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    STRR
    Earnings call· Jun 2026(Q2 FY26)

    Star Equity Holdings Q2 FY26 earnings call STRR

    Aug 14, 2026 Source

    Executive summary

    Star Equity Holdings Q2 FY26 — Mixed Performance with Strategic Merger Announcement

    Star Equity Holdings reported a quarter of mixed divisional performance, with strong growth in Energy Services offsetting softness in Building Solutions and modest gains in Business Services. The company announced a strategic merger with Hart-Hanks, aiming for significant cost synergies and an expanded business process outsourcing footprint. Management continues to focus on disciplined execution, growth investments, and capital allocation, including ongoing share repurchases, while navigating macroeconomic uncertainties.

    Highlights

    4

    • Achieved $3 million in merger synergies from the Hudson acquisition, exceeding the initial $2 million projection.

    • Energy Services revenue increased 19% year-over-year to $3.9 million, with gross profit up 75% and adjusted EBITDA up 126%.

    • Business Services revenue grew modestly by 2% year-over-year to $36.4 million despite challenging market conditions.

    • Building Solutions quarter-end backlog increased to $10.6 million from $8 million in Q1, with new orders of $17.3 million.

    Concerns

    3

    • Building Solutions performance was below expectations, with revenue of $14.6 million, impacted by market softness and project timing.

    • Business Services gross profit declined 4% year-over-year to $17.8 million, and adjusted EBITDA fell from $2.2 million to $1.6 million, due to growth investments and professional talent market pressure.

    • Regional gross profit declines in Business Services, with EMEA down 10% and Asia-Pac down 13%.

    Guidance & targets

    8
    CategoryTargetConfidence
    Hart-Hanks Merger Cost Synergies
    $10 million
    high materiality
    High
    Hart-Hanks Merger Closing
    Q4
    high materiality
    Medium
    Combined Company Pro Forma Revenue (post-merger)
    around $400 million
    high materiality
    High
    Combined Company Pro Forma Adjusted EBITDA (post-merger)
    approximately $30 million
    high materiality
    High
    Building Solutions Normal Run Rate Revenue
    $20 million
    medium materiality
    Medium
    Building Solutions Normal Run Rate Gross Profit Margin
    25%
    medium materiality
    Medium
    Building Solutions Normal Run Rate Adjusted EBITDA Margin
    10% to 15%
    medium materiality
    Medium
    Energy Services Maintenance CapEx
    around $1 million
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Business Services
    Modest revenue growth despite macroeconomic uncertainty and pressure in the professional talent market. Gross profit and adjusted EBITDA declined due to deliberate growth investments in digital solutions and new geographies. Regional performance was mixed, with strong growth in the Americas offset by declines in EMEA and Asia-Pac.
    Gross Profit: $17.8 millionGross Profit YoY Change: -4%Adjusted EBITDA YoY Change: from $2.2 million to $1.6 millionGrowth Investments: $1.5 million (Q2 FY26) vs $0.8 million (Q2 FY25)Americas Gross Profit Growth: ~10%EMEA Gross Profit Decline: 10%Asia-Pac Gross Profit Decline: 13%Asia-Pac Revenue Share: 62% of divisional revenueAsia-Pac Gross Profit Share: 43% of divisional gross profitAmericas Gross Profit Share: 39% of divisional gross profitEMEA Gross Profit Share: 18% of divisional gross profitRolling 4-quarter RPO New Business Total Contract Value: $122.5 millionRolling 4-quarter RPO New Logo Wins: $8.3 millionRolling 4-quarter RPO Renewals and Expansions: $114.2 millionTrailing 12-month Gross Profit: $72 million (stable)Trailing 12-month Adjusted EBITDA Margin: 5.4% (down from 7.9% a year ago)
    		$36.4 million2%—$1.6 million Adjusted EBITDA
    Building Solutions
    Performance was below expectations due to market softness in residential and commercial construction and project timing, with significant revenue recognition deferred to Q3. The division is focusing on specialty areas like workforce, affordable, and senior housing.
    Revenue (Q2 FY25 pro forma): $20.4 millionGross Profit: $3.2 millionGross Profit (Q2 FY25 pro forma): $5.2 millionAdjusted EBITDA (Q2 FY25 pro forma): $2.3 millionQuarter-end Backlog: $10.6 millionQuarter-end Backlog QoQ Change: up from $8 million (Q1)Trailing 12-month Book-to-Bill Ratio: 0.77Trailing 12-month Book-to-Bill Ratio QoQ Change: up from 0.72 (last quarter)New Orders: $17.3 million (highest since Q2 FY25)
    		$14.6 million——$0.5 million Adjusted EBITDA
    Energy Services
    Delivered a strong quarter with significant year-over-year gains in revenue, gross profit, and adjusted EBITDA. This was driven by higher utilization of tools and new client wins in geothermal and mining industries, reflecting benefits from diversified exposure across drilling applications.
    Revenue (Q2 FY25 pro forma): $3.3 millionGross Profit: $1.9 millionGross Profit YoY Change: 75%Gross Profit (Q2 FY25 pro forma): $1.1 millionAdjusted EBITDA YoY Change: 126%Adjusted EBITDA (Q2 FY25 pro forma): $0.5 million
    		$3.9 million19%—$1.2 million Adjusted EBITDA

    Operational metrics

    10
    Merger Synergies Achieved (Hudson)
    $3 millionexceeded initial $2 million projection
    LTM

    Merger synergies achieved from the Hudson acquisition, measured from the adjusted EBITDA table.

    Corporate Costs
    $3.6 milliondown from $5.1 million pro forma
    H1 FY26

    Corporate costs for the first half of the year, reflecting savings from merger synergies.

    Growth Investments
    $1.5 millionvs $0.8 million in Q2 FY25
    Q2 FY26

    Investments made in the digital solution, Hudson Fusion, and related initiatives, impacting adjusted EBITDA.

    Cash Balance
    $8.9 million
    Q2 FY26 end

    Total cash on the balance sheet at the end of the second quarter.

    Working Capital (excluding cash)
    $21.5 millionvs $22.4 million at year-end
    Q2 FY26 end

    Working capital position, showing progress on efficient capital management.

    Share Repurchases Executed
    $0.2 million
    Q2 FY26

    Amount of shares repurchased during the quarter, reflecting management's view of undervalued stock.

    Share Repurchase Authorization Remaining
    $1.6 millionout of $3 million authorization
    Q2 FY26 end

    Remaining amount on the share repurchase authorization approved by the board last September.

    Energy Services CapEx (temporary increase)
    twice maintenance levels
    Recent past

    Increased capital expenditure for tool investments, which is temporary and expected to return to lower maintenance levels.

    Hart-Hanks Acquisition Funding
    Half cash, half preferred stock
    Acquisition

    Details on how the $30 million Hart-Hanks acquisition will be financed, emphasizing no external capital raise is needed.

    RPO New Business Total Contract Value
    $122.5 million
    Rolling 4-quarter

    Total contract value for RPO new business over the last four quarters, showing mix of new and existing client contributions.

    Orderbook & backlog

    2
    Building Solutions Quarter-End Backlog$10.6 millionQ2 FY26 end

    up from $8 million at Q1 end

    Building Solutions New Orders$17.3 millionQ2 FY26

    highest quarterly order intake since Q2 FY25

    Deals & partnerships

    3
    Hart-HanksMerger agreement to acquire Hart-Hanks, expanding business process outsourcing capabilities.$30 million

    Acquisition for $5 per share, funded half in cash and half in preferred stock. Max cash outlay capped at $19.2 million. Subject to 30-day go-shop period, S-4 approval by SEC, and Hart-Hanks shareholder vote. No vote required from Star Equity shareholders. Hart-Hanks' businesses are focused on customer care, revenue solutions, and fulfillment logistics, complementing Star Equity's talent and HR segments.

    HudsonPrior merger that resulted in $3 million in achieved synergies.

    Mentioned as a successful prior merger for comparison of synergy realization.

    ACGAcquisition to expand presence in the Japanese market.

    Leveraging this acquisition to land and expand clients in the Japanese market within the Business Services division.

    Risks & headwinds

    5
    Professional talent market pressureQ2 FY26, ongoing

    Business Services gross profit down 4% YoY, adjusted EBITDA down from $2.2 million to $1.6 million.

    Mitigation: Growth investments in digital solutions, agentic AI, automation tools to enhance recruiter productivity and candidate matching.

    Macroeconomic uncertaintyOngoing

    Client hesitancy on hiring and investments, low attrition impacting new business conversion to revenue.

    Mitigation: Focus on land and expand playbook, expanding footprint, and quicker support model for new and prospective clients.

    Market softness in residential and commercial constructionQ2 FY26, ongoing

    Building Solutions revenue $14.6 million (Q2 FY26) vs $20.4 million (Q2 FY25 pro forma); below normal run rate of $20 million/quarter.

    Mitigation: Disciplined project selection, operational execution, margin management, and focus on specialty areas like workforce, affordable, and senior housing.

    Project timing and revenue recognitionQ2 FY26 impact, Q3 FY26 recognition

    Large Building Solutions project mainly completed in Q2, but most revenue recognized in Q3.

    Mitigation: Acknowledged as a timing issue, not a loss of revenue.

    Geopolitical issues in EMEAQ2 FY26, ongoing

    EMEA gross profit declined 10% in Business Services.

    Mitigation: Acknowledged as a challenging condition, but Americas growth is offsetting.

    What to watch in Q3 FY26

    5

    Hart-Hanks Merger Closing

    Q4 FY26
    CurrentAnnounced, pending regulatory/shareholder approvals
    TargetClosed

    Why it matters

    Completion of this strategic acquisition is key to the company's expanded BPO strategy and realization of significant synergies.

    Our best guess is that the deal is going to close in the fourth quarter. sometime. So the way we're thinking about it is by year-end we think we'll have a closed deal.

    Q&A highlights

    6

    Asked for expectations for Building Solutions revenue and adjusted EBITDA, given the disappointing Q2 results.

    Management stated a normal run rate for Building Solutions would be $20 million in quarterly revenue, 25% gross profit margin, and 10-15% adjusted EBITDA margin over time. They noted current market weakness, especially in single-family and commercial multifamily, but highlighted traction in specialty areas like affordable and senior housing.

    “I would say it's 20 million in revenue a quarter, 25% gross profit margin. And over time, we think an adjusted EBITDA margin should be 10 to 15%.”

    asked by Joseph Gomes · answered by Jeffrey Eberwein

    2 min read5 chapters

    Detailed Narrative

    01

    Hart-Hanks Merger Strategic Rationale

    Star Equity Holdings announced a merger agreement to acquire Hart-Hanks for $5 per share, totaling approximately $30 million. The consideration will be split equally between cash and preferred stock, with a maximum cash outlay of $19.2 million. The acquisition is expected to close in Q4 FY26, pending SEC approval of an S-4 filing and Hart-Hanks shareholder vote. The combined entity is projected to have around $400 million in revenue and $30 million in adjusted EBITDA, including $10 million in cost synergies, which are expected to be fully realized within a year of closing.

    02

    Business Services Growth Investments and Regional Dynamics

    The Business Services division made $1.5 million in growth investments in Q2 FY26, primarily in its digital solution, Hudson Fusion, and agentic AI/automation tools. These investments impacted adjusted EBITDA, which declined to $1.6 million from $2.2 million year-over-year. Regionally, the Americas performed well with approximately 10% gross profit growth, while EMEA and Asia-Pac experienced declines of 10% and 13% respectively, reflecting challenging market conditions. Asia-Pac remains the largest region, contributing 62% of divisional revenue and 43% of gross profit.

    03

    Building Solutions Market Headwinds and Project Timing

    The Building Solutions division's performance was below expectations, with Q2 FY26 revenue of $14.6 million, down from $20.4 million pro forma in Q2 FY25. This was attributed to market softness🌐 in residential and commercial construction, as well as project timing, with a large project's revenue recognition shifting from Q2 to Q3. The division is focusing on specialty areas like workforce, affordable, assisted living, and senior housing, which are expected to be significant business drivers as market conditions improve.

    04

    Energy Services Strong Performance and Diversification

    The Energy Services division delivered a strong quarter, with revenue up 19% to $3.9 million, gross profit up 75% to $1.9 million, and adjusted EBITDA up 126% to $1.2 million year-over-year. This growth was driven by higher utilization of tools and new client wins in the geothermal and mining industries. The company has invested in new tools, leading to a temporary increase in CapEx, but expects future CapEx to return to maintenance levels of approximately $1 million per year. The division is also expanding into water wells and industrial gases (hydrogen, helium, carbon capture).

    05

    Capital Management and Share Repurchases

    Star Equity Holdings ended Q2 FY26 with $8.9 million in cash, including $2.1 million of restricted cash. Working capital, excluding cash, improved slightly to $21.5 million from $22.4 million at year-end. The company continued its share repurchase program, buying back $0.2 million in Q2, with $1.6 million remaining on the $3 million authorization. Management views share repurchases as an attractive capital allocation given their belief that the stock is undervalued, and plans to continue buying back shares post-Hart-Hanks merger.

    AI-generated summary of the company’s earnings call. Not investment advice.