Capstone Holding (CAPS) Q3 2025 earnings summary

Executive summary

• Pro forma revenue increased 19% year-over-year to $41.2 million, driven by the Carolina Stone acquisition and organic expansion, with adjusted EBITDA up 46% and gross profit rising 34% due to margin expansion and cost discipline.

• Two acquisitions completed in 2025, with a third targeted to close by December, positioning the platform as a multi-regional distributor integrating Instone, Carolina Stone, and the upcoming acquisition.

• Integration of Carolina Stone achieved key milestones in ERP, logistics, and marketing, supporting scalable growth and rapid integration of future acquisitions.

• The platform is scaling toward a $100M revenue run-rate by early 2026, supported by strong M&A momentum and a robust acquisition pipeline.

• Net loss widened in Q3 2025 due to higher SG&A, transaction, and debt extinguishment costs, despite revenue growth.

Financial highlights

• Pro forma revenue reached $41.2 million YTD 2025, up 19% year-over-year, with Q3 revenue at $15.3 million and gross profit up 34% year-over-year.

• Gross margin expanded to 24.4% from 21.7% year-over-year, with Q3 2025 gross margin at 23.8%.

• Adjusted EBITDA margin increased from 2.9% to 3.6% YTD, with Q3 adjusted EBITDA margin at 5.7%.

• Non-recurring acquisition-related and non-cash financing costs totaled $1.5 million, negatively impacting net income.

• SG&A expenses rose due to integration and acquisition activities, but cost discipline supported margin expansion.

Outlook and guidance

• Targeting a $100 million revenue run-rate by early 2026, with 3-4 additional accretive acquisitions planned for 2026.

• Expecting organic revenue and earnings growth in 2026 as macroeconomic conditions improve, supported by anticipated interest rate cuts and easing inflation.

• No further acquisitions expected to be announced in 2025; focus shifts to 2026 pipeline.

• Continued under supply of housing underpins long-term sector growth.

• Management expects sufficient liquidity for at least one year, supported by recent capital raises and credit facilities.