Q2 2021 Ault Global Holdings Inc Earnings Call
Yes.
Will they be able to hear me, yes. They can hear you right now hey, everybody sorry for being late here, a little technical difficulty with one of our cameras. We apologize had a lot of reverb and echo and we didn't want to pour conference call.
So we decided to <unk>.
Luiz the eight minutes and change cameras, we apologize.
Darren can you hear us okay.
Yes, I can hear you.
Darren if you could introduce several of US on the conference call and read the forward looking statements and we'll go forward from here.
Okay, everyone. Thank you for joining this presentation contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095, including but not limited to statements about all Global Holdings, Inc. Sometimes referred to as <unk>.
H expectations regarding the market demands future financial performance the implementation of strategic plans and future growth. These statements are made based upon current expectations that are subject to known and unknown risks and uncertainties.
<unk> does not undertake to update forward looking statements in this presentation to reflect actual results changes in assumptions or changes in other factors affecting such forward looking information.
Assumptions and other information that could cause results to differ from those set forth in the forward looking information can be found in the presentation and in the HVAC since filings with the Securities Exchange Commission, including its most recent periodic reports, including the risk factors listed in Form 10-K.
You can also.
Identify things on our website and the security Exchange Commission website at Www Dot SEC Dot Gov.
Now I'll turn it back over to you know Todd I think you. Obviously this is our second quarter conference call for the period ending June 30.
I would say probably the most exciting time in the company's history. As we are in my opinion sort of turned the cycle of.
Converting to a holding company from an operating business that was digital power just a few years ago balance sheet wise et cetera. So on my own screen kind of one thing.
So what you'll see is.
On the leadership side Theres myself.
<unk> Chairman will warn our vice chairman and CEO, who was promoted in January Henry Neuser, Our President director and General Counsel.
I'm really pleased that.
Ken has been establishing a team our CFO, who we were lucky to get.
From $1 billion NASDAQ company, Ken has been with us a while and really starting to shine here his team David Cass op or seem to be the VP of finance, Chris <unk>, who we just hired a head of alternative investments in our global and President about the alliance will get into that later in terms of deal flow, obviously, Darren who.
As a director at Ulta and company and CEO of bulk alliance.
Douglas against a great add on as our Chief Technology Officer, Joe Spazzy under our VP and Chief Information Officer.
We added James Turner in the last few months as Deputy General Counsel VP of legal affairs, lower Kim who is the assistant General counsel for a while now and then Gene Hall, who is our chief accounting officer really at the parent company establishing.
Establishing sort of a really powerhouse crew to help the subsidiaries and our partner companies move forward, Let's go to the next slide.
Yeah.
Sorry.
How many slides as we go.
Got it.
Did we skip them.
Okay.
Yes.
All right. So we're going to go through the forward looking statements the executive leadership team, which we did did a corporate structure relative to the financial highlights we'll commentary for me.
Key near term initiatives beneficial ownership rights of all demand, which is important to cover that with canon will I will go through the financial performance the balance sheet.
<unk> digital power Lendings operations activist strategy near term outlook for the asset base 21, 2021 corporate operating updates.
Forward looking opportunities in future acquisition thesis, let's go to the next slide.
What.
Got it.
Oh.
Sure.
<unk> see it now.
Sure. Okay. So let's go over the executive summary of some of the second quarter highlights.
Next slide.
Yeah.
So this is kind of this.
An important primer to look at it doesn't cover everything we own but it covers the most important sectors of what we own if you've seen this before you've seen on the left hand side, if youre looking at the screen Gresham worldwide led by Jr. Read and Tim long. This business is starting to really become.
Operate with a lot of synergies, we own Gresham power in England.
Micro space in Connecticut, which is a big beneficiary of current defense contracts relax in England, which we bought last November I think we closed on in December and then enter check we bought a few years ago, which is in Israel than you see cool assist in the middle of it as a separate company run by Jodi version and almost con.
Almost as the CEO and chairman of cool assists.
<unk> digital power of the original business that started in 1969 that started this whole process and then what we call turn on Green, which is R. E D business, which we're gonna have will comment later comment later about the status there what's happening with production the best he can given the chip shortage.
We're on the right you see the Alt Alliance. This is the progress of our business that between our public and private.
Business, and obviously driving a lot of revenue here a lot of alliance on OIS Cloud services, which is our data center Pac Eastern where we crypto mind. Today. This is an acquisition we completed in January of a 617000 square foot building with potentially 300 megawatts of power on 34, and a half acres really are a tremendous.
His facility.
Our licensed lender digital power lending what drives all of our investing activities, including all demand.
Which is potentially a large stake MTX international which will have will comment later, the hotel, which is making wonderful progress and is set to open up next year.
AD Tech pharma and announcement, we made earlier I think in the last month, where we have up to a 40% position.
Really I think something you're citing happening there and then grey ledge, which no one's ever heard of which was a small minority and loan investment we made where we have the right to 20% of the company in a special warrant and to get payback, our money Grand ledge as a stem cell company based in Colorado, Let's go to the next slide.
I can I thought you could take us through the these numbers sort of read through them and I would give some commentary along the way a couple of important points here. If you could just walk us through this real quick Ken.
Yeah, you bet, so fantastic quarter from a top line point of view was $62 million of revenue.
And uptick from last fiscal year, which was a $5.4 million.
Most of the revenue growth was driven from Vicki lending from our lending and investing activities 53 million.
Of that lion's share came from our holdings and ultimate neuro, So we had a $40.3 million.
Revenue from.
The increase in value of our investment also in euro.
Many of the people on the call know Osmond had a successful IPO in June.
And we were able to mark our investment to market and have had a significant gain for Q2.
We had a modest revenue from crypto mining.
We're going to talk a little bit more about our mining activity.
The next slides, but a lot of the game from landing dropdown to the bottom line.
So tremendous profitability for the quarter of $44.6 million.
Net income our ESG.
Income before taxes and so the 44.6.40.3 came from from all demand would've still better.
Solidly profitable quarter over $4 million compared to $2 million.
Q1, so excluding the ultimate game nice step up with all of them then it's kind of an off the charts our financial results.
We did we have raised capital over the last few quarters. It's.
Allowed us a positive working capital by $128 million and in the quarter with over a quarter billion in assets.
And the big chunks of the assets are cash of 105 million marketable securities 30 million and our other investments of over $80 million.
Hey, Ken I wanted to reiterate in ever everybody I'm going to take this very slowly and that is will the first quarter. We had profits of what about $1.8 million in the first time, we have been profitable in about I think.
11 years, or so am I correct on the first quarter $1.8 million or so.
Okay.
Nine I believe Ken.
Downward accordingly, okay. So if you exclude the <unk> position, we're still $4.3 million profitable for the second quarter.
<unk>, if you pretended like you'd never even heard of all demand. We would have been thrilled to see that will will and can I assume you guys agree with me that having two quarters in a row of profitability, excluding all demand with a number of virtually double the second quarter versus the first quarter.
I don't know that I could be any happier with this what do you guys have any commentary there at all.
No I think you said it best.
Thank you coach says it best as companies in the strongest position it's ever been.
We're starting to see.
Solid execution across all businesses, not just keeping and lending not just the portion that's attributed tolerance man, but everybody is starting to make.
Big contributions to the overall results.
Ken do you have any commentary on my comment.
I think it's I think it's an excellent trend to what 0.9 to over 4 million kind of doubling that profit so.
Have it having the lender fully funded having the.
Our defense business Gresham, they have the working capital they need to execute on backlog.
<unk> is a good trend there up significantly year over year.
The capital they need to to get their business rolling in and they're making some investments to ramp up that will help us ramp up.
<unk> business.
I think it's probably a good time to talk about the volatility will likely see on these investments you.
Berkshire Hathaway, having large stakes in public companies.
Does see some volatility on their top line.
We'll expect to see that quarter to quarter, but overall, we feel great about the prospects of balls Amanda.
Our position in that company I think it's I think I wanted to iterate Ken's point, if you pay attention to the operating businesses.
Gresham worldwide cooler assists in our primary lending business and you exclude our large investments you'll see that large investment volatility, which we'll talk about later, where you can wake up one day up or down because of those concentrated positions I think Warren Buffett talks about this a lot that this accounting law forces.
US to push them through from an accounting perspective, each quarter will I know your long history of being a CFO. We talked about this can you kind of give our shareholders and investors are sort of an understanding of why we have to flow those things through now the best you can.
Sure well I mean at the end of every quarter, we're required to mark our possessions fair value and the best indicator of fair value whenever you're talking public instruments like our investment announcements.
This is closing market price I mean, that's.
<unk> estimates that the standards, so as the markets fluctuate our investments fluctuate.
Now you can't mechanic.
The balance sheet values without having a corresponding adjustments.
On the income statement so.
The value has gone down one quarter, even though we may not have sold anything in his we're looking at this as long term investments.
We still have volatility.
And that's what's happening with our will happen significantly.
Yes.
Really what drove.
Our big revenue numbers in Q2, right, but going back to Europe because now.
Go ahead go but going back to your prior years prior to the accounting change you wouldn't have to flow those positions mark to the market into your portfolio the way we're doing it today.
Okay.
Again it depends on.
What youre, what how content and training your position is right.
Of course.
Yeah.
So we wish them well.
Okay.
We'll get back to this part this is a part where I give my commentary a little statement here.
Obviously, we've seen the strongest quarter in our 52 years of the company, reflecting our strong results our results for the second quarter the strength in our trading and lending activities. We believe if the current market and invest in pipeline stay strong for small caps.
If it remains strong we have great future prospects.
Runner assets to a quarter of a million dollars announced new goals to get those assets to a $1 billion and at these levels, we envision allocating about a quarter million dollars stood lending operations.
Sorry about.
A quarter of a $1 billion to investment real estate holdings, and about 500 million to acquisitions.
Either a profitable companies are distressed companies that we think we can bolt on or add on to profitability. Let's go to the next slide.
Okay.
These are sort of near term key initiatives and this is where I kind of would like to Ken to talk about he's added to his team and so we're now able to do some carve out accounting and prepare gresham worldwide to become a public company, where we would still have significant ownership and this is.
I think theres a lot of earnings leverage baked into the cake.
And so Ken if we could talk about the team real quick as we're exploring these two ipos yeah. Yeah. We have two two big projects on our plate.
With with the aggression and Kula says looking at taking those public are generally slow strategic.
Our rollout to get them access to capital markets. We have a great addition to our team Jin Ho Who's our Chief Accounting Officer.
Jim has a tremendous background she has been a C O O.
CFO, she's a CPA and an attorney.
And she brings a lot of a lot of energy a lot of horsepower to our team and she's going to be focused on these two key initiatives she's working with Gresham.
To help them with.
IPO or another transaction.
She is also working closely with almost and Jody that cooler says slash turn on green.
For their IPO. So great addition to the team.
<unk>.
Has the ability to focus 100% of her time on these two key projects and so we feel like we're going to.
We're going to make a lot of progress getting the carve out audits the required filings done.
Working with legal working with our bankers to get these transactions consummated. So we're very we're very happy about that addition, and the like I said, the key horsepower and bandwidth that were added to the corporate finance team.
For those shareholders that are not familiar with this process you actually have to have a separate audit for each one of our subsidiaries, but ones that want to go public and selling just envision an idea. This is a hypothetical of course, the gresham worldwide, where to go public in some form of capital access transaction, whether it be an IPO or merger with another public.
Company, and then all global DPW still being a significant shareholder where their revenues would consolidate into our position we still have them on our balance sheet, but they would have access to separate capital markets raising your own capital their own growth and this is why we're pretty excited because if you look at the OSM into IPO.
It's sort of a testament to the proving ground of our thesis that we're gonna be able to bring other companies public that are sort of in our category, whether they're a partner company or a wholly owned subsidiary like rushing worldwide and turn on Green are cool assist.
I Wonder if you had any commentary on how people should look about future potential earnings how that you've put in their mind.
Because I see that what happened with older men happening with Gresham and with a turn on green as they become separate companies accessing the capital markets down the road.
Yes, I think guess touches upon what I Miss.
Alluding to and that goes back to the concentration what your ownership in the company right.
We have a smaller ownership we're doing are mark to market with just been looking at the stock price were not consolidating it per se.
Whereas initially something like progression worldwide or.
Homeless slip coolest slash turn on Green those companies my expectation is movement, having large ownership initially.
And thus they will be consolidated so you wouldn't see fluctuations and volatility as a result of the public markets.
In the end the cosmic prices on the Sox on any particular day.
However, as we reduce our ownership interest income insurance to reduce our interest.
And either through a dividend or liquidating and recognizing gains then ultimately we would see that type of volatility.
Stock price goes up or down with the team.
Significant screens and our overall profitability.
So as we transition to a from a way to potential ipos of two subsidiaries, which we would still consolidate but they would have access to their own capital base their own board of directors their own audit and of course.
Which we think are important events in terms of earning leverage for the company over the coming years ahead. When you look at this 30000 square feet of this 617000 square feet and I want to emphasize we're using 30000 square feet is a data center out of 617000 square feet. So far well I Wonder if you could give us.
An update as to where and how you think it's going at the Michigan datacenter kind of what's taking place there as we move forward.
So I think our initial buildout took a little bit longer than what we initially expected.
And again Covid is certainly a factor in that.
Theres been delays on many fronts. However.
I would expect in the September timeframe, we are in a position where at 30000 feet is essentially built out and we're bringing on.
Significant data operations to include our own bitcoin.
Operations.
Right now as I think everybody is aware.
Thousands of legacy miners that we're using and we're doing a small amount of.
Crypto mining.
I believe in September and we won't be in a position where we can.
Install the original alignment.
Announcement, Argentinean announced S 19 miners that moved to the press release supplemental analyst February guidance I believe it was February yet.
Yeah.
That's our expectation today.
Yeah.
The build out it's not just the build out on a square footage again 30000 square feet that was in one sense arbitrary but it was sufficient for Robert.
On an H score.
Think we've revisited that and we're doing a lot more.
On the power side of it as far as increasing the overall capacity segment to more rapidly build outs.
Actual square footage.
If you look at if you look at total hash rate versus where we're mining now versus what we see coming online with the announcement from February and those delivery schedules as they happen. We will of course as we get delivery will report them.
When you look at that schedule I see crypto mining as a percentage increasing our quarter over quarter, we will see how September it goes with the installation of certain miners, but this as the data center comes online bitcoin as a percentage of the total assets I think it will increase over time.
I assume you agree with that assessment I said that correctly.
I do for multiple reasons, one I am very bullish on the price of bitcoin.
Right.
Okay.
The market is going to have it can be volatile over the next couple of years until we figure out who are the dominant players are.
We're not in a position that we need to liquidate a concurrent.
Current seasons from the mine them. So yeah, I would say as an overall percentage when do you expect that to increase over the next few years.
So as we move on to the $50 million purchase order from MTI ex what's happening with the MLC.
Going to limit our comments here for very specific reason and that is we're in the middle of filing an S. One and all I can say is that we are committed to the MTI business. We are committed to getting the company reporting a after.
After this S. One as filed and we will commit to giving you an update I think theres marketable progress here, but because we want to get the S went out were going to limit our comments here to just saying that standby for the S. One and then after that we'll give you an update here, but we are committed to this process well I didn't know if you wanted to say anything but I kind of.
Want to limit the comments given that Theres an S. One pending.
Yeah.
I Love the business I Love, the technology and I love, what it can do from an environment.
And I'll leave it at that.
So expanding our our loan portfolio and investment portfolio, we've added to our professionals, including Chris.
No.
Bob.
We've I hired other analysts in this category. So we're really ramping up that portion of our shale brought $100 million portfolio of loans and investments and BPL.
Our digital power lending and the fact is is that we have companies inside that portfolio that we think will go public too and we will talk about them later and then we'll be talking about some targeted future acquisitions later in this on the last slide let's go to the next slide.
Now.
I want to pause here for a second and I want to take our time here.
It's a tricky situation with what we're reporting and that is we did not report a $40 million gain.
On the entire full position of what we can potentially have an older and and so Ken I wanted you to carefully navigate that while that's true at the bottom you can see we have the right to own $22.8 million shares, which I think gives us a lot of operating leverage from an investment standpoint, and what could potentially be.
Gain for OEM, and maybe you can walk people through what we actually had at the end of the quarter. The best you can kind of give them an outline as to how that affected us because we reported 40 million, but on actually how many shares right right. So so we own shares we currently own $6.7 million shares outright is a little bit less in.
At the end of.
At the end of <unk>.
Q2, but $6.7 million plus warrants related to that those shares we got warrants on the IPO and we got warrants on our March 2021.
The security purchase agreement.
So we took the outstanding warrants that are outstanding shares multiply it by the closing stock price at June.
The black shoals or valuation on the warrants and that generated a $40 million Jamie.
Wow.
Update on the $10 million security purchase agreement that has certain milestones. So we initially invested $4 million so of the $10 million 4 million was upfront.
$2 million was on.
Approval R R.
Greenlight to proceed from the FDA on Phase one clinical trial trials for <unk> first drug <unk> 001, So we've put in we put that extra Chilean $2 million in but that was.
I believe we did that after.
After Q2.
It is a subsequent event yeah. Subsequent event, so so were $6 million to.
Into that $10 million commitment.
So the yes. So the rest of it are investment you could kind of review that is contingent on AOS.
<unk> 001.
Getting a getting a successful completion of phase one so that will put them in the last $4 million on that investment and there'll be warrants associated with that as well.
And then the $10 million.
Security purchase agreement in March also gave us the right to do another $10 million.
On similar terms.
But no the milestones defined so we have a we have we have upside from our current position.
The remaining $4 million and an additional $10 million and the associated warrants that go with that so that's where we get kind of the bottom line on this slide and we can own up to it should we exercise all of our rights to invest in other words, we could own up to $22.8 million shares.
We're kind of outstanding as of today, $6.7 million shares common 2 million.
Trailing warrants so that's kind of a review.
Accumulable parts on it but.
But we do have do have shifted their rights to invest more at favorable terms and.
And work associated with that.
So you can clearly see what Ken outlined for you was that one we know already because the company has released that they don't need any.
Money currently to get through their stage of testing that they are on now the company says for their foreseeable future for the next year. They don't need capital. So obviously for us and it's really important to understand this if we were to fully exercise everything not only with aimed not need additional capital for a while but you can see that every dollar for us in.
Terms of the increase in price is about $22.8 million total.
For.
The portfolio of the DPW owns and so obviously every $10 that was higher than our purchase price would be over 20 or whatever be over $220 million. So we are very optimistic about what they are and we understand they spent a lot of time on their initial drug <unk> 001, and its co crystal lithium.
Qualities to hopefully be replacement as a baseline for lithium.
And we're excited to watch them go indications in September that they announce and what they're doing with the vaccine hopefully later in the year.
This is what canon will talked about with volatility in our our reported earnings because obviously, we don't have any power to know where the stock's going to trade, but as they make milestones and progress in patients and they get more and more valuable we have a shot on goal here to really participate.
With massive upside and if you look at what the potential value is of vaccines and treatments for all timers and a host of the 15 other indications that <unk> 001 has.
I couldnt be happier if you were to ask me a year ago I would have been a little bit more of a skeptic.
My with my visiting with the scientists and researchers involved over time I've been convinced that this is a <unk>.
Our marketable potential for us really something amazing will do you have any commentary on our position there or anything that the investors shareholders to think about that I havent covered.
No I mean, we're in a fantastic position because we didn't have the right to acquire up to $14 million more to invest another $14 million on the pumps.
Predetermined prices.
And that's in the best interest of our shareholders.
I think people need to understand that.
Most hedge funds and we're not a hedge funds, but most hedge funds or investors would love the right to participate but not the obligation and we have certain rights, but not obligations under certain of these circumstances. So we think we've negotiated the best of both worlds. The independent Board was involved tier scientists were involved here outside firms.
We're involved here to help us negotiate what we had here and so I'm pretty excited about let's go to the next slide.
Let's go to the financial performance.
Yeah.
I'm going to I'm going to let a willing and I'll, let can start with this but I would say to you that.
You know there were a lot of only goes only digress for a second.
There was a lot of people, calling more the demise of our business a few years ago.
But we think that we're in a strong position to counter that especially with the potential ipos of Gresham.
Or or or or go public transaction with Russia, and a potential IPO or go public transactions return on green.
Ken any commentary here on this slide.
Yeah, you can see.
Excluding excluding the trading and lending.
Gresham $6.5 billion of revenue fairly balanced between the three larger companies relic relax microphage, an energetic and accrual assistant $1.8 million of the day I think they were up.
They're up significantly from prior year quarter.
On this also you can see.
That thought a dotted line.
Circle there.
5 billion of cash with 30 million in marketable securities.
Divestments are related parties.
Similarly between horseman.
Avalanche International which is also known as Mci X or it's a subsidiary OTI acts.
<unk> totaled $74 million.
And then we have other investments in equity securities of about $4 million, So significant ASP.
Assets, there, that's a big chunk of our.
Order of $1 billion in assets. Yeah. We were we were off on all of our business segments year over year were up.
Altra Alliance, obviously big Gresham was a cause for that so it's good to see the strength across all of our business segments.
Yeah, I would say, it's really important to understand if you looked at the Ultra alliance side of the slide and you were just to take out $40 million of gains you still see $13.8 million in revenue out of the company and you still see a blended mix of wet what Ken said of a cool assists. The E V. In power electronics business picking up I think that was substantial for them on.
Percentage basis, we're really pleased with the calming operations that are taking place at Gresham worldwide.
And their ability to navigate the current contracts. These are long tail contracts. They have stability is important and really a huge turnaround by Tim long, Jr. And the staff at and micro space really remarkable there and then with relax. They are just not miss there, they're killing it on all cylinders.
Any commentary from you will on this because I I.
I think that the results if even if you take away the $40 million, we'd still be beyond pleased if you look at Gresham.
Theyre on a pretty big tear of becoming.
A $30 million business themselves and coolest. This is just getting started in EV. So I think we're really optimistic about the revenue run rate here anything any possible.
Yeah, that's and this company has really been hindered historically, because we haven't had a strong balance sheet right. I mean, if you look at all of them.
All of the issues, we've had over the last three or four years and there's been a fair number. It's on it's always been around capital. So right now we've got a.
Strong balance sheet and $105 million in cash, we've got $30 million of marketable securities.
And that really allows us to position all of our businesses for success as well as pursue additional acquisitions, if something came along with them.
And we felt warranted.
And investment.
Again, I forget and look at our cash needs over the next 24 to.
48 months.
And I think that MTX international.
Obviously, the parent company Avalanche, that's going to require some capital in that business.
Sure.
In publishing.
Currency thats going to be that's going to require capital and.
Unfortunately, again with a strong balance sheet, we're now in a position executed.
Both with financial resources, and bringing in a really really strong talent.
That's great I would say I want to give a commentary that I'll cover later in the broadcast.
This showed a day or sorry, the shale I'm, just saying response or a bunch of the conference call.
One of the things that's happening that's wonderful is we obviously with Chris coming on we are looking at deals potentially and I think the strong balance sheet really changes the narrative of our ability to acquire companies that are profitable that are EBITDA positive and that put us in the running for those.
Long term acquisitions, let's go to the next slide here.
So this is a little bit of a.
You know, we reached $250 million in assets, we kind of wanted to outline for people sort of dry powder. We only think were operating at 20% capacity.
The hotel.
We do not consider to be something that would go public although there have been conversations about potential sales of that on our balance sheet. It's not significant enough to really go over that anymore. It's only about $2 million on our balance sheet. The all of them and we've talked about already MTI actually talked about Grail edge and AD Tech pharma I'm going to get into ASIC pharma.
Quickly we negotiated for about a year to buy a position that asset pharma, we negotiated the ability to buy up to 40% they've made a lot of progress. If you look who's involved there AD tech pharma, it's kind of a who's who in the pharmaceutical industry really amazing talented people there.
And I think that Theres a potential like there was we're all demand for that to go public in 2022.
At a significant valuation that would materially affect the company now granted there's no assurance that that will happen, but this is something that I think you should be looking for down the road AD Tech and gray alleged ultimately to be public and for us to benefit very similar maybe not in size, but in scope in terms of of.
It being material to Dpw's earnings down the road and so we're pretty excited about owning those positions, let's go to the next slide.
This is a slide covering activism, which is what I specialize in I've been a 13D filing an activist shareholder before.
Before this goes to what will talked about having.
Our balance sheet you can see on this slide we currently have a position in silver Sun technologies SSN Chi we have a position in bria cell therapeutics be CTX.
Our position in Friedman enterprises, the Big Steel company out of Texas, Longview, Texas and in oil and gas company that we're the largest shareholders of.
In Houston, Houston Energy H USA all of those things that were active with management and trying to extract some value there.
If you know anything about 13D filings you can kind of look at the Carl Icahn model, where you kind of take a position you identify something we think the company could do changes they could make.
And then from there obviously, you hope to benefit from the company, making changes or you hope to acquire the asset where you entered in a lower price you got to get in there.
Significant value if you look at one of the examples and will was directly helping me with this one. This is early when we got started we had an entry date of 10.30 on.
The position you you you its a previous 13D.
We bought.
An entry position of $2.57, we exited I believe at an average of 10.11.
You can see on a run rate of return basis.
From when we entered in.
Late October November this thing went from around $2 and some change I think it actually hit 19 at one point.
Intra day, but this is an example of something that's meaningful we'll I believe we made $1.6 million on this investment give or take.
Give or take Q1 investment obviously.
Look at our you look at our public 13D as you can see we've made money I think on most of if not all of them. Obviously these are publicly reported not hard to follow and.
And we envision having more of these like we do with silver Sun. We are we are we have good relationships generally with the management of these companies and we're active we're actively trying to involved in trying to reach some sort of value from cantor well I don't know if you want to comment on the activist strategy at all.
I didn't I didn't know whether you wanted to or not.
So I think it's been.
You have a little bit of a war chest hard to do that I think you in.
Chris and some others on the TMR, our greater identifying some of these opportunities.
We've had good success so far.
I think it's we have the leverage on our balance sheet to continue or continue to do this.
Well anything for me and give me the only the only thing I would say is it some.
Okay.
It is interesting right. We look at some of these companies and take a position.
As we think.
Can either increase our position.
And.
Sure.
You had better results than existing management or help the existing management.
They're never meant to be short term, but it's ironic in this market they have been a little bit.
More short term than we would have.
Thought they would've been in part because of the volatility.
Yes. They are they have been short term I think sometimes when we weighed into the pool, where kind of a little bit of a whale.
And we bring activity to them and that generally can lead to some sort of lift.
But ultimately you got to add value here or it doesn't make sense.
Please go ahead.
So this is.
Sort of a category, we're looking for the end of 2023 and I want people to think about a return on the assets also not just getting to $1 billion in assets, but what it would like do you like to have a return on those assets and the potential probability of future growth for the company now by the end of 'twenty three through a combination of equity.
<unk> acquisitions with financial leverage and liquidity events in our subsidiaries of partner companies like Ipos like spinoffs like going public transactions, we hope to have $1 billion of capital assets. In these categories will any commentary on how to a shareholder investors should think about that.
The mix of roofing here on what we're looking to do from a stable kind of free cash flow model, where we want the parent company to have a certain amount of free cash flow and not have everything I'm, rather black in terms of the market probability.
Well I mean, ultimately that's why you've got we've got an estimated mix of 50% on the operating companies.
The lending and trading activities in simply lending are fantastic and we've been very very soon.
Yes.
And you can see that this year, but.
Intimately, that's not predictable and the nice thing about focusing on Covid operating company incident.
I'm stressed with turnaround, where we really see it can be.
<unk>.
A key driver in the next 20 or 30 years like MPLX.
Like the data center those types of businesses will results in predictable revenue streams for this company.
510 years down the road from now.
Lending again, that's a little bit unpredictable I love the business.
Unless the context of real estate in Kansas, we start getting predictable revenue streams.
Operating cash flows and the positive cash flows we're going to want a place to invest that and there's only so many opportunities.
You can look at dividends you can look at share buybacks or you can look at growing the overall balance sheet.
And adding future revenue.
From us from those stable investments in real estate and of course as Owen said.
Category long term.
Okay do you have any commentary on this matter.
Yeah.
Although our.
Lending and trading activity, but the volatile.
Thank you.
If we're deploying 250 million there were puts.
A big chunk into loans that would would create some stable cash flow maybe be more heavily weighted on the lending rather than the investing side or maybe a more balanced on the lending versus investing so the lending side of that.
Could have a nice stable.
5% to 15%.
Mr Chappell being fairly predictable so the real estate cash flow for us lending a chunk of that should have some stable cash flow going forward and then the model of targeting EBITDA positive companies.
Again, that's another return return on investment there. So I think we have a diverse diversified approach.
Balance little more heavily weighted to the operating but all three of these categories should generate.
Sustainable cash flows.
I would bring to your attention to all the investors attention shareholders that there's a little ashes at the bottom in that as well and I made a strategic decision that we do not want to really exceed 10% of the assets in crypto currency. So if you think about us being around 200, and plus or -60 million that would be around 25.
Million in those assets and if you got two 1 billion in assets that would be around $100 million not kind of exceed theres no way to keep it perfectly exceeding or not exceeding that but we'll I wondered what you give everyone.
At least the commentary I have on this is that.
There's a lot of danger in the way that bitcoin is marked to the market because it's not mark to the market. So I wonder if you could give everyone. Maybe just a high level thought on why we want to limit our assets to around 10% of bitcoin.
Yeah.
Yeah.
I think 10% of that corn right now is reasonable based upon the structure of the company now we've talked about what our long term goals are these operating businesses and obviously as a holding company whenever you look at the <unk> business that could take a significant amount of equity.
And for that type of a company you want access to the capital markets.
Now there could be ways that we can do that and reduce the overall needs.
But you start looking at something like crypto.
We can look at the cost of these miners and you look at what the.
With protests going for right now.
1000 miners youre looking at $678 million, so in order to really scale that company.
You're talking about a potential IPO or some sort of merger with another company. It's the only way that I believe that we can truly.
Truly capitalize on that market.
But I do think targeting 10% and having $25 million maximum put into it right now it gives us a nominal base, where we can leverage that I mean, if you look at it we've got the data center that has 300 megawatts.
Our 600000 square feet, obviously, we've only scratched the surface on our initial build out.
We've only scratched the surface on the Buildout of the electricity right now.
Going after 300 megawatts.
But if you couple that facility any couple of miners.
It gives us a really really nice.
Business and it gives us a lot of options amount of Optionality, where we can either again partner or go to the capital markets directly.
Thanks will thanks, Ken let's go to the next slide.
So this is kind of a corporate update we're going to wrap it up fairly quickly here, obviously, we moved our corporate headquarters to Nevada, but we kept on accounting office in Newport, and we have a legal office in New York.
Were actively building an asset management team through strategic hiring we hired Chris where we talked about as an example of really someone coming over very talented.
Really bringing us deals from an EBITDA perspective, and deals we would never see.
That is an improper thing where it says under management, what we really mean is we've achieved the goal of $250 million in assets.
We finished the acquisition of the datacenter that took place in the first half of the year and we successfully brought all of them in public which we think is a really a driver and an example that we can do it the team proved they could do it.
Ken obviously is intimately involved there and all demand as a senior VP of finance will is of course, the chairman of <unk> and if you look at things like Gresham and turn on Green pool assist and you look at them going public. This team has proven they can do it.
Our strategic right to buy up to 40% of AD SEC pharma continued opportunity in all demand and what the milestones could bring their all.
All the operations, we will set our improving so I'm very thrilled with their performance that they are all improving and by the way, we're still dealing with Covid believe it or not our office was affected in the last month and our travel has been affected and we presently have.
Three employees with Covid, now, which I can't go into and so Unfortunately that Covid thing is just not going away.
We've demonstrated that the Oak alliance team can execute and even if you take away. The argument is still significantly profitable and improvement in profitability.
We've already talked about the topline growth at both Gresham worldwide and causes turn on Green, Let's go to the next slides.
These are forward opportunities, we talked about already on the call a potential IPO or go public transaction per turn on Green Gresham worldwide AD Tech pharma Gray leg and then.
We're working diligently to file an S one and.
Change the name of ABL P to MTI ex international and.
Hopefully someday uplift that company so.
You know, we obviously want to bring that to the NASDAQ too we're bullish on the long term value of the technology I think if.
If we if we were to say one thing about that.
My commentary would be as we probably didn't understand truly the full complication of a rollout globally and the capital needs and then on top of that role in Covid into Italy, where they're manufactured England, where theyre partially manufactured Germany.
Well I don't know what your commentary is yet, but we we continue to be bullish here and we continue to be stubborn and the fact that we're pushing MTX for do you have any commentary at all here about maybe just back commentary I did about the frustration you've had.
I can't see this year as being a frustration I really can't.
I think this year.
Having capital and having a strong balance sheet has allowed us to make some investments.
And allowed the APLP and MTX management teams to start to execute something that.
We struggled with in the past and those struggles some of it less technology, driven but really the bulk of that was just resources, whether it's human capital or financial capital. That's that was the issues historically.
Sure. If you if you look at these forward looking opportunities one of the things that I'm excited about is you could say well all demand is a onetime event.
But when you look at the potential IPO of turn on Green and Gresham or potentially go public transactions with any of these companies here.
And there's five of them right now do you think well these onetime events can be more common than we expect.
And so if you look forward six months to a year. The question is which one of these companies gets out in the capital market with their own balance sheet.
And what does that drive to potential earnings for all global holdings and the shareholders. There and you know theres a lot of potential here, especially with AD Tech.
Churn on these five companies Gresham, a lot of potential for them to be on their own as separately traded public companies and they have they all have their own management teams, which is great at Jack has a who's who in the biotech world.
Gresham as both their own management team turn on Green closest is doing the same MTI acts with president and many until theyre doing that and the.
The Doctor and the.
Couple that runs Grail edge, they've been around for a long time. So I think the board opportunities here is that you get more of these one time events that turn into more not just one time events any thoughts there Ken.
No I think.
I think there is.
Homerun potential with SEC.
Grail edge, and MTI X well as well as process.
Talked in the past about shots on goal, but I think the shots on goal are getting more real.
And I think we're more optimistic about the shots on goal and this can all be massive opportunities.
Because of that strong balance sheet for sure let's go to the next slide.
So this is the last slide and.
I'm going to let.
We'll talk about potential acquisitions in certain categories and kind of what he wants to see when you look at the separation of duties. When you think about Henry <unk>, Our general Counsel and President Ah you, obviously identified that he's strongly involved in running the legal team, which he has built back there with James and Lora and some recent additions if you look at Cannes strategy.
The parent company to build out.
Financial reporting with recent hires and then you look at the operational side of the business, which is really overseen by the CEO will warn well I thought maybe you could talk about sort of our new parameters around trying to get those assets to a $1 billion with acquisitions in the EV in EBITDA and top line space.
Yeah.
Sure so.
Look we have some.
General.
And yes criteria, when we look at acquisitions and.
I am less focused on distressed companies and more focus on companies that are going to be accretive and have positive cash flow. That's the one thing that we've locked historically.
I think you want to be able to buy them at the right price.
Different than anything else, whether it's real estate.
Or.
Our operating companies.
But that being said.
When we're looking at companies.
If you went back a couple of slides of it with the five companies we were discussing.
What's nice about.
We're able to get these things as stand alone publicly traded companies. It gives us again, an opportunity to either one.
Make it a one time event.
Stock price warrants.
And the physician or two if we think that this company is something thats going to generate significant operating profit over the next 20 or 30 years.
Painting that consolidated company so.
It's one of those things that Todd that you and I sit down and we've looked at every quarter.
And I think thats.
That's one of the great options of having a holding company as opposed to just a strict operating company.
Again acquisitions.
Look in all the spaces, we're looking all the different.
Areas I don't care, if it's real estate biotech technology.
We're open to anything but it's got to be something that has a sustainable sustainable profits and growth.
Right.
It's not worth or Ken I Wonder if you could talk about let's say we were to make an acquisition of something that we thought was worth $100 million, we were to put $30 million down borrowed $70 million on a nonrecourse basis.
It was generating $200 million in revenue $20 million of EBITDA was picking some numbers out of my mind.
Here, but could you explain to everybody the nonrecourse side of like private equity, where we'd be able to buy a business for a certain percentage jumped borrow against that EBITDA, but not risk the parent company's balance sheet, except for that $30 million.
Right in the past we have described.
Oh global as.
Having almost like a private equity model as Republic company win, but then where I think we're really positioned to execute on that.
Chris who has a great background I'm doing.
Doing large deals he has a great background on getting those deals finance.
Creating some leverage for us and.
It is our CFO, sometimes you you're worried about taking on too much debt because it can be battalion aircrafts. The next central threat to the consolidated entity.
But if it is nonrecourse to the parent and kind of keep that debt contained within that initiative within that entity.
And that entity has the cash flow the score for that then we can do.
For more acquisitions, because we have the levers you can borrow to make that acquisition and then as that company reforms as they pay down the debt then more value the value of shifts from the debtholders enterprise value from the debt holders to the equity holder star shareholders over time get more of an inch.
<unk> in that initiative, so I think it's <unk>.
Prudent thing.
So there are some safeguards there and keep that debt nonrecourse that kind of stuff can change.
And then a separate corporation that is something that.
It can be very powerful powerful for us.
I'm pretty bullish on the company, we're going to go to the last 10 minutes, probably eight minutes of questions now.
I have some closing comments from myself will and can.
S issue to answer some of the questions I know one of the questions. I got this morning was will are we against the idea of buying back stock and.
Well I'm not going to commit to buying back stock yet I do know, there's a general thesis you and I and the board have talked about this at length. There would be scenarios. There that you would consider it I thought maybe we could get your commentary or Ken on the buyback or potentially buying the stock at the stock continues to trade below book value.
Yeah look we've had these discussions numerous times at the board level and it's always on the table in it so its something thats.
You added seriously.
We've got to weigh it against our overall needs and where we can see ourselves long term in the next five years and whether or not we think that's a better use of our cash right now I know, there's some people who look at this and say, okay about $100 million in cash.
It's a prime time to do a stock buyback.
I wish I had $500 million in cash right now.
Yes, and Thats, a little bit overstated, but.
Yeah.
Just don't know.
Right now is the time that we would seriously consider a buyback.
<unk> the.
Initiatives that we have sitting in front of us over the next 12 months.
Got it.
Any other direct questions I know Gary you Havent received a couple.
Okay.
Are we considering our cash dividend.
I don't think we would consider a cash dividend will and can until we achieved some key metrics around free cash flow and and getting to that sort of larger number.
Well I guess I would give my commentary if we're at 200 and call it $60 million of assets now where about 700 million $740 million away from $1 billion.
I don't think people understand the opportunity for the MTX machines worldwide and in the 100000 textile plants around the world really dramatic opportunity there.
For that business.
But would we consider our cash dividend.
Again right now.
We've got four or five companies were looking at some sort of path to a liquidity event.
Or to make them as standalone entities.
They can access the public markets I think when we work through that we'll be in a position whether or not we're we're able to start considering our cash dividend I think.
It's certainly not off the table.
But it's it's not something that I and <unk>.
Envision happening over the next 12 months I would think people should not be owning DPW for our cash dividend I think it's unlikely.
Given the fact that I think we're going to have high return on invested capital going forward I really people that don't think people understand that we got to the other side.
We have enough scale now and enough.
Tangible earnings power that to me where on the other side, we have a liquid market, we have a shareholder base.
<unk> key initiatives, we're getting that shareholder vote passed which took place last Thursday, Friday, and really can can Craig and David and the team that he's building out on the financial reporting side, what will has done to work with him as he migrated from being the CFO I don't think people realize the work style.
Our.
The staff and people that.
And I'm gonna be selfish here instead, it will and I recruited and convinced to come work at the organization Wills Rockstar. There's no question around that one of the best CFO I've ever known Ken was at $1 billion NASDAQ Company, David didn't have to work gene has worked at great companies.
As you know.
I just think that people don't realize the team, we're assembling and that we're still.
For us for future growth.
And we have multiple shots on goal to get to that 1 billion in assets. So I'm just simply <unk>.
I don't believe I believe that we can generate a stronger return and eventually that will show up in the stock price.
I've personally been buying too often company or a private holding company that will and I control.
I've been buying btw stock as reported almost every day, so I simply if people want to sell to us at a discount that's the market's choice.
I don't have a commentary there other than my actions speak through their check revenue.
So any other questions there.
Okay.
No we're not investing in dose lung we are the only crypto currency that right now I think we will and I and Ken are comfortable with.
Is bitcoin and ethereum.
And we're primarily going to stick with bitcoin with there may be a stake in the theory of in the future and as we said we're committed to having up to 10% of the asset base in those crypto currencies from an asset generation perspective, now that number could be bigger or smaller obviously, a big one goes up in value.
But I don't have any commentary there it can go back to the.
The slides there.
I get this question I got this question several times.
There'll be ipos will kind of handicap that.
I think it's almost inevitable that there will be other companies, we maintained either a subsidiary or a partner company to go public you can never.
Guarantee the timing of them.
But Ken has set the stage with B with hiring gene and the ability for our internal teams.
Separate financials.
We're working well with our auditor listen Ken I'm going to let you have a last word here and then we'll and then I'll wrap it up Ken any thoughts on the first half of the year anything else you want to add to it Europe.
Thoughts on the next six months to year.
First half has been great for us has been very encouraging to see the bottom line performance and our and the ability for us to two.
Raise equity and to really fulfill.
The goals that you have outlined several years Todd.
Getting the holding company.
Capability and accuracy capability to a private equity type capability. So it feels like it's coming together.
What's happening real time and.
Kurt encouraged from what's on the table.
The.
The quality of the opportunities that are out before us.
It's very encouraging.
I feel like with the future freight revenue.
Well any thought process on the final words here.
Hum.
I think again the company historically has lacked tulare unlocking in two areas. One is capital we've addressed that.
Certainly looking at some of these opportunities that we have that will increase our balance sheet, whether it's unrealized gains our operating profit in order to help grow to the 700.750 to get to $1 billion.
So.
I think we've dealt with the balance sheet side, but I think we failed to dusk discuss are really going to todays call was.
Now, it's not just the finance side that we've been increasing the <unk>.
Our skill set and the level of expertise we have.
While down a ton of key hires on the legal side and we've also brought on Chris Kuehn I know, we mentioned his name a little debt.
But theres also consultants that have specific.
Experts that come along with people like Crestwood as well.
We are doing.
And entering into relationships with and I think that.
I think all of those are going to come together and really help us drive this one 1 billion.
Hey, So I'll end it on this note I will just go a little bit of my Thunder.
We've never been in a position will be financially stronger we are financially strong we have a lot of wherewithal, we have good banks behind us.
We recruited a lot of talent and I'm going to go through with Henry <unk>, who is our general counsel, who bring up brought on James Turner.
Laura is there you just brought another lawyer, so were really strong and the internal.
Legal team and what Henry's built around James James It's been a wonderful addition to Henry brought over.
On the financial side of it can David Katz off gene Hoe land, who we have internally.
The team at all demand the team at aggression worldwide cool assist the management team aggression. I think this is really a story, where my job is becoming a lot easier to allocate capital because we've gotten really talented people behind us.
Will is my business partner is a large owner of Dolphin company and he is my partner and making decisions along with the Executive Committee with Henry at all global and so I think that people don't realize the talented group of people. We've hired that we've come to to get together and work with with Chris <unk>.
And Darren and Joe and Douglas gens and Markus over into he decided it was almost an Jody I think youre going to see great things coming from E V. Finally.
That part as you know obviously not baked into the cake yet. So that's there's a lot of upside there I think you're going to see Gresham finally, making a move towards a public company a turn on green, probably hopefully getting a decent valuation.
The people the people we were associated with an AD tech.
And <unk> I, just think there's a ton of potential now with this really strong balance sheet and we don't even know what the potential that Chris brings with the people. He is connected with the distressed assets. We can buy we can buy things out of bankruptcy. We can buy things that are up for auction to have EBITDA. So I'm I have never been more bullish on the future of the company.
The future of our.
Our business is to take the assets that are using them on the call.
Our legal team, calling them. So I appreciate everyone being on the call will and Henry are willing.
Ken Thank you so much.
Great six months, we're appreciate the all the shareholders who stuck with us.
Obviously, you can see some of the vanguard to the world and other people taking positions are at one of our goals is to get a stable shareholder base and people will allow the company the holding company to grow we're pretty thrilled about this and look forward to seeing you at the end of the third quarter reporting on what happens in the third quarter and other milestones happening this year.
Anything else.
Alright, everybody take care be well, Ken well, we'll talk to you later.
But.
Yeah.
Okay.