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Star Equity Holdings, Inc. Announces 2022 Fourth Quarter and Full Year Financial Results

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

Q4 2022 revenues and gross profit increased 8.8% and 34.8%, respectively, compared to Q4 2021

Q4 2022 net income increased to $1.9 million from $4.4 million loss in Q4 2021

Q4 2022 adjusted EBITDA increased to $3.1 million from $1.0 million in Q4 2021

OLD GREENWICH, Conn., March 15, 2023 (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 fourth quarter (Q4) and year (FY) ended December 31, 2022. All 2022 and 2021 amounts in this release are unaudited.

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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Q4 2022 Financial Highlights vs. Q4 2021 (unaudited)

  • Revenues increased by 8.8% to $32.1 million from $29.5 million.

  • Gross profit increased by 34.8% to $9.3 million from $6.9 million.

  • Net income from continuing operations was $1.9 million (or $0.12 income per basic and diluted share) as compared to a net loss from continuing operations of $4.4 million (or $0.84 loss per basic and diluted share).

  • Non-GAAP adjusted net income from continuing operations was $2.2 million (or $0.14 income per basic and diluted share), as compared to $0.3 million (or $0.06 income per basic and diluted share).

  • Non-GAAP adjusted EBITDA from continuing operations was $3.1 million versus $1.0 million.

FY 2022 Financial Highlights vs. FY 2021 (unaudited)

  • Revenues increased by 5.2% to $112.2 million from $106.6 million.

  • Gross profit increased by 69.8% to $25.9 million from $15.2 million.

  • Net loss from continuing operations was $5.3 million (or $0.36 loss per basic and diluted share) compared to a net loss from continuing operations of $8.9 million (or $1.76 loss per basic and diluted share).

  • Non-GAAP adjusted net income was $2.8 million (or $0.19 income per basic and diluted share), as compared to non-GAAP adjusted net loss of $6.6 million (or $1.30 loss per basic and diluted share).

  • Non-GAAP adjusted EBITDA from continuing operations was a gain of $6.0 million compared to a loss of $3.4 million.

  • As of December 31, 2022, cash and cash equivalents increased to $4.7 million from $4.5 million; net debt, defined as total debt less total cash and cash equivalents, decreased to $7.0 million from $8.3 million.

Rick Coleman, Chief Executive Officer, noted, “The strength of our fourth quarter 2022 financial results comes from significantly better operating performance, with improvements we made throughout the year now beginning to show through in our financial results. At our Construction division, both KBS and EBGL delivered strong top and bottom-line growth, resulting in fourth quarter adjusted EBITDA of $2.9 million, more than double that of the prior year quarter. Operational efficiency improvements on large projects combined with better pricing and cost discipline drove the division’s improved results. Our Healthcare division performed well in the fourth quarter despite the continued impact of labor market tightness on our scanning service volumes. Although Healthcare division revenue decreased by 6.7% versus the prior year quarter, gross margin improved by seven percentage points to 27.0% due to our increased focus on cost management and higher margin products and services. As a result of the substantial changes we made beginning with our May 2022 reorganization, Healthcare division fourth quarter adjusted EBITDA improved 79% year-over-year to $2.2 million, and we enter 2023 with a significantly improved Healthcare business and overall operating portfolio. In addition, we continue to identify and investigate future acquisition opportunities, which could either be bolt-ons for our existing divisions or an entry into a new business sector.”

Revenues

The Company’s Q4 2022 revenues increased 8.8% to $32.1 million from $29.5 million in the fourth quarter of the prior year due primarily to better performance at our Construction division.

Revenues in $ thousands (Unaudited)

 

Q4 2022

 

Q4 2021

 

% change

 

FY 2022

 

FY 2021

 

% change

Healthcare

 

$

14,535

 

 

$

15,572

 

 

(6.7)

%

 

$

55,002

 

 

$

58,556

 

 

(6.1)

%

Construction

 

 

17,605

 

 

 

13,968

 

 

26.0

%

 

 

57,149

 

 

 

48,003

 

 

19.1

%

Investments

 

 

158

 

 

 

158

 

 

%

 

 

633

 

 

 

633

 

 

%

Intersegment elimination

 

 

(158

)

 

 

(158

)

 

%

 

 

(633

)

 

 

(633

)

 

%

Total Revenues

 

$

32,140

 

 

$

29,540

 

 

8.8

%

 

$

112,151

 

 

$

106,559

 

 

5.2

%

Healthcare Q4 2022 and FY 2022 revenues decreased 6.7% and 6.1%, respectively, versus the prior year periods. This decrease in revenue resulted from fewer camera sales in 2022 and lower total scanning volume due to the national shortage of Nuclear Medicine Technologists.

Construction Q4 2022 and FY 2022 revenues increased 26.0% and 19.1%, respectively, versus the prior year periods. The increase in revenues reflects a higher number of projects completed and increased end-product pricing.

Gross Profit

The Company’s consolidated Q4 2022 gross profit increased 34.8% to $9.3 million from $6.9 million in the fourth quarter of the prior year due to margin improvements in both the Healthcare and Construction divisions.

Gross profit (loss) in thousands (Unaudited)

 

Q4 2022

 

Q4 2021

 

% change

 

FY 2022

 

FY 2021

 

% change

Healthcare

 

$

3,930

 

 

$

3,196

 

 

23.0

%

 

$

13,509

 

 

$

12,459

 

 

8.4

%

Healthcare gross margin

 

 

27.0

%

 

 

20.5

%

 

31.7

%

 

 

24.6

%

 

 

21.3

%

 

15.5

%

Construction

 

 

5,457

 

 

 

3,767

 

 

44.9

%

 

 

12,660

 

 

 

3,008

 

 

320.9

%

Construction gross margin

 

 

31.0

%

 

 

27.0

%

 

14.8

%

 

 

22.2

%

 

 

6.3

%

 

252.4

%

Investments

 

 

90

 

 

 

107

 

 

(15.9)

%

 

 

343

 

 

 

406

 

 

(15.5)

%

Intersegment elimination

 

 

(159

)

 

 

(158

)

 

0.6

%

 

 

(633

)

 

 

(633

)

 

%

Total gross profit

 

$

9,318

 

 

$

6,912

 

 

34.8

%

 

$

25,879

 

 

$

15,240

 

 

69.8

%

Total gross margin

 

 

29.0

%

 

 

23.4

%

 

23.9

%

 

 

23.1

%

 

 

14.3

%

 

61.5

%

Healthcare Q4 2022 and FY 2022 gross profit increased 23.0% and 8.4%, respectively, versus the prior year periods, due to heightened cost controls and an improved mix of product and service revenues throughout the year.

Construction Q4 2022 gross profit increased 44.9% versus Q4 2021 due to the impact of end-product price increases and better mitigation of the effects of commodity price movements. Additionally, $0.5 million of Q4 2022 Construction gross profit was attributable to unrealized gains on EBGL’s open derivative contracts, which were put in place to hedge future contracted projects. FY 2022 Construction gross profit increased 320.9% from the prior year period due to revenue increases at KBS and EBGL for large commercial projects. We have significantly increased end-product prices to offset higher input costs and have seen an improvement in our gross margin overall in 2022. Our backlog and sales pipeline remain strong.

Operating Expenses

Q4 2022 sales, general and administrative (SG&A) expenses were essentially unchanged versus Q4 2021. SG&A expenses as a percentage of revenue decreased in Q4 2022 to 21.0% versus 22.9% in Q4 2021. FY 2022 SG&A expenses increased $4.7 million or 20.7%, respectively, versus the prior year. The largest components of the full year increase versus the prior year were $3.0 million in one-time legal costs and $0.8 million in retention and severance costs, both related to our Healthcare segment. SG&A expenses as a percentage of revenue increased in FY 2022 to 24.3% versus 21.2% in FY 2021.

Net Income/Loss

Q4 2022 net income was $1.9 million, or $0.12 income per basic and diluted share, compared to a net loss of $4.4 million, or $0.84 loss per basic and diluted share, in the same period of the prior year. Q4 2022 non-GAAP adjusted net income was $2.2 million, or $0.14 income per basic and diluted share, compared to an adjusted non-GAAP net loss of $0.3 million, or $0.06 loss per basic and diluted share, in the same period of the prior year.

FY 2022 net loss was $5.3 million, or $0.36 loss per basic and diluted share, compared to a net loss of $8.9 million, or $1.76 loss per basic and diluted share in FY 2021. FY 2022 non-GAAP adjusted net income was $2.8 million, or $0.19 income per basic and diluted share, compared to an adjusted non-GAAP net loss of $6.6 million, or $1.30 loss per basic and diluted share in the prior year.

Non-GAAP adjusted EBITDA

Q4 2022 non-GAAP adjusted EBITDA increased to $3.1 million from $1.0 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. FY 2022 non-GAAP adjusted EBITDA increased to positive $6.0 million, compared to negative $3.4 million in FY 2021, primarily due to improved performance on large commercial projects at KBS and significant Construction division pricing increases.

Operating Cash Flow

Q4 2022 cash flow from consolidated operations was an outflow of $3.6 million, compared to an inflow of $1.7 million for the same period in the prior year. FY 2022 cash flow from operations was an outflow of $3.9 million, compared to an outflow of $6.5 million for FY 2021, primarily as a result of improved results at our operating businesses.

Preferred Stock

In each quarter of 2022, the Company’s Board of Directors declared and paid a cash dividend of $0.25 per share to holders of the Company’s 10% Series A Cumulative Perpetual Preferred Stock, representing $1.00 per share on an annual basis.

Conference Call Information

A conference call is scheduled for 10:00 a.m. ET (7:00 a.m. PT) on March 15, 2023 to discuss the results and management’s outlook. The call may be accessed by dialing (800) 715-9871 (USA & Canada) or (646) 307-1963 (International).

Conference ID: 2378853, 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 https://www.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 lumber derivatives, litigation costs, non-recurring gain on disposals, restructuring costs, one time severance and retention costs, financing costs, COVID-19 protection equipment, write-off of software costs, goodwill impairment, gain or loss from loan forgiveness, and income tax adjustments. Further excluded in the measure of adjusted EBITDA are stock-based compensation, interest, 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 March 15, 2023.

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

 

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
December 31,

 

Twelve Months Ended
December 31,

 

 

 

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

Healthcare

 

$

14,535

 

 

$

15,572

 

 

$

55,002

 

 

$

58,556

 

Construction

 

 

17,605

 

 

 

13,968

 

 

 

57,149

 

 

 

48,003

 

Investments

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

 

32,140

 

 

 

29,540

 

 

 

112,151

 

 

 

106,559

 

 

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Healthcare

 

 

10,605

 

 

 

12,376

 

 

 

41,493

 

 

 

46,097

 

Construction

 

 

12,148

 

 

 

10,201

 

 

 

44,489

 

 

 

44,995

 

Investments

 

 

69

 

 

 

51

 

 

 

290

 

 

 

227

 

Total cost of revenues

 

 

22,822

 

 

 

22,628

 

 

 

86,272

 

 

 

91,319

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

9,318

 

 

 

6,912

 

 

 

25,879

 

 

 

15,240

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

6,749

 

 

 

6,756

 

 

 

27,264

 

 

 

22,595

 

Amortization of intangible assets

 

 

430

 

 

 

430

 

 

 

1,720

 

 

 

1,728

 

Gain on sale of MDOS

 

 

 

 

 

 

 

 

 

 

 

(847

)

Goodwill impairment

 

 

 

 

 

3,359

 

 

 

 

 

 

3,359

 

Total operating expenses

 

 

7,179

 

 

 

10,545

 

 

 

28,984

 

 

 

26,835

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

 

2,139

 

 

 

(3,633

)

 

 

(3,105

)

 

 

(11,595

)

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Other (expense) income

 

 

(1

)

 

 

(4,758

)

 

 

(998

)

 

 

(550

)

Interest expense, net

 

 

(311

)

 

 

(173

)

 

 

(975

)

 

 

(905

)

Gain on forgiveness of PPP loans

 

 

 

 

 

4,179

 

 

 

 

 

 

4,179

 

Total other (expense) income, net

 

 

(312

)

 

 

(752

)

 

 

(1,973

)

 

 

2,724

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

 

1,827

 

 

 

(4,385

)

 

 

(5,078

)

 

 

(8,871

)

Income tax provision

 

 

82

 

 

 

(26

)

 

 

(174

)

 

 

(60

)

Income (loss) from continuing operations, net of income taxes

 

 

1,909

 

 

 

(4,411

)

 

 

(5,252

)

 

 

(8,931

)

Income (loss) from discontinued operations, net of income taxes

 

 

 

 

 

(7

)

 

 

 

 

 

5,948

 

Net income (loss)

 

 

1,909

 

 

 

(4,418

)

 

 

(5,252

)

 

 

(2,983

)

Deemed dividend on Series A cumulative perpetual preferred stock

 

 

(479

)

 

 

(469

)

 

 

(1,916

)

 

 

(1,906

)

Net income (loss) attributable to common shareholders

 

$

1,430

 

 

$

(4,887

)

 

$

(7,168

)

 

$

(4,889

)

 

 

 

 

 

 

 

 

 

Net income (loss) per common share - basic and diluted*

 

 

 

 

 

 

 

 

Net income (loss) per share, continuing operations

 

$

0.12

 

 

$

(0.84

)

 

$

(0.36

)

 

$

(1.76

)

Net income (loss) per share, discontinued operations

 

 

 

 

 

 

 

 

 

 

 

1.17

 

Net income (loss) per share*

 

 

0.12

 

 

 

(0.84

)

 

 

(0.36

)

 

 

(0.59

)

Deemed dividend on Series A cumulative perpetual preferred stock per share

 

 

(0.03

)

 

 

(0.09

)

 

 

(0.13

)

 

 

(0.37

)

Net income (loss) per share, attributable to common stockholders - basic*

 

$

0.09

 

 

$

(0.93

)

 

$

(0.49

)

 

$

(0.96

)

Net income (loss) per share, attributable to common stockholders - diluted

 

$

0.09

 

 

$

(0.93

)

 

$

(0.48

)

 

$

(0.96

)

Weighted-average common shares outstanding – basic

 

 

15,483

 

 

 

5,281

 

 

 

14,751

 

 

 

5,085

 

Weighted-average common shares outstanding – diluted

 

 

15,570

 

 

 

5,281

 

 

 

14,829

 

 

 

5,085

 

 

 

 

 

 

 

 

 

 

Dividends declared per share of Series A perpetual preferred stock

 

$

0.25

 

 

$

1.81

 

 

$

1.00

 

 

$

2.31

 

*Earnings per share may not add due to rounding

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

 

 

December 31,
2022

 

December 31,
2021

Assets:

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

4,665

 

 

$

4,538

 

Restricted cash

 

 

142

 

 

 

278

 

Equity securities

 

 

3,490

 

 

 

47

 

Lumber derivative contracts

 

 

 

 

 

666

 

Accounts receivable, net

 

 

17,756

 

 

 

15,811

 

Inventories, net

 

 

10,627

 

 

 

8,525

 

Other current assets

 

 

2,587

 

 

 

1,998

 

Total current assets

 

 

39,267

 

 

 

31,863

 

Property and equipment, net

 

 

8,348

 

 

 

8,918

 

Operating lease right-of-use assets, net

 

 

4,482

 

 

 

4,494

 

Intangible assets, net

 

 

13,352

 

 

 

15,072

 

Goodwill

 

 

6,046

 

 

 

6,046

 

Other assets

 

 

1,807

 

 

 

1,659

 

Total assets

 

$

73,302

 

 

$

68,052

 

 

 

 

 

 

Liabilities, Mezzanine Equity and Stockholders’ Equity:

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

 

3,430

 

 

 

4,277

 

Accrued liabilities

 

 

3,137

 

 

 

2,445

 

Accrued compensation

 

 

3,701

 

 

 

3,051

 

Accrued warranty

 

 

291

 

 

 

569

 

Lumber derivative contracts

 

 

104

 

 

 

 

Billings in excess of costs and estimated profit

 

 

 

 

 

312

 

Deferred revenue

 

 

3,376

 

 

 

2,457

 

Short-term debt

 

 

11,682

 

 

 

12,869

 

Operating lease liabilities

 

 

1,427

 

 

 

1,253

 

Finance Lease Liabilities

 

 

397

 

 

 

588

 

Total current liabilities

 

 

27,545

 

 

 

27,821

 

Deferred tax liabilities

 

 

176

 

 

 

72

 

Operating lease liabilities, net of current portion

 

 

3,141

 

 

 

3,299

 

Finance lease obligation, net of current portion

 

 

386

 

 

 

706

 

Other liabilities

 

 

299

 

 

 

412

 

Total liabilities

 

 

31,547

 

 

 

32,310

 

 

 

 

 

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

 

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: $18,988,390 as of December 31, 2021.)

 

 

 

 

 

18,988

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

Preferred stock,$0.0001par 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, 2022. (Liquidation preference: $18,988,390 as of December 31, 2022.)

 

 

18,988

 

 

 

 

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

 

 

 

 

 

 

Common stock, $0.0001 par value: 50,000,000 and 30,000,000 shares authorized; 15,177,919 and 5,805,916 shares issued and outstanding (net of treasury shares) at December 31, 2022 and 2021, respectively

 

 

1

 

 

 

 

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

 

 

(5,728

)

 

 

(5,728

)

Additional paid-in capital

 

 

161,715

 

 

 

150,451

 

Accumulated deficit

 

 

(133,221

)

 

 

(127,969

)

Total stockholders’ equity

 

$

41,755

 

 

 

16,754

 

Total liabilities, mezzanine equity and stockholders’ equity

 

$

73,302

 

 

$

68,052

 

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

 

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

1,909

 

 

$

(4,411

)

 

$

(5,252

)

 

$

(8,931

)

Acquired intangible amortization

 

 

430

 

 

 

430

 

 

 

1,720

 

 

 

1,728

 

Unrealized (gain) loss on equity securities(1)

 

 

59

 

 

 

52

 

 

 

893

 

 

 

35

 

Unrealized (gain) loss on lumber derivatives(1)

 

 

(530

)

 

 

(1,062

)

 

 

768

 

 

 

(664

)

Litigation costs(2)

 

 

61

 

 

 

231

 

 

 

3,016

 

 

 

444

 

Restructuring costs(3)

 

 

163

 

 

 

 

 

 

163

 

 

 

 

Gain on disposal of MD Office Solutions(5)

 

 

 

 

 

 

 

 

 

 

 

(847

)

Allowance / Write off of tenant receivable(6)

 

 

 

 

 

 

 

 

 

 

 

323

 

Write off of software implementation costs

 

 

 

 

 

1,302

 

 

 

 

 

 

1,372

 

Goodwill impairment(4)

 

 

 

 

 

3,359

 

 

 

 

 

 

3,359

 

Severance and retention costs(10)

 

 

68

 

 

 

 

 

 

774

 

 

 

 

Financing costs(7)

 

 

157

 

 

 

337

 

 

 

526

 

 

 

568

 

COVID-19 Protection Equipment(8)

 

 

 

 

 

28

 

 

 

 

 

 

110

 

SBA PPP Loan forgiveness(9)

 

 

 

 

 

 

 

 

 

 

 

(4,179

)

Income tax expense

 

 

(82

)

 

 

26

 

 

 

174

 

 

 

60

 

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

 

$

2,235

 

 

$

292

 

 

$

2,782

 

 

$

(6,622

)

 

 

 

 

 

 

 

 

 

Net income (loss) per diluted share from continuing operations

 

$

0.12

 

 

$

(0.84

)

 

$

(0.36

)

 

$

(1.76

)

Acquired intangible amortization

 

 

0.03

 

 

 

0.08

 

 

 

0.12

 

 

 

0.34

 

Unrealized (gain) loss on equity securities(1)

 

 

 

 

 

0.01

 

 

 

0.06

 

 

 

0.01

 

Unrealized (gain) loss on lumber derivatives(1)

 

 

(0.03

)

 

 

(0.20

)

 

 

0.05

 

 

 

(0.13

)

Litigation costs(2)

 

 

 

 

 

0.04

 

 

 

0.20

 

 

 

0.09

 

Restructuring costs(3)

 

 

0.01

 

 

 

 

 

 

0.01

 

 

 

 

Gain on disposal of MD Office Solutions(5

 

 

 

 

 

 

 

 

 

 

 

(0.17

)

Allowance / Write off of tenant receivable

 

 

 

 

 

 

 

 

 

 

 

0.06

 

Write off of software implementation costs

 

 

 

 

 

0.25

 

 

 

 

 

 

0.27

 

Goodwill impairment(4)

 

 

 

 

 

0.64

 

 

 

 

 

 

0.66

 

Severance and retention costs(10)

 

 

 

 

 

 

 

 

0.05

 

 

 

 

Financing costs(7)

 

 

0.01

 

 

 

0.06

 

 

 

0.04

 

 

 

0.11

 

COVID-19 Protection Equipment(8)

 

 

 

 

 

0.01

 

 

 

 

 

 

0.02

 

SBA PPP Loan forgiveness(9)

 

 

 

 

 

 

 

 

 

 

 

(0.82

)

Income tax expense

 

 

(0.01

)

 

 

 

 

 

0.01

 

 

 

0.01

 

Non-GAAP adjusted net income (loss) per basic and diluted share from continuing operations (11)

 

$

0.14

 

 

$

0.06

 

 

$

0.19

 

 

$

(1.30

)

(1)   Reflects adjustments for any unrealized gains or losses in lumber derivatives value and change in fair value of investments in equity securities.
(2)   Reflects one-time litigation costs.
(3)   Reflects the costs incurred for our vein and chronic care product line that was discontinued during the year.
(4)   Reflects impairment of goodwill related to the Construction division.
(5)   Reflects the gain from the sale of MDOS.
(6)   Reflects one-time write off in uncollectible tenant receivable.
(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) Reflects the severance expense for our former Healthcare division CEO and other employees.
(11) 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 December 31, 2022

 

Healthcare

 

Construction

 

Investments

 

Star Equity
Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

1,419

 

$

2,722

 

 

$

(176

)

 

$

(2,056

)

 

$

1,909

 

Depreciation and amortization

 

 

295

 

 

503

 

 

 

69

 

 

 

9

 

 

 

876

 

Interest (income) expense

 

 

147

 

 

147

 

 

 

51

 

 

 

(34

)

 

 

311

 

Income tax expense

 

 

6

 

 

(88

)

 

 

 

 

 

 

 

 

(82

)

EBITDA from continuing operations

 

 

1,867

 

 

3,284

 

 

 

(56

)

 

 

(2,081

)

 

 

3,014

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (gain) loss on equity securities(1)

 

 

 

 

 

 

 

59

 

 

 

 

 

 

59

 

Unrealized (gain) loss on lumber derivatives(1)

 

 

 

 

(530

)

 

 

 

 

 

 

 

 

(530

)

Litigation costs(2)

 

 

61

 

 

 

 

 

 

 

 

 

 

 

61

 

Restructuring costs(5)

 

 

163

 

 

 

 

 

 

 

 

 

 

 

163

 

Stock-based compensation

 

 

1

 

 

4

 

 

 

 

 

 

111

 

 

 

116

 

Severance and retention costs(6)

 

 

66

 

 

 

 

 

 

 

 

2

 

 

 

68

 

Financing cost(8)

 

 

35

 

 

96

 

 

 

26

 

 

 

 

 

 

157

 

Non-GAAP adjusted EBITDA from continuing operations(11)

 

$

2,193

 

$

2,854

 

 

$

29

 

 

$

(1,968

)

 

$

3,108

 


For the Three Months Ended December 31, 2021

 

Healthcare

 

Construction

 

Investments

 

Star Equity
Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(684

)

 

$

(1,925

)

 

$

(159

)

 

$

(1,643

)

 

$

(4,411

)

Depreciation and amortization

 

 

317

 

 

 

481

 

 

 

50

 

 

 

 

 

 

848

 

Interest expense (income)

 

 

69

 

 

 

53

 

 

 

51

 

 

 

 

 

 

173

 

Income tax (benefit) expense

 

 

26

 

 

 

 

 

 

 

 

 

 

 

 

26

 

EBITDA from continuing operations

 

 

(272

)

 

 

(1,391

)

 

 

(58

)

 

 

(1,643

)

 

 

(3,364

)

 

 

 

 

 

 

 

 

 

 

 

Unrealized (gain) loss on equity securities(1)

 

 

 

 

 

 

 

 

52

 

 

 

 

 

 

52

 

Unrealized (gain) loss on lumber derivatives(1)

 

 

 

 

 

(1,062

)

 

 

 

 

 

 

 

 

(1,062

)

Litigation costs(2)

 

 

122

 

 

 

 

 

 

 

 

 

109

 

 

 

231

 

Stock-based compensation

 

 

23

 

 

 

3

 

 

 

 

 

 

110

 

 

 

136

 

Goodwill impairment(3)

 

 

 

 

 

3,359

 

 

 

 

 

 

 

 

 

3,359

 

Write off of software implementation costs

 

 

1,302

 

 

 

 

 

 

 

 

 

 

 

 

1,302

 

Financing cost(8)

 

 

22

 

 

 

307

 

 

 

8

 

 

 

 

 

 

337

 

COVID-19 Protection Equipment(9)

 

 

28

 

 

 

 

 

 

 

 

 

 

 

 

28

 

Non-GAAP adjusted EBITDA from continuing operations(11)

 

$

1,225

 

 

$

1,216

 

 

$

2

 

 

$

(1,424

)

 

$

1,019

 


For the Twelve Months Ended December 31, 2022

 

Healthcare

 

Construction

 

Investments

 

Star Equity
Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

105

 

$

2,875

 

 

$

(970

)

 

$

(7,262

)

 

$

(5,252

)

Depreciation and amortization

 

 

1,262

 

 

1,974

 

 

 

290

 

 

 

9

 

 

 

3,535

 

Interest expense

 

 

411

 

 

416

 

 

 

182

 

 

 

(34

)

 

 

975

 

Income tax expense

 

 

262

 

 

(88

)

 

 

 

 

 

 

 

 

174

 

EBITDA from continuing operations

 

 

2,040

 

 

5,177

 

 

 

(498

)

 

 

(7,287

)

 

 

(568

)

 

 

 

 

 

 

 

 

 

 

 

Unrealized (gain) loss on equity securities(1)

 

 

 

 

 

 

 

893

 

 

 

 

 

 

893

 

Unrealized (gain) loss on lumber derivatives(1)

 

 

 

 

768

 

 

 

 

 

 

 

 

 

768

 

Litigation costs(2)

 

 

3,016

 

 

 

 

 

 

 

 

 

 

 

3,016

 

Restructuring costs(5)

 

 

163

 

 

 

 

 

 

 

 

 

 

 

163

 

Stock-based compensation

 

 

6

 

 

21

 

 

 

 

 

 

411

 

 

 

438

 

Severance and retention costs(6)

 

 

769

 

 

 

 

 

 

 

 

5

 

 

 

774

 

Financing cost(8)

 

 

80

 

 

355

 

 

 

91

 

 

 

 

 

 

526

 

Non-GAAP adjusted EBITDA from continuing operations(11)

 

$

6,074

 

$

6,321

 

 

$

486

 

 

$

(6,871

)

 

$

6,010

 


For the Twelve Months Ended December 31, 2021

 

Healthcare

 

Construction

 

Investments

 

Star Equity
Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

4,629

 

 

$

(7,488

)

 

$

(443

)

 

$

(5,629

)

 

$

(8,931

)

Depreciation and amortization

 

 

1,315

 

 

 

1,931

 

 

 

226

 

 

 

 

 

3,472

 

Interest expense

 

 

258

 

 

 

509

 

 

 

138

 

 

 

 

 

 

905

 

Income tax expense

 

 

60

 

 

 

 

 

 

 

 

 

 

 

 

60

 

EBITDA from continuing operations

 

 

6,262

 

 

 

(5,048

)

 

 

(79

)

 

 

(5,629

)

 

 

(4,494

)

 

 

 

 

 

 

 

 

 

 

 

Unrealized (gain) loss on equity securities(1)

 

 

 

 

 

 

 

 

52

 

 

 

(17

)

 

 

35

 

Unrealized (gain) loss on lumber derivatives(1)

 

 

 

 

 

(664

)

 

 

 

 

 

 

 

 

(664

)

Litigation costs(2)

 

 

122

 

 

 

 

 

 

 

 

 

322

 

 

 

444

 

Stock-based compensation

 

 

143

 

 

 

6

 

 

 

 

 

 

376

 

 

 

525

 

Gain on disposal of MD Office Solutions(4)

 

 

(847

)

 

 

 

 

 

 

 

 

 

 

 

(847

)

Goodwill impairment(3)

 

 

 

 

 

3,359

 

 

 

 

 

 

 

 

 

3,359

 

Allowance / Write off of tenant receivable(7)

 

 

 

 

 

323

 

 

 

 

 

 

 

 

 

323

 

Write off of software implementation costs

 

 

1,302

 

 

 

70

 

 

 

 

 

 

 

 

 

1,372

 

Financing cost(8)

 

 

111

 

 

 

449

 

 

 

8

 

 

 

 

 

 

568

 

COVID-19 Protection Equipment(9)

 

 

110

 

 

 

 

 

 

 

 

 

 

 

 

110

 

SBA PPP Loan forgiveness(10)

 

 

(2,959

)

 

 

(1,220

)

 

 

 

 

 

 

 

 

(4,179

)

Non-GAAP adjusted EBITDA from continuing operations(11)

 

$

4,244

 

 

$

(2,725

)

 

$

(19

)

 

$

(4,948

)

 

$

(3,448

)

(1)   Reflects adjustments for any unrealized gains or losses in lumber derivatives value and change in fair value of investments in equity securities.
(2)   Reflects one-time litigation costs.
(3)   Reflects impairment of goodwill related to the Construction division.
(4)   Reflects the gain from the sale of MDOS.
(5)   Reflects the costs incurred for our vein and chronic care product line that was discontinued during the year.
(6)   Reflects the severance expense for our former Healthcare division CEO and other employees.
(7)   Reflects one-time write off in uncollectible tenant receivable.
(8)   Reflects financing costs from our credit facilities.
(9)   Reflects purchases related to COVID -19 personal protection equipment.
(10)  Reflects the forgiveness of the Paycheck Protection Program.
(11)  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.

Supplemental Debt Information
(Unaudited)

A summary of the Company’s credit facilities and related party notes are as follows (dollars in thousands):

 

 

December 31, 2022

 

December 31, 2021

 

 

Amount

 

Weighted-
Average Interest
Rate

 

Amount

 

Weighted-
Average Interest
Rate

Revolving Credit Facility - eCapital KBS

 

$

 

%

 

$

3,131

 

6.00

%

Revolving Credit Facility - eCapital EBGL

 

 

2,592

 

10.25

%

 

 

1,652

 

6.00

%

Revolving Credit Facility - Webster

 

 

8,299

 

6.89

%

 

 

7,016

 

2.60

%

Total Short-term Revolving Credit Facilities

 

$

10,891

 

7.69

%

 

$

11,799

 

3.98

%

eCapital - Star Loan Principal, net

 

$

791

 

10.50

%

 

$

1,070

 

6.25

%

Short Term Loan

 

$

791

 

10.50

%

 

$

1,070

 

6.25

%

Total Short-term debt

 

$

11,682

 

7.88

%

 

$

12,869

 

4.17

%

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

 

 

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

 

 

 

2022

 

 

2021(1)

 

 

2022

 

 

2021(1)

Revenue by segment:

 

 

 

 

 

 

 

 

Healthcare

 

$

14,535

 

 

$

15,572

 

 

$

55,002

 

 

$

58,556

 

Construction

 

 

17,605

 

 

 

13,968

 

 

 

57,149

 

 

 

48,003

 

Investments

 

 

158

 

 

 

158

 

 

 

633

 

 

 

633

 

Intersegment elimination

 

 

(158

)

 

 

(158

)

 

 

(633

)

 

 

(633

)

Consolidated revenue

 

$

32,140

 

 

$

29,540

 

 

$

112,151

 

 

$

106,559

 

 

 

 

 

 

 

 

 

 

Gross profit (loss) by segment:

 

 

 

 

 

 

 

 

Healthcare

 

$

3,930

 

 

$

3,196

 

 

$

13,509

 

 

$

12,459

 

Construction

 

 

5,457

 

 

 

3,767

 

 

 

12,660

 

 

 

3,008

 

Investments

 

 

90

 

 

 

107

 

 

 

343

 

 

 

406

 

Intersegment elimination

 

 

(159

)

 

 

(158

)

 

 

(633

)

 

 

(633

)

Consolidated gross profit

 

$

9,318

 

 

$

6,912

 

 

$

25,879

 

 

$

15,240

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations by segment:

 

 

 

 

 

 

 

 

Healthcare

 

$

1,393

 

 

$

(592

)

 

$

440

 

 

$

2,035

 

Construction

 

 

2,880

 

 

 

1,742

 

 

 

3,560

 

 

 

(5,073

)

Investments

 

 

(44

)

 

 

101

 

 

 

192

 

 

 

378

 

Corporate, eliminations and other

 

 

(2,090

)

 

 

(1,525

)

 

 

(7,297

)

 

 

(5,576

)

Segment loss from operations

 

$

2,139

 

 

$

(274

)

 

$

(3,105

)

 

$

(8,236

)

Goodwill impairment(2)

 

 

 

 

 

(3,359

)

 

 

 

 

 

(3,359

)

Consolidated loss from operations

 

$

2,139

 

 

$

(3,633

)

 

$

(3,105

)

 

$

(11,595

)

 

 

 

 

 

 

 

 

 

Depreciation and amortization by segment:

 

 

 

 

 

 

 

 

Healthcare

 

$

295

 

 

$

317

 

 

$

1,262

 

 

$

1,315

 

Construction

 

 

503

 

 

 

481

 

 

 

1,974

 

 

 

1,931

 

Investments

 

 

69

 

 

 

50

 

 

 

290

 

 

 

226

 

Star equity corporate

 

 

9

 

 

 

0

 

 

 

9

 

 

 

0

 

Total depreciation and amortization

 

$

876

 

 

$

848

 

 

$

3,535

 

 

$

3,472

 

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

(2) Reflects impairment of goodwill related to the Construction division.