Slide 1 — Cover
Good morning, and thank you for joining us. I’m Matthew Lipman, CEO of Capstone Holding Corp., ticker C-A-P-S on Nasdaq.
Capstone is built to deliver, positioned to acquire, and ready to scale. This morning I’ll cover the first-quarter results, our progress against the 2026 plan, and the financial detail behind the numbers.
Slide 2 — Preamble Disclosure & Disclaimer
This content is fully qualified by the legal disclosures included in the appendix. Our goal today is to share the strategic thinking and financial analysis guiding the business, in keeping with our principles of being accountable and transparent with shareholders.
We operate in an environment where conditions change quickly — interest rates, tariffs, weather, and demand can all move within a single quarter. What we share today reflects our best current view, and we’ll update it as conditions evolve. Despite that uncertainty, we have to plan and make decisions, and this presentation lays some of that out for your review.
Slide 3 — Q1 ’26 Highlights: Margin Expansion Accelerates
Three numbers anchor the quarter.
Revenue grew 60% year over year, from $7.9 million to $12.6 million, with Carolina Stone and CSI contributing their first full quarter as part of Capstone.
Gross profit grew 124%, from $1.3 million to $3.0 million — growing roughly twice as fast as revenue.
And gross margin expanded 670 basis points, from 16.8% to 23.5%. That is the largest first-quarter margin we’ve reported in four years, and it puts us firmly on the path toward our 26% full-year target.
We delivered that margin expansion against one of the harshest winters seasonal businesses have seen in recent memory. The underlying takeaway is that the platform we built in 2025 is now translating into measurable financial improvement, and we remain on track to achieve our FY 2026 goals.
Slide 4 — Structural Drivers of Margin Expansion
The margin expansion is structural, not cyclical, and it comes from four drivers.
First, pricing discipline. We’ve tightened how we price across the platform, and that has improved the realized margin on the products we sell.
Second, product mix. Higher-margin products and services — owned brands, architectural stone, and installation work — are a larger share of revenue than they were a year ago.
Third, sourcing. The platform supports stronger purchasing power and meaningful efficiencies across freight, inventory, and logistics.
And fourth, AI efficiencies. Basic tools are running today in forecasting, ordering, and routing. The broader rollout begins late in the second quarter, and we’ll have more to say about that on a later slide.
Taken together, these drivers reinforce our FY 2026 outlook, and they are the reason gross margin expanded even in a quarter where weather suppressed installation volume across every geography we serve.
Slide 5 — Capstone Resilient Against Harsh Weather
The first quarter is the seasonally weakest quarter for stone demand, and this year added significant weather pressure on top of that.
In the Northeast, where Instone operates, temperatures averaged about three degrees Fahrenheit below normal, with precipitation up 45%.
In the Midwest, , temperatures averaged about four degrees below normal with precipitation up 38%.
In Canada, where CSI operates, temperatures ran about three and a half degrees below normal with precipitation up 53%. Toronto Pearson set a single-day snow record at 46 centimeters.
And in the Carolinas, where Carolina Stone operates, temperatures averaged four degrees below normal with precipitation up 30%. A bomb cyclone in late January brought roughly 11 inches of snow to Charlotte — a top-five all-time event — and effectively shut down installation for about a week.
The first quarter had significantly more precipitation across every one of our geographies than at least the prior five years. Even so, we delivered gross margin expansion. Demand is delayed, not cancelled, and we expect it to convert into revenue as the year progresses.
Slide 6 — Q1 Trajectory Supports Full-Year Guidance
This slide lays Q1 next to our full-year guidance.
Revenue grew 60% to $12.6 million in the quarter, against a full-year guide of $72.1 million. Gross profit grew 124% to $3.0 million, against an $18.7 million guide. Gross margin expanded to 23.5%, against a 26% full-year target.
The line that needs the most context is Adjusted EBITDA. We reported a loss of $0.9 million in the first quarter, compared with a loss of $0.6 million a year ago. The margin actually improved by about 60 basis points on a much larger revenue base — from negative 7.5% to negative 6.9% — but the absolute dollar loss was a little wider. The reason is that Carolina Stone and CSI are operating through their first quarter inside Capstone, and the first quarter is the off-season for both businesses, with integration costs working through the P&L.
The inflection is what matters from here. Q1 is the weakest quarter of the year for stone demand. We expect positive Adjusted EBITDA in the second quarter, and we expect revenue growth to accelerate as new projects and customer volume ramp through the year.
Slide 7 — A Strengthened Capital Structure
The capital structure is materially better than it was a year ago.
Of the $6.82 million in convertible-note principal originally issued in July and October of 2025, approximately $4.92 million — or 72% — has been converted as of May 1, leaving $1.90 million outstanding. The outstanding principal under the senior secured convertible notes was approximately $3.63 million at March 31, and the reduction to $1.90 million reflects conversion activity through May 1.
On the working capital facility, at year-end 2025 we had approximately $7.9 million drawn against our $11.5 million Beacon Bank & Trust revolver, and we were in compliance with all financial covenants, including the Cash Flow Coverage and Tangible Net Worth requirements. We are in active extension discussions and expect the facility to be extended.
A few additional context points on the broader obligations. The Stream Finance mezzanine facility permits accrued interest rather than full current cash payment. The seller notes do not begin amortizing until later in 2026 and 2027, and they are subordinated.
The balance sheet trajectory has improved significantly, and we believe it is well positioned to support future growth.
Slide 8 — Capstone’s Thesis in Motion
The thesis we laid out last year is now showing up in the numbers.
Pro-forma 2025 revenue was approximately $68 million, against $47 million on a reported basis — the difference is twelve months of contribution from all three businesses, instead of partial-year stubs. We now serve more than a thousand active customers, with project volume accelerating. Gross profit was up 124% in the first quarter. And we are operating from eight locations with coast-to-coast North American coverage.
We are reaffirming our 2026 guidance of 54% revenue growth, 73% gross profit growth, $3.8 million of Adjusted EBITDA — roughly 322% year-over-year growth — and positive Adjusted EBITDA expected in the second quarter.
Slide 9 — Capstone Goals for 2026 (Divider)
That takes us to our goals for 2026 — the strategic priorities, the operating plan, and the financial guidance behind them.
Slide 10 — Capstone’s Strategic Priorities in 2026
We are focused on four priorities this year.
First, new products. New product launches and a direct-to-installer channel support high-margin revenue growth and broader customer reach.
Second, geographic expansion. We are growing our presence in the Pacific Northwest, Northern California, and the Southeast through new hubs and expanded sales coverage.
Third, operating efficiency. Warehouse consolidation and platform integration initiatives are designed to improve margins and absorb fixed costs more efficiently.
And fourth, AI transformation. AI tools are rolling out across purchasing, inventory, routing, finance, and lead generation to support scalability and operational efficiency.
I’ll walk through each one.
Slide 11 — New Products Support Organic Growth
On new products, four lines worth highlighting.
We launched Eldorado Stone in April. This is a manufactured stone veneer distributed through our existing channel infrastructure. We expect it to contribute approximately $5 million in annualized run-rate revenue by the third quarter of 2027, and because we are distributing through infrastructure we already have, we capture the full margin spread without adding incremental fixed cost.
Nature’s Edge launches in the second quarter of this year — a lower-cost thin veneer with faster ramp potential.
In Canada, the CSI pipeline secured its first Flexbrick project, which extends our owned-brand depth into the Canadian market.
And the direct-to-installer channel provides incremental gross profit on existing volume by shortening the distribution chain.
Taken together, new product growth and a higher mix of owned brands are key drivers of the 300 basis points of gross margin expansion embedded in the FY 2026 plan — from 23.0% to 26.0%. Deeper product breadth also increases truck utilization, which drives margins through better logistics.
Slide 12 — Geographic Expansion Brings New Customers
We have moved from four locations to eight, with coast-to-coast North American coverage.
In the Pacific Northwest and Northern California, we are developing new territory, with the buildout supported by deeper penetration within existing accounts.
In the Southeast, Carolina Stone is anchoring regional growth. The Triangle and Charlotte areas serve as our regional hub for further Southeast expansion.
We have also scaled our sales infrastructure to support new markets and the expected project growth.
Our footprint spans 38 U.S. states and Canada. We have grown into one of North America’s few scaled building product distribution platforms. As that geography expands, customer density rises, project volume grows, and revenue grows against a largely fixed operating base.
One note on the location count. The slide reflects eight active locations as of May 1, after the April consolidation of our Alsip, Illinois facility into Navarre, Ohio. The Q1 Form 10-Q reports nine locations as of March 31.
Slide 13 — Operating Leverage Drives Cost Savings
Operating leverage shows up in three places.
First, logistics efficiency. Platform integration enables lower freight costs and improved delivery efficiency as revenue density rises.
Second, the shared operating platform. Integrated inventory and back-office functions reduce duplicate costs across the businesses we have acquired.
And third, fixed-cost absorption. As revenue grows, corporate overhead and operating costs are absorbed across a larger base.
The most concrete example this quarter is the Chicago-area warehouse consolidation. We consolidated the Alsip, Illinois facility into Navarre, Ohio in April. Fill rates and product availability improved, and the move generates approximately $480,000 of annualized run-rate savings, with roughly $240,000 of that flowing through in the second half of 2026. The full run-rate benefit shows up from 2027 onward.
That $240,000 of in-year savings contributes directly to the Adjusted EBITDA inflection from a $0.9 million loss to the $3.8 million target for the full year.
Slide 14 — AI Transformation Supports Platform Efficiency
On AI, we are deploying across the platform, in stages.
The initial deployments are focused on three workflows — purchasing, inventory management, and routing — with finance workflows coming next. Basic tools are running today in forecasting, ordering, and routing. The real rollout begins late in the second quarter, with a good deal more to follow.
We have built dedicated AI capability inside the company. New engineering hires and a shared data infrastructure support platform-wide deployment.
Corporate overhead and sourcing-cost reductions from the initial deployments are expected to support continued margin improvement, and the broader AI build is intended to extend that as it rolls out.
Slide 15 — Acquisition Strategy & Pipeline Overview
On M&A.
The pipeline is active. We have over 150 identified targets, and valuations remain attractive at 4 to 6 times EBITDA with realistic seller expectations.
We are actively engaged across regional distributors and niche product specialists, with relationships being nurtured.
Our near-term focus is on demonstrating the earnings power of the integrated platform, and we will evaluate transaction timing as results mature through 2026.
Our discipline on M&A is unchanged: every deal must be accretive, priced rationally, and additive to per-share value.
We believe the building products industry remains highly fragmented, and that scaled operators are positioned to capture disproportionate value over time. We continue to maintain an active acquisition pipeline.
Slide 16 — Capstone FY 2026 Guidance
2026 is the first full year with all three subsidiaries in the numbers, and it is where the platform begins to pay off for shareholders.
Revenue steps from $46.9 million in 2025 to $72.1 million in 2026, up 54%. Annual gross profit nearly doubles to $18.7 million, with margin expanding 300 basis points to 26.0%. And the Adjusted EBITDA margin more than doubles — from 2.1% to 5.2% — as integration synergies reach the bottom line.
Our execution to date has built the scale, infrastructure, operating leverage, and geographic reach needed to sustain profitability and compound earnings growth over time.
Slide 17 — Performance of Stone Business Q1 2026 (Divider)
That takes us to the financial detail behind the numbers. Stone Business first, then the parent.
Slide 18 — Stone Business Q1 Overview of Results
The Stone Business includes Instone for the full quarter, Carolina Stone from August 22, 2025, and Canadian Stone Industries from December 1, 2025.
This page shows the Q1 results in detail. Excluded from Q1 2026 SG&A are one-time items: $39,000 of acquisition-related consulting expense, $21,000 of non-recurring inventory appraisal costs, and a $13,000 foreign currency translation adjustment. Q1 2025 SG&A excludes $11,000 of non-recurring equipment costs and includes $150,000 of Instone management revenue.
Refer to the 10-Q for more detail.
Slide 19 — MD&A Highlights
Three areas of color on the quarter — the revenue story, the margin story, and execution.
On revenue, growth of 60% year over year, from $7.9 million to $12.6 million. Carolina Stone, which represented 19% of revenue, and CSI, which represented 20%, delivered their first full quarter of contribution. Instone, which represented 62%, saw volume pressured by the harsh winter — square footage was down 10.7% year over year. Canada is soft in line with the broader macro outlook. The Carolinas continue to anchor our Southeast hub strategy.
On margin, 670 basis points of gross margin expansion, with COGS leveraged to 76.5% of revenue versus 83.2% a year ago. The owned-brand mix shift and sourcing gains are compounding.
SG&A is elevated transitionally. Q1 2026 includes approximately $111,000 of one-time transaction and integration costs. The Q1 2025 base was depressed by approximately $150,000 of one-time income. Adjusting for both, the underlying SG&A reflects the run-rate cost base of the larger acquired platform, not organic cost creep. Interest expense was up $163,000 on acquisition financing — also transitional, to be optimized as integration completes.
On execution, three points. Carolina Stone integration is ahead of plan, with Triangle and Charlotte volume building and the Southeast hub thesis validating. Eldorado Stone launched in April, with revenue impact in the second half of the year, and the first quarter under Capstone for CSI executed cleanly with Day-1 ERP stability. And the Alsip-to-Navarre consolidation completed in April, with $240,000 of the $480,000 annualized savings flowing through in the second half, and AI engineers onboarded.
Slide 20 — Capstone Standalone Q1 Overview of Results
Capstone standalone — the parent — does not generate revenue.
Standalone overhead is meaningfully down year over year. Operating expenses fell from $564,000 to $258,000, or 54%, as non-recurring IR and IPO-related costs roll off and integration completes.
Two technical items worth flagging. First, IR expenses of $65,000 in Q1 2025 were non-recurring. Second, Q1 2026 includes $72,000 of transaction-acquisition-related costs, and Q1 2025 included $60,000 of Capstone management fee income. There is also a $476,000 unrealized gain on a derivative in Q1 2026 — that is mark-to-market accounting on a non-cash item, and it is excluded from Adjusted EBITDA. The full reconciliation is in the appendix.
Refer to the 10-Q for more detail.
Slide 21 — Financial Guidance Update
A note on reporting cadence.
We will offer an update on our full-year 2026 guidance with the second-quarter results in August. The critical periods for the business are the second quarter, the third quarter, and often extending into October. By the time we report the second quarter, we will have more meaningful information to share on how the year is shaping up.
Slide 22 — Appendix (Divider)
The pages that follow contain the non-GAAP reconciliation, our non-GAAP definitions, and the full legal disclosure.
Slide 23 — Reconciliation of Non-GAAP Results
This page sets out our reconciliation framework. We use non-GAAP measures alongside GAAP measures, not in place of them. Other companies may define these terms differently.
Slide 24 — Financial Measures: Non-GAAP
This page lays out our definition of Adjusted EBITDA and the items we exclude in calculating it. Please review.
Slide 25 — Legal Disclosure & Disclaimer
The full legal disclosure is on this page. Please review.
Slide 26 — Legal Disclosure, Continued
The legal disclosure continues. Please review.
Slide 27 — Closing
Before we close, the three principles that guide how we work with shareholders.
First, transparency — we will tell you how we are doing, in good quarters and in tougher ones.
Second, accountability — we will set targets, share them publicly, and put our full effort behind hitting them.
And third, adaptability — markets change, conditions change, and we will adjust and keep you informed.
We believe Q1 2026 is the quarter where those principles meet results — the platform is built, the margins are expanding, and the year ahead is laid out clearly in this presentation.
Thank you for your time. For any questions, please reach out at investors@capstoneholdingcorp.com.