Star Equity (STRR) - 2025 Q2 - Quarterly Results

Star Equity Holdings, Inc. 2025 Second Quarter Financial Results Financial Highlights The company reported significant Q2 2025 growth with a 75.8% revenue surge and a shift to positive net income and Adjusted EBITDA Q2 2025 vs. Q2 2024 Financial Highlights | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $23.7 million | $13.5 million | +75.8% | | Gross Profit | $6.3 million | $2.2 million | +182.2% | | Net Income (Loss) | $3.5 million | ($3.8 million) | N/A | | Diluted EPS | $1.07 | ($1.19) | N/A | | Adjusted EBITDA | $7.0 million | ($0.5 million) | N/A | Year-to-Date (6M) 2025 vs. 2024 Financial Highlights | Metric | 6M 2025 | 6M 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $36.6 million | $22.6 million | +62.1% | | Gross Profit | $9.4 million | $3.8 million | +147.7% | | Net Income (Loss) | $2.3 million | ($6.0 million) | N/A | | Diluted EPS | $0.71 | ($1.90) | N/A | | Adjusted EBITDA | $6.2 million | ($1.6 million) | N/A | Management Commentary Management attributes strong performance to the Building Solutions division, acquisitions, and a significant investment gain - Consolidated revenue growth of 76% was driven by strong performance in the Building Solutions division and contributions from the acquisitions of TT and ADT[4] - The Investments Division generated $5.8 million in adjusted EBITDA, primarily from a $5.5 million realized gain on the sale of its investment in Servotronics[4] - A definitive merger agreement has been signed with Hudson Global, Inc. (Nasdaq: HSON), with shareholder votes scheduled for August 21, 2025. The merger is expected to create value through scale, diversification, and cost savings[4] Financial Performance Analysis Q2 2025 saw dramatic improvement with 75.8% revenue growth and a 10-point gross margin expansion, leading to profitability Revenues Total revenues grew 75.8% to $23.7 million, fueled by the Building Solutions and new Energy Services segments Revenues by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Building Solutions | $20,384 | $13,483 | +51.2% | | Energy Services | $3,324 | $— | N/M | | Total Revenues | $23,708 | $13,483 | +75.8% | Gross Profit Consolidated gross profit surged 182.2% to $6.3 million, with total gross margin expanding to 26.4% Gross Profit by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Building Solutions | $5,243 | $2,229 | +135.2% | | Energy Services | $1,084 | $— | N/M | | Total Gross Profit | $6,253 | $2,216 | +182.2% | Gross Margin by Segment | Segment | Q2 2025 | Q2 2024 | Change (ppt) | | :--- | :--- | :--- | :--- | | Building Solutions | 25.7% | 16.5% | +9.2% | | Energy Services | 32.6% | — | N/M | | Total Gross Margin | 26.4% | 16.4% | +10.0% | Operating Expenses SG&A expenses rose 20.2% due to acquisitions but improved as a percentage of revenue from 39.6% to 27.1% - SG&A expenses increased by 20.2% to $6.4 million in Q2 2025, driven by acquisitions and M&A costs[10][37] - SG&A as a percentage of revenue improved significantly, falling to 27.1% in Q2 2025 from 39.6% in Q2 2024[10] Net Income and Adjusted EBITDA The company achieved a significant turnaround, reporting a Q2 2025 net income of $3.5 million and Adjusted EBITDA of $7.0 million Net Income (Loss) and EPS | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income (Loss) | $3.5 million | ($3.8 million) | | Diluted EPS | $1.07 | ($1.19) | | Non-GAAP Adj. Net Income | $6.0 million | ($0.9 million) | | Non-GAAP Adj. Diluted EPS | $1.86 | ($0.29) | - Q2 2025 non-GAAP adjusted EBITDA was a gain of $7.0 million versus a loss of $0.5 million in Q2 2024, mainly due to realized gains on securities at the Investments Division[13] Operating Cash Flow Operating cash outflow for Q2 2025 was $1.7 million, with year-to-date outflow improving significantly to $1.1 million Cash Flow from Operations | Period | 2025 | 2024 | | :--- | :--- | :--- | | Q2 | ($1.7 million) | ($1.9 million) | | 6M (YTD) | ($1.1 million) | ($4.3 million) | Operational and Corporate Updates The company maintained a strong backlog, declared a preferred stock dividend, and protected its significant NOL carryforwards Building Solutions Backlog The Building Solutions division ended Q2 2025 with a strong backlog of $25.7 million, supporting a positive outlook Building Solutions Backlog Trend (in thousands) | Quarter | Beginning Backlog | New Orders | Recognized Revenue | Ending Backlog | | :--- | :--- | :--- | :--- | :--- | | Q1 2025 | $17,190 | $22,841 | $12,118 | $27,913 | | Q2 2025 | $27,913 | $18,223 | $20,398 | $25,739 | - The quarter-end backlog of $25.7 million and a strong sales pipeline indicate continued strong demand for new projects[8] Shareholder Returns and Corporate Actions The company declared a $0.25 per share cash dividend for Series A Preferred Stock and maintained its share repurchase program - A cash dividend of $0.25 per share was declared for Series A Preferred Stock in Q2 2025[18] - As of June 30, 2025, $721 thousand remains authorized for repurchase under the company's stock repurchase program[17] Net Operating Losses (NOLs) The company protects its significant federal and state NOL carryforwards with a shareholder rights plan - The company holds valuable NOLs: $44.6 million federal and $17.6 million state as of year-end 2024[19] - A rights agreement is in place to protect the NOLs, limiting stock ownership to 4.99% without board approval[19] Financial Statements Condensed financial statements detail a shift to profitability and growth in total assets and stockholders' equity Condensed Consolidated Statements of Operations The statement of operations shows a net income of $3.5 million in Q2 2025, a reversal from a $3.8 million loss in Q2 2024 Q2 Statement of Operations Summary (in thousands) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Revenues | $23,708 | $13,483 | | Gross Profit | $6,253 | $2,216 | | Income (Loss) from Operations | ($952) | ($3,713) | | Net Income (Loss) | $3,451 | ($3,787) | | Net Income (Loss) Attributable to Common | $2,778 | ($4,266) | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets grew to $102.4 million and stockholders' equity increased to $62.6 million Balance Sheet Summary (in thousands) | Line Item | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $35,185 | $24,414 | | Total Assets | $102,414 | $83,048 | | Total Current Liabilities | $23,284 | $12,470 | | Total Liabilities | $39,801 | $28,712 | | Total Stockholders' Equity | $62,613 | $54,336 | Non-GAAP Financial Measures Reconciliation Reconciliations detail adjustments from GAAP net income to non-GAAP measures like adjusted net income and adjusted EBITDA - Q2 2025 GAAP Net Income of $3.5 million is reconciled to Non-GAAP Adjusted Net Income of $6.0 million. Key adjustments include acquired intangible amortization ($785k), M&A transaction costs ($503k), and impairment of cost method investment ($371k)[42] - Q2 2025 Non-GAAP Adjusted EBITDA of $7.0 million was primarily driven by the Investments division ($5.8 million) and the Building Solutions division ($2.3 million)[46] Supplemental Information Supplemental data details the company's debt structure and provides a breakdown of segment-level financial performance Total Debt Summary (in thousands) | Category | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Short-term debt | $7,345 | $3,911 | | Long Term Debt, net | $6,988 | $7,405 | | Total Debt | $14,333 | $11,316 | | Weighted-Average Interest Rate | 7.67% | 7.93% | Q2 2025 Segment Performance (in thousands) | Segment | Revenues | Gross Profit | Net Income (Loss) from Operations | | :--- | :--- | :--- | :--- | | Building Solutions | $20,384 | $5,243 | $1,270 | | Energy Services | $3,324 | $1,084 | $109 | | Investments | $158 | $84 | $0 | About the Company and Forward-Looking Statements Star Equity Holdings is a diversified holding company, and this report contains forward-looking statements subject to risks - The company operates through three main divisions: Building Solutions, Energy Services, and Investments[24][25][26][27] - The report includes forward-looking statements that are subject to risks and uncertainties, including those related to the proposed merger with Hudson, business operations, and market conditions[28]