Greetings, ladies and gentlemen, and welcome to Star Equity Holdings Fourth Quarter 2024 Results Conference Call. Please be advised that the discussion 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, 10-Q 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 and 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 Cati 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 at 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, Jeffrey Eberwein; 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 2024, revenue increased 16.5% 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 Star's Building Solutions businesses. Full year 2024 gross profit declined 7.2% due to a onetime $574,000 purchase price accounting adjustment related to the Timber Technologies acquisition, as well as lower revenues and utilization at our KBS 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…

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 $0.15 per diluted share. This compares to adjusted net loss of $0.3 million in Q4 of 2023 or a loss of $0.10 per diluted share. Non-GAAP adjusted EBITDA from continuing operations increased to $1.1…

Thank you, Dave. We ended 2024 with strong activity across our Business Solutions division, and that momentum is carried forward into the first quarter of 2025. We're encouraged by the recent performance at all of our businesses, our growing sales pipeline and backlog and the opportunities presented by our establishment of our Energy Services division. In short, we are excited for the year ahead. Now I'd like to turn the call over to the operator for questions.

[Operator Instructions] Our first question today will come from Theodore O'Neill of Litchfield Hills Research. Please go ahead.

Thank you very much. And congratulations for meeting the revenue and the non-GAAP EPS numbers. I'd like to ask about building side of the business, the Building Solutions. So two questions. One is you announced two big wins in March. And I think you disclosed how those are going to flow through to 2025. Can we read anything into that in terms of additional business? And I'd like to know what accounts for the margin improvement in Building Solutions?

Thanks, Theo. Appreciate the question. This is Rick. One of the things that definitely impacts the margin improvements in the Building Solutions division is increased revenues. We do have a platform in place that's necessary to operate the business, and those fixed costs are now being spread across a number of different projects and a broader revenue base. So that's a big piece of it. What we're looking for in the future is really indicated by what our sales pipeline looks like. The new opportunities that come into the pipeline are evaluated every week. We negotiate those deals. And hopefully, when we win them, we add them to our backlog. And what we see in the pipeline and the backlog is fairly substantial growth beginning in the fourth quarter of '24 and carrying forward into 2025.

Okay. And can you break out what's in the $1.7 million of other expense in the quarter?

Dave, do you want to take that one?

Sure, I can take that. Yes, the big thing -- we mentioned this in the commentary. We had to take a bit of a write-down on our investment in the equity of former Digirad, which we sold to TTG, now Catalyst. And we pretty much have stayed in sync with the private equity firm that put that company together. And given that they're in the midst of a turnaround, they've had some write-down of that equity. And we've had that in three of the four quarters of last year. And so the final quarter was around that $1.7 million number. Furthermore, we recharacterized that. We had been showing that in SG&A, but we've reclassified that into other income because it better aligns with our other investments related activity.

Okay. All right. And that's pretty much all of it now, is it? You've written that down to close to zero?

The equity portion is down. Again, they're in the midst of a turnaround and this is a long-term hold. So from an accounting perspective, we can never write it back up. But I think all of the senior management are super hopeful that this is going to be a win over the long term. We believe Sentinel, who's the firm, is going to turn this thing around and make good investment. So we're happy to be part of it.

Okay. So aside from -- go ahead.

Yes, this is Jeff. We also have a debt investment with them. So we own equity and we own debt in Catalyst. And unfortunately, the way GAAP accounting works is you have to write it down if there's a possibility of it being impaired and our, as Dave said, our methodology is to follow the mark-to-market that the PE firm does. And if it does turn around the way we think it will, unfortunately, we don't get to write that back up under the GAAP accounting rules. The more important thing is that the PE firm will sell this business at some point. It's in a fund that ends in a few years. And so what we really care about is that exit a few years from now and our hope is that both the note and the equity or original equity of $6 million are fully recouped and there's even upside to that. So the mark-to-market is just a noncash item on paper until the business gets sold.

Right. Right. Okay. And I asked about it because I thought there might be something from the Enservco issue. But will that appear in next quarter?

Bill, do you want to handle that?

Write-down on the Enservco notes -- the write-down on the Enservco note actually ends up hitting our stockholders' equity because it was overcollateralized. So it never hits the P&L.

Okay. And my last question is what's going on in Enservco have any impact on Alliance Drilling?

No.

Great. Thanks very much.

Our next question today will come from Tate Sullivan of the Maxim Group. Please go ahead.

Thank you. You covered this on the acquisition call in Alliance Drilling, but what specifically did you like about their business even after your investment or during your investment in Enservco? And can you comment on Alliance Drilling's customer mix? Is it smaller operators, larger operators or a mix thereof, please?

Rick, why don't you handle that. Rick? Are you there, Rick?

I'm sorry, I was on mute. I appreciate the question, Tate. I apologize for that. Yes, one of the things we liked about Alliance Drilling, obviously, was the fact that they operate in multiple sectors of the drilling stream. Their experience is pretty substantial. The founders are still part of the company and are planning to stay for a while, while we transition. There's a strong management team beneath them. And all of them, when we've talked to them about their growth opportunities, have noted that they think that the company has a great upside potential with additional customers, but also tapping into additional revenue from their current customer base. So we believe that a minimal investment in additional tools and some geographic expansion will really help grow that business over time.

Yes, their two biggest customers are household names in the energy sector. So great counterparties. I think they have no credit risk with their customers, no history of bad debt expense. So it's a mix of public companies and some private companies. And we think it's a healthy mix. And as Rick mentioned, it's about two-third traditional energy, but they've been very successful in growing other sectors, geothermal water wells, a little bit of minerals and mining, mainly in the U.S., but there's some occasional activity elsewhere in the Americas.

And then not to overlook the tariff issue, which I tend to, but I mean you commented on the timber from Canada for your modular construction business. And is that mostly the New England, KBS operation? Does KBS mostly get timber from Canada? Are there substitutes on the U.S. side? Can you just talk about where the current sourcing is for KBS?

Yes. Rick will talk about the sourcing. But I'd say lumber, it's not quite a global commodity, but the U.S. and Canada are very closely linked markets. So regardless of where one sources, if lumber prices go up in Canada, they go up in the U.S. and vice versa. But Rick, why don't you talk about the sourcing issue?

Sure. Regarding KBS, which you specifically asked about. KBS sources mostly domestic lumber. There are some inputs, windows, trusses, things like that, that come from other suppliers that may contain Canadian lumber. So we do expect there could be some price impact. And as Jeff mentioned, if prices go up for Canadian lumber, prices are likely to go up for domestic lumber as well. As long as those price increases are not overly sudden or large, then we can address them. We can adjust our pricing and pass along some of that to our customers. But any large or dramatic increase is going to be -- it's going to impact construction across the country. So we'll have to keep an eye on that. We do have a hedging strategy. We have other strategies in our customer contracts that protect us. Timber Tech uses very little Canadian lumber. They outsource almost exclusively domestic lumber, southern yellow pine from Southern states. And EdgeBuilder is probably where we have the most concentration of Canadian lumber, but they also have -- they're watching it very carefully and they use a hedging strategy to protect us there.

Thank you, all.

Our next question today will come from [indiscernible], a Private Investor. Please go ahead.

Hi. Good morning, guys. I'm looking at your balance sheet, and it looks like your book value is about $11.4 million, and there's obviously per share and your stock price is about $2.22. That's 5x book. Have you ever thought about just selling the company or selling the parts of it and return all the equity to shareholders? It just seems like we're kicking a dead horse. And I just don't see any positivity. I hear what you're saying, but I'm very, very disappointed in the results. You're giving preferred dividends out when you're not making money. I'd just like to -- would the Board considers selling the company?

This is Jeff, and I'm Executive Chairman of the Board and the company's biggest shareholder. And I would say, all options are on the table to maximize value for shareholders. And we agree, the stock is really cheap, ridiculously cheap. And with respect to the preferred stock, by paying a dividend, it causes the preferred stock to trade pretty close to par, and we have been able to use it as an acquisition currency. So if you look at the ADT acquisition, most of that purchase price was paid in preferred stock. And yes, the 10% dividend yield is a healthy yield. But if we can buy businesses at 3x and 4x EBITDA and use our preferred stock it's very, very accretive to the common stock. So the situation between our stock price and the intrinsic value isn't sustainable over the long term. We share your frustration. And all I can say is all options are on the table to maximize value for shareholders, including the one you mentioned.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Rick Coleman for any closing remarks.

Thank you, operator. Before concluding, I just want to note that we're always available to take your call and discuss any additional questions you might have. So please don't hesitate to contact us. We'll continue to share our story with existing and potential investors in the coming weeks and months. As always, we appreciate all of our shareholders and your continued feedback and support. Thank you.

Thank you for joining the Star Equity Holdings fourth quarter conference call. Today's call has been recorded and will be available on the Investors section of our website, www.starequity.com. The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.