Financial Data and Key Metrics Changes - In Q1 2021, the company reported a net loss from continuing operations of $0.6 million, an improvement from a net loss of $2.4 million in the same period in 2020 [15] - Non-GAAP adjusted net loss from continuing operations was $1.7 million or $0.35 per share, compared to adjusted net income of $1.3 million or $0.65 per share in Q1 2020 [15] - Operating cash outflow was $2.2 million in Q1 2021, compared to an inflow of $0.6 million in Q1 2020 [17] Business Line Data and Key Metrics Changes - Healthcare division revenue fell by 2.7% to $13.3 million compared to Q1 2020, with gross profit decreasing by 9.6% [10] - Construction division revenue grew by 65% to $9 million, with gross margin decreasing to 6% from 7.3% due to rising raw material prices [14][7] - Diagnostic Services revenue was $10.2 million with a gross margin of 15.7%, down from $10.8 million and 18.5% in the prior year [11] Market Data and Key Metrics Changes - The Construction division now accounts for 40% of consolidated revenues, indicating a shift in revenue contribution [14] - The company completed the sale of DMS Health Technologies for $18.75 million, improving its balance sheet and liquidity [8] Company Strategy and Development Direction - The company is focused on a holdco growth strategy, allowing division CEOs to concentrate on operations while management focuses on corporate strategy and capital allocation [8] - Plans include pursuing bolt-on acquisitions in Healthcare and Construction, as well as creating new business divisions through disciplined acquisitions [8] - The long-term goal for the Construction business is to achieve 20% gross margins and at least 10% EBITDA margin [23] Management Comments on Operating Environment and Future Outlook - Management expects the Healthcare division to return to normal levels as vaccination rates increase [10] - There is optimism about the Construction division's strong sales pipeline, which is reported to be over $50 million [35] - Management anticipates EBITDA positivity in the second half of the year, driven by revenue growth and improved margins [30] Other Important Information - The company’s net debt decreased from $20.4 million a year ago to $13.5 million at the end of Q1 2021 [8] - The company is exploring opportunities in affordable housing and other segments within the Construction business [24] Q&A Session Summary Question: Update on raw material price pressures - Management indicated that raw material price pressures affect both Construction businesses, with significant impacts on margins due to increased wood commodity prices [20] Question: Normalized gross profit levels for Building & Construction - Management aims to significantly increase margins in the second half of the year, targeting long-term gross margins of 20% [22] Question: Progress in affordable housing segment - The company is actively pursuing opportunities in affordable housing, among other segments [24] Question: Acquisition strategy and funding - Management is open to both expanding existing operations and pursuing acquisitions, focusing on increasing shareholder value [26] Question: Preferred stock dividend payments - The decision regarding preferred stock dividends is under board consideration, with a focus on debt repayment first [33] Question: Sales pipeline details - The sales pipeline for KBS is reported to be over $50 million, with strong demand in various sectors [35][36]
Star Equity (STRR) - 2021 Q1 - Earnings Call Transcript