Star Equity Holdings, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• On August 22, 2025, the company completed the acquisition of Star Operating Companies and changed its name to Star Equity Holdings. It operates as a diversified holding company with four divisions: Building Solutions, Business Services, Energy Services, and Investments.
• Third quarter 2025 results: Revenue totaled $48 million, a 30% increase from the same quarter in 2024. Gross profit rose 11%. Net loss was $1.8 million or $0.54 per share, compared to a net loss of $800,000 or $0.28 per diluted share in the prior year. Non-GAAP adjusted net income per share was $0.02, and pro forma adjusted earnings per share was positive $0.19. Adjusted EBITDA increased to $1.3 million, with pro forma adjusted EBITDA at $3.1 million.
• Business Services segment: Demonstrated solid performance despite macroeconomic challenges. HTS was named to the Bakers Dozen for the 17th consecutive year and was #1 in the Asia Pac region. Secured renewals/extensions and new logo wins, and focused on the land-and-expand strategy and investing in new technologies.
• Building Solutions: Capitalized on commercial construction demand growth, with pro forma revenue, gross profit, and adjusted EBITDA showing significant increases. Had a $20 million backlog and a book-to-bill ratio of 1.01.
• Energy Services: Achieved strong results despite energy sector slowdown, with pro forma figures showing revenue, gross profit, and adjusted EBITDA growth.

Segment Performance

• Business Services: Third quarter 2025 revenue was $37 million, slightly up from $36.9 million in the same period last year. Gross profit remained flat at $18.6 million, and adjusted EBITDA was also flat at $1.7 million. The segment secured approximately $39.8 million in gross profit from renewals and extensions at existing clients and about $11.1 million from new logo wins over the past 4 quarters.
• Building Solutions: Third quarter revenue totaled $9.6 million with a gross profit of $1.7 million and adjusted EBITDA of $600,000. On a pro forma basis, including results from July 1, revenue was $21.4 million, pro forma gross profit was $5.3 million, and pro forma adjusted EBITDA was $2.6 million. The segment ended the quarter with a $20 million backlog of committed orders.
• Energy Services: Third quarter revenue was $1.3 million with gross profit of $300,000 and adjusted EBITDA of $100,000. On a pro forma basis, revenue increased to $3.7 million, gross profit reached $1.5 million, and pro forma adjusted EBITDA rose to $1 million.

Guidance

• The company expects to deliver $2 million in synergies, targeting a $2 million per quarter or $8 million annualized run rate. Confident in achieving this, expecting to reach the run rate in 6 months.
• Focus on organic growth, disciplined capital allocation, and accretive acquisitions. The Board authorized a new $3 million share repurchase program.

Risks

• Macroeconomic challenges impacting various industries.
• Seasonal variability in Building Solutions dependent on weather patterns.
• Potential impact of government programs shrinking on low-income housing opportunities.
• Uncertainty in the energy sector due to fluctuating drilling rig counts.

Q: For Rick, on the third quarter on a pro forma basis, that looks like a record for the quarter, at least in my book here.

A: Yes. Thanks, Theo. I appreciate you noticing that. We're enjoying the throughput from a lot of projects in the Building Solutions division that were held up in 2024.

Q: And looking at seasonal patterns here in the last couple of years, your fourth quarter has been higher than your third quarter. Do you think that seasonal trend will continue?

A: It's really hard to say, Theo. The fourth quarter is really dependent on a lot of weather patterns. If we have difficulties in Building Solutions, for example, with builders not having the sites ready for us to build on, then there could be delays. But as long as weather holds, we're optimistic.

Q: And when you talk about softness, I know that part of what you had cited as strength was workplace housing and low-income housing. Is that still the view?

A: It is an important aspect of what we're doing. Our strategy is more diversified than that, but those are still good opportunities for us. They might be impacted somewhat by government programs shrinking over time, but I -- we expect that will come back.

Q: Congratulations on the revenue performance, you guys. Just a couple of questions from me. First of all, looking at Business Services and going through your slide deck, it looks like the adjusted net revenue as a percentage of sales is much higher in the Americas versus APAC. I wondered if you could just explain what's behind that.

A: Yes. We saw some significant growth in our Americas business this last quarter through our land-and-expand strategy, and that has driven some of the uptick for us. And we're really excited to see that as we also launch our digital product, as I mentioned last quarter, and we are seeing the clients really gravitate towards that as agentic AI takes over -- or not takes over, it adds enhanced value to our clients and our partnerships.

Q: So with the merger now closed, I guess, is there any update on the expected synergies that you plan to achieve?

A: Yes. Great question. We still believe that we'll deliver the $2 million in synergies. And that target could be higher over time, but that's the number that we're comfortable using. And where you're going to see that is in the corporate line. So if you look at the pro forma table in our press release, you'll see EBITDA from each one of our four business segments, and then you'll see a column for corporate. And in Q3, that total was $2.6 million for the quarter. That's a pro forma number. And so as we start to realize some of those synergies, you're going to see the corporate costs decline. And so our goal is to get that number down more to like $2 million a quarter or $8 million on an annualized run rate. So that's really where you're going to see the synergies show up if you're going to be tracking it quarter-to-quarter.