Star Equity Holdings, Inc. · NASDAQ:STRR
Star Equity — Investor Presentation (June 2023)
35 slides from Star Equity's investor presentation, Jun 8, 2023
Slide 1: A Diversified Holding Company
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 June 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 : $1.02 15.2 million shares outstanding 3 Series A Preferred Stock (Nasdaq: STRRP): Stock Price 2 : $9.00 1.92 million shares outstanding
Slide 4: Investment & Financial Highlights
4 Investment & Financial Highlights $57.1M Revenue $12.4M Gross Profit $23.1M Cash Balance Currently Debt Free(2) Benefits of our Holding Company Structure • Greater revenue, cash flow, and earnings growth potential due to focus on operational excellence, cost savings, better funding, and other effi
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
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 3 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
Construction Division Financial Highlights 13 $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: 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 STRATEGY • Future acquisition targets could have underappreciated real estate assets that could be placed into SRE • Historically, SRE has raised its own debt and is self-funded • SRE’s separate financing optimizes financial leverage and cost of capital for STRR
Slide 18: Investments Division: Public Investments
18 Investments Division: Public Investments Star Equity Fund, LP: an investment fund managed by Star Investment Management, LLC • 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 po
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 $14.5 Million • Strategic investments in potential acquisition targets or JVs • Debt or equity interests retained in dispositions: o TTG Imaging
Slide 20: Growth Strategy
20 Growth Strategy Organic Growth + Acquisitions
Slide 21: Disciplined Acquisition Strategy
21 Disciplined Acquisition Strategy Seeking attractive acquisition opportunities to: • Expand existing business divisions through bolt-on acquisitions • Create new business divisions Construction • Increase KBS’s modular manufacturing output by expanding South Paris, Maine plant and eventually re- o
Slide 22: Acquisition Strategy and Synergy Objectives
22 Acquisition Synergy Objectives: • Free management teams to maximize operations and pursue growth opportunities • Share certain corporate functions to reduce corporate overhead • Improve access to capital at a lower cost • Support acquisition diligence and execution • Bolt-ons for existing platfor
Slide 23: Corporate Management Team
23 Jeffrey Eberwein Executive Chairman Corporate Management Team • Over 25 years of Wall Street experience; Founder and CEO of Lone Star Value Management • Portfolio Manager at Soros Fund Management and Viking Global • CEO of Hudson Global, Inc., a global recruitment company; extensive public compan
Slide 24: Appendix
24 Appendix
Slide 25: Historical Financial Data: Statements of Operations
25 Historical Financial Data: Statements of Operations ($ 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: 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: Q1 2023 Statements of Operations
27 Financial Data: Q1 2023 Statements of Operations ($ in 000s) Three Months Ended March 31, 2023 2022 Revenues: Healthcare $ 13,359 $ 13,418 Construction 12,346 11,631 Total revenues 25,705 25,049 Cost of revenues: Healthcare 10,032 10,242 Construction 8,017 10,045 Investments 63 99 Total cost of r
Slide 28: Historical Financial Data: Balance Sheet
28 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 29: Pro Forma Balance Sheet
29 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 30: Financial Data: Q1 2023 Balance Sheet
30 Financial Data: Q1 2023 Balance Sheet ($ in 000s) March 31, 2023 December 31, 2022 Assets Current assets: Cash and cash equivalents $ 5,655 $ 4,665 Restricted cash 141 142 Investments in equity securities 3,577 3,490 Accounts receivable, net of allowances of $500 and $714, respectively 15,000 17,
Slide 31: Historical Reconciliation of Net Income to Adjusted EBITDA
31 Historical Reconciliation of Net Income to Adjusted EBITDA ($ 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 32: Reconciliation of Net Income to Adjusted EBITDA - Q1 2023
32 Reconciliation of Net Income to Adjusted EBITDA- Q1 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) Reflects one time litigation costs. 4) Reflects financin
Slide 33: Capitalization Table
33 Capitalization Table 8Weighted average cost of debt. 9 Includes $0.1M and $0.2M of restricted cash as of December 31, 2022 and May 31, 2023, respectively. ¹ Price based on May 31, 2023 closing market price. Share count as of May 7, 2023. ² In terms of share equivalents. Expire May 28, 2025. Strik
Slide 34: Small Cap Holding Company Peers
34 Small Cap: Ticker Market Cap(1) 5 Year TSR Business Highlights Elah Holdings Inc. ELLH 38 -35% • Recently reorganized holding company • Co-sponsored by funds managed by 210 Capital and Goldman Sachs Asset Management Great Elm Group Inc. GEG 62 189% • Investment management and Real estate ALJ Regi
Slide 35: Contact Us
35 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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