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Star Equity Holdings, Inc. Announces 2021 Second Quarter and Six Months Ended Financial Results

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For Q2 2021, reports 57.0% and 117.2% increase in Healthcare and Construction revenues, respectively

Ended Q2 2021 with $6.3 million in cash and cash equivalents

OLD GREENWICH, Conn., Aug. 10, 2021 (GLOBE NEWSWIRE) -- Star Equity Holdings, Inc. (Nasdaq: STRR; STRRP) (“Star Equity” or the “Company”), a diversified, multi-industry holding company with three divisions, Healthcare, Construction, and Investments, reported today its financial results for the second quarter (Q2) and six months (6M) ended June 30, 2021.

Following the sale of our DMS Health Technologies, Inc. (“DMS Health”) business unit for $18.75 million and the sale of another small business for $1.4 million in early 2021, all financial results for 2021 and 2020 reporting periods, unless stated otherwise, relate to continuing operations, which encompass Healthcare (Diagnostic Services and Diagnostic Imaging), Construction, and Investments.

Q2 2021 Financial Highlights vs. Q2 2020 (unaudited)

  • Total revenues from continuing operations increased 77.8% to $25.8 million from $14.5 million

  • Gross profit from continuing operations decreased to $1.5 million from $3.2 million

  • Net loss from continuing operations was $1.8 million (or $0.36 per basic and diluted share) compared to a net loss from continuing operations of $0.8 million (or $0.27 per basic and diluted share)

  • Non-GAAP adjusted EBITDA from continuing operations decreased to $(2.9) million from $0.8 million

  • As of June 30, 2021, cash and cash equivalents and restricted cash decreased to $6.3 million from $9.3 million and net debt decreased to $6.8 million from $14.3 million

6M 2021 Financial Highlights vs. 6M 2020 (unaudited)

  • Total revenues from continuing operations increased 42.9% to $48.2 million from $33.7 million

  • Gross profit from continuing operations decreased to $4.6 million from $6.4 million

  • Net loss from continuing operations was $2.4 million (or $0.48 per basic and diluted share) compared to a net loss from continuing operations of $3.2 million (or $1.25 per basic and diluted share)

  • Non-GAAP adjusted EBITDA from continuing operations decreased to $(3.8) million from $0.2 million

Jeff Eberwein, Executive Chairman of Star Equity, noted, “In Q2 2021, our Healthcare division rebounded to more normal levels versus the second quarter of last year with revenue increasing 57.0% versus the prior year quarter. Our Construction division grew revenue by 117.2% due to significantly increased output at KBS, coupled with increased activity levels at EdgeBuilder. Gross margin percentage at our Construction division declined significantly as a consequence of rapidly rising raw materials costs and other items not expected to repeat in future periods, but is expected to begin to return to normal levels in the second half of this year due to steps we have taken to increase our product pricing and improve operations as well as the expectation that input costs will continue to normalize.”

Mr. Eberwein continued, “With the asset sales completed at end of Q1 2021, we substantially improved our balance sheet and liquidity position, reducing net debt from $14.3 million a year ago to $6.8 million at the end of Q2 2021. We are now better positioned to fund high-return internal growth investments and pursue acquisitions, which could be bolt-ons in Healthcare or Construction or entry into a new business sector.”

Revenues

The Company’s total Q2 2021 revenues from continuing operations increased 77.8% to $25.8 million from $14.5 million in the second quarter of the prior year.

Revenues in $ thousands

Q2 2021

Q2 2020

% change

6M 2021

6M 2020

% change

Healthcare

$

14,870

$

9,473

57.0

%

$

28,177

$

23,148

21.7

%

Construction

10,936

5,035

117.2

%

19,983

10,519

90.0

%

Investments

2

(100.0

)%

33

(100.0

)%

Total Revenues

$

25,806

$

14,510

77.8

%

$

48,160

$

33,700

42.9

%

Q2 2021 revenues for the Healthcare division increased significantly from Q2 2020. This division has largely recovered from the COVID-19 pandemic related downturn and is now performing at pre-pandemic levels. Doctors’ offices have reopened and we are operating at more normal levels.

The increase in revenues for the Construction division was mainly due to higher production levels driven by several large commercial jobs at both our EBGL and KBS businesses.

Gross Profit

Gross profit (loss) in $ thousands

Q2 2021

Q2 2020

% change

6M 2021

6M 2020

% change

Healthcare

$

3,409

$

2,185

56.0

%

$

6,007

$

5,059

18.7

%

Healthcare gross margin

22.9

%

23.1

%

(0.2

)%

21.3

%

21.9

%

(0.6

)%

Construction

(1,844

)

1,053

(275.1

)%

(1,300

)

1,456

(189.3

)%

Construction gross margin

(16.9

)%

20.9

%

(37.8

)%

(6.5

)%

13.8

%

(20.3

)%

Investments

(61

)

(64

)

(4.7

)%

(126

)

(98

)

28.6

%

Total gross profit

$

1,504

$

3,174

(52.6

)%

$

4,581

$

6,417

(28.6

)%

Total gross margin

5.8

%

21.9

%

(16.1

)%

9.5

%

19.0

%

(9.5

)%

Q2 2021 gross profit for the Healthcare division increased by 56.0% from the prior year’s quarter due to the 57.0% increase in sales from continued recovery from the COVID-19 pandemic. Further, we experienced fairly constant fixed costs versus the prior year period.

Q2 2021 gross profit for the Construction division decreased by 275.1% from the prior year’s quarter due to the adverse impact of a rapid rise in raw materials costs. We have increased prices since the beginning of 2021 to offset these higher input costs and expect see the full benefit of these increases on our margins in the second half of the year. We expect gross margins in Construction to continue to improve over time. Our backlog and sales pipeline remain very strong.

Operating Expenses

Q2 2021 sales, general and administrative (SG&A) expenses increased by $1.9 million, or 52.2%, from the prior year period, partly due to a $0.4 million increase in the Construction division as a result of increased commissions and headcount. In addition, we experienced a $0.2 million increase in the Healthcare division as a result of increased commissions, a $0.4 million increase in external and internal auditors review fees, a $0.1 million increase in administrative department due to headcount and a $0.4 million increase in IT and outside services costs. However, SG&A as a percentage of revenue decreased year over year from 25.3% to 21.6% as most of the increase in SG&A was associated with higher production rates and sales rather than unusual items.

6M 2021 sales, general and administrative (SG&A) expenses increased by $2.1 million, or 24.7%, from the prior year period, primarily due to a $0.4 million increase in the Construction division as a result of increased commissions and headcount, a $0.3 million increase due to reserve from tenant receivable in the Construction division, a $0.2 million increase in the Healthcare division as a result of increased commissions, a $0.3 million increase in external and internal auditors review fees, a $0.2 million increase in administrative department due to headcount and a $0.6 million increase in IT and outside services costs. SG&A as a percentage of revenue decreased year over year from 25.3% to 22.1% as most of the increase in SG&A was associated with higher production rates and sales rather than unusual items.

Net Loss

Q2 2021 net loss from continuing operations was $1.8 million, or $0.36 per basic and diluted share, compared to net loss of $0.8 million, or $0.27 per basic and diluted share, in the same period in the prior year. Q2 2021 non-GAAP adjusted net loss from continuing operations was $3.7 million, or $0.74 per basic and diluted share, compared to adjusted net loss from continuing operations of $0.2 million, or $0.06 per basic and diluted share, in the prior year period.

6M 2021 net loss from continuing operations was $2.4 million, or $0.48 per basic and diluted share, compared to a net loss of $3.2 million, or $1.25 per basic and diluted share, in the same period in the prior year. 6M 2021 non-GAAP adjusted net loss from continuing operations was $5.5 million, or $1.10 per basic and diluted share, compared to an adjusted net loss from continuing operations of $1.6 million, or $0.64 per basic and diluted share, in the prior year period.

Non-GAAP Adjusted EBITDA

Q2 2021 non-GAAP adjusted EBITDA from continuing operations decreased to negative $2.9 million from $0.8 million in the same quarter of the prior year due to a rise in raw materials costs in the Construction division, an increase in external and internal auditors review fees, and an increase in IT and outside services costs and was offset by an increase in adjusted EBITDA from the Healthcare division.

6M 2021 non-GAAP adjusted EBITDA from continuing operations decreased to negative $3.8 million from $0.2 million in the same quarter of the prior year due to a rise in raw materials costs in Construction division, an increase in external and internal auditors review fees, and an increase in IT and outside services costs and was offset by an increase in adjusted EBITDA from the Healthcare division.

Operating cash flow

Q2 2021 cash flow from operations was an outflow of $5.4 million, compared to an outflow of $0.6 million for the same period in the prior year, due to increased investment in working capital and operating losses primarily stemming from increased raw materials costs at the Construction division.

6M 2021 cash flow from operations was an outflow of $7.6 million, compared to an inflow of $49 thousand for the same period in the prior year, due to increased investment in working capital and operating losses primarily attributable to increased input costs at the Construction division.

Preferred Stock Dividends

On May 26, 2021, the Company’s Board of Directors (the “Board”) declared a cash dividend to holders of the Company’s 10% Series A Cumulative Perpetual Preferred Stock of $0.25 per share, for an aggregate amount of approximately $479 thousand. The record date for this dividend was June 1, 2021, and the payment date was June 11, 2021.

Net Operating Loss Carryforward (NOL)

Star Equity has approximately $94.9 million of usable federal net operating losses (“NOL”) as of year-end 2020, which the Company considers to be a very valuable asset for its stockholders. In order to protect the value of the NOL for all stockholders, the Company has an NOL protection plan, described below, limiting beneficial ownership of Star Equity common stock to 4.99%. Stockholders who wish to own more than 4.99% of Star Equity common stock, or who already own more than 4.99% of Star Equity common stock and wish to buy more, may only acquire additional shares with the Board’s prior written approval.

On June 2, 2021, the Board adopted a tax benefit preservation plan in the form of a Section 382 Rights Agreement (the “382 Agreement”). The 382 Agreement is intended to diminish the risk that our ability to use our net operating loss carryforwards to reduce future federal income tax obligations may become substantially limited due to an “ownership change,” as defined in Section 382 of the Internal Revenue Code. The Board authorized and declared a dividend distribution of one right for each outstanding share of common stock, par value $0.0001 per share, of the Company to stockholders of record as of the close of business on June 14, 2021. Each right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series C Participating Preferred Stock, par value $0.0001 per share, of the Company at an exercise price of $12.00 per one one-thousandth of a Preferred Share, subject to adjustment.

The rights will become exercisable following (i) 10 days after a public announcement by the Company that a person or group has become an Acquiring Person; and (ii) 10 business days (or a later date determined by the Board) after a person or group begins a tender or an exchange offer that, if completed, would result in that person or group becoming an Acquiring Person.

In addition, upon the occurrence of certain events, the exercise price of the rights would be adjusted and holders of the rights (other than rights owned by an acquiring person or group) would be entitled to purchase common stock at approximately half of market value. Given the potential adjustment of the exercise price of the rights, the rights could cause substantial dilution to a person or group that acquires 4.99% or more of the Company's common stock on terms not approved by the Company's Board of Directors.

No rights were exercisable at June 30, 2021. There was no impact to the Company's financial results as a result of the adoption of the rights plan for the quarter ended June 30, 2021.

Conference Call Information

A conference call is scheduled for 10:00 a.m. ET (7:00 a.m. PT) on August 10, 2021 to discuss the results and management’s outlook. The call may be accessed by dialing 1-877-407-9039 (international callers: +1-201-689-8470) five minutes prior to the scheduled start time and referencing Star. A simultaneous webcast of the call may be accessed online from the Events & Presentations link on the Investor Relations page at starequity.com/events-and-presentations/presentations; an archived replay of the webcast will be available within 15 minutes of the end of the conference call.

If you have any questions, either prior to or after our scheduled Earnings Conference call, please e-mail admin@starequity.com or lcati@equityny.com.

Use of Non-GAAP Financial Measures by Star Equity Holdings, Inc.

This release presents the non-GAAP financial measures “adjusted net income (loss),” “adjusted net income (loss) per basic and diluted share,” “adjusted cash earnings per share”, and “adjusted EBITDA from continuing operations.” The most directly comparable measure for these non-GAAP financial measures are “net income and basic and diluted net income per share”, and “cash flows from operating activities”. The Company has included below unaudited adjusted financial information, which presents the Company’s results of operations after excluding acquired intangible asset amortization, one time transaction costs, financing costs, gain or loss from the early retirement of debt, litigation costs, COVID-19 protection equipment, unrealized gain (loss) on available-for-sale securities, non-recurring gain on disposals, non-recurring costs related to sales and use tax and income tax adjustments. Further excluded in the measure of adjusted EBITDA are interest, taxes, depreciation, amortization, and stock-based compensation.

A discussion of the reasons why management believes that the presentation of non-GAAP financial measures provides useful information to investors regarding the Company’s financial condition and results of operations is included as Exhibit 99.2 to the Company’s report on Form 8-K filed with the Securities and Exchange Commission on August 10, 2021.

About Star Equity Holdings, Inc.

Star Equity Holdings, Inc. is a diversified holding entity with three divisions: Healthcare, Construction, and Investments.

Healthcare

Our Healthcare division designs, manufactures, and distributes diagnostic medical imaging products and provides mobile imaging services. Our Healthcare division operates in two businesses: (i) diagnostic services and (i) diagnostic imaging. The diagnostic services business offers imaging services to healthcare providers as an outsourced alternative to purchasing and operating their own equipment. The diagnostic imaging business develops, sells, and maintains solid-state gamma cameras.

Construction

Our Construction division manufactures modular housing units for commercial and residential real estate projects and operates in two businesses: (i) modular building manufacturing and (ii) structural wall panel and wood foundation manufacturing, including building supply distribution operations for professional builders.

Investments

Our Investments division manages and finances the Company’s real estate assets and investments.

Forward-Looking Statements

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this release that are not statements of historical fact are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking Statements include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to acquisitions and related integration, development of commercially viable products, novel technologies, and modern applicable services, (ii) projections of income (including income/loss), EBITDA, earnings (including earnings/loss) per share, free cash flow (FCF), capital expenditures, cost reductions, capital structure or other financial items, (iii) the future financial performance of the Company or acquisition targets and (iv) the assumptions underlying or relating to any statement described above. Moreover, forward-looking statements necessarily involve assumptions on the Company’s part. These forward-looking statements generally are identified by the words “believe”, “expect”, “anticipate”, “estimate”, “project”, “intend”, “plan”, “should”, “may”, “will”, “would”, “will be”, “will continue” or similar expressions. Such forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon the Company's current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which the Company has no control over. Actual results and the timing of certain events and circumstances may differ materially from those described above as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, the substantial amount of debt of the Company and the Company’s ability to repay or refinance it or incur additional debt in the future; the Company’s need for a significant amount of cash to service and repay the debt and to pay dividends on the Company’s preferred stock; the restrictions contained in the debt agreements that limit the discretion of management in operating the business; legal, regulatory, political and economic risks in markets and public health crises that reduce economic activity and cause restrictions on operations (including the recent coronavirus COVID-19 outbreak); the length of time associated with servicing customers; losses of significant contracts or failure to get potential contracts being discussed; disruptions in the relationship with third party vendors; accounts receivable turnover; insufficient cash flows and resulting lack of liquidity; the Company's inability to expand the Company's business; unfavorable changes in the extensive governmental legislation and regulations governing healthcare providers and the provision of healthcare services and the competitive impact of such changes (including unfavorable changes to reimbursement policies); high costs of regulatory compliance; the liability and compliance costs regarding environmental regulations; the underlying condition of the technology support industry; the lack of product diversification; development and introduction of new technologies and intense competition in the healthcare industry; existing or increased competition; risks to the price and volatility of the Company’s common stock and preferred stock; stock volatility and in liquidity; risks to preferred stockholders of not receiving dividends and risks to the Company’s ability to pursue growth opportunities if the Company continues to pay dividends according to the terms of the Company’s preferred stock; the Company’s ability to execute on its business strategy (including any cost reduction plans); the Company’s failure to realize expected benefits of restructuring and cost-cutting actions; the Company’s ability to preserve and monetize its net operating losses; risks associated with the Company’s possible pursuit of acquisitions; the Company’s ability to consummate successful acquisitions and execute related integration, as well as factors related to the Company’s business including economic and financial market conditions generally and economic conditions in the Company’s markets; failure to keep pace with evolving technologies and difficulties integrating technologies; system failures; losses of key management personnel and the inability to attract and retain highly qualified management and personnel in the future; and the continued demand for and market acceptance of the Company’s services. For a detailed discussion of cautionary statements and risks that may affect the Company’s future results of operations and financial results, please refer to the Company’s filings with the Securities and Exchange Commission, including, but not limited to, the risk factors in the Company’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. This release reflects management’s views as of the date presented.

All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on such statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

For more information contact:

Star Equity Holdings, Inc.

The Equity Group

Jeffrey E. Eberwein

Lena Cati

Executive Chairman

Vice President

203-489-9501

212-836-9611

admin@starequity.com

lcati@equityny.com

(Financial tables follow)

Star Equity Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except for per share amounts)


Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Revenues:

Healthcare

$

14,870

$

9,473

$

28,177

$

23,148

Construction

10,936

5,035

19,983

10,519

Investments

2

33

Total revenues

25,806

14,510

48,160

33,700

Cost of revenues:

Healthcare

11,461

7,288

22,170

18,089

Construction

12,780

3,982

21,283

9,063

Investments

61

66

126

131

Total cost of revenues

24,302

11,336

43,579

27,283

Gross profit

1,504

3,174

4,581

6,417

Operating expenses:

Selling, general and administrative

5,584

3,670

10,638

8,533

Amortization of intangible assets

430

559

868

1,135

Gain on sale of MD Office Solutions

(847

)

Total operating expenses

6,014

4,229

10,659

9,668

Loss from operations

(4,510

)

(1,055

)

(6,078

)

(3,251

)

Other income :

Other income, net

2,950

672

4,205

832

Interest expense, net

(199

)

(394

)

(472

)

(699

)

Total other income

2,751

278

3,733

133

Loss from continuing operations before income taxes

(1,759

)

(777

)

(2,345

)

(3,118

)

Income tax expense

(32

)

(34

)

(34

)

(61

)

Loss from continuing operations, net of tax

(1,791

)

(811

)

(2,379

)

(3,179

)

(Loss) income from discontinued operations, net of tax

(65

)

(476

)

5,955

(1,061

)

Net (loss) income

(1,856

)

(1,287

)

3,576

(4,240

)

Deemed dividend on Series A perpetual preferred stock

(479

)

(484

)

(958

)

(968

)

Net (loss) income attributable to common shareholders

$

(2,335

)

$

(1,771

)

$

2,618

$

(5,208

)

Net income (loss) per share—basic and diluted

Net loss per share, continuing operations

$

(0.36

)

$

(0.27

)

$

(0.48

)

$

(1.25

)

Net (loss) income per share, discontinued operations

$

(0.01

)

$

(0.16

)

$

1.20

$

(0.42

)

Net (loss) income per share—basic and diluted

$

(0.37

)

$

(0.42

)

$

0.72

$

(1.66

)

Deemed dividend on Series A cumulative perpetual preferred stock per share

$

(0.10

)

$

(0.16

)

$

(0.19

)

$

(0.38

)

Net (loss) income per share, attributable to common shareholders—basic and diluted:

$

(0.46

)

$

(0.58

)

$

0.53

$

(2.04

)

Weighted-average shares outstanding—basic and diluted

5,039

3,041

4,978

2,547

Dividends declared per Series A redeemable preferred stock

$

0.25

$

$

0.25

$

Net (loss) income

$

(1,856

)

$

(1,287

)

$

3,576

$

(4,240

)


Star Equity Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share amounts)

June 30,
2021

December 31,
2020

Assets:

Current assets:

Cash and cash equivalents

$

6,160

$

3,225

Restricted cash

168

168

Accounts receivable, net

14,079

12,975

Inventories, net

12,020

9,787

Other current assets

2,700

2,025

Assets held for sale

20,756

Total current assets

35,127

48,936

Property and equipment, net

9,222

9,762

Operating lease right-of-use assets

3,147

1,769

Intangible assets, net

15,932

16,900

Goodwill

9,405

9,542

Other assets

2,553

1,384

Total assets

$

75,386

$

88,293

Liabilities, Mezzanine Equity and Stockholders’ Equity:

Current liabilities:

Accounts payable

$

5,104

$

4,952

Accrued compensation

2,684

2,825

Accrued warranty

345

214

Deferred revenue

3,206

2,184

Short-term debt and current portion of long-term debt

13,113

18,362

Payable to related parties

2,307

Operating lease liabilities, current portion

1,044

1,011

Other current liabilities

2,665

3,000

Liabilities held for sale

7,871

Total current liabilities

28,161

42,726

Long-term debt, net of current portion

3,700

Deferred tax liabilities

85

51

Operating lease liabilities, net of current portion

2,155

828

Other liabilities

1,173

1,059

Total liabilities

31,574

48,364

Preferred stock, $0.0001 par value: 10,000,000 shares authorized: 10% Series A Cumulative Perpetual Preferred Stock, 8,000,000 shares authorized, liquidation preference ($10.00 per share), 1,915,637 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

21,979

21,500

Stockholders’ equity:

Preferred stock, $0.0001 par value: 25,000 shares authorized; Series C Participating Preferred stock, no shares issued or outstanding

Common stock, $0.0001 par value: 30,000,000 shares authorized; 5,073,654 and 4,798,367 shares issued and outstanding (net of treasury shares) at June 30, 2021 and December 31, 2020, respectively

Treasury stock, at cost; 258,849 shares at June 30, 2021 and December 31, 2020, respectively

(5,728

)

(5,728

)

Additional paid-in capital

148,971

149,143

Accumulated deficit

(121,410

)

(124,986

)

Total stockholders’ equity

21,833

18,429

Total liabilities, mezzanine equity and stockholders’ equity

$

75,386

$

88,293


Star Equity Holdings, Inc.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(In thousands, except per share amounts)

Three Months Ended
June 30,

Six Months Ended
June 30,

2021

2020

2021

2020

Net loss from continuing operations

$

(1,791

)

$

(811

)

$

(2,379

)

$

(3,179

)

Acquired intangible amortization

430

559

868

1,135

Unrealized loss (gain) on equity securities (1)

312

(6

)

289

20

Litigation costs (2)

123

19

125

179

MDOS gain (3)

(847

)

Tenant receivable (4)

323

Write off of software costs (5)

70

70

Transaction cost (6)

115

Financing cost (7)

47

179

COVID -19 Protection Equipment (8)

21

29

59

29

SBA PPP Loan forgiveness (9)

(2,959

)

(4,179

)

Income tax expense

32

34

34

61

Non-GAAP adjusted net loss from continuing operations

$

(3,715

)

$

(176

)

$

(5,458

)

$

(1,640

)

Net loss per diluted share from continuing operations

$

(0.36

)

$

(0.27

)

$

(0.48

)

$

(1.25

)

Acquired intangible amortization

0.09

0.18

0.17

0.45

Unrealized gain on equity securities (1)

0.06

0.06

0.01

Litigation costs (2)

0.02

0.01

0.03

0.07

MDOS gain (3)

(0.17

)

Tenant receivable (4)

0.06

Write off of software costs (5)

0.01

0.01

Transaction cost (6)

0.05

Financing cost (7)

0.01

0.04

COVID -19 Protection Equipment (8)

0.01

0.01

0.01

SBA PPP Loan forgiveness (9)

(0.59

)

(0.84

)

Income tax expense

0.01

0.01

0.01

0.02

Non-GAAP adjusted net loss per basic and diluted share from continuing operations (10)

$

(0.74

)

$

(0.06

)

$

(1.10

)

$

(0.64

)

(1) Reflects change in fair value of investments in equity securities.

(2) Reflects one time litigation costs.

(3) Reflects the gain from the sale of MDOS.

(4) Reflects one time write off in uncollectible tenant receivable.

(5) Reflects one time write off in software implementation costs.

(6) Reflects legal and other costs related to the ATRM merger and holding company conversion.

(7) Reflects financing costs from our credit facilities.

(8) Reflects purchases related to COVID -19 Protection Equipment.

(9) Reflects the forgiveness of the Paycheck Protection Program.

(10) Per share amounts are computed independently for each discrete item presented. Therefore, the sum of the quarterly per share amounts will not necessarily equal to the total for the year, and sum of individual items may not equal the total.


Star Equity Holdings, Inc.

Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(In thousands)

For The Three Months Ended June 30, 2021

Diagnostic Services

Diagnostic Imaging

Construction

Investments

Star Equity Corporate

Total

Net income (loss) from continuing operations

$

796

$

3,020

$

(3,871

)

$

(46

)

$

(1,690

)

$

(1,791

)

Depreciation and amortization

269

51

481

61

862

Interest expense

16

24

160

200

Income tax (benefit) expense

(2

)

34

32

EBITDA from continuing operations

1,079

3,129

(3,230

)

15

(1,690

)

(697

)

Unrealized loss (gain) on equity securities (1)

303

9

312

Litigation costs (2)

123

123

Stock-based compensation

10

27

97

134

Write off of software costs (5)

70

70

Financing cost (7)

34

13

47

COVID-19 Protection Equipment (8)

21

21

SBA PPP Loan forgiveness (9)

(2,959

)

(2,959

)

Non-GAAP adjusted EBITDA from continuing operations

$

1,110

$

231

$

(2,844

)

$

15

$

(1,461

)

$

(2,949

)


For The Three Months Ended June 30, 2020

Diagnostic Services

Diagnostic Imaging

Construction

Investments

Star Equity Corporate

Total

Net (loss) income from continuing operations

$

(490

)

$

379

$

160

$

(148

)

$

(712

)

$

(811

)

Depreciation and amortization

307

66

571

66

1,010

Interest expense

18

141

235

394

Income tax expense

12

21

1

34

EBITDA from continuing operations

(153

)

607

967

(82

)

(712

)

627

Unrealized gain on equity securities (1)

(6

)

(6

)

Litigation costs (2)

19

19

Stock-based compensation

33

58

56

147

COVID-19 Protection Equipment (8)

29

29

Non-GAAP adjusted EBITDA from continuing operations

$

(120

)

$

694

$

967

$

(82

)

$

(643

)

$

816


For The Six Months Ended June 30, 2021

Diagnostic Services

Diagnostic Imaging

Construction

Investments

Star Equity Corporate

Total

Net income (loss) from continuing operations

$

1,673

$

2,787

$

(4,225

)

$

(129

)

$

(2,485

)

$

(2,379

)

Depreciation and amortization

559

118

961

126

1,764

Interest expense

33

82

357

472

Income tax expense

34

34

EBITDA from continuing operations

2,265

3,021

(2,907

)

(3

)

(2,485

)

(109

)

Unrealized loss (gain) on equity securities (1)

303

(14

)

289

Litigation costs (2)

125

125

Stock-based compensation

39

75

148

262

MDOS gain (3)

(847

)

(847

)

Tenant receivable (4)

323

323

Write off of software costs (5)

70

70

Financing cost (7)

76

103

179

COVID-19 Protection Equipment (8)

57

2

59

SBA PPP Loan forgiveness (9)

(2,959

)

(1,220

)

(4,179

)

Non-GAAP adjusted EBITDA from continuing operations

$

1,514

$

215

$

(3,328

)

$

(3

)

$

(2,226

)

$

(3,828

)


For The Six Months Ended June 30, 2020

Diagnostic Services

Diagnostic Imaging

Construction

Investments

Star Equity Corporate

Total

Net (loss) income from continuing operations

$

(415

)

$

391

$

(1,343

)

$

(200

)

$

(1,612

)

$

(3,179

)

Depreciation and amortization

637

129

1,143

131

2,040

Interest expense

38

167

494

699

Income tax expense

12

47

2

61

EBITDA from continuing operations

272

734

296

(69

)

(1,612

)

(379

)

Unrealized gain on equity securities (1)

20

20

Litigation costs (2)

179

179

Stock-based compensation

67

118

68

253

Transaction cost (6)

115

115

COVID-19 Protection Equipment (8)

29

29

Non-GAAP adjusted EBITDA from continuing operations

$

339

$

881

$

296

$

(69

)

$

(1,230

)

$

217

(1) Reflects change in fair value of investments in equity securities.

(2) Reflects one time litigation costs.

(3) Reflects the gain from the sale of MDOS.

(4) Reflects one time write off in uncollectible tenant receivable.

(5) Reflects one time write off in software costs.

(6) Reflects legal and other costs related to the ATRM merger and holdings company conversion.

(7) Reflects financing costs from our credit facilities.

(8) Reflects purchases related to COVID -19 Protection Equipment.

(9) Reflects the forgiveness of the Paycheck Protection Program.

Star Equity Holdings, Inc.
Supplemental Debt Information
(Unaudited)
(In thousands)

A summary of the Company’s credit facilities and related party notes are as follows:

June 30, 2021

December 31, 2020

Amount

Weighted-Average Interest Rate

Amount

Weighted-Average Interest Rate

Revolving Credit Facility - Gerber KBS

$

2,181

6.00

%

$

1,099

6.00

%

Revolving Credit Facility - Gerber EBGL

2,493

6.00

%

2,016

6.00

%

Revolving Credit Facility - SNB

7,241

2.60

%

12,710

2.64

%

Total Short-term Revolving Credit Facility

$

11,915

3.93

%

$

15,825

3.30

%

Gerber - Star Term Loan

$

1,198

6.25

%

$

262

6.75

%

Premier - Term Loan

%

419

5.75

%

Total Short Term Debt

$

1,198

6.25

%

$

681

6.13

%

Short-term Paycheck Protection Program Notes

$

%

$

1,856

1.00

%

Short-term debt and current portion of long-term debt

$

13,113

4.15

%

$

18,362

3.17

%

Gerber - Star Term Loan

$

%

$

1,058

6.75

%

Premier - Term Loan

%

321

5.75

%

Total Long Term Debt

$

%

$

1,379

6.52

%

Long-term Paycheck Protection Program Notes

$

%

$

2,321

1.00

%

Long-term debt, net of current portion

$

%

$

3,700

3.06

%

LSV Co-Invest I Promissory Note (“January Note”)

$

%

$

709

12.00

%

LSV Co-Invest I Promissory Note (“June Note”)

%

1,220

12.00

%

LSVM Note

%

378

12.00

%

Total Notes Payable To Related Parties

$

%

$

2,307

12.00

%

Total Debt

$

13,113

4.15

%

$

24,369

3.99

%

Term Loan Facilities

The following table presents the Star term loan balance net of unamortized debt issuance costs as of June 30, 2021 (in thousands):

June 30, 2021

Amount

Gerber - Star Term Loan Principal

$

1,435

Unamortized debt issuance costs

(237

)

Total

$

1,198

Star Equity Holdings, Inc.
Supplemental Segment Information
(Unaudited)
(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Revenue by segment:

Diagnostic Services

$

11,743

$

7,140

$

21,982

$

17,954

Diagnostic Imaging

3,127

2,333

6,195

5,194

Construction

10,936

5,035

19,983

10,519

Investments

2

33

Consolidated revenue

$

25,806

$

14,510

$

48,160

$

33,700

Gross profit by segment:

Diagnostic Services

$

2,393

$

953

$

4,000

$

2,958

Diagnostic Imaging

1,016

1,232

2,007

2,101

Construction

(1,844

)

1,053

(1,300

)

1,456

Investments

(61

)

(64

)

(126

)

(98

)

Consolidated gross profit

$

1,504

$

3,174

$

4,581

$

6,417

Income (loss) from continuing operations by segment:

Diagnostic Services

$

778

$

(128

)

$

1,636

$

(69

)

Diagnostic Imaging

57

96

36

(171

)

Construction

(3,838

)

(398

)

(5,385

)

(1,698

)

Investments

79

(146

)

155

(200

)

Star Corporate expenses

(1,586

)

(479

)

(2,520

)

(1,113

)

Segment loss from operations

$

(4,510

)

$

(1,055

)

(6,078

)

(3,251

)

Depreciation and amortization by segment:

Diagnostic Services

$

269

$

307

$

559

$

637

Diagnostic Imaging

51

66

118

129

Construction

481

571

961

1,143

Investments

61

66

126

131

Total depreciation and amortization

$

862

$

1,010

$

1,764

$

2,040


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