Steel Partners (SPLP) Earnings & Revenues Rise Y/Y in Q2

Zacks Equity Research

Thu, Aug 8, 2024, 9:05 AM 4 min read

Steel Partners Holdings L.P. SPLP reported robust financial results for the second quarter of 2024, showcasing significant growth across several key metrics. Despite some challenges in the Energy segment, SPLP's diversified portfolio and proactive financial strategies bolstered overall profitability and positioned the company for continued success.

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Let us delve into the key financial metrics, segmental results, profitability and management's forward-looking guidance, providing a comprehensive overview of Steel Partners’ second-quarter performance.

Q2 Results

Steel Partners reported second-quarter 2024 earnings per share of $4.85, increasing 99% from $2.44 in the year-ago quarter.

Total quarterly revenues reached $533.2 million, a 6.4% rise from $501 million in the year-ago period.

The strong quarterly results were primarily driven by higher net sales in the Diversified Industrial segment. However, these gains were partially offset by a decrease in the Energy segment’s revenues.

Segmental Performances

Diversified Industrial: The Diversified Industrial segment reported revenues of $334.5 million, a 6.2% increase from $315 million in the second quarter of 2023. Higher sales volumes drove this segment's performance. Adjusted EBITDA for this segment rose to $42.2 million from $34.9 million in the prior-year quarter.

Energy: The Energy segment experienced a 26.5% decline in revenues to $37 million from $50.3 million in the prior year. This segment's adjusted EBITDA also decreased to $5.4 million from $7.2 million in the prior-year quarter primarily due to lower rig hours.

Financial Services: The Financial Services segment saw a 9.7% increase in revenues to $115.6 million from $105.4 million in the second quarter of 2023. This growth was attributed to higher credit performance fees and improved market conditions. Adjusted EBITDA for the segment increased to $28.9 million from $25.8 million in the prior-year quarter, bolstered by higher revenues and lower credit loss provisions.

Supply Chain: The Supply Chain segment reported 52.7% growth in revenues to $46.1 million from $30.2 million in the prior-year quarter. This impressive performance was driven by the consolidation of new business units within the segment. Adjusted EBITDA increased to $6.1 million from $2.9 million in the prior-year quarter.

Performance Metrics

Net income surged 113.2% year over year to $124.9 million in the second quarter of 2024, bolstered by a significant non-cash accounting adjustment. Net income attributable to common unitholders was $116.3 million in the second quarter, up from $59.2 million in the year-ago quarter.

A standout factor in the net income increase was a $71.5-million non-cash adjustment due to the release of a portion of Steel Connect's valuation allowance for deferred tax assets. This adjustment significantly impacted the income tax benefit, which increased to $58.9 million from $15.3 million in the second quarter of 2023.

Adjusted EBITDA increased to $83.8 million in the second quarter from $73.6 million in the same period of 2023, reflecting improved operating income in the Diversified Industrial and Financial Services segments, and the positive impacts of the Supply Chain segment's consolidation. However, the Energy segment experienced a decline due to lower rig hours.

Cost Management

The cost of goods sold increased 4.8% to $303.2 million from $289.4 million in the prior year due to higher net sales in the Diversified Industrial segment and the consolidation of the Supply Chain segment.

Selling, general and administrative expenses rose 2.4% year over year to $139.7 million in the second quarter of 2024, driven primarily by higher expenses in the Financial Services segment, including increased credit performance fees and personnel costs.

Cash and Debt

As of Jun 30, 2024, Steel Partners had cash and cash equivalents of $428.8 million.

Total debt at the end of 2024 was $78.6 million, a significant reduction from $191.3 million at the end of December 2023. Interest expenses significantly declined 71.1% year over year to $1.7 million in the second quarter, reflecting lower average debt outstanding

Other Developments

The quarter saw significant corporate actions, including the repurchase of 43,557 common units for $1.6 million and 76,146 preferred units for $1.8 million. These repurchases align with the company's strategy to return capital to unitholders and optimize its capital structure. The reduction in total debt by $112.7 million to $78.6 million at the quarter-end further underscores Steel Partners' focus on strengthening its balance sheet.

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