Star Equity Holdings, Inc. ((STRR)) has held its Q4 earnings call. Read on for the main highlights of the call.
Star Equity Holdings, Inc. recently held its earnings call, revealing a mixed sentiment regarding its financial performance. While the company celebrated notable achievements such as significant revenue and gross profit increases in the fourth quarter, challenges were also highlighted, including a decline in full-year gross profit, increased SG&A expenses, and a net loss from continuing operations. The overall sentiment was balanced, reflecting both positive developments and areas of concern.
Revenue Increase
In the fourth quarter of 2024, Star Equity Holdings reported a robust revenue increase of 21.1%, reaching $17.1 million compared to $14.1 million in the same period of 2023. For the full year, revenue rose by 16.5% to $53.4 million, up from $45.8 million in 2023. This growth was largely attributed to strategic mergers and acquisitions.
Gross Profit Growth in Q4
The fourth quarter of 2024 saw a remarkable 55.3% increase in gross profit, amounting to $4.5 million versus $2.9 million in Q4 2023. This surge was primarily driven by the inclusion of gross profit from Timber Technologies, highlighting the positive impact of recent acquisitions.
Positive Momentum in Building Solutions
Star Equity Holdings experienced a shift in momentum in the second half of 2024, with several large projects receiving approvals and commencing production. The signed backlog at year-end was $17.2 million, indicating a strong demand in the building solutions sector.
Alliance Drilling Tools Acquisition
The acquisition of Alliance Drilling Tools marked the establishment of a new Energy Services division for Star Equity Holdings. This strategic move is expected to significantly contribute to consolidated results, with the division generating approximately $10.5 million in revenue and a gross margin of 48%.
Improved Non-GAAP Adjusted EBITDA
The company reported an improvement in non-GAAP adjusted EBITDA from continuing operations, which increased to $1.1 million in Q4 from a negative $0.1 million in the same quarter of 2023, showcasing enhanced operational efficiency.
Full Year Gross Profit Decline
Despite positive quarterly results, the full year 2024 gross profit declined by 7.2%. This was due to a one-time purchase price accounting adjustment related to the Timber Technologies acquisition and lower revenues in the KBS and EBGL businesses.
Net Loss from Continuing Operations
Star Equity Holdings reported a net loss from continuing operations of $2.5 million in Q4, contrasting with a net income of $1.8 million in the same quarter of 2023, indicating financial challenges that need addressing.
Increased SG&A Expenses
The company faced increased SG&A expenses, which rose by $1 million or 31.7% compared to Q4 of 2023. This increase was largely due to the full-year impacts of the Timber Technologies and Big Lake Lumber acquisitions.
Cash Flow From Operations Outflow
In Q4 2024, Star Equity Holdings experienced a cash flow from consolidated operations outflow of $1.5 million, a significant change from an inflow of $28,000 in the previous year, highlighting liquidity challenges.
Increased Debt and Reduced Cash Balance
The company’s outstanding balance on interest-bearing debt rose to $11.3 million from $2.0 million at the end of December 2023. Additionally, the cash balance, including restricted cash, decreased to $5.6 million from $18.9 million at the end of 2023, reflecting increased financial leverage.
Forward-Looking Guidance
Looking ahead, Star Equity Holdings remains optimistic about its strategic growth initiatives. The company highlighted a 21.1% increase in Q4 revenue and a 16.5% rise for the full year, driven by acquisitions. The backlog of committed projects and orders at $17.2 million indicates continued strong demand into 2025. Despite a net loss in Q4, adjustments led to an adjusted net income, showcasing resilience and a focus on strategic growth.
In summary, Star Equity Holdings’ earnings call presented a balanced view of its financial health, with significant achievements in revenue and gross profit growth tempered by challenges such as increased expenses and net losses. The company’s strategic acquisitions and forward-looking guidance suggest a focus on long-term growth, despite current financial hurdles.