Hudson Global Aktie

Thank you. Greetings, ladies and gentlemen, and welcome to Star Equity Holdings Second Quarter 2026 Financial Results Conference Call. Please be advised that the discussions 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 Star Equity's most recent 10-K, 10-Q, and other filings for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligation to update forward-looking statements as a result of new information, future events, or otherwise.

Please also note that on this call, management will reference non-GAAP financial measures including EBITDA, adjusted EBITDA, adjusted net income, and adjusted earnings per share, which are all financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our earnings release issued yesterday afternoon.

If you did not receive a copy of the earnings release and would like one after the call, please contact Star Equity at (203) 489-9500 or its Investor Relations Representative, Lena Cati of The Equity Group at (212) 836-9611. Also, this call is being broadcast live over the Internet and may be accessed at Star Equity's website via www.starequity.com. Shortly after the call, this call is being recorded for a replay that will be available on the company's website.

It is now my pleasure to introduce Jeff Eberwein, Chief Executive Officer of Star Equity. Please go ahead.

Thank you, operator, and welcome, everyone. We greatly appreciate your interest in Star Equity Holdings, and thank you for joining us today. I'll begin by reviewing some highlights from our second quarter results at the holding company level. After that, Jake Zabkowicz, CEO of Hudson Talent Solutions, will give us an update on the performance of that business, which is inside our Business Services division. Rick Coleman, our COO, will provide some insights into the performance of our Building Solutions and Energy Services divisions. And I'll discuss some of the key points in the merger with Harte Hanks that we announced this morning.

One item I'd like to point out just to get started is Slide 5 from our earnings deck where you can see the progress we've made on the cost synergies. You may recall that a year ago when we announced the merger with Hudson, we projected approximately $2 million of merger synergies, and we believe we've achieved approximately $3 million of merger synergies at this point in time. And we measure that from the adjusted EBITDA table, which you can find on Pages 10 and 12 of our earnings release.

In that table, you'll see that for the first half of the year, our corporate costs, if you look at the corporate column, were $3.6 million. That's down from $5.1 million on a pro forma basis. So that's savings year-over-year of $1.5 million for 6 months, and that's how we get to the $3 million merger synergy number. When we look at the division results for Q2, Business Services had modest revenue growth. Gross profit was down slightly year-over-year, reflecting some pressure in the professional talent market.

And we did have growth investments of $1.5 million, and just a reminder that rolls through our income statement, so that shows up as an expense and the benefit will come in future periods. Our Building Solutions division had results below our expectations. That's due to market softness and the timing of some contracts when the project started, and in particular when the revenue gets recognized, we'll come back to this issue, but we had a large project that was mainly completed in Q2, but most of the revenue for that project will be recognized in Q3.

Energy Services posted very strong year-over-year gains in revenue, gross profit, and adjusted EBITDA, and that's due to higher utilization of our tools and some new client wins in the geothermal and mining industries. Turning to the balance sheet, we ended the second quarter with $8.9 million in cash that does include $2.1 million of restricted cash. And our working capital, excluding cash, was $21.5 million, which compares to $22.4 million at the end of the year. So we've made a little bit of progress on more efficient working capital management.

We have continued to repurchase shares. We repurchased about $0.2 million in Q2 and we have $1.6 million remaining on our authorization of $3 million, which the board approved last September. We continue to believe our stock is undervalued, and we view share repurchases as a very attractive allocation of capital. Across the company, we remain focused on disciplined execution, cost management, and we are continuing to invest in growth initiatives that we believe will enhance our competitive position and drive improved financial performance over time.

Now I'd like to turn it over to Jake to discuss our Business Services division.

Thank you, Jeff, and good morning. As Jeff mentioned, our Business Services division delivered solid performance in the second quarter with revenue up modestly year-over-year despite continued macroeconomic uncertainty and sustained pressure in the professional talent market. As shown on Slide 11, second quarter 2026 Business Services revenue was $36.4 million, up 2% from $35.5 million in the prior year quarter. Our gross profit was $17.8 million, down 4% from $18.6 million a year ago. Adjusted EBITDA for the division was $1.6 million compared to $2.2 million in the prior year quarter.

That decline largely reflects deliberate growth investments in the second quarter, as we invested $1.5 million within our digital solution, Hudson Fusion, entering into new geographies and also related initiatives compared to $0.8 million in the second quarter of 2025. Regionally, as shown in Slide 13, the Americas performed well with gross profit growth of approximately 10%, while the EMEA and the Asia-Pac regions gross profit declined 10% and 13%, respectively, reflecting more challenging conditions in those markets. Asia Pacific remains our largest region at 62% of the divisional revenue and 43% of the gross profit in the quarter, with the Americas contributing 39% of the gross profit and EMEA at 18%.

We have maintained a strong focus on innovation and operational efficiencies, including the expanded development of our agentic AI and automation tools to enhance recruiter productivity, improve our candidate matching, and deliver greater value to our clients. These initiatives helped limit the year-over-year gross profit decline to less than 5% despite a mixed regional backdrop. We believe our continued focus on technology-enabled delivery and deep client relationships position us to capitalize on the improving market conditions over time.

Turning to Slide 12, on a rolling fourth quarter basis, RPO new business total contract value was $122.5 million, comprised of $8.3 million in new logo wins and $114.2 million in renewals and expansions with our existing clients. The trailing 12-month gross profit of $72 million has been relatively stable over the past 4 quarters, while our trailing 12-month adjusted EBITDA margin was 5.4%, down from 7.9% a year ago, again, reflecting the growth investments I mentioned earlier.

Importantly, we've seen an uptick in new customer conversations and robust new logo interest in recent months, supported by enhancements in our geographical footprint and digital offerings. We continue to execute on our land-and-expand playbooks, including leveraging our recent acquisition with ACG in the Japanese market. Looking ahead, we continue to take a disciplined approach and execute our playbook for the remainder of the year with a focus on creating a more resilient, agile, and growth-oriented business over the longer term.

Now I'll turn the call over to Rick, who will discuss the financial and operational performance of our Building Solutions and our Energy Services division. Rick?

Thank you, Jake, and good morning, everyone. I'll start with an overview of our Building Solutions division highlighted on Slide 9. As Jeff mentioned earlier, second quarter performance was below our expectations as both residential and commercial construction markets remain challenging. Our results were further impacted by project timing and revenue recognition as one large project that was largely constructed in the second quarter will be completed and recognized in the third quarter.

Second quarter Building Solutions revenue was $14.6 million, gross profit was $3.2 million, and adjusted EBITDA was $0.5 million. On a pro forma basis for the second quarter of 2025, Building Solutions revenue was $20.4 million, gross profit was $5.2 million, and adjusted EBITDA was $2.3 million.

As shown on Slide 10, quarter end backlog for Building Solutions was $10.6 million, up from $8 million at the end of the first quarter. And our trailing 12-month book-to-bill ratio was 0.77, up from 0.72 last quarter. New orders in the quarter were $17.3 million, our highest quarterly order intake since the second quarter of 2025. While these metrics still reflect market softness, we continued to add attractive work to the backlog, including the previously announced $4.2 million multifamily housing project in New Hampshire, serving the senior community.

We've also gained traction in the workforce, affordable and assisted living and senior housing markets and expect these sectors to be significant business drivers as market conditions improve. Consistent with the strategy we've outlined previously, we remain focused on disciplined project selection, operational execution, and margin management, which we believe will position the business for stronger performance as market conditions improve.

Turning to Slide 14, the Energy Services division delivered another strong quarter, continuing the momentum we highlighted earlier this year. Second quarter 2026 Energy Services revenue was $3.9 million, up 19%. Gross profit was $1.9 million, up 75% and adjusted EBITDA was $1.2 million, up 126%. On a pro forma basis, second quarter 2025 Energy Services revenue was $3.3 million, gross profit was $1.1 million, and adjusted EBITDA was $0.5 million. The business continues to gain share in core markets with especially strong performance in mining and geothermal applications.

These results reflect disciplined execution and the benefits of our diversified exposure across drilling applications, which continues to differentiate the platform and support consistent growth. We continue to invest in new tools to support this growth while working closely with our largest customers to align our investment decisions with their specific needs. We see significant opportunities to continue expanding our presence and capabilities in the geographies and markets we serve.

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

Thank you, Rick. I'd like to transition now and talk a little bit about the merger with Harte Hanks that we announced this morning. Last night -- late last night, we signed a merger agreement to merge with Harte Hanks. The acquisition will be for $5 per share. And on a fully diluted share count, that implies that the acquisition will be about $38 million, and we will pay for this acquisition half in cash, half in preferred stock. So one way to think about it is, out of the $5 in consideration, $2.50 of that will be in cash and $2.50 of it will be in Star's preferred stock, so 0.25 shares of our preferred for every 1 share of Harte Hanks.

In terms of where will the cash come from, I would point you to the cash we have on our balance sheet, the cash that Harte Hanks has on its balance sheet. And importantly, Harte Hanks has a $25 million revolver in place with a well-known financial institution that we also have a relationship with. And those 3 sources will be how we fund this acquisition. So we don't believe we'll need to raise any external capital in order to close this deal. Also, importantly, in keeping with our thought that our stock is undervalued, we're not using any common shares as part of this transaction, and our plan is to continue buying back shares.

Going back to the -- how the merger is structured, the Harte Hanks shareholders will have a right of election. So those shareholders who choose to get all preferred stock can make that election. Shareholders who choose to get all cash, they would get $5 in cash. That is subject to proration. It has a cap where 50% of the consideration is cash, and that's capped at $19.2 million. So that's a maximum cash outlay, but the preferred is uncapped. So in other words, if say, 60% of the shareholders wanted to get preferred stock, they would get preferred stock and the cash percentage of the total would go down to 40%. Any questions on that, feel free to give us a call.

So both Boards have approved this transaction. It does include a 30-day go-shop period where Harte Hanks is allowed to receive any other offers that might be out there. After that period ends, we'll file an S-4 and that's got to be approved by the SEC. And then after that's approved, we will start soliciting votes from Harte Hanks' shareholders. We don't need any vote from the Star side. So no vote is required by our common shareholders and no vote is required by our preferred stockholders. So those are the hurdles that we need to get to in order to get to a closed deal. Our best guess is that the deal is going to close in the fourth quarter sometime.

So the way we're thinking about it is by year-end, we think we'll have a closed deal. And it would be great if it is earlier than that. It's possible it could be later than that. But our best guess is before the end of the year. And then when we think about the company on a combined basis, Harte Hanks' businesses are all in the category of business process outsourcing. Our Business Services division, which holds our Hudson business, is also in a way business process outsourcing.

Our business is focused on the Talent and HR segments, while theirs is focused on Customer Care, Revenue Solutions and Fulfillment Logistics. Importantly, we both serve Fortune 500 clients. And so we think this business makes a lot of sense inside of Star. There's definitely cost synergies that we believe we'll realize. We're estimating initially that we will be able to get to $10 million of cost savings.

And so combining these 2 companies, we think revenue will be around $400 million. And the adjusted EBITDA, this is a pro forma number, including $10 million of cost synergies, we think that'll be approximately $30 million once those cost synergies are achieved. And so we're very excited about it. We think this is accretive on any metric, accretive to our shareholders, and we look forward to getting to a closed deal and being one company.

So with that, operator, why don't we open it up for questions?

[Operator Instructions] Our first question today is from Joseph Gomes with NOBLE Capital.

So Jeff, I wanted to start off. You talked about the Business Solutions. It was kind of a disappointing quarter. It was below your expectations. What were your expectations for that business for the quarter in terms of revenue and adjusted EBITDA?

Yes, what I would point you to, Joe, is Slide 12 of our earnings deck. We've done a very good job maintaining what we have. So we had quite a few significant contracts that have come up for renewal in the last 12 months. So we've done a good job getting those contracts renewed and in some cases expanded. What has been disappointing, way below our expectations, is the new logo side. So if we look at -- let's just take a year-to-date, new logo, $2.1 million, that's annual contract value. Our expectation for the year is much, much higher than that. And our expectation for the first half is higher than that.

I guess the best thing we could say about that is, it's not like there's a lot of new business to win, and we're losing it to competitors. It's really just a symptom of continuing to be in the low hire, low fire, and I would even add, low attrition environment, and we're particularly seeing that in professional-oriented companies, white-collar type of companies. They're very slow to make decisions. There's a tremendous amount of uncertainty out there with everything going on in the world and then add on top of that, AI.

That is the #1 thing our clients want to talk about is how is AI going to change our business? How is it going to change our talent management? How is it going to change our talent acquisition? And it's just creating an environment where they're very frozen. There's still new business to win out there. It just keeps getting pushed to the right. And then when we do win something and it starts, it typically starts much slower than it otherwise would.

Okay. Actually, Jeff, my question is on Building Solutions, not the Business Services.

Oh, I'm sorry. I thought we were talking about Business Services...

I appreciate the insight into that also.

Yes. On Building Solutions, if you look at our backlog slide, this is on Slide 10. We really want to see new orders of $20 million a quarter, and we want to see revenue of $20 million a quarter, that's what we view to be a normal run rate, a mid-cycle run rate, if you will. We have lower-than-normal capacity utilization at our factories. Probably the best thing we could say there is that new orders of $17 million in Q2 were the highest number -- highest quarterly number we've seen in a year.

But we went through 4 quarters where the new orders were below $20 million, they continue to be below $20 million. So our backlog is low. And I would just describe -- just zooming out a minute, I would describe the environment and real estate, construction are very local markets. We're in 2 markets, as you know, the Northeast and the Upper Midwest. Those markets, in general, are lower growth than some other parts of the country.

I'd also add there's less competition there. People aren't itching to enter those as markets, but single-family is weak. There's a lot of press about that. Commercial multifamily, I would say, is very weak. And where we have traction is in more of the specialty areas, like anything to do with workforce housing, affordable housing. There's some healthcare and education-oriented housing, and then assisted living and senior housing, there are projects to win. And when I look at what we've won year-to-date, the biggest project was a senior living project in New Hampshire.

And then the projects in our backlog, it's not with the traditional commercial builders of multifamily and single-family. A lot of things in our backlog are in that theme of affordable housing, workforce housing, senior housing. So it's just a weak environment. We're managing through it. But when you ask what do we view a normal run rate to be, I would say it's $20 million of revenue a quarter, 25% gross profit margin. And over time, we think an adjusted EBITDA margin should be 10% to 15%. So that implies $8 million to $12 million of EBITDA for a year, which is 2 plus per quarter, and we've been running below that.

Okay. Then one more for me, if I may. So congrats on the announcement of the acquisition of Harte Hanks. But 2 things on that. If I took a quick look at Harte Hanks and I see they've been shedding revenue over the past 5 years and adjusted EBITDA, they've been shedding. I think it's $6 million trailing 12 months roughly adjusted EBITDA. And if I take your equity value and add in their debt, it's about 10x multiple there.

So, I guess, the big point is how do you see yourself bending that curve that's been going on for a while at Harte Hanks where they've been shedding revenue and adjusted EBITDA, number one. And number two, what does this impact, if anything at all, the GEE Group investment that you had made -- an offer you had made for them?

Yes, a lot of questions in there, Joe. So when we look at Harte Hanks, we strongly think that the investment community should look at things on an apples-to-apples basis. So when we look at their balance sheet, we don't see any debt. If you look at the Q1, for example, they had $4 million to $5 million of cash, I believe, nothing drawn on their revolver. Yes, there's some leases, and yes, there's some pension. But that EBITDA number you cited is after lease expense and after pension expense. And that's the way we look at it.

So if you're looking at an EBITDA number that's after lease, after pension, I think you should take leases and pension out of the liability stack. And when you look at it that way, you take the EBITDA number you cited, add $10 million to it, I think you're getting into the mid-teens in terms of the pro forma EBITDA and we're buying it for less than $40 million. We think that's a pretty attractive multiple that's less than 3x EV to EBITDA on our math.

Your question -- the first part of your question is the most important question. What will we do with this business once it's inside of Star? And any acquisition, in our opinion, this is true for any acquisition, you have to buy it right. If you overpay, that's something that lives with you forever. So we have a lot of value discipline around that. We think we're getting Harte Hanks for an attractive multiple. But it only makes sense if we're able to do something with it after it's inside Star.

And initially, focusing on the cost synergies is going to be the main focus. But we do have aspirations to invest in it and grow it. And we see them making some progress on that topic, Joe. I would kind of point you to their announcement in October, where they put out news talking about winning Samsung, great logo. That's a company they used to do business with that they won back. That's a significant new business win that is ramping up.

And so our goal will be to stem those declines, stabilize it, and ultimately grow it. And then with respect to GEE Group, I would just say stay tuned on that. They -- we did make them a proposal. They've hired an investment banking firm to explore strategic alternatives, and that process is underway. And when there's something to announce, there's something -- there'll be something to announce.

Our next question is from Theodore O'Neill with Litchfield Hills Research.

I'm struck by how well Energy Services is doing. And Rick, I wonder if you could talk about -- it's up year-over-year, but it's also up sequentially. Can you give us some more detail on what's going on there?

Go ahead, Rick, and I'll -- I may add to it after you're done.

All right. Thanks, Theo. Happy to address that question. We're very pleased with the way the business is going. One aspect of it is that historically, as the previous owners had approached retirement and had known they were going to sell the business, not surprisingly, they held back on capital investments. So with their retirement and a new younger group of leadership in the company, we saw what the opportunities could be for a relatively small company in the oil fields and elsewhere.

And they were unable to fulfill customer requests simply because they didn't have the tools available in inventory to deliver for rental. So we've done a good deal this year in investing in those tools, and it's paid off. It's really helped us be able to deliver a full complement of what our customers require. So there have been a number of opportunities in some very, very large drillers that we've been able to satisfy, and that's showing up in the bottom line.

And does that show up in CapEx?

Yes, it shows up in CapEx. And so since we bought it a year ago, we have increased CapEx. That's a temporary increase. Interestingly, we're seeing the benefits of that. And what we see going forward is lower CapEx. Those were onetime in nature. So we'll go back down to more maintenance levels of CapEx, which I would estimate to be around $1 million a year. We've been spending probably twice that. And we'll see the growth. We're just starting to see the growth from those investments.

And I think the team on the ground has done a really good job. If you think about Q2, that was way too early to see any benefit from increased activity in the traditional energy sector, which is the original part of the business. They have excellent traction in some of these other segments that they've branched out into. We highlighted geothermal, mining, but there's also improvement in water wells, and they've gotten involved with some drilling for things that are in the industrial gases category.

So things like hydrogen, helium, carbon capture. And if there's one thing I would point the investment community to take a look at a company called Fervo. It went public earlier this year. They have a corporate presentation that's out there in the public domain. Just look at the projects that they're planning to do between now and the end of the decade. It's a lot of projects.

And that's your opportunity set as well.

Exactly.

And how do you spell that company's name?

F-E-R-V-O.

The next question is from Michael Mathison with Sidoti & Company.

Good morning, and congratulations on the merger.

Thank you. It's not done yet. We've signed the agreement. We're a long way from getting to a closed deal, but we're -- our plan is to get there.

So, plunging into some of the details of the acquisition, how long of time do you think it would take for the $10 million in synergies to be realized? Is that 6 months or a year? What's your feeling about that?

We -- it's a great question. It's hard to answer that with precision until we get deeper into it and closer to closing. And hopefully, we'll be able to give more color on that. But the way we're thinking about it is in phases. So Phase 1 is eliminating anything that's duplicative. And this is going to be true for any 2 public companies that merge together. On day 1, you don't need 2 audits, you don't need 2 boards, you don't need 2 sets of D&O policies, all sorts of fees and expenses with being a public company. So that's Phase 1, and so those get eliminated very quickly, let's just say, in the first quarter.

Phase 2, which will also get implemented fairly quickly, is on the corporate team. If we look at the areas of finance, accounting, IT, we have our teams in place. They have their teams in place. You just don't need 2 of everything. And then over time, there could be additional cost synergies from just running the businesses more efficiently inside of the Star umbrella than having the current structure.

And I would point you to -- Michael, I would point you to their financial statements. And they have an adjusted EBITDA table, and they kind of highlight -- they show in there the corporate costs, and that's where a lot of the merger synergies are going to be realized. But I would hope that similar to the Star and Hudson merger we just completed about a year ago, a year in, we will have fully realized the $10 million.

Okay, that seems like a reasonable timeframe. I just wanted to get your views on it. Second question, as was said earlier, this business -- set of businesses has seen declining revenue. But when I took a look at it, I noticed that the revenue declines are quite concentrated in one of their segments, one called Revenue Solutions, down 30% year-over-year. Could you talk a little bit about what that segment does and how you would manage it differently to put it back on a revenue growth track?

Sure. So this business does a lot of marketing services. There's some data and analytics that they do. It's an outsourced service. So you can ask Harte Hanks questions about that. Our perception is that it's due to a variety of things, some clients deciding to in-source instead of outsource. And this is an area where things are changing really rapidly due to AI and kind of all things digital. And when I think about what we're doing on the Hudson side, we've launched a digital initiative. We brought in a very talented person, Steph Edwards, from a bigger company, and she is head of our Digital Division.

And we're staying ahead of the curve, and there's a lot of businesses out there that are going to change because of everything going on in the world, and there's going to be winners and losers, and we are determined to be a winner. So we've already incorporated digital into our service offering. Clients on the Hudson side are adopting it at different speeds. And our plan is to look at all the Harte Hanks businesses and do something similar that's already underway at Harte Hanks. We're just going to work with them and enhance and accelerate what they're doing.

Great, thank you. I just had one more question, and it goes back to the Hudson side of the business. So maybe, Jake, it's a question for you. If you could just kind of give us some color on revenue trends going forward in each of the 3 regions, kind of strong or weak or flat?

Yes, thank you for that. I'd say a couple different things. As Jeff mentioned, if you look at our business and you look at the projection and the direction we're on, we've made a lot of significant strides, right? We've retooled our go-to-market strategy. We've invested heavily in our digital solutions. We've brought on additional geographies to better support our clients, which is all phenomenal. The renewals that we've been under and a lot of the renewals that we're seeing right now are non-competitive.

So that just tells us in our business that we're servicing our clients. We're bringing new ideas. We're staying ahead of them both from a capability capacity, but also from all overall support model, right? What we're seeing now and what we look at with the businesses and we look at where we're going to go, there is something to say about the buying habits of some of our clients. We've added a lot of great new logos this last quarter and this year in and of itself, but some of that business, that revenue is being slower to come to fruition.

And what I mean by that is clients are a little bit hesitant on the number of hires or the investments that they're making. And with the attrition still being relatively low, that's impacting some of the decisions. Specifically talking about your question, I do see the Americas being a significant growth opportunity for us. And when I say the Americas, I mean both North and South America.

I think EMEA as a whole will be, with all of the geopolitical issues going on in the region, will still be, I would say, medium to soft. And in APAC, we'll see some spikes in certain countries, specifically, as I mentioned, in the earnings call on around our acquisition in Japan and growing that geography. We have strong hopes to be able to continue to land and expand in our clients there.

But if I look at the back half of the year and thinking about the direction we're going to continue to focus on is, one, expanding out our footprint and land and expanding new geographies with our clients and our prospective clients to ensuring that those new logo clients that we have won and those clients that we are speaking with currently today, we're quicker to help them support and stand up that support model. So one, we can provide that service to our clients, but also drive revenue growth for Hudson Talent Solutions.

Well, great. That concludes my questions and good luck in the current quarter, and good luck in the rest of the year.

[Operator Instructions] That concludes today's question and answer session. I will now turn the call over to Jeffrey Eberwein for closing remarks.

Well, thank you for the questions, and thank you for your interest, everybody. We are here and available. Our contact information is in the press release and in the earnings slide deck. We're excited about what we're doing. I would say morale and enthusiasm is really high at our company and at our operating subsidiaries, and we believe that will translate into improved financial performance over time, even though we have some areas of softness and some areas that are below our expectations. We're working through it and we're excited about the potential acquisition of Harte Hanks and some other opportunities that we're looking at. So look forward to showing you what we can do in the future.

Thank you for joining the Star Equity Holdings Second Quarter Conference Call. Today's call has been recorded and will be available on the investor section of our website, www.starequity.com. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Greetings, ladies and gentlemen, and welcome to Star Equity Holdings First Quarter 2026 Financial Results Conference Call.

Please be advised that the discussions 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 Star Equity's most recent 10-K, 10-Q and other filings for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligation to update forward-looking statements as a result of new information, future events or otherwise.

Please also note that on this call, management may reference non-GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted net income and adjusted earnings per share, which are all financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to the most comparable GAAP financial measures in our earnings release issued yesterday afternoon.

If you did not receive a copy of the earnings release and would like one after the call, please contact Star Equity at (203) 489-9500 or its Investor Relations representative, Lena Cati of The Equity Group at (212) 836-9611.

Also, this call is being broadcast live over the Internet and may be accessed at the Star Equity's website via www.starequity.com. Shortly after the call, a replay will also be available on the company's website.

It is now my pleasure to introduce Jeff Eberwein, Chief Executive Officer of Star Equity.

Thank you, operator, and welcome, everyone. We greatly appreciate your interest in Star Equity Holdings and we thank you for joining us today. I'll begin by reviewing the first quarter results for 2026 at the holding company level. After that, Jake Zabkowicz, Global CEO of Hudson Talent Solutions, will give us an update on the performance of our Business Services division. Finally, Rick Coleman, our Chief Operating Officer, will provide additional insights into the performance of our Building Solutions and Energy Services divisions.

As highlighted on Slide 3 of our earnings slides deck, our first quarter results reflect the merger we completed last August with revenue and gross profit showing strong year-over-year growth. These increases were driven largely by the inclusion of Star operating companies' results beginning after the merger closed August 22, 2025. We have realized approximately $2.6 million of merger synergies on an annualized basis, as shown on Slide 4. And that beats our initial expectation of about $2 million in merger synergies.

Going back to the first quarter, we were impacted by the timing of new project starts and broader macroeconomic conditions. Despite these near-term pressures, we continued to make progress advancing our strategic priorities and strengthening our operating platform.

Revenue increased 57% year-over-year to $50.1 million. Gross profit increased 25% to $20.6 million. We reported an adjusted EBITDA loss of $1.6 million compared to a loss of $0.7 million in the prior year period.

At the division level, our performance was mixed. Energy Services delivered a strong quarter and continued to gain market share across key end markets. Business Services was worse than expected in a challenging talent environment and we continue to invest for growth. Building Solutions was impacted by delayed project awards and weather-related disruptions. That said, we're already seeing signs of improvement as we move through the second quarter, supported by new business wins, improving activity levels and continued operational and cost focus across the organization.

As shown on Slide 5, we ended the first quarter with $10.3 million of total cash, including $2.2 million of restricted cash. During Q1, we used $1.4 million in operating cash flow. We generated a little over $3 million from the sale-leaseback transactions. We repurchased about $700,000 of stock on our share repurchase program and we have $1.8 million remaining under the current authorization. Over the last 12 months, we've repurchased approximately $3.3 million of stock. And we continue to believe our stock is undervalued. And we view share repurchases as an extremely attractive use of our capital.

Across the company, we remain focused on disciplined execution, cost management and investing in growth initiatives that we believe will enhance our competitive position and drive improved financial performance over the balance of the year.

Now, I'll turn it over to Jake to discuss our Hudson Talent Solutions business.

Thank you, Jeff, and good morning. Our Business Services division continued to demonstrate solid top-line growth in the first quarter despite the challenging macroeconomic environment impacting many industries. As shown on Slide 10 of the deck, revenue increased by 9.8% and HTS year-over-year gross profit increased 6.4%, reflecting steady improvement despite continued macroeconomic sustained pressures in the Talent market.

Regionally, the Americas and EMEA performed well with gross profit growth of 21% and 11%, respectively, partially offset by an 8% decline in Asia Pac market, where the conditions remained more challenging. We have maintained a strong focus on innovation and operational efficiencies, including the expanded deployment of our Agentic AI solutions to enhance recruiter productivity, improve candidate matching and deliver greater value to our clients. These efforts are helping us navigate the current environment while positioning us to capitalize on improving market conditions in the future.

As an example, new business activity accelerated meaningfully in the first quarter of 2026, exceeding levels seen in any quarter of 2025. We've also achieved multiple renewals in Q1 with many of our existing clients opting for a noncompetitive engagement process. This shows the depth and breadth of our partnerships in a very competitive market.

We continue to take steps to strengthen our partnerships, maintain a disciplined approach to our investments and grow the business. We are executing our playbook of land-and-expand with recent wins coming off the acquisition in Japan, giving us a foothold to address previously untapped opportunities. We have also taken steps to recalibrate our business in the Middle East, maintaining our commitment to have a presence in the region, but being realistic about the opportunity there given the broader macroeconomic environment.

Additionally, the enhancements to our geographical footprint and our product offerings, particularly our digital offering, have driven robust new logo interest. We have seen an uptick in customer conversations in recent months and are focused on forging long-term client relationships. We'll continue to take a disciplined approach as we execute our playbook for the remainder of the year. Looking ahead, we are focused on creating a more resilient, agile and growth-oriented business for the longer term.

Now, I'm turning the call over to Rick, who will discuss the financial and operational performance of our Building Solutions and our Energy Services divisions. Rick?

Thanks, Jake, and good morning, everyone. I'll start with Building Solutions highlighted on Slide 8. First quarter performance, which normally -- while normally soft in the quarter, was below our expectations. A combination of delayed contract awards, severe winter weather across our key markets and continued macroeconomic pressures put downward pressure on both commercial and residential construction activity.

Revenue for the quarter was $11.6 million. Gross profit was $1.6 million and adjusted EBITDA was a loss of $900,000. While these results were impacted by near-term factors, our sales pipeline and customer conversations indicate underlying demand remains intact. We're also encouraged by recent wins, including a $4.2 million New Hampshire multifamily housing project we announced in April.

Moving on to Slide 9. Our quarter end backlog was $8.0 million, while the book-to-bill ratio of 0.72 is a significant decline from Q4. It partially reflects the timing of significant projects, which slipped from Q1 to Q2. We expect backlog to rebuild as activity normalizes throughout the remainder of the year.

Consistent with the strategy we outlined previously, we remain focused on disciplined project selection, operational execution and margin management. We believe these priorities, combined with improving market conditions, position the business for stronger performance as the year progresses.

Turning to Slide 13. The Energy Services division delivered a strong quarter, maintaining the momentum we highlighted last quarter. Revenue was $3.5 million, gross profit was $1.5 million and adjusted EBITDA was $1 million. The business continues to gain share in core markets with particularly strong mining and geothermal performance.

These results reflect disciplined execution and the benefits of our diversified exposure across billing applications, which continues to differentiate the platform and support consistent growth. Importantly, the division's strong growth has come as a result of market share gains in a declining rig count environment.

We continue to invest in new tools to support this growth and believe the division is positioned to perform well in all conditions. Recognizing that we represent a relatively small percentage of our customers' -- our largest customers' purchases, we're also incorporating their specific needs in our investment decisions. In general, we believe we have significant opportunities to expand our presence in the geographies and markets we serve.

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

Thank you, Rick. While the first quarter reflected expected seasonality and some near-term challenges, we're encouraged by improving activity levels, recent business wins and the continued strength of our Energy Services platform. As we look ahead, our priorities remain consistent, driving organic growth, improving operational efficiency and maintaining a rigorous approach to capital allocation.

In parallel, we continue to evaluate accretive M&A opportunities across our operating divisions as well as potential new verticals where we can apply our operating model. Our confidence in the path forward is grounded in the progress made over the past year. 2025 marked a pivotal period for Star following the August merger. We're beginning to realize the benefits of shared services, enhanced collaboration and a more diversified holding company structure. This has strengthened our operating and financial position, expanded our strategic flexibility and increased our capacity to execute on a multipronged growth strategy.

Across the organization, we're investing in people, technology and processes to enhance scalability, deepen competitive advantages and drive margin expansion and cash generation. This disciplined approach, combining organic execution with targeted external growth positions us to compound value over time.

With a stronger platform and a clear strategic road map, we believe we're well positioned to navigate the current environment and deliver improved performance over the balance of the year. We remain confident in our long-term outlook and continue to believe our shares are undervalued relative to the strength of our business and the opportunities ahead.

Operator, can you please open the line for questions?

[Operator Instructions] The first question today comes from Joe Gomes with NOBLE Capital.

Jeff, I don't know if you could give us a little more insight into your recent announcement on GEE Group and what you think your game plan for that investment is?

Sure. Thanks for asking, Joe. We identified GEE Group as an interesting investment, partly because it was trading below cash per share, which you don't see very often. And also, we thought it could potentially be a good fit for our Business Services division and could have some synergies with our Hudson Talent business.

And on top of that, Star itself is an amalgamation of a few different companies. And we completed a merger last year where we initially thought we would realize cost savings of $2 million and that number came in at $2.6 million. So we've shown -- we believe we've shown that merging another microcap into our structure, we can reduce a significant amount of unneeded duplicative costs.

And on GEE Group specifically, we were glad that they hired a financial adviser and that they decided to run a more formal process. And we are participating from the outside. We only have public information. We don't have any material nonpublic information on GEE Group at this time. And we decided to really kick off the bidding process, for lack of a better term, by throwing a number out there. And importantly, our bid is contingent on the management team there agreeing to more normal and customary severance. So we'll see how it plays out.

There's scenarios where we could be the winning bidder. There's scenarios where other people outbid us. And when we enter into these situations, we like to own somewhere between 5% and 10% of the target. So if we are outbid, we make money in our investment. And it also gives us more credibility when we go public and bid, that we are also a shareholder. So we'll just have to wait and see how it plays out.

But either way, either one of those outcomes would be positive for us if we end up being a winning bidder or if someone outbids us and we make a nice profit on our investment.

Okay. Thanks for the uptake. And then one of the things we've talked about in the past is monetization of some of the real estate assets and/or some of the private investments that you guys have. And maybe you could give us an update there? And kind of similarly, you've got the Oxford Maine plant that you've talked about potentially restarting. Where does that stand at this point?

Yes. Great -- Another great questions, Joe. So we have talked about having, we believe, at least $20 million of assets that don't really generate any EBITDA or certainly not meaningful EBITDA, that will get -- we believe will get converted to cash over time. And we did demonstrate that by completing the sale leasebacks on the assets that came with the Alliance Drilling Tools acquisition that we made a little over 1 year ago.

And the 2 remaining significant pieces of real estate we own, one is the real estate that came with the Timber Technology acquisition 2 years ago. And then as you pointed out, we have an idle factory in Maine. And both of those pieces of real estate we believe could either be monetized via sale-leaseback transaction or just sold for cash. And I think -- I can't remember the estimate off the top of my head, but it's in our investor deck, it's somewhere in the $8 million to $10 million range for those 2 added together, we believe.

And then on the Catalyst MedTech investment, the majority shareholder there is a private equity firm in New York City. And that business is doing well once again, completing acquisitions, having nice growth, having a nice future. And like all private equity investments, the private equity firm will exit at some point.

And our policy has always been -- we're just going to mark this investment using the same methodology that the PE firm does. And so there was a downturn -- a temporary downturn in the performance of that company. And so the PE firm marked it down on their books. This was in the -- I think really the 2024 time frame, that might have continued into 2025. And so we just marked it down on our books the same way they marked it down on their books.

And then, now that performance has improved, they have marked it back up to our original mark from when we closed that transaction in May of 2023. But under GAAP accounting, we are not allowed to do that. So we're in the uncomfortable spot of having a different NAV for the exact same investment as what the PE firm has. But long story short, that will get converted to cash whenever the PE firm feels like it's right to investigate alternatives.

The next question comes from Theodore O'Neill with Litchfield Hills Research.

For Rick, on the Building Solutions, can you talk about geographically where you're seeing some strength going here in the second quarter?

Go ahead, Rick.

Thanks, Steve. Sure. Happy to address that. We have good visibility to our pipeline, particularly in KBS, our modular home company in Maine, where we have larger projects, so higher revenue projects. And we can see beginning, at the early stage of the pipeline where the opportunities are. And then as we move through the pipeline and we begin talking about building modular components for our construction partners, we call that the active pipeline.

The active pipeline are those projects where we're negotiating the terms, we're doing the initial design work, but we still haven't signed a contract. So as we look into the active pipeline, we feel pretty confident there is strong demand still for more construction activity. But with interest rates where they are and a lot of uncertainty about interest rates, as well as now we have war in the Middle East and a number of other things, it's just been very difficult to move those projects out of the pipeline and into construction-ready mode. But I think that based on what we're seeing here recently, we're going to see significant improvement in the second quarter.

Okay. And I don't know if this is a question for you, Rick. But on the Energy Services, you or Jeff, could you talk about if there are any dynamics related to the change in oil price and the drilling service business?

Yes, I'll take that, Theo. Being from Texas originally, this is a sector I've followed most of my career. And we're very happy -- I'll get to your question in a second. We've been very happy with this acquisition and we feel like it's really thrived inside of Star. We have invested for growth. They had a plan to increase their market share. And we've executed really well on that plan since we completed the acquisition in March.

And if we just look at Q1 results, 2026 versus 2025, for example, if you look at the pro forma table in our press release, pretty nice year-on-year growth and that was way before any increase in oil prices. And in fact, the industry shrank in Q1 2026 versus Q1 2025, if you just look at the rig counts in the U.S., for example.

And they did a very good job of growing in some nontraditional sectors and winning business in things like geothermal, which has really -- a really good growth outlook in the U.S. They've always been active in mining opportunities, water wells. They've also gotten into some carbon capture and some hydrogen drilling, which were really kind of off the radar screen a few years ago.

So we're excited about that business. It was performing very well. And if activity improves later this year and into the next year, and we think it will, we're poised to continue to have good growth there. So I'd say it's a little early for the clients to all of a sudden just flip a switch and start spending more capital, but the early indicators are certainly there and the conversations are happening.

Okay. My last question is about -- can you give us any sort of thoughts about Q2 operating expenses and whether we should be looking for them to be similar to the Q1 levels?

We don't give -- that's a really good question. We don't give guidance line by line on that, but we do look at where the consensus is on Bloomberg. And the Q1 results were disappointing to us. Just -- We didn't hit our budget. And it's short-term temporary factors.

But when we look out into Q2, when we look into the second half of the year, I think the Bloomberg consensus for adjusted EBITDA is above $2 million, $2 million to $2.5 million, something like that. We're comfortable with that. And if we hit that number, we'll be positive -- We'll have positive results for the first half of the year. So in other words, the Q1 positive EBITDA should exceed the -- the Q2 positive EBITDA should exceed the Q1 loss.

And then if we look out to the second half of the year, the Bloomberg consensus is that our adjusted EBITDA should be -- I think it's $9 million. It's in the $8 million to $10 million range. And we're very comfortable with that. Is that an absolute guarantee? No, it's not, but that's what we're projecting internally. It could be higher than that, could be lower than that. But that is our best guess based on everything we're seeing in the business and based on what we see in the market and conversations with customers, what we see in our pipeline, historical conversion rates of that pipeline into backlog, which then translates into revenue.

[Operator Instructions] The next question comes from Michael Mathison with Sidoti.

A couple of questions from me. First, sort of a big picture one for Business Services. In light of higher energy prices, global tensions, inflation, all the things we read about, can you comment on hiring trends in the 3 regions where Business Services operates?

Yes. I'll -- I'm going to turn that over to Jake. But just at a high level, I would say our clients predominantly are Fortune 500 companies. And in general, we're asking them to sign multiyear contracts. And we had some really nice significant long-term contract renewals from 2 of our 5 top clients in Q1. And so that was really refreshing.

But whenever there's uncertainty, regardless of the cause, just everything else being equal, it's not conducive to the Fortune 500 making long-term commitments. So it is -- it's not helpful, but we don't want to use it as an excuse. We want to fight through it and keep pushing and keep providing good services.

Jake, I'm going to turn it over to you to get a little more granular.

Yes. Thank you, Jeff. Thank you for the question. So when you look at the overall macro hiring, what we're seeing, it's truly spotty. And what I mean by spotty is we definitely see some green shoots and some tailwinds in certain areas with some of our businesses. And quite conversely, we've also had some of our clients say, "Hey, hold on a second, let's reevaluate where we're investing."

But if you look at each region, right, and you take the APAC region in general at first, the hiring volumes in APAC were still relatively strong, but the mix was different. And what I mean by the mix, you saw a lot of more internal mobility or internal hiring and movements internally versus hiring externally and bringing new people into the businesses.

And in our -- in some of our fee structures in that region, an internal placement is on a lower fee structure than an external placement for multiple purposes. One is that we're sourcing internally; and two is there's an optics of that cost of just moving internal placements around.

When you look at EMEA and you look at the broader EMEA market, I don't have to give you guys an update on what's happening over there. But it's causing a lot of pause and rethinking investments across all of the countries in EMEA.

As I mentioned in the earnings call, we did take a structured approach to reevaluate our Middle East presence. We're going to continue to be in the Middle East. We're going to continue to have entity and resources there and will help support our enterprise-level clients in the Middle East. But it is taking a drain in a lot of the hiring activity there and having our clients rethink again and pause in certain pockets we think of where they're going to make investments.

In the Americas, we're seeing some pretty good signs of strength in the Americas right now. Latin America continues to be a growth market for us. We're signing new contracts there, a couple this week already. So that's exciting. But it is at a smaller clip and a smaller pace than what we normally see. So we will see contracts, as Jeff mentioned, multiyear contracts. We can hire anywhere from 100 to 1,000 people, if not north of that, every single year.

But now we're seeing some more project-based hiring. And where we're seeing project-based hiring is a specific time frame of less than 1 year and a specific number of anywhere from 20 to a couple of hundred. So you get to more of the project-based versus that long-term forecast. I would say, as a whole, we're still seeing relatively low attrition across all of the markets. There are some pockets where we are continuing to see some growth, which is great in many of our businesses.

But to Jeff's point and to what we were talking about before, with our land-and-expand strategy and offering services in markets that were untapped to us before, is a critical strategy for our business. And we're doing that in the likes of Japan, Latin America and we're going to continue to grow in those areas. So Michael, I hope that answered your question, sir?

It certainly did. Very, very helpful. Turning to Energy Services. The revenue growth is striking, as you pointed out in your prepared remarks, speaking of market share gains and so forth. Do you feel like past a certain point, Alliance will have to invest in more drilling equipment just to fulfill demand?

Yes. We feel like we've already done that. The CapEx levels there might -- we see them basically being flat with the Q1 run rate. So we did -- after we acquired it, we kind of took a countercyclical approach. And we saw an opportunity to increase share and enter some of these new markets. And so we approved one step at a time a higher CapEx spend and that higher CapEx spend very quickly led to revenue growth.

And so we got positive feedback on our thesis very quickly. But we're -- it's really -- a lot of that was just kind of a onetime increase that was needed to grow the business. And I think from here, we can keep that level flat and still have really good growth.

Great. Great. I'll close out with one more question coming back to Building Solutions. Obviously, the weather in the Northeast was horrendous and that clearly played a role. In the balance of the year, do you see the book-to-bill coming back to 2025 levels?

Short answer is...

I -- I'm sorry, Jeff, why don't you go ahead.

Go ahead. I was going to say short answer, yes, and turn it over to Rick. Go ahead, Rick.

The problem is the numerator in that equation. So as revenue picks up, we expect that, that's going to continue to improve. So I guess that's the -- all the color that I can provide on that for now.

[Operator Instructions] That concludes today's question-and-answer session. I will now turn the call over to Jeff Eberwein for closing remarks.

Well, thank you for joining us. Thank you for your interest in our company and we're available. Our contact information is on our website and is in the press release and our corporate materials. So reach out if you have any follow-up questions. Thank you for your interest.

Thank you for joining the Star Equity Holdings first quarter conference call. Today's call has been recorded and will be available on the Investors section of our website, www.starequity.com. Thank you for participating and have a pleasant day.

Greetings, everyone, and welcome to Star Equity Holdings Fourth Quarter 2025 Financial Results Conference Call.

Please be advised that the discussions 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 Star Equity's most recent 10-K, 10-Q and other filings for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligation to update forward-looking statements as a result of new information, future events or otherwise.

Please also note that on this call, management will reference non-GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted net income and adjusted earnings per share, which are all financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our earnings release issued this morning.

If you did not receive a copy of the earnings release and would like one after the call, please contact Star Equity at (203) 489-9500 or its investors representative, Lena Cati from the Equity Group at (212) 836-9611. Also, this call is being broadcast live over the Internet and may be accessed at Star Equity's website via www.starequity.com. Shortly after the call, a replay will also be available on the company's website.

It is now my pleasure to introduce Jeff Eberwein, Chief Executive Officer of Star Equity.

Thank you, operator, and welcome, everyone. We greatly appreciate your interest in Star Equity Holdings, and thank you for joining us today. I'll begin by reviewing our fourth quarter results for 2025 at the holding company level. After that, Jake Zabkowicz, our Global CEO of Hudson Talent Solutions, will give us an update on the performance of our Business Services segment. Then Rick Coleman, our Chief Operating Officer, will provide insights into the performance of 2 business segments, Building Solutions and Energy Services.

Our fourth quarter financial results reflect positive momentum and improvement over the prior year quarter, largely attributable to the addition of Building Solutions and Energy Services divisions, which were added in August 2025. As compared to the fourth quarter of 2024, our fourth quarter 2025 revenue grew 69%, gross profit increased 38% and adjusted EBITDA grew 156% to $2.2 million. Similarly, our 2025 full year results were impacted by the addition of these divisions starting in August. When compared to 2024, it drove a revenue increase of 23%, a 14% increase in gross profit and an increase in adjusted EBITDA from $0.9 million to $4.2 million.

If we look at the results on a pro forma basis, our full year revenue grew to approximately $225 million, a 7% increase. Our gross profit grew to approximately $95 million, a 6% increase, and our adjusted EBITDA almost tripled to $12.6 million. We ended the year with $13.4 million in cash, including restricted cash. Year-end working capital, excluding cash, jumped to $22.4 million, which represents a temporary buildup that is expected to decline in the first quarter of 2026. Lastly, we ended 2025 with $215 million of usable NOL carryforwards.

Now I'll turn the call over to Jake to discuss our Business Services segment.

Thank you, Jeff, and good morning. Our Business Services segment delivered another strong quarter, demonstrating solid performance despite a challenging macroeconomic landscape that has affected many industries. We've continued to adapt to market shifts supported by enduring strength of our client relationships, which drive repeat business and consistent demand for our services.

In the fourth quarter, our Business Services division achieved 3% increase in gross profit versus Q4 of 2024, while full year gross profit increased 2% compared to 2024, a resilient outcome given the economic challenges facing the talent market in 2025, and many companies in the sector experienced continued revenue declines. Regionally, both APAC and the Americas delivered strong performances with gross profit of 11.7% and 4.4%, respectively. These gains were partially offset by EMEA, where gross profit declined 18.7%.

Throughout 2025, we made strategic investments to accelerate future growth while realizing cost efficiencies throughout operational improvements. We've also expanded our go-to-market strategy, enhancing our services portfolio to better meet the evolving needs of existing and prospective clients. At the same time, we continue to lead in digital transformation of the hiring industry, leveraging Agentic AI and advanced automation to streamline workflows, enhance decision-making and respond rapidly to the evolving client demands. By expanding our digital ecosystem and strengthening our enterprise capabilities, we are delivering more innovative and efficient, cost-effective talent solutions at scale. These investments enable us to improve speed, accuracy, transparency across hiring life cycles while empowering our teams and clients with smarter tools and data-driven insights.

Looking ahead, our talented and dedicated team is well positioned to sustain this momentum. We remain focused on building a resilient, agile and growth-orientated business that can quickly adapt and shift to the market dynamics while continuously delivering value to our clients and partners. This commitment is underpinned by continued investments in our people, technology and culture of service excellence that prioritize collaboration, accountability and innovation.

Now I'm turning the call over to Rick, who will be discussing financial and operational performance of our Building Solutions and Energy Services segments.

Thank you, Jake. Good morning, everyone. Residential and commercial building demand were relatively soft throughout the year but our Building Solutions segment delivered strong results, including significantly higher sales and profitability. Fourth quarter 2025 Building Solutions revenue was $18 million. Gross profit was $4.6 million and adjusted EBITDA was $1.9 million. For the full year 2025, revenue was $27.6 million, gross profit was $6.3 million and adjusted EBITDA was $2.5 million. On a pro forma basis, all full year 2025 metrics improved over 2024 with revenue of $71.9 million, gross profit of $18 million and adjusted EBITDA of $7.2 million.

Building Solutions backlog as of December 31, 2025, was $9.6 million, and the trailing 12-month book-to-bill ratio was 0.89. We expect the backlog trends to improve in the first half of the year as several high-value projects move from the pipeline to the backlog. For 2026, we expect the U.S. home construction market to be in a gradual modest recovery. With solid underlying demand from a long-term housing shortage and favorable demographics, single-family construction and new home sales should improve in 2026. However, gains are likely to be modest and constrained by still elevated interest rates.

At the same time, the market is adapting to the current environment and consumer affordability concerns with greater emphasis on smaller, more affordable homes and townhomes in lower-cost regions, trends where we have significant strength and experience. In this environment, our strategy of project selectivity and disciplined execution will remain central to our approach. By concentrating on high-value, high-margin opportunities and ensuring rigorous project management, we've been able to maintain healthy profit margins while deepening our existing client relationships. Those relationships, combined with our reputation for high-quality work delivered on time and within budget are critical to our continued success and position us well to expand our footprint across key markets.

Turning to our Energy Services division. ADT's performance showed continued strength. Although the broader oil and gas sector experienced a weaker fourth quarter, the division expanded market share across all core markets with particularly robust growth in mining and geothermal. These results highlight the team's ability to combine strong execution with innovation across a broad range of drilling markets and applications.

Fourth quarter 2025 Energy Services revenue was $3.6 million. Gross profit was $1.6 million and adjusted EBITDA was $0.9 million. Full year 2025 revenue was $4.9 million, gross profit was $1.9 million and adjusted EBITDA was $1 million. On a pro forma basis, revenue for the full year 2025 was $13.2 million. Gross profit was $5.5 million and adjusted EBITDA was $2.9 million.

Looking ahead for both our Building Solutions and Energy Services segments, we plan to deepen our presence in core markets while thoughtfully entering new markets where we see attractive long-term demand. As always, our priority is to deliver sustainable long-term value for our shareholders, customers and employees.

I will now turn the call back over to Jeff for some closing remarks. Jeff?

Thank you, Rick. 2025 marked a transformational year for Star and a critical step toward our long-term objectives of building scale and increasing value per share. The integration work since the merger is tracking well, and we are already realizing the anticipated cost synergies and enhanced collaboration benefits of our diversified holding company structure. The merger has also significantly strengthened our operating and financial position. We now have a broader range of strategic options and a greater capacity to execute on our multifaceted growth strategy. We remain confident in our long-term outlook and continue to believe that our stock is undervalued strength of our business and the opportunities ahead.

Reflecting that conviction, in 2025, we repurchased over $2.6 million of our stock as dollars and intend to continue using share repurchases under our recently approved plan as a tool to enhance shareholder value. Across each of our business divisions, we are focused on driving organic growth, improving operational efficiency and maintaining a rigorous approach to capital allocation. We're investing in people, technology and processes to deepen our competitive advantages and improve scalability while also sharpening our focus on margin expansion and cash generation.

In parallel, we continue to identify and evaluate potential accretive acquisitions that can build on the strengths of our existing operating divisions as well as opportunities that could establish entirely new verticals. A disciplined approach to this dual path, growth from within and targeted external expansion provides us operating flexibility and positions us to compound value over time. We're excited to build on the momentum of our fourth quarter performance as we work to deliver sustained long-term shareholder value.

With a more resilient balance sheet, a stronger operating platform and a clear strategic road map, we believe Star is better positioned than ever to capture attractive opportunities, navigate market cycles and expand our leadership in the markets we serve. We're committed to executing with discipline, maintaining a long-term mindset and continuing to align our actions with the interest of shareholders.

Operator, can you please open the line for questions?

[Operator Instructions] Our first question today comes from Theodore O'Neill from Litchfield Hills Research.

For Rick, a couple of questions. The backlog dropped significantly Q3 to Q4. And I'm wondering if that's a seasonal -- if there's a seasonal component to that.

The second is, has weather had an impact since it's been severe in some places here where we are out in Wisconsin as well.

And the third question is, are you seeing any delays in projects going forward as certain -- some people might be waiting for a change in interest rates?

Thanks, Theo. Good questions. We appreciate that. Yes, we've seen -- first of all, to the backlog, I think there's some seasonality to it but the current backlog is a point in time, affects our book-to-bill ratio, of course. But it can be impacted by a lot of different things. As projects move through the sales pipeline and get into what we refer to as the active pipeline where we're actively negotiating the terms of the deal, a lot of things can happen at the back end. One of those is weather, as you mentioned. But weather can also affect site preparation for setting a modular home or wall panels. Design changes often come in at the last minute, permitting issues and always financing is an issue. And the financing impact hits us 2 different ways.

If interest rates are holding their own as they are today at a relatively high level, that means there's fewer projects being built. Sometimes it's builders waiting for -- to see some improvement. Sometimes it's just people not willing to move out of their existing low mortgage rates. So that happens and banks also at the tail end want to see some additional information before they finalize a project. So all of those things have an impact on us and keep us from moving something that we're ready to build to the final signature line.

So I'm not sure if all of that answered 100% of your questions. I know that weather, in particular, you asked more about. We did have more weather impact than we expected, particularly around the Twin Cities area. But it's a temporary thing, and those projects haven't gone away. So we would expect to see some improvement in the coming quarters.

Okay. And for Jeff, can you give us any update on what you're seeing in the M&A front?

Yes, good question. We have a lot of activity right now. Nothing imminent. But when I look across our 3 divisions, operating divisions, we are in discussions on acquisition opportunities that would increase our size and be very complementary. So there's a few things we're looking at in Building Solutions, one, a few in Energy Services and also in our Business Services division. So it's active. Nothing is imminent but we're having some robust discussions and it's always hard to predict which ones get to the finish line just because you have a buyer and a seller.

And in some of these cases, they're private companies, and there's a lot of issues, can be family issues or just a lot of issues can come into play there. So we're working on several. Nothing is imminent, but I'll put it this way. I'd be disappointed if we didn't finalize one or more of those by the end of the year.

Our next question comes from Joe Gomes from NOBLE Capital.

I wanted to start off with just kind of big broad. The fourth quarter results come in line with your expectations going into the quarter? If not, what were the variances and what drove them?

Yes. I appreciate the question. I would say roughly in line with our expectations but on the weaker side. Within Business Services, Europe -- not just Europe, it's EMEA has continued to be a weak spot for us. We see that turning around dramatically in 2026. We reengineered some things there. We have new leadership there, which is really important. But when I look at that division, the EMEA piece of that was weaker than we expected. And Building Solutions as well with weather and project slippage was on the weaker side of our expectations. And I'll say that weakness is going to continue into Q1. Q1 is going to be our weakest quarter of the year, probably by far but things are lining up pretty well for significant improvement the rest of the year. So we think we're going to continue to show year-over-year improvement.

But for people looking at quarter-by-quarter, Q1 will be worse than -- will be lower than Q4 in terms of revenue and EBITDA. But when we look out at what the consensus is on Bloomberg for the full year for 2026, we're very comfortable with those numbers.

Okay. And then I drill down a little bit more on the M&A front. I don't know if you can provide any additional color on the GEE Group investment that you had made?

Yes. We think -- look, we're only operating on public information there. It could potentially be a fit for our Business Services division. The business we're already in, Hudson Talent Solutions has some similarities to that business. So it's a business we think we understand pretty well, a business we're already in or at least adjacent to. We think there could be a lot of cost synergies, not just from GEE Group no longer being a public company but also just inside of Star. And we like the fact that their stock before our announcement was trading around cash. So we've tried to interact with them as we disclosed, and they didn't engage with us. So we crossed 5%, went public. We wanted to let shareholders know about that lack of engagement. And since then, they announced that they've engaged an investment banker and it seems like they're going to run a process. We expect to participate in that process but we're very disciplined.

So hopefully, it gets sold. And if it's accretive and attractive, we could participate in that process. And if someone else comes in and just to be frank, pays a higher value than what we see, we will benefit as shareholders. And go on to the next one. I will say the benefit of our model is to increase size and scale over time, and STAR is an amalgamation of 3 microcaps already. And so we are looking for other microcaps that could be a fit for STAR. And I will say us going public on that one has led to frustrated shareholders, not only of GEE Group but frustrated shareholders of other companies coming to us with ideas, which we like. That's a positive of our public action.

So even if we don't end up with GEE Group at the end of the day as part of Star, be totally fine, we'll make money on our investment. And it has already done a lot to lead to some interesting idea flow into Star's M&A team.

Great. And then one more for me. You talked about a temporary buildup in working capital. I wonder if you could just provide a little more color as to what's behind that and why you think that will turn around here in the first half of this year.

Yes. Working capital, as you know, fluctuates each quarter, and it's very hard to predict. And it depends on the business. But in a lot of cases, our counterparties are some pretty big companies, and they're very creditworthy. They have really high credit ratings but they'll often stretch partners sometimes. And if we have a big invoice hard to know if it's going to get paid in December or get paid in January. And Q4 was just one of those odd quarters where a lot of different things align to cause a working capital buildup and a lot of payments came in, for example, in January. So I don't want to predict exactly where it's going to end up at the end of Q1. Usually, Q1 is a poor working capital quarter and Q4 is a positive one. And for whatever reason, it seems like that is going to be the opposite this time around where Q4 had a working capital buildup and Q1 will be, from a working capital standpoint, much better than a typical Q1.

Our next question comes from Michael Mathison from Sidoti & Company.

A couple of questions from me. Starting with Business Services. We all see the news, the headlines about hiring are very gloomy, just gloomy day by day. But Hudson revenue was up 5% year-over-year. Can you comment about the verticals where you saw success in the quarter?

Sure. I'll let Jake answer that question.

Yes, Mike, thank you for that question. We have a very unique position here at Hudson Talent Solutions, right? We are about 1,000 employees. We are in over 30 different countries, and that has actually allowed us to diversify both from a client perspective as well as from an industry perspective. Yes, the market is soft, unfortunately, with the macroeconomic challenges that everybody is facing. We're seeing some, say, some trepidation in both the investments in hiring but also people wanting to leave their jobs.

From a sector perspective, we did see an increase in our manufacturing and our life sciences businesses, which was pretty interesting. We saw that based on our land and expand strategy, where we're taking our existing clients into new markets and new regions and new geographies that they have hiring needs for. But those are the 2 primarily stable industries that we've seen across the board consistently in 2025. With the addition to our acquisition strategy in 2025 as well, we brought on ACG Group, which is our Japanese acquisition that we did at the end of Q3 into Q4. And we are excited about growing and landing and expanding new clients and existing clients into the Japanese market as well.

So more to come there. The team is actively working on it. And yes, the revenue growth was positive for FY '25, considering the fact that many in our industry saw revenue declines in FY '25.

Great. Turning to Building Solutions. I noted that the gross margin was 25% in the quarter. That met the target you discussed in the last quarterly call where it was below 20%. do you feel like 25% is kind of the new normal? Obviously, it will fluctuate a little bit quarter-to-quarter but is that a good figure to use for modeling?

Jeff, again, short version -- short version, yes, Michael.

It's always tricky in that business to look at it quarter-by-quarter. So we look at it more at trend over time. But we've had a lot of initiatives underway to improve gross margin. And mix plays a role, a lot of different things play a role but our internal target is 25%. That is the number we expect to achieve over time and hopefully even improve on. But for modeling purposes, I do think that's a good number to use. But I wouldn't want someone to think that there's some guarantee or expectation that we're going to hit that number every single quarter just because there's a lot of issues that come into play with mix and weather and things like that. But short version, yes, that's a good number to use.

Sure. Understood. Things will be different quarter-by-quarter. You also mentioned or referred to the $2 million in administrative and SSGA expense synergies you were forecasting would come out of the merger. Can you talk about the timing for fully harvesting that? Do you think that will all be baked in this year? And at what point would you think some of the nonrecurring charges would drop off and you'll just be at a steady state?

Yes. Really good question. I think the key thing I look at is in our segment reporting, if one were to look at Q4 for the corporate column, the corporate -- and I'm looking at the adjusted EBITDA line, so it was $1.9 million. That number for Q4 was significantly lower than the pro forma number for Q3. I don't have that number off the top of my head, but that does represent a pretty good sequential decline. Said another way, if you take Q4 times 4 you would get to somewhere in the 7.5% to 8% range for corporate. And that's a pretty good number. If you look at pro forma, well, if you just looked at corporate of the 2 companies separately before the merger, I think it was a lot higher than 8%. It was in the 10%, 11% range, maybe even higher than that. So we've achieved most of the synergies already. Still some more to come. But we -- that $1.9 for corporate for Q4 was -- I was happy to see that number.

Great. And just if you could talk about the nonrecurring charges. Do you think that they will drop off at some point as the business stabilizes?

Yes.

Congratulations on the quarter.

Our next question comes from George Melas from MKH Management.

Could you give us some perspective on the growth that you expect in '26 in revenue and net revenue? And what gives you some confidence that you can -- that you will grow? And just also maybe trying to understand on the Business Services side, if you exclude the acquisition in Japan, what was the organic gross profit growth?

Yes. I'll turn it over to Jake here in a minute. But when I look business by business, our outlook right now is that Building Solutions will show some growth despite the low backlog number in Q4. When we look at our sales pipeline, what we expect will get converted into official backlog it is pretty exciting. We do have to execute. There's a lot of moving parts and a lot of macro factors out there. But we'll be disappointed if Building Solutions doesn't have better results in 2026 than in 2025.

Same thing for the Energy Services division. They have done an excellent job of diversifying away from traditional energy, meaning oil and gas. They have been growing share in oil and gas, which has been good to see. But they've done a very good job getting into some of these nonenergy sectors that need service and use similar tools and that would be mining, water, which are fairly big markets out West. And then the more recent ones are hydrogen drilling, and even carbon capture, which is becoming a theme, and that's in addition to geothermal, which they've been in for some time. So really pleased to see that. And we do have growth expectations for the Business Services division.

So I want to turn this over to Jake to talk about that division.

Yes. Thanks, Jeff, and great question. And if we look at our trajectory and our growth strategy for FY '26, it's going to be very consistent with what we've implemented in FY '25, where it's a 3-pronged approach, right? Prong #1 is new logo growth, where we have our go-to-market team actively pursuing both active and passive deals out there in the industry in the market. They are meeting with new prospective clients, holding events and participating in key events across the world, which is great. The second prong is land and expand, which you've heard me say in a couple of these calls, where we take our existing clients and we expand with them into either a new geography that we can support them in or we take on an additional business unit or project within that client group. And that has worked really well in FY '25. And part of those expansions lead to our also growth strategy in different regions. So for instance, the investment in Latin America that we made in FY '25 or in Japan in Q3, Q4 of last year. So we're going to continue that land and expand strategy.

And then the third piece, as Jeff alluded to earlier, is that we have an M&A strategy here in the Business Services solutions, right? We will continue to actively look at companies across the world to see if they can fit nicely within Hudson Talent Solutions but that will be our third key pillar of our growth strategy.

Regarding your question on Japan, I don't have the exact number but the Japanese revenue for FY '25 was minimal because of the acquisition and when we started ramping up with our clients. We do expect that to continue to grow in FY '26. But from the actual number, it was -- it had a minimal impact but more of a growth strategy for our current and existing clients today.

Great. Super. And just a quick question on the tax side of things. With the significant NOL that Jeff, you referred to, do you expect to pay cash taxes in 2026? And if so, can you give us roughly how much you expect? Of course, it depends on your results, but maybe give us a range.

Yes. I'll let Matt Diamond, our Chief Accounting Officer, take a stab at that one.

Sure. Our cash taxes is one of those things that's tricky to predict. I'm going to go back to the question before for one second, just to say that the revenue for the full year for Japan was $254,000. So it was not a significant driver on our -- on the growth rate. Like if you back out that from the organic rate, it doesn't change the rounding at all in terms of business services for the full year net revenue -- gross revenue rate, and that will be included in our 10-K. There will be some more information around the Japanese acquisition.

In terms of cash taxes, there were a couple of things that impacted our provision in the quarter. One was that there was what we would call a discrete item where there was $1.1 million of an impairment from our -- from a statutory perspective. So these are investments that are intercompany that our U.K. sub holds. It's just the way that our organization entity chart works in Hong Kong, India, Singapore and Germany. And in those entities, there was an impact where we wrote down the internal investment. This is eliminated in consolidation. So there's no effect on our books in total from an investment point of view. So you wouldn't see it in our financial statements. However, there is a deferred tax impact and the deferred tax impact is $1.1 million. So that had a negative impact on our provision in the quarter.

In terms of general cash taxes on a go-forward basis, the tricky part is that because we have revenue mix in different countries, and there are statutory rates that are in different countries. As you know, in the U.S., we have significant NOLs. We're $215 million of usable NOLs as of the end of this year that we can utilize, but that's in the U.S. Internationally, U.K. has a statutory tax rate of 25%. Australia has a statutory tax rate of 30%. And in Australia, particularly in the quarter, we had strong results, and therefore, there was a provision and a cash tax impact from that.

So as long as we have positive results in these international entities where there are statutory tax rates, we will pay cash taxes. It's hard to predict because it depends on the mix in the country, it depends on ForEx rates, it depends on some things like that. But going forward, we do expect to continue to pay taxes in these entities where we have positive results with statutory tax rates.

So George, I hope that answered your question. I mean if you want...

I really appreciate that. It's education. I appreciate the education as well.

Yes. It's very frustrating given that we have a significant NOL but that NOL is just for the U.S. And you'll see in our 10-K when it gets filed, there'll be a table that shows where we paid cash taxes and number one almost always is Australia. And this is all from the business services where the business is global. And the other ones you'll see there where we pay some cash taxes are the U.K. Those are the 2 bigger ones. Some smaller ones might be Hong Kong, China and India. Over time, as we have more income in the U.S., our tax rate will look -- for GAAP purposes will look more and more normal. And the cash taxes we pay every year will be a modest amount, nothing that's a game changer, $1 million or $2 million is what we would expect or what we would tell someone to model.

[Operator Instructions] Our next question comes from [ David Siegfried ], who is a Private Investor.

So that sales leaseback, it looks like the Evanston Wyoming property was completed. Are the other 2 going to be closed here in the next month or 2?

Yes.

And so that cash should show up maybe in first quarter?

That's our expectation.

Got it. And then did I understand correctly regarding Building Solutions that the pipeline would be potentially restored in the first half 2026?

Well, there's kind of 2 concepts here. We have a very strict definition for the word backlog. Backlog means signed contracts and we've received a cash deposit from the client. So it's -- that's our definition. I don't know about other companies' definitions. And our backlog was down in the fourth quarter for all the reasons that Rick mentioned. When we look at the pipeline, the sales pipeline of all the projects, that hasn't really changed, and there's some pretty exciting things in that pipeline. And when we look at the pipeline, we assigned probabilities to it. So we have the total pipeline, which is just all the projects that we're pursuing. And then we have the active pipeline, which is what Rick was referring to.

And the active pipeline are ones where it's really advanced. There's been a lot of design work. We've probably already sent them a contract. It's active pipeline is things that might have a greater than 50% chance of closing in a fairly short period of time, a quarter or 2. And then once it's signed, it goes from active pipeline to backlog. So I would be -- I think we would be more concerned about the one quarter dip in backlog if there was something going on in the pipeline or the active pipeline, and there simply isn't. Our pipeline is fine. Our active pipeline is fine. And so it's just a matter of time before some of those projects that we're pursuing get officially signed and then they will turn into backlog.

Okay. And then with the new logo and expansions with HTS, I mean, I think it's one of the largest quarters that I've seen. And I think I remember hearing that generally Q1 is seasonally large as well. So is that a good precursor to revenue growth in HTS for 2026?

Yes. I think I'll turn it over to Jake here. I think the short version is yes. We have a few large clients that we've had, in some cases, over 10 years. And when we renew a contract, almost always, it's got the same expiration date as the previous contract. So we renew for 3 years, 2 years, 4 years. And there's an unusually large number of those in Q1. And when I first saw that number for Q4, I was like, did client X, Y and Z that normally renews in Q1? Did we get them renewed a little bit early? And the answer was no. Those are new clients, so -- or not the ones I was thinking of.

Jake, why don't you elaborate on that?

Yes, David, as far as Q4 to Q1, we do see -- just because of the cycle of buyers and the buying habits of our clients, you see a lot of renewals and signatures at the end of Q4 and also into the beginning of Q1, right? And so we've been fortunate enough to continue the great work, and I'm very proud of the team, both leveraging our digital ecosystem as well as just our land and expand strategy. So Q4 and Q1 are usually strong renewal and new logo signatures, and you start to see that tailor off throughout the year just because of buying habits within the client groups and the cyclical nature of our business.

Yes, makes sense. Well, good to see anyways. So the acquired Philadelphia integration. So it sounds like you just hired the team. And how is that going to help HTS going forward?

Yes, David, great question. That's a tuck-in integration that we did and very excited about bringing on Jessica and her team for a couple of reasons. One is it adds on to our contingent book of business. So contingent search, not on the retained side but on the contingent side, which is nice. And the team is also helping with some newly acquired clients and new logo clients that we've signed in Q3 or Q4 and Q1 of this year. So nice tuck-in, very small, very similar to what we did with the previous acquisitions in 2025, but something we're excited to add on to our portfolio.

Okay. Good. And then I see the AI certification for HTS. It's one of the first international organizations globally to earn independent validation. Would you say that's a competitive advantage for HTS?

Great question. And we're really proud of it, and the team has done a phenomenal job on ensuring that we get that ISO certification. Is it a competitive advantage? Yes, I do think it is because we are one of the first. More would likely follow because of the adoption of Agentic AI in our workforce within our business units, and they should. However, as I've shared with our clients and our prospective clients, they are all excited to see that certification because it gives them level of certainty and calmness as we bring AI into their workflows.

And I'd say that's particularly true of the Fortune 500, which are the clients we are targeting. Those are the ones that we care about that the most. Some of the midsized or regional clients might care a little bit less about it but it kind of fits with our strategy of really targeting the larger multinational companies that hire thousands of people a year.

Got it. And then the restricted cash, I see that's what $3.1 million. What's that -- what's the restricted cash all about?

Yes. That will gradually get released over time. It's a bucket of a few different things. A lot of times, when we do a sale leaseback, we will need to put a deposit, and we will work into the language of the contract that if we hit certain metrics, that deposit gets released to us. So some of it is sale leasebacks. Others are -- others relate to some deposits we have and in a couple of situations, it relates to some of the bank agreements we have, where in order to have a bank line in place, we need to promise to have x amount on deposit with them as a requirement for that credit line, and we put that in the restricted cash category. But we've been able to renegotiate those lower over time.

Like I'll give you an example, when we acquired Timber Technologies, we got an acquisition loan from Bridgewater Bank, and all of this is public. But this is just an example. We got an acquisition loan from Bridgewater Bank. It's an amortizing loan. We were a new client for them, so they didn't have any history with us. And part of the deal was that we would put $1 million on deposit with them and that money gets released over time. And so that restricted cash will go from $1 million to 0 on a -- just with the passage of time and assuming we're not in violation of any covenants or anything.

Okay. No, that's helpful. And just regarding your corporate expense, Q3, you were at $2.6 million, $2.2 million, well, that was $1.9 million but $300 million was one time. So it's good to see you getting to that run rate because I know that that's what you were shooting for within 6 months of November. So you're a little bit ahead of that. That's good. And there's still room to take out some corporate expense, I understand.

There is. I will say, though, and you'll see this in our proxy when it comes out, a little bit counteracted by bonuses. 2025 wasn't a super robust year. So we didn't have full bonuses in that. So we do expect -- we do have some expense categories that we expect to decline into 2026 versus 2025. So we do expect further progress. But it's possible that that's at least partially offset by having full bonuses instead of partial bonuses, which only happens if we're meeting and exceeding our targets. So that's a high-class problem.

Yes, definitely. We'd rather pay the bonus and record the revenue, right? So good. And then regarding stock buybacks, so 6,000 shares at [ 11 ] basically in Q4. And that was just purchases -- small purchases on the open market, correct?

Yes. And that was very frustrating to us. The window is only open a few times a year. And then when it's open, not only is it in a liquid stock, but we have to abide by the -- I think it's 10b-18 rules, which are very restrictive on when an issuer can buy back stock. So we decided to change course, and this is all public. You'd find this in an 8-K that was filed around the end of the year or maybe beginning of January, where we put in place a 10b-5 purchase plan. So it's on autopilot buying every single day even when the window is closed, and we followed all the rules that go with having a 10b-5 program. And it's just on autopilot. It buys a little bit every day, subject to the 10b-18 trading rules. And the buy order is with the trading desk, and it's up to $2 million, and it's making progress, and we'll give an update on that. And our next call, we'll give an update on how much we bought in Q1 but it's already significantly higher than that tiny tiny amount we bought in Q4.

Yes. Good to hear. And then one last question, Jeff, regarding you buying common shares, really good to see that do you think the Board will follow your example?

I don't want to speak for the other members of the Board. But I think there will be -- let me just say, I think there'll be purchases from other insiders as well, not just me.

[Operator Instructions] And ladies and gentlemen, showing no additional questions, we'll conclude today's question-and-answer session. I'd like to turn the floor back over to Jeff Eberwein for closing remarks.

Well, thank you for your interest in Star. As we mentioned, 2025 was a transformative year with the merger that was completed in August. And the teams have worked really hard to get that integrated. And we think we're well on our way to executing on our strategy, and we're very excited to show what we can do going forward.

Thank you for joining the Star Equity Holdings Fourth Quarter Conference Call. Today's call has been recorded and will be available in the Investors section of our website, www.starequity.com. Once again, thank you very much for joining. The call has now concluded. Have a great day.

Greetings, ladies and gentlemen. Thank you for standing by, and welcome to the Star Equity Holdings Third Quarter 2025 Results Conference Call.

Please be advised that the discussions 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 Star Equity's most recent 10-K, 10-Q and other filings for a more complete description of risk factors that could affect these projections and assumptions. The 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, which are all financial measures not recognized under U.S. GAAP. 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.

If you do not receive a copy of the earnings release and would like one after the call, please contact Star Equity at (203) 489-9500 or its Investor Relations representative, Ms. Lena Cati of the Equity Group at (212) 836-9611. Also, this call is being broadcast live over the Internet and may be accessed at Star Equity's website via www.starequity.com. Shortly after the call, a replay will also be available in the company's website.

It is now my pleasure to introduce Mr. Jeff Eberwein, Chief Executive Officer of Star 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 22, 2025, the company completed its previously announced acquisition of Star Operating Companies, formerly known as Star Equity Holdings, pursuant to the agreement dated May 21. Effective September 5, the company changed its name to Star Equity Holdings from Hudson Global and our trading symbol on NASDAQ from HSON to STRR. Following the merger, we are now operating as a diversified holding company with four divisions: Building Solutions, Business Services, Energy Services and Investments.

I'll begin by reviewing our third quarter results for 2025 at the holding company level. After that, Jake Zabkowicz, 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, 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 22. 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 $0.54 per share, compared to a net loss of $800,000 or $0.28 per diluted share in the third quarter of last year.

On a non-GAAP basis, adjusted net income per share was $0.02 compared to an adjusted net loss of $0.13 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 earnings per share were positive $0.19 versus negative $0.54 in the third quarter a year ago.

Adjusted EBITDA increased to $1.3 million from $800,000 in the third quarter of last year, reflecting improved operating leverage following the merger. Pro forma adjusted EBITDA was $3.1 million versus $600,000 in the third quarter of last year. Total cash, including restricted cash, was $18.5 million at the end of the quarter.

I'll now turn the call over to Jake to discuss our Business Services segment.

Thank you, Jeff, and good morning. Our Business Services segment continued to demonstrate solid performance in the third quarter despite the challenging macroeconomic environment impacting many industries.

While the broader talent acquisition market has contracted in 2025 compared to 2024, our HTS 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. This resilience highlights the robustness of our business model, our ability to adapt to market shifts and the strength of our long-standing client relationships, which continues to drive repeat business and steady demand for our services.

I'm particularly proud to recognize our team has received in the marketplace. HTS was named to the prestigious Bakers 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 and our commitment to excellence. Additionally, HTS was recognized as the #1 provider in the Asia Pac region, further underscoring our global reach and our trust in 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 the 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. This performance reflects our ability to effectively manage costs, sustain margins while continuing to deliver value to our clients in a difficult market environment.

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, which emphasizes expanding our geographical footprint and broadening our service offerings to both existing and prospective clients, has proven to be highly effective. As a result, we secured approximately $39.8 million in 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 4 quarters.

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 seize new opportunities and expand our market leadership.

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.

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 $600,000.

On a pro forma basis, which includes results for the entire third quarter beginning July 1, Building Solutions revenue was $21.4 million, up from $13.7 million in the third quarter of 2024. Pro forma gross profit rose to $5.3 million compared to $2.8 million in the prior-year quarter, while pro forma adjusted EBITDA grew substantially to $2.6 million from $700,000 a year ago. The segment ended the quarter with a $20 million backlog of committed orders and the trailing 12-month book-to-bill ratio remained solid at 1.01, reflecting a healthy pipeline and sales dynamics heading into 2026.

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 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.

Our Energy Services segment also achieved strong results despite a broader slowdown across the energy sector impacted by lower drilling rig counts in all oil-producing basins but offset somewhat by growth in natural gas and geothermal drilling activity. 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. These initiatives have not only improved sales and utilization rates but have also enhanced customer satisfaction and strengthened our overall market position.

In the third quarter of 2025, Energy Services revenue was $1.3 million with gross profit of $300,000 and adjusted EBITDA of $100,000.

On a pro forma basis, which includes results for the entire third quarter beginning July 1, revenue increased to $3.7 million, gross profit reached $1.5 million and pro forma adjusted EBITDA rose to $1 million, underscoring the segment's strong overall performance.

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

Thank you, Rick. Following our recent merger, we are 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 integration has been progressing smoothly, and we are already beginning to realize efficiencies across shared services. This will continue to improve our cost structure and streamline operations as we fully integrate the businesses.

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

Looking ahead, we are well positioned to drive shareholder value through a balanced strategy that combines organic growth, disciplined capital allocation and accretive acquisitions.

As part of this strategy, we continue to evaluate acquisition opportunities that complement our diversified holding company model. Our focus remains on identifying scalable cash-generating businesses that align with our long-term growth objectives, particularly those businesses with strong local operating management teams and sustainable competitive advantages. By executing this strategy, we believe we'll 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?

[Operator Instructions] And our first question for today will come from Theodore O'Neill with Litchfield Hills Research.

For Rick, on the third quarter on a pro forma basis, that looks like a record for the quarter, at least in my book here.

Yes. Thanks, Theo. I appreciate you noticing that. 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 didn't have jobs being canceled, but they just weren't making it through the pipeline as builders and architects and others were kind of daunted, I guess, by interest rates and other things. So we kept pushing jobs to the right, further out in time, and they finally started coming through.

And looking at seasonal patterns here in the last couple of years, your fourth quarter has been higher than your third quarter. Do you think that seasonal trend will continue?

It's really hard to say, Theo. The fourth quarter is really dependent on a lot of weather patterns. If we have difficulties in Building Solutions, for example, with builders not having the sites ready for us to build on, then there could be delays. But as long as weather holds, we're optimistic.

And when you talk about softness, I know that part of what you had cited as strength was workplace housing and low-income housing. Is that still the view?

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 shrinking over time, but I -- we expect that will come back.

The next question will come from Michael Mathison with Sidoti & Company.

Congratulations on the revenue performance, you guys. Just a couple of questions from me. 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 what's behind that.

Jake, do you want to walk him through that?

Yes. And I'm sorry, can you repeat that question? I apologize.

No problem. It just -- it looks from your slide deck like the adjusted net revenue as a percentage of sales is higher in the Americas versus APAC. And I'm just wondering why.

Yes. We saw some significant growth in our Americas business this last quarter through our land-and-expand strategy, and that has driven some of the uptick for us. And we're really excited to see that as we also launch our digital product, as I mentioned last quarter, and we are seeing the clients really gravitate towards that as agentic AI takes over -- or not takes over, it adds enhanced value to our clients and our partnerships.

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

In the contracting business, which is about half the revenue, all of the contractors show up as cost of sales, which causes us to have a really low adjusted net revenue and 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.

So contracting is -- our contracting business is heaviest by far in Australia, we -- and Asia Pac. We do very little of it in the Americas. So said another way, RPO as a percentage of revenue is much higher in the Americas than it is in other geographic regions.

Terrific. I just wanted to confirm that it was the impact of contracting. Just as long as we're on the Hudson business, I think the one region we didn't speak of yet is Europe. How does that look?

Jake, do you want to talk about what's going on with Europe?

Yes. Europe, we are definitely going through a transformation. And the transformation is looking at not only our land-and-expand strategy, but also 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 signs of that business continuing to pick up.

Europe is our smallest region when you look at -- when you compare Europe to the U.S. or the Americas and also to APAC. One of the things, though, that we are looking in Europe is the overall macroeconomic impact that's happening in that region. We did see a downturn in the European market for us this last year. 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. But when you compare Europe versus our APAC or the Americas region, it is our smallest region so far to date.

Michael, I would add, we do have a new management team there that we're very excited about, and we're very optimistic about the Europe segment doing much better in next year than this year.

Okay. Just one last question from me. Looking at Building Solutions, revenue was significantly higher than I had expected. So again, congrats on that. The gross margin was a little less than I had forecast, though. Is this gross margin sort of what we can expect going forward?

Yes. We -- yes, we shoot for kind of mid-20s. And I think that's the best number to use 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 -- the simple way to think about it is that we recognize expenses more aggressively than we recognize revenue. Sometimes the revenue recognition is delayed. And if we've already recognized all the expenses, that very last piece of revenue that we recognize after we finish the punch list, for example, on a big project, can be at 100% margin effectively because we've already recognized all the expenses.

So quarter-to-quarter, it can be a little lumpy, and I wouldn't read too much into it. I think mid-20s on a trend-line basis, rolling 4-quarter basis is what we expect.

[Operator Instructions] Our next question will come from [ David Siegfried ], investor.

So just a number of questions. First, regarding Building Solutions. I noticed KBS on September 1, they completed that 10,000-square-foot project in Nantucket. Are there more contracts like that in the pipeline?

This is Jeff. I'll take that. There are. I'll just answer it in two ways. We -- on our slides, if you look at Slide 9, we do show our backlog and 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.

So 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. 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. But we do have more projects like that one that are -- that will happen in the future.

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? Because you do have that facility in Oxford, Maine that's empty, would you fill capacity -- yes.

Yes. Good memory. So I think the short answer to that is kind of D, all 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. And so we would like to give them more to manage. And so 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.

And then 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 #2 after adding to what we have in an existing geography.

Okay. 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 get -- to monetize that investment?

Yes. So yes, all that is public, our holdings in Gyrodyne. So they are -- 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. And it's very cheap on NAV. I think just based on their publicly-stated NAV, it's got 50%, 60% return to stated NAV. And their plan, per their public documents, is to liquidate their remaining real estate holdings and distribute that out as cash and wind down the entity by the end of, I believe it's 2027.

Okay. All right. Good. And then, let's see, so regarding Hudson, I noticed they moved to a larger office in Edinburgh this past quarter. What was behind that change, move?

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

Yes, 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?

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 a previously shared office space into our own office space that we lease. And we did the same principle in Edinburgh this last time around. And so we were in a shared space. We had shared common area, and it wasn't really conducive to the company that we turned into, being Hudson Talent Solutions.

So the team has found a unique office space, right off of Princess Street in Edinburgh, great location. It's going to allow us to drive the talent that we need to bring into the -- to our clients, but also, it's 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.

So really excited. We just did a ribbon-cutting. Edinburgh is a beautiful area to visit. And like I said, great talent, great culture and we're proud to be there.

Yes. Okay, good. What about -- I noticed from Q3 last year, the new logo and expansions and renewals was up considerably from if you look at quarters. So what was behind that uptick?

Yes. David, great analysis. As I mentioned before a couple of times, our land-and-expand strategy is really working. And 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 and other business lines and making sure we're having those conversations.

So we're seeing a pretty significant tailwind with that and allowing us to build on to 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 are seeing clients gravitate more to that one talent solution.

So all of that is allowing us to gain more market share with our clients and provide a better level and a higher quality of level service to them.

Got it. Okay. Now last quarter, I think Jeff had mentioned with the AI rollout, there was one company that was interested just in the AI offering. And then it was -- you're 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?

Yes, David, we are actually -- we 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? So whether it be TalentIQ, whether it be [ Hudson Flow or Hudson Core, ] every single one of our clients has a different demand, and they're on a different journey. And sometimes that journey takes them to -- they want a full agentic AI solution. Sometimes it takes them, no, they don't want a full agentic AI solution. They want pieces of the puzzle, right? And so we're able to offer that to them.

One thing that has been taking off is, as I just mentioned, our TalentIQ 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. 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 an offshore finance facility or manufacturing facility for FMCG. We can help drive and help inform some of those decision-making capabilities with that.

Okay, good. And then the goal...

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 you wouldn't see on Star's website or might not be a Star press release, but they will have more to say about what they're doing on the digital side going forward.

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? Or I'm just trying to figure that out.

Yes, 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. But our first priority is to get back to the levels we were at in 2022. But this time around, do it with a more stable foundation.

So if I go back to 2022, the Hudson business was about 70%, we would estimate what we would call enterprise RPO, and 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%. 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 will be more sustainable and a stronger, more stable group of clients. So that's kind of point one.

And then if we think about everything going on with this business with all of our clients asking about AI, how is AI going to affect talent procurement, talent assessment. We -- 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. You're just -- you're not going to see Star invest tens and millions of dollars in something that isn't producing revenue, isn't producing immediate cash flow, but 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. So they bring expertise and capital, and they would fund that investment.

So there's just so many different ways that could go. I would just tell you to stay tuned. It's not something that's going to happen in the next few quarters, but I'd put a high probability on something like that happening at some point 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 a very people-oriented business to one that is much more of a tech-enabled, tech-plus-expertise type of a business. And there could be people who could be very interesting to partner with when the time is right.

Yes. 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. But 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?

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.

So 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 cash flow -- that business and that cash flow stream at 3 or 4 or 5x cash flow, then it's highly accretive to do that acquisition. So in other words, the cash flow from the acquisition should more than cover the dividends that we would issue in an acquisition.

Got it. Okay. One last question regarding the mutual funds that were selling since the Star merger was announced. Like you took out 8% of the shares back in September. We're still in the $9 range. Jeff, you were buying at higher prices. 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. Do you think you could do another big block transaction, take those shares out?

We're always open to that. We -- 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. So 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.

And as far as we know, there are no longer any holders -- any institutional holders who are above 5%. So 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%.

The next question will come from [ William Kim ] with Presidio Asset Management.

So with the merger now closed, I guess, is there any update on the expected synergies that you plan to achieve?

Yes. Great question. We still believe that we'll deliver the $2 million in synergies. And that target could be higher over time, but that's the number that we're comfortable using. And where you're going to see that is in the corporate line. So 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. And in Q3, that total was $2.6 million for the quarter. That's a pro forma number.

And so as we 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 really where you're going to see the synergies show up if you're going to be tracking it quarter-to-quarter.

And 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?

Yes. It's a gradual -- it kind of comes in steps. We -- 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, so maybe 6 months from now, we should be at that run rate. So said another way, the $2 million of synergies should be fully realized, I would think, 6 months from now.

Great. A couple of 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?

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

Great. Great. Okay. And then is it fair to say there was a little bit of debt paydown this quarter as well?

We have debt at -- on two of our businesses, the Building Solutions and the Energy Services have debt at the sub-level. And on Building Solutions, we have an acquisition loan 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 over time, everything else being equal, you'll see our debt decline as those two debt pieces decline.

Great. And then last one on the RPO business. I think you previously mentioned the '22 numbers and the kind of environment that we've -- the company has been in the last year or so with very low attrition. Where in the cycle do you think we are now?

We are bouncing along the bottom. So we had a very painful decline from 2022 to, say, a year ago. And so it seems to us that we've bottomed and have not seen a strong recovery, but we think it's coming partly because the attrition rates are abnormally low at the Fortune 500.

So if you were to have -- if you had attrition statistics available at the Fortune 500, you would have seen it be abnormally high coming out of COVID, so starting in 2021, into 2022, the beginning of 2023. So it was above normal. And 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. So I hope that answers your question.

Right. Yes. So if we -- 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 is that -- are we looking at kind of back to peak type of attrition rate numbers?

No, I think getting back to that level would be mid-cycle, not peak. Just in the last 2 years since Jake joined to head up that division, we have -- we now have an offering in the Middle East. We are -- have launched services in Latin America and we did an acquisition in Japan. So those are three pretty significant geographic areas that we weren't in before.

And so 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. And something I've talked about quite a bit is that once we're at steady state, as we grow, we should have a 30% incremental margin. And so 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.

[Operator Instructions] 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 call and for listening in. We appreciate your interest in the company and really great questions. And -- so appreciate those.

And if you want to get in touch with us, the contact information is on our press release, and you can also look at our website, starequity.com, and we'll be available to answer any questions you have. So reach out. Thanks again for your time today.

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