Steel Partners(SPLP) - 2023 Q2 - Quarterly Report

Revenue Growth - Revenue for the three months ended June 30, 2023, increased by $59,517, or 13.5%, compared to the same period last year, driven by higher revenue from the Financial Services and Energy segments, along with contributions from the newly acquired Supply Chain segment [180]. - Revenue for the six months ended June 30, 2023, increased by $99,143, or 11.7%, compared to the same period last year, attributed to higher revenue from Financial Services and Energy segments, and the newly acquired Supply Chain segment, partially offset by lower sales from the Diversified Industrial segment [181]. - Total revenue for the six months ended June 30, 2023 was $946,296, an increase from $847,153 in the same period of 2022, driven by significant growth in the Financial Services segment [194]. - Financial Services revenue for the three months ended June 30, 2023 increased by $57,664, or 120.8%, and by $110,266, or 125.4%, for the six months ended June 30, 2023, compared to the same periods in 2022 [203][204]. - The Supply Chain segment, acquired on May 1, 2023, generated revenue of $30,181 and operating income of $1,835 for the three and six months ended June 30, 2023 [206]. Cost and Expenses - Cost of goods sold for the three months ended June 30, 2023, increased by $586, or 0.2%, primarily due to the newly acquired Supply Chain segment and higher revenue volume from the Energy segment [182]. - Cost of goods sold for the six months ended June 30, 2023, decreased by $6,291, or 1.1%, mainly driven by lower sales from the Diversified Industrial segment, partially offset by the impact of the newly acquired Supply Chain segment [183]. - Selling, general and administrative expenses for the three months ended June 30, 2023, increased by $35,523, or 35.2%, primarily due to higher expenses from the Financial Services segment and the newly acquired Supply Chain segment [184]. - SG&A expenses for the six months ended June 30, 2023 increased by $64,353, or 34.4%, primarily due to higher expenses from the Financial Services segment and newly acquired Supply Chain segment [185]. - Interest expenses increased by $1,015, or 21.1%, for the three months ended June 30, 2023, and by $2,477, or 26.5%, for the six months ended June 30, 2023, due to higher average interest rates [187]. Income and Losses - The Company’s net income for the three months ended June 30, 2023, was $58,615, compared to $92,113 for the same period last year [179]. - The Company’s income from operations before income taxes for the three months ended June 30, 2023, was $48,122, down from $129,289 in the same period last year [179]. - Net income for the three months ended June 30, 2023 was $58,615, compared to $92,113 in the same period of 2022, reflecting a decrease in operating income [194]. - The Company recorded losses from associated companies of $4,837 and $8,804 for the three and six months ended June 30, 2023, respectively, compared to income in the same periods of 2022 [193]. Cash Flow and Capital - Cash used in operating activities for the six months ended June 30, 2023 was $54,511, an improvement from $100,861 in the same period of 2022 [209]. - Cash used in investing activities for the six months ended June 30, 2023 was $143,902, primarily due to loan originations [210]. - Cash generated from financing activities for the six months ended June 30, 2023 was $318,175, significantly higher than the cash used of $6,967 in the same period of 2022 [211]. - As of June 30, 2023, the Company's working capital increased to $329,526 from $156,085 as of December 31, 2022 [216]. - Capital expenditures for the six-month period ended June 30, 2023, were $23,551, compared to $18,470 for the same period in 2022 [216]. - The Company expects full-year capital expenditures in the range of $58,000 to $68,000 for 2023, up from $47,541 in 2022 [216]. Financial Position and Compliance - As of June 30, 2023, total PPP loans and associated liabilities amounted to $31,829 and $25,715, respectively, included in Long-term loans receivable and Other borrowings in the consolidated balance sheet [175]. - The Company was in compliance with all financial covenants of its Credit Agreement as of June 30, 2023, and expects to remain compliant for the next twelve months [214]. - The total availability under the Credit Agreement was approximately $405,700 as of June 30, 2023 [216]. - WebBank had $242,868 in cash and cash equivalents as of June 30, 2023, compared to $174,257 as of December 31, 2022 [217]. - WebBank's total cash, lines of credit, and access to the Federal Reserve Bank discount window amounted to $639,164 as of June 30, 2023, representing approximately 27.7% of its total assets [217]. - ModusLink had available borrowing capacity of $11,890 under its revolving credit agreement as of June 30, 2023 [218]. Economic Conditions - The Financial Services segment, primarily through WebBank, is experiencing economic disruption and loan performance deterioration due to inflation, rising interest rates, and recession risks, which may negatively impact credit losses [174]. - The adoption of ASU No. 2016-13 resulted in an increase of $5,248 to the Allowance for Credit Losses in the Financial Services segment [222].