Q4 2024 Star Equity Holdings Inc Earnings Call
Speaker Change: [music].
Yes.
[music].
Operator: Greetings, ladies and gentlemen, and welcome to Star Equity Holdings. fourth quarter 2024 results conference call. Please be advised that the discussions on today's call may include forward looking statements. Such forward-looking statements involve certain risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statement. Please refer to Star Equity's most recent 10-K, 10-Q, and other filings for a more complete description of risk factors. that could affect these projections in the summer.
Speaker Change: Great day, ladies and gentlemen, and welcome to Star equity holding.
Fourth quarter 2024 results conference call.
Speaker Change: Please be advised that the discussions on today's call may include forward looking statements such forward looking statements involve certain risks.
Speaker Change: And uncertainties that may cause actual results to differ materially from those contained.
Speaker Change: And the forward looking statements.
Speaker Change: Please refer to our equity <unk>. Most recent 10-K 10-Q and other filings for a more complete description of risk factors.
Speaker Change: It affect these projections and assumptions.
Operator: The company assumes no obligation to update forward-looking statements as a result of new information, future events, or other Please also note that on this call management will reference non GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted net income. and Adjusted Earnings Per Share, which are all financial measures not recognized under the U.S. GAAP. as required by SEC rules and regulations. These non gap financial are reconciled to the most comparable gap financial measures in our earnings release issued this morning. If you did not receive a copy of the earnings release and would like one after the call, please contact Star Equity.
Speaker Change: The company assumes no obligation to update forward looking statements.
Speaker Change: As a result of new information future events or otherwise.
Speaker Change: Please also note that on this call management will reference non-GAAP financial measures, including EBITDA adjusted EBITDA adjusted net income.
Speaker Change: And adjusted earnings per share, which are all financial measures not recognized under U S. GAAP.
Speaker Change: As required by SEC rules and regulations. These non-GAAP financial measures are reconciled to the most comparable GAAP financial measures in our earnings release issued this morning.
Speaker Change: If you did not receive a copy of the earnings release and would like one after the call. Please contact star equity at 203.
Operator: 203. for eight now. 9500, or its investor relations representative. of the Equity Group at 212-836-9611.
Speaker Change: 489.
Speaker Change: <unk> five <unk> zebra or its investor relations represented there.
Speaker Change: Latest party of the equity group at 2128369611.
Operator: Also, this call is being broadcast live over the Internet and may be accessed at Star Equity's website at www.starequity.com. Shortly after the caller reply will also be available. on the company's website.
Speaker Change: Also this call is being broadcast live over the Internet and may be accessed at star equity website at W. W. W. W thought star equity Dot com.
Speaker Change: Shortly after the call a replay will also be available on the company's website.
Rick Coleman: It is now my pleasure to introduce Rick Coleman, Chief Executive Officer of Star Equity. Thank you, operator. Good morning, and thank you for joining us today for our fourth quarter 2024 results conference call. On the call with me today are Executive Chairman Jeff Eberwein, and Chief Financial Officer Dave Noble. I'll start today by providing an overview of our recent business developments and financial highlights. Then Dave will provide additional details on our consolidated financial results. In the fourth quarter of 2024, revenue increased by 21.1%, to $17.1 million versus $14.1 million in the fourth quarter of 2023.
Speaker Change: It is not my pleasure to introduce Rick Coleman, Chief Executive Officer of STAAR.
Speaker Change: Our equity.
Speaker Change: Thank you operator good morning.
Speaker Change: And thank you for joining us today for our fourth quarter of 2024 results conference call on.
Speaker Change: On the call with me today are executive Chairman, Jeff Eberwein, and Chief Financial Officer, Dave Noble.
Speaker Change: I'll start today by providing an overview of our recent business developments and financial highlights and then Dave will provide additional detail on our consolidated financial results.
Speaker Change: In the fourth quarter of 2024 revenue increased by 21, 1% to $17 $1 billion versus $14 1 million in the fourth quarter of 2023.
Rick Coleman: For the full year 2024, revenue increased 16.5% to $53.4 million from $45.8 million in 2023. The revenue increases in both periods are largely attributable to M&A activity, particularly the acquisition of timber technologies, which we completed in the second quarter of 2024, and the full year revenue impact of our Big Lake lumber acquisition, which we completed in the fourth quarter of 2023. fourth quarter 2024 gross profit increased 55.3% to four and a half million dollars versus 2.9 million in Q4 2023, due primarily to the inclusion of gross profit from timber technologies, which generates the highest gross margin of stars, business solutions businesses.
Speaker Change: For the full year 2024 revenue increased 16, 5% to $53 4 million from $45 8 million in 2023.
Speaker Change: The revenue increases in both periods are largely attributable to M&A activity, particularly the acquisition of timber technology, which we completed in the second quarter of 2024, and the full year revenue impact or big like lumber acquisition, which we completed in the fourth quarter of 2023.
Speaker Change: Fourth quarter 2024, gross profit increased 55, 3% to four 5 million versus $2 9 million in Q4, 2023, due primarily to the inclusion of gross profit from timber technologies, which generates the highest gross margin of <unk>.
Speaker Change: Business solutions businesses.
Rick Coleman: full year 2024 gross profit declined 7.2% due to a one time $574,000 purchase price accounting adjustment related to the timber technologies acquisition, as well as lower revenues and utilization at our KBS and EBGL businesses. Our Building Solutions division was negatively impacted by demand softness during the first half of 2024, as project starts were delayed primarily due to interest rate sensitivity and credit availability. However, during the second half of 2024, and especially in Q4, momentum shifted as several large projects placed on hold earlier in the year received final approvals and began production. This positive momentum has continued into the first quarter of 2025, as evidenced by our recent announcements of multiple large project signings.
Speaker Change: Full year 2024, gross profit declined seven 2% due to a onetime 574000 dollar purchase price accounting adjustment related to the timber technologies acquisition as.
Speaker Change: As well as lower revenues and utilization at our kgs and <unk> businesses.
Speaker Change: Our building solutions division was negatively impacted by demand softness during the first half of 2024.
Speaker Change: As project starts or delayed primarily due to interest rate sensitivity and credit availability.
Speaker Change: However, during the second half of 2024, and especially in Q4 momentum shifted as several large projects placed on whole earlier in the year received final approval and began production.
Speaker Change: This positive momentum has continued into the first quarter of 2025 as evidenced by our recent announcements of multiple large project signings.
Rick Coleman: Our signed backlog representing committed projects and orders stood at $17.2 million at year end, and has increased year to date as demand continues to build. Over the long term, we have conviction in the structural tailwinds for our building solutions division as factory built construction continues to gain market share versus traditional building methods. While we are well positioned for a strong 2025, we are continuing to monitor the potential impact of the current administration's fiscal policy on our operating businesses. The application of tariffs is one example. And we have taken preemptive action to reduce our businesses exposure to Canadian lumber in favor of domestic lumber.
Our signed backlog representing committed projects and orders stood at $17 $2 million at year end and has increased year to date as demand continues to build.
Speaker Change: Over the long term, we have conviction in the structural tailwind for our building solutions Division as factory built construction continues to gain market share versus traditional building message.
Speaker Change: While we are well positioned for a strong 2025, we are continuing to monitor the potential impact of the current administration's fiscal policy on our operating businesses.
Speaker Change: The application of tariffs is one example, and we have taken preemptive action to reduce our businesses exposure to Canadian lumber in favor of domestic pork.
Rick Coleman: In addition, we have implemented strategies and enhanced our contract language to further reduce the risks associated with changes in input costs. Although we can pass some price increases through to the customer, drastic or rapid price increases risk impacting overall demand for wood based construction.
Speaker Change: In addition, we have implemented strategies and enhanced our contract language.
Speaker Change: To further reduce the risks associated with changes in input costs.
Speaker Change: Although we can pass some price increases through to the customer drastic where rapid price increases risk impacting overall demand for wood based construction.
Rick Coleman: Lastly, I want to highlight our recently announced acquisition of Alliance Drilling Tools, which established our Energy Services Division, diversifying our operating business portfolio, and providing a new platform for growth. We are excited to partner with a business of ADT's caliber and growth potential and expect them to contribute significantly to STAR's consolidated results going forward. Census founding ADT has exhibited strong revenue and profitability growth with consistent cash generation. As previously announced, for full year 2024, ADT generated revenue of approximately $10.5 million, gross margin of 48%, and adjusted EBITDA of $2.4 million. Its business model allows for the majority of costs, including freight, repairs, and damages, to be passed directly to customers, which minimizes ADT's operational expenses, capex, and risk exposure.
Speaker Change: Lastly, I want to highlight our recently announced acquisition of alliance drilling tools, which established our energy services Division diversifying our operating business portfolio and providing a new platform for growth.
Speaker Change: We are excited to partner with a business of adt's caliber and growth potential and expect them to contribute significantly to stars consolidated results going forward.
Speaker Change: So that's just founding ADT has exhibited strong revenue and profitability growth with consistent cash generation.
Speaker Change: As previously announced for full year 2020 for ADT generated revenue of approximately $10 $5 million.
Speaker Change: Gross margin of 48% and adjusted EBITDA of $2 $4 million.
Speaker Change: Its business model allows for the majority of costs, including freight repairs and damages to be passed directly to customers, which minimises adt's operational expenses capex and risk exposure.
Rick Coleman: We believe all of our operating companies operate in industries that support further expansion and will continue to evaluate opportunities for organic growth as well as additional acquisitions.
Speaker Change: We believe all of our operating companies operate in industries to support further expansion and we will continue to evaluate opportunities for organic growth as well as additional acquisitions.
Dave Noble: Now I'll turn the call over to Dave Noble, our CFO, who will provide additional fourth quarter consolidated financial highlights. Dave, go ahead. Thank you, Rick, and good morning.
Speaker Change: Now I'll turn the call over to Dave Noble, our CFO, who will provide additional fourth quarter consolidated financial highlights Dave.
Dave Noble: Dave go ahead.
Dave Noble: Thank you Rick and good morning, let's move on to Star equities consolidated financial results, which for the fourth quarter and full year of 2024 are represented by our two operating divisions building solutions and investments.
Dave Noble: Let's move on to Star Equity's consolidated financial results, which for the fourth quarter and full year of 2024 are represented by our two operating divisions, Building Solutions and Investments. In Q4 2024, consolidated gross profit was $4.4 million, up 55.9% versus Q4 2023, driven by increased revenues and higher gross margins in our building solutions division. However, for the full year, gross profit decreased by 7.3% to $11.1 million. from $11.9 million in 2023. Driven primarily by lower gross margin percentages in our building solutions division during the first half of the year. SG&A increased by $1 million, or 31.7% versus Q4 of 2023.
Dave Noble: In Q4 2024 consolidated gross profit was $4 4 million up 55, 9% versus Q4 of 2023.
Dave Noble: Driven by increased revenues and higher gross margins in our building solutions Division.
Dave Noble: However for the full year gross profit decreased by seven 3% to $11 1 million from $11 9 million in 2023 drill.
Dave Noble: Driven primarily by lower gross margin percentages in our building solutions division during the first half of the year.
Dave Noble: SG&A increased by $1 million or 31, 7% versus Q4 of 2023.
Dave Noble: As a percentage of revenue, SG&A increased in Q4 of 2024 to 24.7% versus 22.8% in Q4 of 2023. For fiscal year 2024, SG&A was $17 million versus $14.5 million in 2023. The main driver of the increase in SG&A are the full year impacts of the timber technologies and the big lake lumber acquisition. In the fourth quarter of 2024, we reclassified the 2024 impairments of our cost method investment from SG&A to other income and expense to align this with the gains and losses of our Investments Division. For reference, these impairments follow the mark to market valuations done by Catalyst, formerly TTG, their largest shareholder, the private equity fund.
Dave Noble: As a percentage of revenue SG&A increased in Q4, 2024 to 24, 7% versus 22, 8% in Q4 of 2023.
Dave Noble: For fiscal year, 2024, SG&A was 17 million versus $14 5 million in 2023.
Dave Noble: The main driver of the increase in SG&A.
Dave Noble: The full year impact of the timber technologies and the big like lumber acquisitions.
Dave Noble: In the fourth quarter of 2024, we reclassified the 2020 for impairments of our cost method investment from SG&A to other income and expense to align us with the gains and losses of our investments Division.
Dave Noble: For reference these impairments followed the mark to market valuations done by catalyst, formerly T T G.
Dave Noble: Their largest shareholder the private equity fund.
Dave Noble: Moving to the bottom line. In Q4, our net loss from continuing operations was $2.5 million versus net income from continuing operations of $1.8 million in Q4 of 2023. Non-GAAP-adjusted net income from continuing operations in Q4 was $0.5 million, or income of $0.15 per diluted share. This compares to adjusted net loss of 0.3 million in Q4 of 2023, or a loss of 10 cents per diluted share. Non-GAAP adjusted EBITDA from continuing operations increased to $1.1 million in Q4 from a negative $.1 million in Q4 of 2023. Segment non-GAAP adjusted EBITDA at our Business Solutions Division increased to $2.3 million in Q4 this year, up from $0.7 million in Q4 of 2023.
Dave Noble: Moving to the bottom line in Q4, our net loss from continuing operations was $2 5 million versus net income from continuing operations of $1 8 million in Q4 of 2023.
Dave Noble: non-GAAP adjusted net income from continuing operations in Q4 was <unk> 5 million or income of 15 cents per diluted share.
Dave Noble: This compares to adjusted net loss of <unk> 3 million in Q4 of 2023 or a loss of 10 cents per diluted share.
Dave Noble: non-GAAP adjusted EBITDA from continuing operations increased to $1 1 million in Q4 from a negative <unk> 1 million in Q4 of 2023.
Dave Noble: Segment non-GAAP adjusted EBITDA at our business solutions Division increased to $2 3 million in Q4. This year up from <unk> 7 million in Q4 of 2023.
Dave Noble: Q4 2024 cash flow from consolidated operations was an outflow of $1.5 million, compared to an inflow of $28,000 for the same period in the prior year. The decrease in operating cashflow was primarily due to increases in working capital associated with the increased business activity in Q4 of 24. As of December 31, 2024, the outstanding balance in our interest bearing debt was $11.3 million versus $2.0 million at the end of December 2023. Our cash balance, including restricted cash, stood at $5.6 million, down from $18.9 million at the end of 2023. The changes in both debt and cash balances can largely be explained by the Timber Technologies Acquisition and its related financing, both of which closed in May of 2024.
Dave Noble: Q4, 2024 cash flow from consolidated operations was an outflow of $1 5 million compared to an inflow of 28000 for the same period in the prior year.
Dave Noble: The decrease in operating cash flow was primarily due to increases in working capital associated with the increased business activity in Q4 of 'twenty four.
Dave Noble: As of December 31, 2020 for the outstanding balance on our interest bearing debt was $11 3 million versus 2.0 million at the end of December 2023.
Dave Noble: Our cash balance, including restricted cash stood at $5 6 million down from $18 9 million at the end of 2023.
Dave Noble: The changes in both debt and cash balances can largely be explained by the timber technologies acquisition and its related financing both of which closed in may of 2024.
Dave Noble: Turning to our Investments Division, our holdings in public equity securities at the end of the year amounted to $3.4 million versus $4.8 million a year ago as we substantially exited one of our public equity positions following its acquisition. A rollover equity investment and seller note receivable from the sale of Digirat Health to Catalyst, formerly TTG, in May of 2023, were valued at $1.4 million and $8.2 million, respectively. As disclosed in Inservco's public filings in the fourth quarter of 2024, we provided Inservco a notice of default regarding the million dollar promissory note issued to Star related to our initial investment.
Dave Noble: Turning to our investments Division, our holdings and public equity securities at the end of the year amounted to $3 4 million versus $4 8 million a year ago as we substantially exited one of our public equity positions following its acquisition.
Dave Noble: Our rollover equity investment in seller notes receivable from the sale of Digirad helped to catalyst formerly T. T. G. In may of 2023 were valued at $1 4 million and $8 2 million respectively.
Dave Noble: As disclosed in and serve goes public filings in the fourth quarter of 2024, we provided an Surat Bowen notice of default regarding the $1 million promissory note issued to star related to our initial investment.
Dave Noble: As a result of this default, we canceled the issuance of $250,000. Star Preferred Shares, which collateralized that. We continue to hold approximately 12 and a half million of common shares on Inservco. And we remain in contact with Inservco regarding potential opportunities to collaborate on business opportunities.
Dave Noble: As a result of this default we canceled the issuance of 250000.
Dave Noble: Star preferred shares, which collateralize that note.
Dave Noble: We continue to hold approximately 12 and a half million of common shares on him circle.
Dave Noble: And we remain in contact with and serve call regarding potential opportunities to collaborate on business opportunities now.
Rick Coleman: Now I'd like to turn the call back over to Rick for some additional remarks. Thank you, Dave. We ended 2024 with strong activity across our business solutions division, and that momentum is carried forward into the first quarter of 2025. We're encouraged by the recent performance at all of our businesses, our growing sales pipeline and backlog, and the opportunities presented by our establishment of our energy services division. In short, we're excited for the year ahead.
Rick Coleman: Now I'd like to turn the call back over to Rick for some additional remarks.
Rick Coleman: Thank you Dave.
Rick Coleman: We ended 2024 with strong activity across our business solutions Division and that momentum has carried forward into the first quarter of 2025.
Rick Coleman: We're encouraged by the recent performance at all of our businesses are growing sales pipeline and backlog and the opportunities presented by our establishment of our energy services Division.
Rick Coleman: In short we're excited for the year ahead.
Operator: Now I'd like to turn the call over to the operator for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch tone. Once you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then two.
Rick Coleman: Now I'd like to turn the call over to the operator for questions.
Rick Coleman: Thank you.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your touch 10.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing Nicky.
Speaker Change: Is it any time your question has been addressed.
Speaker Change: And you would like to withdraw your question. Please press Star then two.
Operator: At this time, we will pause for a moment to assemble our roster.
Speaker Change: At this time went on pause for amendment to assemble our roster.
Theodora Neal: Our first question today will come from Theodora Neal of Litchfield Hills Research. Please go ahead. Thank you very much and congratulations for beating the revenue and the non-GAP EPS.
Speaker Change: Our first question today will come from Theodore O'neill of Litchfield Hills Research. Please go ahead.
Theodore O'Neill: Thank you very much and congratulations for beating the revenue and the non-GAAP EPS numbers.
Speaker Change: Yeah.
Theodora Neal: I'd like to ask about building. The Building Solutions two questions. One is you announced two big wins in March. I think you disclosed how those are going to flow through. Can we read anything into that in terms of additional business?
Speaker Change: Hi, I'd like to ask about it.
Speaker Change: Building side of the business the building solutions.
Speaker Change: Two questions. One is you announced two big wins in March.
Speaker Change: And.
Speaker Change: And then I think you disclosed how those are going to flow through through 2025.
Speaker Change: Can we read anything into that in terms of.
Speaker Change: Additional business.
Speaker Change: And.
Rick Coleman: I'd like to know what accounts for the margin of proof. Thanks, Theo. Appreciate the question.
Speaker Change: I'd like to know what what accounts for the.
Speaker Change: The margin improvement in building solutions.
Steve: Thanks, Steve.
Speaker Change: The question. This is Greg one of the things that are.
Rick Coleman: This is Rick. One of the things that definitely impacts the margin improvements in the Building Solutions Division is increased revenues. We do have a platform in place that's necessary to operate the business. And those fixed costs are now being spread across a number of different projects and our broader revenue base. So that's a big piece of it.
Speaker Change: [laughter] definitely impacts the margin improvements in the building solutions Division is increased revenues, we do have a.
Speaker Change: A platform in place.
Speaker Change: Necessary to operate the business and those fixed costs are now being spread across a number of different projects and a broader revenue base.
Speaker Change: So that's a that's a big piece of it what we're looking for in the future is really indicated by what our sales pipeline looks like the new opportunities that come into the pipeline are evaluated every week we.
Rick Coleman: What we're looking for in the future is really indicated by what our sales pipeline looks like. The new opportunities that come into the pipeline are evaluated every week. We negotiate those deals. And hopefully, when we win them, we add them to our backlog. And what we see in the pipeline and the backlog is fairly substantial growth beginning in the fourth quarter of 2024 and carrying forward into 2025.
Speaker Change: Negotiate those deals and hopefully when we win them, we we add them to our backlog and what we see in the pipeline and the backlog is fairly substantial growth beginning in the fourth quarter of 'twenty, four and carrying forward into 2025.
Unknown Speaker: Okay, and can you break out what's in the $1.7 million of other expense in the quarter? Dave, you want to take that one? Sure, I can take that.
Speaker Change: Okay and can.
Speaker Change: Can you break out what's in the $1.7 million of other other expense in the quarter.
Dave do you want to take that one sure I can take that yeah. The big thing we mentioned this in the commentary we.
Dave Noble: Yeah, the big thing, we mentioned this in the commentary, we We had to take a bit of a write-down on our investment in the equity of a former Digirad, which we sold to TTG, now Catalyst. And we pretty much have stayed in sync with the private equity firm that put that company together. And given that they're in the midst of a turnaround, they've had some write-down of that equity. We've had that in three of the four quarters of last year, and so the final quarter was around that 1.7 number. Furthermore, we re-characterized that. We had been showing that in SG&A, but we've reclassified that into other income because it better aligns with our other investments-related activities.
Speaker Change: We had to take a bit of a write down on our investment in the equity Oh, former Digirad, which we sold to T. T. G now catalyst.
Speaker Change: And you know we pretty much stayed in sync with the private equity firm that put that company together.
Speaker Change: And given that they are in the midst of a turnaround they've had some write down of that equity.
Speaker Change: We've had that in three of the four quarters of last year and so the final quarter was around that 1.7 number. Furthermore, we recalculate that we had been showing that in SG&A, but we've.
Speaker Change: We reclassified that into other income because it better aligns with our other investments related activity.
Dave Noble: Okay, all right. And and that's pretty much all of it now. written it down to close to zero. The equity portion is down to one or two. Again, they're in the midst of a turnaround and this is a long term hold. So, you know, from an accounting perspective, we can never write it back up. But, you know, I think all of the senior management are super hopeful that this is going to be a win over the long term. We believe Sentinel is the. firm, is going to turn this thing around and make a good investment.
Speaker Change: Okay, Alright, and that's pretty much all of it now is it written that down to close to zero.
Speaker Change: The equity portion is down one or two yet.
Speaker Change: Again, they are in the midst of a turnaround and this is a long term hold so you know from an accounting perspective, we can never write it back up but you know I think all of the senior management of our Super hopeful that this is gonna be a win over the long term, we believe Sentinel who's the problem.
Speaker Change: For he's going to turn this thing around in.
Unknown Speaker: So we're happy to be part of it. Okay, so there's no problem. Go ahead.
Speaker Change: They're good investments, but where we're happy to be part of it.
Speaker Change: Okay. So there's no problem go.
Jeffrey Eberwein: Yeah, this is a yeah, this is Jeff. We also have a debt investment with them. So we own equity and we own debt. and Catalyst. And unfortunately, the way GAAP accounting works is We have to. write it down. if there's a possibility of it being. impaired, and our as Dave said, our methodology is to follow. the market market that the PE firm does. And if it does turn around the way we think it will Unfortunately, we don't get to write that back up under the GAAP accounting. The more important thing is that the PE firm will sell this business at some point.
Jeff Eberwein: Go ahead, sorry. This is yeah. This is Jeff.
Speaker Change: We also have.
Speaker Change: A debt investment with them, so we own equity and we own.
Speaker Change: <unk>.
Speaker Change: And in catalysts.
Speaker Change: And unfortunately with the GAAP accounting works is.
Speaker Change: You have to.
Speaker Change: Write it down.
Speaker Change: <unk>.
Speaker Change: If there's a possibility of it being.
Speaker Change: Impaired and are as Dave said, our methodologies as follow.
Speaker Change: The mark to market of the PE firm does.
Speaker Change: And if it does.
Speaker Change: Turn around the way we think it will.
Speaker Change: Unfortunately, we don't get to write that back up under the GAAP accounting rules.
Speaker Change: The more important thing is that the PE firm will sell this business at some point.
Jeffrey Eberwein: It's in a fund that ends in a few years. And so what we really care about is that exit a few years from now, and Our hope is that both the note and the equity, or original equity of $6 million. are fully recouped and there's even upside to that. So the mark to market is just a you know, non-cash. item on paper until the business gets sold. Right, right.
Speaker Change: It's in a fund.
Speaker Change: That ends in a few years and so.
Speaker Change: What we really care about is that exit.
Speaker Change: A few years from now and.
Speaker Change: Our hope is that.
Speaker Change: Hum.
Speaker Change: Both the note.
Speaker Change: And the equity our original equity of $6 million.
Speaker Change: Our fully recouped and there's even upside to that.
Speaker Change:
Speaker Change: So the mark to market is just.
Speaker Change: Noncash.
Speaker Change: Item on paper until the business consultant.
Speaker Change: Okay.
Unknown Speaker: Okay.
Unknown Speaker: And I asked about it because I thought there might be something from Serveco issue, but we'll let up here in next quarter.
Speaker Change: Right right, Okay, and I asked about it because I thought there might be something from from being served co issue, but what was that.
Speaker Change: Up here in next quarter.
Unknown Speaker: Bill, do you want to handle that? Unknown Speaker, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, So it never hit the P&L. Okay.
Speaker Change: Bill do you want to handle that.
Speaker Change: Okay.
Speaker Change: The write down of the <unk> actually ended up hitting our stockholders' equity because it was over collateralized.
Speaker Change: So it never hit the P&L.
Speaker Change: Hey.
Unknown Speaker: And my last question is, what's going on in Inservco, have any impact on Alliance drilling? No. Great, thanks very much.
Speaker Change: And my last question is what's going on in that serve co have an impact on alliance drilling.
Speaker Change: No.
Speaker Change: Great. Thanks very much.
Tate Sullivan: Our next question today will come from Tate Sullivan of the Maxim Group. Please go ahead. Thank you.
Speaker Change: Our next question today will come from Tate Sullivan of Maxim Group. Please go ahead.
Tate Sullivan: You covered this on the acquisition call in Alliance Drilling, but what specifically did you like about their business, even after your investment or during your investment in Servco? And can you comment on Alliance Drilling's customer mix? Is it smaller operators, larger operators?
Speaker Change: Thank you you've covered this on the acquisition call an alliance drilling but.
Speaker Change: What specifically did you like about their business.
Speaker Change: Even after your investment or during their investment and serve cope and can you comment on alliance drillings customer mix is it smaller operators large operators there. Please.
Rick Coleman: Rick, why don't you handle that? Rick? Are you there, Rick? I'm sorry, I was on mute. I appreciate the question, Tate. I apologize for that. Yeah, one of the things we liked about Alliance Drilling, obviously, was the fact that they operate in multiple sectors of the drilling stream. Their experience is pretty substantial. The founders are still part of the company and are planning to stay for a while while we transition. There's a strong management team beneath them. And all of them, when we've talked to them about their growth opportunities, have noted that they think that the company has a great upside potential with additional customers, but also tapping into additional revenue from their current customer base.
Rick Coleman: Rick why don't you handle that.
Rick Coleman: Rick.
Rick Coleman: Hey, there Rick.
Rick Coleman: This is Jerry I'm, sorry, I was on mute.
Speaker Change: I appreciate the question Tate I apologize for that.
Speaker Change: Yeah, one of the things we liked about alliance drilling obviously was.
Speaker Change: The fact that they operate in multiple sectors of the drilling.
Speaker Change: Stream.
Speaker Change: Our experience is pretty substantial the founders are still part of the company are planning to stay for a while while we transition theres a strong management team beneath them.
Speaker Change: And all of them when we've talked to them about their growth opportunities you have.
Speaker Change: Noted that they think that the company has a great upside potential with additional customers, but also tapping into additional revenue from their current customer base.
Unknown Speaker: So we believe that a minimal investment in tools and some geographic expansion will really help grow that business over time. Unknown Speaker, Unknown Speaker, Unknown Attendee, Unknown Speaker Yeah. yet their, their two biggest customers are household names in the energy sector. So great counterparty. I think they have no credit risk. with their customers, no history of bad debt expense, so it's a mix of public companies and some private companies. We think we can think it's a healthy mix and as Rick mentioned. about traditional energy, but they've been very successful in growing other sectors. Geothermal, water wells, a little bit of minerals and mining.
Speaker Change: So we believe that a minimal investment and additional tools and some geographic expansion will really help grow that business over time.
Speaker Change: And I would add on.
Speaker Change: On the customer mix is yes, sorry, yes.
Speaker Change: Yet there there are two biggest customers are.
Speaker Change: Household names in that in the energy sector, so great Counterparties.
Speaker Change: I think they they have no no credit risk.
Speaker Change: With their customers no history of <unk>.
Speaker Change: Bad debt expense, so it's a mix of public companies and some private companies.
Speaker Change: And.
Speaker Change: We think we can think it's a healthy mix and as Rick mentioned.
Speaker Change: It's about.
Speaker Change: Two thirds traditional energy.
Speaker Change: But they've been very successful and growing other sectors.
Speaker Change: Thermal.
Speaker Change: Water wells a little bit of.
Speaker Change: Minerals and mining.
Unknown Speaker: Unknown Speaker Mainly in the US, but there's Occasional activity. elsewhere in the Americas.
Speaker Change: Mainly in the U S, but there is.
Speaker Change: Some occasional activity.
Speaker Change: Elsewhere in the Americas.
Unknown Speaker: Unknown Speaker, and then I not to overlook the tariff issue, which I tend to, but, uh, I mean, you commented on the timber from Canada for your modular construction business. And is that mostly the New England KBS operation? Does KBS mostly get timber from Canada? Is are there substitutes on the US side? Um, can you just talk about where the current sourcing is for KBS? Yeah, Rick will talk about the sourcing, but I'd say lumber. not quite a global commodity, but The U.S. and Canada are very closely linked. Markets. So regardless of where one sources If lumber prices go up in Canada, they go up in the U.S.
Speaker Change: Thank you and then I not to overlook the tariff issue, which I come to bid on I mean, you commented on the timber from Canada for your modular construction business and is that mostly the new England KBS operation does KBS, mostly it's timber from Canada as are their substitute some of you.
Speaker Change: Syed can.
Speaker Change: Can you just talk about where the current source stimulus for KBR.
Rick Coleman: Yeah Rick.
Rick Coleman: Rick will talk about the sourcing, but I'd say lumber.
Speaker Change: It's not quite a global commodity but.
Rick Coleman: The U S and Canada are very closely linked.
Speaker Change: Markets, so regardless of where.
Rick Coleman: One sources.
Rick Coleman: If lumber prices go up in Canada. They go up in the U S.
Unknown Speaker: Vice versa.
Rick Coleman: But Rick, why don't you talk about the sourcing issue? Sure. Regarding KBS, which you specifically asked about KBS sources, mostly domestic lumber. There are some inputs, windows, trusses, things like that that come from other suppliers that may contain Canadian lumber. So we do expect there could be some price impact. And as Jeff mentioned, if prices go up for Canadian lumber prices are likely to go up for domestic lumber as well. As long as those price increases are, you know, not overly sudden or large, then we can address them. We can adjust our pricing and pass along some of that to our customers.
Weis versa.
Dave Noble: But Rick why don't you talk about the sourcing issue.
Rick Coleman: Sure.
Speaker Change: KBS, which you specifically asked about caveats sources, mostly domestic lumber.
Speaker Change: There are some inputs windows trusses things like that they come from other suppliers that may contain Canadian lumber. So we do expect there could be.
Speaker Change: Some price impact any Jeff mentioned.
Speaker Change: If prices go up for Canadian lumber prices are likely to go up for domestic lumber as well.
Speaker Change: As long as those price increases are.
Speaker Change: Not overly sudden or large then we can address that and we can adjust our pricing and pass along some of that to our customers, but any large or dramatic increase is going to be.
Rick Coleman: But any large or dramatic increase is going to be, it's going to impact construction across the country. So we'll have to keep an eye on that. We do have a hedging strategy. We have other strategies in our customer contracts that protect us. Temprotec uses very little Canadian lumber. They source almost exclusively domestic lumber, southern yellow pine from southern states. And EdgeBuilder is probably where we have the most concentration of Canadian lumber. But they also have, they're watching it very carefully and they use a hedging strategy to protect us there.
Speaker Change: Got to impact construction across the country. So we'll have to keep an eye on that we do have a hedging strategy we have other.
Speaker Change: Strategies that are customer contracts that protect us.
Speaker Change: To protect us as very little.
Speaker Change: Canadian lumber they offshore almost exclusively domestic lumber southern yellow pine from southern states.
Speaker Change: And as builders, probably where we have the most concentrations Canadian lumber, but they also have they are watching it very carefully and they use our hedging strategy to protect us there.
Unknown Speaker: Thank you all.
Speaker Change: Thank you all.
Al Hill: Our next question today will come from Al Hill, a private investor. Please go ahead. Hey, good morning, guys. Hey, I'm looking at your balance sheet, and it looks like your book value is about $11.4 million and obviously per share and your stock price is about $2.22. That's five times book.
Our next question will come.
Speaker Change: From Al Hill, a private Investor. Please go ahead.
Al Hill: Hey, good morning, guys, Hey, I'm looking at your balance sheet and then it looks like your book value.
Al Hill: Is about $11 4 million in there obviously for sure in your stock price is about $2 22.
Al Hill: Five times book.
Al Hill: Have you ever thought about just selling the company or some of the parts of it and return all the equity to shareholders? I just seemed like we're kicking a dead horse. and I just don't see any positivity. I hear what you're saying, but I'm very, very disappointed in the results.
Al Hill: Have you ever.
Al Hill: It's not about just selling the company or some of the parts of it and return on the equity the shareholders.
Al Hill: Seems like we're kicking the dead horse.
Al Hill: And I just I, just don't see any positivity I.
Speaker Change: I hear what you're saying.
Al Hill: I'm very very disappointed in the results.
Unknown Speaker: Unknown Speaker You're given preferred dividends out when you're not making money.
Al Hill: Youre given preferred dividends out when youre not making money.
Al Hill: I'd just like to do the board consider selling the company.
Al Hill: Just like.
Speaker Change: Would the board consider selling the company.
Jeffrey Eberwein: This is Jeff and I'm executive chairman of the board and the company's biggest shareholder. And I would say all options are on the table to maximize. Unknown Speaker Value for shareholders and You know, we we agree the stock is really cheap, you know, ridiculously cheap. Unknown Speaker With respect to Unknown Speaker The Preferred Stock by paying a dividend, it causes the preferred stock to trade pretty close to par. And we have been able to use it as an acquisition currency. So if you look at the ADT acquisition, you know, most of that purchase price was paid in preferred stock.
This is Jeff and.
Speaker Change: Executive Chairman of the board and the company's biggest shareholder and I would say.
Speaker Change: All options are on the table to maximize.
Speaker Change: Value for shareholders and.
Speaker Change: You know, we we agree the stock is.
Speaker Change: Really cheap ridiculously cheap.
Speaker Change: And.
Speaker Change: With respect to.
Speaker Change: The preferred stock.
Speaker Change: By paying a dividend at it.
Speaker Change: Causes the.
Speaker Change: Preferred stock to trade pretty close to par and we have been able to use it as an acquisition currency. So if you look at the.
ADT acquisition.
Speaker Change: No most of that.
Speaker Change: Purchase price was paid and.
Speaker Change: Preferred stock and.
Jeffrey Eberwein: And Yes, a 10% dividend yield is a healthy. yield, but if we can buy businesses at three and four times Eva Dye. and use our preferred stock. very, very accretive to the common. to the common stock. So. situation between our stock price and intrinsic value isn't sustainable over the long term. We share your frustration. All I can say is all options. are on the table to maximize value for. shareholders, including the one you mentioned.
Speaker Change: Yes, the 10% dividend yield is it healthy.
Speaker Change: Yield.
Speaker Change: But if we can buy businesses at.
Speaker Change: Three and four times EBITDA.
Speaker Change: And use our preferred stock.
Speaker Change: It's very very accretive to the common.
Speaker Change: To the common stock so.
Speaker Change: The situation between.
Speaker Change: Between our stock price and the intrinsic value.
Speaker Change: Isn't sustainable over the long term.
Speaker Change: We share your frustration and.
Speaker Change: All I can say is all options.
Speaker Change: Or on the table to maximize value for.
Speaker Change: Shareholders are including the one you mentioned.
Operator: And again, ladies and gentlemen, if you would like to ask a question, please press star, then one.
Speaker Change: And again, ladies and gentlemen, if he would like to ask a question. Please press Star then one.
Operator: This concludes our question and answer session.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Rick Coleman for any closing remarks.
Rick Coleman: I would like to turn the conference back over to Rick Coleman for any closing remarks. Thank you, operator. Before concluding, I just want to note that we're always available to take your call and discuss any additional questions you might have. So please don't hesitate to contact us. We'll continue to share our story with existing and potential investors in the coming weeks and months. As always, we appreciate all of our shareholders and your continued feedback and support.
Speaker Change: Thank you operator before concluding I just want to note that we're always available to take your call and discuss any additional questions. You might have so please don't hesitate to contact US we will continue to share our story with existing and potential investors in the coming weeks and months as always we appreciate all of our shareholders.
Speaker Change: Continued feedback and support.
Operator: Thank you.
Speaker Change: Thank you.
Operator: Thank you for joining the Star Equity Holdings fourth quarter conference call. Today's call has been recorded and will be available on the investor section of our website. www. star. .com The conference has now concluded.
Speaker Change: Thank you for joining the Star equity Holdings' fourth quarter Conference call. Today's call has been recorded and will be available on the investors section of our website.
Speaker Change: W. W. W. Yeah.
Speaker Change: Our equity.
Speaker Change: Dot com.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
Operator: Thank you for attending today's presentation, and you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Unknown Speaker: Tate Sullivan, Jeffrey Eberwein, David Noble, Richard Coleman, Unknown Attendee, Star Equity James Durant, Unknown Administrator, Unknown Guide, Celebrity Special guest at US Department of Defense.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: [music].
Unknown Speaker: Tate Sullivan, Jeffrey Eberwein, David Noble, Richard Coleman, Unknown Executive, Unknown Attendee, Star Equity Unknown Speaker, Unknown Speaker, Unknown Speaker, © BF-WATCH TV 2021 David Noble, Richard Coleman, Unknown Executive, Unknown Attendee, Star Equity
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