Q4 2023 180 Degree Capital Corp Earnings Call
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Daniel Wolf: And welcome to 180 Degree Capital Corp.'s fourth quarter 2023 financial results update call. This is Daniel Wolf, President and Portfolio Manager of 180 Degree Capital. Kevin Rendino, 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.
And welcome to 180 degree capital Corp's fourth quarter 2023 financial results update call. This.
This is Daniel Wolfe President portfolio manager of 100 easy capital, Kevin Hern, Deno, our Chief Executive Officer, and portfolio manager and I would like to welcome you to our call. This morning.
Participants are currently in a listen only mode. Following our prepared remarks, we will open the line to questions. If he would like to ask a question. Please type star six on your phone or click the ask a question icon. If you are participating via your computer I'd like to remind participants that this call is being recorded and will be referring to a slide deck.
Daniel Wolf: Following our prepared remarks, we will open the line to questions. If you would like to ask a question, please type star six on your phone or click the ask a question icon if you are participating via your computer. I would like to remind participants that this call is being recorded and that we will be referring to a slide deck, which we have now posted on our investor relations website at IR.180degreecapital.com under financial results. Please turn to our safe harbor statement on slide 2. This presentation may contain statements of a forward-looking nature relating to future events. Statements contained in this presentation that are forward-looking statements are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. However, these forward-looking statements are subject to inherent uncertainties in predicting future results and conditions.
We have posted on our Investor Relations website at IR Dot one injury capital Dot Com under financial results. Please turn to our Safe Harbor statement on slide two this presentation may contain statements of a forward looking nature relating to future events statements contained in this presentation that are forward looking statements are intended to be made pursuant to the safe here.
For provisions of the private Securities Litigation Reform Act of 1995. These forward looking statements are subject to inherent uncertainties.
<unk> future results and conditions.
Daniel Wolf: These statements reflect the company's current beliefs, and a number of important factors could cause actual results to differ materially from those expressed herein. Please see our filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties associated with 180 Degree Capital's business that could affect our actual results, except as otherwise required by federal securities laws. I would now like to turn the call over to Kevin. Thank you, Daniel, and good morning everyone.
And it should reflect the company's current beliefs and a number of important factors could cause actual results to differ materially from those expressed herein.
Please see our filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties associated with 20 degree capital's business that could affect our actual results, except as otherwise required by federal Securities Laws 180 degree capital Corp undertakes 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. Thank you Daniel and good morning, everyone. Let me start with the conclusion before diving into the details of the quarter.
Kevin Rendino: Let me start with the conclusion before diving into the details of the quarter. I've been managing money for over 30 years and have been an investor and portfolio manager since 1988. Never in my life have I been more convinced that we own a collection of companies that I believe have the potential to rise materially in value as much as the portfolio turn is put together as we start 2024. We're also at a point where I believe our constructive activism will make a difference in this value creation. While the last two years have been incredibly frustrating and disappointing, I'm grateful it's over, and we are off to a flying start in 2024. Just look at what we own at the end of the quarter and look at the performance of those names, companies like Synchronous.
I've been managing money for over 30 years and had been an investor a portfolio manager.
Since 1988 never in my life I've been more convinced that we own a collection of companies that I believe have the potential to rise materially in value as much as the portfolio churn has put together as we start 2024.
We're also at a point, where I believe our constructive activism will make a difference in this value creation, while the last two years have been incredibly frustrating and disappointing I'm grateful it's over and we are off to a flying start in 2024, but just look at what we owned at the end of the quarter and look at the performance of those names companies like synchronous.
Kevin Rendino: Having had the 30-year experience of knowing that challenging performance periods happen, during these periods, it is crucial that you don't shy away from talking about them, you don't become over-emotional about them, and you stick to your knitting and process no matter how painful the period can be. Somebody sent me a quote once, and it said, "the one willing to look the stupidest the longest wins."
Having had the 30 year experience of knowing the challenging performance periods happen. During this periods. It is crucial that you don't shy away from talking about them you don't become over emotional about them and you stick to your knitting and process no matter how painful the period can be.
Somebody sent me a quote once and it said the one willing to look the stupid, it's the longest ways over the last two years, we feel stupid on the one hand, yet on the other we couldnt be more optimistic about what we own.
Kevin Rendino: Over the last two years, we feel stupid on the one hand, yet, on the other, we couldn't be more optimistic about what we own and the significant value appreciation is possible in the next few years. The fourth quarter of 2023, we hope, was the start of what we believe will be a return to risk asset classes, including the micro cap stocks in which we invest. Our 7% gross total return in our public portfolio was the primary contributor to the growth of our NAV per share from $4.91 to $5.02. Our assets on our balance sheet are now almost 100% comprised of investments in public companies and cash.
That's significant value appreciation as possible in the next few years.
The fourth quarter of 2023, we hope was a start of what we believe will be a return to risk asset classes, including the microcap stocks in which we invest our 7% gross total return and our public portfolio was the primary contributor to the growth of our NAV per share from $4 91 to $5.02 our assets on our.
Balance sheet are now almost 100% comprised of investments in public companies and cash you can see the slides we've posted them on our website.
Kevin Rendino: You can see those slides, and we posted them on our website, for details of the sources of change in our portfolio during Q4 2023, the full year, and inception to date. On the macroeconomic front, the resilience of the U.S. economy combined with the apparent end of the Fed's tightening cycle and potential future reductions in interest rates should be one tailwind for our investments in general in 2024. For 180, we believe 2024 will be a year defined by our constructive activism and by long-awaited catalysts at certain of our portfolio companies that could together lead to material value creation for 180 Degree Capital's stockholders. On slide four, this will be the very last time we show you this chart. Seven years ago, we embarked on a program designed to recreate ourselves, and we did just that.
For details of the sources of change in our portfolio during Q4 2023.
The full year and inception to date on the <unk>.
Macro economic front, the resilience of the U S economy, combined with the apparent and of the fed's tightening cycle and potential future reductions in interest rates should be one tailwind for our investments in general in 2024 for 180, we believe 2024 will be a year defined by our constructive activism and by long awaited cat.
At certain of our portfolio companies that together could lead to material value creation for 180 degree capital's stockholders.
On slide four this will be the very last time. We've showed you. This chart seven years ago, we embarked on a program designed to recreate ourselves and we did just that just to remind everyone. When we started 75% of our assets were in private companies. During the last seven years through good markets and bad we incurred losses from that prior.
Kevin Rendino: Just to remind everyone, when we started, 75% of our assets were in private companies. During the last seven years, through good markets and bad, we incurred losses from that private portfolio of $25 million, while at the same time generating $31 million in gains from our public portfolio. As we start 2024, that headwind is gone. No longer do I have to sit on pins and needles at the end of a quarter, hoping our VC investments and the marks we take won't offset good public stock performance. We need not worry no more. That chapter is closed.
<unk> portfolio of $25 million, while at the same time generating 31 million.
Dollars and gains from our public portfolio.
As we start 2024 that headwind is gone no longer do I have to sit on pins and needles at the end of the quarter, hoping our VC investments and the marks we take wooden offset good public stock performance. We worry no more that chapter is shut in in 2024, we're off to a great start we're a pure play markets.
Kevin Rendino: And in 2024, we're off to a great start. We're a pure play market, a small cap act. In terms of what helped and hurt in the quarter, please turn to slide five. Potbelly had the biggest positive effect as the company delivered yet another strong quarter, same-store sales growth, and record weekly sales per store.
<unk> small cap actavis.
In terms of what helped that hurt in the quarter. Please turn to slide five potbelly has the biggest positive effect as the company delivered yet another strong quarter of same store sales growth and record weekly sales per store on the franchising side. The company has announced nearly 200 new shop commitments to date.
Kevin Rendino: On the franchising side, the company has announced nearly 200 new shop commitments to date. Comscore went up by 36% in the quarter because, although missing the top line, the company did exceed estimates for EBITDA. We have continued our activism there, and we'll have more on that in a few minutes. However, despite selling its non-core messaging and digital assets, Synchronous' stock declined in the quarter by 28%. We joined the board late in the year, and as you can see, the performance of the stock since that time through yesterday has been stupendous. We're very excited about the potential to work with the management team and the board there, and we'll talk about that involvement shortly also. Arena reported weaker-than-expected results due to softness in the advertising market and changes in search-to-display information that reduced click-through rates.
Comscore went up by 36% in the quarter, because although im missing the topline the company did exceed estimates for EBITDA. We have continued our activism there and we'll have more on that in a few minutes.
Despite selling its non core messaging and digital asset synchronous stock declined in the quarter by 28%. We joined the board late in the year and then you can see the performance of the stock since that time through yesterday has been dependent us. We're very excited about the potential to work with the management team and the board there and we'll we'll talk about.
That involvement shortly also.
Marina reported weaker than expected results due to softness in the advertising market and changes in search to play in for display information that reduce click through rates.
Kevin Rendino: Subsequent to the report, B. Riley sold its stake in Arena to the owner of Bridge Media Networks, who previously announced an agreement to buy 65% of the company. There's also been a series of management changes, delays in the completion of the S4, and the potential end of the partnership with ABG to license the Sports Illustrated brand. This has become a work in progress all over again, but one with significant opportunity to create value. Look at this chart on slide 6 this quote-unquote Recession, which has been one of the drivers of capital away from risk assets to proceed safer as it has been the most fun and awesome one ever. Every recession should look like the one that everyone has called for or said we're in. But sarcasm aside, persistent predictions of a return to Instead, GDP rose 3.1 percent in 2023. Wages and salaries grew 4.7 percent, which is good for consumer spending. Real private fixed investment in manufacturing structures reached all-time highs, and employment remained strong.
Subsequent to the record B Riley sold its stake in arena to be owner of bridge media networks through previously announced an agreement to buy 65% of the company.
It's been a series of management changes delays in completion of the S four and the potential and the partnership with AVG.
Since the sports illustrated brand. This has become a work in progress all over again, but one with significant opportunity to create value.
Look at chart look at this chart on slide six this quote unquote recession, which has been one of the drivers of capital away from risk assets to perceived safer assets has been the most fun and also more than ever.
Every recession should look like the one that everyone is called for where said we are in.
But sarcasm aside persistent.
Persistent predictions of a return to arguably more normal interest rates have absolutely not led to an economic calamity instead GDP rose three 1% in 2023 wages and salaries grew 444, 7%, which is good for consumer spending real private fixed investments in manufacturing.
Factoring structures reached all time highs and employment remains strong.
Kevin Rendino: I didn't live through the 1929 recession, but I did experience 1990, 1998, 2000, and the near depression in 2008, as well as 2020. And 2023, I'm comfortably saying, looks absolutely nothing like those recessions. Despite strong macroeconomic trends in 2023, somehow, a basket of microcap companies that comprise the Russell Microcap Index underperformed the NASDAQ 100 by over 4,600 basis points. In our last shareholder letter, we incorporated a plethora of charts showing that microcap companies are historically inexpensive and undervalued relative to larger-capitalized companies. While substantially all of this data and charts remain applicable today, I'm not going to regurgitate them. You can see them in my last letter, and you can visit them on our website.
I didn't live through the 1929 recession, but I did experienced 1919, 1998, 2000, and the near depression in 2008 as well as 2020.
Totally 23, Im comfortable saying look absolutely nothing like those recessions, despite strong macro economic trends in 2023 somehow a basket of Microcap companies that comprise the Russell Microcap index underperformed, the NASDAQ100 by over 4600 basis points.
And our last your shareholder letter, we incorporated a plethora of chart showing that Microcap companies are historically inexpensive and undervalued relative to larger sized companies while substantially all of this data and charts remain applicable today I'm not going to regurgitate them.
You can see them from my last letter and you can visit our website. Instead I'll note commentary regarding Q4 2023 from Rice investment partners. So we hold in very high regard they talked about the valuations for small caps and how highly attractive they are versus large gas, we think it bears repeating that even with its.
Kevin Rendino: Instead, I'll note commentary regarding Q4 2023 from Royce Investment Partners, who we hold in very high regard. They talked about the valuations for small caps and how highly attractive they are compared to large caps. We think, quote, it bears repeating that even with a terrific fourth quarter 23 and a positive return in 2023, the Russell 2000 finished the year well shy of its 11-8-21 peak, while large caps continued to establish new highs in the fourth quarter of 23. In fact, it's been 563 days since the current cycle low for the Russell 2000, the third largest span without recovering the prior peak on record. Fallout from the investment bubble, the internet bubble, saw small caps need 456 days from their trough to match their previous peak, while it took 704 days for small caps to recover their prior peak following their trough in the 2008-2009 financial crisis.
Terrific fourth quarter, 'twenty, three and a positive return in 2023, the Russell 2000 and finished the year well shy of its 11 821 peak, while large caps continued to establish new highs in the fourth quarter of 'twenty three in.
In fact, it's been 563 days since the current cycle low for the Russell 2000.
Third largest fan without recovering the prior peak on record.
Pullout from the investment bubble Internet bubble saw small caps need 456 days from their trough to match their previous peak, while it took 704 days for small caps to recover their prior peak following their trough in the 2008 2009 financial crisis. Each of these periods saw dramatic developments.
Kevin Rendino: Each of these periods saw dramatic developments, the implosion of high-flying technology stocks in 2000 and a global financial catastrophe in 2008. This current period has seen ample uncertainty, for sure, and a record pace of interest rate increases, yet it lacks the existential threats that characterize the Internet bubble and, even more so, the financial crisis. The latter period also saw less bifurcation between small and large-cap returns.
Implosion of high flying technology stocks in 2000, and a global financial catastrophe in 2008. This current period has seen ample uncertainty for sure but.
And a record pace of interest rate increase means.
Greece's yet it lacks the existential threats that characterize the internet bubble and even more so the financial crisis. The latter period also saw less bifurcation between small and large cap returns.
Kevin Rendino: Yet based on our preferred index valuation metric of enterprise value-to-earnings before interest and taxes, or EV-to-EBIT, the Russell 2000 finished 2024-3, not far from its 25-year low relative to the Russell 1000. On slide seven, even with the increases in small and microcap stocks that we saw in Q4, the IWM to S&P ratio remains at historical lows. We continue to believe that the ratio says nothing about the fundamentals of the businesses that comprise each index, given those fundamentals have held up better for many microcap companies than the index performance would suggest. We think we are at the end of the Fed hiking cycle. We are not in the camp that the Fed will be cutting rates any time soon because we believe the economy will continue to show the resilience that it showed last year.
Based on our preferred index valuation metric of enterprise value to earnings before interest and taxes or EBIT EV. The EBIT. The Russell 2000, and finished 2024 three not far from its 25 year low relative to the Russell 1000.
On slide seven even with the increases in small and micro cap stocks that we saw in Q4, <unk> and P ratio remains at historical lows. We continue to believe that the ratio says nothing about the fundamentals of our businesses that comprise these each index given those fundamentals have held up better.
For many microcap companies than the index performance would suggest we think we're at the end of the fed hiking cycle. We are not in the camp that the fed will be cutting rates anytime soon because we believe the economy will continue to show the resilience that it showed last year that in our view as a positive not negative.
Kevin Rendino: That, in our view, is a positive, not a negative. Our portfolio companies do not require lower rates to execute and build value for shareholders. They benefit from the types of positive economic trends we saw in 2023 and continue to see in the beginning parts of 2024. And against that backdrop, we expect many of our holdings, which are trading at historically low valuations, have a long runway to rise in value and help us increase our net asset value per share. Let's look at a few of our current gains. But before that, I thought I'd do something a tad different on this call and review what we believe is a distinct part of our investment process. That is our constructive activism. Turn to slide 8.
Our portfolio companies do not require lower rates to execute and build value for shareholders. They benefit from the types of positive economic trends. We saw in 2023 and continue to see in the beginning parts of 2024 and against that backdrop. We expect many of our holdings, which are trading at historically low valuations have a long.
Runway to ryzen value and help us increase our net asset value per share.
Let's look at a few of our current games.
Before that I thought I'd do something a tad different this call and review what we believe is a distinct part of our investment process that is our constructive activism turning to slide eight.
Kevin Rendino: Few investors are willing to spend the time and energy identifying, conducting, due diligence on, and actively engaging with companies to unlock intrinsic value. We believe the opportunity for value creation in U.S. microcapitalization publicly traded stocks exists because management teams and boards often prioritize revenue growth over operating profits, favor the status quo versus change, lack the understanding of buy-side investors and the workings of the public markets in general, do not appreciate the impact of flawed capital structure on shareholder returns, and entrench themselves to protect their jobs and positions. To be clear, we are not corporate raiders. Our ultimate goal is to engage constructively with existing boards and management teams to unlock value through resolution of capital structure or other overhangs that we believe inhibit growth or shareholder value.
Few investors are willing to spend the time and energy identifying conducting diligence on and actively engaging with companies to unlock the intrinsic value. We believe the opportunity for value creation and U S. Micro capitalization publicly traded stocks exists because management teams and boards often prioritize revenue growth over operator.
Profits favor the status quo versus change lack the understanding of buy side investors in the workings of the public markets in general.
Do not appreciate the impact of flawed capital structure on shareholder returns and entrench themselves to protect their jobs and positions to be clear we are not corporate raiders. Our ultimate goal is to engage constructively with existing boards and management teams.
A lot value through.
Resolution of capital structure or other overhangs that we believe inhibit growth or shareholder value of shareholder value. The realignment of financial performance to achieve growth of an operating <unk>.
Kevin Rendino: The realignment of financial performance to achieve growth of an operating profit, not just revenues, the improvement of investor relations strategies and outreach, the evaluation of strategic options including M&A, sales, divestitures, the identification of complementary talent and expertise, and the alignment of interest with and support from large shareholders. There are many ways that we can add value. We're not opposed, however, to pursuing changes through other routes, including private and public shareholder communications, proxy solicitations, and or joining boards of directors of our portfolio companies. All efforts, however, will be grounded and based on our fundamental research and diligence. We have different levels of activism, as you can see on slide 9. Level 1 doesn't require substantial time or involvement.
Profits not just revenues the improvement of that Investor relations strategies and outreach to the evaluation of strategic options, including M&A sales divestitures, the identification of complementary talent and expertise.
And the alignment of interest with and support from large shareholders.
There is many ways that we can add value.
We're not averse, however to pursue changes through other routes, including private and public shareholder communications proxy solicitations <unk> joining boards of directors of our portfolio companies. All efforts, however will be grounded and based on our fundamental research and diligence.
We have different levels of activism as you can see on slide nine.
Level, one doesn't require substantial timer involvement level to our suggestions started to become active and level. Three we work directly with management teams on specific outcomes, whether thats board seats or specific overhangs.
Kevin Rendino: Level 2, our suggestions sort of become active. And level 3, we work directly with management teams on specific outcomes, whether that's board seats or specific overhangs that exist that are hurting the stock price of that company. On the next slide, you can see the types of specific ways we have utilized our activism. The companies we own and the type of activism that we have utilized are listed on this slide. Sometimes our activism is outward and obvious, like Comscore. In other cases, it's quiet and behind the scenes.
Of that exists that are hurting stock the stock price of that company.
On the next slide you can see the types of specific ways, we have utilized our activism the companies, we own and that type of activism that we have utilized are listed on this slide sometimes our activism is outward and apparently comscore in other cases, it's quiet and behind the scenes and no way, however will we ever get in.
Kevin Rendino: In no way, however, will we ever get involved in a company unless we have identified ways in which we think we can help the company and its share price recover. That is the challenge. We could have suggested improvements to presentations and transparency, and recommended various potential paths towards improving financial performance, as I said, developing structures and providing financing that result in simplifying capital structures, or joining boards. And in many cases, we've run strategic alternative processes for companies that have led to the sale of the company or certain of its assets. My point in all of this is that never has the need been greater for the type of assistance that we can provide.
<unk> in a company unless we have identified ways in which we think we can help a company and its share price recover that as the opportunity. It could be suggested improvements to presentations and transparency recommended various pat potential path towards improving financial performance as I said developing structures and.
Adding financing that results in simplifying capital structures or joining boards and then in many cases, we've run strategic alternative processes for companies that have led to the sale of the company or certain of his or her as assets. My point in all of this is never has been need been greater for the type of <unk>.
The assistance that we can provide.
Kevin Rendino: And finally, on slide nine, two examples. Our involvement with Synchronys has been one of collaboration since our initial investment. Synchronous provides white label technology that enables large corporations to offer customers cloud-based storage of personal data. Its platform powers the personal cloud offerings of a number of tier one companies like Verizon, SoftBank, AT&T, Assurance, British Telecom, and Tracfone under long-term contracts. We first invested in Synchronous as part of an underwritten financing in June of 2021 that allowed Synchronous to pay off its punitive preferred stock and recapitalize the company with reduced interest expense, while also providing flexibility going forward to execute on the strategic options for the business. The first of these strategic alternatives was completed in Q4 of 2023 with the sale of Synchronous's non-core messaging and digital businesses. Synchronous is now a pure play cloud-focused business with high margins and is on the cusp of generating significant free cash flows.
And finally on slide nine a two two examples our involvement with synchronous has been one of collaboration since our initial investment.
<unk> provides white label technology that enables large corporations to offer customers cloud based storage of personal data synchronous. This platform powers diverse personal cloud offerings are a number of tier one companies like Verizon Softbank, AT&T Assurant, British telecom and Tracfone under long term contracts.
We first invested in synchronous as part of an underwritten financing in June of 2021 that allowed synchronous to pay off its punitive preferred stock and recapitalized the company with reduced interest expense, while also providing flexibility going forward to execute on our strategic options for the business. The first of these strategic ops alter.
<unk> was completed in Q4 of 2023 with the sale of synchronous as noncore messaging and digital businesses synchronous is now a pure play cloud focused business with high margins and is on the cost of generating significant free cash flows are bullish view for 2024 centered around a number of catalysts that we believe we.
Kevin Rendino: Our bullish view for 2024 is centered around a number of catalysts that we believe will improve Synchronous's balance sheet and demonstrate the operating leverage of the business. First, Synchronous has stated that it expects to generate free cash flow and have other cash flows in 2024. That inflow of capital will allow Synchronous to be leveraged.
We'll improve synchronous as balance sheet and demonstrates the operating leverage in the business first synchronous has stated that it expects to generate free cash flow would have other cash flows in 2024 that inflow of capital will allow us to delever.
Kevin Rendino: Second, Synchronous is expecting to return to top-line revenue growth after the runoff of its historical deferred revenue and its continued growth in subscribers at its largest customer, Verizon, and its newest customer, SoftBank. Third, the end of non-recurring charges related to restructuring and prior litigation and corresponding settlement, coupled with revenue growth and a material reduction in interest paid on its outstanding debt, should lead to material-free cash flow generation in 2024 that we believe will grow substantially in 2025. Lastly, we should note that in December of 2023, we were asked to join Synchronous' board of directors to help with the company's execution on its next phase of growth. We couldn't be more excited.
Second synchronous is expecting to return to top line revenue growth. After the run off of its historical deferred revenue and its continued growth in subscribers as largest customer Verizon and its newest customer softbank.
Third the ends of nonrecurring charges related to restructuring and prior litigation and corresponding settlements coupled with revenue growth and a material reduction in interest paid on its outstanding debt should lead to material free cash flow generation in 2024 that we believe will grow substantially in 2025 Lastly, we should note.
That in December of 'twenty, three we were asked to join synchronous as board of directors to help with the company's execution on its next phase of growth, we couldnt be more excited.
Kevin Rendino: As we look at what that means for the stock price of Synchronous, it ended last year at $6.21, which equated to a multiple of enterprise value to estimated 2024 EBITDA of approximately 5.6 times. This multiple declines to approximately 5.2 times if Synchronous receives the kinds of inflows it should receive this year from its tax refund. We do not believe a cloud-focused business with 85 to 90% recurring revenue, 70 to 75% gross margins, and 25 plus percent EBITDA margin that also generates positive free cash flows can command such a low multiple. In our opinion, a more appropriate multiple would be in the double digits, and if so, the stock has a chance to go well north of $20 a share and approach $30 a share just based on that valuation change.
As we look at what that means for the stock price of synchronous. It ended last year at $6 21.
Which equated to a multiple of enterprise value to estimated 2020 for EBITDA of approximately 5.6 times. This multiple declines to approximately five two times as synchronous receives the kinds of inflows. It should received this year from its tax refund, we do not believe a cloud focused business with <unk>.
85% to 90% recurring revenue, 70% to 75% gross margins and 25 plus percent EBITDA margin. Then will also generate positive free cash flow to command such a low multiple in our opinion a more appropriate multiple would be in the double digits and if so the stock has a chance to go.
Two.
Well north of $20, a share and approached $30 a share just based on that valuation change.
Kevin Rendino: We believe this is just the start for Synchronous, and 2024 will be a turning point for Synchronous, both in terms of its business and how investors value the stock. While our investment with ComScore started out as collaboration, the continued gridlock on the ComScore board towards resolving capital structure issues and other governance issues has led to another level of activism for us as we embark on a potential proxy contest that we are 100% prepared to launch this spring. Our initial investment in Comscore took place in 2021, following its recapitalization by Charter, Cerberus, and Liberty. Our original thesis for our investment was centered on multiple factors, including our belief that Comscore was a company with uniquely competitive media management, offerings, and proprietary data.
We believe this is just the start of synchronous.
And 2024 will be a turning point for synchronous both in terms of its business and how investors value the stock.
While our investment with Comscore started out as collaboration the continued grid lock on the Comscore board towards resolving capital structure issues and other governance issues has led to another level for us of activism as we embark on a potential proxy contest that we are 100% prepared for long.
This spring.
Our initial investment in Comscore took place in 2021, following its recap by charter Cerberus and Liberty. Our original thesis for our investment was centered on multiple factors, including our belief that Comscore was a company with uniquely competitive media measurement offerings and proprietary data comscore as new investments would help with.
Kevin Rendino: Comscore's new investments would help with improved execution, financial performance, and overall growth, and Comscore traded at a significant discount to its peers. However, while Comscore's business has improved dramatically under new management, with 33% EBITDA growth over the last two years, the stock has declined precipitously. We believe this is due to poor corporate governance and uncertainty around Comscore's capital structure. As a result, we have ramped up our activism significantly through the nomination of Matt McLaughlin as a director nominee for consideration at ComScore's upcoming annual meeting of stockholders. Matt is a retired advertising technology executive and naval officer. Most recently, he served as chief operating officer of Double Verified Holdings, a software and platform company for digital media measurement and analytics. He served there from 2011 to 2022.
Improved execution financial performance and overall growth in Comscore traded at a significant discount to its peers, while comscore business has improved dramatically under new management was 33% EBITDA growth over the last two years. The stock has declined precipitously. We believe this is due to poor corporate governance and uncertainty around.
Comscore is capital structure.
As a result, we have ramped up our activism significantly through the nomination of Matt Mclaughlin has a director nominee for consideration that Comscore is upcoming annual meeting of stockholders Mad is a retired advertising technology executive and Naval Officer. Most recently he served as Chief operating officer of double verify holdings.
Our software and platform company.
Company for digital media measurement and analytics. He served there from 2011 to 2022.
Kevin Rendino: As COO of Double Verified, Matt directed its product engineering and sales operations activities, including managing over half the company's employees. Given ComScore struggles with and focus on improving its digital offerings, we can think of nobody more useful to this ComScore board and management than Matt. He has been available to speak with ComScore stockholders. Anyone that wishes to speak with him can reach us directly.
I'll double verify Matt directed its product engineering and sales operations activity, including management managing over half the company's employees, given comscore struggles with and focus on improving its digital offerings. We can think of nobody more useful service Comscore board and management in that.
He has been available to speak with Comscore stockholders.
Ones that wish to speak with him can reach us directly.
Daniel Wolf: While we are actively preparing to run a competitive proxy campaign to support his candidacy, we certainly hope that ComScore's board will realize the complementary skill set that we believe he can bring to help build value for all of ComScore's stakeholders and that a competitive proxy contest will not be required. Let me stop there and turn it over to Daniel. Thanks, Kevin. Please turn to slide 13. As we noted in a press release on February 1st, the discount of our NAV to stock price was approximately 26% as of the end of January 24. This discount equates to a NAV at the end of January that was approximately 8% higher than at the end of 2023. We established a discount management program to make it clear that the management and board of 180 Degree Capital are serious about our intentions to narrow this discount.
While we actively are preparing to run the competitive proxy campaign to support his candidacy. We certainly hope that Comscore is board will realize the complementary skill set that we believe he can bring to help to build value for all of comscore stakeholders and that a competitive proxy contest will not be required.
Let me stop there and turn it over to Daniel.
Thanks, Kevin.
Please turn to slide 13 as.
As we noted in our press release on February <unk>, and 'twenty for the discount of our NAV to stock price was approximately 26% as of the end of January 24. This discount equates to our NAV at the end of January that was approximately 8% higher than at the end of 2023, we established a discount management program.
And to make it clear that the management and board of 180 degree capital.
We're serious about our intentions to narrow this discount at.
Daniel Wolf: At the end of each measurement period, our board will consider all available options, including but not limited to a larger buyback than the $5 million currently authorized, a cash distribution that would be considered a return of capital, or a tender option. Management and the board are completely aligned with our stockholders in that we collectively own about 12% of 180 Degree Capital's outstanding shares. And this ownership continues to grow solely through open market purchases, largely with after-tax dollars.
At the end of each measurement period, our board will consider all available options, including but not limited to a larger buybacks and the $5 million current authorized currently authorized a cash distribution that would be considered a return of capital or a tender offer.
Management and board are completely aligned with our stockholders and that we collectively own about 12% of 180 degree capital's outstanding shares and its ownership continues to grow solely through open market purchases largely of after tax dollars.
Daniel Wolf: We are laser focused on creating value for all stockholders of 180 through growth of our NAV and the narrowing of this discount. Please turn to slides 14 and 15. We provided similar slides last quarter and thought it would be useful to do so this quarter as well. Subsequent to the end of June, many of our portfolio companies issued press releases that provided updates on their respective businesses. We've summarized a number of these releases on these slides. Pot Valley continued to report strong growth that exceeded expectations and announced a new credit facility that provides meaningful interest savings and financial flexibility to fund growth initiatives. Synchronost announced completion of its cost removal program at the upper end of its initial target range along with strong performance for the fourth quarter of twenty-three. Manoj Bhargava is now the majority owner of Arena Group through a $12 million investment at a substantial premium to the company's trading price at the day when that investment was made.
Our laser focus on creating value for all stockholders of 183 growth of our NAV and the narrowing of this discount.
Please turn to slides 14 and 15.
We provided similar slides last quarter and thought it would be useful to do so this quarter as well subsequent to the end of 'twenty three and many of our portfolio companies issued press releases that provided updates on their respective businesses. We summarize a number of these releases on these slides potbelly continued to report strong growth that exceeded expectations and announced new.
Credit facility that provides meaningful interest savings and financial flexibility to fund growth initiatives.
Warehouse to announce.
<unk> of its cost removal program at the upper end of its initial target range, along with strong performance for the fourth quarter of 'twenty three.
<unk>.
<unk> is now the majority owner of Arena group through a $12 million investment at a substantial premium to the Companys trading price at the day of when that investment was made arena also filed the form S. Four registration statement for the merger with Mr. Bhargava as bridge media.
Daniel Wolf: Arena also filed the form's S-4 registration statement for the merger with Mr. Bhargava's Bridge Media. Comscore announced a new agreement with Nexstar that we believe will lead to Nexstar being a top 10 customer for Comscore. Ascent is now focused on its chemicals business, with the appointment of that division's president and CFO as the new CEO and CFO of the entire company. Brightcove announced a new streaming deal with the second largest TV network in Brazil.
Comscore announced a new agreement with NEC side that we believe will.
<unk> Nexstar being a top 10 customer for Comscore.
<unk> is now focused on its chemicals business really appointment of that division President and CFO as the new CEO and CFO of the entire company.
Brightcove announced a new streaming deal with this is the second largest TV network in Brazil, CVD equipment under its new CEO is rationalizing its business through divesting noncore assets Mommas creations held an analyst day recently.
Daniel Wolf: BBG Equipment, under its new CEO, is rationalizing its business through divesting non-core assets. Mama's Creations held an analyst day recently. While you can't take advantage of sampling the food at the event in person, you can order its products from Mama's website and enjoy them at home while listening to Adam Michaels and his team describe what they believe will be substantial growth ahead. Even our legacy private holding that completed a public listing, D-Wave Systems, announced new partnerships and the availability of a new quantum computer through its quantum cloud offering. These announcements are just a sampling of what we believe sets up 24 as a year where multiple value-creating catalysts could occur and, if they do, could drive meaningful growth for Tern and its shareholders.
So you can't take advantage of sampling the food at the event in person you can order its products for Mam as website and enjoy them at home, while listening to Adam Michael and his team describe what they believe will be substantial growth ahead.
Even our legacy private holding that completing a public listing D wave systems announced new partnerships and the availability of our new quantum computer through its quantum cloud offering.
These announcements are just a sampling of what we believe sets up 24 is a year, where multiple value, creating catalysts could occur and if they do you drive meaningful growth for <unk> and its shareholders.
Daniel Wolf: Lastly, I would like to note that we included additional slides that contain metrics from the quarter, year, and inception to date, as an appendix at the end of the slide deck on our website. We're not going to discuss those slides in the prepared remarks today, but we would be happy to answer questions on them at any time. We would now like to open the line 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 on your computer.
Lastly, I would like to note that we included additional slides that contain metrics from the quarter year and inception to date.
In an appendix at the end of the slide deck on our website, we're not going to discuss the slides and the prepared remarks today, but we'd be happy to answer any questions on them anytime we would now like to open the line 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 via computer.
Kevin Rendino: We'll now give you a few minutes for... While we're waiting for questions, I have one last comment from me. Now that essentially all of our assets are in public companies, and most of you know that we're investors and not traders, you should be able to do the math and figure out what our NAV is at any given point in time during the quarter by looking at what our holdings were at the end of last quarter. Now that's not going to be an exact science because sometimes we obviously trade in and out of quarters, and of course, you have to subtract expenses as well.
We will now give a few minutes for <unk>.
And while we're waiting for questions.
One last comment from me.
<unk>.
Essentially 100% of our assets are in public companies and most of you know that we are investors and not traders.
You should be able to do the math and figure out what our NAV is.
Is at any given point in time during the quarter by looking at what our holdings were at the end of last quarter now that's not going to be an exact science, because sometimes we obviously trade in and out of quarters and then of course you have to subtract.
<unk> expenses as well, but you should have a much clearer picture of where we stand and how were doing during the course of the quarter and that's something that we couldnt have said it any time in the last seven years. We now are in EV growth is now almost 100% aligned towards our public stock performance and as you.
Kevin Rendino: But you should have a much clearer picture of where we stand and how we're doing during the course of the quarter. And that's something that we couldn't have said at any time in the last seven years. We are now, our NAV growth is now almost 100% aligned with our public stock performance, and as you know or can see, given what's happened year-to-date.
You know or can see.
Given what's happened year to date.
Kevin Rendino: If we continue to own the stocks that we owned at the end of last quarter, our NAV is materially higher than it was at the end of last quarter and approaching six and far away from five. So I'll stop there, Daniel, and see if you have any questions. Again, if you have a question, please type star six on your phone or click the ask a question icon on your computer. No questions means we either gave a complete performance analysis, and nobody had anything to ask, or nobody was on the phone.
If we continue to own the stock that we owned at the end of last quarter.
He is materially higher than it was at the end of last quarter and approaching six too far away from five.
I'll stop there Danielle and thanks, if you have any questions.
Again, if you have a question. Please type star six on your phone or quick ask the question icon on your computer.
Excellent.
No questions I mean, we either gave a complete.
Performance analysis, and nobody had anything they ask where nobody was on the phone either way.
Kevin Rendino: Either way, I wish everybody a good day and a much better 2024. As I said, we're off to a very good start. We're excited about that. We're excited about the amount of stock that we own, in turn, given the potential for us to increase our NAV and narrow that discount going forward.
Everybody.
Good day.
A much better 2024.
As I said, we're off to a very good start we're excited about that we're excited about the amount of stock that we own in turn given the potential for us to increase our navy and narrow that discount going forward.
Kevin Rendino: Have a good 2024. Thanks. And if anyone has any questions, feel free to reach out to us at any time. Thank you very much, and you can now disconnect. Thank you for watching. Please Like, Comment, and subscribe. Goodbye!
Have a good 2024.
And if anyone has any questions feel free to reach out to us at anytime.
Thank you very much and you can now disconnect.
Goodbye.