate with coming investors us. feedback please share shareholders Thank and weeks to to of all don't months. our potential support. our story as we

Operator

www.starequity.com. the available section Call. Quarter recorded Investors our has you and Second Conference on be Holdings Thank Today's been call for joining the of website Equity will Star

Star Equity (STRR) 11 Aug 232023 Q2 Earnings call transcript