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STAR EQUITY HOLDINGS, INC. (STRR)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $17.1M (+21.1% YoY), gross margin expanded to 26.0% (+580 bps YoY), and non-GAAP adjusted EBITDA turned positive at $1.1M; GAAP net loss from continuing operations was $2.5M, driven largely by other expense and investment impairments .
  • Building Solutions momentum accelerated as delayed projects moved into production; year-end backlog closed at $17.2M, supporting confidence in early 2025 conversion .
  • Liquidity tightened and leverage rose: cash and restricted cash fell to $5.6M and total debt increased to $11.3M by year-end 2024, primarily tied to the Timber Technologies acquisition and financing .
  • Strategic catalyst: acquisition of Alliance Drilling Tools (ADT) closed March 4, 2025, launching the Energy Services division (ADT FY2024: ~$10.5M revenue, 48% gross margin, $2.4M adjusted EBITDA) .

What Went Well and What Went Wrong

What Went Well

  • Significant operating turnaround in Q4: Building Solutions revenue +21.1% YoY to $17.1M and gross margin rose to 26.5% (company’s highest-margin timber business, TT, contributed mix uplift) .
  • Non-GAAP profitability improved: adjusted EBITDA swung to +$1.1M in Q4 (vs -$0.1M YoY), driven by higher volumes and mix in Building Solutions .
  • Clear demand recovery signs: “several large projects received final approvals and began production in the fourth quarter… positions Star for a great start to 2025,” with $17.2M year-end backlog highlighting pent-up demand realization .
  • Management quote: “This realization of pent-up demand, coupled with increasing adoption of factory-built construction, contributed to the strong performance in the fourth quarter” – Rick Coleman, CEO .

What Went Wrong

  • GAAP net loss from continuing operations of $2.5M in Q4 (vs $1.8M income YoY), reflecting investment impairments and other expense reclassification from SG&A, highlighting persistent non-operating headwinds .
  • SG&A rose $1.0M in Q4 and to $17.0M for FY 2024, reflecting acquired operations; SG&A ratio ticked up in Q4 to 24.7% (vs 22.8% YoY) .
  • Cash flow and balance sheet pressure: Q4 operating cash outflow of $1.5M; year-end cash declined to $5.6M and debt rose to $11.3M, constraining flexibility absent continued backlog conversion and ADT integration benefits .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Total Revenue ($USD Millions)$13.5 $13.7 $17.1
GAAP Diluted EPS – Continuing Ops ($)-$1.19 -$0.61 -$0.77
Non-GAAP Adjusted EPS ($)-$0.29 -$0.29 $0.15
Gross Profit ($USD Millions)$2.22 $2.82 $4.45
Gross Margin (%)16.4% 20.6% 26.0%
Non-GAAP Adjusted EBITDA ($USD Millions)-$0.50 -$0.32 $1.08

Segment breakdown – Building Solutions

MetricQ2 2024Q3 2024Q4 2024
Building Solutions Revenue ($USD Millions)$13.48 $13.66 $17.10
Building Solutions Gross Profit ($USD Millions)$2.23 $2.85 $4.52
Building Solutions Gross Margin (%)16.5% 20.8% 26.5%

KPIs – Operations Dashboard (Building Solutions)

KPI ($USD Thousands)Q1 2024Q2 2024Q3 2024Q4 2024
Beginning Backlog$19,796 $14,806 $13,957 $19,567
New Orders$4,127 $12,635 $19,273 $14,718
Sales$9,118 $13,483 $13,663 $17,095
Ending Backlog$14,806 $13,957 $19,567 $17,190

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Series A Preferred Dividend ($/share)Q1 2025$0.25/share quarterly $0.25/share declared for Mar 10, 2025 payment Maintained

Note: No explicit quantitative revenue/margin guidance ranges were disclosed in the Q4 2024 press release or call materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Demand/Backlog and Project TimingPipeline strong; financing delays; emphasis on delays not cancellations Announced two large KBS wins; signs of returning demand; backlog/pipeline robust Delayed projects began production; YE backlog $17.2M; momentum into Q1 2025 Improving demand conversion
Margin Mix (TT acquisition)One-time purchase accounting hit ($574K), TT high margin profile Full quarter of TT supports margin sequential improvement Q4 gross margin uplift driven by TT mix and volume Margins expanding with mix/scale
Tariffs / Lumber SourcingNot emphasizedTariff sensitivity noted; hedging and contract pass-throughs in place Explicit strategies: reduce Canadian exposure, hedging, contract language; ability to pass some increases Risk mitigated; monitoring policy
Liquidity / Capital ActionsSale-leasebacks ($7.2M) and buyback authorization ($1M) Sale-leasebacks net proceeds ~$8.3M Operating cash outflow Q4; YE cash $5.6M; debt $11.3M Liquidity tighter; leverage up
M&A / Portfolio StrategyTT closed; Enservco investment initiated Continued focus on accretive deals; Enservco investment details ADT acquisition closed; Energy Services division launched Diversification advancing

Management Commentary

  • “Fourth quarter 2024 Building Solutions revenue, gross profit, and adjusted EBITDA all increased significantly… This realization of pent-up demand… positions Star for a great start to 2025” – Rick Coleman, CEO .
  • “Non-GAAP adjusted EBITDA from continuing operations increased to $1.1 million in Q4… Segment non-GAAP adjusted EBITDA at our Business Solutions division increased to $2.3 million” – Dave Noble, CFO .
  • “We have taken preemptive action to reduce… exposure to Canadian lumber in favor of domestic lumber… and implemented strategies… to further reduce the risks associated with changes in input costs” – Rick Coleman, CEO .
  • “ADT… generated revenue of approximately $10.5 million, gross margin of 48% and adjusted EBITDA of $2.4 million… costs… passed directly to customers” – Rick Coleman, CEO (ADT press release) .
  • “All options are on the table to maximize value for shareholders… 10% preferred dividend used as accretive acquisition currency” – Jeff Eberwein, Executive Chairman .

Q&A Highlights

  • Margin drivers: Fixed cost absorption and TT’s higher-margin product mix drove Building Solutions margin improvement; pipeline/backlog expected to support continued strength .
  • Other expense/investment impacts: ~$1.7M “other expense” tied to equity investment write-downs; reclassified from SG&A for alignment with Investments; equity write-downs are noncash and cannot be written back under GAAP .
  • Tariff exposure and hedging: Limited direct Canadian sourcing at KBS; hedging strategies and contract pass-throughs mitigate lumber price risk; EBGL has more Canadian exposure but is hedged .
  • Strategic posture and capital allocation: Executive Chairman reaffirmed willingness to consider all options (including a sale) to maximize shareholder value; preferred dividend supports using STRRP as acquisition currency, citing ADT deal structure .
  • Enservco default and impact: Write-down on Enservco note affects stockholders’ equity (over-collateralized) rather than P&L; no impact on ADT .

Estimates Context

Wall Street (S&P Global) consensus vs reported

MetricQ2 2024Q3 2024Q4 2024
Primary EPS Consensus Mean ($)-0.07*0.28*-0.06*
Primary EPS Actual per S&P ($)0.04*-0.13*-0.05*
Company GAAP EPS – Continuing Ops ($)-1.19 -0.61 -0.77
Company Non-GAAP Adjusted EPS ($)-0.29 -0.29 0.15
Revenue Consensus Mean ($)35.03M*45.38M*37.17M*
Company Reported Revenue ($)$13.5M $13.7M $17.1M

Values marked with * were retrieved from S&P Global.

Note: S&P “Primary EPS” and revenue methodologies may differ from company-reported GAAP metrics (e.g., normalized EPS, scope differences). The company’s comparisons in this recap reference GAAP and disclosed non-GAAP metrics from Star’s filings and releases .

Key Takeaways for Investors

  • Q4 demonstrated operating momentum and margin recovery in Building Solutions, with mix uplift from Timber Technologies and fixed-cost absorption; watch conversion of $17.2M backlog into early-2025 revenue .
  • Non-operating items (investment impairments/reclassifications) continue to drive GAAP losses; focus on adjusted metrics and segment EBITDA to gauge core performance .
  • Liquidity tighter and leverage higher post-acquisitions; sustained cash generation from Building Solutions and ADT integration will be critical to balance sheet normalization .
  • ADT adds a new, higher-margin Energy Services platform with pass-through cost models; near-term upside from strategic investments, geographic expansion, and potential sale-leaseback monetization of ADT real estate .
  • Tariff/macro risks remain; hedging and contract structures mitigate lumber volatility, but abrupt price shocks could dampen demand—monitor sourcing mix, hedges, and customer pass-through effectiveness .
  • Capital allocation remains active: ongoing preferred dividends (STRRP) and willingness to use preferred as acquisition currency; management open to strategic alternatives to unlock value .
  • Near-term trading lens: positive narrative on backlog conversion and ADT integration vs headline GAAP losses and leverage—positioning likely sensitive to sequential margin/EBITDA traction and cash flow stabilization in Q1–Q2 2025 .