of our tools and some new client wins in the geothermal and mining industries. Turning to the balance sheet, we ended the second quarter with $8.9 million in cash. That does include $2.1 million of restricted cash. And our working capital, excluding cash, was $21.5 million, which compares to $22.4 million at the end of the year. So we've made a little bit of progress on more efficient working capital management. We have continued to repurchase shares. We repurchased about $0.2 million in Q2, and we have $1.6 million remaining on our authorization of $3 million, which the board approved last September. We continue to believe our stock is undervalued, and we view share repurchases as a very attractive allocation of capital. Across the company, we remain focused on disciplined execution, cost management, and we are continuing to invest in growth initiatives that we believe will enhance our competitive position and drive improved financial performance over time. Now I'd like to turn it over to Jake to discuss our business services division.

Thank you, Jeff, and good morning. As Jeff mentioned, our business services division delivered solid performance in the second quarter, with revenue up modestly year-over-year despite continued macroeconomic uncertainty and sustained pressure in the professional talent market. As shown on slide 11, second quarter 2026, business services revenue was $36.4 million, up 2% from $35.5 million in the prior year quarter, while gross profit was $17.8 million, down 4% from $18.6 million a year ago. Adjusted EBITDA for the division was $1.6 million, compared to $2.2 million in the prior year quarter. That decline largely reflects deliberate growth investments in the second quarter, as we invested $1.5 million within our digital solution, Hudson Fusion, entering into new geographies and also related initiatives, compared to $0.8 million in the second quarter of 2025. Regionally, as shown in slide 13, the Americas performed well with gross profit growth of approximately 10%, while the EMEA and the Asia-Pac region's gross profit declined 10 and 13% respectively, reflecting more challenging conditions in those markets. Asia-Pacific remained our largest region at 62% of the divisional revenue and 43% of the gross profit in the quarter, with the Americas contributing 39% of the gross profit and EMEA at 18%. We have maintained a strong focus on innovation and operational efficiencies, including the expanded development of our agentic AI and automation tools to enhance recruited productivity, improve our candidate matching, and deliver greater value to our clients. These initiatives help limit the year-over-year gross profit decline to less than 5%, despite mixed regional backdrop. We believe our continued focus on technology-enabled delivery and deep client relationships position us to capitalize on the improving market conditions over time. Turning to slide 12 on a rolling fourth quarter basis, RPO new business total contract value was $122.5 million, comprised of $8.3 million in new logo wins and $114.2 million in renewals and expansions with our existing clients. The trailing 12-month gross profit of $72 million has been relatively stable over the past four quarters, while our trailing 12-month adjusted EBITDA margin was 5.4%, down from 7.9% a year ago, again, reflecting the growth investments I mentioned earlier. Importantly, we've seen an uptick in new customer conversations and robust new local interest in recent months, supported by enhancements in our geographical footprint and digital offerings. We continue to execute our land and expand playbooks, including leveraging our recent acquisition with ACG in the Japanese market. Looking ahead, we continue to take a disciplined approach and execute our playbook for the remainder of the year, with a focus on creating a more resilient, agile, and growth-oriented business over the longer term. Now, I'll turn the call over to Rick, who will discuss the financial and operational performance of our building solutions and our energy services division.

Rick?

Thank you, Jake, and good morning, everyone. I'll start with an overview of our building solutions division highlighted on slide nine. As Jeff mentioned earlier, second quarter performance was below our expectations as both residential and commercial construction markets remain challenging. Our results were further impacted by project timing and revenue recognition as one large project that was largely constructed in the second quarter will be completed and recognized in the third quarter. Second quarter building solutions revenue was $14.6 million, gross profit was $3.2 million, and adjusted EBITDA was a half a million. On a pro forma basis for the second quarter of 2025, building solutions revenue was $20.4 million, gross profit was $5.2 million, and adjusted EBITDA was $2.3 million. As shown on slide 10, quarter-end backlog for building solutions was $10.6 million, up from $8 million at the end of the first quarter, and our trailing 12-month book-to-build ratio was 0.77, up from 0.72 last quarter. New orders in the quarter were 17.3 million, our highest quarterly order intake since the second quarter of 2025. While these metrics still reflect market softness, we continued to add attractive work to the backlog, including the previously announced $4.2 million multifamily housing project in New Hampshire serving the senior community. We've also gained traction in the workforce, affordable and assisted living and senior housing markets, and expect these sectors to be significant business drivers as market conditions improve. Consistent with the strategy we've outlined previously, we remain focused on disciplined project selection, operational execution, and margin management, which we believe will position the business for stronger performance as market conditions improve. Turning to slide 14, the Energy Services Division delivered another strong quarter, continuing the momentum we highlighted earlier this year. Second quarter 2026 Energy Services revenue was $3.9 million, up 19 percent. Gross profit was $1.9 million, up 75 percent, and adjusted EBITDA was $1.2 million, up 126 percent. On a pro forma basis, second quarter 2025 energy services revenue was $3.3 million, gross profit was $1.1 million, and adjusted EBITDA was a half a million. The business continues to gain share in core markets with especially strong performance in mining and geothermal applications. These results reflect disciplined execution and the benefits of our diversified exposure across drilling applications. which continues to differentiate the platform and support consistent growth. We continue to invest in new tools to support this growth while working closely with our largest customers to align our investment decisions with their specific needs. We see significant opportunities to continue expanding our presence and capabilities in the geographies and markets we serve. I'll turn the call back over to Jeff now for closing remarks.

Thank you, Rick. Eric, I'd like to transition now and talk a little bit about the merger with Hart-Hanks that we announced this morning. Last night, late last night, we signed a merger agreement to merge with Hart-Hanks. The acquisition will be for $5 per share, and on a fully diluted share count, that implies that the acquisition will be about $38 million, and we will pay for this acquisition half in cash, half in preferred stock. So one way to think about it is out of the $5 in consideration, $250 of that will be in cash, and $250 of it will be in Star's preferred stock, so 0.25 shares of our preferred for every one share of Hart Hanks. In terms of where will the cash come from, I would point you to the cash we have on our balance sheet, the cash that Hart Hanks has on his balance sheet, and importantly, Hart Hanks has a $25 million revolver in place with a well-known financial institution that we also have a relationship with. And those three sources will be how we fund this acquisition. So we don't believe we'll need to raise any external capital in order to close this deal. Also, importantly, in keeping with our thought that our stock is undervalued, we're not using any common shares as part of this transaction, and our plan is to continue buying back shares. So going back to how the merger is structured, the Hart-Hanks shareholders will have a right of election. So those shareholders who choose to get all preferred stock can make that election. Shareholders who choose to get all cash, they would get $5 in cash. That is subject to proration. It has a cap where 50% of the consideration is cash, and that's capped at $19.2 million. So that's a maximum cash outlay. But the preferred is uncapped. So in other words, if, say, 60% of the shareholders wanted to get preferred stock, they would get preferred stock, and the cash percentage of the total would go down to 40%. Any questions on that, feel free to give us a call. So both boards have approved this transaction. It does include a 30-day go-shop period where Hart Hanks is allowed to receive any other offers that might be out there. After that period ends, we'll file an S-4, and that's got to be approved by the SEC. And then after that's approved, we will start soliciting votes from Hart-Hanks' shareholders. We don't need any vote from the star side. So no vote is required by our common shareholders, and no vote is required by our preferred stockholders. So those are the hurdles that we need to get to in order to get to a closed deal. Our best guess is that the deal is going to close in the fourth quarter sometime. So the way we're thinking about it is by year end, we think we'll have a closed deal. And it would be great if it was earlier than that. It's possible it could be later than that. But our best guess is before the end of the year. And then when we think about the company on a combined basis, Hart Hanks' businesses are all in the category of business process outsourcing. Our business services division, which holds our Hudson business, is also, in a way, business process outsourcing. Our business is focused on the talent and HR segments, while theirs is focused on customer care, revenue solutions, and fulfillment logistics. Importantly, we both serve Fortune 500 clients, and so we think this business makes a lot of sense inside of STAR. there's definitely cost synergies that we we believe we will realize we're we're estimating initially that we will be able to get to 10 million of cost savings and so combining these two companies we we think revenue will be around 400 million and the adjusted EBITDA this is a pro forma number including 10 million of cost energies, we think that'll be approximately 30 million once those cost energies are achieved. And so we're very excited about it. We think this is accretive on any metric, accretive to our shareholders, and we look forward to getting to a closed deal and being one company. So with that, operator, why don't we open it up for questions?

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question today is from Joe Gomez with Noble Capital. Please go ahead.

Good morning, gentlemen. Thanks for taking my questions. So, Jeff, I wanted to start off. You talked on the business solutions. It was kind of a disappointing quarter. It was below your expectations. What were your expectations for that business for the quarter in terms of revenue and, you know, Jesse Dibadah?

Yeah. Yeah. What I would point you to, Joe, is slide 12 of our earnings deck. We've done a very good job maintaining what we have. So we had quite a few significant contracts that have come up for renewal in the last 12 months. So, we've done a good job getting those contracts renewed and, in some cases, expanded. What has been disappointing, you know, way below our expectations is the new logo side. So, if we look at, let's just take a year to date, you know, new logo, $2.1 million, that's annual contract value. our expectation for the year is much much higher than that and our expectation for the first half is higher than that I guess the best thing we could say about that is it's not like there's a lot of new business to win and we're losing it to competitors it's it's really just a symptom of continuing to be in the low hire, low fire, and I would even add low attrition environment, and we're particularly seeing that in professional-oriented companies, white-collar type of companies. They're very slow to make decisions. There's a tremendous amount of uncertainty out there with everything going on in the world, and then add on top of that AI. That is the number one thing our clients want to talk about is, how is AI going to change our business? How is it going to change our talent management? How is it going to change our talent acquisition? And it's just creating an environment where they're very frozen. There's still new business to win out there. It just keeps getting pushed to the right. And then when we do win something and it starts, it than it otherwise would.

Okay. Actually, Jeff, my question is on building solutions, not the business service.

Oh, I'm sorry. I thought we were talking about business services.

I appreciate the insight into that also.

Yeah. Yeah. On building solutions, you know, if you look at our backlog slide, this is on slide 10, you know, we really want to see new orders of $20 million a quarter, and we want to see revenue of $20 million a quarter. That's what we view to be a normal run rate, a mid-cycle run rate, if you will. We have lower-than-normal capacity utilization at our factories. Probably the best thing we could say there is that new orders of $17 million in Q2 were the highest number, highest quarterly number we've seen in a year. But we went through four quarters where the new orders were below $20 million. They continue to be below $20 million. So our backlog is low. And I would just describe, just zooming out a minute, I would describe the environment and real estate construction are very local markets. We're in two markets, as you know, the Northeast and the upper Midwest. Those markets in general are lower growth than some other parts of the country. I'd also add there's less competition there. People aren't itching to enter those as markets. But single family is weak. There's a lot of press about that. Commercial multifamily, I would say, is very weak. and where we have traction is in more of the specialty areas like anything to do with workforce housing, affordable housing. There's some healthcare and education-oriented housing and then assisted living, senior housing. There are projects to win and when I look at what we've won year to date, the biggest project was a senior living project in New Hampshire and then the projects in our backlog You know, it's not with the traditional commercial builders of multifamily and single family. A lot of things in our backlog are in that theme of affordable housing, workforce housing, senior housing. So it's just a weak environment. We're managing through it. But when you ask, you know, what do we view a normal run rate to be? I would say it's $20 million in revenue a quarter. 25% gross profit margin. And over time, we think an adjusted EBITDA margin should be 10% to 15%. So that implies $8 to $12 million of EBITDA for a year, which is two plus per quarter. And we've been running below that.

Okay. Thanks for that. And then one more for me, if I may. Okay, so congrats on the announcement of the acquisition of Hart-Hanks. But two things on that. If I took a quick look at Hart-Hanks and I see they've been shedding revenue over the past five years, adjusted EBITDA, they've been shedding. I think it's $6 million trailing 12 months roughly adjusted EBITDA. and if I take your equity value and add in, you know, their debt, it's about 10 times multiple there. You know, so I guess the big point is, you know, how do you see yourself bending that curve that's been going on for a while at Hart Hanks where they've been, you know, shedding revenue and adjusted EBITDA, number one, and number two, what does this impact, if anything at all, the, you know, the G group investment that you had made and offer you had made for them?

Yeah, a lot of questions in there, Joe. So when we look at Hart Hanks, we strongly think that the investment community should look at things on an apples to Apple's basis. So when we look at their balance sheet, we don't see any debt. If you look at the Q1, for example, they had four to five million of cash, I believe, nothing drawn on their revolver. Yes, there's some leases and yes, there's some pension, but that EBITDA number you cited is after lease expense and after pension expense. And that's the way we look at it. So if you're looking at an EBITDA number that's after lease, after pension, I think you should take leases and pension out of the liability stack. And when you look at it that way, you take the EBITDA number, you cite it, add 10 million to it. I think you're getting into the mid-teens in terms of the pro forma EBITDA, and we're buying it for less than 40 million. You know, we think that's a pretty attractive multiple. That's less than three times EV to EBITDA on our math. Your question, the first part of your question is the most important question. What will we do with this business once it's inside a star? And any acquisition, in our opinion, this is true for any acquisition. You have to buy it right. If you overpay, that's something that lives with you forever. So we have a lot of value discipline around that. We think we're getting Hart Hanks for an attractive multiple. But it only makes sense if we're able to do something with it after it's inside Star. and initially focusing on the cost energies is going to be the main focus but we do have aspirations to invest in it and grow it and we see them making some progress on that topic Joe I would kind of point you to their announcement in October where they put out news talking about winning Samsung you know great logo uh that's a that's a company they used to do business with that they won back uh that's a significant new business win that is uh ramping up and so um our our goal will be to uh stem those declines stabilize it and ultimately grow it and then with respect to and then with respect to g group I would just say stay tuned on that you know they we did make them a proposal they've hired an investment banking firm to explore strategic alternatives and that process is underway and when there's something to

announce there's there's something there'll be something to announce in I appreciate the insight yes I'll get back in queue thanks thanks Joe next question please the next question is from Theodore O'Neill with Litchfield Hills Research please go ahead hey thanks very much I was I'm struck by how well energy services is doing and Rick I wonder if you could talk about you know it's up year over year but it's also up sequentially

can you give us some more detail on what's going on there go ahead Rick and I'll I may add to it after you're done All right.

Thanks, Theo. Happy to address that question. We're very pleased with the way the business is going. One aspect of it is that historically, as the previous owners had approached retirement and had known they were going to sell the business, not surprisingly, they held back on capital investments. So with their retirement and a new younger group of leadership in the company, we saw what the opportunities could be for a relatively small company in the oil fields and elsewhere. And they were unable to fulfill customer requests simply because they didn't have the tools available in inventory to deliver for rental. So we've done a good deal this year in investing in those tools, and it's paid off. It's really helped us be able to deliver a full complement of what our customers require. So there have been a number of opportunities in some very, very large drillers that we've been able to satisfy, and that's showing up in the bottom line.

And does that show up in CapEx?

Yes, it shows up in CapEx. And so since we bought it a year ago, we have increased CapEx. That's a temporary increase. Interestingly, we're seeing the benefits of that. And what we see going forward is lower CapEx. Those were one time in nature. So we'll go back down to more maintenance levels of CapEx, which I would estimate to be around a million a year. we've been spending probably twice that. And we'll see the growth. We're just starting to see the growth from those investments. And I think the team on the ground has done a really good job. If you think about Q2, that was way too early to see any benefit from increased activity in the traditional energy sector, which is the original part of the business. They have excellent traction in some of these other segments that they've branched out into we highlighted geothermal mining but there's also improvement in water wells and they they've gotten involved with some drilling for things that are in the industrial gases category so things like hydrogen helium carbon capture. And if there's one thing I would point the investment community to, take a look at a company called Fervo. It went public earlier this year. They have a corporate presentation. It's out there in the public domain. Just look at the projects that they're planning to do between now and the end of the decade. It's a lot of projects.

And that's your opportunity set as well.

Exactly.

And how do you spell that company's name?

F-E-R-V-O.

Thanks very much.

Our pleasure.

The next question is from Michael Matheson with Sidoti & Company. Please go ahead.

Good morning, and congratulations on the merger.

Thank you. It's not done yet. We've signed the agreement. We're a long way from getting to a closed deal, but our plan is to get there. um so plunging into some of the details of the acquisition um how long of time do you think it would take for the 10 million in synergies to be realized is that six months or a year what's your feeling about that we that's a it's a great question um it's hard to answer that with precision until we get deeper into it and closer to closing, and hopefully we'll be able to give more color on that. But the way we're thinking about it is in phases. So phase one is eliminating anything that's duplicative, and this is going to be true for any two public companies that merge together. You know, on day one, you don't need two audits. You don't need two boards. You don't need two sets of D&O policies, all sorts of fees and expenses with being a public company. So that's phase one, and so those get eliminated very quickly, let's just say, in the first quarter. Phase two, which will also get implemented fairly quickly, is on the corporate team. If we look at the areas of finance, accounting, IT, we have our teams in place. They have their teams in place. You just don't need two of everything. Um, and then over time, uh, there, there could be additional cost synergies from, um, just running the businesses, um, more efficiently inside of the star umbrella than having, um, than, than having the current structure. And I would point you to, Michael, I would point you to their financial statements. And they have an adjusted EBITDA table, and they kind of highlight, they show in there the corporate costs. And that's where a lot of the merger synergies are going to be realized. But I would hope, similar to the Star-Hudson merger we just completed about a year ago, A year in, we will have fully realized the $10 million.

That seems like a reasonable time frame. I just wanted to get your views on it. Second question. As was said earlier, this set of businesses has seen declining revenue. But when I took a look at it, I noticed that the revenue declines are quite concentrated in one of their segments, one called Revenue Solutions, down 30% year over year. Could you talk a little bit about what that segment does and, you know, how you would manage it differently to put it back on a revenue growth track?

Sure. So this business does a lot of marketing services. There's some data and analytics that they do. It's an outsourced service, so you can ask Hart Hanks questions about that. Our perception is that it's due to a variety of things, some clients deciding to insource instead of outsource. and this is an area where things are changing really rapidly due to AI and kind of all things digital and when I think about what we're doing on the Hudson side, we've launched a digital initiative. We brought in a very talented person, Steph Edwards, from a bigger company and she is head of our digital division. And we're staying ahead of the curve. And there's a lot of businesses out there that are going to change because of everything going on in the world. And there's going to be winners and losers. And we are determined to be a winner. So we've already incorporated digital into our service offering. Clients on the Hudson side are adopting it at different speeds. And our plan is to look at all the Hart Hanks businesses and do something similar that's already underway at Hart Hanks. We're just going to work with them and enhance and accelerate what they're doing.

Great. Thank you. I just had one more question, and it goes back to the Hudson side of the business. So maybe, Jake, it's a question for you. If you could just kind Kind of give us some color on revenue trends going forward in each of the three regions, kind of strong or weak or flat.

Yeah, thank you for that. I'd say a couple of different things. As Jeff mentioned, if you look at our business and you look at the projection and the direction we're on, we've made a lot of significant strides. We've retooled our go-to-market strategy. We've invested heavily in our digital solutions. We've brought on additional geographies to better support our clients, which is all phenomenal. The renewals that we've been under and a lot of the renewals that we're seeing right now are non-competitive. So that just tells us and our business that we're servicing our clients. We're bringing new ideas. We're staying ahead of them both from a capability capacity but also from an overall support model. What we're seeing now and what we look at with the businesses and we look at where we're going to go, there is something to say about the buying habits of some of our clients. We've added a lot of great new logos this last quarter and this year in and of itself, but some of that business, that revenue is being slower to come to fruition. And what I mean by that is clients are a little bit hesitant on the number of hires or the investments that they're making, and with attrition still being relatively low, that's impacting some of the decisions. Specifically talking about your question, I do see the Americas being a significant growth opportunity for us. And when I say the Americas, I mean both North and South America. You know, I think EMEA as a whole will be, you know, with all of the geopolitical and issues going on in the region, will still be, I would say, medium to soft. And in APAC, we'll still see some spikes in certain countries, specifically, as I mentioned in the earnings call, you know, around our acquisition in Japan and growing that geography. You know, we have strong hopes to be able to continue to land and expand in our clients there. But if I look at the back half of the year and thinking about, you know, the direction we're going to continue to focus on is, one, you know, expanding out our footprint and land and expanding new geographies with our clients and our prospective clients. to ensuring that those new logo clients that we have won and those clients that we are speaking with currently today, we're quicker to help them support and stand up that support model so, one, we can provide that service to our clients but also drive revenue growth for Hudson Talent Solutions.

Well, great. Thank you. That concludes my questions. Good luck in the current quarter and good luck in the rest of the year.

Thanks, Michael.

Again, if you have a question, please press star, then 1. Please stand by as we poll for questions. That concludes today's question and answer session. I will now turn the call over to Jeff Eberwine for closing remarks.

Well, thank you for the questions, and thank you for your interest, everybody. We are here and available. Our contact information is in the press release and in the earnings slide deck. We're excited about what we're doing. I would say morale and enthusiasm is really high at our company and at our operating subsidiaries, and we believe that will translate into improved financial performance over time. So even though we have some areas of softness and some areas that are below our expectations, we're working through it, and we're excited about the potential acquisition of Hart Hanks and some other opportunities that we're looking at. So look forward to showing you what we can do in the future.

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