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Star Equity Holdings, Inc. Announces 2022 Third Quarter Financial Results

Star Equity Holdings, Inc.
Star Equity Holdings, Inc.

Reported a 55% increase in Q3 2022 consolidated gross profit versus Q3 2021

Construction division reported a significant gross margin improvement

OLD GREENWICH, Conn., Nov. 11, 2022 (GLOBE NEWSWIRE) -- Star Equity Holdings, Inc. (Nasdaq: STRR; STRRP) (“Star Equity” or the “Company”), a diversified holding company, reported today its financial results for the three months (third quarter) and nine months (year to date) ended September 30, 2022.

Following the sale of a portion of our Healthcare business in early 2021, all financial results for the 2022 and 2021 reporting periods, unless stated otherwise, relate to continuing operations, which include the Healthcare, Construction, and Investments divisions.

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Third Quarter 2022 Financial Highlights vs. Third Quarter 2021 (unaudited)

  • Revenues decreased by 16.0% to $24.2 million from $28.9 million.

  • Gross profit increased by 54.8% to $5.8 million from $3.7 million.

  • Net loss from continuing operations was $1.9 million (or $0.12 per basic and diluted share) compared to a net loss from continuing operations of $2.1 million (or $0.42 per basic and diluted share).

  • Non-GAAP adjusted net income from continuing operations was $0.8 million (or $0.05 per diluted share) compared to a loss of $1.5 million (or $0.28 per diluted share).

  • Non-GAAP adjusted EBITDA from continuing operations was $1.5 million versus a loss of $0.6 million.

Year to Date 2022 Financial Highlights vs. Year to Date 2021 (unaudited)

  • Revenues increased by 3.9% to $80.0 million from $77.0 million.

  • Gross profit increased by 98.9% to $16.6 million from $8.3 million.

  • Net loss from continuing operations was $7.2 million (or $0.49 per basic and diluted share) compared to a net loss from continuing operations of $4.5 million (or $0.90 per basic and diluted share).

  • Non-GAAP adjusted net income from continuing operations was $0.5 million (or $0.04 per diluted share) compared to a loss of $6.9 million (or $1.36 per diluted share).

  • Non-GAAP adjusted EBITDA from continuing operations was $2.9 million versus a loss of $4.5 million.

  • As of September 30, 2022, cash and cash equivalents increased to $8.5 million from $5.6 million; net debt, defined as total debt less total cash and cash equivalents, decreased to $3.3 million from $8.5 million.

Rick Coleman, Chief Executive Officer, noted, “In the third quarter of 2022 we made considerable progress on our operating plan at both our Construction and Healthcare divisions, and we grew gross profit by 55% versus the prior year quarter despite an overall 16% decrease in revenue. Our Healthcare division revenue decreased by 11% versus the prior year quarter and gross margin decreased by one percentage point to 21% primarily driven by the continued impact of labor market tightness on our scanning service utilization. Our Construction division revenue decreased by 21% due primarily to the timing of revenue recognition on certain projects which had a positive impact in the prior quarter. Similar to last quarter, gross margin improved substantially to 28% due to increased pricing, improved operations, and commodity price risk mitigation. Despite quarterly variations due to the timing of profit recognition, particularly on large projects, we expect our Construction division to continue performing over time against our 20% gross margin target.”

Mr. Coleman continued, “We continue to be optimistic about the overall performance of our operating portfolio and our ability to identify and integrate future acquisitions either as bolt-ons for our existing divisions or entry into a new business sector.”

Revenues

The Company’s third quarter 2022 revenues decreased 16.0% to $24.2 million from $28.9 million in the third quarter of 2021.

Revenues in $ thousands

 

Q3 2022

 

Q3 2021

 

% change

 

9M 2022

 

9M 2021

 

% change

Healthcare

 

$

13,137

 

 

$

14,807

 

 

(11.3

)%

 

$

40,467

 

 

$

42,984

 

 

(5.9

)%

Construction

 

 

11,107

 

 

 

14,052

 

 

(21.0

)%

 

 

39,544

 

 

 

34,035

 

 

16.2

%

Investments

 

 

159

 

 

 

475

 

 

(66.5

)%

 

 

475

 

 

 

475

 

 

%

Intersegment elimination

 

 

(159

)

 

 

(475

)

 

(66.5

)%

 

 

(475

)

 

 

(475

)

 

%

Total Revenues

 

$

24,244

 

 

$

28,859

 

 

(16.0

)%

 

$

80,011

 

 

$

77,019

 

 

3.9

%

Our Healthcare third quarter 2022 and year to date 2022 revenue decreased 11.3% and 5.9%, respectively, versus the prior year periods, driven primarily by lower scanning revenue due to the continuing national shortage of Nuclear Medicine Technologists.

Our Construction third quarter 2022 revenue decreased 21.0% and year to date 2022 revenue increased 16.2% versus the prior year periods. The decrease in third quarter 2022 revenue was driven primarily by the timing of revenue recognition on certain projects. The year to date 2022 increase was due to large commercial projects at KBS. Construction division third quarter 2022 revenue accounted for 45.8% of Star Equity’s total revenue.

Gross Profit

Gross profit (loss) in $ thousands

 

Q3 2022

 

Q3 2021

 

% change

 

9M 2022

 

9M 2021

 

% change

Healthcare

 

$

2,725

 

 

$

3,256

 

 

(16.3

)%

 

$

9,579

 

 

$

9,263

 

 

3.4

%

Healthcare gross margin

 

 

20.7

%

 

 

22.0

%

 

(1.3

)%

 

 

23.7

%

 

 

21.5

%

 

2.2

%

Construction

 

 

3,132

 

 

 

541

 

 

478.9

%

 

 

7,203

 

 

 

(759

)

 

1,049.0

%

Construction gross margin

 

 

28.2

%

 

 

3.8

%

 

24.4

%

 

 

18.2

%

 

(2.2

)%

 

20.4

%

Investments

 

 

100

 

 

 

425

 

 

(76.5

)%

 

 

253

 

 

 

299

 

 

(15.4

)%

Investments gross margin

 

 

 

 

 

 

 

%

 

 

 

 

 

 

 

%

Intersegment elimination

 

 

(158

)

 

 

(475

)

 

(66.7

)%

 

 

(474

)

 

 

(475

)

 

(0.2

)%

Total gross profit

 

$

5,799

 

 

$

3,747

 

 

54.8

%

 

$

16,561

 

 

$

8,328

 

 

98.9

%

Total gross margin

 

 

23.9

%

 

 

13.0

%

 

10.9

%

 

 

20.7

%

 

 

10.8

%

 

9.9

%

Healthcare third quarter 2022 gross profit decreased 16.3% and year to date 2022 gross profit increased 3.4% versus the prior year period, respectively. The third quarter 2022 gross profit decrease was driven by lower scanning revenue due to the continuing national shortage of Nuclear Medicine Technologists, while year to date 2022 was driven by an improved mix of product and service revenues.

Construction third quarter 2022 and year to date 2022 gross profit increased 478.9% and 1,049.0% from the prior year period, due to an increase in revenue during the period and significantly increased pricing levels.

Operating Expenses

On a consolidated basis, third quarter 2022 and year to date 2022 sales, general and administrative (“SG&A”) expenses increased by $1.7 million, or 31.9%, and $4.7 million or 29.5% versus the prior year period. The increase in SG&A was driven primarily by one-time litigation costs. SG&A as a percentage of revenue increased in third quarter 2022 and year to date 2022 to 28.3% and 25.6% versus 18.0% and 20.6% in third quarter 2021 and year to date 2021.

Net Income

Third quarter 2022 net loss from continuing operations was $1.9 million, or $0.12 per basic and diluted share, compared to net loss of $2.1 million, or $0.42 per basic and diluted share in the same period in the prior year. Third quarter 2022 non-GAAP adjusted net income from continuing operations was $0.8 million, or $0.05 per diluted share, compared to adjusted net loss from continuing operations of $1.5 million, or $0.28 per diluted share, in the prior year period.

Year to date 2022 net loss from continuing operations was $7.2 million, or $0.49 per basic and diluted share, compared to net loss of $4.5 million, or $0.90 per basic and diluted share, in the same period in the prior year. Year to date 2022 non-GAAP adjusted net income from continuing operations was $0.5 million, or $0.04 per diluted share, compared to adjusted net loss from continuing operations of $6.9 million, or $1.36 per diluted share, in the prior year period.

Non-GAAP Adjusted EBITDA

Third quarter 2022 non-GAAP adjusted EBITDA from continuing operations was $1.5 million versus a loss of $0.6 million in the same quarter of the prior year due to improvements in the Company’s operations leading to increased gross profit at both our Healthcare and Construction divisions. Year to date 2022 non-GAAP adjusted EBITDA was $2.9 million, compared to a loss of $4.5 million in 9M 2021, primarily due to large commercial projects at KBS and overall Construction division pricing increases.

Operating Cash Flow

Third quarter 2022 cash flow from operations was an outflow of $3.2 million, compared to an outflow of $0.6 million for the same period in the prior year. The increase in cash outflow was primarily due to working capital changes as well as one-time litigation costs in the Healthcare division. Year to date 2022 cash flow from operations was an outflow of $0.2 million, compared to an outflow of $8.2 million for 9M 2021, primarily due to large commercial projects at KBS and significant Construction division pricing increases.

Preferred Stock Dividends

In each quarter of 2022, the Company’s board of directors declared cash dividends to holders of our Series A Preferred Stock of $0.25 per share for an aggregate amount of approximately $1.4 million. The dividend record dates were March 1, 2022, June 1, 2022, and September 1, 2022, and the payment dates were March 10, 2022, June 10, 2022, and September 12, 2022.

Conference Call Information

A conference call is scheduled for today, November 11, 2022 at 10:00 a.m. ET (7:00 a.m. PT) to discuss the results. 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 Equity. 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,” and “adjusted EBITDA from continuing operations.” The most directly comparable measures for these non-GAAP financial measures are “net income (loss),” “net income (loss) per basic and diluted 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, unrealized gain (loss) on equity securities and derivatives, litigation costs, non-recurring gain on disposals, one time severance costs, financing costs, COVID-19 protection equipment, gain or loss from loan forgiveness, and income tax adjustments. Further excluded in the measure of adjusted EBITDA are stock-based compensation, interest, taxes, depreciation, and amortization.

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 November 14, 2022.

About Star Equity Holdings, Inc.

Star Equity Holdings, Inc. is a diversified holding company 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 (ii) 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, 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

 

Rick Coleman

Lena Cati

 

Chief Executive Officer

Senior Vice President

 

203-489-9508

212-836-9611

 

rick.coleman@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 September 30,

 

Nine Months Ended September 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

Healthcare

 

$

13,137

 

 

$

14,807

 

 

$

40,467

 

 

$

42,984

 

Construction

 

 

11,107

 

 

 

14,052

 

 

 

39,544

 

 

 

34,035

 

Investments

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

 

24,244

 

 

 

28,859

 

 

 

80,011

 

 

 

77,019

 

 

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Healthcare

 

 

10,412

 

 

 

11,551

 

 

 

30,888

 

 

 

33,721

 

Construction

 

 

7,975

 

 

 

13,511

 

 

 

32,341

 

 

 

34,794

 

Investments

 

 

58

 

 

 

50

 

 

 

221

 

 

 

176

 

Total cost of revenues

 

 

18,445

 

 

 

25,112

 

 

 

63,450

 

 

 

68,691

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

5,799

 

 

 

3,747

 

 

 

16,561

 

 

 

8,328

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

6,860

 

 

 

5,201

 

 

 

20,515

 

 

 

15,839

 

Amortization of intangible assets

 

 

430

 

 

 

430

 

 

 

1,290

 

 

 

1,298

 

Gain on sale of MD Office Solutions

 

 

 

 

 

 

 

 

 

 

 

(847

)

Total operating expenses

 

 

7,290

 

 

 

5,631

 

 

 

21,805

 

 

 

16,290

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(1,491

)

 

 

(1,884

)

 

 

(5,244

)

 

 

(7,962

)

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Other income (expense), net

 

 

(575

)

 

 

3

 

 

 

(997

)

 

 

4,208

 

Interest expense, net

 

 

(185

)

 

 

(260

)

 

 

(664

)

 

 

(732

)

Total other income (expense)

 

 

(760

)

 

 

(257

)

 

 

(1,661

)

 

 

3,476

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

 

(2,251

)

 

 

(2,141

)

 

 

(6,905

)

 

 

(4,486

)

Income tax benefit (provision)

 

 

367

 

 

 

 

 

 

(256

)

 

 

(34

)

Income (loss) from continuing operations, net of tax

 

 

(1,884

)

 

 

(2,141

)

 

 

(7,161

)

 

 

(4,520

)

Income (loss) from discontinued operations, net of tax

 

 

 

 

 

 

 

 

 

 

 

5,955

 

Net income (loss)

 

 

(1,884

)

 

 

(2,141

)

 

 

(7,161

)

 

 

1,435

 

Deemed dividend on Series A perpetual preferred stock

 

 

(479

)

 

 

(479

)

 

 

(1,437

)

 

 

(1,437

)

Net income (loss) attributable to common shareholders

 

$

(2,363

)

 

$

(2,620

)

 

$

(8,598

)

 

$

(2

)

 

 

 

 

 

 

 

 

 

Net income (loss) per share—basic and diluted

 

 

 

 

 

 

 

 

Net income (loss) per share, continuing operations

 

$

(0.12

)

 

$

(0.42

)

 

$

(0.49

)

 

$

(0.90

)

Net income (loss) per share, discontinued operations

 

$

 

 

$

 

 

$

 

 

$

1.19

 

Net income (loss) per share—basic and diluted*

 

$

(0.12

)

 

$

(0.42

)

 

$

(0.49

)

 

$

0.29

 

Deemed dividend on Series A cumulative perpetual preferred stock per share

 

$

(0.03

)

 

$

(0.09

)

 

$

(0.10

)

 

$

(0.29

)

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

 

$

(0.15

)

 

$

(0.51

)

 

$

(0.59

)

 

$

 

Weighted-average shares outstanding—basic and diluted

 

 

15,434

 

 

 

5,101

 

 

 

14,503

 

 

 

5,019

 

 

 

 

 

 

 

 

 

 

Dividends declared per Series A perpetual preferred stock

 

$

0.25

 

 

$

0.25

 

 

$

0.75

 

 

$

0.50

 

*Earnings per share may not add due to rounding



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

 

September 30, 2022 (unaudited)

 

December 31,
2021

Assets:

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

8,503

 

 

$

4,538

 

Restricted cash

 

846

 

 

 

278

 

Investments in equity securities

 

3,180

 

 

 

47

 

Lumber derivative contracts

 

 

 

 

666

 

Accounts receivable, net of allowances of $0.9 million and $0.8 million, respectively

 

13,754

 

 

 

15,811

 

Inventories, net

 

13,065

 

 

 

8,525

 

Other current assets

 

3,069

 

 

 

1,998

 

Total current assets

 

42,417

 

 

 

31,863

 

Property and equipment, net

 

8,499

 

 

 

8,918

 

Operating lease right-of-use assets, net

 

4,823

 

 

 

4,494

 

Intangible assets, net

 

13,782

 

 

 

15,072

 

Goodwill

 

6,046

 

 

 

6,046

 

Other assets

 

1,408

 

 

 

1,659

 

Total assets

$

76,975

 

 

$

68,052

 

 

 

 

 

Liabilities, Mezzanine Equity and Stockholders’ Equity:

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

6,094

 

 

$

4,277

 

Accrued liabilities

 

4,307

 

 

 

2,445

 

Accrued compensation

 

3,395

 

 

 

3,051

 

Accrued warranty

 

247

 

 

 

569

 

Lumber derivative contracts

 

635

 

 

 

 

Billings in excess of costs and estimated profit

 

 

 

 

312

 

Deferred revenue

 

3,801

 

 

 

2,457

 

Short-term debt

 

11,852

 

 

 

12,869

 

Operating lease liabilities

 

1,443

 

 

 

1,253

 

Finance lease liabilities

 

460

 

 

 

588

 

Total current liabilities

 

32,234

 

 

 

27,821

 

Deferred tax liabilities

 

298

 

 

 

72

 

Operating lease liabilities, net of current portion

 

3,463

 

 

 

3,299

 

Finance lease liabilities, net of current portion

 

459

 

 

 

706

 

Other liabilities

 

312

 

 

 

412

 

Total liabilities

 

36,766

 

 

 

32,310

 

 

 

 

 

Preferred stock, $0.0001 par value: 10,000,000 shares authorized: Series A Preferred Stock, 8,000,000 shares authorized, liquidation preference ($10.00 per share), 1,915,637 shares issued and outstanding at December 31, 2021. (Liquidation preference: $18,988 as of December 31, 2021.)

 

 

 

 

18,988

 

 

 

 

 

Stockholders’ Equity:

 

 

 

Preferred stock, $0.0001 par value: 10,000,000 shares authorized: Series A Preferred Stock, 8,000,000 shares authorized, liquidation preference ($10.00 per share), 1,915,637 shares issued and outstanding at September 30, 2022. (Liquidation preference: $18,988 as of September 30, 2022.)

 

18,988

 

 

 

 

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; 15,138,732 and 5,805,916 shares issued and outstanding (net of treasury shares) at September 30, 2022 and December 31, 2021, respectively

 

1

 

 

 

 

Treasury stock, at cost; 258,849 shares at September 30, 2022 and December 31, 2021, respectively

 

(5,728

)

 

 

(5,728

)

Additional paid-in capital

 

162,078

 

 

 

150,451

 

Accumulated deficit

 

(135,130

)

 

 

(127,969

)

Total stockholders’ equity

 

40,209

 

 

 

16,754

 

Total liabilities, mezzanine equity and stockholders’ equity

$

76,975

 

 

$

68,052

 



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

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net income (loss) from continuing operations

 

$

(1,884

)

 

$

(2,141

)

 

$

(7,161

)

 

$

(4,520

)

Acquired intangible amortization

 

 

430

 

 

 

430

 

 

 

1,290

 

 

 

1,298

 

Unrealized loss (gain) on equity securities (1)

 

 

834

 

 

 

(3

)

 

 

834

 

 

 

(17

)

Unrealized loss (gain) on derivatives (2)

 

 

153

 

 

 

95

 

 

 

1,298

 

 

 

398

 

Litigation costs (3)

 

 

1,187

 

 

 

88

 

 

 

2,955

 

 

 

213

 

Gain on disposal of MD Office Solutions (4)

 

 

 

 

 

 

 

 

 

 

 

(847

)

Tenant receivable (5)

 

 

 

 

 

 

 

 

 

 

 

323

 

Write off of software costs

 

 

 

 

 

 

 

 

 

 

 

70

 

Severance and retention costs (9)

 

 

275

 

 

 

 

 

 

706

 

 

 

 

Financing costs (6)

 

 

132

 

 

 

52

 

 

 

369

 

 

 

231

 

COVID-19 Protection Equipment (7)

 

 

 

 

 

23

 

 

 

 

 

 

82

 

SBA PPP Loan forgiveness (8)

 

 

 

 

 

 

 

 

 

 

 

(4,179

)

Income tax (benefit) provision

 

 

(367

)

 

 

 

 

 

256

 

 

 

34

 

Non-GAAP adjusted net income (loss) from continuing operations

 

$

760

 

 

$

(1,456

)

 

$

547

 

 

$

(6,914

)

 

 

 

 

 

 

 

 

 

Net income (loss) per diluted share from continuing operations

 

 

(0.12

)

 

 

(0.42

)

 

 

(0.49

)

 

 

(0.90

)

Acquired intangible amortization

 

 

0.03

 

 

 

0.08

 

 

 

0.09

 

 

 

0.26

 

Unrealized loss (gain) on equity securities (1)

 

 

0.05

 

 

 

 

 

 

0.06

 

 

 

 

Unrealized loss (gain) on derivatives (2)

 

 

0.01

 

 

 

0.02

 

 

 

0.09

 

 

 

0.08

 

Litigation costs (3)

 

 

0.08

 

 

 

0.02

 

 

 

0.20

 

 

 

0.04

 

Gain on disposal of MD Office Solutions (4)

 

 

 

 

 

 

 

 

 

 

 

(0.17

)

Tenant receivable (5)

 

 

 

 

 

 

 

 

 

 

 

0.06

 

Write off of software costs

 

 

 

 

 

 

 

 

 

 

 

0.01

 

Severance and retention costs (9)

 

 

0.02

 

 

 

 

 

 

0.05

 

 

 

 

Financing costs (6)

 

 

0.01

 

 

 

0.01

 

 

 

0.03

 

 

 

0.05

 

COVID-19 Protection Equipment (7)

 

 

 

 

 

 

 

 

 

 

 

0.02

 

SBA PPP Loan forgiveness (8)

 

 

 

 

 

 

 

 

 

 

 

(0.83

)

Income tax (benefit) provision

 

 

(0.02

)

 

 

 

 

 

0.02

 

 

 

0.01

 

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

 

$

0.05

 

 

$

(0.29

)

 

$

0.04

 

 

$

(1.38

)

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

 

$

0.05

 

 

$

(0.28

)

 

$

0.04

 

 

$

(1.36

)

(1)   Reflects adjustments for any unrealized gains or losses in equity securities.
(2)   Reflects adjustments for any unrealized gains or losses in derivatives value.
(3)   Reflects one time litigation costs.
(4)   Reflects the gain from the sale of MDOS.
(5)   Reflects one-time write off in uncollectible tenant receivable.
(6)   Reflects financing costs from our credit facilities.
(7)   Reflects purchases related to COVID -19 Protection Equipment.
(8)   Reflects the forgiveness of the Paycheck Protection Program.
(9)   Reflects the severance expense for our former Healthcare division CEO and other employees.
(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 the 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 September 30, 2022

 

Healthcare

 

Construction

 

Investments

 

Star Equity Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations (10)

 

$

(598

)

 

$

975

 

$

(561

)

 

$

(1,700

)

 

$

(1,884

)

Depreciation and amortization

 

 

330

 

 

 

489

 

 

58

 

 

 

 

 

 

877

 

Interest expense

 

 

117

 

 

 

77

 

 

(9

)

 

 

 

 

 

185

 

Income tax (benefit) provision

 

 

(367

)

 

 

 

 

 

 

 

 

 

 

(367

)

EBITDA from continuing operations

 

 

(518

)

 

 

1,541

 

 

(512

)

 

 

(1,700

)

 

 

(1,189

)

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss (gain) on equity securities (1)

 

 

 

 

 

 

 

834

 

 

 

 

 

 

834

 

Unrealized loss (gain) on derivatives (2)

 

 

 

 

 

153

 

 

 

 

 

 

 

 

153

 

Litigation costs (3)

 

 

1,187

 

 

 

 

 

 

 

 

 

 

 

1,187

 

Stock-based compensation

 

 

1

 

 

 

6

 

 

 

 

 

99

 

 

 

106

 

Severance and retention (9)

 

 

272

 

 

 

 

 

 

 

 

3

 

 

 

275

 

Financing costs (6)

 

 

17

 

 

 

98

 

 

17

 

 

 

 

 

 

132

 

Non-GAAP adjusted EBITDA from continuing operations

 

$

959

 

 

$

1,798

 

$

339

 

 

$

(1,598

)

 

$

1,498

 


For The Three Months Ended September 30, 2021

 

Healthcare

 

Construction

 

Investments

 

Star Equity Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations (10)

 

$

853

 

$

(1,338

)

 

$

(155

)

 

$

(1,501

)

 

$

(2,141

)

Depreciation and amortization

 

 

321

 

 

489

 

 

 

50

 

 

 

 

 

 

860

 

Interest expense

 

 

74

 

 

100

 

 

 

86

 

 

 

 

 

 

260

 

Income tax (benefit) provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA from continuing operations

 

 

1,248

 

 

(749

)

 

 

(19

)

 

 

(1,501

)

 

 

(1,021

)

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss (gain) on equity securities (1)

 

 

 

 

 

 

 

(30

)

 

 

27

 

 

 

(3

)

Unrealized loss (gain) on derivatives (2)

 

 

 

 

95

 

 

 

 

 

 

 

 

 

95

 

Litigation costs (3)

 

 

 

 

 

 

 

 

 

 

88

 

 

 

88

 

Stock-based compensation

 

 

6

 

 

3

 

 

 

 

 

 

118

 

 

 

127

 

Financing costs (6)

 

 

13

 

 

39

 

 

 

 

 

 

 

 

 

52

 

COVID-19 Protection Equipment (7)

 

 

23

 

 

 

 

 

 

 

 

 

 

 

23

 

Non-GAAP adjusted EBITDA from continuing operations

 

$

1,290

 

$

(612

)

 

$

(49

)

 

$

(1,268

)

 

$

(639

)


For The Nine Months Ended September 30, 2022

 

Healthcare

 

Construction

 

Investments

 

Star Equity Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations (10)

 

$

(1,314

)

 

$

153

 

$

(794

)

 

$

(5,206

)

 

$

(7,161

)

Depreciation and amortization

 

 

967

 

 

 

1,471

 

 

221

 

 

 

 

 

 

2,659

 

Interest expense

 

 

264

 

 

 

269

 

 

131

 

 

 

 

 

 

664

 

Income tax (benefit) provision

 

 

256

 

 

 

 

 

 

 

 

 

 

 

256

 

EBITDA from continuing operations

 

 

173

 

 

 

1,893

 

 

(442

)

 

 

(5,206

)

 

 

(3,582

)

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss (gain) on equity securities (1)

 

 

 

 

 

 

 

834

 

 

 

 

 

 

834

 

Unrealized loss (gain) on derivatives (2)

 

 

 

 

 

1,298

 

 

 

 

 

 

 

 

1,298

 

Litigation costs (3)

 

 

2,955

 

 

 

 

 

 

 

 

 

 

 

2,955

 

Stock-based compensation

 

 

5

 

 

 

17

 

 

 

 

 

300

 

 

 

322

 

Tenant receivable (5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance and retention (9)

 

 

703

 

 

 

 

 

 

 

 

3

 

 

 

706

 

Write off of software costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing costs (6)

 

 

45

 

 

 

259

 

 

65

 

 

 

 

 

 

369

 

COVID-19 Protection Equipment (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SBA PPP Loan forgiveness (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted EBITDA from continuing operations

 

$

3,881

 

 

$

3,467

 

$

457

 

 

$

(4,903

)

 

$

2,902

 


For The Nine Months Ended September 30, 2021

 

Healthcare

 

Construction

 

Investments

 

Star Equity Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations (10)

 

$

5,313

 

 

$

(5,563

)

 

$

(284

)

 

$

(3,986

)

 

$

(4,520

)

Depreciation and amortization

 

 

998

 

 

 

1,450

 

 

 

176

 

 

 

 

 

 

2,624

 

Interest expense

 

 

189

 

 

 

456

 

 

 

87

 

 

 

 

 

 

732

 

Income tax (benefit) provision

 

 

34

 

 

 

 

 

 

 

 

 

 

 

 

34

 

EBITDA from continuing operations

 

 

6,534

 

 

 

(3,657

)

 

 

(21

)

 

 

(3,986

)

 

 

(1,130

)

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss (gain) on equity securities (1)

 

 

 

 

 

 

 

 

(30

)

 

 

13

 

 

 

(17

)

Unrealized loss (gain) on derivatives (2)

 

 

 

 

 

398

 

 

 

 

 

 

 

 

 

398

 

Litigation costs (3)

 

 

 

 

 

 

 

 

 

 

 

213

 

 

 

213

 

Stock-based compensation

 

 

120

 

 

 

3

 

 

 

 

 

 

266

 

 

 

389

 

Gain on disposal of MD Office Solutions (4)

 

 

(847

)

 

 

 

 

 

 

 

 

 

 

 

(847

)

Tenant receivable (5)

 

 

 

 

 

323

 

 

 

 

 

 

 

 

 

323

 

Write off of software costs

 

 

 

 

 

70

 

 

 

 

 

 

 

 

 

70

 

Financing costs (6)

 

 

89

 

 

 

142

 

 

 

 

 

 

 

 

 

231

 

COVID-19 Protection Equipment (7)

 

 

82

 

 

 

 

 

 

 

 

 

 

 

82

 

SBA PPP Loan forgiveness (8)

 

 

(2,959

)

 

 

(1,220

)

 

 

 

 

 

 

 

 

(4,179

)

Non-GAAP adjusted EBITDA from continuing operations

 

$

3,019

 

 

$

(3,941

)

 

$

(51

)

 

$

(3,494

)

 

$

(4,467

)

(1)   Reflects adjustments for any unrealized gains or losses on equity securities.
(2)   Reflects adjustments for any unrealized gains or losses in derivatives value.
(3)   Reflects one time litigation costs.
(4)   Reflects the gain from the sale of MDOS.
(5)   Reflects one-time write off in uncollectible tenant receivable.
(6)   Reflects financing costs from our credit facilities.
(7)   Reflects purchases related to COVID -19 personal protection equipment.
(8)   Reflects the forgiveness of the Paycheck Protection Program.
(9)   Reflects the severance and retention expense for our former Healthcare division CEO and other employees.
(10)   Reflects the reclassification of prior year Diagnostic Services and Diagnostic Imaging net income into Healthcare segment and intercompany elimination from Construction and Investments segments.



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

A summary of the Company’s credit facilities are as follows:

 

 

September 30, 2022

 

December 31, 2021

 

 

Amount

 

Weighted-Average Interest Rate

 

Amount

 

Weighted-Average Interest Rate

Revolving Credit Facility - eCapital KBS

 

$

909

 

9.00

%

 

$

3,131

 

6.00

%

Revolving Credit Facility - eCapital EBGL

 

 

2,595

 

9.00

%

 

 

1,652

 

6.00

%

Revolving Credit Facility - Webster

 

 

7,484

 

5.64

%

 

 

7,016

 

2.60

%

Total Short-term Revolving Credit Facilities

 

$

10,988

 

6.71

%

 

$

11,799

 

3.98

%

eCapital - Star Loan Principal, net

 

$

864

 

9.25

%

 

$

1,070

 

6.25

%

Short Term Loan

 

$

864

 

9.25

%

 

$

1,070

 

6.25

%

Total Short-term debt

 

$

11,852

 

6.90

%

 

$

12,869

 

4.17

%



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

(In thousands)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021 (1)

 

 

2022

 

 

2021 (1)

Revenue by segment:

 

 

 

 

 

 

 

 

Healthcare

 

$

13,137

 

 

$

14,807

 

 

$

40,467

 

 

$

42,984

 

Construction

 

 

11,107

 

 

 

14,052

 

 

 

39,544

 

 

 

34,035

 

Investments

 

 

159

 

 

 

475

 

 

 

475

 

 

 

475

 

Intersegment elimination

 

 

(159

)

 

 

(475

)

 

 

(475

)

 

 

(475

)

Consolidated revenue

 

$

24,244

 

 

$

28,859

 

 

$

80,011

 

 

$

77,019

 

 

 

 

 

 

 

 

 

 

Gross profit (loss) by segment:

 

 

 

 

 

 

 

 

Healthcare

 

$

2,725

 

 

$

3,256

 

 

$

9,579

 

 

$

9,263

 

Construction

 

 

3,132

 

 

 

541

 

 

 

7,203

 

 

 

(759

)

Investments

 

 

100

 

 

 

425

 

 

 

253

 

 

 

299

 

Intersegment elimination

 

 

(158

)

 

 

(475

)

 

 

(474

)

 

 

(475

)

Consolidated gross profit

 

$

5,799

 

 

$

3,747

 

 

$

16,561

 

 

$

8,328

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations by segment:

 

 

 

 

 

 

 

 

Healthcare

 

$

(1,036

)

 

$

955

 

 

$

(953

)

 

$

2,627

 

Construction

 

 

1,149

 

 

 

(956

)

 

 

680

 

 

 

(6,341

)

Investments

 

 

97

 

 

 

123

 

 

 

236

 

 

 

278

 

Star equity corporate and intersegment elimination

 

 

(1,701

)

 

 

(2,006

)

 

 

(5,207

)

 

$

(4,526

)

Segment loss from operations

 

$

(1,491

)

 

$

(1,884

)

 

$

(5,244

)

 

$

(7,962

)

 

 

 

 

 

 

 

 

 

Depreciation and amortization by segment:

 

 

 

 

 

 

 

 

Healthcare

 

$

330

 

 

$

321

 

 

$

967

 

 

$

998

 

Construction

 

 

489

 

 

 

489

 

 

 

1,471

 

 

 

1,450

 

Investments

 

 

58

 

 

 

50

 

 

 

221

 

 

 

176

 

Total depreciation and amortization

 

$

877

 

 

$

860

 

 

$

2,659

 

 

$

2,624

 

(1)  Segment information has been recast for all periods presented to reflect Healthcare as one segment. Intercompany elimination previously allocated to Investments have been reclassified to a separate line.