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

NEW YORK--(BUSINESS WIRE)--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.

"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)

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. () 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

Consolidated Statements of Operations (unaudited)

Consolidated Statements of Cash Flows (unaudited)

Supplemental Balance Sheet Data (September 30, 2024 unaudited)

Supplemental Non-GAAP Disclosures

Investor Relations

Jennifer Golembeske
212-520-2300
jgolembeske@steelpartners.com