STRR Q2 2026 - Post-Call Earnings Update
Verdict
- Revenue of $54.9m missed the $56.9m consensus by 3.5%; nothing on the call changed the reported figures.
- Adjusted diluted loss per share of $(0.15) missed the $(0.07) consensus by $0.08.
- Still no financial guidance. Management instead put numbers on what a normal quarter looks like: Building Solutions should run $20m of revenue a quarter at a 25% gross margin and a 10–15% adjusted EBITDA margin, against $14.6m and 3.4% this quarter.
- The one thing that matters: the quarter is no longer the story. Star signed a merger agreement with Harte Hanks late the night before at $5 per share, about $38m fully diluted, half cash and half Star preferred, targeted to close by year-end. Management frames the combination as roughly $400m of revenue and about $30m of pro forma adjusted EBITDA once $10m of cost synergies land — which would triple the revenue base of a company whose two operating divisions just posted a combined $1.7m of quarterly EBITDA.
Consensus scorecard
| Metric / basis | Quartr actual | API Ninjas consensus | Beat/Miss | Beat/Miss % |
|---|---|---|---|---|
| Revenue (total revenues, consolidated GAAP) | $54.941m | $56.919m | Miss $1.978m | -3.5% |
| EPS (adjusted non-GAAP diluted) | $(0.15) | $(0.0733) | Miss $0.077 | -104.6% |
Guidance & KPIs
| Item | New on the call | Prior guide | Prior-year actual |
|---|---|---|---|
| Financial guidance | None given | None given | — |
| Harte Hanks merger | $5.00/share, ~$38m fully diluted; 50% cash capped at $19.2m, 50% Star preferred at 0.25 shares each | Not previously announced | — |
| Expected close | Q4 2026, after a 30-day go-shop and an S-4; no Star shareholder vote | — | — |
| Combined pro forma revenue / adj. EBITDA | ~$400m / ~$30m once $10m of synergies are realized | — | — |
| Hudson merger synergies | ~$3m achieved | ~$2m projected at announcement | — |
| Building Solutions mid-cycle run rate | $20m revenue/qtr, 25% gross margin, 10–15% adj. EBITDA margin | Not previously quantified | $14.6m, 21.9%, 3.4% this quarter |
Management commentary
- Harte Hanks is funded from Star's cash, Harte Hanks' cash, and Harte Hanks' undrawn $25m revolver — no external capital and, deliberately, no common shares: "we're not using any common shares as part of this transaction, and our plan is to continue buying back shares."
- Pressed on five years of revenue and EBITDA decline at the target, Eberwein argued the multiple is under 3x EV/EBITDA on his math, reached by adding the full $10m of unrealized synergies to roughly $6m of trailing adjusted EBITDA and excluding lease and pension obligations from the liability stack.
- The Building Solutions shortfall was attributed to weak single-family and multifamily construction in the Northeast and upper Midwest, with traction confined to workforce, affordable, senior and healthcare housing. New orders of $17.3m were the best in a year but still the fifth straight quarter under $20m.
- Business Services renewals are holding and mostly non-competitive, but year-to-date new-logo annual contract value is $2.1m, which Eberwein called "way below our expectations," blaming a low-hire, low-fire, low-attrition market and client paralysis over AI.
- The GEE Group proposal is still live — GEE has hired a banker to run a strategic-alternatives process and management would say only "stay tuned."
Quality of earnings
- The $3m of Hudson merger synergies is an annualization, not a banked amount. Management's own bridge is first-half corporate cost of $3.6m against $5.1m pro forma — $1.5m of actual six-month savings, doubled to reach $3m.
- Energy Services' 126% adjusted EBITDA growth to $1.2m was bought with capital. Management said tool capex has been running at roughly twice the ~$1m annual maintenance level since the acquisition and will revert, so the incremental return on that spend has not yet been tested against a normal capex base.
- Building Solutions sits about $1.5–2.5m of quarterly EBITDA below management's own mid-cycle definition. Q2 delivered $0.5m of divisional adjusted EBITDA on $14.6m of revenue, a 3.4% margin against the stated 10–15% target on $20m of revenue.
Gotchas & watch items
- The sub-3x purchase multiple depends on synergies that have not been realized and on excluding leases and pension from the liability stack; on trailing adjusted EBITDA of roughly $6m alone the $38m equity price is over 6x.
- Maximum cash consideration is $19.2m against $6.8m of Star unrestricted cash, so the deal leans on Harte Hanks' balance sheet and its $25m revolver — the combined company carries revolver capacity Star does not draw on today.
- Preferred stock is the uncapped half of the consideration, and Star already paid $0.6m of Series A preferred dividends this quarter; a larger preferred stack sits ahead of common shareholders permanently.
- Two transactions are in flight at once: the Harte Hanks S-4 and vote process runs through year-end while the GEE Group proposal remains open, and the go-shop period lets a third party bid for Harte Hanks for 30 days.
Event: https://web.quartr.com/companies/13724/events/666690/overview Retrieved: 2026-08-14T20:45:00Z Comparison mode: maximal · Scorecard contract: v1 The Harte Hanks merger was announced separately the morning of the call and is not in the Q2 release.