Star Equity (STRR) Q3 2016 earnings summary

Executive summary

• Q3 revenue was $108.1M, down 1.7% reported but up 1.6% on a constant-currency basis; gross margin fell 3.6% reported, while EBITDA loss narrowed to $0.3M from $2.6M.

• Nine-month net loss was $8.5M versus net income of $5.0M in 2015, when divestiture and exit gains materially boosted results.

Financial highlights

• Q3 revenue was $108.1M vs. $110.0M YoY; gross margin was $43.5M vs. $45.1M, with constant-currency changes of +1.6% and -1.4%, respectively.

• 9M revenue was $322.4M vs. $357.1M (-9.7% reported; -5.9% constant currency); gross margin was $131.6M vs. $143.3M (-8.1% reported; -5.2% constant currency).

• Net loss was $1.9M in Q3 vs. $2.1M; 9M net loss was $8.5M vs. prior-year net income of $5.0M.

• 9M operating cash use was $15.1M vs. $18.2M; ending cash was $17.4M, down from $37.7M at Dec. 31, 2015.

Outlook and guidance

• Management expected sufficient liquidity to meet needs through at least the next 12 months, based on Sept. 30 liquidity.

• FY2016 capital expenditures were expected at $2.0M-$3.0M; payments for current restructuring actions were expected at $3.0M-$4.0M.