Star Equity Holdings, Inc.

Greetings, ladies and gentlemen, and welcome to the Star Equity Holding, Inc.' 's third quarter 2023 results conference call. Please be advised that discussions on today's call may include forward-looking statements. Such forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. Please refer to Star Equity's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligation to update forward-looking statements as a result of new information, future events, or otherwise. Please also note that on this call, management will be referencing non-GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted net income, and adjusted earnings per share, which are all financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations, these non-GAAP financial measures are mercantile to the most comparable GAAP 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 at 203-489-9500 or its Investment Relations Representative, Lena Catty, of the Equity Group at 212-836-9611. Also, this call is being broadcast live over the Internet and may be accessed at Star Equity's website via www.starequity.com. Shortly after the call, a replay will be available on the company's website. It's now a pleasure to introduce Rick Coleman, Chief Executive Officer of Star Equity.

Thank you, Operator. Good morning, everyone. Thanks for joining us for our third quarter 2023 results conference call. With me today are our Executive Chairman, Jeff Everwein, and our Chief Financial Officer, Dave Noble. It's a pleasure to be with you today to update you on our third quarter results and to discuss our recent acquisition of Big Lake Lumber. Our third quarter revenue decreased 6.1% to 10.4 million compared to 11.1 million in the third quarter of 2022. And our gross margin was also lower at 21.1% versus 27.7% in the same period last year. The primary driver for the revenue shortfall was the delay in large project starts, which have been adversely impacted by interest rates and macroeconomic uncertainty, causing sector-wide difficulty in securing project financing. It's important to note that, in general, we're not seeing large project cancellations, but rather delays in starts as well as project timeline extensions. Year-to-date, our gross margin increased to 28.6%, versus 17.7 percent in the first nine months of last year, resulting in 29.9 percent higher gross profit despite lower revenue. And we maintain our mid-20s or higher gross margin target for our construction division. Sustained execution quality has contributed to the division's ability to maintain pricing levels and, combined with management's ability to scale our workforce to meet demand, These factors have contributed to the division's gross margin improvement. We remain confident in the division's ability to continue delivering good results based on a stronger signed backlog and a significantly stronger sales opportunity pipeline than at this time last year. Despite economic headwinds across the construction space at large, our reputation as a reliable and high-quality partner in the markets we serve gives us a unique and sustainable position, which we will continue to leverage as the construction sector regains strength. We also continue to target niche markets where we feel our experience and reputation give us a sustainable competitive advantage. These include affordable and workforce housing, educational buildings and dormitories, and environmentally sustainable housing. Based on our sales opportunity pipeline and construction backlog, we believe demand in all of these sectors will remain strong. We also have continued conviction in the ongoing growth of factory-built construction in the United States, which according to the Modular Building Institute's most recent report, now accounts for 6% of all new construction starts in North America, having tripled from 2% in 2015. Finally, consistent with our stated acquisition goals, we completed the acquisition of Big Lake Lumber, a Minneapolis-based building supply center and lumberyard, on October 31st. Big Lake will be integrated into Glenbrook Building Supply, the building supply and lumberyard portion of our Edge Builder construction business. We believe this complementary bolt-on transaction establishes Glenbrook as a strong regional player in the Twin Cities market. Additionally, we expect the addition of Big Lake to immediately diversify Glenbrook's revenue mix by adding more single-family residential business where we had historically been weighted more heavily in the commercial sector. We believe Big Lake also presents opportunities for margin synergies and the establishment of potential new product lines. This acquisition represents an important step in the execution of our overall growth strategy, which includes organic construction division expansion, bolt-on acquisitions, acquisitions in new industries, and thoughtfully exploring new opportunities at our investments division. Now, I'll turn the call over to Dave Noble, our CFO, to provide additional third quarter consolidated financial highlights. Dave, go ahead.

Thank you, Rick, and good morning. Let's now turn to Star Equity's consolidated financial results. I would like to note that due to the sale of our healthcare business on May 4th, All results and historical comparisons relate only to continuing operations, which includes construction and investments. Digirad Health is now reported as part of our discontinued operations. In Q3 2023, SG&A increased by 10.9% versus Q3 2022. This was mainly due to transactions costs related to the sale of Digirad, as well as increased activity in our investments division. Moving on to bottom line results for Star Equity. we generated a net loss from continuing operations of 2.4 million in Q3 compared to a net loss from continuing operations of $1 million in Q3 of 2022. Non-GAAP adjusted net loss from continuing operations in Q3 was 0.2 million compared to an adjusted net loss of 0.3 million in Q3 of 2022. Non-GAAP adjusted EBITDA from continuing operations was essentially at break even at minus $14,000 in Q3 versus a positive 0.6 million in Q3 of 2022. For the year-to-date period, non-GAAP-adjusted EBITDA from continuing operations improved to minus $50,000, essentially break-even from minus $1 million in year-to-date 2022. On a standalone basis before public company costs, our construction division generated non-GAAP-adjusted EBITDA of 0.8 million in Q3 down from 1.8 million in Q3 of 2022. However, year-to-date non-GAAP adjusted EBITDA from construction was 3.7 million, which is up from 3.5 million in year-to-date 2022. Consolidated cash flow from continuing operations for Q3 was an inflow of 0.8 million versus an outflow of 3.2 million in Q3 of 2022. This cash flow increase was driven primarily by a decline in working capital needs. For the year-to-date period, consolidated cash flow from continuing operations was an inflow of $2.7 million compared to an outflow of $0.2 million in the prior year period. As of September 30, 2023, our consolidated balance sheet and liquidity remained strong. As a result of the sale of our healthcare business on May 4th, we had just $0.5 million in interest-bearing debt, and our consolidated unrestricted cash balance stood at $20.7 million at the end of Q3. Now I'd like to turn it back to Rick for some additional remarks.