Third Quarter 2024 Results
- Revenue was $520.4 million, an increase of 5.7% as compared to
the same period in the prior year
- Net income was $36.9 million, an increase of 32.2% as compared
to the same period in the prior year
- Net income attributable to common unitholders was $36.4
million, or $1.65 per diluted common unit
- Adjusted EBITDA* totaled $76.0 million; Adjusted EBITDA margin*
was 14.6%
- Net cash provided by operating activities was $101.8
million
- Adjusted free cash flow* totaled $34.3 million
- Total debt at quarter-end was $120.2 million; net cash*, which
includes, among other items, pension and preferred unit
liabilities, and long-term investments was $5.9 million
YTD 2024 Results
- Revenue was $1.5 billion, an increase of 6.4% as compared to
the same period in the prior year
- Net income was $196.6 million, an increase of 76.6% as compared
to the same period in the prior year
- Net income attributable to common unitholders was $187.0
million, or $8.02 per diluted common unit
- Adjusted EBITDA* totaled $218.3 million; Adjusted EBITDA
margin* was 14.3%
- Net cash provided by operating activities was $368.2
million
- Adjusted free cash flow* totaled $96.8 million
Steel Partners Holdings L.P. (NYSE: SPLP) (the “Company”), a
diversified global holding company, today announced operating
results for the third quarter ended September 30, 2024. The
financial results of Steel Connect, Inc. ("Steel Connect" or
"STCN") have been included in the Company's consolidated financial
statements since May 1, 2023.
(Unaudited)
Q3 2024
Q3 2023
($ in thousands)
YTD 2024
YTD 2023
$520,423
$492,254
Revenue
$1,529,928
$1,438,550
36,873
27,887
Net income
196,620
111,305
36,416
25,572
Net income attributable to common
unitholders
186,985
109,568
75,953
44,464
Adjusted EBITDA*
218,320
181,201
14.6%
9.0%
Adjusted EBITDA margin*
14.3%
12.6%
37,349
13,116
Purchases of property, plant and
equipment
55,712
36,667
34,338
85,536
Adjusted free cash flow*
96,796
148,393
*Non-GAAP financial measure. See
reconciliations to the nearest GAAP measure included in the
financial tables. See "Note Regarding Use of Non-GAAP Financial
Measurements" below for the definition of these non-GAAP
measures.
"We are proud to announce continued record revenue this quarter,
driven by robust performance across multiple segments,” said
Executive Chairman Warren Lichtenstein. “Our Financial Services
segment delivered increased profits, while our Diversified
Industrial segment saw significant growth in net sales. These
achievements underscore the strength of our strategic initiatives
and our commitment to delivering value for our shareholders as we
continue to build momentum across the business."
Results of Operations
Comparison of the Three and Nine Months Ended September 30,
2024 and 2023 (unaudited)
(Dollar amounts in table and commentary in
thousands, unless otherwise indicated)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Revenue
$
520,423
$
492,254
$
1,529,928
$
1,438,550
Cost of goods sold
295,577
283,285
872,929
833,977
Selling, general and administrative
expenses
137,310
124,934
412,301
376,252
Asset impairment charge
530
—
530
329
Interest expense
1,993
4,115
5,074
15,934
Realized and unrealized losses (gains) on
securities, net
2,060
(8,665
)
(2,994
)
(6,151
)
All other expense, net*
29,856
58,539
77,367
96,667
Total costs and expenses
467,326
462,208
1,365,207
1,317,008
Income from operations before income
taxes and equity method investments
53,097
30,046
164,721
121,542
Income tax provision (benefit)
16,224
(981
)
(31,906
)
(1,707
)
Loss of associated companies, net of
taxes
—
3,140
7
11,944
Net income
$
36,873
$
27,887
$
196,620
$
111,305
* Includes Finance interest expense,
Provision for credit losses, and Other expense (income), net from
the Consolidated Statements of Operations
Revenue
Revenue for the three months ended September 30, 2024 increased
$28,169, or 5.7%, as compared to the same period last year. This
increase was due to $19,544 or 6.5%, higher net sales from the
Diversified Industrial segment, $8,479, or 21.2% higher revenue
from the Supply Chain segment, and $6,622, or 6.2% higher revenue
from the Financial Services segment. These increases were partially
offset by $6,476 or 13.9%, lower net revenue from the Energy
segment.
Revenue for the nine months ended September 30, 2024 increased
$91,378, or 6.4%, as compared to the same period last year, as a
result of higher revenue of $34,005 or 11.2% from the Financial
Services segment and higher net sales of $27,006, or 2.9% from the
Diversified Industrial segments, as well as higher revenue of
$66,405 or 94.6% from the Supply Chain segment, primarily driven by
favorable impact of the consolidation, partially offset by lower
net revenue of $36,038, or 24.8% from the Energy segment.
Cost of Goods Sold
Cost of goods sold for the three months ended September 30, 2024
increased $12,292, or 4.3%, as compared to the same period last
year, resulting from higher net sales from the Diversified
Industrial segment and higher revenue from the Supply Chain
segment, partially offset by the impact of lower net revenue from
the Energy segment.
Cost of goods sold for the nine months ended September 30, 2024
increased $38,952, or 4.7%, as compared to the same period last
year, resulting from consolidation of the Supply Chain segment and
higher net sales from the Diversified Industrial segment, partially
offset by the impact of lower net revenue from the Energy
segment.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") for
the three months ended September 30, 2024 increased $12,376, or
9.9%, as compared to the same period last year. The increase was
primarily due to higher expenses from the Financial Services
segment of $7,600 and Supply Chain segment of $4,900. The increase
for the Financial Services segment was primarily due to higher
credit performance fees due to higher credit risk transfer ("CRT")
balances and higher personnel expenses related to incremental
headcount. The increase for the Supply Chain segment was primarily
due to an increase in merger and acquisition related expenses
compared to the prior period.
SG&A for the nine months ended September 30, 2024 increased
$36,049, or 9.6%, as compared to the same period last year. The
increase was primarily driven by higher SG&A expenses from the
Financial Services segment of $22,600 as discussed above and Supply
Chain segment of $16,400, primarily due to the consolidation
impact.
Interest Expense
Interest expense decreased $2,122, or 51.6% and $10,860 or 68.2%
for the three and nine months ended September 30, 2024,
respectively, as compared to the same period last year. The
decrease for the three and nine month periods was primarily due to
significantly lower average debt outstanding.
Realized and Unrealized Losses (Gains) on Securities,
Net
The Company recorded losses of $2,060 and gains of $2,994 for
the three and nine months ended September 30, 2024, as compared to
gains of $8,665 and $6,151 for the three and nine months ended
September 30, 2023, respectively. These gains and losses were due
to unrealized gains and losses related to the mark-to-market
adjustments on the Company's portfolio of securities.
All Other Expense, Net
All other expense, net totaled $29,856 for the three months
ended September 30, 2024, as compared to $58,539 in the same period
of 2023 and $77,367 for the nine months ended September 30, 2024,
as compared to $96,667 in the same period of 2023. Lower all other
expense, net for the three months ended September 30, 2024 was
primarily due to $29,884 lower provisions for credit losses related
to the Financial Services segment, as compared to the same period
of 2023. Lower all other expense, net for the nine months ended
September 30, 2024 was primarily due to $37,820 lower provisions
for credit losses, partially offset by $15,203 higher finance
interest expense related to the Financial Services segment, as
compared to the same period of 2023.
Income Tax Provision (Benefit)
The Company recorded an income tax provision of $16,224 and an
income tax benefit of $981 for the three months ended September 30,
2024 and 2023, respectively, and income tax benefits of $31,906 and
$1,707 for the nine months ended September 30, 2024 and 2023,
respectively. As a limited partnership, the Company is generally
not directly subject to federal and state income taxes, and instead
its profits and losses are passed directly to its limited partners
for inclusion in their respective income tax returns. Provisions
have been made for federal, state, local, and foreign income taxes
on the results of operations generated by our consolidated
subsidiaries that are taxable entities. The Company's effective tax
rate was (19.4%) and (1.4%) for the nine months ended September 30,
2024 and 2023, respectively. The lower effective tax rate for the
nine months ended September 30, 2024, is primarily due to a
non-cash income tax benefit of $73,536 for the reduction in the
valuation allowance against Steel Connect's deferred tax assets.
Significant differences between the statutory rate and the
effective tax rate include the effect of the release of valuation
allowances with respect to deferred tax assets, partnership losses
for which no tax benefit is recognized, tax expense related to
unrealized gains and losses on investment, the effect of tax
credits and incentives, and other permanent differences.
Loss of Associated Companies, Net of Taxes
The Company recorded a loss from associated companies, net of
taxes, of $7 for the nine months ended September 30, 2024, as
compared to losses from associated companies, net of taxes, of
$3,140 and $11,944 for the three and nine months ended September
30, 2023, respectively.
Net Income
Net income for the three and nine months ended September 30,
2024 were $36,873 and $196,620, as compared to $27,887 and
$111,305, for the same periods in 2023, respectively. The increase
in net income for the three month period was primarily driven by
higher operating income. The increase in net income for the nine
month period was primarily due to higher income tax benefits and
higher operating income. See above explanations for further
details.
Purchases of Property, Plant and Equipment (Capital
Expenditures)
Capital expenditures for the three and nine months ended
September 30, 2024 totaled $37,349, or 7.2% of revenue and $55,712,
or 3.6% of revenue, respectively, as compared to $13,116, or 2.7%
of revenue and $36,667 or 2.5% of revenue in the same periods of
2023, respectively.
Common Units Repurchase Program
The Company repurchased, under the Repurchase Program, 13,813
and 991,157 common units for an aggregate purchase price of $547
and $41,680 during the three and nine months ended September 30,
2024, respectively. As of September 30, 2024, there were
approximately 720,463 common units that may yet be purchased under
the repurchase program.
On September 1, 2024, the Company entered into a purchase
agreement with Hale Partnership Fund, L.P. and related parties (the
"Hale Entities") pursuant to which the Company purchased an
aggregate of 1,267,803 Common Units from the Hale Entities for an
aggregate purchase price of $63,390. This agreement was approved by
the Company’s Board of Directors outside of the Repurchase
Program.
Preferred Units Repurchase Program
On February 2, 2024, the Board of SPH GP approved the repurchase
of up to 400,000 of the SPLP Preferred Units. For the nine months
ended September 30, 2024, the Company repurchased 76,146, SPLP
Preferred Units for $1,830. The Company did not repurchase any SPLP
Preferred Units during the three months ended September 30,
2024.
Additional Non-GAAP Financial Measures
Adjusted EBITDA was $75,953 for the three months ended September
30, 2024, as compared to $44,464 for the same period of 2023.
Adjusted EBITDA increased by $31,489 for the three months ended
September 30, 2024. The increase for the three month period was
primarily due to 1) higher profit at the Financial Service segment,
resulting from higher revenue impact and lower credit loss
provisions, partially offset by higher finance interest and higher
personnel costs; and 2) higher operating income at the Diversified
Industrial segment, primarily driven by higher net sales. These
increases were partially offset by lower operating income impact at
the Energy segment primarily resulting from lower rig hours. For
the three months ended September 30, 2024, adjusted free cash flow
was $34,338, as compared to $85,536 for the same period in 2023.
Lower adjusted free cash flow from the 2024 period was primarily
driven by higher working capital usage and capital expenditures,
partially offset by higher Adjusted EBITDA.
Adjusted EBITDA was $218,320 for the nine months ended September
30, 2024, as compared to $181,201 for the same period of 2023.
Adjusted EBITDA increased by $37,119 for the nine months ended
September 30, 2024. The increase for the nine month period was
primarily due to: 1) higher profit at the Financial Service
segment, resulting from higher revenue impact and lower credit loss
provisions, partially offset by higher finance interest and higher
personnel costs; 2) favorable impact of the consolidated Supply
Chain segment; and 3) higher operating income at the Diversified
Industrial segment, resulting from higher net sales. These
increases were partially offset by lower operating income impact at
the Energy segment primarily resulting from lower rig hours. For
the nine months ended September 30, 2024, adjusted free cash flow
was $96,796, as compared to $148,393 for the same period in 2023.
Lower adjusted free cash flow from the 2024 period was primarily
driven by higher usage of working capital and capital expenditures,
partially offset by higher Adjusted EBITDA.
Liquidity and Capital Resources
As of September 30, 2024, the Company had approximately $470,000
in availability under its senior credit agreement, as well as
$246,014 in cash and cash equivalents, excluding WebBank cash, and
approximately $78,329 in long-term investments.
As of September 30, 2024, total debt was $120,171, a decrease of
approximately $71,200, as compared to December 31, 2023. As of
September 30, 2024, net cash totaled $5,909, a decrease of
approximately $50,467, as compared to December 31, 2023, primarily
due to treasury stock purchase and higher capital expenditures in
Q3 2024. Total leverage (as defined in the Company's senior credit
agreement) was approximately 1.0x as of September 30, 2024 versus
1.5x as of December 31, 2023.
About Steel Partners Holdings L.P.
Steel Partners Holdings L.P. (www.steelpartners.com) is a
diversified global holding company that owns and operates
businesses and has significant interests in various companies,
including diversified industrial products, energy, defense, supply
chain management and logistics, banking and youth sports. At Steel
Partners, our culture and core values of Teamwork, Respect,
Integrity, and Commitment guide our Kids First purpose, which is to
forge a path of success for the next generation by instilling
values, building character, and teaching life lessons through
sports.
(Financial Tables Follow)
Consolidated Balance Sheets
(Unaudited)
(in thousands, except common
units)
September 30, 2024
December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
388,124
$
577,928
Trade and other receivables - net of
allowance for doubtful accounts of $1,348 and $2,481,
respectively
240,473
216,429
Loans receivable, including loans held for
sale of $653,219 and $868,884, respectively, net
1,430,323
1,582,536
Inventories, net
210,714
202,294
Prepaid expenses and other current
assets
48,311
48,169
Total current assets
2,317,945
2,627,356
Long-term loans receivable, net
236,603
386,072
Goodwill
145,958
148,838
Other intangible assets, net
101,555
114,177
Deferred tax assets
81,397
581
Other non-current assets
328,423
341,465
Property, plant and equipment, net
278,882
253,980
Operating lease right-of-use assets
64,983
76,746
Long-term investments
78,329
41,225
Total Assets
$
3,634,075
$
3,990,440
LIABILITIES AND CAPITAL
Current liabilities:
Accounts payable
$
154,643
$
131,922
Accrued liabilities
98,868
117,943
Deposits
1,475,481
1,711,585
Other current liabilities
91,589
103,682
Total current liabilities
1,820,581
2,065,132
Long-term deposits
258,780
370,107
Long-term debt
120,104
191,304
Other borrowings
2,068
15,065
Preferred unit liability
155,065
154,925
Accrued pension liabilities
43,198
46,195
Deferred tax liabilities
35,073
18,353
Long-term operating lease liabilities
52,094
61,790
Other non-current liabilities
63,439
62,161
Total Liabilities
2,550,402
2,985,032
Commitments and Contingencies
Capital:
Partners' capital common units: 19,183,332
and 21,296,067 issued and outstanding (after deducting 20,626,267
and 18,367,307 units held in treasury, at cost of $434,367 and
$329,297), respectively
1,164,004
1,079,853
Accumulated other comprehensive loss
(121,147
)
(121,223
)
Total Partners' Capital
1,042,857
958,630
Noncontrolling interests in consolidated
entities
40,816
46,778
Total Capital
1,083,673
1,005,408
Total Liabilities and Capital
$
3,634,075
$
3,990,440
Consolidated Statements of Operations (unaudited)
(in thousands, except common units and
per common unit data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Revenue:
Diversified Industrial net sales
$
318,642
$
299,098
$
945,576
$
918,570
Energy net revenue
40,266
46,742
109,182
145,220
Financial Services revenue
113,027
106,405
338,575
304,570
Supply Chain revenue
48,488
40,009
136,595
70,190
Total revenue
520,423
492,254
1,529,928
1,438,550
Costs and expenses:
Cost of goods sold
295,577
283,285
872,929
833,977
Selling, general and administrative
expenses
137,310
124,934
412,301
376,252
Asset impairment charge
530
—
530
329
Finance interest expense
22,648
22,371
69,697
54,494
Provision for credit losses
7,085
36,969
10,159
47,979
Interest expense
1,993
4,115
5,074
15,934
Realized and unrealized losses (gains) on
securities, net
2,060
(8,665
)
(2,994
)
(6,151
)
Other expense (income), net
123
(801
)
(2,489
)
(5,806
)
Total costs and expenses
467,326
462,208
1,365,207
1,317,008
Income from operations before income
taxes and equity method investments
53,097
30,046
164,721
121,542
Income tax provision (benefit)
16,224
(981
)
(31,906
)
(1,707
)
Loss of associated companies, net of
taxes
—
3,140
7
11,944
Net income
36,873
27,887
196,620
111,305
Net income attributable to
noncontrolling interests in consolidated entities
(457
)
(2,315
)
(9,635
)
(1,737
)
Net income attributable to common
unitholders
$
36,416
$
25,572
$
186,985
$
109,568
Net income per common unit -
basic
Net income attributable to common
unitholders
$
1.83
$
1.20
$
9.19
$
5.10
Net income per common unit -
diluted
Net income attributable to common
unitholders
$
1.65
$
1.14
$
8.02
$
4.68
Weighted-average number of common units
outstanding - basic
19,929,713
21,298,871
20,338,033
21,495,689
Weighted-average number of common units
outstanding - diluted
23,985,875
25,081,210
24,470,418
25,360,324
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Nine Months Ended September
30,
2024
2023
Cash flows from operating
activities:
Net income
$
196,620
$
111,305
Adjustments to reconcile net income from
operations to net cash (used in) provided by operating
activities:
Provision for credit losses
10,159
47,979
Loss of associated companies, net of
taxes
7
11,944
Realized and unrealized gains on
securities, net
(2,994
)
(6,151
)
Derivative gains on economic interests in
loans
(4,187
)
(3,762
)
Non-cash pension expense
4,199
8,948
Deferred income taxes
(65,224
)
(30,390
)
Depreciation and amortization
43,839
41,433
Non-cash lease expense
17,342
12,710
Equity-based compensation
1,668
1,007
Asset impairment charges
530
329
Other
1,317
2,193
Net change in operating assets and
liabilities:
Trade and other receivables
(24,479
)
(12,999
)
Inventories
(8,243
)
6,241
Prepaid expenses and other assets
2,544
(1,038
)
Accounts payable, accrued and other
liabilities
(20,590
)
(4,689
)
Net decrease (increase) in loans held for
sale
215,665
(173,385
)
Net cash provided by operating
activities
$
368,173
$
11,675
Cash flows from investing
activities:
Purchases of investments
(50,706
)
(204,611
)
Proceeds from sales of investments
13,788
207,893
Proceeds from maturities of
investments
16,832
41,058
Principal repayment on Steel Connect
Convertible Note
—
1,000
Loan originations, net of collections
76,790
(242,667
)
Purchases of property, plant and
equipment
(55,712
)
(36,667
)
Proceeds from sale of property, plant and
equipment
1,501
490
Increase in cash upon consolidation of
Steel Connect
—
65,896
Other
(181
)
(1,084
)
Net cash provided by (used in) investing
activities
$
2,312
$
(168,692
)
Cash flows from financing
activities:
Net revolver (repayments) borrowings
(71,149
)
6,910
Repayments of term loans
(51
)
(51
)
Purchases of the Company's common
units
(105,070
)
(19,727
)
Purchases of the Company's preferred
units
(1,830
)
—
Net decrease in other borrowings
(10,528
)
(21,277
)
Distribution to preferred unitholders
(7,139
)
(7,225
)
Purchase of subsidiary shares from
noncontrolling interests
(16,181
)
(2,784
)
Tax withholding related to vesting of
restricted units
(1,059
)
(433
)
Net (decrease) increase in deposits
(347,430
)
531,006
Net cash (used in) provided by financing
activities
$
(560,437
)
$
486,419
Net change for the period
(189,952
)
329,402
Effect of exchange rate changes on cash
and cash equivalents
148
(1,701
)
Cash, cash equivalents and restricted cash
at beginning of period
577,928
234,448
Cash, cash equivalents and restricted
cash at end of period
$
388,124
$
562,149
Supplemental Balance Sheet Data (September 30, 2024
unaudited)
(in thousands, except common and
preferred units)
September 30,
December 31,
2024
2023
Cash and cash equivalents
$
388,124
$
577,928
WebBank cash and cash equivalents
142,110
170,286
Cash and cash equivalents, excluding
WebBank
$
246,014
$
407,642
Common units outstanding
19,183,332
21,296,067
Preferred units outstanding
6,345,982
6,422,128
Supplemental Non-GAAP Disclosures
Adjusted EBITDA Reconciliation:
(Unaudited)
(in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Net income
$
36,873
$
27,887
$
196,620
$
111,305
Income tax provision (benefit)
16,224
(981
)
(31,906
)
(1,707
)
Income before income taxes
53,097
26,906
164,714
109,598
Add (Deduct):
Loss of associated companies, net of
taxes
—
3,140
7
11,944
Realized and unrealized losses (gains) on
securities, net
2,060
(8,665
)
(2,994
)
(6,151
)
Interest expense
1,993
4,115
5,074
15,934
Depreciation
10,728
10,255
31,000
29,222
Amortization
4,268
4,438
12,839
12,211
Asset impairment charge
530
—
530
329
Non-cash pension expense
1,399
2,979
4,199
8,948
Non-cash equity-based compensation
743
599
1,612
1,007
Other items, net
1,135
697
1,339
(1,841
)
Adjusted EBITDA
$
75,953
$
44,464
$
218,320
$
181,201
Total revenue
$
520,423
$
492,254
$
1,529,928
$
1,438,550
Adjusted EBITDA margin
14.6
%
9.0
%
14.3
%
12.6
%
Net Cash Reconciliation:
(Unaudited)
(in thousands)
September 30,
December 31,
2024
2023
Total debt
$
(120,171
)
$
(191,371
)
Accrued pension liabilities
(43,198
)
(46,195
)
Preferred unit liability
(155,065
)
(154,925
)
Cash and cash equivalents, excluding
WebBank
246,014
407,642
Long-term investments
78,329
41,225
Net cash
$
5,909
$
56,376
Adjusted Free Cash Flow
Reconciliation:
(Unaudited)
(in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Net cash provided by operating
activities
$
101,758
$
66,186
$
368,173
$
11,675
Purchases of property, plant and
equipment
(37,349
)
(13,116
)
(55,712
)
(36,667
)
Net (decrease) increase in loans held for
sale
(30,071
)
32,466
(215,665
)
173,385
Adjusted free cash flow
$
34,338
$
85,536
$
96,796
$
148,393
Segment Results (unaudited)
(in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Revenue:
Diversified Industrial
$
318,642
$
299,098
$
945,576
$
918,570
Energy
40,266
46,742
109,182
145,220
Financial Services
113,027
106,405
338,575
304,570
Supply Chain
$
48,488
$
40,009
$
136,595
$
70,190
Total revenue
$
520,423
$
492,254
$
1,529,928
$
1,438,550
Income (loss) before interest expense
and income taxes:
Diversified Industrial
$
26,346
$
14,756
$
66,175
$
61,015
Energy
3,466
5,968
8,149
15,239
Financial Services
23,945
(2,588
)
80,846
48,246
Supply Chain
2,637
4,011
8,870
5,846
Corporate and other
(1,304
)
8,874
5,748
(4,814
)
Income before interest expense and
income taxes:
55,090
31,021
169,788
125,532
Interest expense
1,993
4,115
5,074
15,934
Income tax provision (benefit)
16,224
(981
)
(31,906
)
(1,707
)
Net income
$
36,873
$
27,887
$
196,620
$
111,305
Loss of associated companies, net of
taxes:
Corporate and other
$
—
$
3,140
$
7
$
11,944
Total
$
—
$
3,140
$
7
$
11,944
Segment depreciation and
amortization:
Diversified Industrial
$
10,604
$
10,257
$
31,743
$
30,333
Energy
2,161
2,740
6,482
7,732
Financial Services
233
205
620
630
Supply Chain
1,450
1,324
4,145
2,234
Corporate and other
548
167
849
504
Total depreciation and amortization
$
14,996
$
14,693
$
43,839
$
41,433
Segment Adjusted EBITDA:
Diversified Industrial
$
39,988
$
33,581
$
105,222
$
100,370
Energy
5,965
7,971
14,035
22,517
Financial Services
24,218
(4,412
)
81,526
47,573
Supply Chain
4,266
5,935
13,594
8,806
Corporate and other
1,516
1,389
3,943
1,935
Total Adjusted EBITDA
$
75,953
$
44,464
$
218,320
$
181,201
Note Regarding Use of Non-GAAP Financial Measurements
The financial data contained in this press release includes
certain non-GAAP financial measurements as defined by the SEC,
including "Adjusted EBITDA," "Adjusted EBITDA Margin," "Net Cash"
and "Adjusted Free Cash Flow." The Company is presenting these
non-GAAP financial measurements because it believes that these
measures provide useful information to investors about the
Company's business and its financial condition. The Company defines
Adjusted EBITDA as net income or loss from continuing operations
before the effects of income or loss from investments in associated
companies and other investments held at fair value, interest
expense, taxes, depreciation and amortization, non-cash pension
expense or income, and realized and unrealized gains or losses on
securities, and excludes certain non-recurring and non-cash items.
The Company defines Adjusted EBITDA margin as Adjusted EBITDA as a
percentage of revenue. The Company defines Net Cash as the sum of
total debt, accrued pension liabilities and preferred unit
liability, less the sum of cash and cash equivalents (excluding
those used in WebBank's banking operations), and long-term
investments. The Company defines Adjusted Free Cash Flow as net
cash provided by or used in operating activities of continuing
operations less the sum of purchases of property, plant and
equipment, and net increases or decreases in loans held for sale.
The Company believes these measures are useful to investors because
they are measures used by the Company's Board of Directors and
management to evaluate its ongoing business, including in internal
management reporting, budgeting and forecasting processes, in
comparing operating results across the business, as internal
profitability measures, as components in assessing liquidity and
evaluating the ability and the desirability of making capital
expenditures and significant acquisitions, and as elements in
determining executive compensation.
However, the measures are not measures of financial performance
under generally accepted accounting principles in the U.S. ("U.S.
GAAP"), and the items excluded from these measures are significant
components in understanding and assessing financial performance.
Therefore, these non-GAAP financial measurements should not be
considered substitutes for net income or loss, total debt, or cash
flows from operating, investing or financing activities. Because
Adjusted EBITDA is calculated before recurring cash charges,
including realized losses on investments, interest expense, and
taxes, and is not adjusted for capital expenditures or other
recurring cash requirements of the business, it should not be
considered as a measure of discretionary cash available to invest
in the growth of the business. There are a number of material
limitations to the use of Adjusted EBITDA as an analytical tool,
including the following:
- Adjusted EBITDA does not reflect the Company's tax provision or
the cash requirements to pay its taxes;
- Adjusted EBITDA does not reflect income or loss from the
Company's investments in associated companies and other investments
held at fair value;
- Adjusted EBITDA does not reflect the Company's interest
expense;
- Although depreciation and amortization are non-cash expenses in
the period recorded, the assets being depreciated and amortized may
have to be replaced in the future, and Adjusted EBITDA does not
reflect the cash requirements for such replacement;
- Adjusted EBITDA does not reflect the Company's net realized and
unrealized gains and losses on its investments;
- Adjusted EBITDA does not include non-cash charges for pension
expense and equity-based compensation;
- Adjusted EBITDA does not include amounts related to
noncontrolling interests in consolidated entities;
- Adjusted EBITDA does not include certain other non-recurring
and non-cash items; and
- Adjusted EBITDA does not include the Company's discontinued
operations.
In addition, Net Cash assumes the Company's cash and cash
equivalents (excluding those used in WebBank's banking operations),
marketable securities and long-term investments are immediately
convertible in cash and can be used to reduce outstanding debt
without restriction at their recorded fair value, while Adjusted
Free Cash Flow excludes net increases or decreases in loans held
for sale, which can vary significantly from period-to-period since
these loans are typically sold after origination and thus represent
a significant component in WebBank's operating cash flow
requirements.
The Company compensates for these limitations by relying
primarily on its U.S. GAAP financial measures and using these
measures only as supplemental information. The Company believes
that consideration of Adjusted EBITDA, Adjusted EBITDA Margin, Net
Cash and Adjusted Free Cash Flow, together with a careful review of
its U.S. GAAP financial measures, is a well-informed method of
analyzing SPLP. Because Adjusted EBITDA, Adjusted EBITDA Margin,
Net Cash and Adjusted Free Cash Flow are not measurements
determined in accordance with U.S. GAAP and are susceptible to
varying calculations, Adjusted EBITDA, Adjusted EBITDA Margin, Net
Cash and Adjusted Free Cash Flow, as presented, may not be
comparable to other similarly titled measures of other
companies.
Forward-Looking Statements
This press release contains certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, that reflect SPLP's current expectations and projections
about its future results, performance, prospects and opportunities.
SPLP identifies these forward-looking statements by using words
such as "expect," "anticipate," "intend," "plan," "believe,"
"seek," "estimate," and similar expressions, including but not
limited to, the Company's expectations regarding its ability to
deliver shareholder value and build momentum across the business.
These forward-looking statements are only predictions based upon
the Company's current expectations and projections about future
events, and are based on information currently available to the
Company and are subject to risks, uncertainties, and other factors
that could cause its actual results, performance, prospects, or
opportunities in 2024 and beyond to differ materially from those
expressed in, or implied by, these forward-looking statements.
These factors include, without limitation: disruptions to the
Company's business as a result of economic downturns; the negative
impact of inflation and supply chain disruptions; the significant
volatility of crude oil and commodity prices, including from the
ongoing Russia-Ukraine war or the disruptions caused by the ongoing
conflict between Israel and Hamas; the effects of rising interest
rates; the Company's subsidiaries' sponsor defined pension plans,
which could subject the Company to future cash flow requirements;
the ability to comply with legal and regulatory requirements,
including environmental, health and safety laws and regulations,
banking regulations and other extensive requirements to which the
Company and its businesses are subject; risks associated with the
Company’s wholly-owned subsidiary, WebBank, as a result of its
Federal Deposit Insurance Corporation ("FDIC") status,
highly-regulated lending programs, and capital requirements; the
ability to meet obligations under the Company's senior credit
facility through future cash flows or financings; the risk of
recent events affecting the financial services industry, including
the closures or other failures of several large banks; the risk of
management diversion, increased costs and expenses, and impact on
profitability in connection with the Company's business strategy to
make acquisitions, including in connection with the Company's
recent majority investment in the Supply Chain segment; the impact
of losses in the Company's investment portfolio; the Company's
ability to protect its intellectual property rights and obtain or
retain licenses to use others' intellectual property on which the
Company relies; the Company's exposure to risks inherent to
conducting business outside of the U.S.; the impact of any changes
in U.S. trade policies; the adverse impact of litigation or
compliance failures on the Company's profitability; a significant
disruption in, or breach in security of, the Company's technology
systems or protection of personal data; the loss of any significant
customer contracts; the Company's ability to maintain effective
internal control over financial reporting; the rights of
unitholders with respect to voting and maintaining actions against
the Company or its affiliates; potential conflicts of interest
arising from certain interlocking relationships amount us and
affiliates of the Company's Executive Chairman; the Company's
dependence on the Manager and impact of the management fee on the
Company's total partners’ capital; the impact to the development of
an active market for the Company's units due to transfer
restrictions and other factors; the Company's tax treatment and its
subsidiaries’ ability to fully utilize their tax benefits; the
potential negative impact on our operations of changes in tax
rates, laws or regulations, including U.S. government tax reform;
the loss of essential employees; and other risks detailed from time
to time in filings we make with the SEC. These statements involve
significant risks and uncertainties, and no assurance can be given
that the actual results will be consistent with these
forward-looking statements. Investors should read carefully the
factors described in the "Risk Factors" section of the Company's
filings with the SEC, including the Company's Form 10-K for the
year ended December 31, 2023 and subsequent quarterly reports on
Form 10-Q and annual reports on Form 10-K, for information
regarding risk factors that could affect the Company's results. Any
forward-looking statement made in this press release speaks only as
of the date hereof, and investors should not rely upon
forward-looking statements as predictions of future events. Except
as otherwise required by law, the Company undertakes no obligation
to publicly update or revise any forward-looking statements,
whether as a result of new information, future events, changed
circumstances, or any other reason.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241108461716/en/
Investor Relations
Jennifer Golembeske 212-520-2300
jgolembeske@steelpartners.com
Steel Partners (NYSE:SPLP)
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