Financial Data and Key Metrics Changes - Revenue for the Healthcare division fell by 32.9% to $17.3 million in Q2 2020 compared to the same period last year, primarily due to the COVID-19 pandemic [24][25] - Gross profit for Q2 2020 decreased by 41.4% compared to the same period last year, reflecting lower revenue [24] - The company reported a net loss from continuing operations of $1.3 million in Q2 2020, an improvement from a net loss of $1.5 million in Q2 2019 [30] - Non-GAAP adjusted net loss was $0.3 million or $0.11 per share in Q2 2020, compared to adjusted net income of $87,000 or $0.04 per share in the same quarter last year [30] - Non-GAAP adjusted EBITDA decreased to $1.8 million in Q2 2020 from $2.1 million in Q2 2019 [32] Business Line Data and Key Metrics Changes - In the Diagnostic Services segment, revenue fell to $7.1 million with a gross margin of 13.3%, down from $12.3 million and 22.8% in the prior year [25] - Mobile Healthcare revenue was $7.8 million with a gross margin of 10.9%, compared to $10.4 million and 12.4% in the previous year [26] - Diagnostic Imaging revenue was $2.3 million with a gross margin of 52.8%, down from $3.0 million and 35.4% in the prior year, but gross margin improved due to lower costs [27] - The Building & Construction division generated $5 million in revenue with a gross margin of 20.9% in Q2 2020, with no prior year data available due to the merger timing [28] Market Data and Key Metrics Changes - The company noted a slow but steady return to normal operations in late June as doctor offices reopened and hospitals resumed non-emergency procedures [15] - The Building & Construction division faced startup delays on major projects but secured significant contracts worth $5.2 million and $2 million for the U.S. Army and military veterans, respectively [17] Company Strategy and Development Direction - The company is focused on growth through internal investments and acquisitions, with plans to create new business divisions over time [12] - There is an ongoing exploration of divesting non-strategic assets to finance expansion, particularly in the Building & Construction division [13] - The company aims to expand its commercial construction business in New England and may consider reopening its Oxford, Maine plant to double production capacity if growth continues [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in managing business operations amid the COVID-19 pandemic and expects the second half of 2020 to align with initial projections made before the pandemic [21] - The company anticipates that Q3 will outperform Q2, and Q4 will be better than Q3, with a potential return to pre-COVID operational levels [45] - Management highlighted a robust sales pipeline and increased inquiries in the Building & Construction division, indicating strong future demand [63] Other Important Information - The company raised $5.5 million through a public offering in May 2020, which helped mitigate some supply chain challenges [14][38] - As of June 30, 2020, the company had cash and cash equivalents of $9.3 million, significantly up from $1 million a year ago [51] Q&A Session Summary Question: Supply chain issues related to lumber shortages - Management acknowledged price increases due to production shortages but confirmed no actual shortages experienced, operating at full capacity [37] Question: Future bidding activity and project pipeline - Management indicated robust sales activity and a full booking schedule, with ongoing monitoring of lead times [39] Question: Outlook for the Healthcare division - Management noted that while some areas are seeing reduced patient volume, there is pent-up demand for examinations, and operations are returning to normal [49] Question: Potential for positive cash flow - Management expressed strong confidence in achieving positive cash flow in the second half of the year, despite the need for increased working capital as sales rise [47] Question: Evaluation of non-core asset sales - Management confirmed ongoing evaluations of non-core assets, with past sales contributing significant revenue [53] Question: Revenue expectations for 2021 - Management projected potential revenue of $150 million for 2021 if the Healthcare division returns to pre-COVID levels and the Building & Construction division continues to grow [82]
Star Equity (STRR) - 2020 Q2 - Earnings Call Transcript