Star Equity Holdings, Inc.

Greetings, ladies and gentlemen, and welcome to Star Equity Holdings fourth quarter 2024 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 PENQ 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, in 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 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 investor relations representative, Lena Cotty, 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 on the company's website. It is now my pleasure to introduce Rick Coleman, Chief Executive Officer of Star Equity.

Thank you, Operator. Good morning, and thank you for joining us today for our fourth quarter 2024 results conference call. On the call with me today are Executive Chairman Jeff Everwine and Chief Financial Officer Dave Noble. I'll start today by providing an overview of our recent business developments and financial highlights. Then Dave will provide additional details on our consolidated financial results. In the fourth quarter of 2024, revenue increased by 21.1% to $17.1 million versus $14.1 million in the fourth quarter of 2023. For the full year of 2024, revenue increased 16.5 percent to 53.4 million from 45.8 million in 2023. The revenue increases in both periods are largely attributable to M&A activity, particularly the acquisition of timber technologies, which we completed in the second quarter of 2024, and the full-year revenue impact of our Big Lake lumber acquisition, which we completed in the fourth quarter of 2023. Fourth quarter 2024 gross profit increased 55.3% to $4.5 million versus $2.9 million in Q4 2023, due primarily to the inclusion of gross profit from timber technologies, which generates the highest gross margin of STARS Business Solutions businesses. Full year 2024 gross profit declined 7.2% due to a one-time $574,000 purchase price accounting adjustment related to the timber technologies acquisition, as well as lower revenues and utilization at our KVS and EBGL businesses. Our building solutions division was negatively impacted by demand softness during the first half of 2024, as project starts were delayed primarily due to interest rate sensitivity and credit availability. However, during the second half of 2024, and especially in Q4, momentum shifted as several large projects placed on hold earlier in the year received final approvals and began production. This positive momentum has continued into the first quarter of 2025 as evidenced by our recent announcements of multiple large project signings. Our signed backlog representing committed projects and orders stood at $17.2 million at year end and has increased year to date as demand continues to build. Over the long term, we have conviction in the structural tailwinds for our building solutions division as factory built construction continues to gain market share versus traditional building methods. While we are well positioned for a strong 2025, we are continuing to monitor the potential impact of the current administration's fiscal policy on our operating businesses. The application of tariffs is one example, and we have taken preemptive action to reduce our businesses' exposure to Canadian lumber in favor of domestic lumber. In addition, we have implemented strategies and enhanced our contract language to further reduce the risks associated with changes in input costs. Although we can pass some price increases through to the customer, drastic or rapid price increases risk impacting overall demand for wood-based construction. Lastly, I want to highlight our recently announced acquisition of Alliance Drilling Tools, which established our energy services division, diversifying our operating business portfolio and providing a new platform for growth. We are excited to partner with a business of ADT's caliber and growth potential, and expect them to contribute significantly to STAR's consolidated results going forward. Since its founding, ADT has exhibited strong revenue and profitability growth with consistent cash generation. As previously announced, for full year 2024, ADT generated revenue of approximately $10.5 million, gross margin of 48 percent, and adjusted EBITDA of $2.4 million. Its business model allows for the majority of costs, including freight, repairs, and damages, to be passed directly to customers, which minimizes ADT's operational expenses, CapEx, and risk exposure. We believe all of our operating companies operate in industries that support further expansion and will continue to evaluate opportunities for organic growth as well as additional acquisitions. Now I'll turn the call over to Dave Noble, our CFO, who will provide additional fourth quarter consolidated financial highlights. Dave, go ahead.

Thank you, Rick, and good morning. Let's move on to Star Equity's consolidated financial results, which for the fourth quarter and full year of 2024 are represented by our two operating divisions, Building Solutions and Investments. In Q4 2024, consolidated gross profit was $4.4 million, up 55.9% versus Q4 of 2023, driven by increased revenues and higher gross margins in our building solutions division. However, for the full year, gross profit decreased by 7.3% to 11.1 million from 11.9 million in 2023, driven primarily by lower gross margin percentages in our building solutions division during the first half of the year. SG&A increased by $1 million or 31.7% versus Q4 of 2023. As a percentage of revenue, SG&A increased in Q4 of 2024 to 24.7% versus 22.8% in Q4 of 2023. For fiscal year 2024, SG&A was 17 million versus 14.5 million in 2023. The main driver of the increase in SG&A are the full year impacts of the timber technologies and the big lake lumber acquisitions. In the fourth quarter of 2024, we reclassified the 2024 impairments of our cost method investment from SG&A to other income and expense to align this with the gains and losses of our investments division. For reference, these impairments follow the mark-to-market valuations done by Catalyst, formerly TTG, their largest shareholder, the private equity fund. Moving to the bottom line, in Q4, our net loss from continuing operations was 2.5 million versus net income from continuing operations of 1.8 million in Q4 of 2023. Non-GAAP adjusted net income from continuing operations in Q4 was 0.5 million, or income of 15 cents per diluted share. This compares to adjusted net loss of 0.3 million in Q4 of 2023, or a loss of 10 cents per diluted share. Non-GAAP adjusted EBITDA from continuing operations increased to 1.1 million in Q4 from a negative 0.1 million in Q4 of 2023. Segment non-GAAP adjusted EBITDA at our business solutions division increased to 2.3 million in Q4 this year, up from 0.7 million in Q4 of 2023. Q4 2024 cash flow from consolidated operations was an outflow of $1.5 million compared to an inflow of $28,000 for the same period in the prior year. The decrease in operating cash flow was primarily due to increases in working capital associated with the increased business activity in Q4 of 24. As of December 31, 2024, the outstanding balance in our interest-bearing debt was $11.3 million versus $2.0 million at the end of December 2023. Our cash balance, including restricted cash, stood at $5.6 million, down from $18.9 million at the end of 2023. The changes in both debt and cash balances can largely be explained by the timber technologies acquisition and its related financing, both of which closed in May of 2024. Turning to our investments division, our holdings and public equity securities at the end of the year amounted to $3.4 million versus $4.8 million a year ago, as we substantially exited one of our public equity positions following its acquisition. Our rollover equity investment and seller note receivable from the sale of Digirad Health to Catalyst, formerly TTG, in May of 2023, were valued at $1.4 million and $8.2 million, respectively. As disclosed in NSERVCO's public filings, in the fourth quarter of 2024, we provided Inservco a notice of default regarding the million dollar promissory note issued to Star related to our initial investment. As a result of this default, we canceled the issuance of 250,000 Star preferred shares, which collateralized that note. We continue to hold approximately 12 and a half million of common shares on Inservco, and we remain in contact with Inservco regarding potential opportunities to collaborate on business opportunities. Now I'd like to turn the call back over to Rick for some additional remarks.