Executive Summary

Q1 FY2025 delivered strong top-line and margin performance: revenue rose 22.1% year over year to $50.49M with gross margin expanding 630 bps to 34.1%, driven by favorable sales mix and higher volumes in computing and consumer electronics; however, GAAP net income fell on equity investment losses despite higher operating income .
Adjusted EBITDA more than doubled to $7.38M (14.6% margin) as gross profit gains offset FX and other non-cash items; free cash flow was $11.41M, nearly double YoY, reinforcing liquidity .
Sequentially, revenue and profitability improved versus Q4 FY2024, while diluted EPS declined versus Q3 FY2024 given the one-time tax valuation allowance release that inflated Q3 results .
Corporate action is the key stock catalyst: a Short-Form Merger at $11.45 per share cash (plus a CVR tied to Reith litigation proceeds if not distributed before effective time) was approved by the Audit Committee; if consummated, STCN would be taken private and delisted from Nasdaq .
No formal financial guidance or consensus estimates were provided/available; S&P Global consensus was unavailable for STCN, limiting beat/miss analysis.

What Went Well and What Went Wrong

What Went Well
- Revenue acceleration with quality mix: “The increase in net revenue was primarily driven by favorable sales mix and higher volumes associated with clients in the computing and consumer electronics markets.” Gross margin expanded 630 bps to 34.1% .
- Significant operating leverage: Operating income rose to $6.50M from $1.81M YoY; segment operating income (Supply Chain) improved to $8.55M .
- Strong cash generation and balance sheet de-risking: Free cash flow of $11.41M; SPHG 7.50% convertible note matured and was repaid; total debt now $0 with $233.9M cash and equivalents .
What Went Wrong
- GAAP net income and EPS down YoY despite better operations, due to $5.5M net unrealized equity losses in “Other (losses) gains, net” offsetting $2.8M interest income; net income fell to $2.37M from $4.44M .
- SG&A increased ~$1.0M YoY on corporate-level legal/professional and higher management services fees (Amendment No. 2) starting Jan 1, 2024, partially diluting operating leverage .
- Geographic/customer concentration risks persist: top 10 clients ~85.5% of revenue; two clients totaled ~57.4% of Q1 revenue; Mainland China and U.S. were 34% and 21% of revenue, respectively, implying exposure to macro/geo risks .

Financial Results

Sequential results – last three quarters (oldest → newest)

Metric	Q3 FY2024	Q4 FY2024	Q1 FY2025
Revenue ($USD Millions)	$43.86	$45.87	$50.49
Gross Margin (%)	29.7%	27.6%	34.1%
Operating Income ($USD Millions)	$2.98	$0.95	$6.50
Adjusted EBITDA ($USD Millions)	$4.45	$4.28	$7.38
Adjusted EBITDA Margin (%)	10.1%	9.3%	14.6%
Net Income Attrib. to Common ($USD Millions)	$71.13 (tax benefit)	$6.01	$1.83
Diluted EPS ($)	$2.51	$0.23	$0.07
Free Cash Flow ($USD Millions)	$7.56	$5.37	$11.41
Cash & Equivalents (End of Period, $USD Millions)	$269.24	$248.61	$233.93

Year-over-year comparison – Q1 FY2025 vs Q1 FY2024

Metric	Q1 FY2024	Q1 FY2025
Revenue ($USD Millions)	$41.34	$50.49
Gross Margin (%)	27.8%	34.1%
Operating Income ($USD Millions)	$1.81	$6.50
Net Income ($USD Millions)	$4.44	$2.37
Net Income Attrib. to Common ($USD Millions)	$3.90	$1.83
Diluted EPS ($)	$0.15	$0.07
Adjusted EBITDA ($USD Millions)	$3.31	$7.38
Adjusted EBITDA Margin (%)	8.0%	14.6%

Segment operating performance (Supply Chain is the only reportable segment)

Metric	Q3 FY2024	Q4 FY2024	Q1 FY2025
Segment Revenue ($USD Millions)	$43.86	$45.87	$50.49
Segment Operating Income ($USD Millions)	$4.45	$3.55	$8.55
Corporate-Level Activity ($USD Millions)	$(1.47)	$(2.60)	$(2.05)
Total Operating Income ($USD Millions)	$2.98	$0.95	$6.50

Select KPIs and balance sheet

KPI	Q3 FY2024	Q4 FY2024	Q1 FY2025
Free Cash Flow ($USD Millions)	$7.56	$5.37	$11.41
Total Debt ($USD Millions)	$12.90 (SPHG Note)	$12.90	$0.00 (repaid)
Cash & Equivalents ($USD Millions)	$269.24	$248.61	$233.93

Notes and drivers:

Revenue/margin: uplift from computing and consumer electronics mix and higher volumes; gross profit +50% YoY and margin +630 bps .
Other income: Q1 FY2025 recorded $5.5M unrealized losses on equity securities, partly offset by $2.8M interest income, driving the YoY decline in GAAP net income despite higher operating income .
SG&A: +$1.0M YoY, driven by legal/professional fees and higher management services fees effective Jan 1, 2024 .
Liquidity: SPHG 7.50% note fully repaid at maturity (Sep 1, 2024), leaving no debt outstanding; available revolver capacity $11.9M .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Company revenue/margins/EPS	FY2025	None provided	None provided	Maintained (no formal guidance)
Corporate action	2025 timing TBD	—	Short-Form Merger at $11.45/share cash; CVR tied to Reith settlement proceeds if not distributed prior to effective time	New transaction framework
Listing status	Upon merger close	—	If consummated, STCN will be delisted and deregistered	New disclosure

No explicit revenue, margin, OpEx, OI&E, tax, or segment guidance was issued in Q1 FY2025 materials -.

Earnings Call Themes & Trends

No Q1 FY2025 earnings call transcript was available in our document set; we searched and found no earnings-call-transcript for STCN. Thematic trajectory below is based on press releases and the 10-Q.

Topic	Previous Mentions (Q3 FY2024 and Q4 FY2024)	Current Period (Q1 FY2025)	Trend
Mix shift to computing/consumer electronics	Q3: revenue decline but mix aided margin; Q4: revenue +12% YoY on volumes, favorable pricing/mix, new program starts - -	Revenue +22.1% YoY; margin +630 bps on favorable sales mix and higher volumes	Improving mix and volume momentum
Non-operating items	Q3: large tax valuation allowance release (+$71.5M) boosted net income -	Q1: $5.5M unrealized equity losses offset $2.8M interest income	Swing from tax-driven boost to equity mark losses
SG&A discipline	Q3: corporate legal/board fees decreased YoY; Q4: SG&A +26.8% YoY on M&A/legal	Q1: SG&A +$1.0M YoY on legal/professional and higher management services fees	Elevated corporate costs vs prior year
Capital structure/liquidity	Q3: $12.9M SPHG note outstanding; strong cash	Q1: SPHG note repaid; $233.9M cash; revolver availability $11.9M -	De-levered, liquidity intact
Corporate actions/legal	—	Audit Committee approved Short-Form Merger; potential CVR for Reith net proceeds; delisting if consummated -	Transaction overhang/optionality

Management Commentary

“The increase in net revenue was primarily driven by favorable sales mix and higher volumes associated with clients in the computing and consumer electronics markets.”
“Adjusted EBITDA increased $4.1 million, or 123.0%, … primarily due to an increase in gross profit of $5.8 million, offset partially by $1.1 million unfavorable changes in realized foreign exchange losses.”
“The Company recorded $3.2 million in net losses … due to $5.5 million net unrealized losses on investments in equity securities, partially offset by $2.8 million in interest income.”
Liquidity: “As of October 31, 2024, the Company had cash and cash equivalents of $233.9 million and ModusLink had readily available borrowing capacity of $11.9 million… The Company repaid the outstanding principal and accrued interest for the SPHG Note upon its maturity.”

Q&A Highlights

No Q1 FY2025 earnings call transcript was available; therefore, no Q&A themes or clarifications could be extracted.

Estimates Context

Wall Street consensus (S&P Global) for Q1 FY2025 revenue/EPS and FY2025 forecasts was unavailable for STCN in our data environment; we could not compute beat/miss versus estimates. This likely reflects limited analyst coverage for the company.

Key Takeaways for Investors

Operating momentum: Broad-based improvement in revenue and gross margin from favorable mix and higher volumes in target end-markets drove robust Adjusted EBITDA and free cash flow performance .
GAAP volatility: Equity portfolio marks drove a non-operating loss that masked underlying operating strength; investors should focus on margin/EBITDA trajectory while monitoring investment mark-to-market exposure .
Cleaner balance sheet: Full repayment of the 7.50% SPHG note eliminates debt and interest drag; cash remains ample for operations and potential corporate actions .
Corporate event path: The Short-Form Merger at $11.45 per share plus potential CVR on Reith proceeds, if consummated, is the primary stock catalyst and may cap upside near the offer level; delisting risk if completed .
Customer/geographic concentration: Continued dependence on a small number of clients and Mainland China/U.S. exposures warrants vigilance amid macro and regulatory risks .
No guidance/estimates: Absence of formal guidance and unavailable consensus estimates increases uncertainty for near-term modeling; track volumes/mix, SG&A trajectory, and non-operating items in subsequent quarters -.
Watch legal outcomes: Reith settlement approval and mechanics of any CVR distribution could affect minority holders’ realized proceeds in a transaction scenario - .

Supporting detail:

Prior-quarter baselines (for trend): Q4 FY2024 revenue $45.87M, gross margin 27.6%, Adj. EBITDA $4.28M (9.3% margin) . Q3 FY2024 revenue $43.86M, gross margin 29.7%, Adj. EBITDA $4.45M (10.1% margin), non-recurring tax benefit drove $71.66M net income .

Citations

Q1 FY2025 press release/8-K (Item 2.02, EX-99.1): .
Q1 FY2025 10-Q details: - - - -.
Q4 FY2024 press release/8-K: -.
Q3 FY2024 press release/8-K: -.
Short-Form Merger/CVR 8-K: - -.

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