Star Equity (STRR) Q1 2016 earnings summary

Executive summary

• Q1 revenue was $101.2M and gross margin $41.3M; net loss narrowed to $3.5M from $6.8M YoY, while EBITDA loss improved to $3.2M from $5.6M.

• Revenue and gross margin fell mainly because of prior-year divestitures; retained-business revenue grew on a constant-currency basis, led by Australia, Americas RPO and Belgium.

Financial highlights

• Revenue declined 18.6% reported to $101.2M; constant-currency revenue fell 14.4%, primarily from prior divestitures and lower contracting revenue.

• Gross margin declined 13.9% reported to $41.3M; constant-currency gross margin fell 10.1%, with permanent recruitment gross margin flat.

• Operating loss narrowed to $3.7M from $6.7M; net loss was $3.5M versus $6.8M, and diluted loss per share was $0.10 versus $0.21.

• Adjusted for discontinued operations and standard EBITDA reconciliation items, continuing-operations EBITDA loss was $3.2M versus $5.6M; SG&A and non-operating expenses fell 16.1% reported to $43.8M.

• Operating cash used was $5.8M versus $18.4M; cash and equivalents were $31.9M at March 31, 2016, down from $37.7M at year-end.

Outlook and guidance

• Expected FY16 capital expenditures of $2.5M–$3.5M and restructuring payments of $3.0M–$4.0M.

• Liquidity of $31.9M cash plus $18.3M additional borrowing availability was considered sufficient for needs through at least the next 12 months.

• Expected continued quarterly dividends at a level similar to $0.05 per share, subject to Board discretion and financial and other conditions.