Star Equity (STRR) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue increased 30.9% year-over-year to $13.7 million, driven by acquisitions of Timber Technologies and Big Lake Lumber, offset by slower activity at KBS and EBGL.

• Net loss from continuing operations narrowed to $2.0 million from $2.4 million in Q3 2023, aided by gains from sale-leasebacks and investment income.

• Building Solutions remains the largest division, with a strong sales pipeline, renewed project activity, and recent large contract wins indicating improving momentum.

• Investments division diversified into energy services and logistics via a $2.5M investment in Enservco and a $1M promissory note.

• Completed the sale of the Healthcare division in 2023, with results now reported as discontinued operations.

Financial highlights

• Q3 2024 gross profit was $2.8M (20.6% margin), up 27.9% year-over-year; nine-month gross profit was $6.6M (18.2% margin), down from $9.1M (29.2%) in 2023.

• SG&A increased by $4M (53.7%) to 54.3% of revenue, driven by a $2.8M impairment on TTG equity investment.

• Net loss attributable to common shareholders was $2.5M in Q3 2024; adjusted net loss from continuing operations was $0.9M ($0.31/share).

• Adjusted EBITDA loss of $0.3M in Q3 2024 vs. break-even last year.

• Cash outflow from continuing operations for the first nine months was $3.7M vs. $2.7M inflow last year.

Outlook and guidance

• Management expects Q4 2024 and FY 2025 results to improve significantly, citing increased project signings, customer activity, and a robust sales pipeline.

• Project delays and economic headwinds are seen as temporary, with backlog and customer feedback supporting confidence in future revenue conversion.

• Anticipates significant revenue increase at KBS in Q4 and first half of next year.