Q3 2023 FG Group Holdings Inc Earnings Call
[music].
Good morning.
And welcome to the F. G Group Holdings earnings Conference call for the third quarter 2023.
At this time, all participants are on a listen only mode.
A question and answer session will follow the formal presentation.
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I will now turn the conference over to your host John Nesbit of IMS Investor Relations.
John you may begin.
Thank you good morning, and welcome to F. G Group Holdings earnings Conference call for the quarter ended September 32023 on the call today are Mark Roberson, Chief Executive Officer, Todd Major Chief Financial Officer, and Karl <unk>, Our chairman of the board of directors.
Before we begin I would like to remind everyone that some statements made on this call will be forward looking in nature. These statements are based on management's current views and expectations as of today and the company is under no obligation and expressly disclaims any obligation to update forward looking statements except as required by law. These statements are also subject to risks and uncertainties.
And may cause actual results to differ materially from those described in today's call risk.
Risks and uncertainties are also described in the company's SEC filings.
Today's presentation and discussion also contains references to non-GAAP financial measures. The definition of non-GAAP terms and reconciliations to GAAP measures are available in the earnings release posted on the Investor Relations section of the website are non-GAAP measures may not be comparable to those used by other companies and we encourage you to review and understand.
All of our financial reporting before making any investment decisions.
Like to remind everyone that there is a slide presentation accompanying today's presentation on the company's website. So at this time I'll turn the call over to Mark Roberson. Please go ahead Marc.
Thanks, John Good morning, and thank you all for joining us today and happy Veterans day to those of you who served.
We've been transitioning Ft group holdings into a holding company really over the past several years.
A few of the key steps in that process and accomplishments, including turning around and then monetizing the convergent operating business.
Converting our digital signage business into what is now our investment in Firefly.
Investing in a task of capital and then turning that into Green first.
And most recently completing the separation in the initial public offering a strong global entertainment.
Okay.
When you look at F. G. H today, our core holdings include the controlling stake in strong entertainment where are we.
We hold approximately 76% of the common shares.
And non controlling stakes in Green <unk>, Chief financial and Firefly.
We also still have commercial real estate holdings in Georgia, as well as in Quebec. These.
These valuable real estate holdings were retained when we sold the convergent business and when we spun out the straw entertainment business earlier this year.
We will start with strong global entertainment, which again continues to be consolidated as part of the FG and H financial statements and represents.
The majority of the operating results that Youll see in our financial statements.
I know that many of you may have listened to our call last night for strong mobile Entertainment, which is also available for replay on their Investor Relations site. So we'll keep things pretty high level. This morning.
If you want to refer to slides five through seven strong we're continuing to see strong organic growth.
With increasing demand from our exhibitors for laser upgrades and.
And other investments, they're making in upgrading their auditoriums to premium cinema.
Our technical services group continues to perform at a high level.
And they've really done a nice job of expanding market share and becoming the go to service partner for the cinema industry.
One example is our installation services group, our revenues, they're up 68% quarter over quarter.
This is a direct result of the team they're listening to our customers' needs and then customizing our services and solutions to meet those needs.
Our screen business continues to perform well with laser upgrades driving steady demand from semi exhibitors.
The team there is expanding our non <unk> offerings as well rolling out new products. This year like our size most flooring as well as our Orion optical tiles.
The flooring product came again from listening to our customers and designing solutions specifically to meet their needs.
We introduced the new flooring product just earlier this year and it's already starting to contribute revenue.
And we're also continuing to develop our content IP portfolio and production services capabilities in our studios unit.
An important part of the strong entertainment growth strategy is M&A.
And over the past few weeks strong completed its first two acquisition transactions post IPO.
Unbounded was a strategic acquisition and it positions the studios group with resources and capabilities in the production services area.
Bounded focuses on shorter form video production things such as commercial and building. This part of our business will help establish a more consistent revenue stream for studios.
The unbounded teams a small team, but they have deep experience and it represents a nice first step in our M&A strategy.
More importantly, it's a foundational piece as we build a larger production services business.
We also just this week closed the acquisition of innovative cinema services.
This transaction will add immediate revenue and additional scale.
Where their run rate is over 6 million in annual revenue and we expect to grow from that base level.
Overall, we're very excited about the outlook for entertainment business, the increasing demand for premium murder immersive experiences.
And we expect to see continued positive momentum.
Moving over to our non consolidated holdings, we have equity positions in three other operating companies Green first FG financial and Firefly.
Over the past year Green first has continued to successfully execute on its strategy to monetize noncore assets.
Streamline operations and strengthen their balance sheet.
Earlier this year Green first announced the sale of private forest land for 49 million.
And in that transaction was followed by the sale of saw mills in Quebec for $90 million.
These operations were in regions that contain higher costs.
And the sale of those operations not only added cash to the balance sheet, but also bring down the average cost per board foot of their remaining operations and allows the team there to focus their attention and resources on the more valuable and more efficient, Ontario mill operations.
S Chief financial continues to grow its reinsurance and asset management business.
The reinsurance business is performing very well and continuing to patiently grow and allocate capital there.
The merchant banking operations have been very active with crave worthy NFC communities.
<unk> also completed the disk backup ichor connect recently, which is a cloud based company we're.
We're very excited about fts and the potential for the reinsurance and merchant banking as they continue to scale and add value.
Turning to Firefly, there quietly continuing to expand their digital out of home advertising solutions.
Growing their footprint into new markets in the U S as well as abroad.
Recently Firefly expanded its footprint in the U K, Canada in Abu Dhabi for example.
That's why it's more than an out of home advertising company, it's really more of a technology company, that's enabling advertisers to use data to target and measure the effectiveness of their AD spend in very unique ways.
Todd will now walk us through the financials.
Todd.
Thanks, Mark and good morning, everyone as Mark mentioned since F. G. H continues to hold the majority of the outstanding shares of strong Global Entertainment F. G. H consolidates S Ge's results.
SCE is by far the largest part of our operating business. My prepared remarks. Today will include a good amount of discussion on the <unk> results that were released yesterday afternoon.
As you can see on slide 14, consolidated revenue was up 8% from the prior year with increases in both products and services on the product side increases in traditional cinema screen sales and higher revenue from the newly launched size, most flooring and Orion optical tiles product lines were partially offset by a small decline in the <unk>.
Sale of digital equipment.
Services revenue benefited from the continuing momentum in installation services, which saw its seventh consecutive quarter with year over year increases as well as increases in revenue generated from field maintenance and monitoring.
From a geographic perspective sales outside the U S increased approximately 70% from the prior year.
This was primarily the result of the large immersive flooring project in Asia, but is expected to be completed by the end of the year.
While gross margin generated from the sale of products was relatively flat year over year gross margin from services was 26% during the third quarter as compared to 23% in the prior year.
Margins on services benefited from the strategic move away from outsourcing the installation work, so utilizing internal labor to complete the projects.
The increase in gross profit was offset by higher selling and administrative expenses, including marketing and travel and entertainment expenses as revenue and business activity increased.
General and administrative expenses were also higher as S. G. Now operates as an independent public company following its IPO in May.
Flipping over to the balance sheet overall, we have healthy liquidity enough to operate the business on a day to day basis on.
On a consolidated basis working capital is being utilized to grow the FTE business. For example, the FTE accounts receivable balances increasing as revenue continues to rise.
We believe Sce's customer base is stable with a solid mix of large international companies and some smaller regional players.
She continues to work with each of its customers, both new and existing as they look for additional solutions and efficiencies.
On the liability side the debt that was related to the production of safe Haven that was added to the balance sheet. In Q2 was fully repaid during the third quarter the receipt of the minimum guarantee and the tax rebates preceding the series in Canada.
That concludes the financial review for the quarter and I will now turn the call over to Kyle for a few remarks.
Thank you Todd Mark.
I want to start by addressing the recent performance of our stock as the former CEO. The current nonexecutive chairman and the largest shareholder of the company I think I can offer insight into each of our businesses and holdings I certainly have a vested interest in seeing our company and stock price exceed.
It's been a very challenging market for many micro cap and small cap stocks, but the market is no excuses. Many companies are executing and seeing their stock prices were awarded.
While there are undoubtedly challenges in every business in our portfolio of holdings will no doubt change over time I want to emphasize that we're committed to thriving in any environment.
The strong global Entertainment IPO was completed but the value creation, we are hoping for hasn't been recognized by the market. If this continues we will need to consider our options in terms of the existing foot, there's outstanding and determine if it makes sense to be a buyer of our stock.
The ultimate goal for Green first remains to have the company sold there is no doubt that rising interest rates and lower lumber prices have impacted the stock price, but we believe theres good value in the company.
<unk> financial is a critical part of our strategy, but now and in the future and were excited about the financial services platform. We're building. Our team has demonstrated an uncanny ability to do deals in all environments are one of only a handful of spec teams getting deals done right now which shows the strength of our team our merchant banking continues to create new opportunities as well and I'm really excited about the future.
Sure.
Firefly continues to build a powerful technology model for the outdoor advertising space and we're patient supporters of the long term growth and value creation plans. We're constantly looking for ways to further reduce costs increase scale and create the most possible value for shareholders will continue to work hard with urgency I look forward to taking any questions you may have.
Thank you at this time, we'll be conducting a question and answer session.
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One moment, please while we poll for questions.
Thank you.
We have a question on the line from Brett Reiss with Janney Montgomery Scott Your line is life.
Hey, Brett good morning, good morning, good morning.
You know of all of the stocks I mean, the the one with the I.
I mean greatest disconnect.
Our valuation is the F T. A F financial so I've got a couple of questions on on that.
Kyle the 2 million dollar investment in that F. G. C community housing can you describe that a little bit and you know it's something like that.
Throwing off cash.
Cash too to F T financial.
Sure I can describe that so particularly was a a company that we started about a little over a year ago and it was to invest.
Invest in manufactured housing communities to own them and operate them and to preserve that essentially so the goal is to preserve and improve affordable housing.
Mainly in the southeast United States as the initial focus so we've.
We we spun the company we funded the company.
And we've now grown to over 20 communities.
<unk> that we own inside of ethnic communities. The company is raising outside capital has raised both common equity and <unk>.
Preferred equity and has a it.
It's growing very nicely I expect that to be one of our largest holdings over the next 12 months to 24 months in terms of.
The size and scale.
So it's been quite a success you know manufactured housing.
A wonderful industry.
That's we're really excited about we are the cash flows or our our extraordinary on that business. We have not paid any cash flows to the common shareholders, yet because it's still in growth mode.
As the company you know achieves critical scale over the next few years I anticipate the common shareholders of African means will receive cash flow and or some type of an exit.
Through an IPO or.
Some type of a recapitalization transaction like that but there's also a return of capital to shareholders.
Okay. Now you know we still have.
S T.
Apps still has I think shares in op Fi op Fi seems to turn themselves around and they had a very good quarterly release.
Hum.
Do you hold your op Fi or do you are you were inclined to opportunistically monetize that yeah, you know to bring cash in for other initiatives you know what what what are your thoughts on something like that.
So I don't want to.
Go too much into detail on our thoughts on whether it will by herself offline in the future, but we we certainly are pleased with the turnaround and some of the things that happened post the spin transaction were surprised with the C O, leaving and and.
The earnings disappointment.
But out there they seem to be back on track I'm not on the board or an executive of the company that havent been so for a few years, but as an outside investor looking in they certainly are or are starting to show signs of improvement as you know we we currently think the stock is undervalued and I would be surprised if we're selling at this price.
But at all it depends at the time of what opportunities, we have and whether those have more upside or downside. So.
Yeah, we run everything like our portfolio and if if there's something that has more upside than what we'll take that into consideration, but right. Now you know we haven't been a seller.
Okay could you share with me and the people on the call.
You know the current situation with the Firefly as you know it.
Yeah sure so Firefly as you know.
If you don't know.
It was a company that.
We originally astounded as they work out from where their business how convergent media systems that we eventually sold at this stage not but conversion had a customer that defaulted on us we had significant screens that we could use for our business. So I came up with the idea of like lots.
Use the you know it's.
Let's turn our lemons into lemonade and create a business that we can use this customer.
Customer that defaulted on us.
And turned it into a business. So we we created a company called strong digital media, LLC, which which was branded a strong outdoor.
Strong outdoor you know went and signed one of the largest contracts in New York City for a taxi cabs and we installed all of our screens on taxi cabs, we grew that business.
We then.
Or what sort of learned in the marketplace that are.
That Google had founded a company called Firefly and you know if you know anything about Google Google's, obviously really successful in the advertising space and they have lots of money.
So we were in the advertising space.
Trying to pursue a technology model.
With less capital than Google obviously.
And we felt that Google had much more experience in technology than we did and had much more experience in advertising that we did it in probably more experienced in both of those and then anywhere in the world.
No.
We decided to partner with with Google Ventures, and merge our business strong outdoor into what is now called Firefly Firefly has expanded well beyond New York City to when when we merged with them.
Had lots of other sit.
Cities as well like San Francisco and L. A but now they're not only just nationwide in the U S. But there are also global in terms of they have launched cities outside the U S like London and others and.
It's really it's really become you know from what was a few million dollars of revenue when we started it to now a much larger company with.
Great prospects they have raised you know.
Over $100 million of venture money from some of the best venture funds in the world like by G V, which is Google ventures, and effects and probably on ventures and others like really it's a really attractive cap table that we're proud of.
And it'll beyond that where where you know we expect them to continue to grow our revenue and ultimately earnings and are you now have a accident that and in that company. When the board you know I'm on the board of Firefly and when the board feels that that the company is ready to be a public company that's sort of the.
Planners to at some point take the company public.
Okay.
Great I'll I'll drop back in queue, there may be other questioners on the call.
Q.
Okay.
So the question is with.
Thank you. Our next question is coming from Bill Brewster, who is an investor.
Your line is life.
Hey, guys How's it going.
Hey, Bill good morning.
I wanted to ask a couple of questions about the strategy in production you know I think.
From the outside looking in when.
When I initially heard about getting into content production I was concerned about the.
Our cash flow dynamics of the business and how much risk you all were taking I know that some of it has been disclosed in previous 10-Qs but.
It might be helpful to lay out how you're trying to minimize the.
The potential outflow that is required in content production and how youre minimizing the risk and I'd be curious to hear you talk a little bit about your strategy on that that side of the house.
Yeah, Yeah Bill. Thanks for the question I can start and call may want to chime in on this as well yeah. We're taking you know our approach to content.
It's pretty conservative in terms of the way we're approaching it you know we're not.
Allocating lots of capital to develop projects yeah on the fly it's pretty disciplined approach the model that we deploy in the studios grouped for developing content is yeah, we'll spend small amounts developing projects to a certain stage, where we have scripts and.
We have a marketable a project that we can take out.
And determined how much interest there is in.
And the overall model is to develop these projects you build the portfolio go out and marketed gauge interest and raise capital to support these projects either privately.
Or through pre sales and minimum guarantees and then utilize those commitments.
As well as tax credits by producing these these are projects and tax friendly jurisdictions to fund their production. So you know before we greenlight spending millions of dollars of capital only of any given project. You know there has to be significant interest from the market and there has to be either pre sales minimum guarantees or other.
Sources of funding through the tax credits that supplement the production and basically cover the cost of production.
So that keeps our capital at risk you know very controlled and very low as well is that still gives us lots of upside in future benefit from participation in those projects when they do.
When they do come to market from a royalty standpoint.
Yeah.
Can you expand a little bit on why now right like why why is the company sort of evolving into this business at this time and it's in its lifecycle.
Yeah, Bill I mean, it's something that we had been looking at and talking about really for quite you know the last few years in terms of before we pulled the trigger on it in terms of how we evolve our entertainment business you know from from its core roots, which is a great business solid cash flow profitable business with a long.
Operating history.
And how we evolve that business into other areas of entertainment. This was a logical adjacency. We believe too that that has a fair amount of headroom for growth that adds onto our core business.
And where we can create value and we see this cinema really the entertainment business overall, continuing to all be out of that evolution. We you know it was accelerated.
Through Covid.
The disrupted it's an industry, that's being disrupted from a streaming standpoint.
And you know that the.
Demand for content is continuing to rise you know the demand for content that can be made.
Economically and efficiently I think is going to grow faster because you know at some point the streamers have to make money.
So you have to be more efficient more effective in terms of your approach to producing high quality content and I think that's where small smaller nimble kind.
Content producers like strong studios can excel.
Okay.
Do you think you know just looking at where the capital cycle is and whatnot its.
If streamers decide to start pulling back on.
On their spend.
Is there I mean is this a fairly low risk like is there going to be demand at the end of the tunnel no matter what or is this a project that can be shut down if necessary without like big exit cost just kind of curious how you're thinking about if its aggregate content spend were to slow.
You know what our exposure is there.
Yeah, Bill I think I can.
Oh breakout.
I can address that so right now we have very little capital and invest it in any specific project and when I say very little like less than a few hundred thousand dollars.
And in any specific project.
We did have.
You know more than you know we had you know over a million dollars invested in safe Haven.
And we've now you Derisk safe Haven and received all of our money back paid off everything related to the development costs and we still own a substantial portion of the backend when when that sells.
So that's that's a good model for us where we can.
Find projects that are interesting. It's it's it's it's somewhat analogous to like an asset management business, where we are building. These.
Yeah.
Alright.
Hey, Kyle I don't mean to cut you off but did you went dark on my line did you go dark on everybody's line.
Yeah.
I don't know.
Okay.
Okay.
Okay, sorry, I can read the transcript, but it was it was a it was an interesting point you were making and I wanted to make sure that it was it was captured so I apologize.
Sure no no worries or what I was saying can you hear me now bill yeah.
Yeah, Yeah, okay.
Okay, what I was saying was that.
We have limited capital exposure right now to any of our projects and when I say eliminate I mean, and certainly less than a million and in many cases, it's a few hundred thousand dollars per project at most.
And.
And that's like.
When I say, a few hundred thousand ethic, our largest projects have like a few hundred thousand dollars of exposure and we've we've really fashion. It is like an asset management business.
Right like we've done with other businesses, where we raise capital for the projects or we don't do them and if you know we let the market decide if the if the project is a good one or not and if if there's investor demand for the opportunity we've presented it we've given investors an opportunity to invest.
And we have.
We've built a model where strong global entertainment through strong studios can make fees that are similar to what I would call. It.
Asset management fees.
Where were getting we call them production fees right, we're producing the product.
And then we're getting fees that are similar to performance fees.
On an asset management product and that we are on a percentage of the back end.
So there's a and in the more of these that we build the better, particularly when we're doing it.
Like an asset management like model, where we have it it's an asset light asset management model where not.
Betting tons of our money on US we are betting some of our money on us.
And to your question about whether it's possible to unwind, we we could unwind it but we think that.
Yeah, we will be able to build this out to a nice business now.
If a year from now we we you know a year or two years from now we say Hey, you know what we've tried and it's not working then then certainly well in or if the market changes and the market has changed in the couple of years that we've been involved so we've been adapting and changing too. We've also through unbounded acquired.
The business that has more recurring.
Potential revenue because they do not only movies and documentaries, but they also do a lot of advertising content, they're creating content for companies that you know need advertising content. So that that's much more regular.
Job smaller jobs, but regular jobs that can really build a nice steady stream of cash flow when you're not wait when you while you're waiting for the big win on a on a Uh huh.
On something like safe havens so.
I feel very good about that model I think it's very consistent with what we're doing and other businesses, where we're not deploying tons of our capital.
And you know eventually when you know ideally when green first is sold or if reimbursed and so we'll have a lot more capital to do more of these types of things <unk> buy our stock because yeah, well, so I have to make a decision when that happens but right now.
I'm really pleased with the progress we've made in that business.
All right I'm going to ask you one quick follow up on Green first and then I'll drop into queue, but I got a couple more if if theres no. One. After me you know Green first is is obviously you know in the middle of it of the storm that the fed is.
Getting real estate and lumber, obviously goes into real estate, but I'm curious as you look at where the investment is today.
And given the sales of assets and the monetization.
How do you feel about the price paid for.
For Green first and using the F. G H capital to purchase that asset given you know sort of how the facts have unwound I'm curious your thoughts and whether or not you still have to use it the transaction or whether or not you would have done something differently.
Yes. So we originally purchased Green first one it was a task or.
Actually before it was the testing capital it was called <unk> capital.
And we bought it as a cash show in Canada with the idea that we can do something interesting with it not much different than you know a Canadian spak with no timeline to do a deal. So it was a pretty attractive structure, but it didn't have a promote who I guess back and it didn't have.
You know I'm, a deadline I guess back to us. So the spec is a has a promote for the you know for the sponsors and it has a typically a 12 to 24 months.
Time period for which you can do a deal. This was definitely because we had a cash shell that had tax Nols that had the ability for us to look for something really interesting to do but we had time.
And but we don't want a incident time, because as time where on.
We started to get impatient and wanted our capital back so we invested originally and the.
Like.
At a much lower price than the current stock price and.
What when the opportunity to do the deal with power back came along we we jumped on it and thought it was a really good opportunity.
The question my follow up.
There wasn't a good use of capital to exercise the shareholder rights that were given as part of the transaction to acquire those assets from Ryanair.
And if you remember back then we were under tremendous amounts of pressure to exercise all of them and in fact.
We were like chastised for not exercising all of them by shareholders like they were angry that we didnt exercise every single one of them how could you do this it was like we had there so I I recused myself from that decision until at the board make the decision because I knew it was gonna be a controversial decision and I wanted the board to have.
No insight into that particularly since I was I was on the border of Green first.
And I wanted to make sure. It was you know totally independent decision that was made so they made the decision that they made what's supposed to exercise part of the rights, but not all of them. There's a period of time, where that was a great decision.
And you know I I left the board of Green for shortly after that.
You know too yeah, I thought that I had done what I was put on the board to do which was fine the deal close the deal and then you know what the operators of that company thrive.
I I as an investor in the company I've I've, certainly been involved and looking and trying to help the company find ways.
Ways to monetize because we want to monetize that position at some point obviously.
And you know we went about that with I went about that with great urgency.
Over the last 12 to 24 months I've been very much.
In contact with with lots of the other potential buyers of the company that are floating around the world I've gone to Vancouver have gone to all kinds of other places to meet with these type of you know with potential buyers and I feel like I have a pretty good sense for.
What the company should do I'm not on the board. So I you know others are but I think that they have more access to information about why or why not those things have not happened yet I can tell you I'm personally frustrated that they have not happened I do I do understand the idea behind monetizing the Quebec mills and monetize it.
The land that they did first.
I I you know you can look back with 20, 2020, hindsight and say Oh. They say you just sold the whole company when lumber prices were high sure I I don't disagree with that would've been great. If they had sold at a much higher price. The fact of the matter is interest rates have gone from you know two and a half per center.
Seven or 8% or whatever they are now you know as of today I think like seven 5% average mortgage rates.
And that's impacted the housing market and that's you know lumber prices have fallen some so that's not been great. You know a lot of the other probably treated lumber companies have gotten hit as well and.
That doesn't mean that.
It was a bad decision for the board to do what they did they were trying to maximize I'm guessing that they were trying to remember I wasn't involved in this decision about my guess is that they were trying to maximize value for shareholders and get the best possible price. So now you say well, what where do we go from here and I say well they have a CEO in place that's an.
They just put in place I've not spoken to him and I don't know him. So hopefully he's he's good I trust the board that they've done a good job selecting him.
And I think that as an ongoing concern you you'll likely have to you know.
Run your company properly until there's you know a strategic transaction to do there's other things that they can do like monetizing some of the assets that we we purchased likely can or a.
They can hormel land around that there's other things that they can do like that.
I think that a lot of people have been wondering like when they will monetize or sell or or or get rid of the the newsprint mill and I think that some of these things are really important for them to do so that going forward, we can being positioned to best maximize value for shareholders.
I have no view on whether interest rates will go up or down or or or lumber prices will go up or down that is better than your view.
Or or anyone else's on this call I'm sure everyone has their own view of interest rates are going to stay high they're going to go down lumber prices are going to go up or down you know I think that my view is as I was educated as all as everyone on this call but.
But beyond that I think that there's more value in the company than than the stock price and and I'm, hoping that we can have a favorable transaction.
At some point in the next few months or a year, but that's what we that's what we want to shareholders, but again, we also don't Wanna be desperate as as Oh shareholders. If it takes multiple years to my ear to monetize that I guess that will be the course like that that's what we've done with firefly, but hopefully they.
Hopefully they do something very soon.
Thank you all for your time.
Thank you Bill.
Yeah.
Once again, ladies and gentlemen, if you have any final questions or comments. Please press star one on your telephone keypad.
Okay as we have.
We do have a question, but let's come back into queue.
Your question is coming from Joe Moore, who is an investor.
Alright, one more so Kyle on ichor connect and I'm curious, how how that deal you know what your perception of that deal is now that it's closed and how you think FTF structured that deal.
You know I think from the outside looking in it's kind of hard to to maybe understand exactly what happened, but my sense is turned out pretty well so I'm curious for your thoughts.
So I think that there's a lot of companies on the you know the trade on the pink sheets or over the counter that.
Are not great companies, but there's also some companies that are good companies and and many of them would like to have access to more capital to grow and it's very hard to raise you know lots of capital as a you know pink she traded company or OTC trade company without our SEC filings and other things to it.
I think our investors, sometimes don't realize like all the laws related to raising capital when you're not in FCC. If I were like being I said, if I were generally makes it easier to raise capital if that's your desired goal to raise capital and grow them. So.
Yeah, the stock market as you know had hundreds of specs that were launched in 2020 'twenty one.
And and got over saturated with people looking for deals. We we had been very firm with the view that we were long term dedicated to the stock market that we've been in this market for a long time, we have a team that has been doing specs.
Since you know as early as 2000 and 567 time period.
And that's regardless of the spec market, whether it's booming like it did in 2020 or whether it's it's Buster hit did over the last year or two and I could did you know previous to 2020, it's really not in our view a bust of the stock market, it's really like a return to the normal.
And I'm actually quite happy that we had this boom so that it brought awareness and understanding of stocks and I always had a bus to that now.
You know a lot of the participants that should not have been in specs have kind of been flushed out.
Yeah, we think that where we have a very experienced team and specs just from the actual knowledge of how to get US back transaction done. We think we have a great team from the perspective of getting due diligence thing and and and and really working hard to find the right transaction to do and then we also think we have some really good.
Experience with people like Joe Moglia, and Larry and myself and that that can sort of guide you know our team too you know what what we think is is is the right type of transaction for us to do and build a franchise around around F. G. As a snack company I think we've done a good job with that.
What's really neat about the ichor transaction one is that we got.
A deal done in a very difficult environment, but to US is how we did it and you know this was a company that wanted to raise capital wanted to to uplift to the NASDAQ and we helped them raise capital we help them.
To do so in a very innovative way, we went to the market place and understood what what capital might be available and then we structured a transaction with them, where we have convertible preferred that has a ratchet feature down that essentially are a conversion feature goes lower down.
Two I believe as long as $2 per share. If you know in the event that we decided to convert but we are protected with the preferred principal so its a really nice you know feature that we built into that for investors and we we actually rather than just giving it to us we made it available to anyone who invested.
In the I P. O. This back so I think it was a really innovative structure I'm proud of our team for the way they bake innovated and and I'm I'm very happy that the capital markets were supportive of it and I'm thankful to the investors that we've had that that continue to support us.
So I'm you know I think that you know all in all it's a because it worked out to be a good transaction I think I call. It now needs to execute on their business model that they laid out in terms of of of executing on that pipeline of potential software deals.
If they do that I think that that there'll be successful. So yeah. I think it's we're not on the board anymore, we're not management, where we're well we're letting them sort of do what they need to do we we got our our job done and now it's their turn to to execute so hopefully the management team and board executes.
Okay, and just one follow up you know to the extent that it's it's a you know ftes capital at risk and Theres a vested interest in the outcome are you thinking about this as the preferred is likely covered in most scenarios and then the conversion to common is the upside like is that how you're thinking about.
And your own capital or am I misreading that.
Yeah.
I think that we we certainly view it as though we have.
More downside protection a lot more downside protection than you would normally have and that yeah. If the stock price falls with which it has but it also rallied it's been all over the place so theres not a whole lot of public float. So it's been the stock has been you know everywhere.
That we have downside protection in the preferred and we also have downside protection in the conversion feature but you know if we have significant upside like we did it can really be material. So I think we were very happy with that structure of Oh and by the way that structure is consistent with the way, we try and do ebb.
Thing.
We try and do everything with protect the downside preserve the upside protect the downside preserve the upside protect the balance of it we do that again and again and again every time, we do a deal protected downside preserve upset sometimes it's not perfect, but that's our goal on every transaction.
But it's not always going to be foolproof.
Yeah, well that's risk right.
Alright, but alright cool I appreciate your thoughts and I hope you all have a good day.
Okay. Thank you.
Okay.
Thank you as we have no further questions in queue I'll turn the call back to management for closing remarks.
Thank you for joining the call today, thanks to Bill and Brad those are great questions. If there any other questions that you guys have as you digest the material or listen to the call or read the transcript feel free to reach out you know we'd be happy to happy to answer any other questions you might have otherwise again, thanks for joining the call and hope you have a go.
Weekend.
Yeah.
Thank you. This concludes today's conference and you may disconnect your lines at this time.
And we thank you for your participation.