Greetings, ladies and gentlemen, and welcome to the Star Equity Holdings, Inc. Fourth Quarter and Year-End 2020 Results Conference Call.

As a reminder, certain statements made during this conference call, including question-and-answer period, are Forward-Looking Statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other Federal Security Laws.

These forward-looking statements include, but are not limited to, statements about the Company’s revenues, costs and expenses, margin, operations, financial results, acquisitions and other topics related to Star’s business strategy and outlook.

These forward-looking statements are based on current assumptions and expectations and involve risks and uncertainties that could cause actual events and financial performance to differ materially.

Risks and uncertainties include, but are not limited to, business and economic conditions, technological change, industry trends and changes in the Company’s market and competition. More information about the risks and uncertainties is available in the Company’s filings with the U.S.

Securities and Exchange Commission, including Annual Reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K as well as today’s press release.

The information discussed on this morning’s conference call should be used in conjunction with the consolidated financial statements and notes included in those reports and speak only as of the date of this call. The Company undertakes no obligation to update these forward-looking statements.

In the earnings release today and in the comments, management remarks references to both GAAP results as well as adjusted results. The adjusted results are non-GAAP and do not include non-recurring charges. Also adjusted EBITDA, which is non-GAAP measure that further excludes depreciation, amortization, interest, taxes and stock-based compensation.

Finally, free cash flow, which is a non-GAAP measure, taking operating cash flow and subtracting cash paid for capital expenditures. Management believes the presentation of the non-GAAP measures, along with GAAP financial statements and reconciliations, provide a more thorough analysis of ongoing financial performance.

Investors can find the reconciliation of results on a GAAP versus non-GAAP basis in the earnings release. If you did not receive a copy of the press report and would like one, please contact Star at 203-489-9500 after the call or its Investor Relations representative, Lena Cati, of the Equity group at 212-836-9611.

Also, this call is being broadcast live over the internet and may be accessed at Star’s website via www.starequity.com. Shortly after the call, a replay will also be available on the Company’s website. It is now my pleasure to introduce Jeff Eberwein, Chairman of Star Equity Holdings, Inc..

Thank you, operator. Good morning, and thank you all for joining us today for our fourth quarter and year-end 2020 financial results conference call. On the call with me today are Matthew Molchan, CEO of Digirad Health; and David Noble, our CFO and Chief Operating Officer. 2020 was a challenging, but exciting year for our company.

While our business experienced reduced revenue due to the COVID-19 pandemic, we made significant progress on our growth and value maximization strategy by improving operating and financial results at our Building & Construction division and by announcing the sale of two assets in our Digirad Health division for over $20 million, which are expected to close in Q1.

Also, we have rebranded the public company to better reflect our business strategy and structure. In the fourth quarter, our Digirad Health division continued to be impacted by lower sales of new cameras and reduced camera rental activity levels due to the pandemic.

Heading into 2021, however, our backlog of rental contracts has improved and is respected to return to normal levels as the year progresses. In 2020, sales of new cameras declined 59% versus 2019. Although sales of new cameras is expected to improve somewhat in 2021, it remains very dependent on capital spending decisions by health care providers.

At our Building & Construction division, fourth quarter revenue improved 15% versus the fourth quarter of 2019 and also improved 15% versus the third quarter. Gross margins for this division were adversely impacted by an extreme increase in raw material prices.

We increased our prices in January to offset these higher input costs, and our backlog remains very strong. We continue to expect margins in our Building & Construction division to improve overtime, and we have made progress on our goal of substantially increasing our output capacity at KBS.

Our plan there is to eventually increase our production to 15 to 20 modules per week versus the current run rate of approximately 7.5 per week, and we expect to make progress on this goal in 2021. In the first quarter of 2021, we have been focused on closing the sales of two pieces of our Digirad Health division for over $20 million.

The smaller deal for 1.3 million already closed, and we expect to close the sale of DMS for 18.75 million by the end of March. With an estimated $18 million in immediate cash proceeds, we will pay down some of our higher cost debt and fund high-return internal growth investments.

We will also continue to explore acquisitions, which could be either bolt-ons for our existing businesses or new platform companies, which would create new business segments for our holding company structure. With that, I will turn it over to our Healthcare CEO, Matt Molchan. Matt, please go ahead..

Thanks, Jeff. Revenue from our Healthcare division in Q4 2020 fell by 21.4% to 13.3 million over the same period in the prior year. This was due to a slowdown due to COVID-19 pandemic. Although many backer offices have reopened and hospitals are performing non-emergency procedures, overall activity levels remain below pre-COVID levels.

Gross profit for the Q4 2020 reporting period decreased by 45.4% and gross profit margin decreased by 8.6% over the same period last year due to lower revenue generated from high-margin mobile scanning services and less camera sales.

In Diagnostic Services, revenue and gross margin percentage for the fourth quarter of 2020 was 10.6 million and 16.3% compared to 12 million and 22.4% in last year’s fourth quarter.

The decrease in Diagnostic Services revenue and gross margin percentage compared to the prior year was primarily due to a decrease in testing days and scans resulting from the impact of the COVID-19 pandemic.

In addition, non-GAAP adjusted EBITDA for Diagnostic Services decreased to 1.3 million from 2.1 million in the fourth quarter compared to last year’s fourth quarter. This is mainly attributed to a decrease in revenue.

In our Diagnostic Imaging business, revenue and gross margin percentage for the fourth quarter of 2020 was 2.7 million and 32.7%, respectively, compared to 4.9 million and 42.4%, respectively, in the prior year fourth quarter.

The decrease in Diagnostic Imaging revenue and gross margin was due to the slowdown of camera sales associated with capital funding delays and uncertainty due to the COVID-19 pandemic. Now I will turn the call to Dave Noble, our CFO, who will provide additional financial highlights for the fourth quarter. Dave, please go ahead..

Thanks, Matt, and good morning. Now for a bit of more positive news. Fourth quarter 2020 Building & Construction division revenue was 9.8 million versus 8.5 million in the fourth quarter of last year. Gross margins did dip a little bit to 13.6% versus 18.0% in the prior year.

The increase in revenue is attributable to higher levels of business activity at KBS, our modular subsidiary, as we successfully reentered the commercial multifamily segment of the market.

The decrease in gross margin percentage is attributable largely to EdgeBuilder, our structural wall panel business as the sharp rise in lumber weighed on our profitability there in the fourth quarter.

For Q4 2020, company-wide SG&A decreased slightly by about 0.6% compared to the fourth quarter of 2019 as we held the line on headcount and experienced slightly lower health care expenses.

During 2020, we also experienced reduced costs from contracted services as we realize the benefits of prior streamlining in the IT and HR areas in our Digirad Health division. We did incur a non-cash charge to goodwill of $0.4 million in Q4 2020 related to our EdgeBuilder reporting unit.

Moving on to company-wide bottom line results for the fourth quarter of 2020, we had a net loss from continuing operations of 0.5 million compared to a net loss from continuing operations of 0.3 million in the same period in 2019.

Non-GAAP adjusted net loss from continuing operations in the fourth quarter of 2020 was 1.6 million or $0.34 per share compared to an adjusted net income of 0.4 million or $0.22 per share in the fourth quarter of last year.

As a reminder, in Q2, we completed a public equity offering through the issuance of 2.5 million shares of common stock, including exercise of the over allotment, which raised 5.5 million before fees and expenses. Concurrently, we issued warrants to purchase up to an additional 1.1 million shares, and some of those warrants were exercised during 2020.

Therefore, per share amounts for the Q4 2020 period reflect a new common share count of 4.8 million shares. Non-GAAP adjusted EBITDA decreased to negative 0.7 million for the fourth quarter of 2020 compared to positive 1.2 million in the fourth quarter of last year, attributable mainly to the decrease in revenue resulting from the COVID-19 pandemic.

For the fourth quarter of 2020, we had an operating cash outflow of 3.1 million and a free cash outflow of 1.4 million compared to an operating cash inflow of 1.2 million and a free cash inflow of 1.4 million in the fourth quarter of 2019.

As of December 31, 2020, the outstanding balance on our credit facilities was 24.4 million, including 4.2 million in PPP funds, which we fully anticipate will be completely forgiven in the coming months, and we have made further progress on that so far this year.

Our overall net debt position, including 3.4 million in cash and cash equivalents was 21 million. With that, I will turn it back to the operator for questions..

Thank you. [Operator Instructions] Our first question comes from the line of Tate Sullivan with Maxim. Please proceed with your question..

Hi, thank you good morning. Just starting with your balance sheet and adjusting going forward for the sale to close at the end of the quarter. It looks like your PP&E, property and equipment, balance declined meaningfully from 3Q to 4Q.

Was the asset-intensive side of the Mobile Healthcare assets that you sold one of the main considerations of selling those or does that hint at what you may look at going forward in terms of more asset-light businesses, please?.

Yes. I think it is a great question, Tate. Thanks. Yes. So that change is almost solely due to the recharacterization of the mobile health care business into discontinued ops. Much of the rolling stock, in fact, most of the rolling stock that we have as a company is in that division.

And as you point out, that is a much more capital-intensive business, given the nature of the equipment and the cost of that equipment to replace it. So we do prefer less capital-intensive businesses.

If you think about KBS, it requires a fair bit of working capital, but in terms of true capital intensity, it is much less than that Mobile Healthcare division that we are selling..

Same thing for our main Healthcare business, the traditional Digirad Health business is a low capital intensity business..

And then once you finalize the larger sales at the end of this quarter and pay down, are you paying down mostly some of your more expensive longer term debt, did you say and can you just give us some indication on what that might do to your annual interest expense or what will your balance sheet look like after there or how much cash might you retain? And I know it is still subject to the timing of that close to..

Yes. And so the idea is to focus on the higher cost debt to lower cost of capital. But the credit line we have on our Healthcare division is tied to the collateral, and we will be paying down a meaningful amount on that line as well just because the collateral is going to be a lot lower going forward.

And we expect to retain some cash so we have some dry powder for our organic growth plans and also for acquisition opportunities..

Yes. And it will significantly reduce overall interest cost. There is some higher interest debt that will be paid as part of that. But as Jeff points out, we need to pay some of the revolver, even though that is cheap debt because it is linked to those assets..

Understood.

And you talked about the timing of hospitals to start to purchase cameras again, and maybe this is for you, Matt, to how historically - I know it is tough with this current situation, but when might hospitals start to spend to install new cameras or how does the capital Accenture cycle usually work your hospital clients?.

Yes, absolutely. We traditionally, the majority of our cameras are sold in the third and fourth quarter. And that is why we had such a big pullback as you compare the fourth quarter of 2019 compared to the fourth quarter of 2020 it kind of sits out there. So we would tend to see that.

We are starting to see things open up a little bit as the vaccine gets out there, and we see a little bit more, some pent-up demand for some of our cameras as we continue to work through this year.

So we should see a more normal flow where we still are anticipating based on our discussions with our hospital customers that the third and fourth quarter, especially the fourth quarter, should open up a little bit more for us as COVID-19, hopefully.

And really, the uncertainties around - as things become more certain, I think the budgets and the normal way of life is coming back to us. So we anticipate that we will see some sales, more normalized sales here in the first couple of quarters of 2021, and then really back to full normal by the end of the year..

Matt, maybe you could talk about the sales pipeline we have.

And I know it is something we have talked about internally, sales of new cameras, are they canceled or are they just getting deferred because hospitals have so many other things going on?.

Yes. I mean it is surprising we have not any cancellations, it is mostly deferments. And as hospitals are directing their capital expenditures, COVID-related and have put the purchase of nuclear cameras on hold. But we haven’t had many at all cancellations and very few, but mostly those orders continue to be available and viable.

And that is what we anticipate to have a stronger 2021 than 2020 based on the conversations that we are having with our customers.

So we anticipate that those orders that have not been canceled will go through the cycle, again, the budgeting cycle and cash will be allotted to pay for those cameras here as we enter into the second two quarters of the year..

Okay. thank you all for your comments..

Our next question comes from the line of Theodore O’Neill with Litchfield Hills Research. Please proceed with your question..

Thank you very much. I have two questions about the Building & Construction side of the business. In your prepared remarks, you talked about having adverse pricing in lumber, which impacted the EdgeBuilder, but you didn’t say anything about KBS.

Wouldn’t they have the same issue?.

They do, but if you think about COGS, the structural wall panel business at EdgeBuilder is really just 2/4 sheeting and some labor. And really, the commodities are the majority of that COGS, right. At KBS, it is a more complex process. So there is more that goes into it, for one, there is a lot more labor.

And also the structural sort of commodity lumber is only part of the materials cost. There is bathtubs, and doors and windows and other value-added products, which are not as volatile. A couple of other things.

I mean, when you think about single-family homes, for example, which is half of what we do at KBS, we can win a project and price it and produce it within a month or two. So the exposure to commodity price risk is lower in that case.

On the commercial side, we have some ability to push price increases, and we have proven that with the Tachi project that we did last year. When the third phase came, we were able to get a price increase to offset the increase in lumber. The structural wall panel business is a little different.

Sometimes we sign larger contracts a few months before they actually get produced, and it is a little bit more challenging, although we are working on it, a little bit more challenging to pass along some of those price increases..

Okay. That is a great explanation, thank you.

And so now that it is warming up here in the Northeast, can you give us some outlook for construction business?.

Yes. I mean, I would say that let’s take, KBS to start, our plant a year ago was operating at sort of three or four units a week. We are somewhere between seven to eight, and I think as we overcome some operational challenges, we should be up in the sort of eight, nine, 10-ish area. A year and a half ago, it is kind of a demand issue. We solved that.

We restructured the sales force and hired a fantastic VP of Business Development. So we have really as much work as we want at this point. So it is not really an issue of demand, it is an issue of how fast we can get things through the plant. So our outlook is pretty good.

I mean, I would say that we are operating right where we were in the second half of last year, and again, I think we are going to actually increase the number of units per week slowly as we head into the mid year.

And as we have mentioned many times, we have contemplated and continue to contemplate opening a second factory to really shorten our lead times. I mean our challenge right now is, our lead times have expanded from a couple of months to more like four or five or six months. So we think the outlook on the KBS side is terrific.

Also on the wall panels, like I say that we are plagued a little bit with these commodity price increases, although we are selling projects now at this price so that will be helpful if prices come down.

I think it is about a $9 million commercial backlog at EdgeBuilder, which is the highest backlog we have had in the last couple of years since I have been involved. So I think the outlook is very good for construction. The COVID challenge is not demand, it is more supply.

In other words, we think there is a bit of a COVID-related chokehold on capacity to produce some of the materials that we need to produce the product, right. So not only are prices high, but there is a few things that are a little bit hard to get, and there is longer lead times on materials. But in terms of the demand side, people are nesting, right.

So on the EdgeBuilder side, doing a lot of renovations of their homes, decks, kitchens, et cetera, roofs. They are spending more time at home. They have more money that they are not spending, traveling, et cetera. So the outlook, I think, for construction for the near to medium-term is quite strong. The issue would be materials.

But I think with vaccines rolling out the way they are, we expect that, that supply chain is going to free up a bit as we enter the middle of the year. And on the housing side, you have seen, I mean, housing is strong, new housing. There is a lot of demand still for affordable housing.

It is an area that we are very keen on getting involved in, and we have been doing some affordable housing projects. So we think it is very good. I mean, it is a cyclical industry, but the outlook for us, for 2021, for building and construction is very strong..

Great. One last question.

Will the SG&A expense level change in any meaningful way once the sale of DMS goes through?.

Yes, we think so. We know that there is a lot of noise in the numbers right now, because since we had signed the sales contract to sell that business, it is in discontinued operations, but yet we haven’t sold it yet, don’t have the cash yet. And we are still running that business, and we still own that business right up until the minute we don’t.

And so we do have some costs associated with that business, and once it is sold, we do think there will be some ability to be more efficient across our whole cost structure. But at the same time, we are looking that internal growth projects, and we are looking at acquisitions. And so the idea is to have more scale - more upside in what we are doing.

And so this is just a moment in time when we are actually descaling, but I think the trend over time is going to be greater scale, greater cost efficiencies..

Okay. thanks very much..

Our next question comes from the line of Adam Waldo with Lismore Partners. Please proceed with your question..

Hi good day and thanks very much for taking my questions. With regard to the pending Mobile Healthcare sale, I was encouraged by the fact that you classified as a discontinued operation and obviously, your commentary, it is pretty encouraging in terms of closing here by the end of the month.

What milestones remain prior to closing that you can discuss at this point?.

Yes. And Matt can chime in here, too. It is a complicated business and heavily regulated business. So when we announced the transaction at the 1st, November, we needed to get regulatory approvals. So that was one hurdle. And then the buyer who is in the business is been working on really a new company that he is creating. He is already in the business.

So he is combining his business with the business we are buying from us and then refinancing that whole entity. And some of that is bank financing, and some of it involves some programs with some government entities, and you can imagine that they have been pretty backed up. So we have made a tremendous amount of progress.

It is getting very close, but there have been a lot of hurdles to get from announcement to close. And it is taken longer than we originally anticipated, but we believe we are getting very close..

And are you able to comment on the status of the buyer’s financing, is that all pretty much in place at this point?.

We believe it is, yes..

Terrific. Okay. And then turning to the Building & Construction segment for my final line of questions. Can you give us a quantification of the total business’ backlog now on a dollar value basis and maybe on a total project basis, if you have that handy versus at this time last year.

Just so we can kind of see how those compare given the constraints to production as the main factor here that is limiting the ability to complete projects faster..

Yes. And that is a complicated question, especially the comparison just because we are doing a much better job of quantifying that pipeline today than we were a year ago. But if we look at KBS, for example, we use a CRM program within NetSuite.

And in terms of, I would say, identifiable sort of probability weighted projects, we are in touch with over $50 million of business. Depending on how you weight it, and each salesperson has their own kind of way to weigh that, that number is probably 15 million, 16 million.

But it really doesn’t speak to the whole level of activity that we are experiencing, because we have got probably another 50 million of sort of, what I would call, prospects on top of that. And again, this is all New England. The other complexity there is our single-family business, which is about half of what we do.

Some of that never hits the pipeline, because it comes in and gets produced and it goes out, much shorter lead time. So that pipeline that I just cited is really our commercial side, and that is kind of half of our business, but versus a year ago, it is definitely significantly higher.

Our challenge right now is, we are in touch with a number of very large projects, and I would consider a large project anything from 30, 40, 50 boxes up to 200. You kind of have to demonstrate that you have got the capacity to do those. So those kind of fall one way or another and can be really significant impacts to the top-line.

So I guess all that is to say. We have a significant pipeline. It is more than we can do with one factory, again, we are contemplating whether we need to get that second one up and running to try to bring our lead times down..

Adam just to paint that picture a little bit, historically, KBS’ backlog has been typically 15 million to 20 million. That is not probability weighted, and we have talked about it being more like 50 million now. And so it is huge growth versus last year at this time. We don’t have an exact number for exactly where it was at this time last year.

But we needed capital to fund the working capital needs for some of the big projects that we were on the cusp of winning, which is why we did the offering in the spring of last year. And then right when that offering was done, we announced a string of several big projects.

And one thing that I think is helpful is that we have executed on those projects, produced those projects, and so now they are out of our pipeline. Yet our pipeline is still the same so that tells you that we have replaced those projects with new ones, which we find really encouraging..

Yes. On the EdgeBuilder side, I mentioned on the commercial side, we have about a $9 million pipeline or backlog. That is a backlog number. The pipeline is larger than that considerably. But we know that the pipeline of executable projects today is about nine million.

And also a good portion of that business, about a third of that business, is retail sort of professional builders coming into our lumber yard and ordering materials. A little bit of a slow start maybe to the beginning of this year, but we expect that is going to be a pretty robust business given the outlook for construction.

So all-in-all, I think we are pretty happy with the pipelines..

And finally, just on that same segment.

How sensitive do you all feel based on your analysis, that segment is overall to volatility of sort of longer-term interest rates that we have been seeing in the capital markets in recent weeks?.

I will try to take a stab at that. There is the cyclical and secular. So on the cyclical side, housing start. I think everybody knows we are incredibly high before the global financial crisis in 2008, 2009. And then went really, really low, and we spent 10-years below normal levels, and we have just gotten back to right around normal.

So my point is, it is a very different situation than the situation in 2004, 2005 and 2006, which were really peak bubble type situations. So there is a zone where volatility and interest rates doesn’t really matter that much. Interest rates, if they go from 1% to 2%, I really don’t think that matters at all.

If they go to 5%, that is a really big change. And it can be a cyclical business by just putting that on the shelf for a second, we strongly believe in modular. We think modular is going to gain share overtime. And in both of our businesses, we are a very small fish in a very big pond.

So if modular is going to grow a share, and if we are able to grow our share, we will have plenty of projects to do to ride out those cycles. So said a different way, like KBS, there is a lot of different things we can produce. It is not just single-family houses or multifamily houses. We historically have also done dorm rooms.

There is a lot of retail applications that could be relevant in terms of chains and hotels and things like that. So modular has a lot of applications, and the goal is to grow that business and diversify that business overtime so that even though it is in a cyclical industry, we won’t be as impacted as we would otherwise be..

That is extremely helpful perspective. Thanks. Have a great coming out of COVID period..

Thank you..

Thank you..

Our next question is a follow-up from Tate Sullivan with Maxim. Please proceed with your question..

Hi thank you. I think you just answered it, but earlier, you mentioned 50 New England prospects for KBS zeroing in. And I think, remind me, currently, in your book of business, is it mostly the large orders are military bases or military or VA hospitals. I mean, that continue to be a large portion or - say again - sorry....

$50 million, just to be clear, what we have talked about in terms of - in our presentations, we have talked about having 50 million of sales pipeline..

Yes. And I wouldn’t say that we are targeting government projects, although we have done them, as you suggest.

But if you consider the two commercial projects we did last year, one of them was for veteran’s housing, but it was actually a privately funded project, and the owner of the facility was targeting veterans, because you get some rent contribution from the state, et cetera. But that was a private project, even though it was targeting veterans.

The other project the Tachi Building did or is doing that we are almost finished with, that is a much larger project. It happened to be a military base, and it was housing for officers, primarily. Most of these projects actually are going to be more privately funded.

I mean, we are doing some affordable housing in Vermont, where we are doing some single box structures. We have already shipped three or four of those over to replace what was HUD housing in really kind of trailer parks. But we were able to develop a zero energy modular that is a better replacement than putting another HUD-type product there.

So we are really looking at all kinds of different opportunities that meet our sort of gross margin objectives, but I would say, most of our projects are going to be private projects. And the only one other thing I wanted to mention as a follow-up to the last gentleman’s question.

I mean when it comes to commercial modular, and again, we do both single-family and multifamily.

But when it comes to the multifamily side, our competitors in New England are really too small to service that market because when you are doing 50 to 100 boxes, I mean, if you can only produce six or eight a week, it just ties up your factory for a significant amount of time.

So we have some competition from Pennsylvania, and there was some competition from Canada, specifically RCM in Canada. And they have had some issues because of the distance to travel from Canada into the Boston-based market. So I think we actually have a really great strategic location.

And the fact that we have a second factory that we can bring online really puts us, I think, as the only bona fide multifamily producer in New England.

And again, that is not to say you can’t produce outside New England and ship into the Boston area, but we have quite an advantage being 100 miles from Boston as opposed to some of our competitors that are 300, 400 miles. These things are 30,000 pounds apiece and they are not cheap to transport..

Okay. Thank you. yes, it was mainly just you gave the context to that pipeline of opportunities. Thank you..

Thank you..

[Operator Instructions] Our next question comes from the line of Jeff Kobylarz with Diamond Bridge Capital. Please proceed with your question..

Hi good morning guys. I was just curious if you could help us out with the breakdown in Building & Construction, the 29 million of revenue last year.

Can you say how much was KBS, how much was EdgeBuilder and Glenbrook?.

It was almost exactly 50/50. And in recent history, EdgeBuilder was kind of two thirds and KBS, one third. But KBS is growing faster. There is more growth opportunity there. So I think you are going to see that flip overtime. KBS would be larger than EdgeBuilder. I mean, we hope to grow them both, but the growth rate is much higher at KBS..

Okay. Alright. So KBS was down last year..

No. KBS did about 12 million in revenue in 2019. And again, it is about half of last year, but keep in mind that in terms of weeks worked, we only worked 46 weeks last year. So if you adjust for weeks worked, we grew about 35%. And on an absolute level, I think, more like 20%, but 35% if you take out the six weeks that the factory was shuttered..

Right. Okay. And so with your pipeline backlog, the 50 million, just given the run rate, if you are at 7.5 per week, that 50,000 each box, that is 19 million or so.

So you have - that is why, obviously, you want to double your output to get to your 40 million of annual revenue to be able to fulfill your backlog then?.

Yes. I mean, that backlog, though - yes. No, you are right. I mean, we would love to double our production levels. But you are right on the numbers, if we are between seven and eight a week, we would love to get closer to eight to 10 a week on that factory. ASPs are around 50,000. We are actually experiencing a bit higher than that.

And I think depending on the projects we choose that, that may actually go up a little bit. I don’t think it will be 60, but it will be somewhere in the mid-50s. But then we have a second factory. So we are evaluating, do we do single-family maybe in one and multifamily and the other.

These boxes are - our product is much more diverse today than it was three, four years ago. When you are doing single-family ranches, those are kind of carbon copies of each other. We are now doing passive homes and multifamily and single family.

So we are trying to figure out and making some good progress with some consultants, et cetera, to how to optimize things so that we can maximize or optimize our throughput. But your numbers are right. I mean if you figure eight to 10 a week, 50,000 apiece, you are right on the revenue.

There is a little bit of ancillary revenue that we do charge some gross margin. So there is some shipping and stamps and other things, revenue. So you can add about, I don’t know, 7% or 8%, I think, to the box revenue for other revenues, but those numbers are roughly accurate..

Okay. And the gross margin, 14% for Building & Construction in both the third quarter and fourth quarter.

Any comments you can make about how we could see that going forward?.

It is a blended average. I mean, that is both businesses. As I mentioned, the commodity price rise hurt the gross margin line at EdgeBuilder more. At KBS, our pricing discipline is good. There is a lot of demand for our product. We are pricing things anywhere from, say, 20% to 30% gross margin.

So the average is probably low to mid-20s on a gross margin basis. So that is obviously being diluted a little bit by some of the projects at EdgeBuilder. But our goal is to push that gross margin as close to mid-20s at KBS as we can. And I’m not promising we can do that, but we are seeing a lot of projects in that range, and that is kind of our goal..

And on the business model, and this is somewhat, what I was referring to when I was talking about scale earlier in the call, if we can double our output and get that gross margin up to at least 20%, we don’t think the SG&A for that business would increase very much at all. And so the benefits of economies of scale there would be very significant..

Alright. Got it. Thanks very much for your help..

Thanks for your questions..

Thank you. We have no further questions at this time. I would now like to turn the floor back over to management for closing comments..

I would like to thank David and Matt for joining on the call and also thank our team.

Across all of our businesses, we have a very dedicated team of employees, everything from frontline workers in our Healthcare business, who went to work every day and serve patients even in the face of COVID, and also workers who came to the factory to produce product to serve people, despite the difficulties of doing so during COVID and social distancing and all that.

So I want to thank all of our teammates. And Dave, Matt and I are always available to take your call and discuss any additional questions you have. So please feel free to reach out. And we are going to continue to talk about our company with existing and potential investors in the coming weeks and months.

We are scheduled to present at the Maxim Conference on March 18th and the Sidoti Conference in mid-May. And we appreciate your questions and your feedback and your support. Thank you very much..

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day..