Star Equity Holdings Inc Stock

Greetings, ladies and gentlemen. Thank you for standing by, and welcome to the Star Equity Holdings Third Quarter 2025 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, 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 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 their most recent comparable GAAP financial measures in our earnings release issued this morning. If you do 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, Ms. 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 via www.starequity.com. Shortly after the call, a replay will also be available in the company's website.

It is now my pleasure to introduce Mr. Jeff Eberwein, Chief Executive Officer of Star Equity. Please go ahead, sir.

Thank you, operator, and welcome, everyone. We greatly appreciate your interest in Star Equity Holdings and thank you for joining us today. As a reminder, on August 22, 2025, the company completed its previously announced acquisition of Star Operating Companies formerly known as Star Equity Holdings, pursuant to the agreement dated May 21. Effective September 5, the company changed its name to Star Equity Holdings from Hudson Global and our trading symbols on NASDAQ from HSON to STRR.

Following the merger, we are now operating as a diversified holding company with 4 divisions: Building Solutions, Business Services, Energy Services and Investments. I'll begin by reviewing our third quarter results for 2025 at the holding company level. After that, Jake Zabkowicz, Global CEO of Hudson Talent Solutions will give us an update on the performance of our Business Services segment. Finally, Rick Coleman, our Chief Operating Officer, will provide additional insights into the performance of our Building Solutions and Energy Services segments.

Third quarter results reflect the impact of our recent merger with revenue, gross profit and adjusted EBITDA all showing year-over-year growth. These increases were largely driven by the inclusion of Star Operating Companies beginning August 22. For the third quarter of 2025, revenue totaled $48 million, representing a 30% increase from the same quarter in 2024. Gross profit rose 11%. The company reported a net loss of $1.8 million or $0.54 per share compared to a net loss of $800,000 or $0.28 per diluted share in the third quarter of last year.

On a non-GAAP basis, adjusted net income per share was $0.02 compared to an adjusted net loss of $0.13 per share in the prior year quarter. Importantly, on a pro forma basis, which includes the full third quarter's results from Star Operating Companies, adjusted earnings per share were positive $0.19 versus negative $0.54 in the third quarter a year ago. Adjusted EBITDA increased to $1.3 million from $800,000 in the third quarter of last year, reflecting improved operating leverage following the merger. Pro forma adjusted EBITDA was $3.1 million versus $600,000 in the third quarter of last year. Total cash, including restricted cash, was $18.5 million at the end of the quarter.

I'll now turn the call over to Jake to discuss our Business Services segment.

Thank you, Jeff, and good morning. Our Business Services segment continued to demonstrate solid performance in the third quarter despite the challenging macroeconomic environment impacting many industries. While the broader count acquisition market has contracted in 2025 compared to 2024, our HTS business has been able to maintain its profitability and even saw a slight increase in gross profit for both the third quarter and year-to-date. This resilience highlights the robustness of our business model, our ability to adapt to market shifts and the strength of our long-standing client relationships, which continues to drive repeat business and steady demand for our services.

I'm particularly proud to [ recognize ] our team has received in the marketplace. HTS was named to the prestigious Baker's Dozen for the 17th consecutive year, a testament to our consistent delivery of high-quality talent acquisition solutions. What's even more notable is that we achieved our highest ever overall ranking reflecting the strength of our service offering and our commitment to excellence. Additionally, HTS is recognized as the #1 provider in the Asia Pac region, further underscoring our global reach and our trust that our clients place in us.

For the third quarter of 2025, Business Services revenue was $37 million, slightly up from $36.9 million the same period last year. Gross profit remained flat at $18.6 million compared to the prior year quarter, again, speaking to the quality of our operations despite external challenges. Adjusted EBITDA for the segment was also flat at $1.7 million. This performance reflects our ability to effectively manage costs, sustain margins while continuing to deliver value to our clients in a difficult market environment. Building on our momentum in the first half of the year, the third quarter, we continue to execute our land-and-expand strategy. This strategy will emphasize is expanding our geographical footprint and broadening our service offerings to both existing and prospective clients has proven to be highly effective. As a result, we secured approximately $39.8 million in gross profit from renewals and extensions at existing clients, reflecting the strong relationships we have cultivated by our ability to deliver ongoing value. Additionally, we have secured approximately $11.1 million from new logo wins over the past 4 quarters.

Looking ahead, we're focused on creating a more resilient, agile and growth-oriented business for the long term. By continuing to invest in new technology such as our digital offering, we are confident in our ability to drive sustainable growth and create lasting value for our clients and stakeholders. Our commitment to execution and operational excellence will continue to guide us as we seize new opportunities and expand our market leadership.

Now I'll turn the call over to Rick, who will discuss the financial and operational performance of our Building Solutions and Energy Services segments.

Thank you, Jake, and good morning, everyone. Our Building Solutions segment delivered strong growth during the third quarter, capitalizing on the rebound in commercial construction demand while managing through softness in residential markets. .

In the third quarter, Building Solutions revenue totaled $9.6 million with a gross profit of $1.7 million and adjusted EBITDA of $600,000. On a pro forma basis, which includes results for the entire third quarter beginning July 1, Building Solutions revenue was $21.4 million, up from $13.7 million in the third quarter of 2024. Pro forma gross profit rose to $5.3 million compared to $2.8 million in the prior year quarter, while pro forma adjusted EBITDA grew substantially to $2.6 million from $700,000 a year ago.

The segment ended the quarter with a $20 million backlog of committed orders and the trailing 12-month book-to-bill ratio remains solid at 1.01x, reflecting a healthy pipeline and sales dynamics heading into 2026. By focusing on higher-margin projects and ensuring rigorous project management, we've been able to maintain healthy profit margins and strengthen our existing client relationships. Our reputation for high quality, on time and within budget deliveries is key to our continued success and positions us well to expand our footprint across key markets.

Our Energy Services segment also achieved strong results despite a broader slowdown across the energy sector impacted by lower drilling rig counts in all oil-producing basins, but offset somewhat by growth in natural gas and geothermal drilling activity. As a smaller company in the drilling arena, we believe our growth opportunities are outsized versus our larger competitors and expect to drive future growth through strong sales execution, disciplined operations and targeted capital investments. These initiatives have not only improved sales and utilization rates but have also enhanced customer satisfaction and strengthened our overall market position.

In the third quarter of 2025, Energy Services revenue was $1.3 million with gross profit of $300,000 and adjusted EBITDA of $100,000. On a pro forma basis, which includes results for the entire third quarter beginning July 1, revenue increased to $3.7 million. Gross profit reached $1.5 million and pro forma adjusted EBITDA rose to $1 million, underscoring the segment's strong overall performance.

I'll now turn the call back over to Jeff for closing remarks. Jeff?

Thank you, Rick. Following our recent merger, we're operating from a much stronger and more diversified platform, which has significantly enhanced our scale expanded our exposure to a broader range of end markets and improved our operating leverage. The integration has been progressing smoothly, and we are already beginning to realize efficiencies across shared services. This will continue to improve our cost structure and streamline operations as we fully integrate the businesses.

Across all our operating segments, we remain highly focused on operational excellence, ensuring we optimize every facet of our business for improved performance. At the same time, we're committed to prudent capital allocation and a disciplined approach to growth which will allow us to maximize shareholder returns while maintaining financial discipline.

In line with this strategy, we believe our stock price remains undervalued. In recognition of this belief, during the third quarter, we repurchased about 8% of our shares outstanding demonstrating our confidence in the intrinsic value of the company and our commitment to enhancing value per share. Furthermore, our Board of Directors has authorized a new $3 million share repurchase program which underscores their confidence in the long-term growth prospects of the company.

Looking ahead, we are well positioned to drive shareholder value through a balanced strategy that combines organic growth, disciplined capital allocation and accretive acquisitions. As part of this strategy, we continue to evaluate acquisition opportunities that complement our diversified holding company model. Our focus remains on identifying scalable cash-generating businesses that align with our long-term growth objectives, particularly those businesses with strong local operating management teams and sustainable competitive advantages. By executing this strategy, we believe will strengthen Star Equity's foundation for sustained, profitable expansion to deliver meaningful value to our shareholders.

Operator, can you please open the line for questions.

[Operator Instructions] And our first question for today will come from Theodore O'Neill with Litchfield Hills Research.

For Rick, on the third quarter on a pro forma basis, that looks like a record for the quarter, at least in my book here.

Yes. Thanks, Theo. I appreciate you noticing that. We're enjoying the throughput from a lot of projects in the Building Solutions division that were held up in 2024. I think we talked about that in prior calls. But throughout the year, we didn't have jobs being canceled but they just weren't making it through the pipeline as builders and architects and others, were kind of daunted , I guess, by interest rates and other things. So we kept pushing jobs to the right further out in time, and they finally started coming through.

And looking at seasonal patterns here in the last couple of years, your fourth quarter has been higher than your third quarter. Do you think that seasonal trend will continue?

It's really hard to say, Theo. The fourth quarter is really dependent on a lot of weather patterns. If we have difficulties in Building Solutions, for example, with builders not having the sites ready for us to build on, then there could be delays. But as long as the weather holds, we're optimistic.

And when you talk about softness, I know that part of what you had cited the strength was workplace housing and in low-income housing. Is that still -- is that still the view?

Yes. It is an important aspect of what we're doing. Our strategy is more diversified than that but those are still good opportunities for us. They might be impacted somewhat by government programs shrinking over time but we expect that will come back.

Next question will come from Michael Mathison with Sidoti & Company.

Congratulations on the revenue performance, you guys. Just a couple of questions from me. First of all, looking at Business Services and going through your slide deck, it looks like the adjusted net revenue as a percentage of sales is much higher in the Americas versus APAC, I wondered if you could just explain what's behind that.

Yes, Jake, do you want to walk him through that?

Yes. And I'm sorry, can you repeat that question? I apologize.

No problem. It just -- it looks from your slide deck, like the adjusted net revenue as a percentage of sales is higher in Americas versus APAC? And I'm just wondering, why?

Yes. We saw some significant growth in our Americas business this last quarter through our land and expand strategy, and that has driven the uptick for us. And we're really excited to see that as we also launch our digital product, as I mentioned last quarter, and we are seeing the clients really gravitate towards that as Agentic AI takes over -- not takes over, it added enhanced value to our clients and our partnerships.

Michael, this is Jeff. So if we compare that business by region, like if you were to look at some of the old Hudson results, you'll see this in our 10-Q when it's filed that there's really 2 different businesses there. There's the RPO business and in the RPO business, adjusted net revenue or gross profit equals revenue. So there's no cost of sales. All the costs are down in SG&A.

In the contracting business, which is about half the revenue all of the contractors show up as cost of sales which causes us to have a really low adjusted net revenue and makes the margin percentage really, really low. So that's why we always focus people on adjusted net revenue or gross profit as the real revenue because that kind of ignores that pass-through effect. So contracting is -- our contracting business is heaviest by far in Australia. We -- and Asia Pac, we do very little of it in the Americas. So said another way, RPO as a percentage of revenue is much higher in the Americas than it is in the other geographic regions.

Terrific. I just wanted to confirm that it was the impact of contracting. Just as long as we're on the Hudson business, I think the one region we didn't speak of yet is Europe. How does that look?

Yes. Jake, do you want to talk about what's going on with Europe?

Yes. Europe, we are definitely going through a transformation. And the transformation is looking at not only our land and expand strategy, but also geographies that we're entering into. So the Middle East, as I mentioned a couple of quarters ago, we entered the Middle East last year, and we're starting to see signs of that business continue to pick up Europe is our smallest region. When you look at and you compare Europe to the U.S. or the Americas and also to APAC, one of the things, though, that we are looking in Europe is the overall macroeconomic impact that's happening in that region.

We did see a downturn in the European market for us this last year. We had a couple of our clients take some of their business in-house, which has impacted revenue. But at the same time, our land and expansion strategy is picking up in some other geographies in that region as well. So Europe is going to continue to be a focus for us. But when you compare Europe versus our APAC or the Americas region, it is our smallest region so far to date.

Michael, I would add, we do have a new management team there that we're very excited about, and we're very optimistic about the Europe segment. Doing much better in next year than this year.

Okay. Just one last question from me. Looking at Building Solutions, revenue was significantly higher than I had expected. So again, congrats on that. The gross margin was a little less than I had forecast though. Is this gross margin sort of what we can expect going forward?

Yes. We -- we shoot for -- yes, we shoot for kind of mid-20s. And I think it's the best number used over the medium and long term. In any one quarter, it can be higher than that. It can be lower than that due to business mix and also the vagaries of construction accounting where on some of the big projects we recognize -- the simple way to think about it is that we recognize expenses more aggressively than we recognize revenue.

Sometimes the revenue recognition is delayed and if we've already recognized all the expenses that very last piece of revenue that we recognize after we finish the punch list, for example, on a big project can be at 100% margin effectively because we've already recognized all the expenses. So quarter-to-quarter, it can be a little lumpy, and I wouldn't read too much into it. I think mid-20s on a trend line basis, rolling 4 quarter basis is what we expect.

Terrific. Congrats on the quarter and good luck next quarter.

[Operator Instructions] Our next question will come from David Sigrid, investor.

So just a number of questions. First, regarding Building Solutions. I noticed KBS on September 1, they completed that 10,000 square foot project in Nantucket. Are there more contracts like that in the pipeline?

This is Jeff. I'll take that. There are -- I'll just answer it in 2 ways. We -- on our slides, if you look at Slide 9, we do show our backlog. And the backlog did start to improve about a year ago as some of those larger projects that Rick was talking about that were on hold or frozen got unfrozen. So we have had a string of projects that we've announced, some of which we've completed, some of which are still in our backlog. And then in terms of our sales pipeline, we continue to have a lot of those opportunities. So we're trying to win them and get them started. But we do have more projects like that one that are -- that will happen in the future.

Okay. Good to hear. I noticed you've indicated that you're looking for bolt-ons. Would you be looking for bolt-ons in the region or outside the region because you do have that facility in Oxford, Maine, that's empty would you fill capacity?

Yes. Good memory. So I think the short answer to that is kind of, D, all of the above. Our highest priority is to add more size to our existing businesses. We feel like we have some good operating management teams across all of our businesses. And so we would like to give them more to manage. And so that could be an acquisition in their geographic region.

Yes, you're right, we do have an idle factory in Maine, and we constantly explore different ways to reopen that and have more growth. And then the bar is a little bit higher for what we would call adjacent acquisition where, let's say, a business we're in, so we know the business well, but it's in a new geography. We do look at those, but I'd say that's priority #2, after adding to what we have in an existing geography.

Okay. Question on the public investments that you have. I think is most of that in Gyrodyne? Do you have like 150,000 shares? What do you see a catalyst to get to monetize that investment?

Yes. So yes, all that is public, our holdings in Gyrodyne. So they are -- they -- if you look at their public filings, they are in the process of liquidating. They have a long history of selling the remaining real estate assets and dividend being out those proceeds. And it's very cheap on NAV. I think just based on their publicly stated NAV, it's got 50%, 60% return to stated NAV, and their plan for their public documents is to liquidate their remaining real estate holdings and distribute that out as cash and wind down the entity by the end of, I believe, it's 2027.

Okay. All right. Good. And then, let's see, so regarding Hudson, I noticed that they moved to a larger office in Edinburgh this past quarter. What was behind that change move?

Very good question. I'll let Jake answer that one. He was there for the grand opening of that new location. Go ahead, Jake.

Yes, David, as you know, Edinburgh is a hub for us for a European market and actually it also supports many of our clients across the globe. One thing that we like about Edinburgh is the talent there is very dynamic. You get language capabilities. You get a great cost basis and it's a great culture to be a part of, right? So what we did is, over the last year, we really looked at our footprint. And we did this in Tampa, where we actually moved from a previously shared office space into into our own office space that we lease. And we did the same principle in Edinburgh this last time around.

And so we were in the shared space, we had shared common area and it wasn't really conducive to the company that we turned into it being Hudson Talent Solutions. So the team has found a unique office space right off of Princes Street in Edinburgh, great location. It's going to allow us to drive the talent that we need to bring into the -- to our clients. But also it's going to allow us to spot in place and we're proud to bring our clients and our potential clients in to see not only the culture, but the quality of team members that we have. So really excited, we just did a ribbon cutting, Edinburgh's a beautiful area to visit and like I said, great talent, great culture, and [ we're proud ] to be there.

Yes. Okay. Good. What about -- I noticed from Q3 last year, the new logo and expansions and renewals was up considerably from if you look at quarters. So what was behind that uptick?

David, great analysis. As I mentioned before, a couple of times our land and expand strategy is really working. And what I mean by that is, really looking at the clients that we service today. And how do we continue to support them in other geographies and other business lines and making sure we're having those conversations. So we're seeing a pretty significant tailwind with that and allowing us to build on to our existing client portfolio.

Not to mention adding the digital offering and our different solutions and our different products with boutique executive search as well, we are seeing clients gravitate more to that one talent solution. So all of that is allowing us to gain more market share with our clients, and provide a better level and a higher quality of level of service to them.

Got it. Okay. Now last quarter, I think Jeff had mentioned with the AI rollout, there was one company that was interested just in the AI offering. And then I was -- you're hoping that it would expand to other services that you offer. Is there any follow-up on that? Was there any expansion or any other success stories along the lines with the AI offering that you have?

Yes, David, we are actually -- we have some clients that now have -- let me take a step back, we've embedded our digital offering into our RPO solution, RPO suite, right? So whether it be TalentIQ, whether it be Hudson Flow or Hudson Core, every single one of our clients has a different demand and they're on a different journey. And sometimes that journey takes them to they want a full Agentic AI solution. Sometimes they know they don't want a full Agentic AI solution, they want pieces of the puzzle, right? And so we're able to offer that to them.

One thing that has been taking off is, as I just mentioned, our TalentIQ solution, which provides real-time market intelligence and market data to our clients so they can make better talent decisions. We have a couple of partners that are out of that now. So it's more than one now, and we're getting very good feedback. And the best part about that solution is it's a global solution, right? It's not just looking at the Americas or EMEA or APAC. Clients can come to us and say, we need to understand where is the best area to put an offshore finance facility or manufacturing facility for FMCG. We can help drive and help inform some of those decision-making capabilities with that.

Okay. Good. And then the goal...

Yes, this is Jeff. So I would encourage you to follow -- and all of our shareholders really follow the Hudson Talent Solutions website. They sometimes have news and announcements that you wouldn't see on Star's website or -- might not be a Star press release but they will have more to say about what they're doing on the digital side going forward. .

Got it. Okay. Question about the partnering with private equity or growth capital. If someone were interested at some point. How would that impact Star as a company? Would there be like -- would they have to buy equity in Hudson Talent or in Star Equity? Or -- I'm just trying to figure that out.

Yes. I'll take that. David, it's a great question. The short version is we don't know exactly what that's going to look like. But our first priority is to get back to the levels we were at in 2022. But this time around, do it with a more stable foundation. So if I go back to 2022, the Hudson business was about 70%, we would estimate what we would call enterprise RPO, and that's where it's with a Fortune 500 company.

This next time around, we'd like that to be a lot closer to 100%. So when we get back to those 2022 levels of, let's call it $100 million of gross profit and $20 million of EBITDA, we think it will be more sustainable and a stronger, more stable group of clients. So that's kind of point one.

And then if we think about everything going on with this business, with all of our clients asking about AI, how is AI going to affect talent procurement, talent assessment. We -- it's just hard to know where that's going to go. So like one of the things we've talked about is, let's say, there's some really interesting investments to make on that side, digital, AI, tech, you're not going to see Star invest tens and millions of dollars and something that isn't producing revenue, isn't producing immediate cash flow but it could make sense to partner with somebody who has that expertise, maybe even somebody that has other investments in digital AI type of companies.

So they bring expertise and capital and they would fund that investment. So there's just so many different ways that could go. I would just tell you to stay tuned. It's not something that's going to happen in the next few quarters but I'd put a high probability on something like that happening at some point in the future.

And I guess the short -- another way to say everything I'm saying is that we're transforming the business from being a very people-oriented business to one that is much more of a tech-enabled, tech plus expertise type of a business, and there could be people who could be very interesting to partner with when the time is right.

Yes. Good. I know there's value in that division because much larger company, Heidrick & Struggles just -- was bought out this past quarter with similar type services that are offered. What about the preferred shares? I know you utilize that as a tool for acquisitions. But is there a point where you see interest payments becoming unsustainable for the company to carry? I mean, you can't just offer preferred shares endlessly, correct?

Very good question. The way we think about that, if we're going to use preferred shares in an acquisition, the preferred shares, if you just think about it on a multiple basis, it's a 10x multiple. If you think about the par value being $10 a share and the annual dividend being $1 a share, so if we can acquire a business like we did earlier this year, that has a cash flow stream that is growing over time, and we can buy that cash flow -- that business and that cash flow stream at 3 or 4, 5x cash flow, then it's highly accretive to do that acquisition. So in other words, the cash flow from the acquisition should more than cover the dividends that we would issue in acquisition. .

Got it. Okay. One last question regarding the mutual funds that we're selling since the Star merger was announced, you took out 8% of the shares back in September. We're still in the $9 range. Jeff, you were buying at higher prices. Do you -- I know that you feel the company is still undervalued, but I still kind of sense like there's maybe an overhang, maybe there's still a seller out there. Do you think you could do another big block transaction take those shares out?

We're always open to that. We -- I think the most effective share repurchases we've done have been a negotiated transaction with a block seller that is, by far, the most efficient and effective in terms of how to buy back stock. So if there is an overhang, as you say, or remaining block out there and they want to sell to us, we will certainly entertain that. And as far as we know, there are no longer any holders, any institutional holders who are above 5%. So if there is a remaining seller out there and they do have a block for sale, it's going to be a block size that's less than 5%.

The next question will come from William Ken with Presidio Asset Management.

Jeff, so with the merger now closed, I guess, is there any update on the expected synergies that you plan to achieve?

Yes. Great question. We still believe that we'll deliver the $2 million in synergies and that target could be higher over time but that's the number that we're comfortable using. And where you're going to see that is in the corporate line. So if you look at the pro forma table in our press release, you'll see EBITDA from each 1 of our 4 business segments, and then you'll see a column for corporate. And in Q3, that total was $2.6 million for the quarter. That's a pro forma number. And so as we start to realize some of those synergies, you're going to see new corporate costs decline. And so our goal is to get that number down more to like $2 million a quarter or $8 million on an annualized run rate. So that's really where you're going to see the synergies show up if you're going to be tracking it quarter-to-quarter.

And do you think that's achievable in the near term? Or is that kind of a year out or what kind of timing are we looking at?

Yes. It's gradually -- it kind of comes in steps. We -- I'll put it this way. We have high confidence, we'll be at that run rate, I would say, at some point next year, so maybe 6 months from now, we should be at that run rate. So said another way, the $2 million of synergies should be fully realized, I would think, 6 months from now.

Great. A couple of more questions on the corporate side before going to the RPO. Could you just clarify for us what the quarter end share count looks like with the repurchase?

Yes. You'll see the number on the cover of our 10-Q. I think it's -- I think you'll see it's right at 3.4 million shares, maybe a little bit higher than that.

Great. Great. Okay. And then is it fair to say there was a little bit of debt pay down this quarter as well?

We have debt on 2 of our businesses, the Building Solutions and the Energy Services have debt at the sub level. And on Building Solutions, we have an acquisition loan that we took out when we acquired Timber Technologies and that loan is amortizing. So we're making principal payments on that every quarter. Same thing with the seller note there at Timber Technologies. So over time, everything else being equal, you'll see our debt decline as those 2 debt pieces decline.

Great. And then last one on the RPO business, I think you previously mentioned the '22 numbers and the kind of environment that we've -- the company has been in the last year or so with very low attrition where in the cycle do you think we are now?

We are balancing along the bottom. So we had a very painful decline from 2022 to say, a year ago. And so it seems to us that we've bottomed and have not seen a strong recovery. But we think it's coming partly because the attrition rates are abnormally low at the Fortune 500. So if you were to have -- if you had attrition statistics available at the Fortune 500, you would have seen it be abnormally high coming out of COVID. So starting in 2021 into 2022, at the beginning of 2023, so it was above normal.

And now we've had a period where it's been substantially below normal levels. Some people have called it the no hiring, no firing job environment. We are seeing the attrition rate start to return to a more normal level but it is a very gradual return to normal. So I hope that answers your question.

Right. Yes. So if we -- if the business got to a more normal environment, is that where you're getting the $100 million in gross profit, $20 million EBITDA number? Or is that -- are we looking at kind of back to peak type of attrition rate numbers?

No, I think getting back to that level would be mid-cycle, not peak. Just in the last 2 years since Jake joined to head up that division, we have -- we now have an offering in the Middle East we are -- have launched services in Latin America, and we did an acquisition in Japan. So those are 3 pretty significant geographic areas that we weren't in before. And so I guess the significance of the 2022 numbers and the reason why we bring those up is that $100 million of gross profit and $20 million of EBITDA is a 20% margin.

If you go back to, say, 2018, we were at a 10% margin. And something I've talked about quite a bit is that once we're at steady state, as we grow, we should have a 30% incremental margin. And so we view getting back to $100 million of gross profit and $20 million of EBITDA as kind of a mid-cycle normalized level, not at peak level with the business that we've built and what we have today with those 3 new geographic regions and with our digital offering.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Jeff Eberwein for any closing remarks. Please go ahead.

Well, thank you all for participating in our call and for listening in. We appreciate your interest in the company and really great questions and -- so appreciate those. And if you want to get in touch with us, the contact information is on our press release, and you can also look at our website starequity.com, and we'll be available to answer any questions you have. So reach out. Thanks again for your time today.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.