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 margin 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, partially offset by 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.

• New positions were established in Aviat and Hudson, while positions in Mama's Creations and Orion were exited.

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

Financial highlights

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

• 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 microcap index is down 25% since November 2021, while the S&P is up 22% over the same period.

• Portfolio companies like Potbelly and Synchronoss experienced significant stock price volatility despite operational improvements.

Outlook and guidance

• Management remains constructive on long-term value creation, especially in Potbelly and Synchronoss, expecting eventual market recognition or strategic exits.

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

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

• Management remains confident in significant upside potential despite recent underperformance of small caps.