Executive Summary

Q3 revenue was $13.65M, up 11% year over year and up 6% quarter over quarter, with gross margin of 23.8% vs 24.4% in Q2; GAAP EBITDA was -$0.65M and net loss was -$2.01M, driven by transaction costs and a loss on extinguishment from convertible note amendments .
Results missed Wall Street consensus: revenue $13.65M vs $15.57M and EPS -$0.35 vs $0.12; coverage was thin (one estimate), amplifying volatility in expectations; the miss was primarily due to higher SG&A and non-operating items rather than top-line weakness .
Management highlighted “record” pro forma outcomes (YTD pro forma revenue +19%, adjusted EBITDA +46%) and announced/accretive M&A momentum with $26M annualized revenue from two deals, targeting a $100M revenue run-rate by early 2026 .
Near-term stock catalysts: closing of the second acquisition before Dec 15, posting of the investor deck and transcript, and clarity on revolver extension past Dec 2025; liquidity actions (convertible notes, equity line) and integration pacing will drive narrative and sentiment .

What Went Well and What Went Wrong

What Went Well

Pro forma growth backdrop: Management stated YTD pro forma revenue +19% to $41.2M and adjusted EBITDA +46%, supported by acquisitions and cost discipline; gross profit rose 34% on this pro forma basis .
M&A execution and integration: Carolina Stone closed Aug 22 and integration milestones across ERP, logistics, and marketing were achieved quickly; management expects the second acquisition (~$15M revenue) to close before Dec 15 and be immediately accretive to revenue and EBITDA .
Strategic confidence: “We are well-positioned to reach our $100 million revenue run-rate target by early 2026,” said CEO Matthew Lipman, signaling continued pipeline depth and valuation discipline (targets at 4–6x EBITDA, with 20–45% non-cash consideration) .

What Went Wrong

Consensus miss on headline metrics: Q3 revenue $13.65M vs $15.57M estimate; EPS -$0.35 vs $0.12, reflecting higher SG&A (+31% YoY) and transaction expenses; gross margin ticked down QoQ (23.8% vs 24.4%) .
Non-operating headwinds: A $652k loss on extinguishment from conversion price changes on the senior convertible notes and higher interest expense (+59% YoY) pressured bottom-line results despite operational progress .
Liquidity and leverage watchpoints: Revolver matures Dec 17, 2025; line outstanding $8.3M; working capital (excluding current LT debt) is $2.8M; execution risks remain around covenants, refinancing, and further equity-linked financing .

Financial Results

Consolidated Performance across Q1–Q3 2025

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($USD)	$7.90M	$12.85M	$13.65M
Gross Profit ($USD)	$1.33M	$3.13M	$3.25M
Gross Margin (%)	16.8%	24.4%	23.8%
EBITDA ($USD)	-$1.31M*	-$0.15M*	-$0.65M*
Diluted EPS ($)	-$0.47*	-$0.13*	-$0.35*

Values with an asterisk were retrieved from S&P Global.

Year-over-Year and Sequential Comparison (Q3 2024 vs Q2 2025 vs Q3 2025)

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue ($USD)	$12.32M	$12.85M	$13.65M
Gross Margin (%)	21.4%†	24.4%	23.8%
Diluted EPS ($)	-$6.33	-$0.13*	-$0.35*

† Management disclosed comparative margin improvements across periods; exact Q3 2024 margin context appears within MD&A discussions. EPS comparability is limited due to share restructurings and conversions in 2025 . Values with an asterisk were retrieved from S&P Global.

Actual vs Wall Street Consensus (Q3 2025)

Metric	Actual	Consensus	Surprise
Revenue ($USD)	$13.65M	$15.57M*	-$1.92M (Miss)
Diluted EPS ($)	-$0.35*	$0.12*	-$0.47 (Miss)
EBITDA ($USD)	-$0.65M*	N/A	N/A

Values with an asterisk were retrieved from S&P Global. Coverage depth: Primary EPS and Revenue # of Estimates = 1, highlighting thin coverage and potential estimate volatility.*

Segment Breakdown (Q3 2025)

Segment	Sales ($USD)	Gross Profit ($USD)	SG&A ($USD)	Transaction Expense ($USD)	Operating Income ($USD)
TotalStone	$12.70M	$3.02M	$2.47M	$34k	$0.51M
Carolina Stone	$0.96M	$0.24M	$0.30M	$0	-$0.06M
Parent (Corporate)	$0	$0	$0.60M	$0.62M	-$1.22M
Consolidated	$13.65M	$3.25M	$3.37M	$0.65M	-$0.77M

KPIs and Balance Sheet Watchpoints (Quarter-End)

KPI	Q3 2025
Working Capital (ex current LT debt)	~$2.8M
Revolver Outstanding	$8.3M; SOFR + 3.0% (7.43% at 9/30/25); matures 12/17/25
Total Debt (Gross)	$11.66M scheduled maturities profile disclosed
Convertible Notes	First note $3.27M (amended conversion to $1.00); second note $3.55M at $1.10 conversion (10/22/25)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue Run-Rate Target	Early 2026	Not previously quantified in Q1/Q2 filings	$100M run-rate by early 2026	New articulation
Acquired Annualized Revenue	H2 2025	N/A	~$26M total (Carolina Stone + second multi-location stone distributor)	New
Second Acquisition Close Timing	Q4 2025	N/A	“Before Dec 15”; immediately accretive to revenue and EBITDA	New
2026 M&A Pace	FY 2026	N/A	3–4 strategic acquisitions; 4–6x EBITDA, with 20–45% non-cash consideration	New

Management also plans to post Q3 investor materials (deck and transcript) following the 10‑Q filing, enhancing disclosure but not constituting formal financial guidance .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Macro/Interest Rates	Headwinds from rates, inflation; seasonality; colder winter impacted H1 demand	“Economic conditions have improved meaningfully,” citing rate cuts and remodeling rebound outlook	Improving macro tone
Tariffs/Sourcing	Shift sourcing from China to limit tariff impact; product mix adjustments	Continued efficiency initiatives; no new tariff issues highlighted	Stabilizing
Product Performance Mix	Veneer softness vs landscape strength in H1; margin improved on mix and freight	Margin held ~23.8%; incremental revenue from Carolina Stone	Mix aided by acquisition
M&A Strategy	Preparing for inorganic growth; equity line set, note financing initiated	Two acquisitions in H2; pipeline active at 4–6x EBITDA; integration milestones achieved	Accelerating
Liquidity/Leverage	Revolver covenant waivers; extension efforts; equity line and convertible notes	In compliance at Q3; revolver extended to Dec 2025; new convertible note in Oct	Managed but a key watchpoint

Note: The full Q3 call transcript was not available in the document catalog; management indicated investor materials and a transcript would be posted externally .

Management Commentary

“It was another exciting quarter for Capstone, as we delivered record results across multiple fronts and announced our first two acquisitions. We expect our second acquisition to close before December 15 and to be immediately accretive to both revenue and EBITDA. We are well-positioned to reach our $100 million revenue run-rate target by early 2026.” — Matthew Lipman, CEO .
Management cited an “active, favorable pipeline” at 4–6x EBITDA with significant non-cash consideration components, reinforcing disciplined capital deployment and integration readiness (ERP/logistics/marketing) .
Industry tone improved with rate cuts and remodeling recovery tailwinds; Instone’s owned brands and distribution footprint across 32 states underpin organic momentum alongside M&A .

Q&A Highlights

The full Q3 2025 Q&A transcript was not available in the catalog. Management published an investor deck and transcript externally; specific Q&A themes cannot be validated here. Refer to posted materials for detailed Q&A content .

Estimates Context

Q3 2025 results missed S&P Global consensus: revenue $13.65M vs $15.57M; EPS -$0.35 vs $0.12; coverage was one estimate for both, implying high sensitivity to model assumptions and limited analyst follow-through.*
Implications: Given SG&A increases (investor relations and integration costs) and non-operating items (debt extinguishment), models likely require higher OpEx and OI&E drag assumptions near term; acquisitions should lift revenue baseline but integration costs and financing effects temper EPS near term .

Values retrieved from S&P Global.

Key Takeaways for Investors

Operational momentum with acquisitions: ~$26M annualized revenue adds to the base and supports the stated path to ~$100M run-rate by early 2026; integration capability appears proven with Carolina Stone .
Near-term earnings pressure likely persists: transaction costs, higher SG&A (IR spend) and non-operating charges (debt extinguishment, interest) weighed on Q3; watch for normalization of these items and synergy capture .
Liquidity and capital structure are central: revolver maturity December 2025, convertible notes with amended conversion prices, and equity line create flexibility but also dilution/leverage considerations; monitor covenants and refinancing timing .
Margins stable but slightly lower QoQ; mix and freight efficiencies helped in Q2, with Q3 gross margin at 23.8%—integration of higher-margin products/brands and logistics discipline remain key levers .
Estimate dispersion risk is high due to thin coverage; expect models to update for acquisition contributions and higher non-GAAP adjustments; potential upside if non-operating drags abate and pipeline closes on schedule .
Upcoming catalysts: second acquisition close before Dec 15, investor materials posted, and revolver extension progress—each can shift narrative and sentiment in the near term .
Execution focus: rapid post-close integration and disciplined M&A (4–6x EBITDA, structured consideration) are core to the medium-term thesis; consistent cash generation and working capital management will be scrutinized amid growth .

Capstone Holding Corp. (CAPS)·Q3 2025 Earnings Summary