Star Equity Holdings, Inc. Common Stock LD Micro 20th Annual Main Event Conference

Take it away. Thank you everyone.

Thank you for your time and attention, and for being here. It's nice to be here in sunny, beautiful, California. Star Equity is a unique company. You're probably not going to run across anything like it at this conference or out in the marketplace. We are an investment holding company on Nasdaq. Our ticker symbol is STRR, and we have non-convertible preferred stock that trades that we've been using as an acquisition currency, and that ticker symbol is STRRP, also on Nasdaq. We believe we have a tremendous amount of upside potential from what we've already built. We've built a platform, a multi-industry platform of companies. Thus far, we've merged together three micro caps that had been publicly traded for some time and needed an exit strategy.

In August, we signed an agreement to merge with a fourth micro cap, and that should close at the end of this year. We just filed the S-4 for that transaction on Monday. It's taken a while to get to this point, and there's been some messiness in the structure, and multi-industry holding company might not be for everybody. We've had some turnover in our shareholder base, but as we move forward and deliver the results, we think our stock has a tremendous amount of upside potential. Trailing 12 months, we generated $6 million of EBITDA, and without any further acquisitions, we see this going to $40 million of EBITDA by the end of the decade. It'll be here before you know it, and I'll walk through how we're going to get there.

In addition, one of our predecessor companies comes with a significant amount of NOLs, over 200 million of NOLs. We have a tax shield that we can use for all the income we generate and for acquisitions that we make. We have a long history of buying back stock. We think our stock is undervalued. Insiders own a significant amount of our stock, 35%. I personally own 30% of the stock and have consistently been in the market buying stock and have never sold a share. We're out in the market looking for acquisitions, other micro caps that could be part of our platform of companies or private companies, we could be a good exit for them. Just a little more detail on our financials. Over the last 12 months, generated about $225 million in revenue, about $6 million of EBITDA.

We have had negative earnings, so we are not quite earnings positive. If we deliver on this vision by the end of the decade and have $400 million of revenue, $40 million of EBITDA, that suggests roughly $10 a share in earnings. Our stock price today is around $10, and I think if we execute on this, our stock price has a huge amount of upside potential. Our NOL also has value depending on how much of it we end up using, but it is a significant asset. Here is the detail by division, and I will give a little more detail on the businesses we are in. Our Building Solutions business obviously has some cyclicality to it, and this is a low point in the cycle.

We have some growth initiatives that I can talk about, but that business has a lot of upside potential from some of the growth initiatives and from just a return to kind of normal business conditions. Our Business Services business, we have been investing heavily for growth here, making this business, incorporating AI into the service offering, and that is causing us to gain share. We have been rising up through the rankings of our peers. 2 years ago, this business globally was ranked ninth and has moved up to fifth, and in the most recent rankings that came out, it moved up to 3. So we feel like we are on the right track there. We have an Energy Services division that is doing very well right now, and they have done an excellent job of diversifying into geothermal drilling, carbon capture drilling, hydrogen, helium, mining, water wells.

Any kind of drilling that is needed, we will use our tools. Just a minute on the corporate costs, and this is where some of the value comes from merging three micro caps together. Do not remember exactly what the corporate cost would have been of those three micro caps standalone, probably in the low to mid teens. The most recent merger that we completed a year ago resulted in $3 million of annual cost reductions, and that is one of the initial benefits of merging micro caps together. So would love to have you in our stock, but would also love you to bring us ideas. Some of the companies here at this conference have a really bright future, and they are going to do well. But ones that stay as a micro cap for a long period of time, I would say, are doing a disservice to their shareholders.

A little bit on who we are today and what this amalgamation of three different micro caps looks like. Our Building Solutions division, the theme here is wood-based construction is done in a factory. We are in two geographic locations right now. One is the Northeast, the other one is in the Minneapolis area. Our businesses can prefabricate an entire house in a factory, so just think prefab construction. We can prefabricate walls, we have some lumber yards, we have design teams, we also have some engineered wood products. We think factory-built construction is going to gain share over time. It is already gaining share. It has gone from 3% market share pre-COVID to 7% today. As labor goes up, the other costs go up, we think more and more developers are going to use a factory-built solution.

Our Business Services division, this used to be a standalone microcap that was a little bit orphaned. This is in the Business Services space, so it serves Fortune 500 companies. What this business is, it's an outsource solution. You think about a typical Fortune 500 company might have 20,000 employees globally. We will take care of, globally, all of the things that recruitment agencies do for them, all the things that a staffing firm will do for them and say, half their HR department. If they outsource all of that to us, they end up saving a significant amount of money and there's a much better alignment of interest. More and more companies are choosing an outsourced option like Hudson.

Hudson's the business I'm talking about that 2 years ago was ranked ninth, moved up to third, and has moved up to, yeah, moved up to third in the global rankings. A little over a year ago, we bought a private company that's in the Energy Services space, and they rent a mission-critical tool that is used to drill any well, and it's the kind of business we like. Even though these businesses, you might say, don't have a lot in common or there's not an industrial logic of putting these together, they're all orphaned microcaps that were subscale as public companies, and they do have some characteristics in common. Lastly, we have an Investments division, and this is one that also has a significant amount of upside that we think we don't get much credit for. We have real estate assets that can be monetized.

That's probably $10 million. We have an investment in a healthcare company. It used to be one of the predecessor companies, and we merged it with another company. That's a transaction that could not have gotten done had it been a standalone microcap company. We still have an investment in that company. It's controlled by a PE firm. When that PE firm sells, that investment will get monetized. We look a little bit like a private equity firm. We are a good home for private companies or microcaps. We have some differences and some benefits versus private equity. We think this model will cause our stock to outperform the Russell and eventually get added to the Russell.

One of the thoughts behind it is that if you combine 3 or 4 or 5 microcaps together and you get enough size and scale to get added to the Russell, you benefit from something that none of those microcaps could have done on their own. Just carrying this analogy a little bit further, Star has 12 employees. That looks and feels like a small private equity firm. We take care of all of the public company responsibilities, and we have an internal M&A team, like a small PE fund. What we are not are operators. We entrust that to the local operating teams, and this part on the right looks similar to the holdings of a private equity fund. If the part on the left is the private equity firm, the part on the right is the private equity portfolio.

The companies we own have about 1,500 people, and these are the businesses generating the $225 million of revenue that I talked about earlier. Just a few examples here of some things that our M&A team has done. The first part was we merged one of the businesses with a similar business that was owned by a PE fund, and there was a lot of strategic value of putting those businesses together, and the rest of that investment will get monetized at some point. In our Building Solutions business, we have done some bolt-on acquisitions, one in 2023, another one in 2024. Then we bought a private company in 2025. That is the Energy Services division. We have monetized the real estate there, and that business is generating $4 million of EBITDA. If you do the math on the multiple we paid, it is less than three times EBITDA.