Star Equity (STRR) Q2 2016 earnings summary

Executive summary

• Q2 revenue was $113.1M, down 7.9% YoY as prior-year divestitures and lower contracting activity outweighed growth in retained businesses; net loss was $3.1M.

• On a constant-currency basis, retained-business revenue and gross margin increased in Australia and Belgium, partly offset by declines in the U.K. and China.

Financial highlights

• Q2 revenue was $113.1M vs. $122.7M YoY; gross margin was $46.8M vs. $50.2M, and operating loss was $2.4M vs. operating income of $13.6M.

• Q2 net loss was $3.1M vs. net income of $13.9M; diluted EPS was $(0.09) vs. $0.41.

• H1 revenue was $214.3M vs. $247.1M; gross margin was $88.1M vs. $98.1M, and net loss was $6.6M vs. net income of $7.0M.

• H1 operating cash use was $10.1M, compared with $23.0M; cash and equivalents fell to $24.9M from $37.7M at Dec. 31, 2015.

Outlook and guidance

• Liquidity was expected to cover needs for at least 12 months, based on $24.9M cash and $19.8M of additional borrowing availability at June 30, 2016.

• FY 2016 capital expenditures were expected at $2.0M–$3.0M, with $3.0M–$4.0M of payments for current restructuring actions.