Financial Data and Key Metrics Changes - In Q2 2021, the company reported a net loss from continuing operations of $1.8 million, compared to a net loss of $0.8 million in the same period in 2020 [14] - Non-GAAP adjusted net loss from continuing operations was $3.7 million or $0.74 per share, compared to an adjusted net income of $0.2 million or $0.06 per share in Q2 2020 [14] - Operating cash outflow for Q2 2021 was $5.4 million, compared to $0.6 million in Q2 2020 [15] - Net debt decreased from $14.3 million a year ago to $6.8 million at the end of Q2 2021 [6] Business Line Data and Key Metrics Changes - Healthcare division revenue increased by 57% to $14.9 million compared to the same period last year [8] - Construction division revenue grew by 117% to $10.9 million, up from $5.0 million in Q2 2020 [12] - Gross margin for the construction division was negative 16.9% in Q2 2021, down from a positive 20.9% in the prior year [12] Market Data and Key Metrics Changes - Diagnostic services revenue was $11.7 million with a gross margin of 20.4%, compared to $7.1 million and 13.3% in the prior year [9] - Diagnostic imaging revenue was $3.1 million with a gross margin of 32.5%, compared to $2.3 million and 52.8% in the prior year [9] Company Strategy and Development Direction - The company aims to improve gross margins in the construction division to a target range of 20% to 25% [20] - Management is focused on increasing product pricing and improving operations to counteract rising raw material costs [5] - The company is well-positioned to pursue acquisitions and internal growth investments following asset sales that improved its balance sheet [6] Management's Comments on Operating Environment and Future Outlook - Management noted that the healthcare division has rebounded to pre-pandemic levels, operating at full capacity [8] - The construction division is experiencing strong demand, with a robust sales pipeline and backlog despite price increases [30] - Management expects that input costs will normalize in the second half of the year, leading to improved margins [19] Other Important Information - The company resumed paying dividends on preferred stock in June 2021, with future payments to be determined by the board [39] - Management indicated that they are working on reducing SG&A costs while increasing pricing to improve profitability [51] Q&A Session Summary Question: Impact of falling lumber prices on construction business - Management indicated that a six-month backlog means it would take time to see benefits from falling lumber prices, but they expect average input costs to decline significantly in the second half of the year [18][19] Question: Sustainability of healthcare margins - Management stated that the gross margin for diagnostic services is expected to remain steady, while diagnostic imaging margins may fluctuate based on camera sales [27][28] Question: Demand for construction business amid raw material cost swings - Management reported strong demand and a robust backlog, although some larger projects have been delayed due to rising costs [30][31] Question: Future of preferred stock dividends - Management confirmed that the board will decide on future dividends, with discussions ongoing about the preferred stock dividend strategy [40][41] Question: Guidance on construction gross margins for upcoming quarters - Management anticipates improved gross margins in the second half of the year, with a target of achieving 20% or higher [42][44]
Star Equity (STRR) - 2021 Q2 - Earnings Call Transcript