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

and set up for a strong 2026.

Carolina Stone is a premier installer and distributor of manufactured and natural stone veneer. It serves commercial, residential, and multifamily markets with premium brands, expert masonry installation, and strong project management. With warehouses and showrooms in North Carolina, it provides immediate coverage in the Triangle and Charlotte metros. This acquisition establishes caps on Southeast platform, expands distribution and provides margin upside through higher value products. The purchase price for Carolina Stone is $3.9 million with potential upside to 4.7 million. The multiple is 4.7 to 5.2 times EBITDA in line with our discipline acquisition criteria. Carolina Stone generates approximately $11 million in revenue and $750,000 in EBITDA. We expect this to grow to about $1 million of EBITDA in 2026. This transaction is a perfect fit with our strategy, disciplined, accretive, and growth-focused. Our M&A pipeline remains strong. Market conditions are producing realistic seller expectations and limited competition. Some of the best targets are waiting, and Capstone is nurturing those relationships. We expect an additional transaction from our active pipeline by year-end, with the potential to sign a third acquisition before 2025 closes. We are capitalizing on a favorable deal environment while staying disciplined. Our acquisition strategy remains unchanged. Tuck-ins to expand our platform and add earnings momentum. Sister companies with product and channel synergies to unlock cost savings and mutual growth. And new platforms longer term, to drive their own tuck-ins. Valuations remain attractive at 4-6x EBITDA, typically with 20-45% non-cash consideration.

We remain disciplined on pricing, structure, and fit. InStone had a strong second quarter.

Gross margins increased from 21.4% to 24.4% year-over-year, reflecting the mixed shift to owned higher margin brands. SG&A stabilized towards an $8.5 million run rate. And Toro and Pangea are continuing to gain traction with dealers and expanded to new geographies. With rate cuts expected later in 2025, demand should improve combined with margin expansion and disciplined cost control. The groundwork is laid for a strong 2026. On this page and the next, you'll find a summary Q2 results, please refer to the 10Q for more detail. As a public company, Capstone incurs corporate costs beyond those of its subsidiaries, currently instant. Fixed costs include leadership, board, legal, and compliance. Variable costs, like investor relations and marketing, can be scaled upwards or downwards as needed. When valuing our core business, we believe many corporate costs, including Capstone overhead, are non-essential to our subsidiaries' operations. Capstone corporate expenses are not expected to scale quickly as we grow, allowing Capstone to expand profitably as it executes its strategy. The first year includes a number of non-recurring expenses, such as higher investor relations spent. We expect Capstone expenses to normalize over the third and fourth quarter.

These are our key principles.

a promise to our investors. We will be transparent. We will always tell you how we are doing. We will be accountable. We will make commitments and share targets. Some may be stretch goals, but we will put our full effort behind them. And we will be adaptable. Markets change and conditions change. Capstone, ticker symbol C-A-P-S, is executing with discipline, margin expansion, accretive M&A in a clear path So the $100 million in revenue, $10 million EBITDA run rate goals.