Q2 2024 180 Degree Capital Corp Earnings Call

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Daniel Wolfe: Corp's second quarter 2024 financial results update call. This is Daniel Wolfe, President and Portfolio Manager of 180 Degree Cap. Kevin Rendino, our Chief Executive Officer, Portfolio Manager, and I would like to welcome you to our call this morning. All participants are currently in a listen-only mode.

Operator: Corp's second quarter 2024 financial results update call.

Kevin Rendino: Goodbye.

Speaker Change: star s the recording has started cor 's second quarter two thousand and twenty four financial results upd call

Daniel Wolfe: This is Daniel Wolfe, President and Portfolio Manager of 180 Degree Capital.

Speaker Change: this is danie wolf president portfolio manager of one hundredand eighty capital kevin renundino our chief executive officer portfolio manager and i would like to welcome you to our call this morning all participants are currently in a listen only mode

Daniel Wolfe: Following our prepared remarks, we will open the line to questions. If you would like to ask a question, please type star 6 on your phone or click ask a question icon if you are participating via computer. I would like to remind participants that this call is being recorded and that we will be referring to a slide deck that we have posted on our investor relations website, at IR.180degreecapital.com under financial results. Please turn to our presentation.

Speaker Change: following our prepared remarks we will open the line of questions

Speaker Change: if you would like to ask the question please type star six on your phone or click ask a question iicon if you are participating by a computer i'would like to remind participants that this call being recorded andthat we will be referring to a slidedeck thatwe have posted on our investor relationations website

Speaker Change: that i are got twent year capital dot com under financial results

Daniel Wolfe: This presentation may contain statements of a forward-looking nature related to future events. Statements contained in this presentation that are forward-looking events are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions.

Speaker Change: please turn to our presentation

Speaker Change: this presentation may concern to contain statements of a forward-looking nature related to future events statements contained in this presentation that our forward-looking events are intended to be made pursuant to the safe harbor provisions of the private securities litigation orform of one thousand nine hundred n five

Kevin Rendino: 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 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, of the Corp undertakes no obligation to update or revise these four looking statements to reflect new events or uncertainties.

Speaker Change: these forward-looking statements are subjects tothe inherent uncertainties in predicting future results and conditions 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

Speaker Change: please see the company's filings with the securities 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

Kevin Renundino: except as otherwise required by seal securities laws one hundredand eighty recapital the courpt undertakes no obligation to update or revise these forwardlooking statements to reflect new event or uncertainties and now gives me special pleasure to turn over the call to kevin

Operator: Kevin Rendino, our Chief Executive Officer,

Kevin Rendino: It now gives me special pleasure to turn over the call to. Thanks, Daniel, and good morning, everyone. First off, I want to thank everyone for your generous thoughts and well wishes following my unfortunate accident a few weeks ago.

Daniel Wolfe: Portfolio Manager and I would like to welcome you to our call this morning.

Kevin Renundino: thanks daniel and good morning everyone first off i want to thank everyone for your generous thoughts and will wishes following my unfortunate accident a few weeks ago

Operator: All participants are currently in a listen-only mode.

Daniel Wolfe: Following our prepared remarks, we will, open the line to questions.

Kevin Rendino: And, of course, Daniel and our board for navigating, turn through that announcement. The bottom line is I'm better, I've been back working the last couple of weeks and I'm very excited about that. While I'm not excited to have lived through this very difficult market for the asset class that we invest in. And despite this horrendous market for small caps versus the invidious of the world, working on behalf of our shareholders is truly my happy place. And I look forward to talking or seeing you all.

Daniel Wolfe: If you would like to ask a question, please type star 6 on your phone or click ask a question icon if you are participating via computer.

Kevin Renundino: and of course daniel on our board for navigating turn through that announcement

Kevin Renundino: the bottom line is on better have been backworking the last couple of weeks andi'm very excited about that

Kevin Renundino: while i'm not excited to have lived through this very difficult market for the asset class that we invest in

Kevin Renundino: despite this horrendous market for small caps versus the NVIDIA's of the world, working on behalf of our shareholders is truly my happy place and I look forward to talking or seeing you all.

Daniel Wolfe: I would like to remind participants that this call is being recorded and that we will be referring to a slide deck that we have posted on our investor relations website at ir.180degreecapital.com under financial results.

Kevin Rendino: In terms of the slides and in terms of the quarter itself, our stock price unfortunately declined 11.7%. Our NAV declined 12.8 percent. Our stock price as a percentage of our NAV was 83 to 84 percent, although, As you can see from our absurd current price of $3.37, it trades at a 25% discount of our June 30 end NAV, the widest margin it's traded at since we started this seven years ago. Our cash and public-related securities declined from $51.7 million to $45.5 million. Our public portfolio net value decreased by approximately 5.6 percent.

Daniel Wolfe: Please turn to our presentation.

Kevin Renundino: in terms of the slides and the terms of the quarter itself our stock price unfortunately declined eleven point seven percent

Daniel Wolfe: This presentation may contain statements of a forward-looking nature related to future events.

Daniel Wolfe: Statements contained in this presentation that are forward-looking events are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward- looking statements are subject to the inherent uncertainties in predicting future results and conditions.

Daniel Wolfe: 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 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.

Kevin Renundino: our nav decline twelve point eight percent our stock price as a percentage of our av was eighty-three to eighty four percent although

Daniel Wolfe: 180 Degree Capital Corp undertakes no obligation to update or revise these forward-looking statements to reflect new events

Daniel Wolfe: or uncertainties.

Kevin Renundino: as you can see from our absurd current price of three dollars and thirty seven cents it trades at ita twenty- five percent discount of our june thirtith and av the widest

Kevin Renundino: value that is the widest margin it's traded at since we started this seven years ago.

Kevin Renundino: our cash and public related securities declined from fifty-one point seven million to forty five point five million our public before portfolio net value decreased by approximately three five point six percent

Kevin Rendino: $5.6 million from the prior quarter. Our largest increases in value were Potbelly, D-Wave Quantum, Quantum Computer, and ComScore. Our largest increases in value were Synchronous, Grightcove, and MAMA creations. We had new positions in Aviat and Hudson, and we exited positions in Mama Creations and Ryan. Our private portfolio declined slightly from the prior quarter.

Kevin Renundino: five point six million from the prior quarter our our largest decreases in value wewhere popbelly

Speaker Change: the waave quantum

Speaker Change: Quantum Computer, and ComScore. Our largest increases in value were Synchronous, Gritecove, and Mama creations.

Speaker Change: We had new positions in Aviat and Hudson.

Speaker Change: our private portfolio decled slightly from the prior quarter

Kevin Rendino: Although it's essentially gone and the entire future of our company resides in our ability to generate returns in our public portfolio, excuse me, Everyone knows how brutal this period has been for small caps. They underperform when economic data has been weak, when everyone is convinced the recession is on the horizon and why would I want to own small caps in that environment. And then at the same time, they underperform when economic data is strong, convincing everyone that inflation will never recede and the Fed won't cut rates anytime soon. It's been a maddening period since really November of 2021.

Speaker Change: although it's essentially gone and the entire future of our company resides in our ability to generate returns in our public portfolio

Speaker Change: suthing

Speaker Change: everyone knows how brutal this period has been for small caapps they underperformed when economic data has been weak whenevereveryone iss convinced to recession is the horizon and why would i want to own small caapps in that environment

Speaker Change: and one at the same time the underperformed when economic data is strong convmenincing everyone that inflation will never receivee and the fed an cut rates anytime soon it's been madding period since really november of two thousand and twenty-one

Kevin Rendino: Since November of 2021, the S&P is up 22%, while the Micro Cap Index is literally down 25% over that same period, the widest margin you can see in history. But you all know that, and we have talked about it almost every quarter for the last three years. So instead of continuing to talk about that, I'd like to talk to you about some of our positions and the constructive activism we have instituted for a number of our holders.

Speaker Change: since november of two thousand and twenty one the s smp is up twenty two percent while the microcapp index is literally down twenty five percent over that same period the widest margin you can see in history

Speaker Change: but you will all know that and we have talked about it almost every quarter for the last three years so instead of continu to talk about that i'd like to talk to you about some of our positions and the constructive actiimism we have instituted for a number or a number of our holdings

Kevin Rendino: To say the obvious, it's been, become one of the most absurd stock markets that I've seen in the last 36 years, having been in the asset management business. And I only need to look at Potbelly this year as a testament to that.

Speaker Change: to say the to say the obvious it's been

Speaker Change: become one of the most absurd stock markets so the i've seenen in the last thirty six years having been in the asset management business and i only need to look at popbly this year as as a testament into that

Kevin Rendino: After a wonderful turnaround off the COVID lows led by the new senior executive management team, Bob Wright and Steve Cerullis, the stock went from $1.50 near the COVID lows to almost $14 a share against the backdrop of strong comps, robust EBITDA, and a new franchising strategy, which hopefully will get the company to have 2,000 stores over the next seven to 10 years. This year, despite essentially beating comps, EBITDA, cost savings, and new franchise agreements, and most continued good news, the stock has been cut in half, as you can see on the chart in the slide deck.

Speaker Change: after a wonderful turnaround off the covid lows led by the new senior executive management team bob right and steves to ru us

Kevin Rendino: It's declined to 7 from 14, to a price that has allowed the company to trade at 6.5 times enterprise value to EBITDA, when many of the competitors trade at 17 times or so. You would look at the stock price and assume the company is missing, losing share, and not being able to grow their franchising strategy. Hardly been the case.

Speaker Change: the stock one from a dollar fifty near the covid lows to almost fourteen dollars a share

Kevin Rendino: It's just an example of a small cap company performing like almost any other small cap stocks that doesn't have an AI business, that goes down despite what has been very, very good news in 2023. We still own it. It's one of our biggest holdings. We're constructive on their ability to generate significant shareholder return over the upcoming years and eventually sell themselves to either a private equity firm or a strategic at some point in the next couple of years. But again, it's gone from 14 to 7 for no reason.

Speaker Change: against the backdrop of strong comps robust ebitda and a new franchising strategy which hopefully will get the company to have two thousand stores over the next seven to ten years

Speaker Change: this year despite essentially beating comps ebitda cost savings and new franchise agreements

Speaker Change: and most continued good news the stock has been cut half as you can see on the chart in the slide deck it's declined to seven from fourteen to a price that has allowed the company to trade it

Speaker Change: six point five times enterprise value to ebitda when many of the competitors trade at seventeen times or ur so

Speaker Change: you would look at the stock price and assume the company is missing losing share or not being able to grow their franchising strategy hardly in the case it's just an example of a small cap company performing like almost any other smallke cap stocks that doesn't have an ai business

Speaker Change: that goes down despite what has been very very good news in two thousand and twenty three we still ownt it it's one of our biggest holdings were're constructive on their ability to generate significant shareholder return over the outcoming years

Speaker Change: and eventually sell themselves to either a private equity firm or strategic at some point in the next couple of years but again it's gone from fourteen to seven for no reason

Kevin Rendino: Lastly, as part of our what we think are differentiated parts of our process is our constructive activism strategy. And we have ramped that up significantly on many of our holdings recently. And you can see that also in our slide deck after the Potbelly site, slide. Let me talk about two of them.

Speaker Change: lastly as part of our what we think our differentiated parts of our process is our constructive activism strategy

Speaker Change: and we have ramped that up significantly on many of our holdings recently and you can see that also in our slide deck after the poppebelli side slide

Kevin Rendino: Synchronous, we've actively worked with management to improve their investor relations and their balance sheet, as well as assisting with ongoing strategic alternatives evaluation. The company has returned to top-line revenue growth and generation of material-free cash flow. The improvement of their balance sheet through the opportunistic refinancing, deleveraging this past quarter has helped the stock price as well, and for sure will get the receipt of a $28 million tax refund. We were asked to buy this board, to join this board in November of last year.

Speaker Change: let me talk about two of them snickronness we have actively worked with management to improve their investor relations and their balance sheet as well as assisting with ongoing strategic alternatives evaluation

Speaker Change: the company has returned to top line revenue growth and generation of material free cash flow the improvement of their balance sheet through the opportunistic refinancing the leveraging this past quarter has helped the stop price as well and for sure we'll get the seat of a twenty eight million dollar tax refund

Speaker Change: we were asked to buy this board to join this board in november of last year

Kevin Rendino: We've been very busy since we've been on the board helping the management team run their business and also work on fixing their balance sheet and their investor relations. And the stock has gone from essentially 5 to 12 since we joined. This is a great example for us of our collegial collaborative activism that we do. We didn't demand to go on the board.

Speaker Change: we've been very busy since we've been on the board helping the management team run their business and and also work on fixing their balance sheet and their investor relations

Speaker Change: and the stock has gone from essentially five to twelve since we joined this is a great example for us of our collegiial collaborative

Kevin Rendino: Instead, we were asked to go on the board by the company as they saw that we had some skill sets that they could better use. And it's been a great partnership since we joined the board in November, and you can see that from the stock. The second one I wanted to talk to before I turn it over to Daniel, is comScore, which has been the complete opposite of synchronous, written a number of public letters, which you've seen. We continue to pressure the preferred stockholders to demonstrate alignment with all stakeholders. COUGH COUGH, Um.

Speaker Change: and it's been a great partnerships since we joined the board in november and you can see that from the stock price

Daniel Wolfe: It now gives me special pleasure to turn over the call to Kevin.

Speaker Change: the second one i wanted to talk to beforei turn over to daniel

Kevin Rendino: Thanks, Daniel, and good morning, everyone.

Kevin Rendino: First off, I want to thank everyone for your, generous thoughts and well wishes following my unfortunate accident a few weeks ago.

Speaker Change: is comscore which has been the complete opposite of synchronous we've written a number of public letters which you've seen we continue to pressure the preferred stockholders to demonstrate alignment with all stakeholders

Kevin Rendino: It's an awful board with a bunch of masters of the universe people that have no idea how to make a decision for the benefit of shareholders. Whether it's Charter, Cerberus, or Liberty, they've all failed. The independent directors, like Bill Livick, who've been a part of this business for years and years and years with no strategic benefit, have no business being on the board anymore. We did nominate Matt McLaughlin as a board member, and the company did agree to put him on the board.

Speaker Change: yeah

Speaker Change: um

Speaker Change: it's an awful board with a bunch of masters of the universe people that have no idea how to make a decision for the benefit of shareholders

Speaker Change: whether it's charter serviceous or liberty they go failed

Speaker Change: the independent directors like they'll livethat who've been on part of this business for years and years and years with no

Speaker Change: strategic benefit

Speaker Change: i have no business being on the board anymore

Speaker Change: we did nominate mt mclolauin as a board member and the company did agree to put them on the board we will continue to pressure the board to do the right thing to align themselves with shareholders

Kevin Rendino: We will continue to pressure the board to do the right thing, to align themselves with shareholders, and to fix the share price. They did recently announce that the pick of the annual dividends, which started last year, would actually have reduced interest rate from 9.5% to 7.5%, and it did remove one liquidity overhang. Instead of taking cash, they got it in dividends, preferred dividends, and more stock, which is better than the company spending out cash when they need the cash to grow the business.

Speaker Change: and to fix the share price

Speaker Change: they did recently announce that the pick of the annual dividends which started last year

Speaker Change: would actually have reduced interest rate from nine point five percent to seven point five percent and it did remove one liquidity overhanging stesaid it taken cash they got it in dividends

Speaker Change: prefer dividends

Speaker Change: and more stopck which is better than the company spending out cash when they need to cash to grow the business so we'll continue

Kevin Rendino: So we'll continue our, what I would consider to be, slightly hostile activism that this company needs. We will stand for all common shareholders by calling this board out, whether that's privately or publicly, and you can continue to see us leading that pressure on the company as we go forward and we'll come up with, hopefully, a reason why this company will do the right thing for common shareholders with that pressure. Let me turn it over to Daniel who wants to talk about some of our other holdings and our concerns. Thanks, Kevin.

Speaker Change: are what i would couldn't consider to be slightly hostile activism that this company needs

Speaker Change: we will stand for all common shareholders by calling this management team this board out whether that's privately or publicly and you can continue to see us leading that pressure on the company as we go forward and we'll come up with hopefully

Speaker Change: a reason why this company will do the right thing for a common shareholders with with that pressure let me turn it over to daniel who wants to talk about some of our other holdings and our actiimism

Kevin Rendino: And, of course, Daniel and our board for navigating through that announcement.

Kevin Rendino: The bottom line is I'm better.

Kevin Rendino: I've been back working the last couple of weeks, and I'm very, excited about that. While I'm not excited to have lived through this very difficult market for the asset class that we invest in, and despite this horrendous market for small caps versus the NVIDIAs of the world, working on behalf of our shareholders is truly my happy place, and I, look forward to talking or seeing you all.

Kevin Rendino: In terms of the slides and in terms of the quarter itself, our stock price unfortunately declined 11.7 percent.

Kevin Rendino: Our NAV declined 12.8 percent. Our stock price as a percentage of our NAV was 83 to 84 percent, although, as you can see from our absurd current price of $3.37, it trades at a 25 percent discount of our, June 30-end NAV, the widest margin it's traded at since we started this seven years ago. Our cash and public-related securities declined from 51.7 million to 45.5 million. Our public, portfolio net value decreased by approximately 5.6 percent.

Daniel Wolfe: I'm going to continue running through a few more names on slides four through six before handing it back to Kevin to cover the discount management program. We've talked about Intivac a lot in the past as a refresher. Intivac, or the symbol is IVAC, develops tools that are critical for the manufacturing of hard disk drives. And it has a new tool that is bringing the market called the TRIO that aims to more uniformly coat glass and plastic surfaces used in everyday electronic devices as well as other applications.

Daniel: thanks kev

Speaker Change: i'm going to continue running through a few more names on slide fourorts to sixick before handing a back cabin to co the discount management program update

Daniel: we've talked about intointer ac a lot in the past as a reoffreshor intovacor the symbols iac develops tools that are critical for the manufacturing of hard distrs

Daniel: and it has a new tool that is bring the market called the trio that aims to more uniformly co glass and plastic surfaces used in everyday electronic devices as well as other applications

Kevin Rendino: 5.6 million from the prior quarter.

Daniel Wolfe: IVAC reported a stronger than expected quarter for Q2 2024 from its hard disk drive business given a cyclical upswing of that industry led by adoption of its new Hammer platform that enables the manufacturing of a new class of high-density disk drives. IVAC also has approximately 72% of its market capitalization in cash, which it plans to maintain through at least 2024, while it pushes adoption of its new TRIO platform. This platform is in testing with a large glass coating company in Asia that works with the largest consumer electronic, So for IVAC, the market is currently valuing its $45 to $50 million annual recurring hard disk drive business at approximately 0.6x revenue, and his trio business at zero, or you can swap within those numbers and apply any value to trio, but it will reduce the value of the hard disk drive.

Kevin Rendino: Our largest increases in value were Potbelly, D-Wave Quantum, Quantum Computer, and ComScore.

Kevin Rendino: Our largest increases in value were, Synchronous, Grycov, and Mama Creations.

Speaker Change: i've back reported a stronger than expected quarter for q two two thousand and twenty-four from its hard desdrive business given a cyclical upswing of that industry led by adoption of its new hammer platform that enables the manufacturing of a new class of high density distrge

Speaker Change: iback also has approximately seventy two percent of its marartket capitalization in cash which it plans to maintain through atleasttwo thousand and twenty four while pushes adoption of its nutrio platform this platform is in testing with a large glass ccooding company in asia that works with the largest cut consumer electronic comptoies

Speaker Change: so if iriback the market is currently valuing it forty to five to fifty million dollar annual recurring hard drive business at approximately point six thatx revenue

Speaker Change: and it's trio business at zero or you can swap it within those numbers and apply any value to trio but will reduce the value of the hard desroribed business

Daniel Wolfe: Given its clean balance sheet, the protection of its cash on hand, and the sticky hard disk drive business that is in a cyclical upswing, we like our downside protection and we believe there is material upside if TRIO starts to gain traction in the market. Aviat Networks, or AVNW, is a new position that we established in the quarter. AVNW designs and installs microwave routers, switches, antenna systems, and network management tools, as well as offers network optimization, lifecycle support, and managed network services.

Speaker Change: given a clean balance sheet the protection of its cash on hand in the seeickking hard disdri business that is in a cyclical upswing we like our downside protection and we believe there is material upside at trio starts togain traction in the market

Kevin Rendino: We had new positions in Aviat and Hudson, and we, exited positions in Mama Creations and Ryan.

Kevin Rendino: Our private portfolio declined slightly, from the prior quarter, although it's essentially gone, and the entire future of our company resides in our ability to generate returns in our public portfolio.

Kevin Rendino: Everyone knows how brutal this period has been for, small caps.

Kevin Rendino: They underperform when economic data has been weak, when everyone is convinced a recession is on the horizon and why would I want to own small caps in that environment? And then at the same time, they underperform when economic data is strong, convincing everyone that inflation will never recede and the Fed won't cut rates anytime soon.

Kevin Rendino: It's been a maddening period since really November of 2021. Since November of 2021, the S&P is up, 22%, while the microcap index is literally down 25% over that same period, the widest margin you can see in history.

Speaker Change: avot networks or avnw is a new position that we've established in the quarter

Kevin Rendino: But you all know that, and we have talked about it almost every quarter for the last three years, so instead of continuing to talk about that, I'd like to talk to you about some of our positions and the constructive optimism we have instituted for a number of our holdings.

Kevin Rendino: To say the obvious, it's become, one of the most absurd stock markets that I've seen in the last 36 years, having been in the asset management business, and I only, need to look at Potbelly this year as a testament to that. After a wonderful turnaround off the COVID lows, led by the new senior executive management team, Bob Wright and Steve Cerullis, the stock went from $1.50 near the COVID lows to almost $14 a share, against the backdrop of strong comps, robust EBITDA, and a new franchising strategy, which hopefully will get the company to have 2,000 stores over the next 7 to 10 years.

Kevin Rendino: This year, despite essentially beating comps, EBITDA, cost savings, and new franchise agreements, and most continued good news, the stock has been cut in half, as you can see on the chart in the slide deck. It's declined to $7 from $14 to a price that has allowed the company to trade at 6.5 times enterprise value to EBITDA, when many of the competitors trade at 17 times or so.

Kevin Rendino: You would look at the stock price and assume the company is missing, losing share, and not being able to grow their franchising strategy.

Speaker Change: avn w designs andinstalls microwave routers switches and ten systems and network management tools as well as offers network optimization lifecycle suort and manage net services

Kevin Rendino: Hardly been the case.

Kevin Rendino: It's just an example of a small cap company performing like almost any other small cap stocks that doesn't have an AI business that goes down despite what has been, very, very good news in 2023.

Kevin Rendino: We still own it.

Daniel Wolfe: Its solutions are most often found enabling private networks and deployment of internet connectivity to areas where it is cost prohibitive to lay optical fiber. We've gotten to know its CEO over a number of quarters and have been impressed by his overall execution, turning around a historically broken company. In Q124, Aviat reported a weaker-than-expected quarter due to under-foreseen issues with one large customer. That was part of its acquisition of Paso Link that closed in Q423.

Speaker Change: its solutions are most often found enabling private networks and deployment of internet connectivity there as where it is cost prohibitedive to lay of optical fiber

Kevin Rendino: It's one of our biggest holdings.

Speaker Change: fiber optic cables

Kevin Rendino: We're constructive on their ability to generate significant shareholder return over the outcoming years, and eventually sell themselves to either a private equity firm or a strategic at some point in the next couple of years.

Speaker Change: we've got to know its ceo over a number of quarters and have been impressed by his overall execution turning around historically broken company

Kevin Rendino: But again, it's gone from $14 to $7 for no reason.

Speaker Change: in q one and twenty-four a reported a weaker than expected quarter to under thir teen issues with one large customer that was part of its acquisition of pas anket that closed in q four twenty-three

Daniel Wolfe: This was the first time in a long time that the CEO and his team missed guidance, which resulted in a material decline in the stock to prices that were very attractive, particularly given the fact that the balance sheet has net cash the company generates. Cash, and it continues to grow on all operating, We also believe Aviat has a better handle on its acquisition and is set up to resume its trend of exceeding, Turning to Lantronics, this is our latest example of where we believe constructive activism can lead to material appreciation and value.

Speaker Change: this was the first time in a long time that the ceo and his team misguidancewhich resulted in a material decline in the stock to prices that were very attractive to us

Speaker Change: particularly given the fact that the c balance sheet has net cash the company generates cash and it continues to grow on all operating metrics

Speaker Change: we also believe avot has a better handleon acisition and is set up to resume its trend of exceeding expectations

Speaker Change: thirty of land tronics this is our latest example of where we believe constructive activism in lead to material appreciation and value

Daniel Wolfe: We've been investors in electronics for a long time, and we've traded around our position throughout, Recently, we've got to know Lantronics' new CEO, Celil Aguare, through multiple conversations discussing both his and our expertise expectations for the business. Lantronics is a really good company with a solid foundation that experienced significant growth in fiscal 24 that it's fiscal 24 that ended June 30th, 24, and is now set up to build on that foundation into the future.

Speaker Change: we have been investors in l tronack for a long time and we'have trained around our position throughout this time

Speaker Change: recently we've got to know antronics 's new ceo who will warrrenant

Speaker Change: through multiple conversations discussing both his and our ext expectations for the business

Daniel Wolfe: As we spend more time with Salil, we believe that he could benefit from additional skill skill sets on his board of directors, particularly around, How to Build an IoT Business as a Microcapitalization Public Company. Our former portfolio company, Odessa Technologies, went through a similar growing pains until its successful acquisition by Dialog Semiconductor. So we thought that former members of that business could be helpful to Salil. We made introductions of Adesso's former CEO, Narbe Derakobian, and former board member, Kevin Palatnik, to Salil and Lantronics, and then entered into a cooperation agreement whereby Lantronics agreed to nominate Narbe and Kevin to Lantronics' board of directors at this next annual meeting, which will take place likely in November 24th.

Speaker Change: when tronics is a really good company with a solid foundation that experienced significant growth in fiscal twenty four that 's fiscal to before that ended june thirtieth twenty four and hass now set up to build on that foundation into the future

Speaker Change: as we spend more time a alia we believe that he could benefit from additionalskin skill sets on his boardder directors particular early around c to build an iot business as a micro capitalization public company

Speaker Change: our former portfolio company of desto technologies went through a similar growing pains until it's a successful acquisition by dialogue semiconductor

Speaker Change: so we thought that form er members of that business could be helpful to cealil

Speaker Change: we made introductions of desto's former ceo norbay daracobian

Speaker Change: and four board member could kevin pollatin two silil electronics and then entered into a cooperation agreement whereby lectronics agreed in our to nominate narv cabin into lronics board directors of the next annual meeting which will take place likely in november twenty-four

Daniel Wolfe: This is a great example of how we work with management teams and boards collaboratively, most of the time, rather than combatively to achieve outcomes that we believe will be in the interest of all stakeholders, the company, including 180. Lastly, I would like to talk a little bit about Commercial Vehicle Group, or CVGI. CVGI makes components primarily for commercial vehicles, including wire harnesses, seats, plastics, and aftermarket parts.

Speaker Change: this is a great example of how we work with management teams and boards collaboratively most of time rather than comcompbatiively to achieve outcomes that we believe will be in the interest of all stakeholders of the company including one hundred and eighty capital

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Operator: To ask your question, please press star six. The recording has started.

Kevin Rendino: Lastly, as part of what we think are differentiated parts of our process is our constructive activism, strategy.

Daniel Wolfe: PVGI is another example of a company that we have traded around our position as it went through a successful turnaround led by its former CEO where costs were rationalized, contracts renegotiated, and the overall approach to running a company was changed to be more proactive rather than reactive. After a comprehensive search, James Ray, a member of CBGI's board, was appointed CEO of the company. James brings a strong operational background and deep knowledge of the company through this leadership position. Shortly after his appointment, the cyclical industries in which CVGI serves began to experience weakness, particularly among its customers in agriculture and in structure.

Kevin Rendino: We have ramped that up significantly on many of our holdings recently, and you can see, that also in our slide deck after the Potbelly slide.

Operator: The recording has started.

Speaker Change: lastly i would like to talk a littlebit about commercial vehicle grouroom c gi dgi makes components primarily for commercial vehicles including wire harness and seeds plastics and aftermarket parts

Kevin Rendino: Let me talk about two of them.

Operator: Court of second quarter, 2024 financial results update call.

Daniel Wolfe: Court of second quarter, 2024 financial results update call. This is Daniel Wolfe, president and portfolio manager of 180 Degree Capital.

Daniel Wolfe: This is Daniel Wolfe, president and portfolio manager of 180 Degree Capital.

Kevin Rendino: Kevin Rendino, our chief executive officer, portfolio manager and I would like to welcome you to our call this morning.

Daniel Wolfe: Kevin Rendino, our chief executive officer, 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 the question, please type star six on your phone or click ask a question icon if you are participating via computer. I would like to remind participants that this call is being recorded and that we will be referring to a slide deck that we have posted on our investor relations website at ir.1euredcapital.com under financial results.

Speaker Change: bgi is the number example of the company that we have treatedit around our position as i went through successful turnaround led by its former ceo where cost rationalizede contracts renegotiated and the overallapproach runningthe company was changed to be more proactive than reactive

Operator: All participants are currently in a listen only mode.

Kevin Rendino: Synchronous, we have actively worked with management to improve their investor relations, and their balance sheet, as well as assisting with ongoing strategic alternatives evaluation.

Operator: Following our prepared remarks, we will open the line to questions.

Operator: If you would like to ask the question, please type star six on your phone or click ask a question icon if you are participating via computer.

Kevin Rendino: The company has returned to top-line revenue growth and generation of material-free cash, flow.

Kevin Rendino: The improvement of their balance sheet through the opportunistic refinancing, deleveraging, this past quarter has helped the stock price as well, and they for sure will get the receipt of a $28 million tax refund.

Kevin Rendino: We were asked to buy this board, to join this board in November of last year.

James Ray: after a comprehensive search james ray a member of cb ggi' board was appointed ceo of the company drams brings a strong operational background or deep knowge of the company d this leadership position

Kevin Rendino: We've been very busy since we've been on the board, helping the management team run their, business and also work on fixing their balance sheet and their investor relations.

Kevin Rendino: The stock has gone from essentially 5 to 12 since we joined.

Kevin Rendino: This is a great example for us of our collegial, collaborative activism that we do.

Kevin Rendino: We didn't demand to go on the board. Instead, we were asked to go on the board by the company, as they saw that we had some, skill sets that they could better use, and it's been a great partnership since we joined the board in November, and you can see that from the stock price.

Operator: I would like to remind participants that this call is being recorded and that we will be referring to a slide deck that we have posted on our investor relations website at ir.1euredcapital.com under financial results.

Speaker Change: shortly after apployment the cyclical industries in which cb ag cvg serves by' experienence weakness particularly among its customers and agriculture of instruction

Operator: Please turn to our presentation.

Daniel Wolfe: Please turn to our presentation. This presentation may turn to contain statements of a forward looking nature related to future events. Statements contain in this presentation that are forward looking events are intended to be made pursuant to the safe harbor provisions of the private securities litigation or form act of 1995. These forward looking statements are subject to the inherent uncertainties in predicting future results and conditions. 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.

Daniel Wolfe: While we initially believe this weakness was captured and was near bottom as of the end of Q1, 24. It continued to decline in Q2-24, leading to further reduction in guidance and expose some inefficient, inefficiencies in CVGI's business that resulted in some unforeseen restructuring. The Q2-24 report results in a substantial decline in the stock to levels that we believe are both unwarranted, given the manageable debt-to-EBITDA ratio of approximately two times, even with the reduced EBITDA guide.

Operator: This presentation may turn to contain statements of a forward looking nature related to future events.

Speaker Change: while we initially believe this weakness was captured and was near bottom as of the end of q and twenty four it continued to decline in q twenty four leadaning to further reduction in guidance and expose some inefficiency inefficiencies and cv g's business that resulted in some unforeseen restructuring costs

Operator: Statements contain in this presentation that are forward looking events are intended to be made pursuant to the safe harbor provisions of the private securities litigation or form act of 1995. These forward looking statements are subject to the inherent uncertainties in predicting future results and conditions.

Speaker Change: the q two twenty-four report results in the substantial decline the stock to levels that we believe are both unwarranted given the manageualable debt to ebitit alreadyatio approximately two times even with the reduced ebitda god

Operator: 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 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, a 180 degree cap of the corp, undertakes new obligation to update or revise these forward looking statements to reflect new events or uncertainties.

Daniel Wolfe: The company continues to generate cash and pay down debt, along with using funds from pending non-core asset sales to further reduce debt. CVGI's business is based on long-term contracts and is therefore relatively sticky, even though there can be some delays due to overall in-market cyclicality. We believe the improvements in its business being implemented by James and his management team will set CVGI up to generate even higher than historical EBITDA margins in the future, as its end markets recover, particularly agriculture and construction in the future.

Daniel Wolfe: 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, a 180 degree cap of the corp, undertakes new obligation to update or revise these forward looking statements to reflect new events or uncertainties.

Speaker Change: the company continues to generate cash and pay down dadt along with using funds from pending noncore asset sales to further reduce debt

Speaker Change: cg's business is based on long-term contracts and is therefore relatively sticky even thoughthere can be some delaysdue to overall end market and cyclicality

Speaker Change: we believe the improvements is business being implemented by james management team will set cvg to generate even higher has than historical ebitda margins in the futureand as its end markets recover particularly agriculture in construction in the future years

Kevin Rendino: It now gives me special pleasure to turn over the call to Kevin.

Kevin Rendino: It now gives me special pleasure to turn over the call to Kevin. Thanks, Daniel, and good morning, everyone. First off, I want to thank everyone for your generous thoughts and will wishes following my unfortunate accident a few weeks ago. And of course, Daniel and our board for navigating turn through that announcement. The bottom line is I'm better, have been working the last couple of weeks, and I'm very excited about that. While I'm not excited to have lived through this very difficult market for the asset class that we invest in, and despite this horrendous market for small caps versus the endidious of the world, working on behalf of our shareholders is truly my happy place and I'm look forward to talking or seeing you all.

Kevin Rendino: Thanks, Daniel, and good morning, everyone.

Kevin Rendino: First off, I want to thank everyone for your generous thoughts and will wishes following my unfortunate accident a few weeks ago.

Daniel Wolfe: We hope these summaries provide a window into how we think about our investments and the catalysts that we believe that can drive material value appreciation in the future, should they occur. These slides provide our thoughts on all of our portfolio holdings at the end of Q24, and we'd be happy to dive into any of them with you at any time. Lastly, I would like to know we include additional detail on our training during the quarter as well as operational metrics in appendix at the end of our slide deck on our website. We're not going to go through those slides right now.

Speaker Change: we hope these summaries proide a window into how we think about our investments and the catalyst that we believe that can drive material value appreciation in the future should they occur these slides provide our thoughts on all all of ourportfolio holdings at the end of q two twenty fourandwe'll be happ to d in tenany of them with you at any time

Kevin Rendino: And of course, Daniel and our board for navigating turn through that announcement.

Kevin Rendino: The bottom line is I'm better, have been working the last couple of weeks, and I'm very excited about that.

Kevin Rendino: The second one I wanted to talk to before I turn it over to Daniel is Comscore, which, has been the complete opposite of Synchronous.

Kevin Rendino: While I'm not excited to have lived through this very difficult market for the asset class that we invest in, and despite this horrendous market for small caps versus the endidious of the world, working on behalf of our shareholders is truly my happy place and I'm look forward to talking or seeing you all.

Kevin Rendino: We've written a number of public letters, which you've seen.

Kevin Rendino: We continue to pressure the preferred stockholders to demonstrate alignment with all stakeholders.

Kevin Renundino: lastly i would like to know we include additional detail on our training during the quar as well as operational metrics in appendix at the end of our slide deck on our website we're not going to go through those slides right now we would have to discuss that manyany time i'll out turning the call back over to kevin

Kevin Rendino: It's an awful board with a bunch of masters of the universe people that have no idea how, to make a decision for the benefit of shareholders, whether it's Charter, Cerberus, or Liberty, they've all failed.

Kevin Rendino: The independent directors like Bill Livick, who have been a part of this business for, years and years and years with no strategic benefit, have no business being on the board anymore.

Kevin Rendino: We would have to discuss them. I'll now turn the call back over. Thanks, Daniel. Finally, a quick update on our discount management program, that we announced early in the year, late last year. The Discount Management Program is comprised of two measurement periods, January 1st, 2024 to December 31st, 2024, and then January 1st, 2025 to June 30th, 2025.

Kevin Rendino: We did nominate Matt McLaughlin as a board member, and the company did agree to put him, on the board.

Kevin Rendino: In terms of the slides and in terms of the quarter itself, our stock price unfortunately declined 11.7 percent, our NAV declined 12.8 percent, our stock price as a percentage of our NAV was 83 to 84 percent, although as you can see from our absurd current price of $3.37, it trades at a 25 percent discount of our June 30 end NAV, the widest value that the widest margin it's traded at since we started this seven years ago. Our cash and public related securities declined from 51.7 million to 45.5 million, our public portfolio net value decreased by approximately 5.6 percent.

Kevin Rendino: In terms of the slides and in terms of the quarter itself, our stock price unfortunately declined 11.7 percent, our NAV declined 12.8 percent, our stock price as a percentage of our NAV was 83 to 84 percent, although as you can see from our absurd current price of $3.37, it trades at a 25 percent discount of our June 30 end NAV, the widest value that the widest margin it's traded at since we started this seven years ago. Our cash and public related securities declined from 51.7 million to 45.5 million, our public portfolio net value decreased by approximately 5.6 percent.

Kevin Renundino: thanks daniel finally a quick update on our discount management program

Kevin Renundino: that we announced early in the year late last year

Speaker Change: the discount management program is comprised the two measurement periods january first two thousand and twenty four in december thirty first two thousand andtwenty four and thenjanuary fifth first two thousand and twenty five june thirtieth two thousand and twenty five

Kevin Rendino: If the average discount of our equity during each management period is greater than 12%, 180 Degree Capital's board of directors will consider all available options, including, but not limited to, a significant expansion of our current stock buyback program up to $5 million, cash distributions reflecting a return of capital to shareholders, or a tender offer. You can see in the chart that we have here through July 21st, 2024, the average daily discount is approximately 19%, and as I said earlier, given where our share price is this morning, it's closer to 25%, which is, ludicrous, if you ask me.

Speaker Change: if the average discount of our equity during the each management periods greater than twelve percent eighty degree capitals board directors will consider all available options including but not limited to

Kevin Rendino: We will continue to pressure the board to do the right thing, to align themselves with, shareholders, and to fix the share price.

Kevin Rendino: 5.6 million from the prior quarter.

Speaker Change: a significant expansion of our current stop buyback program up to five million cash distributions reflecting a return of capital to shareholders or tender offer

Speaker Change: you can see in the chart that we have here through july twenty first twoto two thousand and twenty four the average daily discount is approximately nineteen percent and as i send i said earlierare given where our share prices this morning it's closer to twenty five percent

Kevin Rendino: 5.6 million from the prior quarter. Our largest accretes in value were pot belly, de-wave quantum, quantum computer, and com score. Our largest accretes in value were synchronous, bright-cove, and mama creations. We had new positions in Aviat and Hudson, and we exited positions in mama creations in Ryan. Our private portfolio declined slightly from the prior quarter, although it's essentially gone and the entire future of our company resides in our ability to generate returns in our public portfolio.

Kevin Rendino: Our largest accretes in value were pot belly, de-wave quantum, quantum computer, and com score.

Kevin Rendino: And quite frankly, while this will be a board decision, I am because of the share price itself, the potential upside of our portfolio at some point, and the discount wondering why I'm waiting to the end of the year to ask the board to do something rather than ask the board today. So I would, it's not a promise, but I stand by on that as we are very sensitive to where our share price is trading.

Speaker Change: which is

Speaker Change: blludicrous

Kevin Rendino: Our largest accretes in value were synchronous, bright-cove, and mama creations. We had new positions in Aviat and Hudson, and we exited positions in mama creations in Ryan.

Speaker Change: if you ask me

Speaker Change: and quite frankly while this will be a board decision i am because of the share price itself the potential upside of our portfolio at some point and the discount wondering why i'm waiting to the end of the year to ask the board to do something

Kevin Rendino: Our private portfolio declined slightly from the prior quarter, although it's essentially gone and the entire future of our company resides in our ability to generate returns in our public portfolio.

Speaker Change: rather than asked the board today so i would not a promise but i stand by on that as we are a very sensitive to wearour share pric is trading

Kevin Rendino: And the opportunity to do this may be better now than it will be at the end of the year. But time will tell on that and stay tuned for that, as I said. With that, Daniel, I think that's done with our formal comments. We'd be happy to take any questions by anybody right now. Thanks, Kevin. If you have a question, please type star six on your phone or click the ask a question icon if you are participating via your computer.

Speaker Change: and the opportunity to do this may be better now than it will be at the end of the year but time will tell on that and stay tuned for that as i said

Kevin Rendino: Everyone knows how brutal this period has been for small caps.

Kevin Rendino: Everyone knows how brutal this period has been for small caps. They underperform when economic data has been weak when everyone is convinced the recession is on the horizon and why would I want to own small caps in that environment. And then at the same time the underperform when economic data is strong, convincing everyone that inflation will never recede and the Fed won't cut rates anytime soon. It's been a maddening period since really November of 2021.

Kevin Rendino: They underperform when economic data has been weak when everyone is convinced the recession is on the horizon and why would I want to own small caps in that environment.

Kevin Rendino: They did recently announce that the pick of the annual dividends, which started last year, would actually have reduced interest rate from 9.5% to 7.5%, and it did remove one liquidity overhang.

Speaker Change: with that dannual i think that's done with our formal comments we be happy to take any questions by anybody right now

Kevin Rendino: And then at the same time the underperform when economic data is strong, convincing everyone that inflation will never recede and the Fed won't cut rates anytime soon.

Speaker Change: thank phone if you have a question please type stars it' onyour fephone or 't clickly ask a question iicon if you participating by your computer

Kevin Rendino: It's been a maddening period since really November of 2021. Since November of 2021, the S&P is up 22%, while the microcap index is literally down 25% over that same period, the widest margin you can see in history.

Kevin Rendino: Since November of 2021, the S&P is up 22%, while the microcap index is literally down 25% over that same period, the widest margin you can see in history. But you all know that and we have talked about it almost every quarter for the last three years.

Operator: We'll hold for a second while you pop. Yes, go ahead. I apologize. Good day, Kevin and Daniel. I hope you're okay.

Speaker Change: will'll hold for a second whilethe

Speaker Change: few populates

Speaker Change: really

Kevin Rendino: But you all know that and we have talked about it almost every quarter for the last three years.

Kevin Renundino: yes i had a i apologize good day kevin dan 'll pe you okay had a modern technical difficability there you can give me okay

Kevin Rendino: So instead of continuing to talk about that, I'd like to talk to you about some of our positions and the constructive activism we have instituted for a number of our holdings.

Kevin Rendino: So instead of continuing to talk about that, I'd like to talk to you about some of our positions and the constructive activism we have instituted for a number of our holdings. To say the obvious, it's been become one of the most absurd stock markets that I've seen in the last 36 years having been in the asset management business. And I only need to look at pop-belly this year as a testament to that.

Operator: I had a minor technical difficulty there. I hope you can hear me. Good morning.

Kevin Rendino: Instead of taking cash, they got it in dividends, preferred dividends, and more stock, which, is better than the company spending out cash when they need the cash to grow the business.

Kevin Rendino: We'll continue our, what I would consider to be, slightly hostile activism that this, company needs.

Operator: We can. Great, Kevin, great to hear you search Dipper. It's a really. Uh, what? three of your holdings, and draw you out a little bit from them. On top score, obviously.., quite a while. I'll wait, energetically active with the board for a while. From here, what does the value capture?

Kevin Renundino: the morning we can

Kevin Rendino: We will stand for all common shareholders by calling this board out, whether that's, privately or publicly, and you can continue to see us leading that pressure on the company as we go forward, and we'll come up with, hopefully, a reason why this company will do the right thing for common shareholders with that.

Kevin Rendino: To say the obvious, it's been become one of the most absurd stock markets that I've seen in the last 36 years having been in the asset management business.

Kevin Renundino: great cvin great to hear you search stipper it's

Kevin Rendino: Let me turn it over to Daniel who wants to talk about some of our other holdings and our activism.

Daniel Wolfe: Thanks, Kevin.

Speaker Change: really ly get the thing and what out three of your holdings or and draw youout a little from them on topps qure obviously you've been in there for quite while i'll act i call it quite quite

Kevin Rendino: And I only need to look at pop-belly this year as a testament to that.

Kevin Rendino: After a wonderful turnaround off the COVID lows led by the new senior executive management team, Bob Wright and Steve Sturoulos. The stock went from $1.50 near the COVID lows to almost $14 a share against the backdrop of strong comps, robust EBITDA and a new franchising strategy which hopefully will get the company to have two thousand stores over the next seven to ten years.

Kevin Rendino: After a wonderful turnaround off the COVID lows led by the new senior executive management team, Bob Wright and Steve Sturoulos. The stock went from $1.50 near the COVID lows to almost $14 a share against the backdrop of strong comps, robust EBITDA and a new franchising strategy which hopefully will get the company to have two thousand stores over the next seven to ten years. This year, despite essentially beating comps, EBITDA, cost savings and new franchise agreements, and most continued good news, the stock has been cut in half as you can see on the chart in the slide deck.

Speaker Change: energetically active put the board for a while

Speaker Change: very stress through ar more from here but the value capture and actto trject br ocupants at that local like for hundred ne ag that id like to ask about the in ofack and

Kevin Rendino: and Accident Trajectory Options, and I'd like to ask about InnoVac and how it works. Are you cutting out a little bit? I think you asked on ComScore. Adam Waldo, Kevin Rendino, It's been a horrendous ownership by us. We believed at the end of the day that those three preferred holders were better, would be better for the business than the prior situation that Comscore had, because they're in the business and they wanted to own the business.

Kevin Rendino: It's declined to seven from 14 to a price that has allowed the company to trade at 6.5 times enterprise value to EBITDA when many of the competitors trade at 17 times or so. You would look at the stock price and assume the company is missing, losing share or not being able to grow their franchising strategy. Hardly been the case. It's just an example of a small-cap company performing like almost any other small-cap stocks that doesn't have an AI business that goes down despite what has been very, very good news in 2023.

Daniel Wolfe: I'm going to continue running through a few more names on slides 4 through 6

Daniel Wolfe: before handing it back to Kevin to cover the Discount Management Program update.

Speaker Change: good

Speaker Change: are you cutting on a little bit i think you've asked on com score

Kevin Rendino: This year, despite essentially beating comps, EBITDA, cost savings and new franchise agreements, and most continued good news, the stock has been cut in half as you can see on the chart in the slide deck.

Speaker Change: it's been a horrendous ownership by us we've

Speaker Change: we believed at the end of the day that those three preferred holders were better

Kevin Rendino: It's declined to seven from 14 to a price that has allowed the company to trade at 6.5 times enterprise value to EBITDA when many of the competitors trade at 17 times or so.

Speaker Change: would be better for the business than the prior situation that comscore had because they're in the business and they wanted to own the business

Kevin Rendino: What I've seen, unfortunately, is.., inactivity and self-serving behavior rather than working for the benefit of not just themselves but common shareholders. Look, they've done a number of things that we wanted them to do. They haven't done the preferred dividend or the special dividend that was available to them.

Speaker Change: what i've seen unfortunately is

Kevin Rendino: You would look at the stock price and assume the company is missing, losing share or not being able to grow their franchising strategy.

Speaker Change: inactivity and selfal-serving behavior rather than working for the benefit of not just themselves but common shareholders

Kevin Rendino: Hardly been the case.

Kevin Rendino: It's just an example of a small-cap company performing like almost any other small-cap stocks that doesn't have an AI business that goes down despite what has been very, very good news in 2023.

Speaker Change: well they've done a number of things that we've wanted them to do they they haven't done the preferred dividend or the special special dividend that was available to them they took their last dividend in

Kevin Rendino: They took their last dividend in.., stock instead of cash, which was good. They hired John, who up until the last quarter has done a really, really good job. I'd say he did not do a good job last quarter at all, in terms of the guidance and the rest.

Kevin Rendino: We still own it.

Kevin Rendino: We still own it. It's one of our biggest holdings. We're constructive on their ability to generate significant shareholder return over the upcoming years and eventually sell themselves to either a private equity firm or strategic at some point in the next couple of years. But again, it's gone from 14 to seven for no reason, and lastly, as part of what we think are differentiated parts of our process is our constructive activism strategy and we have ramped that up significantly on many of our holdings recently and you can see that it also in our slide deck after the pop belly side slide.

Kevin Rendino: It's one of our biggest holdings. We're constructive on their ability to generate significant shareholder return over the upcoming years and eventually sell themselves to either a private equity firm or strategic at some point in the next couple of years.

Speaker Change: is stock instead of cash which was good

Speaker Change: john who up anduntil the last quarter has done a really a really good job i say he did not do a good job last quarter at all

Kevin Rendino: But again, it's gone from 14 to seven for no reason, and lastly, as part of what we think are differentiated parts of our process is our constructive activism strategy and we have ramped that up significantly on many of our holdings recently and you can see that it also in our slide deck after the pop belly side slide.

Kevin Rendino: They cut their comp. The board cut their comp. So they've done some things, but they haven't done the most important thing. And so. For us, the business should trade at one times revenue, which is sort of $370 million. And with $220 million or so of preferred, getting the first money in some sort of sale, that leaves $150 million or so for common shareholders, and I think there's 5 million shares out. So you can do the math on that. It's infinitely higher than where last sale is.

Speaker Change: in terms of the guidance in the rest they cut their comp the board cuter comp so they've done some things but they haven't done the most important thing and so

Speaker Change: for us the business at trade at one times revenue

Speaker Change: which is sort of three hundred seventy million and with two hundred twenty million dollars or so of preferred getting the first money in some sort of sale that leaves one hundred fifty million or so for common shareholders

Kevin Rendino: Let me talk about two of them synchronous.

Kevin Rendino: Let me talk about two of them synchronous. We have actively worked with management to improve their investor relations and their balance sheet as well as assisting with ongoing strategic alternatives evaluation. The company is returned to top line revenue growth and generation of material free cash flow. The improvement of their balance sheet through the opportunistic refinancing, the leveraging of this past quarter has helped the stock price as well and for sure will get the receipt of a $28 million tax refund.

Kevin Rendino: We have actively worked with management to improve their investor relations and their balance sheet as well as assisting with ongoing strategic alternatives evaluation.

Speaker Change: and i think there's five million shares out so you can do the math on that it's infinitely higher than where l salis i mean it's this price is so ludicrous to me but they deserve it because they've been obstinate in their

Kevin Rendino: The company is returned to top line revenue growth and generation of material free cash flow.

Kevin Rendino: I mean, this price is so ludicrous to me, but they deserve it because they've been obstinate in their, ability to actually just make decisions that common shareholders want. So we're just going to continue doing what we've done. You could expect us doing that either privately or publicly. What do I care if I embarrass a bunch of board members that have.., have really hurt common shareholders. It's just very infuriating, to say the least, but the value is there.

Kevin Rendino: The improvement of their balance sheet through the opportunistic refinancing, the leveraging of this past quarter has helped the stock price as well and for sure will get the receipt of a $28 million tax refund.

Speaker Change: ability to actually just make decisions that common shareholders want

Kevin Rendino: We were asked to buy this board to join this board in November of last year.

Kevin Rendino: We were asked to buy this board to join this board in November of last year. We've been very busy since we've been on the board, helping the management team, run their business and also work on fixing their balance sheet and their investor relations and the stock has gone from essentially five to 12 since we joined. This is a great example for us of our collegial collaborative activism that we do. We didn't demand to go on the board.

Speaker Change: so we're just going to continue doing what we've done

Kevin Rendino: We've been very busy since we've been on the board, helping the management team, run their business and also work on fixing their balance sheet and their investor relations and the stock has gone from essentially five to 12 since we joined.

Speaker Change: you could expect us doing that either privately or publicly would i care if i embarrass a bunch of board members that have

Speaker Change: have really heard common shareholders it's just very infuriating to say the leaseast but the value is there i mean they have a

Kevin Rendino: I mean, they have a, They have an excellent product. They have a good position within the industry. The data they provide for companies is useful, and many of them need it.

Kevin Rendino: This is a great example for us of our collegial collaborative activism that we do.

Speaker Change: they have an excellent product that have a good position within the industry dat a they provide for companies it is useful and then even need it

Kevin Rendino: We didn't demand to go on the board.

Kevin Rendino: Instead we were asked to go on the board by the company as they saw that we had some skill sets that they could better use and it's been a great partnership since we joined the board in November and you can see that from the stock price.

Kevin Rendino: Instead we were asked to go on the board by the company as they saw that we had some skill sets that they could better use and it's been a great partnership since we joined the board in November and you can see that from the stock price.

Kevin Rendino: And with a market cap right now of $335 million or something like that, it's just an absolutely absurd valuation. Considering that it should trade at one times revenue, and 10 times Ibiza, so that's. Our story here, it's a triple from here, Adam. No, understood.

Speaker Change: and with a market cap right now of three thirty-five million or something like that it's just an absolutely absurd valuation considering that it should trade at one times revenue

Kevin Rendino: The second one I wanted to talk to before I turn it over to Daniel is Comscore, which has been the complete opposite of synchronous.

Kevin Rendino: The second one I wanted to talk to before I turn it over to Daniel is Comscore, which has been the complete opposite of synchronous. We've written a number of public letters, which you've seen. We continue to pressure the preferred stockholders to demonstrate alignment with all stakeholders.

Adam: when ten times ebitda so that's our story here it's a triple from here adam

Kevin Rendino: We've written a number of public letters, which you've seen.

Kevin Rendino: Okay, so let's switch gears to to better manage and govern, and Hudson. And in fact, Nigel's done a nice job op.., both agree, during his tenure, and he's done a very good job on the customer-facing side. They got Trio to market with Corning, they have some good initial traction there. They haven't been consistently active in telling their story, and with the end markets for HDD... For all the research we do, actually seeing more than a cyclical upswing here, but maybe a secular upswing due to AI.

Kevin Rendino: We continue to pressure the preferred stockholders to demonstrate alignment with all stakeholders.

Speaker Change: nounderstood ok so let's siers to to better manage and govervenment companies into back and hudson

Daniel Wolfe: We've talked about INTOVAC a lot in the past. As a refresher, INTOVAC, or the symbol is IVAC, develops tools that are critical for the manufacturing of hard disk drives. It has a new tool that is bringing to market called the TRIO that aims to more uniformly coat glass, and plastic surfaces used in everyday electronic devices as well as other applications.

Speaker Change: into fact n' on a nice job operational i think would both agreee during his tenureyear and he's done a very good job on the custom facing side they gottria

Kevin Rendino: It's an awful board with a bunch of masters of the universe people that have no idea how to make a decision for the benefit of shareholders, whether it's charter, service or liberty they've all failed.

Kevin Rendino: It's an awful board with a bunch of masters of the universe people that have no idea how to make a decision for the benefit of shareholders, whether it's charter, service or liberty they've all failed. The independent directors like Bill Ledeck who have been part of this business for years and years and years with no strategic benefit have no business being on the board anymore. We did nominate Matt McLaughlin as a board member and the company did agree to put them on the board.

Speaker Change: to market with corning they have some good initial traction there they haven't been consistently active in telling their story and what the end markets for h a hd from through all the research we do actually seeing more than the cyclical upsoing hibitbut maybe a secular up swing due to a i adoption

Kevin Rendino: The independent directors like Bill Ledeck who have been part of this business for years and years and years with no strategic benefit have no business being on the board anymore.

Kevin Rendino: How energetic are you with them in trying to, I mean they have a full time IR, how are they going to get out there and tell their story? That's a great question. Thanks. Thanks for asking. We do spend a lot of time with Nigel. I think the issue for InnoVac around the hard disk drive, and I agree with you that, there is a potential for a secular upswing given the need for various storage mediums, especially as, you know, if you're storing something, you know, and flash is expensive. And so you need to have complimentary storage alongside flash, not just using flash.

Kevin Rendino: We did nominate Matt McLaughlin as a board member and the company did agree to put them on the board.

Speaker Change: how energetic are you with them in trying to i mean they have a full time i are how are they going to get out there and tell their storyor

Kevin Rendino: We will continue to pressure the board to do the right thing to align themselves with shareholders and to fix the share price.

Kevin Rendino: We will continue to pressure the board to do the right thing to align themselves with shareholders and to fix the share price. They did recently announce that the pick of the annual dividends which started last year would actually have reduced interest rate from 9.5% to 7.5% and did remove one liquidity overhang instead of taking cash they got it in preferred dividends and more stock, which is better than the company spending out cash when they need to cash to grow the business.

Speaker Change: it's a great question a sp for asking and we do spend a lot of time with nigelle i think the issue for in of back around the hardest drive i agree with you that

Daniel Wolfe: IVAC reported a stronger than expected quarter for Q2 2024 from its hard disk drive business, given a cyclical upswing of that industry led by adoption of its new Hammer platform that enables the manufacturing of a new class of high-density disk drives.

Kevin Rendino: They did recently announce that the pick of the annual dividends which started last year would actually have reduced interest rate from 9.5% to 7.5% and did remove one liquidity overhang instead of taking cash they got it in preferred dividends and more stock, which is better than the company spending out cash when they need to cash to grow the business.

Speaker Change: there is a

Speaker Change: potential for a secular upswing

Speaker Change: given the need for various storage mediums

Speaker Change: especially as if you're storing something it flash is expensive and so you need to have complementary storage alongside flash not just using flash so

Kevin Rendino: So we'll continue our what I would consider to be slightly hostile activism that this company needs.

Kevin Rendino: So we'll continue our what I would consider to be slightly hostile activism that this company needs. We will stand for all common shareholders by calling this management team this board out whether that's privately or publicly and you can continue to see us leading that pressure on the company as we go forward and we'll come up with hopefully a reason why this company will do the right thing for common shareholders. We'll go forward with that. Pressure.

Kevin Rendino: So. And you need it to be more adaptable and more accessible than tape. So at the end of the day, hard disk drives definitely is a really good option to include in any solution. The problem for hard disk drive for Intivac is it's really, I mean, unless they start selling a lot of lean tools, which those, I think that's upside. I think there is the potential for that. You know, it's not like the industry is going through a massive capacity expansion, but they do need to upgrade their tools.

Speaker Change: and you needed to be more adaptable and more accessible than tape so at the end of the day hard est rives definitely is a really good option to include in any solution

Kevin Rendino: We will stand for all common shareholders by calling this management team this board out whether that's privately or publicly and you can continue to see us leading that pressure on the company as we go forward and we'll come up with hopefully a reason why this company will do the right thing for common shareholders.

Daniel Wolfe: IVAC also has approximately 72% of its market capitalization in cash, which it plans to maintain through at least 2024 while it pushes adoption of its new TRIO platform. This platform is in testing with a large glass coating company in Asia, that works with the largest consumer electronic companies. For IVAC, the market is currently valuing its $45 to $50 million annual recurring hard disk drive business, at approximately .6x revenue and its TRIO business at zero.

Daniel Wolfe: Or you can swap within those numbers and apply any value to TRIO, but it will reduce the value of the hard disk drive business.

Speaker Change: the problem for hard est drive for into that is it's really i mean unless they start selling a lot of lean tools which those i think that's upside i think there is the potential for that

Kevin Rendino: We'll go forward with that.

Kevin Rendino: Pressure.

Daniel Wolfe: Let me turn it over to Daniel who wants to talk about some of our other holdings and our activism.

Daniel Wolfe: Let me turn it over to Daniel who wants to talk about some of our other holdings and our activism. This is bringing a market called a trio that aims to more uniformly coat glass and plastic surfaces used in everyday electronic devices as well as other applications. IVAC reported a stronger than expected quarter for Q2-2024 from its hard-drive business, given a cyclical upswing of that industry led by adoption of its new hammer platform that enables the manufacturing of a new class of high-density disc drives.

Speaker Change: it's not like the industry is going through a massive capacity expansion but they do need to upgrade their tools so we're looking at about a forty five to fifty and maybe it could be a little bit higher business every year fifty million dollars business every year

Kevin Rendino: So we're looking at about a 45 to 50, and maybe it could be a little bit higher business every year, $50 million business every year. It's almost like an annuity, but you're not going to see a ton of growth there, most likely. I mean, it's possible, but I don't think anyone is looking at InnoVac along those sides. It really comes down to the TRIO tool, and so that's why we like the downside protection.

Speaker Change: it's almost like an annuity but you're not going to see a ton of growth there

Speaker Change: most likely i mean it's possible but that's not i don't think anyone is looking at in a act along those sides

Daniel Wolfe: This is bringing a market called a trio that aims to more uniformly coat glass and plastic surfaces used in everyday electronic devices as well as other applications.

Daniel Wolfe: Given its clean balance sheet, the protection of its cash on hand, and the sticky hard disk drive business that is in a cyclical upswing, we like our downside protection and we believe there is material upside if TRIO starts to gain traction in the market.

Speaker Change: it really comes down to the trio tool and so that's why we like the downside protection for the upside the trio tool

Daniel Wolfe: Aviat Networks, or AVNW, is a new position that we established in the quarter. AVNW designs and installs microwave routers, switches, antenna systems, and network management tools, as well as offers network optimization, lifecycle support, and managed network services. Its solutions are most often found enabling private networks, and deployment of Internet connectivity to areas where it is cost-prohibitive to lay fiber optic cables.

Kevin Rendino: For the upside, the TRIO tool is potentially a completely game-changing platform for deposition of a variety of new coatings on especially consumer electronics, but other materials as well, with much higher uniformity and at cost savings for the manufacturers. That really drum coders don't provide, which is the only all their alternative option to deposit these types of code.

Daniel Wolfe: We've gotten to know its CEO over a number of quarters, and have been impressed by his overall execution, turning around a historically broken company.

Daniel Wolfe: In Q124, Aviat reported a weaker-than-expected quarter due to under-foreseen, issues with one large customer that was part of its acquisition of Paso Link that closed in Q423.

Daniel Wolfe: This was the first time in a long time that the CEO and his team missed guidance, which resulted in a material decline in the stock to prices that were very attractive to us, particularly given the fact that the balance sheet has net cash, the company generates cash, and it continues to grow on all operating metrics.

Daniel Wolfe: We also believe Aviat has a better handle on its acquisition, and is set up to resume its trend of exceeding expectations.

Daniel Wolfe: Turning to Lantronics, this is our latest example of where we believe, constructive activism can lead to material appreciation and value.

Daniel Wolfe: We have been investors in Lantronics for a long time, and we have traded around our position throughout this time. Recently, we got to know Lantronics' new CEO, Salil Awarian, through multiple conversations discussing both his and our expectations for the business.

Daniel Wolfe: Great.

Speaker Change: is a completely potentially a completed game changing platform for the deposition of a variety of new codatings on especially consumer electronics but other materials as well with much higher uniformity

Daniel Wolfe: Lantronics is a really good company with a solid foundation, that experienced significant growth in fiscal 24, that is fiscal 24 that ended June 30th, 24, and is now set up to build on that foundation into the future.

Daniel Wolfe: As we spend more time with Salil, we believe that he could benefit from additional skill sets on his board of directors, particularly around how to build an IoT business as a microcapitalization public company.

Daniel Wolfe: IVAC reported a stronger than expected quarter for Q2-2024 from its hard-drive business, given a cyclical upswing of that industry led by adoption of its new hammer platform that enables the manufacturing of a new class of high-density disc drives.

Daniel Wolfe: Our former portfolio company, Odesto Technologies, went through similar growing pains until its, successful acquisition by Dialog Semiconductor. So, we thought that former members of that business could be helpful to Salil. We made introductions of Odesto's former CEO, Narbe Derakobian, and former board member, Kevin Palatnik, to Salil and Lantronics, and then, entered into a cooperation agreement whereby Lantronics agreed to nominate Narbe and Kevin to Lantronics' board of directors at its next annual meeting, which will take place likely in November 24.

Daniel Wolfe: This is a great example of how we work with management teams and boards collaboratively most of the time rather than combatively to achieve outcomes that we believe will be in the interest of all stakeholders of the company, including 180 Degree Capital.

Daniel Wolfe: Lastly, I would like to talk a little bit about Commercial Vehicle Group, or CVGI. CVGI makes components primarily for commercial vehicles, including wire harnesses, seats, plastics, and aftermarket parts.

Daniel Wolfe: CVGI is another example of a company that we have traded around our position as it went through a successful turnaround led by its former CEO where costs were rationalized, contracts renegotiated, and the overall approach to running a company was changed to be more proactive rather than reactive.

Daniel Wolfe: After a comprehensive search, James Ray, a member of CVGI's board, was appointed CEO of the company. James brings, a strong operational background and deep knowledge of the company to this leadership position. Shortly after his appointment, the cyclical industries in which CVGI serves began to, experience weakness, particularly among its customers in agriculture and instruction.

Daniel Wolfe: While we initially believed this weakness was captured and was near bottom as of the end of Q1, 24, it continued to decline in Q2 24, leading to further reduction in guidance and exposed some inefficiencies in CVGI's business that resulted in some unforeseen restructuring costs. The Q2 24 report resulted in a substantial decline in the stock to levels that we believe are both, unwarranted given the manageable debt to EBITDA ratio of approximately two times even with the reduced EBITDA guide.

Daniel Wolfe: The company continues to generate cash and pay down debt along with using funds from pending non-core asset sales to further reduce debt.

Daniel Wolfe: CVGI's business is based on long-term contracts and is therefore relatively sticky even though there can be some delays due to overall end market cyclicality. We believe the improvements in its business being implemented by James and his management team will set CVGI up to generate even higher than historical EBITDA margins, in the future as its end markets recover, particularly agriculture and construction in the future years.

Daniel Wolfe: We hope these summaries provide a window into how we think about our investments and the catalysts that we believe that can drive material value appreciation in the future should they occur.

Daniel Wolfe: These slides provide our thoughts on all of our portfolio holdings at the end of Q2 24, and we'd be happy to dive into any of them with you at any time.

Daniel Wolfe: Lastly, I would like to note we include additional detail on our trading during the quarter as well as operational metrics in appendix at the end of our slide deck on our website.

Daniel Wolfe: We're not going to go through those

Daniel Wolfe: slides right now.

Daniel Wolfe: We would have to discuss them at any time.

Daniel Wolfe: I'll now turn the call back over to

Daniel Wolfe: IVAC also has approximately 72% of its market capitalization in cash, which it plans to maintain through at least 2024, while it pushes adoption of its new trio platform. This platform is in testing with a large glass coating company in Asia that works with the largest cut-and-consumer electronic companies.

Daniel Wolfe: IVAC also has approximately 72% of its market capitalization in cash, which it plans to maintain through at least 2024, while it pushes adoption of its new trio platform. This platform is in testing with a large glass coating company in Asia that works with the largest cut-and-consumer electronic companies. For IVAC, the market is currently valuing its $40 to $50 million annual recurring hard-drive business that approximately 0.6x revenue in its trio business at zero, or you can swap within those numbers and apply any value to trio, but it will reduce the value of the hard-drive business.

Kevin Rendino: Kevin.

Speaker Change: and at cost savings for manufacturers

Kevin Rendino: Thanks, Daniel.

Kevin Rendino: Finally, a quick update on our discount management program, that we announced early in the year, late last year. The Discount Management Program is comprised of two measurement periods, January 1st, 2024 to December 31st, 2024, and then January 1st, 2025 to June 30th, 2025. If the average discount of our equity during each management period is greater than 12%, 180 Degree Capital's board of directors will consider all available options, including, but not limited to, a significant expansion of our current stock buyback program up to $5 million, cash distributions reflecting a return of capital to shareholders, or a tender offer.

Kevin Rendino: You can see in the chart that we have here through July 21st, 2024, the average daily discount is approximately 19%, and as I said earlier, given where our share price is this morning, it's closer to 25%.

Kevin Rendino: Which is ludicrous, if you ask me.

Kevin Rendino: And quite frankly, while this will be a board decision, I am, because of the share price itself, the potential upside of our portfolio at some point, and the discount, wondering why I'm waiting to the end of the year to ask the board to do something, rather than ask the board today.

Speaker Change: that really drum coders don't provide which is the only all their alternative option deposit these types of codatingings so that is the upside and if trio takes off

Kevin Rendino: So, I would, it's not a promise, but I'd stand by on that, as we are very sensitive to where our share price is trading.

Kevin Rendino: And the opportunity to do this may be better now than it will be at the end of the year.

Kevin Rendino: So, you know, that is the upside. And if TRIO takes off, then they're addressing a market that could have a TAM in the $500 million to $1 billion or even more. It just depends on how diverse of tools that they end up getting their systems into.

Kevin Rendino: But time will tell on that, and stay tuned for that, as I said.

Kevin Rendino: With that, Daniel, I think that's done with our formal comments.

Daniel Wolfe: We'd be happy to take any questions by anybody right now.

Daniel Wolfe: Thanks, Kevin.

Daniel Wolfe: If you have a question, please type star six on your phone, or click the ask a question icon, if you are participating via your computer.

Daniel Wolfe: We'll hold for a second while the queue populates.

Operator: Yes, Adam, go ahead.

Operator: I apologize.

Adam Waldo: Good day, Kevin and Daniel.

Adam Waldo: I hope you're okay.

Adam Waldo: I had a minor technical difficulty there.

Daniel Wolfe: For IVAC, the market is currently valuing its $40 to $50 million annual recurring hard-drive business that approximately 0.6x revenue in its trio business at zero, or you can swap within those numbers and apply any value to trio, but it will reduce the value of the hard-drive business.

Adam Waldo: I hope you can hear me okay.

Speaker Change: then they're addressing a market that could be have a tam in the

Adam Waldo: Good morning.

Daniel Wolfe: We can.

Speaker Change: five hundred million billion dollars or even more it just depends on how diversseive tools that they end up getting their systems into so

Kevin Rendino: So that's, as we look at, and we do believe that they are close, hopefully, to being adopted, have an adoption of their tool for manufacturing for a consumer electronic device as a first entry point into the market. And then I think it can grow from there, but they need to show that they need to prove that. And that's what everybody's waiting for.

Speaker Change: that's

Speaker Change: as as we look at and we do believe that they are close hopefully to being adopted to have an adoption of their tool for manufacturing if we're a consumer electronic device as a first entry point into the market

Daniel Wolfe: Given its clean balance sheet, the protection of its cash on hand, and the sticky hard-drive business that is in a cyclical upswing, we like our downside protection and we believe there is material upside if trio starts to gain traction in the market.

Daniel Wolfe: Given its clean balance sheet, the protection of its cash on hand, and the sticky hard-drive business that is in a cyclical upswing, we like our downside protection and we believe there is material upside if trio starts to gain traction in the market.

Kevin Rendino: Because corning, you know, it has been a little bit of, you know, the goalposts getting moved and we need that to stop happening. And we need that to, we need them to actually get those, those tools adopted, which we do think it has the, they're on the right trajectory to do so, but we need to see it. Once they have that happen...

Daniel Wolfe: IVAC networks, or AVNW, is a new position that we established in the quarter. AVNW designs, installs microwave routers, switches, antenna systems, and network management tools, as well as offers network optimization, life cycle support, and manage network services. Its solutions are most often found enabling private networks and deployment of internet connectivity to areas where it is cost-prohibited to lay of optical fiber.

Daniel Wolfe: IVAC networks, or AVNW, is a new position that we established in the quarter. AVNW designs, installs microwave routers, switches, antenna systems, and network management tools, as well as offers network optimization, life cycle support, and manage network services. Its solutions are most often found enabling private networks and deployment of internet connectivity to areas where it is cost-prohibited to lay of optical fiber. We have gotten to know its CEO over a number of quarters, and have been impressed by his overall execution, turning around a historically broken company.

Speaker Change: and then i think it can grow from there but they need to show that they need to prove that and that's what everybody is waiting for because

Speaker Change: corning it has been a little bit of the goal post getting moved and we need that to stop happening and we need that we need them to actually get those those tools adopted which we do think has they're on the right trajectory to do sobut we need to see it happen

Kevin Rendino: I think the market will be more receptive to the, No, I think that's, I mean, I think that's fair on Intervac, obviously. We have a very similar investment thesis. But, you know, when he first came in, Nigel would tell the story quite a bit more and then they obviously had the operational push out. D. Quietz and McHuddle, were internally focused for a while which was understandable, and now those seem to be kind of reversing, quite a bit more over the next year than they have over the last. I think you could.

Speaker Change: once they have that happen

Daniel Wolfe: We have gotten to know its CEO over a number of quarters, and have been impressed by his overall execution, turning around a historically broken company. In Q124, AVNW reported a weaker than expected quarter due under-foreseen issues with one large customer, that was part of its acquisition of Paso-Lante that closed in Q423.

Speaker Change: i think the market will be more receptive to the story

Speaker Change: i think that i mean i think that's fair on interact obviously we have very similar investment thesis but know when of first came nagl would tell the story quite a bit more and then they obviously had the operational pushouts from hdde clients and they kind of want

Daniel Wolfe: In Q124, AVNW reported a weaker than expected quarter due under-foreseen issues with one large customer, that was part of its acquisition of Paso-Lante that closed in Q423. This was the first time in a long time that the CEO and his team Miss Guidance, which resulted in a material decline in the stock to prices that were very attractive to us, particularly given the fact that the balance sheet has met cash, the company generates cash, and it continues to grow on all operating metrics. We also believe AVNW has a better handle on its acquisition and is set up to resume its trend of exceeding expectations.

Daniel Wolfe: This was the first time in a long time that the CEO and his team Miss Guidance, which resulted in a material decline in the stock to prices that were very attractive to us, particularly given the fact that the balance sheet has met cash, the company generates cash, and it continues to grow on all operating metrics.

Speaker Change: internally focused for a while which is understandable and now those seem to be kind of reversing so do you think guys get out other story quite a bit more over the next year than they have over the last year and half

Kevin Rendino: You could imagine we don't have tolerance for companies that, report earnings and you don't hear from them again for until they report the next earnings. So we will. We did this with Synchronous as well.

Speaker Change: you think you could

Speaker Change: you could imagine we don't have tolerance for companies that

Daniel Wolfe: We also believe AVNW has a better handle on its acquisition and is set up to resume its trend of exceeding expectations.

Speaker Change: report earnings and you don't hear from them again until they rebefore the next earnings so we will

Kevin Rendino: We felt like they needed, a new investor relations function, which we felt for a long time. I guess maybe we waited for until we were on the board to push the push the envelope on that. And they actually did recently change their IR. So we're not afraid to go to management, suggest that they're being not reflected well by either an IR firm, or they're not reflecting best for themselves. So you could imagine that we were gonna be on them for that because I just don't have tolerance.

Daniel Wolfe: Turning to Lantronics, this is our latest example of where we believe constructive activism can lead to material appreciation and value.

Daniel Wolfe: Turning to Lantronics, this is our latest example of where we believe constructive activism can lead to material appreciation and value. We have been investors in Lantronics for a long time, and we have traded around our positions throughout this time. Recently, we have gotten to know Lantronics' new CEO, Suell Avarin, through multiple conversations discussing both his and our expectations for the business. Lantronics is a really good company with a solid foundation that experienced significant growth in fiscal 24 that it's fiscal 24 that ended June 30th, 24, and is now set up to build on that foundation into the future.

Speaker Change: we did this with synchronous as well we felt like they needed a new investor relations function which we felt for a long time i guess maybe we waited for until we were on the board to push the

Daniel Wolfe: We have been investors in Lantronics for a long time, and we have traded around our positions throughout this time. Recently, we have gotten to know Lantronics' new CEO, Suell Avarin, through multiple conversations discussing both his and our expectations for the business.

Speaker Change: push the envelope on that and they actually did recently change their irr so we're not afraid to go to management and

Daniel Wolfe: Lantronics is a really good company with a solid foundation that experienced significant growth in fiscal 24 that it's fiscal 24 that ended June 30th, 24, and is now set up to build on that foundation into the future.

Speaker Change: suggest that they're being not reflected well by either an ir firm or they're not reflecting best for themselves so you could imagine that we were going to be on them for that because i just don't have tolerance for that

Daniel Wolfe: As we spend more time with Celio, we believe that he could benefit from additional skill sets on his board of directors, particularly around how to build an IoT business as a micro-capitalization public company.

Daniel Wolfe: As we spend more time with Celio, we believe that he could benefit from additional skill sets on his board of directors, particularly around how to build an IoT business as a micro-capitalization public company. Company. Our former, a corporate company of desktop technologies went through a similar growing pans until its successful acquisition by dialogue semiconductor. So we thought that former members of that business could be helpful to Suleal. We made introductions of a desktop's former CEO, Narbe D'Aracovian, and former board member Kevin Palatinec to Suleal and Lantronics, and then entered into a cooperation agreement where by Lantronics agreed to nominate Narbe and Kevin to Lantronics's board of directors at this next annual meeting, which will take place likely in November of 24.

Kevin Rendino: I think the other thing that I would say, Adam, is. Up until recently, Nigel was kind of a one man show for the from external perspective, and they just hired a new CFO, who I think will provide additional bandwidth for being able to get out and, and make sure the story is getting told. But we, as Kevin said, we, we will make sure that they also hear from us that they need to make, So, great call. And then finally on Hudson, I mean, you know, Brian's built a nice company here over a while. The CFO, I agree, on paper looks like an upgrade. Time will tell.

Speaker Change: i think the other thing that i would say auto is

Daniel Wolfe: Company.

Daniel Wolfe: Our former, a corporate company of desktop technologies went through a similar growing pans until its successful acquisition by dialogue semiconductor. So we thought that former members of that business could be helpful to Suleal.

Speaker Change: up until recently nigel was kind of a one man show for the from external perspective and they just hired a new cfo

Speaker Change: who i think will'll provide a additional bandwidth for being able to get out and and make sure the story is getting told but we as kind said we we will make sure that they also hear from us as they need to make sure to do that

Daniel Wolfe: We made introductions of a desktop's former CEO, Narbe D'Aracovian, and former board member Kevin Palatinec to Suleal and Lantronics, and then entered into a cooperation agreement where by Lantronics agreed to nominate Narbe and Kevin to Lantronics's board of directors at this next annual meeting, which will take place likely in November of 24.

Speaker Change: no great color then finally on hudson i mean i' get brian' built a nice company here over while wewith seeifi agree on paperlook like an upgrade time willhotel

Kevin Rendino: But do you guys have any sense there? Are there any governance issues you all have uncovered? Is it really just truly kind of, you know, solid management, market leader, volume stories there and eventually pricing recovers? And you get a double or more kind of investment thesis? Or is there anything more on the governance side?

Speaker Change: in reality but do you guys have any sense there are there any governance issues that you all have uncovered or is it really just

Daniel Wolfe: This is a great example of how we work with management teams and boards collaboratively, most of the time rather than combattably, to achieve outcomes that we believe will be in the interest of all stakeholders of the company, including a 180 degree capital.

Daniel Wolfe: This is a great example of how we work with management teams and boards collaboratively, most of the time rather than combattably, to achieve outcomes that we believe will be in the interest of all stakeholders of the company, including a 180 degree capital.

Speaker Change: truly kind of solid management market lead volume stories there and eventually pricing recovers and you get a double or more kind of investment thesis ers there anything more on the governnor side you think is an opportunity to

Daniel Wolfe: Lastly, I would like to talk a little bit about commercial vehicle group or CVGI.

Daniel Wolfe: Lastly, I would like to talk a little bit about commercial vehicle group or CVGI. DBGI makes components primarily for commercial vehicles, including wire harnesses, seats, plastics, and aftermarket parts. DBGI is another example of a company that we have traded around our position as it went through successful turnaround led by its former CEO, where cost for rationalized contracts renegotiated, and the overall approach to running a company was changed to be more proactive rather than reactive.

Kevin Rendino: We think it is an option. Daniel, I'll let you, answer that question. The one thing I'd say is you were the one who actually got this name on our brains, a while ago, probably at the same price, and then it obviously, maybe even lower, went a lot higher last year. We waited for it to pull back to initiate a position, which is what we did last quarter in the sort of the seven-ish range.

Daniel Wolfe: DBGI makes components primarily for commercial vehicles, including wire harnesses, seats, plastics, and aftermarket parts.

Daniel: down daniel that you've ansred that question the one thing i'd say is you are the one who actually got this name on our brains

Daniel Wolfe: DBGI is another example of a company that we have traded around our position as it went through successful turnaround led by its former CEO, where cost for rationalized contracts renegotiated, and the overall approach to running a company was changed to be more proactive rather than reactive.

Speaker Change: a while ago probably at the same price and then it obviously

Speaker Change: maybe even lower went a lot higher last year and we waited for it's pull back to initiate a position which is what we did last quarter in the sort of the seven

Daniel Wolfe: After a comprehensive search, James Ray, a member of CBGI's board, was appointed CEO of the company. James brings a strong operational background and deep knowledge of the company to this leadership position.

Daniel Wolfe: After a comprehensive search, James Ray, a member of CBGI's board, was appointed CEO of the company. James brings a strong operational background and deep knowledge of the company to this leadership position. Shortly after his appointment, the cyclical industries in which CBGI serves have been and experienced weakness, particularly among its customers and agriculture and instruction. While we initially believe this weakness was captured and was near bottom as of the end of Q1-24, it continued to decline in Q2-24, leaning to further reduction in guidance and expose some inefficiency in efficiencies in CBGI's business that resulted in some unforeseen restructuring costs.

Daniel Wolfe: Daniel, go ahead. Yeah, I think, you know, we, so I've enjoyed conversations with the company. I think that they are running the business the right way, haven't found anything that causes us concern along those sides, did get to chat with the new CFO recently and I think he will bring a lot of new capabilities to the company, both internally and externally. I think he will show well.

Speaker Change: sevenish range d g yeah i think you know we so i'haveve enjoyed conversations is with the company i think that they are running the business the right way haven't found aanything that causes us concern along those sides

Daniel Wolfe: Shortly after his appointment, the cyclical industries in which CBGI serves have been and experienced weakness, particularly among its customers and agriculture and instruction.

Daniel Wolfe: While we initially believe this weakness was captured and was near bottom as of the end of Q1-24, it continued to decline in Q2-24, leaning to further reduction in guidance and expose some inefficiency in efficiencies in CBGI's business that resulted in some unforeseen restructuring costs.

Speaker Change: did get to chat with the new cfo recently and i think he will bring a lot of

Speaker Change: new capabilities to the company both internally and externally

Daniel Wolfe: And so I'm encouraged by that. I think for Hudson, you know, part of their issue is, it's a lot of the stuff is not completely in their control. And it's going to be driven by, you know, pricing dynamics, but the way they run their business, they'll be able to take advantage of those pricing dynamics very quickly. I think the other piece that I like or that we like about Hudson is if nothing changes, absolutely nothing in terms of price, and they did exactly the same business next, they will actually make more money from a P&L perspective because as they burn off higher price inventory, they will start, and so in 25, the inventory that they're gonna be using against their sales is gonna be significantly lower cost.

Daniel Wolfe: The Q2-24 report resulted in a substantial decline in the stock to levels that we believe are both unwarranted, given the manageable debt to EBITDA ratio of approximately two times, even with the reduced EBITDA guide. The company continues to generate cash and pay down debt, along with using funds from pending non-core asset sales to further reduce debt.

Daniel Wolfe: The Q2-24 report resulted in a substantial decline in the stock to levels that we believe are both unwarranted, given the manageable debt to EBITDA ratio of approximately two times, even with the reduced EBITDA guide. The company continues to generate cash and pay down debt, along with using funds from pending non-core asset sales to further reduce debt. CBGI's business is based on long-term contracts and is therefore relatively sticky, even though there can be some delays due to overall end-market and cyclicality.

Speaker Change: i think he will show well and so i'm encouraged by that i think for hudson a parour issue is it's a lot of the stff is not completely in their control

Speaker Change: and it's going to be driven by pricing dynamics but the way they were on their business

Daniel Wolfe: CBGI's business is based on long-term contracts and is therefore relatively sticky, even though there can be some delays due to overall end-market and cyclicality. We believe the improvements in its business being implemented by James and his management team will set CBGI up to generate even higher- than historical EBITDA margins in the future as its end-markets recover, particularly agriculture and construction in the future years.

Speaker Change: they'll be able to take advantage of those pricing dynamics very quickly i think the other piece that i like or that we like about hudson is if nothing changes absolutely nothing in terms of pricing

Daniel Wolfe: We believe the improvements in its business being implemented by James and his management team will set CBGI up to generate even higher- than historical EBITDA margins in the future as its end-markets recover, particularly agriculture and construction in the future years.

Speaker Change: and they did exactly the same business next year

Speaker Change: they will actually make more money from a pl perspective because with as they burn off inventory higher price inventory

Daniel Wolfe: We hope these summaries provide a window into how we think about our investments and the catalyst that we believe that can drive material value appreciation in the future should they occur.

Daniel Wolfe: We hope these summaries provide a window into how we think about our investments and the catalyst that we believe that can drive material value appreciation in the future should they occur. These slides provide our thoughts on all of our portfolio holdings at the end of Q2-24 and we'd be happy to dive in to any of them with you at any time. Lastly, I would like to know we include additional detail on our trading during the quarter as well as operational metrics in appendix at the end of our slide deck on our website. We're not going to go through those slides right now. We would have to discuss them anytime.

Speaker Change: they will start and so in twenty five the inventory that they're going to be using against their sales is going to be significantly lower cost and so you'll see that flow through the p n l very quickly and that's again with no change in the market andit

Daniel Wolfe: These slides provide our thoughts on all of our portfolio holdings at the end of Q2-24 and we'd be happy to dive in to any of them with you at any time.

Daniel Wolfe: And so you'll see that flow through the P&L very quickly. And that's, again, with no change in the market. And. There are dynamics as we, as we all know, around, you know, the restrictions on virgin, you know, new HFC is being produced. And so and there are mandates coming on the reclaim side, and using reclaim within certain government industry, government and other industries. And so there are a lot of potential tailwinds, we've been legging into the stock, slowly to some extent because the timing is the question around there.

Daniel Wolfe: Lastly, I would like to know we include additional detail on our trading during the quarter as well as operational metrics in appendix at the end of our slide deck on our website.

Daniel Wolfe: We're not going to go through those slides right now.

Speaker Change: there are dynamics as we

Daniel Wolfe: We would have to discuss them anytime.

Speaker Change: as we all know around the restrictions on virgin new hcesis being produced

Kevin Rendino: I'll now turn the call back over to Kevin.

Kevin Rendino: I'll now turn the call back over to Kevin. Thanks, Daniel.

Kevin Rendino: Thanks, Daniel.

Kevin Rendino: Finally, a quick update on our discount management program, that we announced early in the year, late last year. The Discount Management Program is comprised of two measurement periods, January 1st, 2024 to December 31st, 2024, and then January 1st, 2025 to June 30th, 2025. If the average discount of our equity during each management period is greater than 12%, 180 Degree Capitals Board Directors will consider all available options, including but not limited to a significant expansion of our current stock buyback program up to 5 million, cash distributions reflecting a return of capital to shareholders or tender offer.

Kevin Rendino: Finally, a quick update on our discount management program, that we announced early in the year, late last year. The Discount Management Program is comprised of two measurement periods, January 1st, 2024 to December 31st, 2024, and then January 1st, 2025 to June 30th, 2025. If the average discount of our equity during each management period is greater than 12%, 180 Degree Capitals Board Directors will consider all available options, including but not limited to a significant expansion of our current stock buyback program up to 5 million, cash distributions reflecting a return of capital to shareholders or tender offer.

Speaker Change: and so and there are mandates coming on the reclaim side and using reclaim within certain government industry government and other industries and so there are a lot of potential tailwinds we've been legging into the stock slowly to some extent because

Daniel Wolfe: We do believe it will happen, but there are a lot of extraneous factors around the cost side that they don't control, but they are running their business to run profitably regardless of whether those costs remain depressed as they are right now. The only thing I'd say, sorry, no governance issues, but I will tell you from the time we started, the thing I think we reason why we passed the first time, was we felt like every time we talked to them, they were being so secretive about their business.

Speaker Change: the timing is the question around there we do believe it will happen but know there are a lot of extreous factors around the cost

Speaker Change: side that they don't control but they are running their business to run profitably regardless of whether those costs remain depressed as they are right now

Speaker Change: no anythingthing i'd say it's orry the no governance issues but i will tell you from the time we started the thing i think we' reason why we passed the first time

Kevin Rendino: You can see in the chart that we have here through July 21st, 2024, the average daily discount is approximately 19%, and as I said earlier, given where our share price is this morning, it's closer to 25%, which is ludicrous, if you ask me.

Kevin Rendino: You can see in the chart that we have here through July 21st, 2024, the average daily discount is approximately 19%, and as I said earlier, given where our share price is this morning, it's closer to 25%, which is ludicrous, if you ask me. And quite frankly, while this will be a board decision, I am because of the share price itself, the potential upside of our portfolio at some point, and the discount, wondering why I'm waiting to the end of the year to ask the board to do something rather than ask the board today.

Speaker Change: we felt like every time we talked them they were being so secretive about their business we actually couldn't understand it and we didn't understand why they were being so secretti they were not very forthcoming with their answers and

Daniel Wolfe: We actually couldn't understand it. And we didn't understand why they were being so secretive. They were not very forthcoming with their answers. We feel like they've gotten a little more receptive to having, I'd say, better conversations about their business so we can understand it a little more. Terrifically healthy color.

Speaker Change: we feel like they've gotten a little more receptive to having it's a better conversations about their business so we can understand it a little more

Kevin Rendino: And quite frankly, while this will be a board decision, I am because of the share price itself, the potential upside of our portfolio at some point, and the discount, wondering why I'm waiting to the end of the year to ask the board to do something rather than ask the board today.

Daniel Wolfe: Thanks Adam for everything. Thanks Adam. Our next question comes from. David Mealy.

Speaker Change: grrificically i' you call thank

Speaker Change: thanks adam for everything thank thought

Kevin Rendino: So it's not a promise, but I stand by on that as we are very sensitive to where our share price is trading, and the opportunity to do this may be better now than it will be at the end of the year.

Kevin Rendino: So it's not a promise, but I stand by on that as we are very sensitive to where our share price is trading, and the opportunity to do this may be better now than it will be at the end of the year. But time will tell on that, and stay tuned for that, as I said.

Operator: How are you, David? Good. How are you, Daniel?

Speaker Change: our next question comes from

Operator: Hey, Kevin, and welcome back. Glad you're doing well. Thanks, David. I appreciate your emails and I appreciate you saying that today. Happy to be back.

Adam Waldo: Kevin, great to hear you so chipper.

Speaker Change: david maililey all right then

Speaker Change: good you you'll hate riven and then welcome back like you're doing well

Speaker Change: tas david i appreciate your e-mails and i appreciate you saying that today happy to be b

Kevin Rendino: Good, good. I have a question about sort of the pipeline of new ideas. I know for me, I have too many ideas. So I'm wondering if with the markets down, are you looking at new opportunities, both in terms of seeing things that are cheap and also where you think constructive activism could be helpful and how are you balancing that versus staying concentrated and knowing the names that you are in and have a good thesis on all of them? Yeah, great question.

Kevin Rendino: But time will tell on that, and stay tuned for that, as I said.

Speaker Change: good i have a question about sort of the pipeline of new ideas i know for me there's i have too many ideas

Kevin Rendino: With that, Daniel, I think that's done with our formal comments.

Daniel Wolfe: With that, Daniel, I think that's done with our formal comments.

Operator: We'd be happy to take any questions by anybody right now.

Operator: We'd be happy to take any questions by anybody right now. Thanks, John. If you have a question, please type star sits on your phone or click the Ask the Question icon if you are participating via your computer.

Speaker Change: so i'm wondering if you the markets down are you looking at and new opportunities both in terms of theme things that are cheap and also where you think constructive activism could be helpful and how you' balancing adversus stay and concentrated and no the names that you

Operator: Thanks, John.

Operator: If you have a question, please type star sits on your phone or click the Ask the Question icon if you are participating via your computer.

Operator: We'll hold for a second while the few populations.

Operator: We'll hold for a second while the few populations. Yes, I apologize. Good day, Kevin and Daniel. I hope you're okay. Had a minor technical difficulty there. I hope you can give me okay. Good morning, we can. Great. Kevin, great to hear you so stiffer. It's really, really good to say.

Speaker Change #100: are in and have a good thesis on all of them

Kevin Rendino: One of my... Great sayings that I've utilized since 1990 was the definition of a bear market is when you run out of money before you run out of good ideas. And just like you, I have... So many good ideas and not a lot of money to invest in them. You know, one of the reasons why we love Mama Creations, it's been, it was a great stock for us. It went from 250 to 750, but one of the reasons why we sold it was because we wanted to own Avia and we wanted to own Hudson.

Speaker Change #101: yeah a great question one of my

Speaker Change #102: great thingsings that i've utilized since one thousandnine and was the definition of a bear market is when you run out of money before you run out a good ideas and just like you i have

Operator: Yes, I apologize.

David Melee: Good day, Kevin and Daniel.

David Melee: I hope you're okay.

David Melee: Had a minor technical difficulty there.

Speaker Change #103: so many good ideas and not a lot of money to invest in then so it's

David Melee: I hope you can give me okay.

David Melee: Good morning, we can.

David Melee: Great.

David Melee: Kevin, great to hear you so stiffer.

Speaker Change #104: one of the reasons why we love momama creations it's been it was a greatssto for us one two fifty seven and fifty one of the reasons why we sold it is because we wanted to own v we want to own hudson so you've got to find the money from some place

David Melee: It's really, really good to say.

David Melee: One of the questions about three of your holdings, three of them, and Daniel, a little bit from them.

Operator: One of the questions about three of your holdings, three of them, and Daniel, a little bit from them. On top of square, obviously you've been in there for quite a while. Act, you know, I call it quite energetically active with the board for a while.

Kevin Rendino: So you've got to find the money from someplace. And so there's been a bit of portfolio adjusting from some of our bigger holdings in order to, you know, find those new positions. So yeah, our pipeline is probably as long as yours. It's just a matter of, you know, what am I going to do? I'm not selling Potbelly here, for the reasons I mentioned earlier.

David Melee: On top of square, obviously you've been in there for quite a while.

David Melee: Act, you know, I call it quite energetically active with the board for a while.

Speaker Change #104: and so there's been a bit of portfolio adjusting from some of our bigger holdings in order to find those new positions

David Melee: From here, what is the value capture and exit trajectory options that local like for an age group that I'd like to ask about in a back and question.

Kevin Rendino: From here, what is the value capture and exit trajectory options that local like for an age group that I'd like to ask about in a back and question. Are you cutting on a little bit? I think you asked on con score. Look. It's been a horrendous ownership by us. We've believed at the end of the day that those three preferred holders would be better for the business than the prior situation that ComScore had because they're in the business and they wanted to own the business.

Speaker Change #105: so yes our pipeline is probably as long as yours

Speaker Change #106: it's just a matter of what i'm going to do i'm not selling pop bella here for the reasons i mentioned earlieror synchronous on the board ' actually working for the first time in a long time comscore 'm not selling here

Kevin Rendino: Synchronous, we're on the board. It's actually working for the first time in a long time. Comscore, I'm not selling here. And those are gigantic holdings for us. You know, I want to own more Lantronics. I want to own more CBGI. They're sitting at lows. Where am I going to find the money from there? Brightcove is another one.

David Melee: Are you cutting on a little bit?

Kevin Rendino: I think you asked on con score.

Speaker Change #106: and those are gigantic holdings for us i want to own work lland ronics i want to own more cbgi ' they're staying they're sitting at lows 're not going to find the money from their breover as another one it'

Kevin Rendino: Look.

Kevin Rendino: It's been a horrendous ownership by us.

Kevin Rendino: It's an absolutely idiotic valuation. I think it trades at four or five times EBITDA. And like 0.2 revenue.

Kevin Rendino: We've believed at the end of the day that those three preferred holders would be better for the business than the prior situation that ComScore had because they're in the business and they wanted to own the business.

Speaker Change #106: and absolutely idiotic valuation i think get traded four five times ebitda point two revenue it's crazy insane so i want to own more that but i've got to find the money from from other places so

Kevin Rendino: It's crazy. So I want to own more of that, but I've got to find the money from other places. That's our frustration is I've got more ideas than I do capital. Makes sense.

Speaker Change #106: that's our frustration as i've got more ideas than i do capital

Operator: Okay. Thanks a lot. Appreciate it. Thanks, Dave, and I'm seeing no other questions. With that, I can't.

Kevin Rendino: What I've seen unfortunately is inactivity and self-serving behavior rather than working for the benefit of not just themselves but common shareholders.

Kevin Rendino: What I've seen unfortunately is inactivity and self-serving behavior rather than working for the benefit of not just themselves but common shareholders. Well, they've done a number of things that we wanted them to do. They haven't done the preferred dividend or the special dividend that was available to them. They took their last dividend in stock instead of cash, which was good. They hired John who, up until the last quarter, had done a really, really good job.

Speaker Change #107: yes ma sense ok thanks lot for sha

Dave: thanks dave

Speaker Change #109: and i've seen no other questions like you

Kevin Rendino: On the one hand, tell you how disappointed I am with, Our performance, you know, in the last, you know, since the Fed started raising rates and it's been a maddening market. One that we think creates a tremendous amount of opportunity going forward. But I am thrilled to be here today, given what happened to me a month ago. So, and I'm determined, and I told you earlier in this call that my happy place is working on behalf of... Shareholders and coming in every day with a glass half-filled view and thinking that this market is so ridiculous in terms of the haves and the have-nots.

Speaker Change #109: that i can't

Kevin Rendino: Well, they've done a number of things that we wanted them to do.

Speaker Change #109: on the one hand tell you how disappointed i am was

Kevin Rendino: They haven't done the preferred dividend or the special dividend that was available to them.

Speaker Change #110: our performance in the last since a fed started rising rates and it's been a maddening market one that we think creates a tremendous amount of opportunity going forward

Kevin Rendino: They took their last dividend in stock instead of cash, which was good. They hired John who, up until the last quarter, had done a really, really good job. I'd say he did not do a good job last quarter at all in terms of the guidance and the rest.

Speaker Change #111: but i am it' thrilled to be here today given what happened to me a month ago so and i'm determined and i told you earlier in this call that my happy place is working on behalf of

Kevin Rendino: I'd say he did not do a good job last quarter at all in terms of the guidance and the rest. They cut their comp, the board cut their comp. They've done some things but they haven't done the most important thing. For us, the business retreated at one time's revenue, which is $370 million. With $220 million or so of preferred, getting the first money in in some sort of sale, at least $150 million or so for common shareholders and I think there's 5 million shares out. You can do the math on that. It's infinitely higher than where last sale is.

Kevin Rendino: They cut their comp, the board cut their comp.

Speaker Change #111: shareholders and coming in every day with the glass half fill a view and thinking that this market is so ridiculous in terms of the halbves and they have nots and

Kevin Rendino: They've done some things but they haven't done the most important thing.

Kevin Rendino: For us, the business retreated at one time's revenue, which is $370 million.

Kevin Rendino: We're not in a recession, the economy is pretty good, the companies that we own are performing pretty well from a fundamental perspective. You know, we've had some missteps like quantum, for example, but by and large, most of our holdings have done quite well in this environment, and we're not getting rewarded, but I do think that we are going to get rewarded. I've seen markets like this before, whether it was, 1990 for value stocks, 1998-2000 during the head of the dot-com frenzy when, you know, companies like Allstate and Philip Morris were trading at low as well, chair.com was trading at 100 times revenue, whatever, whatever.com it was, or, you know, 2008, the subprime mortgage meltdown, where it never felt like we were ever going to get out of that period. And, of course, the S&P got to 666. And that was the bottom.

Speaker Change #111: we're not in a recession the economy is pretty good the companies that we own are performing pretty well from a fundamental perspective we've had some

Kevin Rendino: With $220 million or so of preferred, getting the first money in in some sort of sale, at least $150 million or so for common shareholders and I think there's 5 million shares out.

Speaker Change #111: we've had some mis steps like quantum for example but byy large most of our holdings of doneun quite well in this environment and we'renot getting rewarded but i do think that we are going to get rewarded i' seen markets like this before whether it is

Kevin Rendino: You can do the math on that.

Kevin Rendino: It's infinitely higher than where last sale is.

Kevin Rendino: I mean, this price is so ludicrous to me but they deserve it because they've been obstinate in their ability to actually just make decisions that common shareholders want.

Kevin Rendino: I mean, this price is so ludicrous to me but they deserve it because they've been obstinate in their ability to actually just make decisions that common shareholders want. So we're just going to continue doing what we've done. You could expect us doing that either privately or publicly. What do I care if I embarrass a bunch of board members that have really heard common shareholders? It's just very infuriating to say the least.

Speaker Change #111: one thousand nine hundred andninety for value stock onethousandninehundred and ninety eight two thousand during the head of the dot com frenzy when companies like all state philip morris we're trading at lows while

Speaker Change #111: chairred dotcom was trading at one hundred times revenue whatever whatever dot coma was or two thousand and eight the subprime mortgage melt down where it never felt like we were ever goingtoget out of that period in

Kevin Rendino: So we're just going to continue doing what we've done.

Kevin Rendino: You could expect us doing that either privately or publicly.

Kevin Rendino: So the COVID is another one, you know, we were down what 2030% during the beginning parts of that, and it felt like that was never going to end. And then of course, we went through a great couple of years after that. So I'm happy to be back. It's happy to hear from all of you. Thank you again for your well wishes. And we're determined to get the turn back to the place that it was three years ago when we had unbelievable performance. And we feel we're going to have that again here in the next few, Thank you everyone for participating and feel free to reach out anytime.

Speaker Change #111: of course the smmp got and tysix and that was the bottom so a covidit is another one you know we were down what twenty thirty percent during the beginning parts of that and it feltlike that was never going to end and then of course

Kevin Rendino: What do I care if I embarrass a bunch of board members that have really heard common shareholders?

Kevin Rendino: It's just very infuriating to say the least.

Adam Waldo: It's really, really good to say.

Adam Waldo: And once we've been talking about three of your holdings, we're going to draw you out a little bit from them.

Speaker Change #111: we went through a great couple of years after that so i'm happy to be back it's happy to hear from all of you thank you again for you well ishes

Adam Waldo: On top score, obviously, you've been in there for quite a while.

Adam Waldo: You're on the board.

Kevin Rendino: But the value is there.

Kevin Rendino: But the value is there. I mean, they have an excellent product. They have a good position within the industry. The data they provide for companies is useful and many of them need it. With a market cap right now with $335 million or something like that, it's just an absolutely absurd valuation considering that it should trade at one time's revenue and 10 times EBITDA.

Adam Waldo: You know, I call it quite energetically active with the board for a while.

Adam Waldo: From here, what is the value capture and exit trajectory options that look like for 180 degree?

Adam Waldo: And I'd like to ask about InnoVac and Huston.

Kevin Rendino: But the value is there.

Kevin Rendino: I mean, they have an excellent product. They have a good position within the industry. The data they provide for companies is useful and many of them need it.

Adam Waldo: Are you cutting out a little bit?

Kevin Rendino: I mean, they have an excellent product. They have a good position within the industry.

Kevin Rendino: I think you asked on top score.

Kevin Rendino: The data they provide for companies is useful, and many of them need it, and with a market cap right now of $35 million or something like that, it's just an absolutely absurd valuation, considering that it should trade at one times revenue and 10 times EBITDA.

Adam Waldo: No, understood.

Kevin Rendino: Look.

Kevin Rendino: So that's our story here.

Adam Waldo: Okay, so let's switch gears to two better managed and governed companies, Intivac and Hudson.

Kevin Rendino: It's been a horrendous ownership by us.

Kevin Rendino: It's a triple from here, Adam.

Adam Waldo: Intivac, Nigel's done a nice job operationally, I think we'd both agree, during his tenure, and he's done a very good job on the custom-facing side.

Kevin Rendino: We believed at the end of the day that those three preferred holders would be better for the business, than the prior situation that Comscore had, because they're in the business and they wanted to own the business.

Adam Waldo: They got Trio to market with Corning. They have some good initial traction there.

Kevin Rendino: What I've seen, unfortunately, is inactivity and self-serving behavior, rather than working for the benefit of not just themselves but common shareholders.

Adam Waldo: They haven't been consistently active in telling their story, Adoption.

Daniel Wolfe: We did this with Synchronous as well.

Speaker Change #112: and we are determined to get the turn back to the place that it was three years ago when we had unbelievable performance and we feel we're going to have that again here in the next few years

Kevin Rendino: Look, they've done a number of things that we wanted them to do.

Adam Waldo: How energetic are you with them in trying to, I mean, they have a full-time, IR, how are they going to get out there and tell their story?

Daniel Wolfe: We felt like they needed a new investor relations function, which we felt for a long time. I guess maybe we waited until we were on the board to push the envelope on that, and they actually did recently change their IR.

Kevin Rendino: They haven't done the preferred dividend or the special dividend that was available to them.

Daniel Wolfe: That's a great question.

Daniel Wolfe: I'm not afraid to go to management and suggest that they're being not reflected well by either an IR firm or they're not reflecting best for themselves.

Kevin Rendino: They took their last dividend in stock instead of cash, which was good.

Daniel Wolfe: Thanks for asking.

Daniel Wolfe: So you could imagine that we were going to be on them for that because I just don't have tolerance for that.

Kevin Rendino: And we are determined to get the turn back to the place that it was three years, ago when we had unbelievable performance, and we feel we're going to have that again here in the next few years, years.

Kevin Rendino: They hired John, who up until the last quarter had done a really, really good job. I'd say he did not do a good job last quarter at all in terms of the guidance and the rest.

Daniel Wolfe: We do spend a lot of time with Nigel.

Daniel Wolfe: The other thing that I would say, Adam, is up until recently, Nigel was kind of a one-man show from an external perspective, and they just hired a new CFO who I think will provide additional bandwidth for being able to get out and make sure the story is getting told.

Kevin Rendino: They cut their comp.

Daniel Wolfe: I think, the issue for InnoVac around the hard disk drive, and I agree with you that there is a potential for a secular upswing given the need for various storage mediums, especially as if you're storing something, and Flash is expensive, and so you need to have complementary storage alongside Flash, not just using Flash.

Daniel Wolfe: But as Kevin said, we will make sure that they also hear from us that they need to make sure to do that.

Kevin Rendino: Thank you everyone for participating and feel free to reach out anytime if you have any questions.

Kevin Rendino: The board cut their comp.

Daniel Wolfe: And you need it to be more adaptable and more accessible than tape.

Daniel Wolfe: So great call.

Kevin Rendino: So they've done some things, but they haven't done the most important thing.

Daniel Wolfe: So, at the end of the day, hard disk drives definitely is a really good option to include in any solution.

Adam Waldo: And then finally on Hudson, Brian's built a nice company here over a while.

Kevin Rendino: So for us, the business should trade at one times revenue, which is sort of $370 million, and with $220 million or so of preferred getting the first money in some sort of sale, that leaves $150 million or so for common shareholders, and I think there's 5 million shares out.

Daniel Wolfe: The problem for hard disk drives for InnoVac is it's really, I mean, unless they start selling a lot of lean tools, which those, I think that's upside, I think there is the potential for that.

Adam Waldo: The CFO, I agree, on paper looks like an upgrade.

Kevin Rendino: So you can do the math on that.

Daniel Wolfe: You know, it's not like, the industry is going through a massive capacity expansion, but they do need to upgrade their tools.

Adam Waldo: Time will tell in reality.

Kevin Rendino: With a market cap right now with $335 million or something like that, it's just an absolutely absurd valuation considering that it should trade at one time's revenue and 10 times EBITDA.

Kevin Rendino: It's infinitely higher than where last sale is.

Daniel Wolfe: So, we're looking at about a 45 to 50, and maybe it could be a little bit higher business every year, $50 million business every year.

Adam Waldo: But do you guys have any sense there?

Kevin Rendino: Otherwise, we look forward to speaking with you next quarter.

Kevin Rendino: This price is so ludicrous to me, but they deserve it because they've been obstinate, in their ability to actually just make decisions that common shareholders want.

Daniel Wolfe: It's almost like an annuity, but you're not going to see a ton of growth there, most likely.

Adam Waldo: Are there any governance issues that you all have uncovered, or is it really just truly kind of solid management, market leader, volume stories there, and eventually pricing recovers and you get a double or more kind of investment thesis?

Kevin Rendino: So we're just going to continue doing what we've done.

Daniel Wolfe: I mean, it's possible, but that's not, I don't think anyone is looking at InnoVac along those sides.

Adam Waldo: Or is there anything more on the governance side you think is an opportunity there?

Kevin Rendino: You could expect us doing that either privately or publicly.

Daniel Wolfe: It really comes down to the trio tool, and so that's why we like the downside protection.

Daniel Wolfe: Daniel, I'll let you answer that question.

Kevin Rendino: What do I care if I embarrass a bunch of board members that have really hurt common shareholders?

Daniel Wolfe: For the upside, the trio tool is a completely, potentially a completely game-changing platform for the deposition of a variety of new coatings on especially consumer electronics, but other materials as well with much higher uniformity and at cost savings for the manufacturers that really drum coders don't provide, which is the only other alternative option to deposit these types of coatings. So, that is the upside, and if trio takes off, then they're addressing a market that could have a TAM in the $500 million to a billion dollars or even more.

Kevin Rendino: The one thing I'd say is you were the one who actually got this name on our brains a while ago, probably at the same price and then it obviously, maybe even lower, went a lot higher last year.

Kevin Rendino: Take care.

Kevin Rendino: It's just very infuriating, to say the least.

Daniel Wolfe: It just depends on how diverse of tools that they end up getting their systems into.

Kevin Rendino: And we waited for it to pull back to initiate a position, which is what we did last quarter in sort of the 7-ish range.

Daniel Wolfe: So, that's, as we look at, and we do believe that they are close, hopefully, to being adopted, have an adoption of their tool for manufacturing for a consumer electronic device as a first entry point into the market, and then I think it can grow from there, but they need to show that.

Daniel Wolfe: Daniel, go ahead.

Daniel Wolfe: They need to prove that, and that's what everybody's waiting for because Corning, it has been a little bit of the goalposts getting moved, and we need that to stop happening, and we need them to actually get those tools adopted, which we do think it has the – they're on the right trajectory to do so, but we need to see it, Once they have that happen, I think the market will be more receptive to the story.

Daniel Wolfe: Yeah, I think we – so I've enjoyed conversations with the company.

Daniel Wolfe: Do you guys get out and tell their story quite a bit more over the next year than they have over the last year and a half?

Daniel Wolfe: I think that they are running the business the right way, haven't found anything that causes us concern along those sides. I did get to chat with the new CFO recently, and I think he will bring a lot of new capabilities to the company, both internally and externally.

Daniel Wolfe: I think you could imagine we don't have tolerance for companies that report earnings and you don't hear from them again until they report the next earnings.

Daniel Wolfe: I think he will show well, and so I'm encouraged by that, and it's going to be driven by you know pricing dynamics but the way they run their business they'll be able to take advantage of those pricing dynamics very quickly.

Daniel Wolfe: I think the other piece that I like or that we like about Hudson is if nothing changes, absolutely nothing in terms of pricing, and they did exactly the same business next year.

Daniel Wolfe: They will actually make more money from a P&L perspective because as they burn off higher price inventory they will start and so in 25 the inventory that they're going to be using against their sales is going to be significantly lower cost and so you'll see that flow through the P&L very quickly and that's again with no change in the market and there are dynamics as we as we all know around you know the restrictions on virgin you know new HFC is being produced and so and there are mandates coming on the reclaim side and using reclaim within certain government industry government and other industries and so there are a lot of potential tailwinds.

Daniel Wolfe: We've been legging into the stock slowly to some extent because the timing is the question around there.

Daniel Wolfe: We do believe it will happen but you know there are a lot of extraneous factors around the cost side that they don't control but they are running their business to run profitably regardless of whether those costs remain depressed as they are right now.

Daniel Wolfe: The only thing I'd say sorry no governance issues but I will tell you from the time we started the thing I think we reason why we passed the first time was we felt like every time we talked them they were being so secretive about their business we actually couldn't understand it and we didn't understand why they were being so secretive they were not very forthcoming with their answers and we feel like they've gotten a little more receptive to having I'd say better conversations about their business so we can understand it a little more.

Kevin Rendino: So that's our story here.

Operator: So that's our story here. It's a triple from here, Adam. No, understood. Okay.

Adam Waldo: Thanks Adam for everything.

Adam Waldo: Thanks Adam.

Operator: Our next question comes from David Maley.

Kevin Rendino: It's a triple from here, Adam.

David Maley: How are you David?

David Maley: Good how are you Daniel?

Daniel Wolfe: Hey Kevin and welcome back glad you're doing well.

Kevin Rendino: Thanks David.

David Melee: No, understood.

Kevin Rendino: I appreciate, your emails and I appreciate you saying that today.

David Melee: Okay.

David Melee: So let's switch gears to two better management government companies in tobacco and Hudson.

Kevin Rendino: So let's switch gears to two better management government companies in tobacco and Hudson. In tobacco, Nigel's done a nice job operation. I think we'd both agree during his tenure and he's done a very good job on the custom-facing side. They got real. To market with Corning, they have some good initial traction there. They haven't been consistently active in telling their story. And with the end markets for HDD from all the research we do actually seeing more than a cyclical upswing, but maybe a secular upswing due to AI, adoption.

Kevin Rendino: Happy to be back.

David Maley: Good good.

David Maley: I have a question about sort of the pipeline of new ideas.

David Maley: I know for me, there's I have too many ideas so I'm wondering if you know with the markets down are you looking at new opportunities both in terms of seeing things that are cheap and also where you think constructive activism could be helpful and how are you balancing that versus you know staying concentrated and knowing the names that you are in and have a good thesis on all of them.

Kevin Rendino: Yeah great question.

Kevin Rendino: One of my Great sayings that I've utilized since 1990 was, the definition of a bear market is when you run out of money before you run out of good ideas.

David Melee: In tobacco, Nigel's done a nice job operation.

Kevin Rendino: And just like you, I have so many good ideas and not a lot of money to invest in them.

Kevin Rendino: So it's, you know, one of the reasons why we love Mama Creations, it was a great stock for us, it went from $250 to $750, but one of the reasons why we sold it was because we wanted to own Avia and we wanted to own Hudson.

Kevin Rendino: So you've got to find the money from someplace.

David Melee: I think we'd both agree during his tenure and he's done a very good job on the custom-facing side.

Kevin Rendino: And so there's been a bit of portfolio adjusting from some of our bigger holdings in order to, you know, find those new positions.

Kevin Rendino: So, yeah, our pipeline is probably as long as yours.

Kevin Rendino: It's just a matter of, you know, what am I going to do?

Kevin Rendino: I'm not selling Potbelly here for the reasons I mentioned earlier.

Kevin Rendino: Synchronous, we're on the board.

David Melee: They got real.

Kevin Rendino: It's actually working for the first time in a long time.

David Melee: To market with Corning, they have some good initial traction there.

Kevin Rendino: Comscore, I'm not selling here.

Kevin Rendino: And those are gigantic holdings for us.

Kevin Rendino: You know, I want to own more Lantronics.

Kevin Rendino: I want to own more CBGI. They're sitting at lows.

David Melee: They haven't been consistently active in telling their story.

Kevin Rendino: Where am I going to find the money from there?

Kevin Rendino: Breitkov is another one.

Kevin Rendino: It's an absolutely idiotic valuation.

Kevin Rendino: I think it trades at four or five times EBITDA.

David Melee: And with the end markets for HDD from all the research we do actually seeing more than a cyclical upswing, but maybe a secular upswing due to AI, adoption.

Kevin Rendino: And like 0.2 revenue.

Kevin Rendino: It's crazy.

Kevin Rendino: So I want to own more of that, but I've got to find the money from other places.

Kevin Rendino: So that's our frustration is I've got more ideas than I do capital.

David Maley: Yeah, makes sense.

David Maley: Okay, thanks a lot.

David Maley: Appreciate it.

David Maley: Thanks, Dave.

Daniel Wolfe: And I'm seeing no other questions in the queue.

Kevin Rendino: With that, I can't, on the one hand, tell you how disappointed I am with our performance, you know, in the last, you know, since the Fed started raising rates.

Kevin Rendino: And it's been a maddening market, one that we think creates a tremendous amount of opportunity going forward.

David Melee: How energetic are you with them in trying to, I mean they have a full-time IR.

Kevin Rendino: How energetic are you with them in trying to, I mean they have a full-time IR. How are they going to get out there and tell their story? That's a great question. Thanks for asking. We do spend a lot of time with Nigel. I think the issue for in the back around the hardest drive. I agree with you that there is a potential for a secular up swing given the need for various storage mediums, especially as if you're storing something, and flash is expensive.

Kevin Rendino: But I am thrilled to be here today, given what happened to me a month ago.

Kevin Rendino: And I'm determined, and I told you earlier in this call, that my happy place is working on behalf of shareholders and coming in every day with a glass half-filled view and thinking that this market is so ridiculous in terms of the haves and the have-nots.

Kevin Rendino: And we're not in a recession.

Kevin Rendino: The economy is pretty good. The companies that we own are performing pretty well from a fundamental, perspective.

Kevin Rendino: We've had some missteps like Quantum, for example.

David Melee: How are they going to get out there and tell their story?

Kevin Rendino: But by and large, most of our holdings have done quite well in this, environment, and we're not getting rewarded. But I do think that we are going to get rewarded.

Kevin Rendino: I've seen markets like this before, whether it was 1990 for value stocks, 1998, 2000 during the head of the dot-com frenzy when, you know, companies like Allstate and Philip Morris were trading at lows, while, you know, Chair.com was trading at 100 times revenue, whatever dot-com it was.

Kevin Rendino: Or, you know, 2008, the subprime mortgage meltdown, where it never felt like we were ever going to get out of that period.

Kevin Rendino: And, of course, the S&P got to 666, and that was the bottom.

Kevin Rendino: So COVID is another one.

David Melee: That's a great question.

Kevin Rendino: You know, we were down, what, 20%, 30% during the beginning parts of that, and it felt like that was never going to end.

David Melee: Thanks for asking.

Kevin Rendino: And then, of course, we went through a great couple of years after that.

Kevin Rendino: So I'm happy to be back.

David Melee: We do spend a lot of time with Nigel.

Kevin Rendino: It's happy to hear from all of you.

Kevin Rendino: Thank you again for your well wishes.

David Melee: I think the issue for in the back around the hardest drive.

David Melee: I agree with you that there is a potential for a secular up swing given the need for various storage mediums, especially as if you're storing something, and flash is expensive. And so you need to have complementary storage alongside flash, not just using flash.

Kevin Rendino: And so you need to have complementary storage alongside flash, not just using flash. So, and you need it to be more adaptable and more accessible than tape. So at the end of the day, you know, hard drives definitely is a really good option to include in any solution. The problem for hard drives for Intovac is it's really, I mean unless they start selling a lot of lean tools, which I think that's upside.

David Melee: So, and you need it to be more adaptable and more accessible than tape.

David Melee: So at the end of the day, you know, hard drives definitely is a really good option to include in any solution.

David Melee: The problem for hard drives for Intovac is it's really, I mean unless they start selling a lot of lean tools, which I think that's upside.

David Melee: I think there is the potential for that.

Kevin Rendino: I think there is the potential for that. You know, it's not like the industry is going through a massive capacity expansion, but they do need to upgrade their tools. So we're looking at about a 45 to 50 and maybe it could be a little bit higher business every year, 50 million dollar business every year. It's almost like an annuity, but you're not going to see a ton of growth there, most likely.

David Melee: You know, it's not like the industry is going through a massive capacity expansion, but they do need to upgrade their tools.

David Melee: So we're looking at about a 45 to 50 and maybe it could be a little bit higher business every year, 50 million dollar business every year.

David Melee: It's almost like an annuity, but you're not going to see a ton of growth there, most likely.

David Melee: I mean, it's possible, but that's not, I don't think anyone is looking at Intovac along those sides.

Kevin Rendino: I mean, it's possible, but that's not, I don't think anyone is looking at Intovac along those sides. It really comes down to the trio tool. And so that's why we like the downside protection. For the upside, the trio tool is a completely, potentially a completely game changing platform for the deposition of a variety of new coatings on, especially consumer electronics, but other materials as well with much higher uniformity and it costs savings for the manufacturers that really drum coders don't provide, which is the only all their alternative option to deposit these types of coatings.

David Melee: It really comes down to the trio tool.

Kevin Rendino: So that is the upside. And if trio takes off, then they're addressing a market that could be, you know, have a tam in the 500 million to a billion dollars or even more. It just depends on how diverse of tools that they end up getting their systems into. So that's, you know, as we look at and we do believe that they are close, hopefully, to being adopted, have an adoption of their tool for manufacturing, for a consumer electronics device as a first entry point into the market.

David Melee: And so that's why we like the downside protection.

David Melee: For the upside, the trio tool is a completely, potentially a completely game changing platform for the deposition of a variety of new coatings on, especially consumer electronics, but other materials as well with much higher uniformity and it costs savings for the manufacturers that really drum coders don't provide, which is the only all their alternative option to deposit these types of coatings. So that is the upside.

David Melee: And if trio takes off, then they're addressing a market that could be, you know, have a tam in the 500 million to a billion dollars or even more.

David Melee: It just depends on how diverse of tools that they end up getting their systems into.

David Melee: So that's, you know, as we look at and we do believe that they are close, hopefully, to being adopted, have an adoption of their tool for manufacturing, for a consumer electronics device as a first entry point into the market.

David Melee: And then I think it can grow from there, but they need to show that.

Kevin Rendino: And then I think it can grow from there, but they need to show that. They need to prove that. And that's what everybody's waiting for because corning, you know, it has been a little bit of, you know, the goalposts getting moved. And we need that to stop happening. We need that to, we need them to actually get those those tools adopted, which we do think it has the, they're on the right trajectory to do so, but we need to see that.

David Melee: They need to prove that.

David Melee: And that's what everybody's waiting for because corning, you know, it has been a little bit of, you know, the goalposts getting moved.

David Melee: And we need that to stop happening.

David Melee: We need that to, we need them to actually get those those tools adopted, which we do think it has the, they're on the right trajectory to do so, but we need to see that.

David Melee: One say have that happen.

Kevin Rendino: One say have that happen. I think the market will be more receptive to the story. I think that's fair. Obviously we have very similar investment thesis. But when he first came in, Nigel would tell the story quite a bit more. Then they obviously had the operation pushouts from HDD clients. They kind of went internally focused for a while, which was understandable. Now those seem to be kind of reversing. Do you think these guys get out and tell their story quite a bit more over the next year than they have over the last year and a half?

David Melee: I think the market will be more receptive to the story.

David Melee: I think that's fair.

David Melee: Obviously we have very similar investment thesis.

David Melee: But when he first came in, Nigel would tell the story quite a bit more.

David Melee: Then they obviously had the operation pushouts from HDD clients.

David Melee: They kind of went internally focused for a while, which was understandable.

David Melee: Now those seem to be kind of reversing.

David Melee: Do you think these guys get out and tell their story quite a bit more over the next year than they have over the last year and a half?

David Melee: You think you could imagine we don't have tolerance for companies that report earnings and you don't hear from them again until they report the next earnings.

Kevin Rendino: You think you could imagine we don't have tolerance for companies that report earnings and you don't hear from them again until they report the next earnings. So we did this with synchronous as well. We felt like they needed a new investor relations function, which we felt for a long time. I guess maybe we waited until we were on the board to push the envelope on that. And they actually did recently change their IR.

David Melee: So we did this with synchronous as well.

David Melee: We felt like they needed a new investor relations function, which we felt for a long time.

David Melee: I guess maybe we waited until we were on the board to push the envelope on that.

David Melee: And they actually did recently change their IR.

David Melee: So we're not afraid to go to management and suggest that they're being not reflected well by either an IR firm or they're not reflecting best for themselves.

Kevin Rendino: So we're not afraid to go to management and suggest that they're being not reflected well by either an IR firm or they're not reflecting best for themselves. So you could imagine that we were going to be on them for that because I just don't have tolerance for that. I think the only thing that I would say, Adam, is up until recently Nigel was kind of a one-man show for the external perspective and they just hired a new CFO, who I think will provide additional bandwidth for being able to get out and make sure the story is getting told. But we, as Kevin said, we will make sure that they also hear from us that they need to make sure to do that. So a great color.

David Melee: So you could imagine that we were going to be on them for that because I just don't have tolerance for that.

David Melee: I think the only thing that I would say, Adam, is up until recently Nigel was kind of a one-man show for the external perspective and they just hired a new CFO, who I think will provide additional bandwidth for being able to get out and make sure the story is getting told.

David Melee: But we, as Kevin said, we will make sure that they also hear from us that they need to make sure to do that.

David Melee: So a great color.

David Melee: Then finally on Hudson.

Operator: Then finally on Hudson. I mean, you know, Brian's built a nice company here over a while with CFO. I agree on paper looks like an upgrade time will tell in reality.

David Melee: I mean, you know, Brian's built a nice company here over a while with CFO.

David Melee: I agree on paper looks like an upgrade time will tell in reality.

David Melee: But do you guys have any sense there?

Daniel Wolfe: But do you guys have any sense there? Are there any governance issues that you all have uncovered? Or is it really just truly kind of, you know, solid management, market leader, volume stories there, and eventually pricing, recovers, and you get a double or more kind of investment thesis? Is there anything more on the governance side you think is an opportunity though? Daniel, Daniel, you've answered that question. The one thing I'd say is you were the one who actually got this name on our brains a while ago, probably at the same price and then it obviously maybe even lower went a lot higher last year.

David Melee: Are there any governance issues that you all have uncovered?

David Melee: Or is it really just truly kind of, you know, solid management, market leader, volume stories there, and eventually pricing, recovers, and you get a double or more kind of investment thesis?

David Melee: Is there anything more on the governance side you think is an opportunity though?

Daniel Wolfe: Daniel, Daniel, you've answered that question.

Daniel Wolfe: The one thing I'd say is you were the one who actually got this name on our brains a while ago, probably at the same price and then it obviously maybe even lower went a lot higher last year.

Daniel Wolfe: And we waited for it to pull back to initiate a position, which is what we did last quarter in the sort of the seven, seven this range.

Daniel Wolfe: And we waited for it to pull back to initiate a position, which is what we did last quarter in the sort of the seven, seven this range. Daniel, again. Yeah, I think, you know, we, so I've enjoyed conversations with the company. I think that they are running the business the right way. They haven't found anything that causes us concern along those sides. Did get to chat with the new CFO recently. And I think he will bring a lot of new capabilities to the company, both internally and externally.

Daniel Wolfe: Daniel, again.

Daniel Wolfe: Yeah, I think, you know, we, so I've enjoyed conversations with the company.

Daniel Wolfe: I think that they are running the business the right way.

Daniel Wolfe: They haven't found anything that causes us concern along those sides.

Daniel Wolfe: Did get to chat with the new CFO recently. And I think he will bring a lot of new capabilities to the company, both internally and externally.

Daniel Wolfe: I think he will show well and so I'm encouraged by that.

Daniel Wolfe: I think he will show well and so I'm encouraged by that. I think for Hudson, you know, part of their issue is a lot of stuff is not completely in their control, and it's going to be driven by pricing dynamics, but the way they run their business, they'll be able to take advantage of those pricing dynamics very quickly. I think the other piece that we like about Hudson is, if nothing changes, absolutely nothing in terms of pricing, and they did exactly the same business next year, they will actually make more money from a P&L perspective, because as they burn off the inventory, higher price inventory, they will start, so in 25, the inventory that they're going to be using against their sales is going to be significantly lower cost.

Daniel Wolfe: I think for Hudson, you know, part of their issue is a lot of stuff is not completely in their control, and it's going to be driven by pricing dynamics, but the way they run their business, they'll be able to take advantage of those pricing dynamics very quickly.

Daniel Wolfe: I think the other piece that we like about Hudson is, if nothing changes, absolutely nothing in terms of pricing, and they did exactly the same business next year, they will actually make more money from a P&L perspective, because as they burn off the inventory, higher price inventory, they will start, so in 25, the inventory that they're going to be using against their sales is going to be significantly lower cost. And so you'll see that flow through the P&L very quickly, and that's again with no change in the market.

Daniel Wolfe: And so you'll see that flow through the P&L very quickly, and that's again with no change in the market. And there are dynamics as we all know around the restrictions on Virgin, new HFCs being produced, and there are mandates coming on the reclaim side, and using reclaim within certain government industry, government and other industries, and so there are a lot of potential tailwinds. We've been legging into the stock slowly to some extent, because the timing is the question around there, we do believe it will happen, but there are a lot of extraneous factors around the cost side that they don't control, but they are running their business to run profitably regardless of whether those costs remain depressed as they are right now.

Daniel Wolfe: And there are dynamics as we all know around the restrictions on Virgin, new HFCs being produced, and there are mandates coming on the reclaim side, and using reclaim within certain government industry, government and other industries, and so there are a lot of potential tailwinds.

Daniel Wolfe: We've been legging into the stock slowly to some extent, because the timing is the question around there, we do believe it will happen, but there are a lot of extraneous factors around the cost side that they don't control, but they are running their business to run profitably regardless of whether those costs remain depressed as they are right now.

Daniel Wolfe: The only thing I say, sorry, the no governance issues, but I will tell you from the time we started, the thing I think we reason why we passed the first time, was we felt like every time we talked them, they were being so secretive about their business, we actually couldn't understand it, and we didn't understand why they were being so secretive, they were not very forthcoming with their answers, and we feel like they've gotten a little more receptive to having, I'd say, better conversations about their business so we can understand it a little more.

Daniel Wolfe: The only thing I say, sorry, the no governance issues, but I will tell you from the time we started, the thing I think we reason why we passed the first time, was we felt like every time we talked them, they were being so secretive about their business, we actually couldn't understand it, and we didn't understand why they were being so secretive, they were not very forthcoming with their answers, and we feel like they've gotten a little more receptive to having, I'd say, better conversations about their business so we can understand it a little more.

David Melee: Perfectly helpful, thank you.

Operator: Perfectly helpful, thank you.

David Melee: Thanks, Adam, for everything.

Operator: Thanks, Adam, for everything.

David Melee: Thanks, Adam.

Operator: Thanks, Adam.

Operator: Our next question comes from David Melee.

David Melee: Our next question comes from David Melee. How are you, David? Good. How are you, Daniel? Hey, Kevin, and welcome back, glad you're doing well. Thanks, David. I appreciate your emails, and I appreciate you saying that today. Happy to be back. Good. I have a question about sort of the pipeline of new ideas. I know, for me, I have too many ideas, so I'm wondering if, you know, with the markets down, are you looking at new opportunities, both in terms of seeing things that are cheap and also where you think constructive activism could be helpful, and how are you bouncing that versus, you know, staying concentrated and knowing the names that you are in and have a good thesis on all of them? Yeah, a great question, one of my...

Operator: How are you, David?

Operator: Good.

Operator: How are you, Daniel?

Operator: Hey, Kevin, and welcome back, glad you're doing well.

Operator: Thanks, David.

Operator: I appreciate your emails, and I appreciate you saying that today.

Operator: Happy to be back.

Operator: Good.

Operator: I have a question about sort of the pipeline of new ideas.

Operator: I know, for me, I have too many ideas, so I'm wondering if, you know, with the markets down, are you looking at new opportunities, both in terms of seeing things that are cheap and also where you think constructive activism could be helpful, and how are you bouncing that versus, you know, staying concentrated and knowing the names that you are in and have a good thesis on all of them?

Operator: Yeah, a great question, one of my...

Kevin Rendino: Great saying that I've utilized since 1990 was the definition of a bear market is when you run out of money before you run out of good ideas and just like you I have so many good ideas and not a lot of money to invest in them so it's you know one of the reasons why we love Mama Creations it's been it was a great thought for us it was 250 to 750 but one of the reasons why we sold it was because we wanted to own Aviate we wanted to own Hudson so you've got to find the money from someplace and so there's been a bit of portfolio adjusting from some of our bigger holdings in order to you know find those new positions so yeah our pipeline is probably as long as yours it's just a matter of you know what am I going to do I'm not selling potbelly here for the reasons I mentioned earlier synchronous we're on the board that's actually working for the first time in a long time conscore I'm not selling here and those are gigantic holdings for us you know I want to own work lantronics I want to own more CBGI there's they're staying they're sitting at lows we're not going to find the money from there bright cova is another one it's an absolutely idiotic valuation I think it trades at four or five times either and like point two revenue it's crazy so I want to own more of that but I've got to find the money from from other places so that's our frustration is I've got more ideas than I do capital yeah makes sense okay thanks a lot for sharing thanks Dave and I've seen no other questions thank you with that I can't on the one hand tell you how disappointed I am with our performance you know in the last you know since the fed started raising rates and it's been a maddening market one that we think creates a tremendous amount of opportunity going forward but I am thrilled to be here today given what happened to me a month ago so and I'm determined and I told you earlier in the skull that my happy place is working on behalf of shareholders and and coming in every day with a glass half filled of view and and thinking that this market is so ridiculous in terms of the haves and the have-nots and we're not in a recession the economy is pretty good the companies that we own are performing pretty well from a fundamental perspective we've had some you know we've had some missteps like quantum for example but by and large most of our holdings have done quite well in this environment and we're not getting rewarded but I do think that we are going to get rewarded I've seen markets like this before whether it was 1990 for value stock 1998 2000 during the head of the dot com frenzy when you know companies like all state and philip morris were trading at lows while you know chair dot com was trading at a hundred times revenue whatever whatever dot com it was or you know 2008 the subprime mortgage meltdown where it never felt like we were ever going to get out of that period and of course the S&P got the 666 and that was the bottom so the covid is another one you know we were down what 20 30 percent during the beginning parts of that it felt like that was never going to end and then of course we went through a great couple of years after that so I'm happy to be back it's happy to hear from all of you thank you again for your well wishes and we are determined to get the turn back to the place that it was three years ago when we had unbelievable performance and we feel we're going to have that again here in the next few Thank you everyone for just fitting and feel free to reach out any time if you have any questions.

Kevin Rendino: Great saying that I've utilized since 1990 was the definition of a bear market is when you run out of money before you run out of good ideas and just like you I have so many good ideas and not a lot of money to invest in them so it's you know one of the reasons why we love Mama Creations it's been it was a great thought for us it was 250 to 750 but one of the reasons why we sold it was because we wanted to own Aviate we wanted to own Hudson so you've got to find the money from someplace and so there's been a bit of portfolio adjusting from some of our bigger holdings in order to you know find those new positions so yeah our pipeline is probably as long as yours it's just a matter of you know what am I going to do I'm not selling potbelly here for the reasons I mentioned earlier synchronous we're on the board that's actually working for the first time in a long time conscore I'm not selling here and those are gigantic holdings for us you know I want to own work lantronics I want to own more CBGI there's they're staying they're sitting at lows we're not going to find the money from there bright cova is another one it's an absolutely idiotic valuation I think it trades at four or five times either and like point two revenue it's crazy so I want to own more of that but I've got to find the money from from other places so that's our frustration is I've got more ideas than I do capital yeah makes sense okay thanks a lot for sharing thanks Dave and I've seen no other questions thank you with that I can't on the one hand tell you how disappointed I am with our performance you know in the last you know since the fed started raising rates and it's been a maddening market one that we think creates a tremendous amount of opportunity going forward but I am thrilled to be here today given what happened to me a month ago so and I'm determined and I told you earlier in the skull that my happy place is working on behalf of shareholders and and coming in every day with a glass half filled of view and and thinking that this market is so ridiculous in terms of the haves and the have-nots and we're not in a recession the economy is pretty good the companies that we own are performing pretty well from a fundamental perspective we've had some you know we've had some missteps like quantum for example but by and large most of our holdings have done quite well in this environment and we're not getting rewarded but I do think that we are going to get rewarded I've seen markets like this before whether it was 1990 for value stock 1998 2000 during the head of the dot com frenzy when you know companies like all state and philip morris were trading at lows while you know chair dot com was trading at a hundred times revenue whatever whatever dot com it was or you know 2008 the subprime mortgage meltdown where it never felt like we were ever going to get out of that period and of course the S&P got the 666 and that was the bottom so the covid is another one you know we were down what 20 30 percent during the beginning parts of that it felt like that was never going to end and then of course we went through a great couple of years after that so I'm happy to be back it's happy to hear from all of you thank you again for your well wishes and we are determined to get the turn back to the place that it was three years ago when we had unbelievable performance and we feel we're going to have that again here in the next few Thank you everyone for just fitting and feel free to reach out any time if you have any questions.

Operator: Otherwise, we look forward to speaking with you next door.

Kevin Rendino: Otherwise, we look forward to speaking with you next door. Take care.

Take care.