Q4 2020 Star Equity Holdings Inc Earnings Call
And Kelly.
Greetings, ladies and gentlemen, and welcome to the Star Equity Holdings, Inc. Fourth quarter and year end 2020 results conference call you.
As a reminder, certain statements made during this conference call, including the question and answer period are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 and.
And other federal security laws.
These forward looking statements include but are not limited to statements about the companys revenues.
Costs and expenses margin operations financial results acquisitions, and other topics related to Starz business strategy and outlook.
These forward looking statements are based on current assumptions and expectations involve risks and uncertainties that could cause actual events and financial performance to differ materially.
Risks and uncertainties include but are not limited to business and economic conditions.
Technical logical change <unk>.
Industry trends and changes and the company's market and competition.
More information about the risks and uncertainties is available and the company's filings with the U S Securities and Exchange Commission, including annual reports on form 10-K quarterly.
Quarterly reports on form 10-Q, and current reports on form 8-K, as well as today's press release.
The information discussed on this mornings conference call should be used in conjunction with the consolidated financial statements and notes included and those reports and speak only as of the day of this call.
The company undertakes no obligation to update these forward looking statements.
In the earnings release today and in the comments management remarks references to both GAAP results as well as its adjusted results.
The adjusted results are non-GAAP and do not include depreciation and amortization.
And I'm, sorry nonrecurring charges.
Also adjusted EBITDA, which is non-GAAP measure that further excludes depreciation and amortization.
Interest taxes and stock based compensation.
Finally, free cash flow, which is a non-GAAP measure taking operating cash flow and subtracting cash paid for capital expenditures.
Management believes the presentation of the non-GAAP measures, along with GAAP financial statements and reconciliations provide a more thorough analysis of ongoing financial performance.
Investors can find the reconciliation and a result on a GAAP versus non-GAAP basis, and the earnings release.
If you did not receive a copy of the press reports and would like one please contact star at 20348 and nine nine 500 after the call or it's in Investor Relations Representative Lena Ekati of the equity group at 2128369 and see.
One one.
Also this call is being broadcast live over the Internet and maybe accessed at staar's website by at Www Dot Star equity Dot com.
Shortly after the call a replay will be also be available on the company's website.
It is now my pleasure to introduce Jeff Eberwein, Chairman of Star Equity Holdings, Inc.
Thank you operator, good morning, and thank you all for joining us today for our fourth quarter and year end 2020 financial results Conference call.
On the call with me today are Matt Molchan, CEO of Digirad Hill, and David Noble, our CFO and Chief operating officer.
2020 was a challenging but exciting year for our company, while our business experienced reduced revenue due to the COVID-19 pandemic, we made significant progress on our growth and value maximization strategy by improving operating and financial results and are building and construction division and by announcing the sale.
And two assets and our health Digirad Health division for over $20 million, which are expected to close and Q1.
Also we rebranded the public company to better reflect our business strategy and structure.
And the fourth quarter, our Digirad Health Division continue to be impacted by lower sales of new cameras and reduced camera rental activity levels due to the pandemic heading.
Heading into 2020. One however, our backlog of rental contracts has improved and is respected to return to normal levels the year progresses.
And 2020 sales of new cameras declined 59% versus 2019.
Although sales from new cameras and is expected to improve somewhat in 2020, one and it remains very dependent on capital decisions capital spending decisions by health care providers.
And our building and construction division fourth quarter revenue improved 15% versus the fourth quarter of 2019, and also improved 15% versus the third quarter.
Gross margins for this division were adversely impacted right by and extreme increase and raw material prices.
We increased our prices and January to offset these higher input costs and our backlog remains very strong.
We continue to expect margins and our building and construction division to improve over time, and we've made progress on our goal of substantially increasing our output capacity and KBS.
Our plan there is to eventually increase our production to 15 to 20 modules per week versus the current run rate of approximately seven and a half per week and we expect to make progress on other school and 2021.
And the first quarter 2020, one we have been focused on closing the sales of two pieces of our Digirad health division for over $20 million.
A smaller deal for 1.3 million already closed and we expect to close the sale of D. M. S for $18 seven and $5 million by the end of March.
With an estimated 18 million and immediate cash proceeds will pay down some of our higher cost debt and fund high return internal growth investments.
We will also continue to explore acquisitions, which could be either bolt ons for our existing businesses or new platform companies, which would create new business segments for a holding company structure.
With that I'll turn it over to a health care CEO, Matt Molchan, Matt. Please go ahead.
Thanks, Jeff.
Revenue from our health care Division in Q4, 2020 fell by 21, 4% to $13 3 million and over the same period and the prior year. This was due to a slowdown due to the COVID-19 pandemic, although many doctor offices have reopened and hospitals are performing non emergency procedures.
Overall activity levels remain below pre COVID-19 levels.
Gross profit for the Q4, 2020 reporting period decreased by 45, 4% and gross profit margin decreased by eight 6% over the same period last year due to lower revenue generated from high margin mobile scanning services and bus camera sales.
And diagnostic services revenue and gross margin percentage for the fourth quarter, 2020 was $10 6 million and $16 three per cent compared to $12 million and $22 four per cent and last year's fourth quarter.
The decrease and diagnostic services revenue and gross margin percentage compared to the prior year was primarily due to a decrease and testing days and scans, resulting from the impact and the COVID-19 pandemic.
In addition, non-GAAP adjusted EBIT for diagnostic services decreased to $1 3 million from $2 1 million and the fourth quarter compared to last year's fourth quarter. This is mainly attributed to decrease in revenue.
And our diagnostic imaging business revenue and gross margin percentage for the fourth quarter of 2020 was $2 7 million and 32, 7%, respectively compared to four 9 million and 42, 4%, respectively and the prior year fourth quarter. The decrease in diagnostic imaging revenue and <unk>.
Margin was due to the slowdown and camera sales associated with capital funding delays and uncertainty due to the COVID-19 pandemic now I'll turn the call the day noble our CFO, who will provide additional financial highlights for the fourth quarter day. Please go ahead.
Thanks, Matt and and good morning, now for a bit of more positive news fourth quarter 2020 building and construction Division revenue was $9 8 million versus $8 5 million in the fourth quarter of last year gross margins did dip a little bit from to 13, 6% versus 18.0 per cent in the.
Prior year, the increase and revenue is attributable to higher levels of business activity at KBS, Our modulus subsidiary as we successfully reenter the commercial and multifamily segment of the market. The decrease in gross margin percentage is attributable largely to edge builder, our structural wall panel business as the sharp rise and lumber weighed on our profit.
The ability there and the fourth quarter.
For Q4 2020, our company.
Companywide SG&A decreased slightly by about <unk> six per cent compared to the fourth quarter of 2019 as we held the line on head count and experienced slightly lower health care expenses.
During 2020, we also experienced reduced costs from contracted services as we realize the benefits of prior streamlining and the I T and HR areas and our Digirad Health Division.
And we did incur a noncash charge to goodwill of <unk> 4 million and the Q and Q4 2020 related to our edge builder reporting unit.
Moving onto companywide bottom line results for the fourth quarter of 2000, and 'twenty, We had a net loss from continuing operations of <unk> 5 million compared to a net loss from continuing operations of <unk> 3 million and the same period and 2019.
Non-GAAP adjusted net loss from continuing operations and the fourth quarter of 2020 was $1 6 million or <unk> 34 per share compared to an adjusted net income of <unk> 4 million or 22 cents per share and the fourth quarter of last year.
As a reminder, and Q2, we completed a public equity offering through the issuance of two 5 million shares of common stock, including exercise of the overallotment, which raised five and a half million dollars before fees and expenses.
And currently we issued warrants to purchase up to an additional $1 1 million shares and some of those warrants were exercised during 2020.
Therefore per share amounts for the Q4, 2000, and 'twenty period reflect a new common share count of $4 8 million shares.
Non-GAAP adjusted EBITDA decreased to negative <unk> 7 million for the fourth quarter of 2020 compared to a positive $1 2 million and the fourth quarter of last year attributable mainly to the decrease in revenue, resulting from the COVID-19 pandemic.
For the fourth quarter of 2000, and 'twenty, we had and operating cash flow, our cash outflow of $3 1 million and a free cash outflow of $1 4 million compared to an operating cash inflow of $1 2 million and a free cash inflow of $1 4 million and the fourth quarter of 2019.
As of December 31, 2020 of the outstanding balance and our credit facilities was $24 4 million, including $4 2 million and PPE PPP funds, which we fully anticipate will be completely forgiven in the coming months and we've made further progress on that so far this year.
Our overall net debt position, including $3 $4 million and cash and cash equivalents was $21 million.
With that I'll turn it back to the operator for questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad and confirmation tone will indicate your line is and the question queue. You May Press Star two if you would like to remove your question from the queue.
All participants using speaker equipment, it may be necessary to pick up your handset before a person's darkies.
One moment, please while we poll for questions.
Thank you. Our first question comes from the line of Tate Sullivan with Maxim. Please proceed with your question.
Hi, Thank you good morning, I, just starting with your balance sheet and.
And adjusting going forward for the sales and the sale to close at the end of the quarter and it looks like your PP&E property and equipment balance declined.
<unk> fleet from three two to four Q was the heavy asset what's the asset intensive side of the mobile health care assets that you sold one of the main considerations and selling those or can you get or and does that and what you may look at going forward in terms of more asset light businesses. Please yeah, and I think it's a great question Tate. Thanks.
And so that change is.
Most solely due to the re characterization of mobile health care business into discontinued ops. Most much of the rolling stock in fact, most of the rolling stock that we have as a company is in that division.
And as you point out that's a much more capital intensive business.
Given the nature of the equipment and the cost of that equipment to replace it.
So you know we do prefer less capital intensive businesses. You know if you think about KBS. It it requires a fair bit of working capital, but in terms of true capital intensity. It's a much less and then that mobile health care division that we're selling.
And at the same thing for us.
Health care business, the traditional Digirad health business is a low capital intensity business.
And then.
And once you finalize that the larger sale at the end of this quarter and pay down are you paying down or mostly some of your more expensive longer term debt did you say and can you just give us some indication on what that might do to your annual interest expense or what what where your balance sheet look like after that or how much cash might you retain.
And I know, it's still subject to the timing of that close to.
Yeah and.
So the idea is to focus on are the higher cost debt.
And to lower our cost of capital.
But the credit line and we have on our health care Division is tied to the collateral and we will be paying down.
A meaningful amount on that line as well just because the collateral is gonna be a lot lower going forward and we expect.
To retain some cash and.
So we have some dry powder for our organic growth plans and also for acquisition opportunities.
Yeah, and it and it will significantly reduce overall interest cost there is some high higher interest debt that will be paid as part of that.
But as Jeff pointed out we need to pay some of the revolver, even though that's cheap debt because it's linked to those assets.
Understood. Thank you and and and you talked about the timing of hospitals to start to purchase cameras again and maybe this is for you Matt to how historically I know its tough with this current situation, but when might hospitals start to spend to install new cameras or how does the capital expenditure cycle usually work.
Sure Hospital clients.
Yeah, Yeah absolutely.
We.
Traditionally you know.
We have.
The majority of our cameras are sold and the third and fourth quarter.
And it's why we interest a big pullback as you compare the fourth quarter of 2019 compared to the fourth quarter of 2020, you can you kind of.
Sits out there and so we will we would tend to see that we were starting to see things open up a little bit.
And there's a vaccine and gets out there and and you know.
And we see a little bit more.
Some some pent up demand for some of our cameras and and.
As we as we continue to work through.
Through this year. So we will we should see a more normal flow, where we still are anticipating based on our discussions with our hospital customers and the third and fourth quarter and especially in the fourth quarter should open up a little bit more for us.
As Covid, 19, and hopefully and and the and really the and.
Uncertainty around it and you know how is it.
Things become more certain.
Yeah, I think other budgets and and the normal way of life is getting back and from coming back to us. So so we anticipate that we will see some some sales and a more normalized sales here and the first couple of quarters of 2021, and then you know.
Really back to full normal by the end of the year.
Matt maybe you could talk about the.
The sales pipeline, we have and.
And that is something we've talked about internally.
Sales and new cameras.
Are they canceled or are they just getting deferred because hospitals.
And so many other things going on.
Yeah, and it's surprising and cancellations, it's mostly deferments and as you know is as you know.
Hospitals are directing their cash.
Capital expenditures.
More COVID-19 related and and it put and put per.
A nuclear cameras on hold but we haven't had.
And many at all and cancellations and very few but mostly you know more and more.
And those orders continue to be available and viable and we and that's what we anticipate to have a stronger 2021, and 2020 based on and conversations that we're having with our customers. So we anticipate that those those orders that have not been cancelled and we will go through the cycle again the budgeting.
Cycle and it would be and cash will be allotted to pay for those cameras.
As we enter into the the like this.
Second two quarters of the year.
Okay. Thank you. Thank you all for your company.
Our next question comes from the line of Theodore O'neill with Litchfield Hills Research. Please proceed with your question.
Thank you very much.
I have two questions about the about the building and construction side of the business in your prepared remarks, you talked about having adverse pricing and lumber, which impacted the edge builder, but you didn't say anything about KBS wouldn't they have the same issue.
They do but if you if you think about Cogs.
The structural wall panel business at edge builder is really just two by fours sheathing and some labor.
And really the commodities are the majority of that Cogs right.
And at KBS, It's a more complex process. So there's more that goes into it for one there's a lot more labor.
And also the structural sort of commodity lumber is only part of the materials cost. There's you know bathtubs and doors and windows and other value added products, which are not as volatile.
And a couple of other things I mean, when you think about single family homes. For example, which is half of what we do at KBS we.
We can win a project and a price it and produce it within a month or two so the exposure to commodity price risk is lower and that case.
On the on the commercial side, we have some ability to push price increases and we have proven that with the touchy project that we did last year. When the third phase came we were able to get a price increase to offset.
The increase in lumber and structural wall panel business is a little different sometimes we sign larger contracts a few months before they actually get produced and it's a little bit more challenging although we're working on it a little bit more challenging to pass along some of those price increases.
Oh, Okay. That's great explanation. Thank you and so now that it's warming up here in the northeast can you give us some outlook for the construction business.
Yeah, I mean, I would say that.
You know for it let's take KBS to start.
Or plant a year ago was operating at sort of three or four units a week.
We're somewhere between seven to eight and I think as we overcome some operational challenges we should be up in the sort of eight 910 ish area.
A year and a half ago. It was and is kind of a demand issue we.
And we saw that we.
Restructured the sales force and hired a fantastic VP of business development. So we have really as much work as we want at this point. So it's not really an issue of demand. It's an issue of how fast we can get things through the plant.
So our outlook is pretty good I mean, I would say that.
We're operating.
Right, where we were in the second half of last year and again I think we're going to actually increase the number of units per week slowly as we head into the mid year and as we've mentioned many times, we've contemplated and and continue to contemplate opening a second factory to to really.
Really shorten our lead times I mean, our challenge right now is our lead times have expanded from a couple of months to more like four or five or six months or.
So we think the outlook on the KBS side is terrific and also on the wall panels like I say that were plagued a little bit with these commodity price increases, although we're selling projects now at this price so that that'll be helpful. If prices come down we have about a nine and I think it's about a $9 million commercial backlog at at edge builder, which is the highest.
Backlog we've had.
And the last couple of years since I've been involved so I think the outlooks very good for construction. There is you know if anything the challenge of the Covid challenge is not demand it's more supply in other words.
We think there's a bit of a.
Covid related choke hold on capacity to produce some other materials that we need to produce the product right. So.
Not only a price is high but there's a few things that are a little bit hard to get and there is longer lead times on materials, but in terms of the demand side people are nesting right. So they're doing a lot of.
You know and the edge builder side doing a lot of renovations of their homes decks kitchens et cetera roofs, they're spending more time at home they have more money that theyre not spending traveling et cetera. So the outlook I think for construction for the near to medium term is quite strong.
The issue would be you know.
Materials, but I think with vaccines and rolling out the way. They are we expect that that supply chain is going to free up a bit as we enter the middle of the year and on the housing side, you've seen I mean housing and strong new housing.
There's a lot of demand still for affordable housing, it's an area that we're very keen on on getting involved in and we've been doing some affordable housing projects.
So we think it's very good I mean, you know it is a cyclical industry, but the outlook for us for 2021 for building and construction is very strong.
Great One last question Wil.
Will the SG&A expense level changed in any meaningful way once the sale of Dms goes through.
And we think so we know that there's a lot of noise and the numbers right now because since.
Since we had signed the sales contract to sell that business.
It's and discontinued operations, but yet we haven't sold it yet don't have the cash yet.
And we're still running that business and we still own that business right up until the minute, we don't and so we do have some costs associated with that business and one once it's sold.
Do you think.
And there'll be some ability to be more efficient and across our whole.
Cost structure and but at the same time, we are looking that internal growth.
Growth projects and we're looking at acquisitions and so the idea is to.
Have more scale.
More and more upside and and what we're doing and so this is just a moment in time when when we're actually.
D scaling, but I think the trend over time, there's going to be a greater scale greater cost efficiencies.
Okay. Thanks very much.
Yeah.
Our next question comes from the line of Adam Waldow with Lismore Partners. Please proceed with your question.
Good day, and thanks very much for taking my questions.
With regards to the pending mobile health care sale I was encouraged by the fact that you.
Classified as discontinued operations and obviously your commentary, it's pretty encouraging in terms of closing by the end of the month what milestones remain.
Prior to closing that you can discuss at this point.
Yeah, It's it's really and Matt can can chime in here too.
It's a complicated.
Complicated business and heavily regulated business. So when we announced the transaction at the first of November we needed to get regulatory approvals. So that was one hurdle and then the buyer who is who is in the business is.
<unk> been working on.
Really a new company that he's he's creating he he's already and the business and he is combining his business with the business, we're buying from US and then refinancing that whole entity and some of that is is bank financing and some of it is involves some programs with some government entities and you can imagine.
Net there.
They've been pretty backed up so the.
We've made a tremendous amount of progress is getting is getting very close.
But there have been a lot of a lot of hurdles to get from announcement to close and it's taken longer than we originally anticipated but.
And we believe we're getting very close.
And are you able to comment on the status of the buyers financing is that all pretty much in place at this point.
We believe it is yes.
Terrific, Okay, and then turning to the building and construction segment from my final one of the questions.
Can you give us a quantification of the total businesses backlog now on a dollar value basis, and then maybe on a total project basis, if you have that handy.
Versus at this time last year, just so we can kind of see how those compare given the.
The constraints to production as the main factor here.
And limiting.
Limiting the ability to complete projects faster.
Yeah, and that's a complicated question, especially the comparison just because we're doing a much better job of quantifying that pipeline today than we were a year ago, but if we look at KBS for example.
We use we use a CRM program within net suite and in terms of.
I would say identifiable sort of probability weighted projects, we're in touch with over $50 million of business depending.
And depending on how you weighted and each sales person has their own kind of way to weight that that number's, probably 15 and $16 million, but it really doesn't speak to the whole level of activity that we're experiencing because we've got another probably another $50 million of sort of.
What I would call prospects on top of that.
And again this is all new England.
The other the other complexity there is our single family business, which is about half of what we do.
Some of that never hits the pipeline because it comes in and it gets produced and it goes out a much shorter lead times. So that pipeline that I. Just cited is really our commercial side and that is kind of half of our business.
But versus a year ago, it's definitely significantly higher.
And our challenge right now is we're in touch with a number of very large projects and I would consider a large project anything from 30, 40 50 boxes up to 200.
Those you kind of have to demonstrate that you've got the capacity to do though so so those kind of fall one way or in other and can be really significant impacts to the top line. So I guess I'll all of that that is to say we have a significant pipeline. It's more then.
You know more than we can do with one factory and again, we're contemplating whether we need to get that second one up and running to try to bring our lead times down and just to paint that picture a little bit.
And historically KBS as backlog has been.
Typically 15 to 20 million.
That's that's not probability weighted and we've talked and.
About it being more like 50 million now and so that's it's huge growth versus last year at this time.
And we don't have an exact number for exactly where it was this year at this time last year, but we needed cash.
Capital to fund the working capital needs for some of the big projects that we were on the cusp of winning which is why we did the offering and the spring of last year, and then right when that offering was done.
And we announced a string of several big projects and one thing that I think is helpful is that we have executed on those projects produce those projects and so now they're out of our pipeline, but yet our pipeline is still the same. So that tells you that we've replaced those projects with new ones, which we find.
And really encouraging.
On the edge builder side, I mentioned and the commercial side, we have about a $9 million pipeline.
Our backlog that's that's a backlog number the pipeline is larger than that considerably.
But we know that the pipeline of executable projects today is about $9 million and also a good portion of that business about a third of that business is retail sort of professional builders coming into our lumberyard and ordering materials.
A little bit of a slow start maybe to the beginning of this year, but we expect that's going to.
And that's gonna be a pretty robust business given the outlook for construction. So you know.
All and all I think we're pretty happy with the pipelines.
And finally, just on that same segment, how sensitive do you all feel based on your analysis that segment as overall to volatility.
And sort of longer term interest rates than we had been seeing and the capital markets and recently.
And I'll I'll try and take a stab at that.
There is.
There's the cyclical and the and the second secular so on the cyclical side.
Housing starts I think everybody knows we're incredibly high before the global financial crisis, and a way to nine and then what really really low and we spent 10 years below normal levels and we've just gotten back to right around normal.
So my point is it's a very different situation, there and the situation and 2004, five and six which were really peak bubble type situations.
So, there's a zone where volatility and <unk>.
Interest rates doesn't really matter that much you know interest rates if they go from 1% to two per cent.
I really don't think that matters at all.
And they go to 5% that that is a really big change.
And and it is it can be a cyclical business, but just putting that on the shelf for a second we strongly believe and modular and we think modular is going to gain share over time and and both of our businesses, where a very small fish and a very big pond. So if modular is going to grow a share and if we're able to.
Grow our share we'll have plenty of projects to do to write out those cycles. So.
Said, a different way like KBS theres a lot of different things, we can produce and not just single family houses or multifamily houses. We historically have also done dorm rooms.
There's a lot of retail applications that could be relevant in terms of chains and hotels.
Hotels, and and things like that so modular has had a lot of applications and the goal is to grow that business and diversify that business overtime. So that even though it's in a cyclical industry we won't be.
As impacted.
As we would otherwise be.
That's extremely helpful perspective, thanks have a great have a great coming out of the Covid period.
Thank you.
Yeah.
Our next question is a follow up from Tate Sullivan with Maxim. Please proceed with your question.
Hi, Thank you I think you just answered it but earlier you mentioned 50, new England prospects for KBS zeroing in and.
And I think remind me I currently and your and your book of business is it mostly the large orders or our military basis or military or VA hospitals.
Is that okay. That's.
And that continues to be a large portion or day again sorry.
$50 million just to be clear that what we're what we've talked about in terms of and our presentations, we've talked about having $50 million of the sales pipeline and I and I wouldn't say that we're targeting government projects. Although we have done them as you suggest but if you consider the two commercial projects. We did last year one of them was for veterans housing, but it was actually a privately fund.
And project and the and the owner of the facility was.
Targeting veterans.
Because we get some rent.
<unk> contribution from the state et cetera, but that was a private project, even though it was targeting veterans and the other project for the Touchy building did or is doing and that we're almost finished with.
And that's a much larger project and happened to be a military base and it was housing for.
Officers primarily.
But we know.
Most of these projects actually are going to be more privately funded I mean, we are doing some affordable housing and Vermont, where we're doing some single box structures, we've already shipped three or four of those over to replace what was HUD housing and really kind of trailer parks, but we were able to develop a zero energy modular that as of <unk>.
Replacement and putting another HUD type product there. So we're really looking at all kinds of different opportunities that meet our sort of gross margin objectives.
But I would say most of our projects are going to be private projects and the only the only other one other thing I wanted to mention as a follow up to the last gentlemen.
And I mean, when it comes to commercial modular and again, we do both single family and multifamily, but when it comes to the multifamily side.
Our competitors and new England are really too small to service that market because when you're doing 50 to 100 boxes. I mean, if you can only produce six or eight a week. It just ties up your factory for a significant amount of time. So we have some competition from Pennsylvania and there was some competition from Canada, specifically RCM and Canada.
And they've had some issues because of the distance to travel from Canada into the Boston based market. So I think we actually have a really great strategic location.
And the fact that we have a second factory that we can bring online really puts us I think as the only.
Bonafide.
Multifamily producer in New England, and again, that's not to say you can't produce outside new England and ship into the Boston area, but we have quite an advantage being 100 miles from Boston.
As opposed to some of our competitors that are three or 400 miles. These things are 30000 pounds, a piece and they're not they're not cheap to transport.
Okay. Thank you yeah. It was mainly just you gave the context to that pipeline of opportunities. Thank you.
Thank you.
As a reminder, if you would like to ask a question press star one on your telephone keypad.
Our next question comes from the line of Jeff Kobe and hours with Diamond and bridge capital. Please proceed with your question.
Hi, Good morning, Guy and I'm, just curious if you could help us out with.
The breakdown and building and construction and the 29 million of revenue last year.
You say, how much with KBS and how much was that as builder and Glenn book.
It was almost exactly 50 50 and.
Historically edge builder and recent history edge builder was kind of two thirds and KBS one third but.
<unk> is growing faster there is more growth opportunity there, so I think youre going to see that.
Flip.
Overtime, KBS will be larger than edge builder, and we hope to grow them, both but the growth rate is much higher at caveats.
Okay.
Alright, so and caveats.
And was down last year.
No.
KBS did about a.
$12 million and revenue and 19.
And again, it's about half of last year, but keep in mind that in terms of weeks worked we only worked 46 weeks last year. So if you.
Adjust for weeks worked we grew about 35%.
Okay.
And on an absolute level I think more like 'twenty, but.
35%, if you take out the six weeks that the factory was shuttered.
Right Okay.
And so with your.
Pipeline and backlog and the 50 million and.
And just given the run rate if you were at seven seven and a half per week that.
And at 50000, each each box.
$19 million or so so you have and that's why obviously you want to double your you're all going to get to.
And we're 40 and $40 million of.
The annual revenue.
You're.
And you're able to fulfill your backlog.
We're gonna, yes, I mean that backlog, though yes, no you're right I mean, we do we would love to double our production levels, but you are right on the numbers if were between seven and eight a week, we'd love to get closer to eight to 10, a week on that factory Asp's are around 50000, we're actually experiencing a bit higher than that and I think.
Depending on the projects, we choose that that May actually go up a little bit I don't think it'll be 60, but it'll be somewhere in the mid <unk>.
<unk>.
And then we have a second factory so we are evaluating.
Should we are evaluating do we do single family, maybe and one and multifamily and the other these.
And these boxes are our product is much more diverse today than it was three or four years ago. When youre doing single family Ranch's those are kind of carbon copies of each other we're now doing passive homes and multifamily and single family. So we're trying to figure out and making some good progress with some consultants et cetera to how to optimize things so that we.
And.
Maximize or optimize our throughput.
But your numbers are right I mean it.
If you figure eight to 10 a week.
<unk> thousand a piece youre right on the revenue, there's a little bit of ancillary revenue that we do charge. Some gross margin. So there is some shipping and stamps and other things revenue. So you can add about seven or 8% I think to the to the box revenue for other revenues, but those numbers are roughly accurate.
Okay, and the gross margin and 14% per building and construction and both the per quarter and fourth quarter.
And.
And comments you can make about and how we can do that.
That going forward.
It's a blended average I mean that that's both businesses as I mentioned the commodity price.
Rise hurt the gross margin line and edge builder more.
And KBS we are.
Our pricing discipline as good there's a lot of demand for our product, we're pricing things anywhere from say, 20% to 30% gross margin. So the average is probably.
Low to mid twenties on the gross margin basis.
And so that's obviously being diluted a little bit by some of the projects that edge builder.
But our goal our goal is to push that gross margin is close to mid Twenty's, if KBS as we can and you know.
Im not promising we can do that but we're seeing a lot of projects and that range.
And that's kind of our goal.
And then on the <unk>.
Business model and this is what I was somewhat what I was referring to and I was talking about scale earlier and the call.
Can.
Double our output.
And get that gross margin up to at least 20%. We don't think the SG&A for that business would increase very much at all and so it.
The.
The economies of scale the benefits of economies of scale, there would be very significant.
Yes.
Alright, thanks, very much for you all.
Thanks for your questions.
Thank you we have no further questions at this time I would now like to turn the floor back over to management for closing comments.
I'd like to thank them.
And David and Matt for joining on the call and and also thank our team.
Across all of our businesses, we have a very dedicated team of employees everything from frontline workers and our health care business.
Went to work every day and serve patients even in the face of Covid and and also.
Workers, who came to the factory to produce <unk>.
To serve people.
Despite the difficulties of doing so during COVID-19, and social distancing and and all that so I don't want it and what they think Oliver.
All of our or all of our teammates.
And Dave and Matt and I are always available to take your call and discuss any and additional questions. You have so please feel free to reach out and we're going to continue to talk about our company with our existing and potential investors and the coming weeks and months. We're scheduled to present at the maximum conference on March 18th and the <unk>.
Sidoti Conference in mid May and.
And we appreciate your questions and your feedback and your support thank you very much.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.