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STAR EQUITY HOLDINGS, INC. (STRR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue rose 41.7% year over year to $12.9M, gross margin expanded to 24.3% (up 700 bps YoY), and net loss narrowed to $1.2M as Building Solutions improved and Alliance Drilling Tools (ADT) contributed its first quarter in Energy Services .
  • Backlog reached a record $27.9M; management expects strong Q2 and full-year 2025 performance driven by pent-up project demand and improved sales conversion in Building Solutions .
  • Non-GAAP adjusted EBITDA loss improved to $0.8M versus a $1.1M loss last year; operating cash flow swung positive to +$0.563M from a -$2.4M outflow in Q1 2024, supported by collections and better operations .
  • Energy Services launched via the ADT acquisition; management highlighted high-margin, low-maintenance CapEx characteristics and project-based rental dynamics as attractive drivers of profitability .
  • Estimates context: S&P Global consensus for Q1 2025 EPS was +$0.06* and revenue $32.35M*, while S&P “actual” shows -$0.46* EPS and $31.87M* revenue; company-reported GAAP EPS was -$0.37 and revenue $12.9M, indicating definitional differences and caution in comparing bases (only 1 estimate) . Values retrieved from S&P Global*.

What Went Well and What Went Wrong

What Went Well

  • Record backlog of $27.9M with strong sales pipeline, providing confidence in Q2 and FY 2025; “we expect the division to show strong second quarter and full-year 2025 performance” .
  • Successful integration of ADT, establishing Energy Services; “integration of ADT has been progressing smoothly… now focused squarely on ADT’s future growth” .
  • Margin and cash flow improvement: gross margin up to 24.3% (17.3% prior year), adjusted EBITDA loss reduced, and operating cash flow turned positive .

What Went Wrong

  • Building Solutions revenue below internal expectations in Q1 due to commercial projects shifting to Q2 and late-quarter residential demand pickup, with EBGL softness from economic uncertainty .
  • SG&A increased $1.2M YoY (28.5%) on TT/ADT inclusion and M&A costs, although SG&A/revenue ratio improved to 40.7% from 44.9% .
  • Energy Services (ADT) gross margin tracked ~35% in Q1 versus ~56% in parts of 2024; management attributed Q1 margin to intra-quarter mix and ramping activity rather than structural change .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Millions)$9.12 $17.10 $12.92
Gross Profit ($USD Millions)$1.57 $4.45 $3.14
Gross Margin (%)17.3% 26.0% 24.3%
Net Income (Loss) ($USD Millions)$(2.22) $(2.46) (cont. ops) $(1.18)
Diluted EPS (GAAP) ($)$(0.70) $(0.77) (cont. ops) $(0.37)
Adjusted EPS (Non-GAAP) ($)$(0.44) $0.15 $(0.52)
Adjusted EBITDA ($USD Millions)$(1.07) $1.08 $(0.82)
Cash from Operations ($USD Millions)$(2.40) $(1.50) $0.56

Segment revenue and margin

SegmentQ1 2024 Revenue ($USD Millions)Q1 2025 Revenue ($USD Millions)Q1 2024 Gross Margin (%)Q1 2025 Gross Margin (%)
Building Solutions$9.12 $12.12 18.4% 24.2%
Energy Services— $0.81 — 35.0%
Investments$0.19 $0.16 ——

KPIs – Building Solutions operations dashboard (USD thousands)

MetricQ1 2024Q2 2024Q3 2024Q4 2024Q1 2025
Beginning Backlog19,796 14,806 13,957 19,567 17,190
New Orders4,127 12,635 19,273 14,718 22,841
Recognized Revenue9,118 13,483 13,663 17,095 12,118
Ending Backlog14,806 13,957 19,567 17,190 27,913

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue/EPS (company-level)FY 2025None provided None provided; qualitative outlook positive Maintained “no formal guidance”
Building Solutions outlookQ2 2025, FY 2025N/AManagement expects strong performance Positive qualitative outlook
STRRP dividend per shareQ1 2025$0.25 $0.25 Maintained
Share repurchase authorizationAs of 3/31/25$1.0M total; $0.279M used in 2024 $0.721M remaining authorization Maintained authorization

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2024)Previous Mentions (Q-1: Q4 2024)Current Period (Q1 2025)Trend
Backlog momentum & project timingCustomers resuming projects; KBS signed $4.6M in contracts; improving pipeline Backlog $17.2M at YE; momentum shifted in H2’24 Record backlog $27.9M; projects pushed from Q1 to Q2; confidence in Q2/FY 2025 Improving
Tariffs/lumber & supply chainHeadwinds; higher rates; price sensitivity; hedging Proactive shift to domestic lumber; contract protections Monitoring lumber/OSB; limited tariff impact; projects moving forward Stabilizing
Energy Services (ADT)Entry via investments (Enservco); sector interest ADT acquired; high margins, low maintenance CapEx; $10.5M 2024 revenue, 48% GM Integration smooth; 35% GM in Q1; rental model supports recurring economics Scaling
Capital structure & liquidityDebt increased with TT; working capital pressure Debt $11.3M; cash down due to TT acquisition/financing Unrestricted cash ~$1.9M; positive OCF; added ADT credit lines Mixed (building capacity; funding growth)
M&A pipelineTT impact; evaluating opportunities Pursuing accretive deals; ADT closed Continuing to evaluate acquisitions across divisions Ongoing

Management Commentary

  • “Looking forward, our Building Solutions backlog, representing orders under contract, stood at a record $27.9 million at quarter end. Given these dynamics, we expect the division to show strong second quarter and full-year 2025 performance.” – Rick Coleman, CEO .
  • “I’m pleased to report our integration of ADT has been progressing smoothly… we are now focused squarely on ADT’s future growth.” – Rick Coleman, CEO .
  • “Non-GAAP adjusted EBITDA from continuing operations was a loss of $0.8 million… primarily due to improved operating performance at our Building Solutions division.” – Company release .
  • “Operating cash flow… an inflow of $0.6M versus an outflow of $2.4M in Q1 2024… attributable to favorable results… and strong accounts receivable collections.” – David Noble, CFO .

Q&A Highlights

  • Project delays and weather: EBGL experienced a project-specific 2‑month pause and severe winter impacts; revenue recognized in Q2 as schedules resumed .
  • Tariffs/pricing: Management is not seeing projects put on hold; monitoring lumber/OSB input costs; exposure to new home construction is modest .
  • ADT margins: Q1 gross margin near 35% versus ~56% in 2024; management views Q1 mix as intra-quarter, reiterating ADT’s high-margin profile .
  • ADT rental model: Project-based rental terms with refurb cycles of 5–10 uses; “razor blade” economics noted .
  • Credit facilities: ADT revolver with $3M limit (borrowing base) and a $0.6M term loan; approximately half the revolver drawn; headroom remains .

Estimates Context

S&P Global consensus vs S&P actual (limited coverage; 1 estimate)

MetricQ4 2024 Consensus*Q4 2024 Actual*Q1 2025 Consensus*Q1 2025 Actual*# of Estimates*
Primary EPS Consensus Mean ($)$(0.06)$(0.05)$0.06$(0.46)1 / 1 [per period]*
Revenue Consensus Mean ($USD Millions)$37.17$33.60$32.35$31.871 / 1 [per period]*
EBITDA Consensus Mean ($USD Millions)$0.29$0.36$0.54$(1.44)—*

Values retrieved from S&P Global*.

Company-reported vs S&P consensus (Q1 2025)

MetricCompany Reported Q1 2025S&P Consensus Q1 2025*
Revenue ($USD Millions)$12.92 $32.35*
Diluted EPS (GAAP) ($)$(0.37) $0.06*
Adjusted EBITDA ($USD Millions)$(0.82) $0.54*

Note: S&P Global “actual” and company-reported totals differ materially, likely due to differing bases/definitions; coverage is thin (single estimate). Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Backlog-driven visibility: Record $27.9M backlog supports near-term revenue acceleration in Q2 and an improving FY 2025 trajectory; watch conversion pace and EBGL recovery .
  • Margin recovery: Building Solutions gross margin improved to 24.2% with TT contribution and operational leverage; sustaining this mix is key to earnings normalization .
  • Energy Services scaling: ADT integration adds a high-margin platform; monitor margin normalization from 35% in Q1 toward historical levels and rental utilization trends .
  • Cash discipline: Positive operating cash flow and revolver capacity provide funding flexibility; monitor working capital and debt costs amid growth and M&A .
  • Estimates reset likely: Given definitional discrepancies and limited coverage, expect consensus recalibration; near-term beats/misses will hinge on backlog conversion and ADT contribution .
  • Shareholder actions: Preferred dividend maintained; buyback authorization remains with $0.721M capacity—potential capital allocation lever depending on liquidity and deal flow .
  • Watch catalysts: Q2 delivery of delayed projects, ADT margin/volume progression, incremental contract wins, and any accretive M&A announcements .