Star Equity Holdings, Inc. Q2 FY2025 earnings call

• Revenue growth: Second quarter revenue increased 76% year-over-year, driven by organic growth of KBS and inclusion of acquired companies (Alliance Drilling Tools and Timber Technologies). - Gross margin improvement: Gross margin rose to 26% from 16% in the prior year quarter, due to higher revenues and higher-margin businesses. - Building Solutions backlog: Backlog stood at $25.7 million at quarter end, up from $14 million in Q2 2024, indicating strong customer interest. - Energy Services integration: Integration of ADT is smooth; pursuing organic growth and potential acquisitions in the division. - Investments performance: Realized a $5.5 million gain from Star Equity Funds' investment in Servotronics acquired by TransDigm. - Merger progress: Entered into a definitive merger agreement with Hudson Global in May 2025, subject to shareholder approval.

In the second quarter of 2025, the Building Solutions division saw revenues increase by 51% to $20.4 million compared to $13.5 million in the same quarter of 2024. The Energy Services division had Alliance Drilling Tools (ADT) generate $3.3 million in revenue and $0.5 million in non-GAAP adjusted EBITDA. The Investments division had holdings in public equity securities amounting to $1.8 million at quarter end. Overall, total revenue increased 76% from the second quarter of 2024, driven by organic growth in the KBS business, the inclusion of Alliance Drilling Tools acquired in March 2025, and a full quarter of Timber Technologies revenue acquired in May 2024.

• The company stopped giving formal guidance pre-COVID. - Building Solutions and Energy Services are expected to be at least flat in performance compared to Q2. - For the merged Hudson business (Business Services), the trend of higher year-over-year revenue and EBITDA is expected to continue. - Anticipates removing $2 million of redundant public company costs over time.

• Macro-economic headwinds such as rig count declines affecting the Energy Services division. - Uncertainties related to integration of acquired companies and success of potential acquisitions. - Risks associated with the merger agreement, including shareholder approval and post-merger integration challenges.

Q: Can you talk about which division has the best pricing power?

A: Richard Kenneth Coleman stated Building Solutions has pricing power as it can maintain or raise prices with lumber market volatility, and Jeffrey E. Eberwein added Energy Services has pricing power on in-demand mission-critical tools.

Q: Many energy servicing companies face pricing pressure, why does Energy Services stand out?

A: Jeffrey E. Eberwein said ADT has high service level with mission-critical tools, and they replenish in-demand tools to increase utilization and gain share.

Q: About stick-built vs prefab in Building Solutions?

A: Richard Kenneth Coleman mentioned territory in the Northeast with housing shortage and success with traditional stick-built construction.

Q: Guidance on Q3 and Q4 post-merger?

A: Jeffrey E. Eberwein said they don't give formal guidance but divisions have positive outlooks.

Q: About $4.9 million Other income and prefab dynamics?

A: Jeffrey E. Eberwein confirmed Other income includes the $5.5 million gain, and Richard Kenneth Coleman talked about prefab's quality, timing, and lower waste advantages.