STRRP earnings call transcript, November 12, 2026

Good morning, Joe.

Yeah, Joe, great question. And one of the things that we talk about with a lot of our partners is, you know, what's the ROI that we're seeing as we continue to invest in further automation, agentic AI? And we're seeing a couple of different fronts. First and foremost, we're seeing a couple of different fronts. With some of the agents that we've had deployed within our partnerships, we're seeing a greater intake and uptick of client satisfaction. And what I mean by that is hiring manager satisfaction, candidate satisfaction, because our recruiters are allowed to be more consultative with both the hiring managers and candidates and spending more time on understanding their needs and wants versus sourcing and screening and going through. the normal processes with the recruitment team. Where we're seeing another uptick in ROI is on the coordination side, and when I mean by coordination side, it's interview scheduling, Q&A with candidates, allowing candidates to understand what the hiring manager are looking for, and so we're seeing a broad range of productivity, and it really depends on the client and their work. Workflow, but also to the region that we're supporting and how we're supporting them. It's hard to quantify in an exact percentage right now because the adoption is still undertaking, and it's actually workflow-driven and not specific to a broad function, but we're expecting further automation, further consistencies, and further ROI as adoption does happen, but when

we think about AI and we think about the adoption of AI, we're really workflow-driven in that regards versus a broad spectrum, so more to come, but one of the things with Hudson Fusion and our agentic AI strategy is to not only create that further automation and see efficiencies and recruiter productivity, but also bring that higher level of customer and client.

And Joe, I would add to this as Jeff, I would add to that, you know, we've had softer hiring conditions for, you know, three to four years now, and that's coincided with increasing use and interest in AI. And so we felt it necessary despite the. Market softness to step up our investment in our technology, our digital offering, as well as sales and marketing. And we believe in our business, there's going to be more and more of a separation over time between those service providers who are facile with digital and AI and ones that are less so. And in the HRO Today ranking. Which are all based on client surveys. We have risen in the rankings. A few years ago, we ranked ninth globally. And in the most recent rankings that came out, we've moved up to third. And we think that's the clearest indication that we're on the right track and that there is a benefit to the investments we're making. And we think that improvement in reputational capital. Will ultimately translate into market share gains, improvements in revenue growth, and profitability. And so it will ultimately translate into improved financial performance.

Thanks for that detailed answer.

And then switching over to building services, if you look at some of the commentary coming out of the National Association of Home Builders, they're talking, you know, elevated financing, construction costs will continue to constrain, you know, housing production in 2027. So how is that factoring into your demand assumptions for your budgeting for, you know, building service, building solutions for 2027? Yeah, that's a really good point, Joe. We do follow kind of the nationwide trends as well as the trends that are in our particular geographies. And we would describe single family as weak and commercial multifamily as very weak. And what we have done in our businesses is a few different things. One is we've really made a focus on. On the theme of affordable housing, workforce housing, like the project we announced this morning, and the areas of senior living, assisted living. And we had a project along that theme earlier this year. Those are markets that are where there's a strong need. We have a great solution. And they're a little bit independent of things like interest rates and macro. Economic factors is more driven by need. And when I think about, you know, there's a lot of statistics out there showing that we're underbuilt as a country. And it's unfortunate that, you know, construction costs are up and interest rates are higher because we need more units being built, not.

Not fewer, you know, as a country. And if there's one thing that would make an improvement, which is permitting reform, one of the reasons why this large project that we thought was going to happen in 2026 got shifted to 2027 is some permitting issues in an urban area. But, you know, we're I would say we're we're we're cautiously optimistic. We're focused on the thing. We can control and our new orders have improved the last two quarters versus where they were earlier in the year. So that's somewhat encouraging. We would like new orders to be 20 million a quarter, if not higher, and get our book to bill ratio up above one. And we would like this business to be generating 20 million of. revenue a quarter, and it's not there yet. So another thing I would say is that our sales teams have been spending more time on the road, making new relationships, educating people about the benefits of building in a factory. The construction market is a big market, and factory-built construction is a small share of the total. And we do. We do think that share will grow over time. And so, we do think that's a secular growth theme and a cyclical business.

Okay. Well, the short version is we're cautiously optimistic about things getting better. We'd like to see our new orders $20 million a quarter or higher, and we're doing a lot of things to get there. Okay.

Thanks, Zach.

Okay.

Thanks for that update.

I'll get back in queue. All right.

Thanks, Joe.

Really excited to see that growth this last quarter and hopefully into the next quarters. EMEA is still a hit and miss. EMEA, with the geopolitical issues, with the ongoing pressures in EMEA, we're seeing spotty results in certain areas. But we are tightening our strategy and our operational rigor in EMEA, and it is still a pinnacle of our delivery. But I do expect EMEA to be, you know, soft in the coming months, in the coming quarters, and obviously focus our investments in the other regions. Mike, I hope that answers your question, sir. Oh, it does. Thank you. Very informative, very thorough. Some other questions on the revenue side. You've spoken about building solutions and how you, you know, $17 million. Back to back quarters. That's great. But you're aiming for $20 million as kind of a target. Do you have a sense of how long the ramp to $20 million would take? Is that a year from now?

Yeah, this is Jeff, Michael.

That we experienced really Q4 last year and the first half of this year, but we do think our revenue has bottomed on a, say, like a trailing four quarter basis and is improving going forward. And just remind people that because we're in the upper Midwest and the Northeast, Q1 is always a very weak quarter for us. So I would encourage people to look at like a rolling four quarter average. Okay. All right. That makes sense. Refresh my memory on the KBS $2 million business for workforce housing in Nantucket. The timing of that, is that, refresh my memory on this, you can't do the construction until the summer people leave and then you can bring the stuff in. Is that the timing? That's right. And then you have the winter to deal with. So there's basically no deliveries, roughly Memorial Day to Labor Day is a good way to think about it. You know, that's peak season for them, you know, no deliveries. Yep. We are past that. And even though we just got the contract signed, we've already been producing the project and. It's similar to other projects we've done before. And the current schedule has us delivering it on site before the end of the year. Okay. Thanks. And on the business services side of the business, the year over year decline, is that structural across sort of your business and it's not a market share issue for you? Or is there some idiosyncratic? Part of this by a country or by the type of job you fill that's part of why it's down year over year?

Yeah, I would note a couple things there. So in our Hudson business, which makes up our business services, there's really two businesses in there. One is the true RPO. And the way the accounting works is that there's no cost of sales there, cost of revenue. All the costs are down in SG&A. And then contracting, which is a service we do for existing RPO clients. Most of the time, it's only a service we do for existing RPO clients. We did lose a client that's solely on the contracting side. It never converted into full RPO. And so that's about, I think, a 3% margin. And so we did have a revenue loss, but much less of a gross profit loss because of that one contracting client. So that's kind of one thing. And then you're right if you look at gross profit, which is, we think, a better metric to look at for fee income, which is a term that a lot of people in the industry use. We do have a different geographic mix than some of the peers. Our strongest area is, as Jake mentioned, is the Americas. We are growing from scratch in Latin America and starting to get traction there. Really good growth in our highest area of investment, which is the Americas. We think that will continue into next year. As Jake mentioned, we're more international than some of the peer group. We did have some softness in areas of Asia-Pac, and then in EMEA, the Middle East was much worse year-to-year, as you might expect, and continental Europe and the U.K. we would describe as the weak side of neutral.

So we really don't think we're losing share, if anything. We are gaining share, and if we're down and Q3 and a competitor happen to be up, I would say that's because of geographic mix, not because we're losing share. Okay. And then energy services, I sort of understand the machine shop acquisition is to try to support your broader geographic mix of customers, and if that's the case, is to try to support your broader geographic mix of customers, and if that's the case, is there a limit to the number of machine shops you should be buying? Yes, in any one geographic area. So the original location of this business is Evanston, Wyoming. They added three other locations over time, and I think that's in our materials, and so happy to talk about those. The other three locations... Let's just say aren't as fully built out as the Evanston location in terms of the number of machines, in terms of the capability. And so in this instance, our existing shop in Vernal, Utah, would have to outsource that work to that machine shop in Vernal. So they were kind of like a subcontractor at times for us in a way. A business we've known for a very long time, have done business with, know them very well. They have their own clients as well, in addition to doing work for us. And the owners wanted to retire, and so we ended up acquiring it. And it makes that Vernal, Utah, location more capable. I'm not going to say quite as capable as Evanston, but more so. And so it just enables us to better serve clients in that region.

And we'd like all four of our geographic locations to have improved capabilities over time. And we'd also like to add more geographic locations. Okay. Makes sense. That's it for me. Thank you. All right.

Thanks, Theo.