10-Q: Star Equity Holdings Reports Increased Net Loss Amid Revenue Growth

Star Equity Holdings, Inc. reported a net loss of $1.8 million for the three months ended June 30, 2026, an increase from $0.7 million in the prior year, despite a significant rise in revenue driven by acquisitions.

Summary

• Star Equity Holdings, Inc. reported a net loss of $1.8 million for the three months ended June 30, 2026, compared to a net loss of $0.7 million for the same period in 2025. For the six months ended June 30, 2026, the net loss was $5.6 million, up from $2.4 million in the prior year.
• Total revenues for the three months ended June 30, 2026, increased to $54.9 million from $35.5 million in the prior year, largely due to the inclusion of revenues from the Star Operating Companies acquisition.
• Gross profit for the three months ended June 30, 2026, was $22.8 million, an increase from $18.6 million in the prior year. However, gross profit margins were pressured by rising input costs and lower volumes.
• Selling, general, and administrative expenses (SG&A) and other non-operating expenses increased to $24.0 million for the three months ended June 30, 2026, from $18.8 million in the prior year, driven by acquisitions and higher compensation costs.
• EBITDA loss for the three months ended June 30, 2026, was $0.6 million, an increase from an EBITDA loss of $0.2 million in the prior year. For the six months ended June 30, 2026, the EBITDA loss was $3.7 million, up from $1.7 million in the prior year.
• The company announced a merger agreement with Harte Hanks, Inc. on August 14, 2026, which is expected to be accounted for as a business combination.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as having a negative sentiment due to the increased net loss and EBITDA loss, despite revenue growth driven by acquisitions. The company faces ongoing macroeconomic challenges and operational pressures.

Positives

• Revenue for the three months ended June 30, 2026, increased by 54.6% to $54.9 million, primarily driven by the acquisition of Star Operating Companies.
• Gross profit for the three months ended June 30, 2026, increased by 22.3% to $22.8 million.
• The Energy Services segment showed positive momentum, with strong margin performance and increased activity levels, contributing $1.1 million in EBITDA for the three months ended June 30, 2026.
• The company raised $790,000 in net proceeds from the sale of Series A Preferred Stock under an At Market Issuance Sales Agreement.
• The company believes it has sufficient liquidity to satisfy its needs through at least the next 12 months.

Negatives

• Net loss attributable to common shareholders increased to $2.5 million for the three months ended June 30, 2026, from $0.7 million in the prior year.
• Basic and diluted loss per share was $0.66 for the three months ended June 30, 2026, compared to $0.23 in the prior year.
• EBITDA loss increased to $0.6 million for the three months ended June 30, 2026, from $0.2 million in the prior year.
• The Building Solutions segment experienced margin pressure due to rising input costs outpacing pricing actions and lower volumes.
• The Business Services segment saw a decrease in gross profit for the three months ended June 30, 2026, driven by lower RPO gross profit in EMEA and Asia Pacific.
• The company's cash and cash equivalents and restricted cash decreased to $8.9 million as of June 30, 2026, from $13.4 million as of December 31, 2025.

Risks

• Challenging macroeconomic conditions, including persistent inflation, market uncertainty, and decreased demand for labor, are expected to continue into the second half of 2026.
• Project timing delays in the Building Solutions segment are affecting revenue recognition, with some projects being delayed due to customers securing financing.
• The company faces competition in its markets, which has pressured margins in the Building Solutions segment.
• The demand for Energy Services products is tied to oil and gas prices, drilling activity, and capital expenditures by E&P companies, which can be volatile.
• Ongoing macroeconomic uncertainty, including potential for renewed inflationary pressures or changes in interest rate policy, could have material adverse effects.
• Risks arising from global economic instability, conflicts, wars, and health crises could impact the business.
• The company's ability to utilize net operating loss carryforwards may be substantially limited if an ownership change occurs.
• The merger agreement with Harte Hanks, Inc. is subject to customary closing conditions, including stockholder approval and debt financing, and there can be no assurance it will be completed.

Future Outlook

The company anticipates that challenging market conditions in the Business Services segment, characterized by persistent inflation, market uncertainty, and decreased labor demand, will continue into the second half of 2026. In the Building Solutions segment, while demand remains strong, project delays due to customer financing are expected. The company is exploring strategic alternatives to maximize stockholder value, including organic growth, strategic initiatives, and potential acquisitions or dispositions.

Management Comments

• The company believes its diversified multi-industry holding company structure allows management to focus on capital allocation, strategic leadership, mergers and acquisitions, capital markets, and investor relations.
• Management believes that the company operates in markets and geographies that will allow for continued growth of its core businesses.
• The company plans to continue looking at complementary businesses that meet its acquisition growth criteria, as well as larger, more transformational mergers and acquisitions.
• The company believes it has sufficient liquidity to satisfy its needs through at least the next 12 months.

Industry Context

StockSavvy.ai notes that the Building Solutions segment is experiencing a broader industry trend of increased acceptance of offsite/prefab construction, with the Modular Building Institute reporting significant growth in this area. However, the segment is also facing headwinds from higher interest rates impacting customer financing and project delays. The Business Services segment is navigating challenging labor market conditions and economic uncertainty, while the Energy Services segment benefits from improved oil prices and activity in specific markets like geothermal.

Comparison to Industry Standards

• The Building Solutions segment's revenue growth is influenced by the broader construction industry trend where permanent modular construction has increased significantly, from 2.14% in 2015 to an estimated 6.64% in 2023, indicating a growing market acceptance for offsite construction methods.
• The company's Business Services segment operates in the global RPO and contracting services market, which is sensitive to labor market dynamics and economic conditions. Competitors in this space include large global staffing firms and specialized RPO providers.
• The Energy Services segment's performance is directly correlated with oil and gas prices and E&P company capital spending, a common benchmark for the oilfield services industry. The U.S. rig count, a key indicator, was down 4% year-over-year in June 2025, reflecting industry-wide pressures.

Legal Proceedings

• The company is subject to various claims, lawsuits, contract disputes, and other complaints arising in the ordinary course of business.
• The company believes that the final resolution of these matters will not have a material adverse effect on its financial condition, results of operations, or liquidity.
• The company had $0.2 million of legal reserves as of both June 30, 2026, and December 31, 2025.

Stakeholder Impact

• Shareholders: Increased net loss and loss per share may negatively impact shareholder value. The proposed merger with Harte Hanks could create new opportunities or risks depending on its completion and terms.
• Creditors: The company's liquidity and debt levels will be monitored. The proposed merger financing involves existing credit facilities and potential alternative debt financing.
• Employees: The company's financial performance and strategic initiatives, including acquisitions and potential dispositions, could impact employment levels and opportunities.
• Customers: The company is navigating challenging market conditions and customer demand fluctuations across its segments.

Next Steps

• Continue to explore all strategic alternatives to maximize value for stockholders, including improving market position and profitability, and enhancing valuation.
• Monitor capital markets for opportunities to repurchase shares.
• Review information regarding potential acquisitions or combinations.
• Provide information to third parties regarding potential dispositions of assets or business lines.
• Complete the integration of Star Operating Companies and Alliance Drilling Tools (ADT) operations and internal controls.
• Complete the proposed merger with Harte Hanks, Inc., subject to closing conditions including stockholder approval and debt financing.

Key Dates

Recommendation

The company continues to report increasing net losses and EBITDA losses, despite revenue growth driven by acquisitions. The deterioration in core profitability metrics, coupled with ongoing macroeconomic challenges and operational pressures in key segments, suggests a worsening financial trajectory. While the proposed merger with Harte Hanks presents a potential future catalyst, the current financial performance and outlook warrant a cautious approach.

Keywords

Star Equity Holdings, Form 10-Q, Quarterly Report, Business Services, Building Solutions, Energy Services, Merger Agreement, Harte Hanks