180 Degree Capital (TURN) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q2 2023, the company's regular operating expenses increased to approximately $879,000 from $741,000 in the prior year, primarily due to the addition of a new team member [1] - The company's NAV declined by 4.6% due to a 5.8% decline in public holdings, with notable declines in IVAC, Parabellum, RYAM, and Comscore [30] - The share price trades at a 30% discount to book value and less than the cash and liquid securities on the balance sheet [30][54] Business Line Data and Key Metrics Changes - Intevac's stock decreased from $7.33 to $3.75, attributed to delays in a program with Corning and a significant cancellation of tool orders by Seagate [32] - Comscore's stock fell from $1.23 to $0.80, despite improved EBITDA estimates, due to the Board's inaction on shareholder concerns [57][60] - Synchronoss successfully negotiated an extension of its largest contract with Verizon through 2030, yet its stock price remains puzzlingly low [39][40] Market Data and Key Metrics Changes - The Russell Microcap Index advanced by 1.8%, while the company's holdings were slightly behind this index and ahead of the Russell Microcap Value Index [31] - The market has been dominated by a few large-cap stocks, leading to a challenging environment for microcap stocks [5][54] Company Strategy and Development Direction - The company maintains a lean cost structure focused on enhancing investment performance and managing outside capital [1] - The management emphasizes an activist approach to unlock inherent value in portfolio companies, particularly in Comscore and Synchronoss [34][60] - The company plans to liquidate and return capital to shareholders when it is deemed appropriate, aiming for a higher price realization before doing so [80][81] Management's Comments on Operating Environment and Future Outlook - The management acknowledges the current challenging market environment but remains optimistic about future price appreciation in their holdings [54][79] - There is a belief that as the macroeconomic environment improves, small-cap stocks will also perform better, benefiting from inflationary pressures [78][94] - The management is committed to creating value for shareholders and believes that the current low prices of certain stocks present significant upside potential [79][97] Other Important Information - The company has a remaining private portfolio valued at approximately $8.6 million, with AgBiome being the primary position [44][69] - The management has expressed a commitment to treating shareholder capital with care and consideration, despite recent declines in net assets [45] Q&A Session Summary Question: Can you talk about the share buyback program and return of capital? - The company is willing to buy back stock when it trades at a significant discount to NAV but prefers to invest in other businesses instead [72][73] Question: What are the prospects for small-cap stocks in the current environment? - The management believes that small-cap stocks can perform well even if large-cap stocks dominate the market, as demonstrated in previous years [76][94] Question: Is there a consideration for liquidating the company and returning cash to shareholders? - The management acknowledges that liquidation could occur in the future but emphasizes the importance of doing so at a higher price [80][97]