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Star Equity (STRR) - 2024 Q2 - Earnings Call Transcript
STRRStar Equity (STRR)2024-08-13 23:02
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Financial Data and Key Metrics Changes - The company's Q2 2024 revenue increased by 51.6% compared to Q2 2023, driven by the inclusion of Timber Technologies revenue and a full quarter of revenue from Big Lake Lumber [5][6] - Gross margin declined by 14.9%, primarily due to a one-time purchase price adjustment related to the Timber Technologies acquisition [5][6] - The net loss from continuing operations was 3.8millioninQ22024,comparedtoanetlossof3.8 million in Q2 2024, compared to a net loss of 1.4 million in Q2 2023 [9] - Non-GAAP adjusted net loss from continuing operations was 0.9million,roughlythesameasinQ22023,whileadjustedEBITDAforcontinuingoperationswasalossof0.9 million, roughly the same as in Q2 2023, while adjusted EBITDA for continuing operations was a loss of 0.5 million [10] Business Line Data and Key Metrics Changes - The Building Solutions division's performance reflected a decline on an organic basis due to credit tightening impacting project funding and timing, although the sales pipeline remains strong [6][7] - The integration of Timber Technologies into the Building Solutions division is substantially complete, and it is expected to generate healthy cash flow and improve overall profitability [4][6] Market Data and Key Metrics Changes - The company's unrestricted cash balance at the end of Q2 2024 was 2.5million,downfrom2.5 million, down from 21.4 million a year ago, reflecting significant cash outlay associated with the Timber Technologies acquisition [11] - The Investments division's holdings in public securities decreased to 3.8millionfrom3.8 million from 4.8 million a year ago [11] Company Strategy and Development Direction - The company announced a 1millionsharebuybackprogramtocapitalizeonperceivedundervaluationofitscommonstock[5]−TherecentinvestmentinEnservcomarksthecompany′sentryintotheenergyservicesandtransportationandlogisticssectors,diversifyingitsportfoliobeyondBuildingSolutions[12]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedthatvisibilityintofutureprojectsisbecominghazy,withmanyprojectsexperiencingdelaysratherthancancellations,primarilyduetofinancingissues[21][22]−Thereiscautiousoptimismforimprovementinthesecondhalfoftheyear,althoughtheextentofthisimprovementremainsuncertain[21][22]OtherImportantInformation−Thecompanycompletedtwosale−leasebacktransactionstotalingapproximately1 million share buyback program to capitalize on perceived undervaluation of its common stock [5] - The recent investment in Enservco marks the company's entry into the energy services and transportation and logistics sectors, diversifying its portfolio beyond Building Solutions [12] Management's Comments on Operating Environment and Future Outlook - Management noted that visibility into future projects is becoming hazy, with many projects experiencing delays rather than cancellations, primarily due to financing issues [21][22] - There is cautious optimism for improvement in the second half of the year, although the extent of this improvement remains uncertain [21][22] Other Important Information - The company completed two sale-leaseback transactions totaling approximately 7.2 million in net proceeds, which will not impact operations [4][5] - A one-time impairment of 1.3 million related to a cost method equity investment in TTG was reported, impacting SG&A expenses [8][10] Q&A Session Summary Question: Benefits of structuring the acquisition of Enservco as a share interest - Management believes the common stock is undervalued and structured the acquisition to take an initial stake of around 20%, allowing for monitoring of the transition [13][14] Question: Accounting treatment for the share interest in Enservco - The investment will sit in the Investments division and will be treated as a mark-to-market position since the company does not have control over Enservco [15] Question: Impact of Timber Technologies acquisition on gross profit - The 574,000 impact on gross profit was due to a one-time accounting adjustment related to the valuation of finished goods inventory from the Timber Technologies acquisition [17] Question: Overall business tone and outlook for the second half - Management indicated that while projects are being delayed, they are not being canceled, and they expect some improvement in the second half of the year [21][22]