Star Equity Holdings, Inc. · NASDAQ:STRR
Star Equity — Investor Presentation (August 2023)
37 slides from Star Equity's investor presentation, Aug 11, 2023
Slide 1: A Diversified Holding Company - Investor Presentation August 2023
1 A Diversified Holding Company www.starequity.com Creating shareholder value through operational excellence and disciplined capital allocation Common Stock: Nasdaq: STRR Series A 10% Preferred Stock: Nasdaq: STRRP Investor Presentation August 2023
Slide 2: Safe Harbor Statement
2 “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this presentation that are not statements of historical fact are h
Slide 3: About Star Equity Holdings
3 About Star Equity Holdings Construction Corporate HQInvestments A Diversified Holding Company with Two Divisions (1) Common Stock (Nasdaq: STRR): Stock Price (2) : $1.05 15.5 million shares outstanding (3) Series A Preferred Stock (Nasdaq: STRRP): Stock Price (2) : $9.15 1.92 million shares outsta
Slide 4: Investment & Financial Highlights
4 Investment & Financial Highlights $57.1M Revenue $12.4M Gross Profit $21.4M(2) Cash Balance Currently Debt Free(2) Benefits of our Holding Company Structure • Stronger growth in revenue, cash flow, and earnings due to focus on operational excellence, cost savings, better funding, and other efficie
Slide 5: Differentiated Corporate Strategy and Structure
5 Differentiated Corporate Strategy and Structure Looking for accretive bolt-ons and new verticals Able to pursue both private and public acquisition targets, sometimes through activism(1) Flexible deal structuring given ability to use mix of cash, debt, common, preferred Open-ended investment time
Slide 6: Case Study: Healthcare Division
6 Case Study: Healthcare Division Feb 2021 Mar 2021 May 2022 May 2023 Real Estate Sales $1 Million Sept 2018 Oct 2018 Telerhythmics Sale $2 Million Reorganization Margins DMS Sale $18.8 Million MDOS Sale $1.4 Million DHI Sale* $40 Million Since announcing its transition to a diversified holding comp
Slide 7: Case Study: Construction Division
7 Case Study: Construction Division April 2023 Long-Term GoalSeptember 2019 • Approx. 145k sq. ft. of production capacity / two facilities • Approx. 230 modules/year • $55k/module average selling price • Primarily in single-family residential housing market • Approx. 235k sq. ft. of production capac
Slide 8: Construction Division: Two Business Units
8 Construction Division Two Business Units KBS Builders (“KBS”) EdgeBuilder-Glenbrook (“EBGL”)
Slide 9: Construction Division
9 Construction Division Maine / New England • Designs and manufactures structural wall panels for commercial-scale, multi-family projects • Designs and manufactures engineered wood products for single family homes and residential developments • Distributes building materials and operates a professio
Slide 10: KBS Builders Business Unit
10 KBS Builders Business Unit Maine-based designer and manufacturer of modular housing units serving the New England Market MODULAR CONSTRUCTION BENEFITS - Shorter construction period - Significantly lower labor costs - Design flexibility - High quality control 2 MANUFACTURING FACILITIES - South Par
Slide 11: KBS Builders Commercial Project Evolution
11 KBS Builders Commercial Project Evolution Completed Contracts $2.0M $6.7M $2.0M $2.0-2.5M $9.2M $4.2M Client Martin Realty Tocci Building Corporation Real Estate Developer Non-Profit Affordable Housing Developer College in New England Real Estate Developer Scope Manufacture building modules to re
Slide 12: EBGL Business Unit
12 EBGL Business Unit Complementary manufacturing and distribution businesses managed together ❖ Long-Term Goal: high single-digit annual organic growth rate (CAGR from 2019 through 2022 = 16%) and strategic growth through bolt-on acquisitions GLENBROOK - Operates a lumber yard and showroom in Oakda
Slide 13: Construction Division Financial Highlights
13 Construction Division Financial Highlights $28.9 $48.0 $57.1 $- $10 $20 $30 $40 $50 $60 FY 2020 FY 2021 FY 2022 Revenue ($ in millions) $4.1 $3.0 $12.7 $- $2 $4 $6 $8 $10 $12 $14 FY 2020 FY 2021 FY 2022 Gross Profit ($ in millions) $0.7 ($2.7) $6.3 $(4) $(2) $- $2 $4 $6 $8 FY 2020 FY 2021 FY 2022
Slide 14: Construction Division Financial Highlights (Trailing 4Q)
14 -$5 $0 $5 $10 Trailing 4Q Adj. EBITDA ($ in millions) $20 $30 $40 $50 $60 Trailing 4Q Revenue ($ in millions) Construction top- and bottom-line financials have improved significantly since being acquired by Star Equity in Q3 2019 Construction Division Financial Highlights Business value has grown
Slide 15: Investments Division: Three Asset Classes
15 Three Asset Classes Real Estate Public Investments Private Investments Investments Division
Slide 16: Investments Division
16 Investments Division Real Estate • Star Equity Fund manages public equity portfolio • Focuses on impact investments to unlock latent value • Could use activist approach in certain situations • Makes strategic investments including potential acquisition targets or JVs • Owns, manages, and finances
Slide 17: Investments Division: Real Estate
17 Investments Division: Real Estate Real Estate Portfolio Value 2 Factories $5.0 Million (1) (1) Based on 2019 third-party appraisals. Owns Real Estate assets used by operating divisions Overview • Star Real Estate (“SRE”) owns, manages, and finances operating company real estate assets • Two plant
Slide 18: Investments Division: Public Investments
18 Star Equity Fund, LP: investment fund managed by Star Investment Management, LLC Investments Division: Public Investments • Portfolio companies can be: o Potential acquisition targets for Star Equity Holdings o Activist investments; pushing for change to create value or o Undervalued equity portf
Slide 19: Investments Division: Private Investments
19 Investments Division: Private Investments Private Investments Portfolio Value TTG Note $7.0 Million TTG Equity $6.0 Million MDOS Note $1.5 Million Total $14.5 Million Holds private company debt and equity interests Debt or equity interests retained in dispositions: • TTG Imaging Solutions, LLC (“
Slide 20: Growth Strategy
20 Growth Strategy Organic Growth + Acquisitions
Slide 21: Disciplined Acquisition Strategy
21 Disciplined Acquisition Strategy Seeking attractive acquisition opportunities to: • Expand existing business divisions through bolt-on acquisitions • Create new business divisions Construction • Increase KBS’s modular manufacturing output by expanding South Paris, Maine plant and eventually re- o
Slide 22: Acquisition Strategy and Synergy Objectives
22 Acquisition Synergy Objectives: • Free management teams to maximize operations and pursue growth opportunities • Share certain corporate functions to reduce corporate overhead • Improve access to capital at a lower cost • Support acquisition diligence and execution • Bolt-ons for existing platfor
Slide 23: Corporate Management Team
23 Jeffrey Eberwein Executive Chairman Corporate Management Team • Over 25 years of Wall Street experience; Founder and CEO of Lone Star Value Management • Portfolio Manager at Soros Fund Management and Viking Global • CEO of Hudson Global, Inc., a global recruitment company; extensive public compan
Slide 24: Appendix
24 Appendix
Slide 25: Historical Financial Data: Statements of Operations
25 Historical Financial Data: Statements of Operations ($ in 000s) Twelve Months Ended December 31, 2022 2021 Revenues: Healthcare $ 55,002 $ 58,556 Construction 57,149 48,003 Investments — — Total revenues 112,151 106,559 Cost of revenues: Healthcare 41,493 46,097 Construction 44,489 44,995 Investm
Slide 26: Historical Financial Data: Pro Forma Statements of Operations
26 Historical Financial Data: Pro Forma Statements of Operations ($ in 000s) Star Equity Holdings, Inc Historical (See note below) Transaction Accounting Adjustments Star Equity Holdings, Inc. Pro Forma Revenues: Healthcare $ 55,002 $ (55,002) $ — Construction 57,149 — 57,149 Investments — — — Total
Slide 27: Financial Data: Q2 2023 Statements of Operations
27 Financial Data: Q2 2023 Statements of Operations ($ in 000s) 2023 2022 Revenues: Healthcare Imaging $ — $ — Building and Construction 8,893 16,806 Real estate and Investments — — Total revenues 8,893 16,806 Cost of revenues: Healthcare Imaging — — Building and Construction 6,229 14,321 Real estat
Slide 28: Financial Data: Six Months 2023 Statements of Operations
28 Financial Data: Q2 2023 Statements of Operations ($ in 000s) 2023 2022 Revenues: Healthcare Imaging $ — $ — Building and Construction 21,239 28,437 Real estate and Investments — — Total revenues 21,239 28,437 Cost of revenues: Healthcare Imaging — — Building and Construction 14,246 24,366 Real es
Slide 29: Historical Financial Data: Balance Sheet
29 Historical Financial Data: Balance Sheet ($ in 000s) December 31, 2022 December 31, 2021 Assets Current assets: Cash and cash equivalents $ 4,665 $ 4,538 Restricted cash 142 278 Investments in equity securities 3,490 47 Lumber derivative contracts — 666 Accounts receivable, net of allowances of $
Slide 30: Historical Financial Data: Pro Forma Balance Sheet
30 Historical Financial Data: Pro Forma Balance Sheet ($ in 000s) Star Equity Holdings, Inc Historical Transaction Accounting Adjustments Star Equity Holdings, Inc. Pro Forma Assets Current assets: Cash and cash equivalents $ 4,665 $ 18,455 $ 23,120 Restricted cash 142 — 142 Securities available-for
Slide 31: Financial Data: Q2 2023 Balance Sheet
31 Financial Data: Q2 2023 Balance Sheet ($ in 000s) June 30, 2023 (unaudited) December 31, 2022 Assets: Current assets: Cash and cash equivalents $21,368 $4,377 Restricted cash 53 142 Investments in equity securities 4,783 3,490 Lumber derivative contracts 43 — Accounts receivable, net of allowance
Slide 32: Historical Reconciliation of Net Income to Adjusted EBITDA
32 Historical Reconciliation of Net Income to Adjusted EBITDA ($ in 000s) 1) Reflects adjustments for any unrealized gains or losses in lumber derivatives value and change in fair value of investments in equity securities. 2) Reflects one-time litigation costs. 3) Reflects impairment of goodwill rel
Slide 33: Reconciliation of Net Income to Adjusted EBITDA - Q2 2023
33 Reconciliation of Net Income to Adjusted EBITDA- Q2 2023 ($ in 000s) (1) Reflects adjustments for any unrealized gains or losses on equity securities. (2) Reflects adjustments for any unrealized gains or losses in lumber derivatives value. (3) We allocate all corporate interest income to the Inve
Slide 34: Reconciliation of Net Income to Adjusted EBITDA - 1H 2023
34 Reconciliation of Net Income to Adjusted EBITDA- 1H 2023 ($ in 000s) (1) Reflects adjustments for any unrealized gains or losses on equity securities. (2) Reflects adjustments for any unrealized gains or losses in lumber derivatives value. (3) We allocate all corporate interest income to the Inve
Slide 35: Capitalization Table
35 Capitalization Table 8 Weighted average cost of debt. 9 Includes $0.1M and $0.1M of restricted cash as of December 31, 2022 and June 30, 2023, respectively. 1 Price based on June 30, 2023 closing market price. Share count as of August 7, 2023. ² In terms of share equivalents. Expire May 28, 2025.
Slide 36: Small Cap Holding Company Peers
36 Small Cap: Ticker Market Cap(1) 5 Year TSR Business Highlights Great Elm Group Inc. GEG 63 -43% • Investment management and Real estate ALJ Regional Holdings Inc.(2) ALJJ 74 1% • Business process outsourcing services Crawford United Corp CRAWA 81 172% • Aerospace manufacturing & metal, silicone,
Slide 37: Contact Us
37 Jeff Eberwein Executive Chairman Rick Coleman CEO David Noble CFO admin@starequity.com Investor Relations Lena Cati The Equity Group Inc. Senior Vice President 212-836-9611 / lcati@equityny.com Contact Us
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