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Steel Partners Q3 Earnings & Revenues Increase Year Over Year

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Steel Partners Holdings L.P. (SPLP - Free Report) demonstrated resilience and strategic agility in its third-quarter 2024 financial performance, showcasing strong revenue growth and substantial improvements in profitability. The company’s diversified business model, spanning industrial, financial, and supply chain sectors, allowed it to capitalize on robust demand across multiple segments.

Through disciplined cost management, a focus on shareholder returns, and a commitment to growth initiatives, Steel Partners has solidified its position for continued success, despite facing challenges within its energy division. This analysis provides insight into the company’s latest financial achievements and management’s outlook for future growth.

Quarterly Earnings Performance

SPLP reported third-quarter 2024 earnings per diluted common unit of $1.65, a 44.7% increase from $1.14 in the prior-year quarter.

Total quarterly revenues of $520.4 million increased 5.7% from $492.3 million in the year-ago quarter.

The strong quarterly results demonstrate improved profitability across most segments, with management's strategic initiatives showing positive outcomes. This performance was fueled by solid growth in the Diversified Industrial, Financial Services, and Supply Chain segments.

Steel Partners Holdings LP Price, Consensus and EPS Surprise

Steel Partners Holdings LP Price, Consensus and EPS Surprise

Steel Partners Holdings LP price-consensus-eps-surprise-chart | Steel Partners Holdings LP Quote

Segment Performance

Steel Partners’ diversified operations generated robust segment-wise growth. Here is a breakdown of segment performance and growth drivers:

Diversified Industrial Segment: The largest contributor, with revenue of $318.6 million, up 6.6% from the $299.1 million reported in the prior-year quarter. This growth, attributed to higher net sales volumes, contributed to an income before interest and taxes of $26.3 million in the reported quarter, up 78.5% from third-quarter 2023.

Financial Services: The segment’s revenues rose 6.2% to $113 million from the $106.4 million reported in the prior-year quarter. The segment reported a profit of $23.9 million in the reported quarter against a loss of $2.6 million in the prior-year period. The improvement was driven by higher credit performance fees and increased personnel investment in response to growing demand.

Supply Chain: The segment’s revenues jumped 21.2% to $48.5 million from the $40 million reported in the prior-year quarter due to increased sales and recent acquisitions, delivering $2.6 million in profit in the third quarter of 2024. However, the figure was lower than the prior year’s $4 million due to elevated merger-related costs.

Energy Segment: This is the only segment that experienced a decline in revenues in the reported quarter. Revenues dipped 13.9% to $40.3 million from the $46.7 million reported in the prior-year quarter due to decreased rig activity and lower energy prices. Segment income also fell to $3.5 million from $6 million in third-quarter 2023.

Profitability Metrics

The adjusted EBITDA improved significantly, reaching $76 million in the third quarter of 2024, a 70.8% increase from $44.5 million in third-quarter 2023, with an adjusted EBITDA margin of 14.6%, up from 9%. This increase was fueled by higher profitability in the Financial Services and Diversified Industrial segments, coupled with lower provisions for credit losses.

The company’s net income margin increased to 7.1% in third-quarter 2024 from 5.7% in third-quarter 2023. This margin expansion was driven by revenue growth across several segments and a notable decrease in interest expenses, reflecting the company's effective cost management and deleveraging efforts.

Costs

The cost of goods sold increased 4.3% year over year to $295.6 million in the third quarter of 2024, mainly due to higher sales volumes in Diversified Industrial and Supply Chain.

Selling, General, and Administrative Expenses (SG&A) rose 9.9% year over year to $137.3 million in the third quarter of 2024. The Financial Services segment saw higher personnel expenses, while Supply Chain costs were impacted by M&A activities.

Cash Position, Debt, and Capital Expenditure

SPLP reported cash and cash equivalents of $388.1 million as of Sept. 30, 2024, down from $577.9 million at 2023-end. This reduction is attributed to share repurchases and capital expenditures.

Total long-term debt was $120 million as of Sept. 30, 2024, down significantly from $191.3 million at 2023-end, driven by debt repayments.

Capex rose to $37.3 million in the reported quarter from $13.1 million in third-quarter 2023, reflecting continued investment in growth initiatives, notably in property, plant, and equipment.

Adjusted free cash flow was $34.3 million in third-quarter 2024, down from $85.5 million in third-quarter 2023 due to higher working capital usage and capital expenditures.

Other Developments

During the third quarter, Steel Partners repurchased 13,813 common units and completed a larger repurchase agreement with Hale Partnership Fund, acquiring 1.3 million common units for $63.4 million. This repurchase activity underscores management’s commitment to returning value to shareholders. Furthermore, the board authorized the repurchase of up to 400,000 preferred units, with 76,146 preferred units repurchased year to date.

Conclusion

Steel Partners delivered a strong third-quarter 2024 performance, underpinned by significant earnings growth and solid revenue contributions from key segments. While challenges in the Energy segment persist, the company’s diversified business model has enabled it to offset this weakness with strength in industrial and financial services. Going forward, Steel Partners' enhanced profitability and strategic focus on shareholder value position it well for continued performance improvement.


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