Executive Summary

Q2 2025 was a step-change quarter: revenue grew 75.8% year over year to $23.7 million, gross margin expanded to 26.4%, and GAAP net income swung to $3.5 million; adjusted EBITDA rose to $7.0 million, aided by a $5.5 million realized gain in the Investments division.
Building Solutions drove the quarter with $20.4 million revenue and 25.7% gross margin as large commercial projects ramped; backlog ended at $25.7 million, supporting a strong 2H and FY25 outlook.
Energy Services (ADT) contributed $3.3 million of revenue and $0.53 million adjusted EBITDA despite macro headwinds; management noted selective pricing power on mission‑critical tools.
Management does not provide formal guidance, but expects Building Solutions and Energy Services to be at least flat vs Q2 near‑term; longer‑term catalysts include merger with Hudson Global (shareholder vote Aug 21) and targeted removal of ~$2 million in redundant public company costs post‑closing.
Cash from operations was an outflow of $1.7 million in Q2, with a $6.7 million broker receivable converted to cash in early July, expected to be reflected in Q3 CFFO; debt rose to $14.3 million with weighted average rates 7.7–9.3%.

What Went Well and What Went Wrong

What Went Well

Significant operating leverage and mix: gross profit rose 182% to $6.3 million; Building Solutions margin expanded 910 bps YoY to 25.7% on higher volumes and TT/ADT inclusion.
Investments division realized a $5.5 million gain (Servotronics → TransDigm), contributing $5.8 million adjusted EBITDA and marking a “watershed win.”
Strong demand indicators: quarter‑end Building Solutions backlog at $25.7 million; management is “optimistic [the division] will show strong second half and full‑year 2025 performance.”

What Went Wrong

Operating cash flow still negative in Q2: outflow of $1.7 million vs $1.9 million outflow in Q2 2024; working capital remained a drag though improved YoY.
SG&A rose 20% YoY to $6.4 million on ADT/TT consolidation and higher M&A costs, limiting GAAP operating income (loss from operations of $(0.95) million).
Non‑GAAP adjustments were material (e.g., intangible amortization, transaction costs, equity method impacts), highlighting reliance on realized investment gains and acquisitions to reach adjusted profitability.

Financial Results

Consolidated Performance (GAAP and Non‑GAAP)

Metric	Q2 2024	Q4 2024	Q1 2025	Q2 2025
Revenue ($USD Millions)	$13.483	$17.095	$12.924	$23.708
Gross Profit ($USD Millions)	$2.216	$4.448	$3.136	$6.253
Gross Margin (%)	16.4%	26.0%	24.3%	26.4%
Net Income ($USD Millions)	$(3.787)	$(2.457)	$(1.176)	$3.451
Diluted EPS (GAAP)	$(1.19)	$(0.77)	$(0.37)	$1.07
Diluted EPS attributable to common	$(1.34)	$(0.94)	$(0.52)	$0.86
Adjusted Net Income ($USD Millions)	$(0.914)	$0.495	$(1.660)	$5.989
Adjusted Diluted EPS ($)	$(0.29)	$0.15	$(0.52)	$1.86
Adjusted EBITDA ($USD Millions)	$(0.500)	$1.076	$(0.818)	$7.042
Cash from Operations ($USD Millions)	$(1.9)	$(1.5)	$0.563	$(1.7)

Segment Breakdown

Segment Metric	Q2 2024	Q2 2025
Building Solutions Revenue ($USD Millions)	$13.483	$20.384
Building Solutions Gross Profit ($USD Millions)	$2.229	$5.243
Building Solutions Gross Margin (%)	16.5%	25.7%
Energy Services Revenue ($USD Millions)	—	$3.324
Energy Services Gross Profit ($USD Millions)	—	$1.084
Energy Services Gross Margin (%)	—	32.6%
Investments Revenue ($USD Millions)	$0.194	$0.158
Adjusted EBITDA – Building Solutions ($USD Millions)	$0.391	$2.302
Adjusted EBITDA – Energy Services ($USD Millions)	—	$0.530
Adjusted EBITDA – Investments ($USD Millions)	$0.502	$5.831
Adjusted EBITDA – Corporate ($USD Millions)	$(1.393)	$(1.621)
Adjusted EBITDA – Total ($USD Millions)	$(0.500)	$7.042

KPIs: Building Solutions Operations Dashboard (USD thousands)

KPI	Q2 2024	Q3 2024	Q4 2024	Q1 2025	Q2 2025
Beginning Backlog	$14,806	$13,957	$19,567	$17,190	$27,913
New Orders	$12,635	$19,273	$14,718	$22,841	$18,223
Recognized Revenue	$13,483	$13,663	$17,095	$12,118	$20,398
Ending Backlog	$13,957	$19,567	$17,190	$27,913	$25,739

Guidance Changes

Management does not provide formal quantitative guidance; below table captures qualitative outlook and declared dividends.

Metric	Period	Previous Guidance	Current Guidance/Commentary	Change
Building Solutions outlook	Near-term (Q3–Q4 2025)	No formal guidance	“Should be at least flat with what we did in Q2” supported by $25.7m backlog	Maintained qualitative positive
Energy Services outlook (ADT)	Near-term (Q3–Q4 2025)	No formal guidance	“At least flat” vs Q2; selective pricing power on mission‑critical tools	Maintained qualitative positive
Merger cost synergies	2–4 quarters post‑close	N/A	Target removal of ~$2 million in redundant public company costs over time	New synergy target
Preferred dividend (Series A)	Q2 2025	$0.25 declared, paid Jun 10	Partial $0.225 declared, record Aug 21, pay Sep 10	Adjusted timing/amount

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024 and Q1 2025)	Current Period (Q2 2025)	Trend
Backlog/demand	Backlog $17.2m YE; projects “unclogged” beginning in Q4 2024; record $27.9m at Q1 end	Backlog $25.7m; strong pipeline; confidence in 2H/FY25	Positive, sustained
Pricing power	Hedging and contract language to mitigate input cost volatility; cautious on tariffs	Pricing power in Building Solutions during lumber volatility; selective pricing increases in Energy Services	Improving mix/pricing on mission‑critical tools
Energy Services (ADT)	High‑margin, low capex model; ~$10.5m FY24 revenue, 48% GM, $2.4m adj. EBITDA	$3.3m Q2 revenue; $0.53m adj. EBITDA; selective pricing; adding in‑demand tools	Stable to improving utilization
Tariffs/lumber	Shift to domestic sourcing; hedging strategies; monitoring	Continued monitoring; ability to pass through moderate price changes	Managed risk
M&A/merger with Hudson	ADT closed; evaluating acquisitions; merger announced	Merger vote Aug 21; aim to close quickly; expect scale/diversification and cost saves	Near‑term corporate catalyst

Management Commentary

“Consolidated revenues increased by 76% due to strong Building Solutions division performance as well as the inclusion of revenues from TT and Alliance Drilling Tools… backlog… remains strong at $25.7 million.” — CEO Rick Coleman
“Star’s second quarter results include $5.8 million in adjusted EBITDA from our Investments Division, mainly due to a $5.5 million realized gain… a watershed win for Star Equity Fund.” — Executive Chairman Jeff Eberwein
“ADT generated $3.3 million in revenue and $0.5 million in non‑GAAP adjusted EBITDA… we’ve been able to increase utilization and gain share… pricing on mission‑critical tools.” — Executive Chairman Jeff Eberwein

Q&A Highlights

Pricing power: Building Solutions can maintain/adjust pricing through lumber cycles; Energy Services can “gently raise prices” on mission‑critical tools; commodity tools see pressure.
Modular vs. stick-built: Factory environment yields higher quality, lower waste, weather resilience; growing comfort among builders expanding opportunities.
Merger timing: Plan to close “as quickly as possible” after Aug 21 vote; synergy plan to remove ~$2 million of redundant costs over subsequent quarters.
Segment demand mix: Backlog includes a mix of residential and commercial; notable momentum in affordable/multifamily in Northeast markets served by KBS.

Estimates Context

S&P Global consensus appears inconsistent with STRR‑reported actuals this quarter (e.g., consensus “actual” revenue of $35.541m* vs company‑reported $23.708m), likely reflecting mismapped Hudson Global figures amid the pending merger; as a result, we treat Wall Street consensus for STRR Q2 2025 as unavailable/non‑comparable. Values retrieved from S&P Global.

Item	S&P Global	Company Reported
Q2 2025 Revenue ($USD Millions)	35.541*	$23.708
Q2 2025 Diluted EPS ($)	0.12*	$1.07

Values retrieved from S&P Global.

Implication: Do not draw “beat/miss” conclusions vs consensus for STRR Q2 2025; rely on intra‑company trend and management commentary until coverage normalizes.

Key Takeaways for Investors

The quarter shows operating momentum: Building Solutions volume/mix and ADT contributions drove margin expansion and a swing to GAAP profitability; adjusted EBITDA strength was amplified by realized investment gains.
Backlog and pipeline support a constructive near‑term setup; management qualitatively expects Building Solutions and Energy Services at least flat vs Q2, providing visibility as projects convert.
Monitor cash conversion: CFFO remains negative in Q2, but the $6.7m broker receivable conversion in July should aid Q3 cash flow; working capital discipline will be key alongside debt carrying costs.
Corporate catalyst: The Hudson merger vote on Aug 21 and targeted ~$2m cost synergies offer medium‑term accretion potential; watch closing timeline and integration milestones.
Energy Services pricing/utilization mix is an upside lever; continued shift toward higher‑demand tools may offset broader energy service softness.
Non‑GAAP adjustments matter: Intangible amortization, transaction costs, investment gains/losses and equity method items significantly impact adjusted results; evaluate sustainability of investment‑driven gains vs core operating trajectory.
Near‑term trading: Narrative centers on backlog strength, ADT integration, and merger execution; absence of formal guidance shifts focus to quarterly delivery and cash conversion cadence.

STAR EQUITY HOLDINGS, INC. (STRR)·Q2 2025 Earnings Summary