Capstone Holding Corp. Reports $1.7 Million Net Loss in Q1 2025 Amid Sales Decline

Capstone Holding Corp. reported a net loss of $1.7 million for the first quarter of 2025, a significant increase from the $1.1 million loss recorded in the same period of 2024. The company's net sales decreased by 16% to $7.9 million, down from $9.4 million a year earlier. This decline was attributed to challenging economic conditions, including trade policies, rising interest rates, and colder winter temperatures, which adversely affected sales volumes, particularly in veneer products. The cost of goods sold also decreased by 14% to $6.6 million, reflecting lower volumes and higher fixed freight costs.

In terms of operational metrics, Capstone's gross profit margin fell to 16.8% from 18.6% year-over-year, primarily due to the same factors impacting sales. Selling, general, and administrative expenses rose by 12% to $2.8 million, driven by increased investor relations and legal fees. The company reported a loss from operations of $1.4 million, compared to a loss of $717,000 in the prior year. The weighted average number of common shares outstanding increased significantly to 5,190,251 from 157,610, following a public offering of 1.25 million shares at $4.00 each, which generated net proceeds of approximately $3.3 million.

Capstone's balance sheet showed total assets of $52.2 million as of March 31, 2025, up from $47.2 million at the end of 2024. Current assets increased to $16.7 million, primarily due to a rise in cash and accounts receivable. The company’s working capital improved to $2.1 million, a notable increase from $250,000 at the end of the previous fiscal year. However, total liabilities also rose to $25.2 million, up from $20.7 million, largely due to increased accounts payable and a higher line of credit balance.

Strategically, Capstone has focused on expanding its distribution network and product offerings. The company operates in 31 states and serves over 400 active customers, primarily in the masonry and building materials sectors. The management indicated plans for organic growth and potential acquisitions to enhance its market position. The company is also addressing its financial covenants with its revolving credit facility, which it was not in compliance with as of March 31, 2025, but has since executed an amendment to extend the maturity date.

Looking ahead, Capstone remains optimistic about its growth prospects despite current market challenges. The company plans to utilize proceeds from its recent public offering to fund both organic growth initiatives and acquisitions. Management believes that the ongoing economic conditions present opportunities for value-creating acquisitions in the building products sector, which could further strengthen its market presence and operational capabilities.