Steel Partners(SPLP) - 2023 Q3 - Quarterly Report

Revenue Growth - Revenue for the three months ended September 30, 2023, increased by $66,581, or 15.6%, compared to the same period last year, driven by higher revenue from Financial Services and the newly added Supply Chain segment [188]. - Revenue for the nine months ended September 30, 2023, increased by $165,724, or 13.0%, compared to the same period last year, attributed to higher revenue from both Financial Services and Energy segments, along with the Supply Chain segment [189]. - Total revenue for the three months ended September 30, 2023 was $492,254, an increase from $425,673 in the same period of 2022, while total revenue for the nine months ended September 30, 2023 was $1,438,550, up from $1,272,826 in the same period of 2022 [202]. - Financial Services revenue increased by $44,341, or 71.4%, for the three months ended September 30, 2023, and by $154,607, or 103.1%, for the nine months ended September 30, 2023 compared to the same periods of 2022 [209][210]. Expenses and Costs - Cost of goods sold for the three months ended September 30, 2023, increased by $9,628, or 3.5%, primarily due to the Supply Chain segment, partially offset by lower sales from the Diversified Industrial segment [190]. - Selling, general and administrative expenses (SG&A) for the three months ended September 30, 2023, increased by $31,300, or 33.4%, mainly due to higher expenses in the Financial Services segment and the newly added Supply Chain segment [192]. - SG&A for the nine months ended September 30, 2023, increased by $95,653, or 34.1%, primarily driven by higher expenses in the Financial Services segment and the Supply Chain segment, despite the impact of the divestiture of the SLPE business [193]. - Total costs and expenses for the three months ended September 30, 2023, were $462,208, compared to $380,650 for the same period last year [187]. Income and Impairments - Net income for the three months ended September 30, 2023, was $27,887, a decrease from $36,428 in the same period last year [187]. - The Company’s income from operations before income taxes and equity method investments for the three months ended September 30, 2023, was $30,046, compared to $45,023 for the same period last year [187]. - The Company recorded a non-cash impairment charge of approximately $3,140 related to other-than-temporary impairment on its equity method investment in PCS-Mosaic for the three months ended September 30, 2023 [185]. - The Company recognized an impairment charge of $329 related to unused equipment in the Building Materials business unit for the nine months ended September 30, 2023 [194]. - The Company recorded losses from associated companies of $3,140 and $11,944 for the three and nine months ended September 30, 2023, respectively, compared to income and losses in the same periods of 2022 [200]. - The Company recognized an other-than-temporary impairment charge of $3,140 for its equity method investment in PCS-Mosaic for the nine months ended September 30, 2023 [227]. Cash Flow and Financing - The Company generated $11,675 of cash from operating activities for the nine months ended September 30, 2023, compared to a cash usage of $58,524 in the same period of 2022 [216]. - The Company used $168,692 of cash in investing activities during the nine months ended September 30, 2023, primarily due to loan originations of $242,667 and purchases of investments of $204,611 [217]. - Cash generated from financing activities was $486,419 during the nine months ended September 30, 2023, mainly from an increase in deposits of $531,006 [218]. Financial Position and Expectations - As of September 30, 2023, the Company's working capital was $410,043, up from $156,085 as of December 31, 2022 [222]. - The Company expects full-year capital expenditures in the range of $52,000 to $57,000 for 2023, compared to $47,541 in 2022 [222]. - WebBank had total cash, lines of credit, and access to the Federal Reserve Bank discount window of $618,344 as of September 30, 2023, representing approximately 24.7% of its total assets [223]. - The Company’s total availability under the Credit Agreement was approximately $403,500 as of September 30, 2023 [222]. - The Company was in compliance with all financial covenants of its Credit Agreement as of September 30, 2023, and expects to remain compliant for the next twelve months [220]. Economic Outlook - The Company anticipates economic disruption and loan performance deterioration in its Financial Services segment due to inflation and rising interest rates [181]. - The effective tax rate for the nine months ended September 30, 2023 was (1.4)%, significantly lower than 29.4% for the same period in 2022, primarily due to changes in U.S. income tax expense related to unrealized gains and losses [199]. - Interest expenses decreased by $995, or 19.5%, for the three months ended September 30, 2023, but increased by $1,482, or 10.3%, for the nine months ended September 30, 2023 compared to the same periods last year [195].