Breaking Down Steel Connect, Inc. (STCN) Financial Health: Key Insights for Investors

You're looking at Steel Connect, Inc. (STCN) financials to understand the investment story, but the real takeaway is simple: the public story is over, and the final chapter was written early in the 2025 fiscal year, so any analysis must be framed by the definitive merger with Steel Partners Holdings L.P. The firm was delisted on January 2, 2025, with shareholders receiving $11.45 per share in cash, which is the ultimate valuation metric for this period. Still, the underlying business showed momentum right up to the end, reporting Q1 Fiscal Year 2025 net revenue of $50.5 million, a solid 22.1% jump from the prior year, driven by its ModusLink supply chain segment. The operational efficiency improved signifcantly, with Adjusted EBITDA soaring 123% to $7.4 million, even though net income dropped to $2.4 million due to other gains and losses. Honestly, the key to understanding the company's financial health wasn't just the $233.9 million in cash on the balance sheet, but the fact that the majority owner decided the best path forward was privatization at a fixed price, capping the upside for public investors.

Revenue Analysis

You need to know where Steel Connect, Inc. (STCN)'s money is coming from right now, not last year. The direct takeaway is that the company started its fiscal 2025 with a strong surge, posting net revenue of $50.5 million for the first quarter, which ended October 31, 2024. That's a significant 22.1% jump from the $41.3 million reported in the same period of the prior year. That kind of near-term growth is defintely a positive signal.

Breaking Down the Revenue Streams

Steel Connect, Inc. (STCN) operates primarily through two distinct business segments: Direct Marketing and Supply Chain. The company's core offering, delivered through its subsidiary ModusLink Corporation, is digital and physical supply chain solutions, which serves diverse sectors like consumer electronics, computing, and telecommunications. However, for now, the Direct Marketing segment is the one generating the maximum revenue for the company. That's your largest revenue contributor, so you need to keep a close eye on its performance.

The recent revenue increase was not accidental; it was driven by two clear factors: a favorable sales mix and higher volumes, particularly from clients in the computing and consumer electronics markets. This shows the company is successfully capturing demand in high-growth tech-adjacent areas. Plus, a favorable sales mix means they are selling more of their higher-margin services, which is why the gross profit margin climbed significantly to 34.1% in Q1 FY2025, up from 27.8% a year earlier.

Near-Term Growth and Geographic Footprint

Looking at the broader picture, the Trailing Twelve Months (TTM) revenue, which captures the most recent full year of activity up to October 2024, stands at $183.26 million. This TTM figure represents a year-over-year growth rate of 2.34%, which is a modest but positive trend after previous years of decline. Geographically, the majority of the company's revenue originates from the United States, but they also maintain a global presence in places like China and the Netherlands, which introduces both market diversification and foreign exchange risk.

To understand the full context of their operations, you should review their core principles: Mission Statement, Vision, & Core Values of Steel Connect, Inc. (STCN).

What this latest data tells us is that the company's focus on segments like computing and consumer electronics is paying off in the short term, driving a significant Q1 revenue increase. The challenge for the rest of FY2025 will be maintaining that 22.1% growth momentum across the remaining three quarters.

• Monitor: Sustained demand in computing and consumer electronics.
• Watch: Segment revenue split for any shift from Direct Marketing.
• Action: Factor the 2.34% TTM growth into your valuation models.

Profitability Metrics

You're looking at Steel Connect, Inc. (STCN) and seeing a high net profit number, but you need to know if that profit is sustainable and driven by the core business. The short answer is that while the company's gross margin is strong against industry peers, the elevated net margin is largely due to non-core income, not operational efficiency alone.

For the trailing twelve months (TTM) ending October 31, 2024, which serves as our best proxy for fiscal year 2025 data, Steel Connect, Inc. (STCN) reported $183.26 million in revenue. Here's the quick math on how that revenue translates into profit:

• Gross Profit Margin: 29.60%
• Operating Profit Margin: 6.63%
• Reported Net Profit Margin (TTM): 50.53%

Gross, Operating, and Net Profit Margins

The gross profit margin of 29.60% (calculated from $54.25 million TTM gross profit) is a clear strength. This is where Steel Connect, Inc. (STCN) shines in managing its direct costs, like material procurement and labor, for its supply chain solutions business (ModusLink Corporation). For context, the industry average gross margin for Logistics & Transportation is typically in the 15% to 25% range in 2025, so the company is operating well above its peers on this metric.

However, the operating profit margin, which strips out selling, general, and administrative (SG&A) expenses, drops significantly to 6.63% (based on $12.16 million TTM operating income). This is a realistic measure of core business health. To be fair, this 6.63% is right in line with or slightly better than the 5% to 7% operating margin guidance reported by peers like Universal Logistics in Q3 2025, and the 6.7% net operating margin projected for the global airline industry's supply chain segment in 2025.

The reported TTM net profit margin of 50.53% is the anomaly. Honestly, no supply chain company generates a 50% net margin from shipping and logistics. This figure is heavily skewed by non-operating income, such as the $13.31 million in TTM Interest & Investment Income, which is a key factor boosting the bottom line. You should defintely focus on the operating margin for a true sense of core profitability.

Trends in Profitability and Operational Efficiency

The most encouraging near-term trend is the sharp improvement in gross margin. In the first quarter of fiscal year 2025 (ending October 31, 2024), the gross profit margin jumped to 34.1%, a significant increase from 27.8% in the same quarter the prior year. This signals a clear win in operational efficiency and cost management, driven by a favorable sales mix and higher volumes in the computing and consumer electronics markets.

Here's how the core profitability compares to the industry, focusing on the realistic operational picture:

The high gross margin trend, particularly the Q1 FY2025 jump to 34.1%, proves management is effectively controlling the cost of goods sold (COGS) and leveraging value-added services. Still, the narrow operating margin of 6.63% shows that SG&A expenses are consuming a large portion of that gross profit, which is a key area for investors to monitor. For a deeper look at the balance sheet and overall financial stability, you can read the full analysis at Breaking Down Steel Connect, Inc. (STCN) Financial Health: Key Insights for Investors.

Debt vs. Equity Structure

You're looking at Steel Connect, Inc. (STCN) and wondering how they finance their operations-a smart move, because the debt-to-equity (D/E) ratio tells a clear story about financial risk and management philosophy. The direct takeaway here is that Steel Connect, Inc. operates with an extremely conservative, cash-rich capital structure, preferring equity and internal funds over debt.

As of the first quarter of fiscal year 2025 (ending October 2024), Steel Connect, Inc.'s total debt stood at a mere $18.90 million. This is a remarkably low figure, especially when you consider the company's cash and cash equivalents of $233.93 million. Here's the quick math: this leaves them in a net cash position of $215.03 million, meaning they could pay off all their debt more than twelve times over with just the cash on hand. That's a fortress balance sheet.

The company's debt load is minimal, and what remains is likely operational debt or minor facilities. This follows a significant deleveraging action: in September 2024, Steel Connect, Inc. fully repaid the outstanding principal and interest on its $14.94 million 7.50% Convertible Senior Note due 2024. [cite: 2 from 1, 1 from 1] Eliminating this major long-term liability underscores their preference for a debt-free operation, a financial strategy that reduces interest expense and rollover risk in a higher-rate environment.

The Debt-to-Equity (D/E) ratio is the clearest signal of this strategy. This ratio measures how much debt a company uses to finance its assets relative to the value provided by shareholders' equity (book value). Steel Connect, Inc.'s D/E ratio is currently sitting at a very low 0.05. To be fair, this is a massive outlier compared to the industry average for Conglomerates, which often hovers around 1.01. [cite: 8 from 1] This comparison tells you two things:

• Low Risk: The company is defintely not heavily leveraged.
• High Flexibility: It has significant capacity to take on debt for strategic acquisitions or large capital expenditures if a compelling opportunity arises.

With total shareholder equity at $394.31 million as of October 2024, the company is overwhelmingly funded by equity and retained earnings, not borrowed money. This conservative approach means less financial risk for investors, but it can also sometimes signal that management is prioritizing capital preservation over aggressive, debt-fueled growth. Still, having a $11.9 million readily available borrowing capacity under their revolving credit facility provides a clean, low-cost liquidity buffer for working capital needs. [cite: 2 from 1]

For a deeper dive into who holds this equity and their motivations, you should read Exploring Steel Connect, Inc. (STCN) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

You're looking for a clear picture of Steel Connect, Inc. (STCN)'s ability to cover its short-term bills, and honestly, the numbers paint a very strong liquidity position. The company isn't just liquid; it's awash in current assets.

As of the first quarter of fiscal year 2025, ended October 31, 2024, Steel Connect, Inc. reported a Current Ratio of 4.27 and a Quick Ratio (acid-test ratio) of 4.14. A Current Ratio above 2.0 is generally considered healthy, so a ratio over 4.0 means the company has more than four times the current assets needed to cover its current liabilities. That's defintely a significant buffer.

• Current Ratio: 4.27 (Excellent short-term coverage).
• Quick Ratio: 4.14 (Strong liquidity even without selling inventory).
• Cash and Equivalents: $233.9 million as of October 31, 2024.

Working Capital Trends and Analysis

The core of this liquidity strength lies in the working capital (Current Assets minus Current Liabilities). For the first quarter of fiscal year 2025, Steel Connect, Inc.'s working capital stood at approximately $217.0 million (Total Current Assets of $283.4 million less Total Current Liabilities of $66.4 million).

This level of capital is exceptional for a company of its size and reflects a deliberate strategy to maintain a massive cash cushion. The trend is stable, moving from approximately $220.9 million at the end of fiscal year 2024 to the current $217.0 million, a minor dip that is not a cause for concern. The key driver for the improved ratio is the reduction in current liabilities, which fell to $66.4 million from $75.1 million in the prior fiscal year.

Cash Flow Statement Overview

A look at the cash flow statement for the first quarter of fiscal year 2025 shows a healthy operating engine and minimal capital expenditure. This is where you see the quality of the balance sheet liquidity.

Operating Cash Flow (OCF) was robust at $12.0 million for the quarter, a significant jump from $6.6 million in the same period a year prior. The investing activities are consistently low, with only $0.6 million used for capital expenditures (CapEx), which is typical for a supply chain management and services company. Low CapEx means more of that operating cash flow becomes free cash flow (FCF), which was $11.4 million for the quarter.

Liquidity Strengths and Outlook

The primary liquidity strength is the sheer size of the cash position, which stood at $233.9 million at the end of the first quarter of fiscal year 2025. This cash pile, combined with the quick repayment of the SPHG Note (a 7.50% Senior Convertible Note) upon its maturity in September 2024, eliminates a significant interest expense and short-term debt obligation. The company has a net cash position of approximately $215.0 million (latest TTM data), meaning cash far exceeds total debt.

The main opportunity here is what management does with this massive cash balance. It's a low-debt, high-cash scenario that gives them immense flexibility for strategic acquisitions, like their previously stated interest in acquiring DMC Global, or for shareholder returns. For a deeper dive into the ownership structure and motivations behind these strategic moves, you should read Exploring Steel Connect, Inc. (STCN) Investor Profile: Who's Buying and Why?

Valuation Analysis

You are looking at Steel Connect, Inc. (STCN) and asking the right question: is the stock priced fairly? Based on the latest available trailing twelve-month (TTM) data, the answer points toward a strong argument for undervaluation, but you must factor in the significant context of the company's negative Enterprise Value (EV).

As of November 2025, the stock trades around $12.18 per share. The valuation multiples are strikingly low, suggesting the market is not giving full credit to the company's earnings and book value. The low multiples are a clear signal of potential undervaluation, but they also reflect the market's uncertainty around the company's corporate structure and recent merger activity.

Here's the quick math on the key valuation multiples, using TTM data:

• Price-to-Earnings (P/E) Ratio: 4.01
• Price-to-Book (P/B) Ratio: 0.49
• Enterprise Value-to-EBITDA (EV/EBITDA): -9.23

A P/E ratio of 4.01 is exceptionally low, especially when the broader market average is often in the high teens or twenties. This suggests investors are paying only about four dollars for every one dollar of annual earnings. Similarly, a P/B ratio of 0.49 means the stock is trading for less than half of its book value (assets minus liabilities), which is a classic indicator of a deep-value opportunity or, conversely, a sign of deep-seated market skepticism about the quality of those assets.

The EV/EBITDA of -9.23 is a bit of a head-scratcher until you look closer. The Enterprise Value is negative, around -$158.49 million, because the company holds significantly more cash than its total debt and market capitalization combined. This is a massive net cash position-a very powerful balance sheet-but it makes the EV/EBITDA multiple mathematically unhelpful for comparison. Simply put, the company has a cash hoard that the market hasn't fully appreciated. You can learn more about the institutional interest in this cash position by Exploring Steel Connect, Inc. (STCN) Investor Profile: Who's Buying and Why?

Stock Performance and Market Sentiment

The stock's price action over the last 12 months shows a positive return, despite the operational noise. The stock has delivered a 26.41% return over the last 52 weeks, with the price moving from around $12.46 in November 2024 to the current $12.18. This performance is solid, but still leaves the valuation multiples in the deep-value territory. The stock is defintely volatile.

What this estimate hides is the lack of a clear analyst consensus. Wall Street analysts have not provided a formal 'Buy,' 'Hold,' or 'Sell' rating, nor are there publicly available price targets for the stock. This lack of coverage often means the stock is flying under the radar, which can be an opportunity or a risk, depending on your due diligence.

Finally, Steel Connect, Inc. does not currently pay a dividend, with a trailing twelve-month dividend yield of 0.00%. This means the investment thesis must be entirely based on capital appreciation from a potential re-rating of its valuation or a corporate action, not on income generation.

Risk Factors

You need to look past the recent top-line growth at Steel Connect, Inc. (STCN) because the biggest near-term risk is a strategic one: the company is in the process of going private. The proposed short-form merger with Steel Partners Holdings L.P., announced in late 2024, means that common stockholders, excluding Steel Partners and its affiliates, are expected to receive $11.45 in cash per share. Upon completion, Steel Connect, Inc.'s common stock will be delisted from the NASDAQ Stock Market, ending its life as a publicly traded entity. That is the ultimate structural risk for a public investor.

Beyond the merger, the company faces significant operational and financial risks that show up even in the most recent numbers. For the first quarter of fiscal year 2025 (ended October 31, 2024), while net revenue increased by approximately $9.1 million, net income actually decreased by $2.1 million compared to the prior year period. This drop was largely due to a $6.8 million unfavorable change in Other (losses) gains, net, which includes interest income. You need to see if revenue growth is translating to bottom-line efficiency; here, it did not.

Here is a quick breakdown of the core risks you should track:

• Client Concentration: A massive risk. For the fiscal year ended July 31, 2023, the 10 largest clients accounted for approximately 83% of consolidated net revenue. Losing even one major client can defintely crater revenue.
• International Exposure: Steel Connect, Inc.'s supply chain business, ModusLink, operates globally, with approximately 75% of total net revenues from foreign operations in fiscal year 2023. This exposes the company to geopolitical instability, foreign currency exchange rate fluctuations, and complex, changing international regulatory environments.
• Corporate Cost Creep: Selling, General and Administrative (SG&A) expenses increased by approximately $1.0 million in Q1 FY2025, with Corporate-level activity rising by $1.2 million due to higher legal and other professional fees. This suggests rising overhead costs at the holding company level, which eats into operating profit.

The company's strategic actions are largely focused on resolving past issues and executing the merger. The settlement of a class and derivative action lawsuit, which includes a $6 million payment and the adoption of corporate governance enhancements, is a mitigation strategy for legal and fiduciary risks. These enhancements, like a review process for compensation clawbacks, aim to improve internal oversight and transparency, which is a good sign for future operational hygiene, but the merger risk still overrides all others for the public shareholder.

To be fair, the company's financial health score was rated 'GREAT' with a strong current ratio of 3.94 just before the merger announcement, suggesting strong short-term liquidity. Still, the impending delisting means the stock's value proposition is now tied almost entirely to the $11.45 cash offer, not long-term operational performance. You can read more about the players involved here: Exploring Steel Connect, Inc. (STCN) Investor Profile: Who's Buying and Why?

Here's the quick math on the merger: If you own the stock, your primary action is to evaluate the $11.45 cash offer against your cost basis, because the public market for the stock is essentially closing. The table below summarizes the key financial and strategic risks.

Growth Opportunities

The future growth prospects for Steel Connect, Inc. (STCN) are now fundamentally tied to its strategic transition into a private subsidiary of Steel Partners Holdings L.P. (SPLP), a move expected to finalize in early 2025. This is the single most important factor, as it shifts the focus from public market pressures to long-term operational optimization within a larger, diversified holding company. You should view this not as a typical growth story, but as a strategic realignment for efficiency.

The immediate financial health of the operating subsidiary, ModusLink Corporation, going into this transition is strong. For the first quarter of fiscal 2025 (ended October 31, 2024), Steel Connect, Inc. reported net revenue of $50.5 million, a significant 22.1% increase from the prior year. This growth was driven by higher volumes and a favorable sales mix, particularly within the computing and consumer electronics markets. Honestly, those are solid numbers to take into a private structure.

Here's the quick math on recent performance: Adjusted EBITDA for Q1 Fiscal 2025 saw a substantial rise of 123.0%, hitting $7.4 million. That improvement suggests better cost management and margin control, which is defintely a good sign for the new parent company. The company also holds a substantial cash position, reporting cash and cash equivalents of $233.9 million as of October 31, 2024.

The key growth drivers post-merger will not be acquisitions in the near term, but rather internal optimization and a deeper focus on core strengths. SPLP's strategy is to optimize the ModusLink business by addressing challenges like customer concentration risk and leveraging the existing infrastructure. What this estimate hides is the elimination of public reporting costs, which frees up capital for operational investment.

• Gain operational flexibility without NASDAQ reporting.
• Prioritize long-term growth over short-term earnings cycles.
• Optimize ModusLink's global supply chain network.
• Invest in the proprietary Poetic software platform.

The core competitive advantage for Steel Connect, Inc. remains its ModusLink subsidiary's integrated, global supply chain network and its enterprise-class Poetic software. This software provides a unique entitlement management solution for activation, provisioning, and subscription management for both physical and digital products. This is a sticky, high-margin service that positions the company well for future growth in connected products.

For investors, the near-term action is clear: the merger agreement stipulates shareholders receive $11.45 in cash per share, plus a Contingent Value Right (CVR) related to potential proceeds from the pending Reith v. Lichtenstein litigation. The company's common stock will be delisted from the NASDAQ Stock Market in early 2025. You can find more details on the financial health and merger rationale in our full analysis: Breaking Down Steel Connect, Inc. (STCN) Financial Health: Key Insights for Investors.

The strategic initiatives under SPLP will focus on deepening ModusLink's relationships with key clients and expanding the reach of its digital entitlement solutions. Becoming a private entity allows the management team to take a longer view on capital allocation, which is often a better path for complex supply chain and software businesses. This is a pivot from public market trading to private value creation.