Questioned Hart-Hanks' declining revenue and EBITDA trends, the valuation multiple, and how Star Equity plans to reverse the decline, also asking about the G Group investment.

Jeff Eberwein defended the valuation, stating that on an apples-to-apples basis (adjusting for leases/pension), the acquisition is at less than 3x EV to EBITDA. He emphasized initial focus on $10 million cost synergies and then investing to stabilize and grow the business, citing a recent Samsung win as positive. He deferred comment on the G Group, stating they made a proposal and to 'stay tuned'. “But it only makes sense if we're able to do something with it after it's inside STAR. And initially, focusing on the cost energies is going to be the main focus. But we do have aspirations to... invest in it and grow it.”

Asked for more detail on the strong year-over-year and sequential performance of the Energy Services division.

Rick Coleman attributed the strength to increased capital investments in tools, which were previously held back by prior owners, allowing them to fulfill customer requirements. Jeff Eberwein added that these CapEx increases were temporary, and future CapEx would return to maintenance levels of about $1 million annually. He also highlighted successful diversification into geothermal, mining, water wells, and industrial gases. “So we've done a good deal this year in investing in those tools and it's paid off. It's really helped us be able to deliver. a full complement of what, um, what our customers require.”

Inquired about the expected timeframe for realizing the $10 million in synergies from the Hart-Hanks acquisition.

Jeff Eberwein explained that synergies would be realized in phases, starting with duplicative public company costs (e.g., audits, boards) in the first quarter post-close, followed by corporate team consolidation (finance, IT). He hoped that, similar to the Hudson merger, the full $10 million would be realized within a year of closing. “A year in, we will have fully realized the $10 million.”

STRR

Star Equity Holdings (STRR) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Industrials· Aug 14, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Hart-Hanks Merger Cost Synergies	$10 million high materiality	Post-merger	High
Hart-Hanks Merger Closing	Q4 high materiality	Q4 · FY26	Medium
Combined Company Pro Forma Revenue (post-merger)	around $400 million high materiality	Pro forma	High
Combined Company Pro Forma Adjusted EBITDA (post-merger)	approximately $30 million high materiality	Pro forma	High
Building Solutions Normal Run Rate Revenue	$20 million medium materiality	Per quarter	Medium
Building Solutions Normal Run Rate Gross Profit Margin	25% medium materiality	Per quarter	Medium
Building Solutions Normal Run Rate Adjusted EBITDA Margin	10% to 15% medium materiality	Over time	Medium
Energy Services Maintenance CapEx	around $1 million low materiality	Per year	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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 million	2%	—	$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 million	19%	—	$1.2 million Adjusted EBITDA

Orderbook & backlog

Building Solutions Quarter-End Backlog $10.6 million Q2 FY26 end

up from $8 million at Q1 end

Building Solutions New Orders $17.3 million Q2 FY26

highest quarterly order intake since Q2 FY25

Deals & partnerships

Hart-Hanks Merger 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.

Hudson Prior merger that resulted in $3 million in achieved synergies.

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

ACG Acquisition 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

Professional talent market pressure Q2 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 uncertainty Ongoing

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 construction Q2 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 recognition Q2 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 EMEA Q2 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

Hart-Hanks Merger Closing

Q4 FY26

Current Announced, pending regulatory/shareholder approvals

Target Closed

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.

Find out whether STRR delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 5 chapters

Detailed narrative

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.

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.

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.

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).

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.