Q4 2022 180 Degree Capital Corp Earnings Call
They call. This is Daniel President portfolio manager of 108 capital, Kevin Rendina, Our Chief Executive Officer, and portfolio manager and I would like to welcome you to our call. This morning.
All participants are currently in a listen only mode. Following our prepared remarks, we will open the line to questions. If you would like to ask a question. Please press star six on your phone or click the ask a question icon. If you are participating by your computer I would like to remind participants with this call is being recorded and then we were referring to slide deck that we are posted on our Investor Relations Webster.
Right at I R. Dot 180 degree capital Dotcom under financial results.
Police turned our safe Harbor statement on slide to this presentation may contain statements of a forward looking nature relating to future events statements contained in this presentation that are forward looking events are forward looking statements are intended to be made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act 1995. These forward looking state.
Ants are subject to the inherent uncertainty as in predicting future results in conditions. These statements reflect the company's current beliefs.
And a number of important factors cause cause actual results to differ materially from those expressed here in please see the company's filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties associated with the company's business that could affect the company's actual results, except as otherwise required by federal Securities laws 183 capital Corp on it.
Takes no obligation to update or revise these forward looking statements to reflect new events or uncertainties I would now like to turn the call over to Kevin.
<unk> good morning, everyone. After five years of consistent outperformance 2022 was a difficult year for 180 on slide three we show is February .
The fourth quarter was challenging for the entire company when taking into consideration the entire portfolio specifically the legacy private portfolio that came from Harrison Harris, our predecessor Company December .
December itself is challenging for the public portfolio will give it the frenzied tax loss selling of many of our holdings Alrighty V declined to $6.32 71 per cent of that decline was due to the private portfolio, which as many of you know we simply have had no control over that was led by quantum attacked by them.
The balance was due to a decline in the value of our public holdings, namely synchronous Arena group Comscore sent and <unk>, we'll have more on those later, let's.
Let's turn to slide four.
Which may be the most important slide in the deck and I'm gonna be blunt here, so while the month fourth quarter and year were disappointing to me, let's understand where we are as we start 2023 <unk>.
The sins of Harris and Harris are almost done if not totally done hindering the 180 shareholder we've undergone over the last five years before last year or slow and methodical business transformation, we have mitigated the dampening effects of Harrison Harris portfolio by generating nearly $3.50 of gains in our public portfolio.
Since we started.
While it's almost unconscionable that the private portfolio in a bull market has had $1.80 of losses through the end of last year. It is what it is.
But it's over it as of February 24th we now have a total of nine and a half million dollars in private holdings, but it's really seven if you remove the terror milestone payment, which in and of itself is about two and a half million dollars. So the private portfolio now is less than 10% of our nev when 180 <unk>.
Started I said it was our goal to have 100 per cent of the assets and public related assets for transparency purposes. We are now 90% of the way they're.
Six and a half million dollars X Terra is the remaining value of our private portfolio given the write downs that we took in the fourth quarter to sort of cleared the decks as we think through the next five years.
Slide five is a different version chart to show you how far we've come and remaking the business. We finally have a balance sheet, where we control over 90 per cent of the assets and you could see here now our ear in 2023 was disappointing as it related to the public <unk> holdings, and we own that but unlike the last six years it'll be nice to her.
Have our performance in the future dictated solely from our strategy of picking public microcap stocks without having to fight the massive headwind of a private portfolio that not only didn't carry its weight in the last six years, but actually hurt us.
The show you how linked our future now is to our core competency of picking public stocks, let's look at the impact our public <unk> has had an R. N. A V. In 2023, keeping the private portfolio stagnant year to date or book value has climbed as of February 24th to $7.08 on the.
Back of a 14.8% gain in our public portfolio R. N. A V would now be up 12%.
If this was the case when we started in 2017 of 14 per cent increase in our public stock picking would have had just a 2.9% increase in R. N. A V. You can see now how are N. A V growth is more directly linked to our public stocks rather than having an esoteric private portfolio impacted it's easier we <unk>.
<unk> for shareholders to judge how we're doing and will be much more transparent in the next five years and we were even in the last five we're finally change the company the way we always wanted to when we first started.
Slipping skipping ahead to slide six you can see the dip in our cash in public securities here. It was indeed, a rough quarter for our stock picking with a 7.6 per cent decline versus a similar increase for the Russell Microcap index I'd encourage everyone to read our shareholder letter, where we take a deep dive into the markets are holdings and all the rest.
We review 2022, and we provide insight into 2023, we struggled last year I missed a risk off environment with the Russian war with Ukraine subs.
Subsequent higher rates to combat inflation due to a messy supply chain, which was caused by Covid. We were wrong in thinking that our holdings would perform better given their low valuations to start and for the most part good fundamentals except for the case of quantum we were wrong. The messier the capital structure of the more investors couldn't wait to sell which is <unk>.
One reason why names like synchronous an arena underperform not only in most of 2022, but it's certainly in the fourth quarter.
Then the fourth quarter came especially December and I haven't seen tax loss selling like that in a very long time and unfortunately, we were the recipients of it it wasn't enough that synchronous got cut in half during the course of the year. It got cut in half and one month in December as tax loss selling was wrapped it.
With 2022 in the rear view in our sights on.
2023, being here now being pollyanna ish isn't part of our thinking as we acknowledge that rates are materially higher than they were just 12 months ago and this increase will no doubt have a dampening effect on global growth rates as well as equity valuations, that's here's a nutshell of our views, which will which we support in.
Shareholder letter from a number of charts and research if you happen to read the letter.
One or over all viewers inflation peaked in the multitude of fed rate hikes has already had a significant effect and lowering inflation. Two we believe we are already in some sort of recession, given real G. D. P. As a client for more than two quarters in a row already.
Three we do not believe we are headed for financial Armageddon like we had in 2008 and 2008, we had 1.3 trillion dollars a subprime mortgage assets on the balance sheets of banks and insurance companies that financial leverage simply doesn't exist like it did in the past, we believe stock price valuations have significantly discounted.
Dire economic outlooks that are not occurring currently and in fact may never occur. We believe we are headed to a normal environment, where the market can no longer rely on free money and quantitative easing and zero percent interest rates stocks will have competition from the bond market and we do expect multiples at a whole contract but bud.
<unk> will continue to be popped slower growth rates will inevitably occur and companies would real revenues and real cashflow can still prosper for.
For the time being we believe rightly. So gone are the gold rush days, when talking heads financial fees and children pontificate endlessly on how things have changed and how we were in a new world order would these individuals arguing for an entirely new investment landscape. So we think back to the basics scenario where companies or.
Being judged based on real cash flow and real revenues will come to exist and be more important in the next five years and it was in the last five years.
Slide seven shows are quarterly performance for every time frame, obviously, we didn't get the job done in 2022, we were down every quarter. The calendar turned on January 1st and are 14.9 per cent performance to start the year Ah doubles that of the benchmark we're off to a good start but it is what it is nothing but a start and we know how.
Quickly things can change, but at least I'm sitting here today I'm happy that were up 14.8% instead of down 14.8 per cent.
Like we actually were in the first quarter of last year as you can see from that short on slide aid here the sources and changes for our assets in queue for as you can see $1.27 or 71% of a decline came from our legwork legacy portfolio.
Slide nine shows are 22, a year to date numbers not pretty Ah public performance. If left alone was not competitive, but if left alone would've caused or any veto drop only 28% versus what we're worried it ended up at the end of the year layer on more than a dollar of losses in the <unk> private portfolio for the year and you get what was a very difficult.
All ear.
As you can see on slide 10, obviously, while last quarter and last year were substandard. We've enjoyed significant outperformance from a public holdings and while it would've been nice to get some help from our private portfolio. It hurt us to the tune of $1.80 per share. The good news and I really cannot emphasize this enough or private portfolio is now <unk>.
<unk> at roughly 65 cents per share rather than comprised of over $5 a share of N. A V. Just six years ago.
Slide 11, the performance of every stock we owned in queue for you can see arena group synchronous sent <unk> and Comscore led the way with significant declines to.
To say a few words about each of our holdings sit down in the past quarter. Please turn to slide 12.
On December 13th 2022 Arena announced the acquisition of men's journal using a new death facility can be rally to fund the acquisition. The facility was meant to be a bridge to completion of an equity or other type of financing as it has terms that include increases in the interest rate.
Quarterly starting in March of 23 with that lack of transparency in confusion. Unfortunately arena stocks absently collapsed from approximately $16 to $10.61 at the end of the quarter as it turns out we liked the transaction. It was the funding a piece that was was a little bothersome to.
The Street <unk>.
Comscore continued to improve to to show improved financial report results for Q3 and announced the negotiation of a day to deal with charter to provide lower cost increase data access and a longer term a form of exclusivity with regards to the agreement, but that said the stock was unable to <unk>.
Cover from the collapsed it started earlier in the year due primarily to continued and <unk> and big ambiguity can never say the word.
Around the potential for the special dividend to be called by the preferred stock holders and other concerning corporate governance matters.
Service did continue buying scores common stock in the open market with large purchases of a million and a half shares at $1.10. The company does report Tonight, we truly believe in the business. We are on the cusp of ramping up her activism. If in fact, we don't see improvements from the.
Corporate governance from the board of directors that we intend to see when they report their results Tonight.
In terms of we did have a couple of the names of help potbelly continue to provide strong results across all financial and shop level metrics. They also provided a strong guide for Q4 and announced the signing of four additional shop development deals with existing franchises.
Commercial vehicle group was up in the quarter. They continue to show the improvements made by management <unk> negotiation of contracts and the streamlining of their business. They reported new business wins continued strong free cash flow that allowed the company to pay down debt near the top and of the guidance and all of the group reported results that exceeded.
All <unk> expectations and guidance with continued strong performance across all of its business.
The company also notes that it continues to be.
Constrained in its rental fleet and does not seen any weakness in demand at all.
The next set of slides starting on a slide 15 show our performance for calendar 22, which tells the picture of each of our holdings. We also include a slide 16, as we do every quarter snapshot of each of our holdings since the day, we started and clearly while 22 was an underperforming year. The six years, we have been at this have yielded significant outperformance.
All of which leads to slide 21, the complete look at what we have done I'd say last year knocked out three numbers down three your numbers down, but it did very little to our five year performance numbers and our inception numbers. Fortunately this year is off to a better start so we hope to be able to report a much different picture.
Then they start with dictate <unk> depict when we visit with you after Q1 of this year.
And finally to reiterate we've undergone significant business transformation that is essentially complete, albeit not necessarily the way we would have on them at the last piece to fall by taking write Downs and act by them and quantum.
And remember between Daniel and we own eight per cent of turn our full team includes the board, including the board on 10% of the company. We're economically a line with our shareholder nobody feels the pain of 22 more than we do it is also over and as we begin 2023 and the next five years I'm thankful and I'll have to stare at many of the private holdings as we did.
When we first started instead of having $50 million a private holdings to worry about in which we couldn't control we were sensually down to 266, and a half million dollars. The Dexter cleared in our performance now will be dictated by our primary focus of picking a small microcap stocks with a grandma died focus and an activist bent.
Daniel why don't I turn it over to you know.
Thank you Kevin.
So as Kevin just mentioned our business transformation really is almost complete and if you turn to slide 22, I'm really looking forward to the day when we actually no longer have this line is part of our shareholder update call.
This quarter, we wrote down the value of our holdings and add by them due primarily to declines in the value of public comparable companies.
Mailed out life has been written down to zero. Following it's management's continued endless failure to raise capital filing. These write downs one eighties remaining private portfolio has only one material possession, which is <unk> <unk>.
Total assets and the remaining portfolio is Kevin status, approximately 9.5 million and all of that 2.4 million are payments, we would expect to receive from the sale of <unk> with $1.1 million would be paid in April 23, and 1.3 million in April of 24, the remaining legacy companies make up approximately 1.5.
Five per cent of our net assets as of December 2022, and less as of today with the appreciation and our <unk> public.
Public holidays.
There really isn't anything else worth discussing relating to these assets so I'm gonna move on.
Please turn to slide twenty-three for.
Q for 22, a regular operating expenses equals approximately 800000 versus approximately 750000 in queue for 21 main increase year over year relates to add an operating expenses, which include our marketing efforts and I'll discuss in detail in the next slot will.
Who maintain a lean cost structure have side effects expenses for being a public company focusing on our our expenses on activities designed solely to enhance our investment performance or to increase our revenues managing outside capital.
That has been the case since Kevin and I took over running 180, we have been consistent in saying that the management team will only participate in a bonus full if our performance warrants. It. Yeah. This is Sarah performance for 22 didn't warrant a bonus pulling us know performance based on our nurses are created at <unk> as of the end of the <unk> 22. In addition, no.
New bonus schools to be created so we overcome a high watermark step of our public holding some payment and historically <unk> portion of the prior bonus pools will require the same.
With respect to each year that they were established.
Our management team and board are acutely aware that we are in business to serve our shareholders. Please turn to slide 24.
As I mentioned some of the increase your over your expenses relates to our marketing efforts with each strategies. We showed you last quarter. Some of the efforts that we had and as you can see on this five pieces done a great job in getting us in front of leading financial journalists to help increase the exposure of turn.
We continue to pursue these opportunities with Ernest.
Please turn to slide 25, and 26, we provide these slides each quarter the naval our show just to look at the trend of our total expenses and compensation related to expenses as a percentage of net assets.
This year, the percentages increase primarily because of the decline in that assets. We continue to anticipate reductions in our operating expenses as a percentage of net assets will be <unk> based on growth in our net assets.
Rather than further reductions in our expenses.
We remain committed to treating every dollar shareholder money with the utmost care and consideration please turn to slide 27.
Here, we present, our scorecards Q4 of 22 based on certain metrics somebody track throughout the year. While 22 is difficult. We believe we're well positioned to grow value for our shareholders across all these metrics over time as we have done during the prior five years and it's 180 his existence.
Please turn to slide 28 as of the end of Q4 22 turned traded at 84% of <unk>.
Security is a publicly traded companies and cash in on their assets and their liabilities, where 541 per share stock prices 528.
You receive if we receive 100% credit for the value of these assets. The market is describing a negative 13 cents per share or negative 1.35 million to our legacy private portfolio as of the end of the year.
Now if you take an update this analysis three February 23rd of 23, given the discussion earlier this ladder.
Using solely changes in value of level, one or publicly traded holdings or assets that are valued using level one are publicly traded.
Amazed information turned traded approximately 75 per cent of now our security is a publicly traded stock cash and other assets whereabouts 616 per share.
Our stock price was 528.
If we receive 100 per cent credit similar analysis, the market describing valued proximately negative 89 cents per share a negative $922 million for a legacy private portfolio is Kevin mentioned earlier and I've talked to my earlier menu that 2.4 million of this legacy private portfolio payments from the sale of terror.
Val health and we expect to receive that first 1.1 million in April 23, we received 200, the first 250000 in.
December of 22.
Given how painful the market has been in 22, we think the current construct of our balance sheet is provided really a true, florida or share prayers. While nine of 22 has been fun had 20th 2017 to 21 not occurred our share price would be nowhere near where it is trading today.
Now please turn to slide 29, and I I'd like to end with examining this discount to our stock trades that with respect to an Avi and a little more detail. The chart shows our stock price versus Nab over time with the NAV, that's being used in the denominator.
That is the prior quarter disclosed NAV and you notice that the most abrupt jumps and jumps or declines occur when the new and a quarter Nab is used in the calculation.
100 point eighties assets are now comprise substantially it publicly traded acid as investments.
The Nab is much easier for shareholders to estimate, particularly relative to our share price. We also believe that it will be easier for us going forward to provide a closer look at our business at various points of the year outside of our normal reporting cycle. While it is still very early and 23 and the performance of the quarter and the full year maybe materially differ.
<unk> then as what we've listed as of February 23rd we are encouraged by this started twenty-three and got an important to provide the interim update to shareholders.
And that we <unk>, we separately from our normal earnings release as you can see from this chart our stock train discounts NAV expanded during due to growth in our naff rather than declines in our stock price.
Our belief in it the increase the ability to understand where <unk> at a more frequent basis lane in our continuing quest to narrow the discount between our stock price and <unk> <unk>.
That said, we focus on what we control and can control and that is increasing 180 degree capital Carbs Nasty, we were able to do that the stock price should follow as it has in her six year history and for the benefit of its shareholders.
He gave that we certainly do not believe turned stock price reflects the appropriate value of 180 and as you've seen as soon pry quarters in similar situations management looks forward to adding to our ownership of 180 and open windows for such purposes, We would now like to turn open to call for questions.
If you have a question. Please type star six on your phone or click the ask a question icon. If you are participating by your computer.
Give it a minute for the kids to open.
While we're waiting <unk>.
[laughter] okay.
There you go on our first question comes from Brian Alexis Hey, Brian .
Can we hear you Brian .
Can you hear me.
Yes, now I can hear you Brian .
Oh, there you go I guess I can turn off I need a question for you on <unk> I read in your letter that there's.
Kind of capital raising deadline of now ish for the.
Depending acquisition and and then then the the target and can kind of decide what they want to do.
I'm, just assuming let's say that it doesn't work with them I think you have roughly another E. R eight months or so to <unk> eight months to find an acquisition targets.
Can you just say what would happen.
To the turned balance sheet, you know that you guys were the facts sponsor if nothing happened then the this back it's redeemed.
You know have <unk>, what's the read through how do we think about that scenario.
Yeah. So thanks. Thanks for your question Bryan So obviously I can't speak too much on <unk> and the specifics really into it except for what is publicly known as you mentioned there is that ability it's not a it's not a.
A an automatic determination in terms of if the board of the target an ocean.
Wants to pursue different alternatives and terminate the does this combination agreement. So you know that and and that deadline for having the capital commitments is today, there hasn't been anything announced publicly of guarding that so I can't again can't speak in in specifics if the at the end of the day.
Day this transaction does not go forward.
From a technical perspective, the spak is able to extend its life through the through through September and then but to do that the sponsors would have to put in approximately $185 per month $185000 per month.
And so I I you know I think that would have that's that's a decision that would have to be made if the if an ocean where to terminate the agreement or we were to terminate the agreement with an ocean.
And but if at the end of the day under the scenario, where the back was shut down and the trust distributed then the result to turns balance sheet would be dimmitt would be diminished amount of capital potentially coming back depending on how much is left.
In the operating account at the end of the day right now we have it valued at about $2.7 million. So you know in a downside scenario. It would be you know approximately 27 cent impact to nap.
Got it than what I would say there Brian hang on one second is.
It's.
It's a good company.
In a <unk>.
Very difficult market for everything funding.
The debt markets.
<unk> raising capital.
So there's been a back and forth in terms of.
Trying to find the right value for the business and.
It will either will either be in agreement or there will not be I wouldn't take it as if you don't see an announcement by the end of the day that it's over you can always have extensions and there's a give and take always back and forth between investors and the board. So it's still a work in progress.
We hope to be able to conclude on something but as Daniel said, if we don't.
This will have been a waste of time, but it but it will and it will the waste of time will will have been $2.7 million as David pointed out.
Got it then if I could ask one more.
<unk> D wave hard not to notice the volume on February six are you guys able to share anything about your position in D wave as of today.
No.
You know that we can share with you.
What are <unk>.
Ownership stake in.
And a particular day you know.
Okay can't do that I'm.
Thanks Bye.
Brian <unk> I will say one other thing that Daniel Human day session is over.
Oh, sorry, I hit the wrong button there.
[noise] we've gotten.
[noise] Killeen day session has started to ask you a question. Please press star six this line is now on hold.
Mmm Mmm Mmm Mmm Mmm.
[music].
Mmm.
[music].
Because we now know what we own and we can value what we own because they they all trade on the NASDAQ with the New York and the rest.
But as it relates to specifically <unk>.
Sharing with folks outside of form.
No you know 13D or 13G filings we can <unk>.
Probably won't ever provide what we're doing in the middle of a quarter with regards to our position that just wouldn't make any sense now if we exited at and we were a filer.
Probably see that but we we don't we're not gonna get ourselves in a situation where.
We're we're showing our hand, when we we don't have to show our hand, so that's kind of the.
Professional answer Brian to your question, Okay date of birth.
Yeah, sorry about that sorry, Buddy I think we're back on Adam while though please go ahead.
[noise] good morning, Kevin and Daniel Thank you very much for taking my questions. I Hope you can hear me okay.
Yes, we can.
So I apologize I got on the call a little bit late you may have covered this when you're prepared remarks, but two topics I bought them right down in Comscore activism.
An egg volume right.
A bit of a sizable right down obviously and I wonder if you could provide a little more color on the factors that drove the size of that right down I've done virtually what factors you should going forward that might lead to a write up and then I'll follow up on Tom's score.
So Daniel I'll, let me to attack that environment.
Go ahead.
There are two reasons.
Look when you do an analysis of any of our private holdings. You know this encompasses a number of factors it could be the last rays of the company did but if you're outside of a raise then you sort of have to look at the company profiles and you do and options pricing methodology with regards to it and clearly 2022 was a difficult year for the add space and a.
Such as you're looking at a bar and when they were a year removed from doing a deal you have to value. It differently than you did starting me or Daniels or anything else there.
Nope you raise it right.
Yeah. So.
And I don't know what to say I mean, they they need to they need to run their business.
Better I mean, [laughter], that's the best way for me to phrase it adamant, it's the whole frustrating part about all this stuff is I I I.
I don't know I can't control it.
We have no say other than we could we could we speak to the board we speak to the management team but.
<unk>, we can't control anything and they've got a lot of work to do.
To improve their business model they have a board that would more than love for them to be public.
But are they really ready to be public I mean, that's all all the question. It was a challenging year for the industry and obviously, if you could see from.
Mark there was a challenging your frag volume that's really all we can say on it.
In terms of <unk>.
Yeah.
Just to find out if I'm if I'm at so so the the bulk of the right done was operating performance driven it wasn't discount right because of the backup in interest rates, but funds and so forth. It was mainly operating performance of the company was the principal driver.
Oh, no that was the Bulldogs, but also yeah.
Yeah. So it says the option pricing models do include and it's actually not discount rate base, it's actually when interest rates go up the volatility the end and volatility also goes up.
You can actually see the option pricing models have an option opposite impact it actually it really comes down to is Kevin said when you have a company that has done that has that financing. This over a year out you know under a C 820, which is the accounting standard for determining fair value.
You need to incorporate other factors into determination because there's been a long time since the you know that price and evaluation was set and so when you looking at both the you know some of the input. So we had around the company, but mostly related to the performance.
Comparable related companies and I again, it was it was a pretty difficult year for most AD companies, especially small pack a small cap as we know and that being incorporated into value and determination of value led to the.
Made it is significant decrease in value.
Okay. So if I'm hearing you properly Joseph it's really more multiple compression and the cops at rather than.
Way off target operating performance of the business.
It's still a relatively early stage company right.
So products on the market, it's not you know it and you know they're not the the the the actual operating performance isn't out there right, but they do have some products that are on the market, but it's thoroughly stage and if you look at you know if you look at just the the weather right and you know a lot of their stuff. They they developed fungus sides.
That's one of their main products that's on the market for funding for fungus sides you need all you need you need wet weather and if you look at just the weather from last year. It was difficult in some of the main growing areas. So you know there's there's no that's not to say that they don't have really interesting products and capabilities.
And.
And there is the opportunity for you know growth into the future, but you know in 22 was a difficult year.
Needless to say needless to say as it relates to.
Coming public this market is not about idea stocks, we don't need the billion dollar ideas right now.
We were in a risk off environment, where that sort of the last thing on investors' attention. So.
Named like this just get pushed Chris pushed to the back of the line. If if in fact, there actually is a line.
Obviously disappointing.
We have a high regard if it had a high regard for the company.
And it's just one other just another reason why.
It's hard for me to ascertain Oh, Harrison Harris existed for as long as it did with names like this.
Because we as Daniel said it is early stage and how long we've owned it what they are and how long have you on this.
<unk> was 2014, if I remember correctly.
It's nine years of early stage D wave.
It was funded in 19.
<unk>, Yeah, I can't believe I'm, saying this was in 1999.
It was the way it was founded in 1999, we invested in D wave in 2000 actually I take back what I said earlier bag by them, we invested our initial investment data <unk> 13 <unk>.
And our initial investment in D wave I believe was in 2006 or seven.
It's insane that the company existed for as long as it did <unk> inevitably would've would have ended up as a zero.
If it didn't change of stripes on Comscore Adam.
Two business that it's a real franchise.
The board has done some good things they hired John Carpenter.
They've been buyers of their own stock in in in the open market Board members, specifically service as well.
Vitiated cost improvement program.
Which should help their EBITDA margins investing in the right areas.
And so they've done some good things here.
Here's where the issue is number one it's.
It's a 10 person board.
Which is completely unwieldy and out of <unk>.
Pocket for a company of this size is just too big the.
The compensation in 2021 was $4.1 million paid to the board.
Now some of that was payback from 27 unconscionable amount of capital.
When I was on the board of a company.
The Street, we didn't we didn't get paid I don't think we took zero cash from the company because our economic incentive was a 17 per cent ownership stick that we had in the street well some of the.
Preferred holders, which I have to see teacher actually paying themselves as well.
That bothers me.
And.
And that needs to change.
You have a lead independent director Who's been there for 15 years wasn't added a day of value in the 15 years that he's been there and he made $900000 in 2021, that's disgraceful and agree just.
And they're not addressing the issue of the preferred where it has dominated the capital structure, there's a special dividend out there <unk>.
Which the company is entitled which the preferred holders can call, except they can't call. It because it would put the company at risk.
And the company doesn't necessarily acknowledge this they don't really discuss it or they're in a weird spot because.
They can say, we can't pay it on the one hand, except on the other hand, they can't pay it and and the special dividend is not going to be called that everyone thinks they're gonna call. The special dividend. So there's a number of things at.
At the board level, which needs to be fixed and altered there's more alignment that the preferred shareholders could make.
With the common shareholders to show that there are lined with the common shareholders and we're gonna press, we're gonna we're gonna we're.
We're gonna get more aggressive and some of our commentary if we don't see some significant changes we're done talking about the things that we think they should be doing we're.
We're gonna start demanding that they do certain things.
And if that means writing a public letter then we'll write a public letter I'm hopeful I'm hopeful we don't have to do it in the board will will operate properly they need to shrink the size of the board they.
They need to shrink the comp that's pay to the board.
They need to deal with the special dividend.
Because you can't have a board that's paying themselves $4.1 million and then telling the C. E OS of fire a bunch of people or hold People's comps you know, what they've left and inflation. It just it doesn't work. So the people that had been as the disadvantaged here of the employees of Comscore.
And the board it has a responsibility to not serve preferred shareholders of responsibilities to common shareholders and we're gonna make sure that they're aware of the responsibility. So it's completely agree <unk> mispriced business.
Like $1.16 makes zero sense to me zero, it's worth three times that amount now.
But the boards got basically deliver on on an enhanced corporate governance practices, they're just behind the April here. So we'll see if they do it.
Hopefully well.
Time will tell but we <unk> we're activists for a reason we're never gonna be able to run a proxy contest I'm I'm. The first person that we're not gonna waste service shoulders money by <unk> watching a proxy contest, we can never win but we will <unk> will make their lives a little more difficult by being very bold and and and letters written to call.
Shareholders and employees, if they don't change their stripes.
Long winded, and that's where I can sir.
And maybe the only thing I would add to that is well you know we've had a good dialogue with them. They have done a number of things that we have suggested and they have been somewhat responsive.
It's really these remaining at remaining topics that we think you know if they're if they if they actually focus on and work to resolve that should unlock value for everyone.
Alright. So thank you for the help of comments on and Kevin. Thanks for clarifying about a potential proxy contests are obviously under Delaware corporate law. The board's obligation is to the common shareholders above the preferred.
Could you envision some sort of contingency litigation around fiduciary duty here, what other forms might activism check besides the letter writing.
Yeah proxy contest, probably not gonna do.
The Delaware courts had been very emphatic.
About what the obligations are of board members that as they are there to facilitate the rights and represent the rights of common shareholders.
I haven't really done anything to violate.
The right.
I mean, what are they done.
There's nothing to sue them over yet.
But we haven't we're watching and.
You know if they cross the line then litigation as <unk> as an open possibility.
Like I said that the day. This point, we've had a good dialogue.
With the with the board.
But the dialogue has stopped being a dialogue because they're not addressing certain things that need to be addressed they've addressed a lot of other things that they need to keep addressing the issues that are plaguing. The stuff. There's no reason given the results while the share prices of dollars 16. It was three times the price.
In April of last year, three times nothing's changed in a matter of fact, the business is better.
But what.
Last year, if it were more you better.
What happened last year, if you remember is.
They because the prefer does not calculated as equity according to Russell.
And so they they.
They unfortunately ran through to the downside where the market cap levels were to remain in the Russell and.
And we kept sending him notes conferred somebody if you prefer it because you convert it to calm and it it.
Some economic interest to you, we weren't asking them to lose economics here.
But if you do that your market cap will be higher because now because obviously communist calculated as equity in you can retain your status in the Russell they just completely ignoring it ignoring it ignoring it is ignored it in the stock went from three to basically $1.50. As a result of the the Russell being kicked out of the Russell and so we're not going to allow them.
<unk> to disregard the things that are important to this equity price which is.
Dealing with the prefer dealing with a special dividend talking about it.
Being transparent about it they're just ignoring it but hoping it will go away, it's not going to go away.
And then the dollar 15 proves it.
But it's not going to go away because we've had a rally in the market and the stock has done nothing so we're on it litigation potentially possible no proxy contest.
But public letters for sure and if that embarrasses certain members of the board so be it clean up your act or if you're gonna get a letter from a big shareholder.
Okay. Thanks, very much and keep your chin up does.
Thanks, Adam Adam have a good year.
Again, if you have a question. Please press star six on your phone.
I'm not seeing any other questions on the queue.
So look thanks, everyone. It's it was a good five years and then a bad bad last year, there's no there's no getting around that.
Promise you full transparency when we got here.
That means when it's good it's bad you're gonna get the same level of transparency, we don't hide behind bad performance.
We had that performance in our public portfolio last year for the first time since we arrived and that was disappointing.
And while we also had hits in our private portfolio, which was completely disappointing.
And not helpful. In 2022, as I said, our business transformation is now 90% complete $50 million worth of assets that we had in private holdings. When we started is now down to six and a half million.
And so as we stare down the next five or 10 years or performance is going to be dictated by the public stock picking that that we do here and that's gonna drive R. N. A V. Unlike it has in the past five or six years, where the private portfolio is still dominated.
It was the great majority of our assets for more than half of the last six years left no longer the case. So that's not to suggest we're gonna have outperformance, that's gonna take blood sweat and tears and a lot of hard work, but the good news for us as I no longer have to spend a ton of time worrying about which private portfolio may or may not hurt.
Does this quarter, we've had some wins in the private portfolio throughout H G. L. In Petra, but for the most part as you can see in the slides $1.80 losses in the last six years has been nothing short of a tremendous headwind that no longer exists exists as we stare at the next five years and with edit transparency should <unk>.
Lead to a narrowing of the discount and remember at the end of the day the more that we build scale. The more opportunities will have to return capital back to shareholders, whether that's share repurchase or dividends and if the discount never narrows and we could always close it down and give all the money back to shareholders. That's not for today's discussion, but as we think through the next five years, we do.
Have a chance to make a lotta money here for our shareholders and we thank the dislocation of the equity markets and 2022 is gonna serve as well as we look out the next three years. So thank you for your time today, we look forward to chatting with you about our Q1 results. If anybody has any questions you know where to find us please email or call and we'll be happy to jump on the phone with you and discuss whatever it is.
So you wanted to discuss so thanks.
Thanks, everyone now disconnect.
[noise] good.