Capstone Holding Corp.

Welcome to Capstone Holding Corp's second quarter 2025 earnings presentation. Capstone is built to deliver, positioned to acquire, and ready to scale. This slide is our preamble and summary of our legal disclosure. The following content is fully qualified by the legal disclosures on the next two slides. Our goal is to share with some of the strategic thinking and financial analysis we've been using to guide the growth of our business. This content aligns with our principles of being accountable and transparent with our shareholders. We operate in a hyper-dynamic environment. That's a fancy way of saying things change quickly. What we're telling you today is based on our best estimates and assumptions. We reserve the right to revise our views as new information becomes available. Despite uncertainty, we must plan. must make operating and investment decisions.

This presentation lays out some of that thinking for your review.

In Q2, InStone delivered significant margin expansion and earnings growth. Revenue was essentially flat year but gross profit increased 13%. Gross margin improved from 21.4% to 24.4%, driven by growth in our owned higher margin brands. EBITDA more than doubled, up 120% from 374,000 in Q2 2024 to 839,000 in Q2 2025. Adjusted net income swung from a loss of $129,000 last year to a positive $308,000 this year. This quarter demonstrates the strength of our brand strategy and disciplined SG&A control. Today we signed the agreement to acquire Carolina Stone Products, a leading stone veneer installer and distributor in North Carolina. The deal is expected to close within 10 days. Revenue is approximately $11 million with trailing EBITDA of approximately $750,000. By 2026, we expect Carolina Stone to contribute a million dollars in EBITDA. This is an immediately accretive acquisition. Carolina Stone provides immediate entry into the Southeast, one of the fastest growing construction markets in the U.S. It establishes a platform for brand expansion and creates operating synergies across our business. This transaction is exactly what we outlined in our strategy. Discipline acquisitions at attractive valuations that build scale and profitability. Our M&A pipeline remains active. We expect to close a second transaction within 60 days and are in discussions that could lead to a third by year-end. Favorable valuations, flexible deal structures, and disciplined execution keeps us on track to achieve $100 million in revenue and $10 million in EBITDA run rate for 2026. Earlier expectations of 100 basis points of rate cuts have shifted. Our current outlook calls for a 50 basis point cut later this year, which should support demand. In the meantime, we are delivering margin expansion and stronger profitability through cost discipline. With Carolina Stone in our growing product portfolio, Capstone is assembling the business needed to hit our 2026 targets. Capstone's target remains $100 million in run-right revenue and $10 million in run rate adjusted EBITDA for 2026. We are on track to close our first M&A transaction, Carolina Stone Products, within 10 days. Our acquisition funnel is active and valuations remain attractive at four to six times EBITDA. We are staying disciplined, focusing on tuck-ins that expand our platform and add earnings momentum. Rate cuts expected later in 2025 should improve demand