Release Date: November 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Star Equity Holdings Inc (STRR, Financial) reported a 30.9% increase in third-quarter revenue compared to the same period in 2023, driven by acquisitions.
- The company announced two large KBS projects in Maine, indicating a return to demand for large commercial construction projects.
- Star Equity Holdings Inc (STRR) has a strong construction backlog and sales pipeline, with increased activity in the fourth quarter.
- The company successfully integrated its acquisition of Big Lake Lumber and Timber Technologies, which are performing as expected.
- Star Equity Holdings Inc (STRR) diversified its investment portfolio by entering the energy services and transportation sectors through an investment in Enservco.
Negative Points
- Gross margin declined by half a percent due to constant fixed costs despite revenue declines at KBS and Edge Builder Glenbrook.
- The company recorded a $2.8 million impairment related to its equity investment in TTG, impacting SG&A expenses.
- Star Equity Holdings Inc (STRR) reported a net loss from continuing operations of $2 million for Q3 2024, compared to a $2.4 million loss in Q3 2023.
- Consolidated cash flow from continuing operations was an outflow of $3.7 million for the first nine months of 2024, compared to an inflow of $2.7 million in the same period of 2023.
- The company's unrestricted cash balance decreased significantly from $18.3 million at the end of 2023 to $5.5 million at the end of Q3 2024, largely due to acquisition costs.
Q & A Highlights
Q: Rick, regarding the improved outlook, is the improvement due to previously delayed projects coming back, new business, or a combination of both?
A: It's a combination of both. We're seeing new business filling the pipeline and previously delayed projects coming to fruition as builders and homeowners adjust to changes in interest rates and the overall environment. There's still strong demand for housing, and we weren't seeing major project cancellations, just delays.
Q: Dave, regarding the $2.8 million impairment cost recorded in SG&A, should we expect more of that, and how much is left to write down, if any?
A: We hope not to see more of that. There is a restructuring underway at TTG, and while further write-downs could happen, we do not anticipate them. The maximum potential write-down is $1.9 million, but we don't foresee needing to write down the debt piece.
Q: How much of the business is exposed to imported lumber products if new tariffs are imposed?
A: We don't buy much imported lumber, but the market could be impacted. We hedge larger projects, and any tariff increase would be an industry issue, not specific to Star Equity. We would likely raise prices to pass through any cost increases.
Q: Regarding the $14 million revenue in the quarter for building solutions, can you provide context on the projects involved?
A: It's a contribution from all our businesses, including modular and Edge Builder with the new Big Lake acquisition. Wall panels were slow, but TimberTech, which sells to distributors, showed steady performance. Overall, it was a strong performance across our businesses.
Q: What contributed to the sequential improvement in margins and EBITDA from Q2 to Q3?
A: The improvement is likely due to having a full quarter of Timber Technologies, which is our highest margin and most consistent business, whereas Q2 only included part of the quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
