180 Degree Capital (TURN) Q2 2024 earnings summary

Executive summary

• Q2 2024 saw a stock price decline of 11.7% and a NAV drop of 12.8%, with shares trading at a 25% discount to NAV, the widest in seven years.

• The public portfolio's net value decreased by $5.6 million, with notable losses in Potbelly, D-Wave Quantum, Quantum Corporation, and comScore, and gains in Synchronoss, Brightcove, and Mama's Creations.

• SMA assets under management declined from $9.9 million to $6.3 million, mainly due to pension fund redemptions.

• The private portfolio is now minimal, with future returns expected from the public portfolio.

• Emphasizes the disconnect between large and small cap stocks, with small caps trading at historically low valuations compared to large caps.

Financial highlights

• Cash and public-related securities declined from $51.7 million to $45.5 million quarter-over-quarter.

• Stock price ended Q2 at $3.79, down from $4.29; NAV per share fell to $4.50 from $5.16.

• Public portfolio gross total return for Q2 2024 was -10.2%, and YTD return was -5.9%.

• Operating expenses increased 9% year-over-year to $959,704.

• The stock trades at 83%-84% of NAV, with a current price of $3.37.

Outlook and guidance

• Management remains optimistic about long-term value creation despite current market headwinds for small caps.

• Discount management program may trigger expanded buybacks or capital returns if the share discount persists above 12%.

• Constructive activism and anticipated catalysts are expected to drive value in 2024, with ongoing strategic initiatives across portfolio companies.

• The team is actively seeking new investment opportunities but is constrained by available capital.

• Believes constructive activism will continue to differentiate performance in the next investment cycle.