Q3 2025 Star Equity Holdings Inc Earnings Call

Questions on today's call May include forward looking statements such forward looking statements involve certain risks and uncertainties that may cause actual results to differ materially from those contained in the forward looking statements.

Please refer to start equities. Most recent 10-K 10-Q and other filings for more complete description of risk factors that could affect these projections and assumptions.

Rick Coleman: I think mid-20s on a trend line basis, rolling four-quarter basis is what we expect.

Company assumes no obligation to update forward looking statements as a result of new information future events or otherwise.

Please note that on this call management will reference non-GAAP financial measures, including EBITDA adjusted EBITDA adjusted net income and adjusted earnings per share.

Michael Matheson: Terrific. That's very helpful to have that information. Well, that runs me out of questions. Again, congrats on the quarter, and good luck next quarter.

Jeffrey Eberwein: Thanks, Michael.

Which are all financial measures not recognized under U S. GAAP.

Operator: Again, if you have a question, please press Star, then One. Our next question will come from David Sickfried, investor. Please go ahead.

As required by SEC rules and regulations. These non-GAAP financial measures are reconciled to their most recent comparable GAAP financial measures in our earnings release issued this morning.

David Sickfried: Thanks for taking my call. I have a number of questions. First, regarding building solutions, I noticed KBS on 1 September 2024 completed that 10,000sq ft project and then took it. Are there more contracts like that in the pipeline?

If you do not receive a copy of the earnings release, and well liked and were like one after the call. Please contact star equity at Tuesday row three.

4899500.

The Investor Relations representative Miscellanea Ekati.

Of the equity group at 2128369611.

Jeffrey Eberwein: This is Jeff. I'll take that. There are. I'll just answer it in two ways. On our slides, if you look at slide nine, we do show our backlog. The backlog did start to improve about a year ago as some of those larger projects that Rick was talking about that were on hold or frozen got unfrozen. We have had a string of projects that we've announced, some of which we've completed, some of which are still in our backlog. In terms of our sales pipeline, we continue to have a lot of those opportunities. We're trying to win them and get them started. We do have more projects like that one that'll happen in the future.

Also this call is being broadcast live over the Internet and may be accessed at star equities website via Www Dot store equity dotcom.

Shortly after the call a replay will also be available in the company's website.

Now my pleasure to introduce Mr.

Mr. Jeff Eberwein, Chief Executive Officer of STAAR equity. Please go ahead Sir.

Thank you operator and welcome everyone. We greatly appreciate your interest in Star equity Holdings, and thank you for joining us today.

As a reminder on August 22nd.

2025, the company completed its previously announced acquisition of Star operating companies, formerly known historically holdings pursuant to the agreement dated May 21.

Effective September 5th the company changed its name to Star equity Holdings from Hudson Global.

And our trading symbols on NASDAQ from H S O N to S. T. R. R.

Following the merger we are now operating as a diversified holding company with four divisions building solutions business services energy services and investments.

David Sickfried: Okay. Good to hear. I noticed you've indicated that you're looking for bolt-ons. Would you be looking for bolt-ons in the region or outside the region? You do have that facility in Oxford, Maine that's empty. Would you fill capacity? Yeah.

I'll begin by reviewing our third quarter results for 2025 at the holding company level.

After that Jay exact words.

Jeffrey Eberwein: Yep. Good memory. I think the short answer to that is kind of D, all of the above. Our highest priority is to add more size to our existing businesses. We feel like we have some good operating management teams across all of our businesses, so we would like to give them more to manage. That could be an acquisition in their geographic region. Yes, you're right, we do have an idle factory in Maine, and we constantly explore different ways to reopen that and have more growth. The bar is a little bit higher for what we would call an adjacent acquisition where, let's say, it's a business we're in, so we know the business well, but it's in a new geography. We do look at those, but I'd say that's priority number two after adding to what we have in an existing geography.

Global CEO of Hudson talent solutions will give us an update on the performance of our business services segment.

Finally, Rick Coleman, our Chief operating officer, who will provide additional insights into the performance of our building solutions and energy services segments.

Third quarter results reflect the impact of our recent merger with revenue gross profit and adjusted EBITDA, all showing year over year growth.

These increases were largely driven by the inclusion of star operating companies beginning August 22nd.

For the third quarter of 2025 revenue totaled 48 million, representing a 30% increase from the same quarter in 2024.

Gross profit rose 11%.

The company reported a net loss of $1 8 million or <unk> 54 per share compared to a net loss of 800000 or 28 cents per diluted share in the third quarter of last year.

On a non-GAAP basis, adjusted net income per share was <unk> <unk> compared to an adjusted net loss of 13.

David Sickfried: Okay. Yeah. Question on the public investments that you have. I think is most of that in Gyrodyne? You have like 150,000 shares. What do you see as a catalyst to monetize that investment?

Per share in the prior year quarter.

Importantly on a pro forma basis, which includes the full third quarter's results from star operating companies adjusted.

Adjusted earnings per share were positive 19th.

Jeffrey Eberwein: Yeah, all that is public, our holdings in Gyrodyne. If you look at their public filings, they are in the process of liquidating. They have a long history of selling the remaining real estate assets and dividending out those proceeds. It's very cheap on NAV. I think just based on their publicly stated NAV, it's got 50% to 60% return to stated NAV. Their plan per their public documents is to liquidate their remaining real estate holdings, distribute that out as cash, and wind down the entity by the end of, I believe it's 2027.

<unk> negative 54 cents.

As a reminder on August 22nd, 2025 the company completed. Its previously announced acquisition of star operating companies formerly known as star Equity Holdings. Pursuant to the agreement. Dated May 21st

In the third quarter a year ago.

Adjusted EBITDA increased to $1 3 million from 800000.

Effective September 5th, the company changed, its name to Star Equity Holdings from Hudson global.

In the third quarter of last year, reflecting improved operating leverage following the merger.

And our trading symbols on NASDAQ from HS on to St, RR.

Pro forma adjusted EBITDA was $3 $1 million versus 600000 in the third quarter of last year.

Following the merger. We are now operating as a diversified holding company with 4 divisions, Building Solutions, Business Services, Energy Services, and Investments.

Total cash, including restricted cash was $18 5 million.

At the end of the quarter.

I'll begin by reviewing our third quarter results for 2025 at the holding company level.

I'll now turn the call over to Jay to discuss our business services segment.

Thank you, Jeff and good morning or.

After that, Jake Zaid kowitz Global CEO of Hudson Talent Solutions will give us an update on the performance of our business services segment.

Our business services segment continued to demonstrate solid performance in the third quarter, despite the challenging macroeconomic environment impacting many industries.

Finally Rick Coleman, our chief operating officer will provide additional insights into the performance of our Building Solutions and Energy Services segments.

While the broader talent acquisition market has contracted in 2025 compared to 2024 are AC HTS business has been able to maintain its profitability and even saw slight increase in gross profit for both the third quarter and year to date. This resilience highlights the robustness of our business model, our ability to adapt to market shifts and the.

David Sickfried: Okay. All right. Good. Let's see. Regarding Hudson, I noticed they moved to a larger office in Edinburgh this past quarter. What was behind that change move?

Third quarter results reflect the impact of our recent merger with Revenue, with gross profit and adjusted EVAa, all showing year-over-year growth.

These increases were largely driven by the inclusion of star operating companies. Beginning August 22nd.

<unk> of our longstanding client relationships, which continues to drive repeat business and steady demand for our services.

Jeffrey Eberwein: Yeah, very good question. I'll let Jake answer that one. He was there for the grand opening of that new location. Go ahead, Jake.

For the third quarter of 2025 Revenue totaled. 48 million representing a 30% increase from the same quarter in 2024.

I'm, particularly proud to recognize our team has received in the marketplace hcs's named to the prestigious Baker's dozen for the 17th consecutive year, a testament to our consistent delivery of high quality talent acquisition solutions Whats even more notable is that we achieved our highest ever overall ranking reflecting the strength of our service offering and our commitment to excellence.

Gross profit Rose 11%.

Jacob Zabkowicz: Yeah, David. As you know, Edinburgh is a hub for us for our European market, and actually, it also supports many of our clients across the globe. One of the things that we like about Edinburgh is the talent there is very dynamic. You get language capabilities, you get a great cost basis, and it's a great culture to be a part of, right? What we did is over the last year, we really looked at our footprint. We did this in Tampa, where we actually moved from a previously shared office space into our own office space that we lease. We did the same principle in Edinburgh this last time around. We were in a shared space, we had shared common area, and it wasn't really conducive to the company that we turned into, it being Hudson Talent Solutions.

The company reported a net loss of 1.8 million or 54 cents per share compared to a net loss of 800,000 or 28 cents per diluted share and the third quarter of last year.

Additionally, Acs is recognized as the number one provider in the Asia Pac region further underscoring our global reach and our trust and our clients place in us.

For the third quarter of 2025 business services revenue was $37 million slightly up from $36 9 million. The same period last year gross profit remained flat at $18 6 million compared to prior year quarter again speaking to the quality of our operations. Despite external challenges adjusted EBITDA for the segment was also flat at $1 7 million.

On a non-gaap basis. Adjusted net income per share was 2 cents. Compared to an adjusted net loss of 13 cents per share in the prior year quarter.

importantly, on a pro-forma basis which includes the full third quarters results from Star operating companies

Adjusted earnings per share were positive 19 cents. Versus negative 54 cents in the third quarter a year ago.

This performance reflects our ability to effectively manage costs sustained margins, while continuing to deliver value to our clients in a difficult market environment.

Adjusted EBITDA increased to $1.3 million from $800,000.

Jacob Zabkowicz: The team has found a unique office space right off of Princes Street in Edinburgh. Great location. It's going to allow us to drive the talent that we need to bring into our clients. It is also going to allow us a spot and place that we're proud of to bring our clients and our potential clients in to see not only the culture, but the quality of team members that we have. Really excited. We just did a ribbon cutting. Edinburgh is a beautiful area to visit. Like I said, great talent, great culture. We're proud to be there.

And the third quarter of last year reflecting improved operating leverage following the merger.

Building on our momentum from the first half of the year. The third quarter, we continued to execute our land and expand strategy. This strategy with emphasizing expanding our geographical footprint and broadening our service offerings to both existing and prospective clients has proven to be highly effective.

Proforma. Adjusted Eva was 3.1 million versus 600,000 and the third quarter of last year.

Total cash, including restricted, cash was 18.5 million.

At the end of the quarter.

As a result, we secured approximately $39 8 million and gross profit from renewals and extensions at existing clients, reflecting the strong relationships, we have cultivated by our ability to deliver ongoing value. Additionally, we have secured approximately $11 1 million from new logo wins over the past four quarters.

I'll now turn the call over to Jake to discuss our business services segment.

Thank you, Jeff, and good morning.

David Sickfried: Yeah. Okay. Good. I noticed from Q3 last year, the new logo and expansions and renewals was up considerably from look at quarters. What was behind that uptick?

our business services segment continue to demonstrate solid performance, in the third quarter, despite the challenging macroeconomic environment, impacting many Industries,

Looking ahead, we're focused on creating a more resilient agile and growth oriented business for the long term by continuing to invest in new technologies, such as our digital offering we have.

Confident in our ability to drive sustainable growth and create lasting value for our clients and stakeholders our commitment to execution and operational excellence will continue to guide us as he sees new opportunities and expand our market leadership.

while the while the broader count acquisition Market has contracted in 2025, compared to 2024, our HC HCS business has been able to maintain its profitability. And even saw a slight increase in gross profit for both the third quarter and year to date.

Jacob Zabkowicz: Yeah, David, great analysis. As I mentioned before a couple of times, our land and expand strategy is really working. What I mean by that is really looking at the clients that we service today and how we continue to support them in other geographies and other business lines, making sure we're having those conversations. We're seeing a pretty significant tailwind with that, allowing us to build onto our existing client portfolio. Not to mention adding the digital offering and our different solutions, and our different products with boutique executive search as well. We're seeing clients gravitate more to that one talent solution. All of that is allowing us to gain more market share with our clients and provide a better level, and higher quality of level service to them.

Now I'll turn the call over to Rick who will discuss the financial and operational performance of our building solutions and energy services segments.

This resilience highlights the robustness of our business model, our ability to adapt to Market shifts, and the long-standing client relationships, which continue to drive repeat business, and study demand for our services.

Thank you Jake and good morning, everyone. Our building solutions segment delivered strong growth during the third quarter capitalizing on the rebound in commercial construction demand, while managing through softness in residential markets.

In the third quarter building solutions revenue totaled $9 6 million with a gross profit of $1 7 million and adjusted EBITDA of 600000.

I'm particularly proud to recognize our team has received in the marketplace. HCS was named to the prestigious Baker's Dozen for the 17th consecutive year. A testament to our consistent delivery of high-quality Talent, acquisition Solutions. What's even more notable, is that we achieved our highest ever overall ranking reflecting the strength of our service offering in our commitment, to Excellence. Additionally, HCS was recognized as a number 1 provider in the Asia, Pac region further underscoring our Global reach and our trust and our clients place in US.

On a pro forma basis, which includes results for the entire third quarter. Beginning July one building solutions revenue was $21 4 million up from $13 7 million in the third quarter of 2024.

For the third quarter of 2025 Business Services, Revenue was 37 million slightly up from 36.9 million the same period last year.

David Sickfried: Got it. Okay. Last quarter, I think Jeff had mentioned with the AI rollout, there was one company that was interested just in the AI offering. You were hoping that it would expand to other services that you offer. Is there any follow-up on that? Was there any expansion or any other success stories along the lines with the AI offering that you have?

Pro forma gross profit rose to $5 3 million compared to $2 eight.

8 million in the prior year quarter, while pro forma adjusted EBITDA grew substantially to $2 6 million from $700000 a year ago. The.

Deliver value to our clients in a difficult Market environment.

The segment ended the quarter with a $20 million backlog of committed orders and the trailing 12 month book to Bill ratio remains solid at one point <unk>, reflecting a healthy pipeline and sales dynamics heading into 2026.

Jacob Zabkowicz: Yeah, David, we actually have some clients that now have—let me take a step back. We've embedded our digital offering into our RPO solution, RPO suite, right? Whether it be Talent IQ, Hudson Flow, or Hudson Core, every single one of our clients has a different demand, and they're on a different journey. Sometimes that journey takes them to where they want a full agentic AI solution. Sometimes it takes them where, no, they don't want a full agentic AI solution. They want pieces of the puzzle, right? We're able to offer that to them. One thing that has been taking off is, as I just mentioned, our Talent IQ solution, which provides real-time market intelligence and market data to our clients so they can make better talent decisions. We have a couple of partners that are on that now.

By focusing on higher margin projects and ensuring rigorous project management, we've been able to maintain healthy profit margins and strengthen our existing client relationships our.

Our reputation for high quality on time and within budget deliveries is key to our continued success and positions us well to expand our footprint across key markets.

Building on our momentum from the first half of the year. The third quarter, we continue to execute our land and expand strategy. This strategy with emphasizes expanding our geographical footprint and broadening our service. Offerings to both existing and prospective clients has proven it to be highly effective as a result. We secured approximately 39.8 million in gross profit for renewals and extensions at existing clients reflecting the strong relationships. We have cultivated by our ability to deliver ongoing value. Additionally, we have secured approximately 11.1 million from new logo wins over the past 4 quarters.

Our energy services segment also achieved strong results, despite a broader slowdown across the energy sector impacted by lower drilling rig counts and all oil producing basins, but offset somewhat by growth in natural gas and geothermal drilling activity.

Jacob Zabkowicz: It's more than one now, and we're getting very good feedback. The best part about that solution is it's a global solution, right? It's not just looking at the Americas, EMEA, or APAC. Clients can come to us and say, we need to understand where's the best area to put an offshore finance facility or a manufacturing facility for FMCG. We can help drive and help inform some of those decision-making capabilities with that.

Looking ahead. We're focused on creating a more resilient agile and growth-oriented business for the long term by continuing to invest in new technologies, such as our digital offering. We are confident in our ability to drive sustainable growth and create lasting value for our clients and stakeholders our commitment to execution. And operational excellence will continue to guide us as we see New Opportunities and expand our Market leadership.

As a smaller company in the drilling arena, we believe our growth opportunities are outsized versus our larger competitors and expect to drive future growth through strong sales execution disciplined operations and targeted capital investments.

Now, I'll turn the call over to Rick. We'll discuss the financial and operational performance of our Building Solutions and Energy Services segments.

These initiatives have not only improved sales and utilization rates, but as all have also enhanced customer satisfaction and strengthened our overall market position.

Thank you, Jay and good morning everyone. Our building solution, segment delivered, strong growth during the third quarter capitalizing on the rebound in commercial construction, demand while managing through softness in residential markets.

In the third quarter of 2025 energy services revenue was $1 3 million with gross profit of 300000 and adjusted EBITDA of 100000.

David Sickfried: Okay. Good. The goal that we would have.

In the third quarter Building Solutions Revenue totaled, 9.6 million with a growth profit of 1.7 million and adjusted evida of 600,000.

Jeffrey Eberwein: David, this is Jeff. Sorry. I would encourage you to follow, and all of our shareholders really follow, the Hudson Talent Solutions website. They sometimes have news and announcements that you would not see on Star's website or might not be a Star press release. They will have more to say about what they are doing on the digital side going forward.

On a pro forma basis, which includes results for the entire third quarter beginning July one.

Revenue increased to $3 7 million gross profit reached one 5 million and pro forma adjusted EBITDA rose to $1 million underscoring the segment's strong overall performance.

On a pro forma basis, which includes results for the entire third quarter. Beginning July, first Building Solutions, Revenue was 21.4 Million up from 13.7 million in the third quarter of 20124.

I'll now turn the call back over to Jeff for closing remarks.

David Sickfried: Got it. Okay. Question about the partnering with private equity or growth capital. If someone were interested at some point, how would that impact Star as a company? Would there be like would they have to buy equity in Hudson Talent or in Star Equity? I'm just trying to figure that out.

Proformer growth profit, Rose to 5.3 million compared to 2.08 million in the prior year quarter while proforma adjusted Eva grew substantially to 2.6 million from 700,000 a year ago.

Jeff.

Thank you Rick following our recent merger, we're operating from a much stronger and more diversified platform, which has significantly enhanced our scale expanded our exposure to a broader range of end markets and improved our operating leverage.

The segment ended the quarter with the 200 backstroke.

The integration has been progressing smoothly and we are already beginning to realize efficiencies across shared services.

Jeffrey Eberwein: Yeah. I'll take that. David, it's a great question. The short version is we don't know exactly what that's going to look like. Our first priority is to get back to the levels we were at in 2022. This time around, do it with a more stable foundation. If I go back to 2022, the Hudson business was about 70%, we would estimate, what we would call enterprise RPO. That's where it's with a Fortune 500 company. This next time around, we'd like that to be a lot closer to 100%. When we get back to those 2022 levels of, let's call it $100 million of gross profit and $20 million of EBITDA, we think it'll be more sustainable and a stronger, more stable group of clients. That's kind of point one.

This will continue to improve our cost structure and streamline operations as we fully integrate the businesses.

By focusing on higher margin projects and ensuring rigorous project management. We've been able to maintain healthy profit margins and strengthen our existing client relationships.

Across all our operating segments, we remain highly focused on operational excellence, ensuring we optimize every facet of our business for improved performance.

Our reputation for high-quality on time and within budget deliveries is key to our continued success and positions us well to expand our footprint across key markets.

At the same time, we're committed to prudent capital allocation and a disciplined approach to growth, which will allow us to maximize shareholder returns, while maintaining financial discipline.

In line with this strategy, we believe our stock price remains undervalued.

Our Energy Services segment also achieved strong results. Despite a broader slowdown across the energy sector impacted by lower drilling rig counts and all oil-producing basins, this was offset somewhat by growth in natural gas and geothermal drilling activity.

In recognition of this belief during the third quarter, we repurchased about 8% of our shares outstanding demonstrating our confidence in the intrinsic value of the company and our commitment to enhancing value per share.

As a smaller company in the drilling Arena, we believe our growth opportunities are outside versus our larger competitors and expect to drive future growth through strong sales execution, disciplined operations, and targeted Capital Investments.

Furthermore, our board of directors has authorized a new $3 million share repurchase program, which underscores their confidence in the long term growth prospects of the company.

These initiatives have not only improved sales and utilization rates, but as all have also enhanced customer satisfaction and strengthened our overall Market position,

Looking ahead, we are well positioned to drive shareholder value through a balanced strategy that combines organic growth.

Jeffrey Eberwein: If we think about everything going on with this business, with all of our clients asking about AI, how's AI going to affect talent procurement, talent assessment, it's just hard to know where that's going to go. One of the things we've talked about is, let's say, there's some really interesting investments to make on that side, digital AI tech. You're not going to see Star invest billions and millions of dollars in something that isn't producing revenue, isn't producing immediate cash flow. It could make sense to partner with somebody who has that expertise, maybe even somebody that has other investments in digital AI type of companies. They bring expertise and capital, and they would fund that investment. There are just so many different ways that could go. I would just tell you to stay tuned.

Disciplined capital allocation and accretive acquisitions.

In the third quarter of 2025 Energy Services. Revenue was 1.3 million with growth profit of 300,000 and adjusted IBA of 100,000.

As part of this strategy, we continue to evaluate acquisition opportunities that complement our diversified holding company model.

On a pro forma basis, which includes results for the entire third quarter, beginning July 1st.

Our focus remains on identifying scalable cash generating businesses that align with our long term growth objectives objectives.

Typically those businesses with strong local operating management teams and sustainable competitive advantages.

Revenue increased to 3.7 million gross profit, reached 1.5 million and pro-forma adjusted Eva. Rose to 1 million underscoring, the segments, strong overall performance,

I'll now turn the call back over to Jeff for closing remarks.

Jeff.

By executing this strategy, we believe will strengthen star equities foundation for sustained profitable expansion to deliver meaningful value to our shareholders.

Operator can you. Please open the line for questions.

Thank you. Rick following our recent merger. We're operating from a much stronger and more Diversified platform which is significantly. Enhanced our scale, expanded our exposure to a broader range of in markets and improved. Our operating Leverage

Thank you we will now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

The integration has been progressing smoothly, and we are already beginning to realize efficiencies across shared services.

If youre using a speakerphone please pick up your handset before pressing the keys.

Anytime Youre question has been addressed and you would like to withdraw your question. Please press Star then two.

This will continue to improve our cost structure and streamline operations as we fully integrate the businesses.

And our first question for today will come from Theodore O'neill with <unk> Research. Please go ahead.

Across all our operating segments, we remain highly focused on operational excellence, ensuring. We optimize every facet of our business for improved performance.

Jeffrey Eberwein: It's not something that's going to happen in the next few quarters. I'd put a high probability on something like that happening at some point in the future. I guess the short another way to say everything I'm saying is that we're transforming the business from being a very people-oriented business to one that is much more of a tech-enabled, tech-plus expertise type of a business. There could be people who could be very interesting to partner with when the time is right.

Oh, thanks very much.

Rick on the on.

On the third quarter pro forma basis that looks like a record.

For the quarter at least in my.

Just to maximize shareholder returns while maintaining Financial discipline.

<unk> book here.

Okay.

Yes, Thanks, Phil I appreciate you noticing that.

In line with this strategy, we believe our stock price remains undervalued.

We're enjoying the throughput from a lot of projects in the building solutions Division that were held up in 2024, I think we talked about that in prior calls, but throughout the year, we didnt have jobs being canceled, but they just weren't making it through the pipeline.

In recognition of this belief during the third quarter. We repurchased about 8% of our shares outstanding, demonstrating our confidence, in the intrinsic value of the company and our commitment to enhancing value per share.

David Sickfried: Yeah. Good. I know there's value in that division because a much larger company, Heidrick & Struggles, just was bought out this past quarter with similar type services that are offered, so. What about the preferred shares? I know you utilize that as a tool for acquisitions. Is there a point where you see interest payments becoming unsustainable for the company to carry? I mean, you can't just offer preferred shares endlessly, correct?

<unk>.

As builders and architects and others.

Furthermore, our board of directors says, authorized the new million dollar share repurchase program which underscores their confidence in the long-term growth prospects of the company.

We're kind of daunted I guess by by interest rates and other things. So we kept pushing jobs to the right further out in time and the.

Looking ahead. We're well, positioned to drive shareholder value through a balanced strategy that combines organic growth.

Disciplined Capital allocation, and accretive acquisitions.

Finally started coming through.

And looking at our seasonal patterns here. The last couple of years your fourth quarter has been.

As part of the strategy, we continue to evaluate acquisition opportunities. That complement our Diversified holding company model

Higher than your third quarter.

Do you do you think that seasonal trend will continue.

It's really really hard to say the fourth quarter is really.

Jeffrey Eberwein: Very good question. The way we think about that, if we're going to use preferred shares in an acquisition, the preferred shares, if you just think about it on a multiple basis, it's a 10x multiple. If you think about the par value being $10 a share and the annual dividend being $1 a share, if we can acquire a business like we did earlier this year that has a cash flow stream that is growing over time, and we can buy that business and that cash flow stream at 3x or 4x or 5x cash flow, then it's highly accretive to do that acquisition. In other words, the cash flow from the acquisition should more than cover the dividends that we would issue in an acquisition.

Dependent on a lot of weather patterns. If we have difficulties in building solutions for example.

Our Focus remains on identifying scalable cash, generating businesses, that align with our long-term growth objective objectives, particularly those businesses with strong local, operating management, teams and sustainable competitive advantages.

With.

Builders not having.

The sites ready for us to build on then there could be delays, but as long as the weather holds we are optimistic.

Uh, executing this strategy, we believe, will strengthen Star Equity's foundation for sustained, profitable expansion to deliver meaningful value to our shareholders.

Operator, can you please open the line for questions?

And when you talk about softness I know that part of what you had cited the strength was workplace housing.

Thank you. We will now begin the question and answer section.

to ask a question, you may press star then 1 on your touchtone phone,

And low income housing.

If you're using a speakerphone, please pick up your handset before pressing the keys.

Is that still.

Is that still the view.

Yes. It is an important aspect of what we're doing our strategy is more diversified than that but those are still good opportunities for us they might be impacted somewhat by government programs.

If I need to question has been addressed and you will like to withdraw your question. Please press star and 2

And our first question for today will come from Theodore O'Neal with Lynchfield Hills Research. Please go ahead.

oh, thanks very much for for Rick on the um,

Shrinking over time.

But I would expect that will come back.

On the third quarter of our pro forma basis, that looks like a record.

Okay. Thanks very much.

For the quarter, at least in my book here.

David Sickfried: Got it. Okay. One last question regarding the mutual funds that we're selling since the Star merger was announced. You took out 8% of the shares back in September. We're still in the $9 range. Jeff, you were buying at higher prices. I know that you feel the company is still undervalued, but I still kind of sense like there's maybe an overhang. Maybe there's still a seller out there. Do you think you could do another big block transaction, take those shares out?

The next question will come from Michael Matheson with Sidoti <unk> Company. Please go ahead.

Yep, thanks steel. Appreciate you noticing that we're um

Congratulations on the revenue performance you guys.

Thanks, Michael.

Just a couple of questions from me.

we're enjoying uh the throughput from a lot of projects in the building Solutions division that were held up in 2024.

First of all looking at business services and going through your slide deck. It looks like the adjusted net revenue as a percentage of sales is much higher in the Americas versus APAC I wondered if you could just explain whats behind that.

Jake you want to.

Walking through that.

Yeah, and I'm, sorry can you repeat that question I apologize.

Jeffrey Eberwein: We're always open to that. I think the most effective share repurchases we've done have been a negotiated transaction with a block seller. That is by far the most efficient and effective in terms of how to buy back stock. If there is an overhang, as you say, or remaining block out there, and they want to sell to us, we will certainly entertain that. As far as we know, there are no longer any institutional holders who are above 5%. If there is a remaining seller out there and they do have a block for sale, it's going to be a block size that's less than 5%.

Alright, no problem.

I think we talked about that in Prior calls, but throughout the year, we didn't have jobs being canceled, uh, but they just weren't making it through the pipeline as, uh, Builders and Architects. And others were, were kind of, daunted, I guess by the by interest rates and other things. So we kept pushing jobs, uh, to the right further out in time and the finally started coming through.

It looks from your slide deck.

The adjusted net revenue as a percentage of sales is higher in the Americas versus APAC.

and I was looking at seasonal patterns here in the last couple of years, your fourth quarter is been uh,

And I'm just wondering why.

Higher than your third quarter.

Yes, we saw some significant growth.

Do you do you think that seasonal Trend will continue?

Our Americas business this last quarter.

Through our land and expand strategy.

Yes, the uptick for us and we're really excited to see that as we also launched our digital product as I mentioned last last quarter.

We are we are seeing the clients really gravitate towards that as you know I can't think AI takes over.

That takes over.

Enhanced value to our clients and our partnerships.

Uh it's really really hard to say. Theo the fourth quarter is really um dependent on a lot of weather patterns. If we have difficulties in uh Building Solutions. For example, uh with uh you know, Builders and not having. Um, the sites ready for us to build on then there could be delays but as long as the weather holds, we're optimistic

Michael This is Jeff so if we compare that business.

By region.

and when you talk about softness, I know that part of what you had, uh, cited as strength was workplace housing and um in low-income housing

If you were to look at some of the old.

Hudson results.

Is that still uh, is that still is the The View?

Youll see Youll see this in our in our 10-Q.

When it's filed that.

David Sickfried: Got it. Yeah. Very good. Well, thank you for the time. Thanks for taking my questions.

There's really two different businesses there there is the <unk> business.

And in the <unk> business.

Jeffrey Eberwein: Yeah, great questions. Thank you.

Adjusted net revenue or gross profit equals revenue. So there is no cost of sales all of the costs are down in SG&A.

Operator: The next question will come from William Kinn with Presidio Asset Management. Please go ahead.

Yeah, it is an important aspect of what we're doing. Um, our strategy is, uh, more diversified than that, but those are still good opportunities for us. They might be impacted somewhat by government programs, um, shrinking over time. Um, but we expect that will come back.

William Kinn: Hey, Jeff. With the merger now closed, I guess, is there any update on the expected synergies that you plan to achieve?

In the contracting business, which is about half the revenue.

Okay, thanks very much.

All of the contractors show up as cost of sales.

Next question will come from Michael, Matt, with the sidonian company. Please go ahead.

Which causes us to have a really low.

congratulations on the revenue performance, you guys,

Jeffrey Eberwein: Yeah. Great, great question. We still believe that we'll deliver the $2 million in synergies. That target could be higher over time, but that's the number that we're comfortable using. Where you're going to see that is in the corporate line. If you look at the pro forma table in our press release, you'll see EBITDA from each one of our four business segments, and then you'll see a column for corporate. In Q3, that total was $2.6 million for the quarter. That's a pro forma number. As we start to realize some of those synergies, you're going to see the corporate costs decline. Our goal is to get that number down more to like $2 million a quarter, or $8 million on an annualized run rate.

Adjusted net revenue.

Thanks Michael.

And it makes it makes the margin percentage really really low. So that's why we always focus people on adjusted net revenue or gross profit as the real revenue because that kind of ignores that pass through effect.

No.

Contracting as our.

Uh, just a couple questions um from me. Um, first of all, looking at business services and going through your slide deck, it looks like the adjusted net revenue as a percentage of sales is much higher in the Americas versus APAC. I wondered if you could just explain uh what's behind that?

Our contracting business is heaviest by far in Australia.

yeah, Jake you want to

Walk in through that.

In Asia Pac, we do very little of it in and the Americas.

Yeah, and I'm sorry. Can you repeat that question? I apologize.

So said another way <unk> as a percentage of revenue is much higher in the Americas than it is in the other geographic regions.

Sales are higher in the Americas versus APAC.

Um, and I'm just wondering why?

Terrific. Thanks for all that background I just wanted to confirm that it was the impact of contract.

Just as long as we're on.

Yeah, we saw some significant growth in our America's business this last quarter throughout our land and expand strategy.

The Hudson business.

I think the one reason we didn't speak of yet as Europe, how does that look.

Yeah, Jake you want to talk about what's going on with you.

Jeffrey Eberwein: That's really where you're going to see the synergies show up if you're going to be tracking it quarter to quarter.

Yes.

We are definitely going through a transformation and the transformation is looking at not only our land and expand strategy, but also.

Yeah, that has driven, you know, the uptick for us and, you know, we're really excited to see that as we also launched our digital product. As I mentioned last last quarter, um, and, you know, we are, we are seeing the clients really gravitate towards that. As you know, agentic AI takes over, um, or not takes over adds enhanced value to our clients and our Partnerships.

William Kinn: Do you think that's achievable in the near term, or is that kind of a year out, or what kind of timing are we looking at?

Geographies that we're entering into so the middle East as I mentioned, a couple of quarters ago, We entered the middle East last year, and we're starting to see.

Jeffrey Eberwein: Yeah. It's gradual, it kind of comes in steps. I'll put it this way. We have high confidence we'll be at that run rate. I would say at some point next year, maybe six months from now, we should be at that run rate. Said another way, the $2 million of synergies should be fully realized, I would think, six months from now.

Signs of that business is continuing to pick up.

Europe is our smallest region.

When you look at the compare in Europe to the.

The U S or the Americas and also to APAC.

One of the things, though that we are looking in Europe is the <unk>.

Um, my my call this is, this is, this is Jeff. So if we compare that business, um, by region, uh, like if you were to look at some of the old, um, Hudson results, um you'll you'll see and you'll see this in our in our 10 Q, uh, when it's filed that uh there's really 2 different businesses there, there's the RPO business

Overall macroeconomic impact that's happening in that in that region, we did see.

A downturn in the European market for Us this last year.

And in the RPO business, adjusted net revenue or gross profit equals revenue. So, there's no cost of sales; all the costs are down in SG&A.

We had a couple of our clients take some of their business in house, which has impacted revenue, but at the same time, our land and expand strategy is picking up in some other geographies in that region as well. So Europe is going to continue to be a focus for us.

In the contracting business, which is about half the revenue.

Um, all of the contractors show up as cost of sales.

William Kinn: Great. A couple more questions on the corporate side before going to the RPO. Could you just clarify for us what the quarter-end share count looks like with the repurchase?

Which causes us to have a really low. Um,

But when you compare Europe versus our APAC or the Americas region. It is our it is our smallest region so far to date.

Jeffrey Eberwein: Yeah. You'll see the number on the cover of our 10Q. I think you'll see it's right at 3.4 million shares, maybe a little bit higher than that.

Okay great.

Michael I would add we do have a new management team there that we're very excited about and we're very optimistic about.

Adjusted net revenue, uh, and it makes makes the margin percentage really, really low. So, that that's why we always Focus people on adjusted, net, revenue or or gross profit as as the real Revenue because that kind of ignores that pass through effect. So,

Contracting is, is

The Europe segment.

William Kinn: Great. Great. Okay. Is it fair to say there was a little bit of debt paid on this quarter as well?

Doing much better.

Next year then.

This year.

Okay. Thank you for the background just one last question for me.

Jeffrey Eberwein: We have debt on two of our businesses. The Building Solutions and the Energy Services have debt at the sublevel. On Building Solutions, we have an acquisition loan that we took out when we acquired Timber Technologies. That loan is amortizing, so we're making principal payments on that every quarter. Same thing with the seller note there at Timber Technologies. Over time, everything else being equal, you'll see our debt decline as those two debt pieces decline.

Looking at building solutions revenue was significantly higher than I had expected. So we can congrats on that.

Our contracting business is heaviest by far. In Australia, we and and Asia Pac. We do very little of it in in the Americas. Um so set, another way, RPO as a percentage of of Revenue is much higher in the Americas than it is in the other geographic regions.

The gross margin was a little less than I can forecast, though.

Terrific. Thanks for all that background. I just wanted to confirm that it was the impact of Contracting.

Is this gross margin sort of what we can expect going forward.

Yes.

I don't think.

We shoot for.

Um, just as long as we're on, um you know, the Hudson uh business. Um I think the 1 Regional

Yes, we shoot for.

Mid mid twenties.

Yeah, Jake, we want to talk about what's going on with Europe.

And I think that's the best number use over over the medium and long term.

In any one quarter it can be higher than that it can be lower than that due to business mix.

And also the vagaries of construction accounting, where on some of the big projects.

We recognize.

William Kinn: Great. Thank you. Last one, on the RPO business, I think you previously mentioned the 2022 numbers and the kind of environment that the company has been in the last year or so with very low attrition. Where in the cycle do you think we are now?

The simple way to think about it is that we recognize expenses.

More aggressively than we recognize revenue sometimes the revenue recognition is is delayed and if we've already recognized all of the expenses that very last piece of revenue that we recognize.

Jeffrey Eberwein: We are bouncing along the bottom. We had a very painful decline from 2022 to, say, a year ago. It seems to us that we've bottomed and have not seen a strong recovery. We think it's coming partly because the attrition rates are abnormally low at the Fortune 500. If you had attrition statistics available at the Fortune 500, you would have seen it be abnormally high coming out of COVID, starting in 2021, into 2022, and the beginning of 2023. It was above normal. Now we've had a period where it's been substantially below normal levels. Some people have called it the no-hiring, no-firing job environment. We are seeing the attrition rate start to return to a more normal level, but it is a very gradual return to normal. I hope that answers your question.

After we finish the punch list, where an example on a big project.

Be at 100% margin effectively because we've already recognized all of the expenses so quarter to quarter. It can it can be a little lumpy and I wouldn't read too much into it I think.

Yeah, here we are. We are definitely going through a transformation and the transformation is looking at, not only our land and expand strategy. But also, you know, geographies that we're we're, we're entering into so the Middle East, as I mentioned, a couple quarters ago, we entered the Middle East uh, last year and we're starting to see the, you know, signs of that business continuing to pick up. Um, Europe is our smallest region. Um, when you look at, when you compare Europe to the US or the Americas and also to APAC um, 1 of the things, though that we are looking in Europe is is, you know, the the the the overall macroeconomic impact that's happening in that in that region. We did see uh, a, A downturn in the European market for us, this last year. Um, we had a couple of our clients, take some of their business in house which is impacted Revenue but on the same time our land and expansion strategy is picking up in some other geographies in that region as well. So Europe is going to continue to be a focus.

Mid twenties on a on a trend line basis rolling four quarter basis.

Is is what we expect.

For us. Um but when you compare Europe versus our APAC or the America's region, it is our it is our smallest region, so far to date.

Terrific. That's very helpful to have that information will that runs out of questions again, congrats on the quarter and good luck next quarter.

I would.

Thanks, Michael.

Get Michael. I would I would add, we do have a a new management team there that we're we're very excited about and we're we're very optimistic about um

Again, if you have a question. Please press Star then one our next question will come from David <unk> Investor. Please go ahead.

the Europe segment, uh, doing much better in in next year than

This year.

Thanks for taking my call.

Okay, thank you for the background. Um, just 1. Last question from from me, um,

So December questions first regarding building solutions I noticed.

KBS on September 1st that completed that.

10000 square foot project in Nantucket.

Are there more contracts like that in the pipeline.

Looking at Building Solutions um Revenue was significantly higher than I had expected. So again, congrats on that. Um the gross margin was a little less than I had forecast though. Um is this gross margin sort of what we can expect uh going forward?

Yeah, we I I don't think.

This is Jeff I'll take that.

we shoot for, um,

There are.

yeah, we we shoot for

I'll just answer it in two ways, we on our slides if you look at slide nine we do show our.

Our backlog.

And.

The backlog.

Did <unk>.

Did start to improve.

About a year ago as some of those larger projects that Rick.

William Kinn: Right. Yeah. If the business got to a more normal environment, is that where you're getting the $100 million in gross profit, $20 million EBITDA number, or are we looking at kind of back-to-peak type of attrition rate numbers?

I was talking about that were on.

On hold or frozen and frozen.

Kind of mid mid, mid 20s. And uh I think that's the best number used over over the medium and long term and any 1 quarter, it can be higher than that, it can be lower than that due to business mix. And also the the vagrity of uh construction accounting where on some of the big projects. Uh we recognize

So we have had a string of Av.

Projects that we've announced some of which we've completed some of which are are still on our our backlog.

Jeffrey Eberwein: No. I think getting back to that level would be mid-cycle, not peak. Just in the last two years since Jake joined to head up that division, we now have an offering in the Middle East, we have launched services in Latin America, and we did an acquisition in Japan. Those are three pretty significant geographic areas that we were not in before. I guess the significance of the 2022 numbers and the reason why we bring those up is that $100 million of gross profit and $20 million of EBITDA is a 20% margin. If you go back to, say, 2018, we were at a 10% margin. Something I have talked about quite a bit is that once we are at steady state, as we grow, we should have a 30% incremental margin.

And then in terms of our sales pipeline.

We continue to have a lot of those opportunities. So we're trying to win them and get them started.

Expenses um more aggressively than we recognize Revenue. Uh, sometimes the the revenue recognition is is delayed and if we've already recognized all the expenses um that very last piece of Revenue that we recognize.

But we do have more projects like that one.

<unk>.

That will.

It happened in the future.

Okay good to hear.

Notice you are indeed.

David that you were looking for bolt ons would you be looking for bolt ons in the region are outside the region.

After we've finished the the punch list for example on a big project uh can be at 100% margin effectively because we've already recognized all the expenses so quarter to quarter. It can just it can be a little lumpy and I wouldn't read too much into it. I think um mid 20s on a on a trendline basis. You know, rolling 4 quarter basis

Because you do have that facility in Oxford, Maine FMT.

Um is is is what we expect.

What do you feel competitively.

Yep Yep.

Good good good memory.

Oh, terrific. That's very helpful to to have that information. Well that runs me out of questions again. Congrats on the quarter and good luck next quarter.

Thanks Michael.

So I think the short answer to that is D. All the above are our highest priority is to add more.

Again, if you have a question, please press star. Then 1 our next question will come from David sride investor. Please go ahead

<unk> to our existing businesses, we feel like we have some good operating management teams across all of our businesses and so we would like to.

And thanks for taking my call.

Jeffrey Eberwein: We view getting back to $100 million of gross profit and $20 million of EBITDA as kind of a mid-cycle normalized level, not a peak level, with the business that we've built and what we have today with those three new geographic regions, and with our digital offering.

Um,

Give them.

so December of questions first regarding Building Solutions, I noticed um, KBS on September 1st. I completed that.

More to manage and so that could be.

10,000 square foot project and then tuck it.

And acquisition in their geographic region.

Um, are there more contracts like that in the pipeline?

Yes, you are right, we do have an idle factory in Maine, and we constantly explore.

Different ways to reopen that and have more growth.

William Kinn: Got it. Great. Thank you so much.

And then the bars, a little bit higher for what we would call an adjacent acquisition, where let's say, it's a business. We're in so we know the business well, but its in a new geography.

Operator: We have a question. Please press star and one. This concludes our question-and-answer session. I would like to turn the conference back over to Jeff Eberwein for any closing remarks. Please go ahead.

We do look at those.

Uh, this is Jeff. I'll I'll take that. Um, you know, there, there are, um, I I'll just answer it in 2 ways, we on our slides. If you look at slide 9, we do show our our backlog and, um, you know, the backlog, uh, did did start to improve, um, about a year ago as some of those larger projects that

So thats priority number two after.

Adding to what we have in an existing geography.

Jeffrey Eberwein: Well, thank you all for participating in our call and for listening in. We appreciate your interest in the company, really great questions, and appreciate those. If you want to get in touch with us, the contact information is on our press release. You can also look at our website, star-equity.com. We'll be available to answer any questions you have. Reach out. Thanks again for your time today.

Okay.

A question on the public investments that you have I think is most of that in Giro Dion you have like 150000 shares.

What do you see as a catalyst to get.

To monetize that investment.

Yes so.

All of that is public our holdings in <unk>.

And gyrodyne.

They are are they if you look at their public filings. They are in the process of liquidating they have a long history of.

Was talking about that were uh on hold or or frozen got got unfrozen. Um so we we have had a, a string of of uh projects that we've announced some of which we've completed. Some of which are are still in our our, our backlog. And then in terms of our sales pipeline, uh we we we continue to have a lot of those um, opportunities so we're trying to win them and and get them started. Um, but we we do have more projects like that 1. Uh,

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

that, that are, uh, that that'll.

Happen in the future.

Selling the remaining real estate assets and dividend and being out those proceeds.

And it's.

Okay. Yeah, good to hear. Um, I noticed you've indicated that you're looking for bolt-ons. Would you be looking for bolt-ons in the region or outside the region?

Very cheap on.

On an NAV.

Um, because you do have that facility in Oxford Maine. That's empty.

I think.

Just just based on their on their publicly stated in its Scott.

You know, when you fill capacity

60% return to to stated NAV.

Yeah. Yep. Good good. Good. Good memory. Um, so

And their plan per their public documents is to liquidate their remaining real estate holdings and distribute that out as as cash and wind down the entity by the end of I believe it's 2027.

Okay Alright.

I think the short answer to that is is kind of D. All the above our, our highest priority is to add more, um, size to our existing businesses. Uh, we feel like we have some good operating management teams, uh, across all of our businesses. And so we would like, to, uh, give give them

And then.

Let's see so regarding Hudson.

They move to a larger office on <unk>.

Last quarter what was it.

Behind that change move.

Yeah very good question I'll, let <unk>.

<unk> answer that one he was there for the.

For the Grand opening of that new location go ahead Jake.

Yes, David.

Edinburgh is a hub for all things for European market and actually.

Also supports many of our clients across the globe when things, we like about Edinburgh is the.

The talent there is very dynamic and you get language capabilities.

More to manage. And so that could be, uh, an acquisition in their geographic region. Um, yes, you're right. We do have an idol Factory in Maine and we, we constantly explore, uh, different ways to, uh, re reopen that and and have more growth. Um, and then the bar is a little bit higher for what we would call an adjacent acquisition where let's say, it's a a business we're in so we know the business well, but it's in a new geography. Um, you know, we we do look at those, uh, but I would say that's priority number 2 after, um,

Great cost basis, and it's a great culture to be a part of right.

Adding to what we have in an existing geography.

Okay. Now

um,

So what we did is over the last year, we really looked at our footprint and we did this in Tampa, where we actually moved from Ah.

Question on the public investments that you have. I think most of that is in GYRO, right? You have like 150,000 shares.

As previously shared office space into into our own office space that we lease.

Um, what do you see as a catastrophic to monetize that investment?

And we did the same principle in Edinburgh. This last time around and so we are in a shared space. We had shared common area and it wasn't really conducive to the company that we turned into it being Hudson town solutions. So the team has found a unique office space right off of Princess Street in Edinburgh Great.

<unk> is going to allow us that drive the talent that we need to bring into the to our clients, but also it's going to allow us to spot in place and we're proud of to bring our clients and potential clients and to see not only the culture, but the quality of team members that we have so really excited we get the ribbon cutting Edinburgh is a beautiful area to visit.

Yeah, so yeah. Um, all all that is public. Um, are are Holdings in in uh, in gyro. So they are. Uh, they, if you if you look at their public filings, they are in the process of, uh, liquidating. They have a long history of, um, selling the remaining real estate assets and dividend. Ding out those proceeds.

and it's, um, very cheap on, uh, on nav, I think, um,

Great talent.

We want to be there.

Okay. Good.

What about I noticed from Q3 last year, the new logos and expansions and renewals was up considerably from Q.

To uh to state it nav and their plan per their public documents is to liquidate their remaining uh, real estate holdings and distribute that out as uh, as cash and and wind down the entity by the end of uh I believe it's 2027.

Looking at quarters.

Okay, all right. Good.

What was behind that.

um, and then

Optic.

Yeah, David and create great analysis.

As I mentioned before a couple of times, our land and expand strategy is really working and.

Let's see. So regarding Hudson, you know, I noticed that they moved to a larger office and Edenberg um this past quarter. What was behind that change move?

What I mean by that is really looking at the clients that we service today and how do we continue to support them in other geographies in other business lines and making sure. We're having those conversations so we're seeing a pretty significant.

Yeah, very, very good question. I'll let uh, Jake answer that 1. He he was there for the uh, for the grand opening of that. Uh, new location. Go ahead, Jake.

A tailwind with that and allowing us to build onto our.

Existing client portfolio not to mentioned, adding the digital offering in our different solutions in our different products with boutique executive search as well, we're seeing clients gravitate more to that one talent solutions. So all of that is allowing us to gain more market share with our clients and provide a better level.

The higher quality of level service to them.

Got it Okay now last quarter I think.

Jeff had mentioned.

AI rollout.

There was one company that was interesting just on the AI offering.

And then I was hoping you are hoping that it would expand to others.

Yeah, David, you know, as you know, Edinburgh is a, is a hub for us and for our European market. And actually, it also supports many of our clients across the globe. Uh, when things that we like about Edinburgh is the the the the the the the talent there is very Dynamic you get language capabilities. You get to get a great cost basis and it's a great culture to to be a part of, right? Um, so what we did is over the last year, we really looked at our footprint and and we we did this in Tampa where we actually moved from a, a a, a a previously shared office space into, uh, into our own office space. And you know, that we lease and we did the same principle in, in Edinburgh, this last time around. And so we are in a shared space. We had shared common area.

Other services that you offer is there any follow up on that was there any expansion or any other success stories, along the lines with the AI offering that can have.

Yes, David.

Actually we have some clients.

Sure.

When you take a step back we have embedded our digital offering into our appeal solution. Our appeal suite right. So so whether it be talent IQ, whether it be hudson flow or Hudson core every single one of our clients have a different and has a different demand and they're on a different journey and sometimes that journey. It takes them two they were.

On a full <unk> solution, sometimes it takes them no. They don't want a full agenda Ks listen they want they want the pieces of the puzzle right and so we're able to offer that to them. One thing that has been taking off as I just mentioned that our talent IQ solution, which provides real time market intelligence and market data to our.

And it wasn't really conducive to the the company that we turned into. It, being Hudson, Town Solutions. So the team has has found a, a, a unique office space right off of Princess Street and down in Edinburgh, great location. It's going to allow us to, you know, Drive the town that we need to bring into the, you know, to our clients. But also it's going to allow us a spot in place that we're proud of to bring our clients and our potential clients in to see, not only the culture but the quality of of team members that we have. So really excited, we just did a ribbon cutting, Edinburgh of beautiful area to visit. Um, in in, you know, like I said, great talent, great culture to be there.

Yep. Okay good.

Um, I noticed that from King Street last year, the new logo and expansions and renewals were up considerably for you. You know, looking at the quarters, what was behind that uptick?

Clients, so they can make better talent decisions.

We have a couple of partners that are out of that now so it's more than one now and we're getting very good feedback and the best part about that solution is.

It's a global solution right, it's not just looking at the Americas or EMEA or APAC clients can come to us and say we need to understand where is the best area to put our offshore finance facility or manufacturing facility for FMC G. We can help drive.

Yeah, David great. Great, great analysis. Um you know as I mentioned before a couple times our land and expand strategy is is really working and you, you know, and what I mean by that is really looking at the clients that we service today and, you know, how do we continue to support them in other geographies and other business lines and making sure we're having those conversations. So, we're seeing a pretty significant, you know, you know, uh, a Tailwind with that and allowing us to, you know, to build onto our, our our existing client portfolio not to mention, you know, adding the digital offering and and our different

Help inform some of those decision making capabilities with that.

Okay got it.

And then the goal that you would have heard Shaun.

David Yes. This is Jeff sorry, I would encourage you to follow and all of our shareholders really follow the Hudson talent solutions website, they sometimes have news and announcements that.

Solutions in our different products with Boutique executive Search as well. We are seeing clients gravitate more to that 1 Talent solution. So all of that is, is, is allowing us to, you know, gain more market share with our clients and provide a better level and a higher quality of level of service to them.

You wouldn't see on staar's website or might.

It might not be a star press release, but.

We'll have more to say about.

Got it. Okay, now last quarter, I think um Jeff like mentioned with the AI roll out. Um there was 1 company that was interested just in the AI offering and then it was hope you're hoping that it would expand to others.

What theyre doing on the digital side going forward.

Got it okay.

Question about the partnering with private equity or growth capital.

Other services that you offer. Is there any follow-up on that? Was there any expansion or any other success stories along the lines? With the AI offering that you have?

We're interested at some point.

How would that impact <unk>.

Star.

Company.

Would there be like what they have to buy equity.

Hudson is Alan R <unk> equity or I'm, just trying to.

Figure that out.

Yes.

Take that.

David It's a great question the short version is.

<unk>.

We don't know.

Exactly what that's going to look like but.

Our first priority is to.

Get back to the levels, we were at in 2022, but this time around.

Do it with a.

Morris.

Table Foundation, so if I go back to 2022, the Hudson business was about 70% we would estimate.

Yeah, David we we are we are actually we have some clients that now have have. Uh we take a step back, we've embedded, our digital offering into our RPO solution, our RPO Suite, right? So so whether it be Talent IQ, whether it be Hudson flow, or Hudson core, every single 1 of our clients have a different, it has a different demand, and they're on a different journey and and sometimes that Journey takes them to. They want a full, agentic AI solution. Sometimes it takes them know, they don't want a full, agentic AI solution, they want, they want, you know, pieces of the puzzle, right? And so, we're able to offer that to them. Um, 1 thing that has been taking off is so I just mentioned, there are Talent IQ solution, which provides real time Market intelligence and Market data to our clients, so they can make better talent to

What we would call enterprise <unk> and Thats, where it is with a fortune 500 company.

Company.

This next time around we'd like that to be a lot closer to a 100%.

So.

When we get back to those 2022 levels of.

Let's call it $100 million of gross profit and $20 million of EBITDA.

We think it'll be.

Yeah.

More more sustainable and a stronger more stable.

facility for fmcg, we can help drive and help inform some of those decision-making to get the

okay good.

Group of clients.

And then the goal.

That's kind of 0.1, and then if we think about.

Everything going on with this business with.

All of our clients asking about AI AI is going to affect <unk>.

Procurement talent assessment.

It's just hard to know.

Where that's going to go.

So like one of the things we've talked about is let's say.

There's some really interesting investments to make on that side digital AI Tech.

Yeah, this is Jeff. Sorry, I, I would encourage you to follow, uh, and all of our shareholders really follow the Hudson Talent Solutions website. Uh, they sometimes have news and announcements that, um, you, you wouldn't see on Starz website or, uh, wouldn't might not be a star press release, but they, they will have, um, more to say about, uh, what they're doing on the digital side going forward.

Got it, okay.

Youre not going to see star invest.

Um, question about the partnering with private equity or growth capital; you know, if someone were interested at some point.

And millions of dollars in something that isn't producing revenue isn't producing.

How would that impact?

Star as a company.

Immediate.

Cash flow, but it could make sense to partner with somebody who has that expertise maybe somebody that.

Um, would there be like, would they have to buy equity in Hudson Talent OR in Star Equity? Or I'm just trying to

Figure that out.

Has other investments in digital AI type of companies so they bring.

Expertise.

And capital and they would fund that that investment so.

Yeah, I'll I'll I'll take that. Um, this David is a great question that this the short version is, um,

There's just so many different ways that could go I would just tell you to stay tuned its not something thats going to happen.

And the next few quarters, but I would put a high probability on something like that happening at some point.

In the future.

I guess, the short and another way to say everything I'm, saying is that we're transforming the business from being.

A very people oriented business to one that is much more of a tech tech enabled tech plus expertise.

We don't know exactly what that's going to look like, but our our our first priority is to, um, get back to the levels. We were at in 2022, but this time around, uh, do it with a, a more stable foundation. So if I go back to 2022, the Hudson business was about 70%. We would estimate, uh, what we would call Enterprise RPO, and that's where it's with a Fortune, 500, uh, company. Um, this next time around, we'd like that to be a lot closer to 100%. So,

Type of the business and there could be people who.

when we get back to those 2022 levels of

Could be very interesting to partner with when the time is right.

Let's call it a 100 million of gross profit and 20 million of ibida. Uh, we think it'll be, um,

Yeah, good I know there's value in that division because.

Much larger company Heidrick <unk> struggles.

It was bought out this past quarter, which similar type services that are offered so.

More more sustainable. And a and a stronger more stable uh group group of clients. So that that's kind of Point 1. And then if we think about

What about.

The preferred shares I know utilize that as a tool for acquisitions, but is there a point, where you're seeing interest payments, becoming unsustainable for the company to carry I mean.

everything going on with this business with, um, all of our clients asking about AI, how is AI going to affect

Talent procurement, talent assessment. You know, it's just hard to know.

You can't just.

Offer preferred shares Emmis clean correct.

Very very very good question.

The way, we think about that if we're going to use preferred shares in an acquisition.

Where that's going to go. So, like one of the things we've talked about is, let's say, um, there's some really interesting investments to make on that side: you know, digital, AI, um, tech.

The preferred shares if you just think about it on a multiple basis its a 10 times multiple.

You know, you're just not going to see Star invest.

If you think about.

Tens of millions of dollars and something that, um, isn't producing revenue isn't producing. Um,

The par value being $10, a share and the annual dividend being $1 a share. So if we can acquire a business like we did earlier this year.

<unk>.

Has a cash flow stream that is growing over time, and we can buy that cash flow of that business and that cash flow stream at three or four five times.

Cash flow.

And then it's highly occur.

Accretive to do that acquisition. So in other words, the cash flow from the acquisition should more than cover.

Immediate, uh, cash flow, but it could make sense to partner with somebody who has that expertise. Maybe even somebody that um, has other investments in digital AI type of companies, so they bring expertise and uh, capital and uh they would fund that that investment. So um, you know, there's just so many different ways that could go. I would just tell you to, to stay tuned to, you know, it's not something that's going to happen.

The dividends.

In uh, in the next few quarters. But I put a high probability on something like that happening at some point.

That we would issue an acquisition.

Got it okay.

One last question regarding <unk>.

The mutual funds that were selling.

Since the start of merger was.

<unk>.

You took out 8% of the shares back in September.

We're still in $9 range.

Jeff you were buying at higher prices.

In the future and I guess the short. Another way to say everything I'm saying is that we're transforming the business from being um a very people-oriented business to 1. That is much more of a tech tech enabled uh Tech Plus expertise uh type of a business and there, there could be people who um could be very interesting to partner.

Or do you feel the company is still undervalued, but I still kind of sounds like there is maybe an overhang maybe theres still a seller out there do you think.

With when the time is right.

You could do another big block transaction take those shares out.

Yeah, good. I know there's value in that division because you know, much larger company. Hydrogen struggles just was bought out this past quarter, which, you know, similar type services that are offered. So

We're always open to that.

um,

We I think the most effective share repurchases we've done have been.

A negotiated transaction with.

With a block seller that is.

What about um, the preferred shares, I know you utilize that as a tool for Acquisitions, but is there a point where you see interest payments becoming unsustainable for the company to carry? I mean, you can't just

By far the most efficient and effective in terms of how to buy back stock.

Offer preferred shares endlessly. Correct.

So if there is.

And an overhang as you say or remaining block.

Out there and a <unk>.

Uh very very very good question. Um, the way we think about that, if we're going to use preferred shares in in an acquisition, um,

Want to sell to US we will we will certainly entertain that.

And as far as we know they're.

There are no longer any holders.

Any institutional holders who are above 5%. So if there is.

Remaining.

Seller out there and they do have a block for sale is going to be.

Our block size.

Less than 5%.

Got it.

Very good well. Thank you for the time, thank you for taking my questions.

Great questions. Thank you.

The next question will come from William Kent.

It's a 10 times multiple. If, if you think about um the par value, being ten dollars a share and the annual dividend being $1, a share. So if we can acquire a business like we did earlier this year that um, has a cash flow stream that is growing over time, and we can buy that cash flow that business and that cash flow stream at 3 or 4, or 5 times, um, cash flow. Uh, then it's it's it's highly accretive, um, to do that acquisition. So, in other words, the cash flow from the acquisition should

Whats Presidio asset management. Please go ahead.

Hey, Jeff.

More than cover. Um, the the dividends um, that that we would issue an acquisition.

With the merger now closed I guess is there any update on the expected synergies.

Got it, okay.

Um, 1 last question. Regarding, you know, the mutual funds that were selling.

And can achieve.

Yes, great great Great question.

um, since the star merger was

um, announced

We still believe that we'll.

We will deliver the $2 million in in synergies.

You know, my, you know, you took out 8% of the shares back in September. Um, we're still in 9 range.

And that that target could be higher over time, but that's the number that.

We're comfortable using and where youre going to see that is in the corporate.

Um, Jeff you were buying at higher prices, you know what do you I know that you feel the company is still undervalued but I still kind of sense. Like there's maybe an overhang, maybe there's still a seller out there and do you think

Line. So if you look at the pro forma table in our press release Youll see EBITDA from each one of our four business segments, and then Youll see a column for corporate and in Q3 that are that total was $2 6 million for the quarter and that's a pro forma number.

You could do another big block transaction. Take those shares out.

We're, we're always open to that. Um,

So as we.

Start to realize some of those synergies youre going to see the corporate costs decline and so our goal is to get that number down more to like $2 million a quarter or $8 million on an annualized run rate, so thats really where youre going to see the synergies show up if you're.

we, I think the most effective uh, shareware purchases. We've done have been, uh, a negotiated transaction with um, with a with a block seller. That is uh, by far the most efficient and effective in terms of, uh, how to buy back stock. So if if there is

An overhang as you say or remaining block.

um, out there and they

Want to sell to us. We will, we will certainly entertain that. And as, as far as we know there,

If youre going to be tracking at quarter to quarter.

there are no longer any holders. Um,

And you think that's it.

<unk> in the near term or is that kind of.

Any institutional holders, who are above 5%. So if there is

Year Oliver.

What kind of timing are we looking at.

Yes, it's a.

Gradually.

A a remaining um, seller out there and they and they do have a a block for sale. It's going to be

uh,

It kind of comes in and in steps.

a block size. That's

We.

Less than 5%.

I'll put it this way we have.

Got it. Yeah.

High confidence, we will be at that run rate.

Very good. Well, thank you for the time. Thanks for taking my questions.

I would say at some point next year, so maybe six months from now.

A great questions. Thank you.

We should be at that run rate. So said another way the $2 million of synergies should be fully.

The next question will come from William Ken with Presidio Asset Management. Please go ahead.

Realized I would think six months from now.

Hey Jeff. So uh with the merger now closed, I guess. Is there any update on the expected synergies that you uh,

Great.

Sent to achieve.

A couple more questions on the corporate side before going to the.

The IPO.

Could you clarify for us what the quarter end share count looks like with the repurchase.

Yeah Youll see.

The number on the on the cover of our 10-Q.

I think its I.

I think youll see its right at three 4 million shares may be a little bit higher than that.

Right Great. Okay, and then is it fair to say there was a little bit of debt pay down this quarter as well.

Have debt at.

<unk>.

On two of our businesses.

The building solutions and energy services.

Okay.

Yeah, great, great. Great question. Um, you know, we still believe that uh we'll we'll deliver um, the 2 million in in synergies and uh, that that Target could be higher over time. But that's the number that uh, that that we're comfortable using and where you're going to see that is in the, the corporate um line. So if you look at the proforma table in our press release, you'll see ibida from each 1 of our 4. 6 4,

Debt at the sub level.

And on.

Building solutions, we have an acquisition loan that we that we took out when we acquired timber technologies and that loan is amortizing. So we're making principal payments on that.

Every quarter same thing with the seller note there at timber technologies. So.

Start to realize some of those synergies, you're going to see the corporate costs Decline. And so our goal is to get that number down, more to like 2 million a quarter or 8 million on an annualized run rate. So that's that's really where you're going to see the the synergies, uh, show up. If you're, if, if you're going to be tracking at quarter to quarter.

and you think that's,

Over time, everything else being equal Youll see our debt decline as.

Achievable in the near term, where is that kind of a, you know, a year out or...

what kind of timing are we looking at?

As those two.

Debt pieces.

Yeah, it's it's a

Decline.

Alright, thank you.

And then lastly on the RPM business.

You've previously mentioned the 2002 numbers.

gradual, you know, it's it kind of comes in in uh, in in steps. Um, we I I'll I'll put it this way. We we have, um,

The kind of environment that the company has been in the last year or so with very low attrition.

We're in the cycle and where you think we are now.

We are.

Bouncing along the bottom so we had a.

Very.

High confidence will be at that run rate. I would say at some point next year, so maybe 6 months from now. Uh, we we we should be at that run rate. Uh, so, so set another way, all the 2 million of synergies should be fully uh, realized. Um, I I would think 6 months from now.

Painful decline from two.

<unk> 2022 to say.

A year ago.

And so it seems to us that we've that we've bottomed and.

Um, a couple more questions on the corporate side before going to the RPO. Um, could you just clarify for us what the quarter-end share count looks like with the repurchase?

Have not seen a strong recovery.

But we.

We think it's coming.

Partly because the attrition rates are abnormally low at the fortune five hundreds. So if you were to have.

Yeah you'll you'll see um the number on the on the cover of our uh 10 Q. Um I think it's uh I think you'll see it's right at 3.4 million shares, maybe a little bit higher than that.

Great great.

If you had attrition statistics.

Okay, and then is it fair to say, there was a little bit of Debt Pay down this quarter as well.

Bailable at a fortune 500, you would've seen it be abnormally high coming out of Covid. So starting in 2021.

Um, you know, we have debt on two of our businesses. Um,

Into 2022 at the beginning of 2023, so it was above normal.

The Building Solutions and the Energy Services. Um,

And now we've had a period, where it's been substantially substantially below normal levels. Some people have called it the no hiring no firing.

We have debt at the sub-level. Um,

and on, uh,

Job environment.

We're we are seeing the attrition rate start to return to a more normal level, but it is a very gradual.

Return to normal so I hope that answers your question.

Right yes.

So if we.

The business got to a more normal environment is that where you're getting the 100 and $100 million in gross profit of $20 million EBITDA number or is that are we looking at kind of the peak.

Building Solutions. We, we have a an acquisition loan that we, that we took out when we, uh, acquired Timber Technologies, and that loan is advertising. So, we're we're making principal payments on that um, every quarter. Uh, same thing with the with the seller note there at Timber Technologies. So you know oh over time everything else. Being equal. You'll see our debt decline as um, as those 2 uh, debt pieces. Uh, decline.

Nutrition right.

Numbers now.

I think getting back to that level would be mid cycle not not peak.

Just in the last two years since Jay joined to head up that division we have.

Great, thank you and then last 1 on the RPO business, you know, I think you previously mentioned the 22 numbers. Um, and, you know, the kind of environment that we've, the company has been in the last year or so, with very low attrition, where where are in the Cycles? Do you think we are now?

we, we are

We now have an offering in the middle East.

We are have launched services in Latin America.

bouncing along the bottom. So we had a

And we did an acquisition in Japan. So those are three pretty significant geographic areas that we werent in before and so.

a very, um, painful decline from

I guess the significance of the 2022 numbers and the reason why we would bring those up is that $100 million of gross profit and $20 million of EBITDA is a 20% margin.

2022 to say, um, a year ago and so I, it seems to us that we've, that we've bottomed and, um, have not seen a strong recovery but, uh, we we think it's coming, um,

If you go back to say 2018, we were at a 10% margin and something I've talked about quite a bit is that.

Partly because the attrition rates are abnormally low At The Fortune 500. So if, if you were to have, um,

Once we're at steady state as we grow we should have a 30% incremental margin.

And so.

So we view getting back to a $100 million.

<unk> profit and 20 million of EBITDA as is kind of a mid cycle.

Normalized level not at peak level with the with the business that we've built and what we have today with those three new geographic regions and with our digital offering.

You know, if if you had attrition statistics available at the Fortune 500, you would have seen it be abnormally High coming out of Co. So starting in 2021, um, into 2022 at the beginning of 2023. So it was above normal and now we've had a period where it's been substantially substantially below.

Got it great. Thank you so much.

Yes, I have a question. Please press Star then one.

Normal levels. Uh some people have called it the the no hiring no firing uh job environment. Um we're we're we are seeing the attrition rate start to return to a more normal level, but it is a very gradual, um, return to normal. So, uh, hope hope that answers your question.

This concludes our question and answer session I would like to turn the conference back over to Jeff Eberwein for any closing remarks. Please go ahead.

Right. Yeah.

Well. Thank you all for participating in our call and for listening and we appreciate your interest in the company and really great questions and so.

So I appreciate those and if you want to get in touch with us.

The contact information is.

Is on is on our press release.

And.

You can also look at our website STAAR equity dot com.

So if we if if the business got to more normal environment is that where you're getting the the 100% 20 million if it's that number or is that, are we looking at kind of back to Peak type of attrition rate, numbers know? I I I think getting back to that level would be mid-cycle not not Peak uh just in the last 2 years since Jake joined to to head up that division. We have um,

And we'll be we'll be available to answer any questions you have so reach out.

Again for your time today.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Uh, we now have an offering in the Middle East. We uh, are have launched uh services in Latin America. And we did an acquisition in Japan. So those are 3, pretty significant Geographic areas that we weren't in before. And so um, I guess the, the significance of the 2022 numbers and the reason why we would bring those up, is that 100 million of gross profit?

Line of EBITDA is a 20% margin.

Uh, if you go back to say, 2018, we were at a 10% margin and something I've talked about quite a bit, is that?

Um,

Once we're at steady state as we grow, we should have a 30% incremental margin. And um so we we View getting back to 100 million of of gross profit and 20 million of ibadah as as as kind of a a mid-cycle

Not at peak level with the with the business that we've built. And what we have today with those 3, new geographic regions and with our digital offering

Got it. Great, thank you so much.

Yeah, I have a question, please. Press star. Spin 1.

This concludes our question and answer session. I would like to turn the conference back over to Jeff Eberwein for any closing remarks. Please go ahead.

Well, thank you all for participating in our, in our call, and for listening in. We appreciate your interest in the company and, uh, really great questions. And, uh, so so appreciate those and if you want to get in touch with us, the, the contact information is, uh, is on our is, on our pressure release and, um, you can also, uh, look at our website star equity.com and, uh, we'll be. We'll be available to answer any questions you have. So, Reach Out.

Thanks again for your time today.

Hey, conference attendees. Now concluded, thank you for attending today's presentation. You may now disconnect.