180 Degree Capital Corp. (TURN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I am Kevin Rendino, Chairman of the Board and Chief Executive Officer of 180 Degree Capital Corp., and I will be chairing this meeting. I now call this meeting to order and welcome our shareholders and guests to the 180 Degree Capital Corp. 2023 Annual Meeting of Shareholders. Before making introductions, I'd like to review the program for the meeting. We will begin by covering the business of the meeting as outlined in the proxy. We will end the meeting with an informal session, during which we will entertain questions from shareholders and attendees of this meeting. We'd like to thank our shareholders for attending this meeting by webcast or by phone. If you previously have voted by proxy, you do not need to vote again unless you wish to change your vote. If you would like to change your vote at this meeting or to change your vote, please e-mail our Inspector of Elections, Alicia Gift at [email protected] to inform her of your desire to vote or change your vote at the meeting and the votes you would like to cast. That's A-L-I-C-I-A @180degreecapital.com. We ask that you send any e-mails now so that we can be sure to address any requests ahead of the time the polls are closed. We would like to ask that attendees hold all questions and comments to the designated question and comments period. During the formal portion of this meeting, please restrict questions and comments at that time to the 2 proposals submitted for vote of our shareholders in our proxy materials. Please hold all other questions to the informal portion of this meeting. We ask that all questions and comments be directed to me for response or referral to the appropriate officer or director and that you be as brief as possible to allow everyone who wishes an opportunity to participate. Also, please identify yourself before speaking and tell us if you are a shareholder or a proxy for a shareholder. If you're a proxy for a shareholder, please identify the shareholder. I would like to introduce our officers who are present with me today by telephone, Daniel B. Wolfe, President, Chief Financial Officer and Chief Compliance Officer; and Alicia M. Gift, Secretary and Senior Controller. Alicia has been designated the Inspector of Election and is present today. The inspector has signed her oath, and the secretary has been instructed to file the oath with the records of this meeting. I am informed that a quorum is present for the transaction of business. Proper notice of this meeting was duly mailed on or about March 30, 2023, to all holders of record on March 10, 2023, and the affidavit of the mailing agent confirms such mailing. The secretary will please file the affidavit with the records of the company and a copy with the minutes of this meeting. March 10, 2023 is the record date for the voting of shares at this meeting. As of the record date, the company has 10,373,820 shares of common stock outstanding. We will now proceed with the formal business of the meeting. At this meeting, shareholders are voting to elect 5 directors to the Board of Directors to serve until the next annual meeting or until their respective successors are elected. The 5 persons nominated by the Board of Directors are Stacy R. Brandom, Kevin M. Rendino, Richard P. Shanley, Parker A. Weil, and Daniel B. Wolfe. The Board of Director recommends that the shareholders vote for the election of the Board's 5 nominees as directors of the company. The second item of business is the approval of the Audit Committee selection of EisnerAmper LLP as the independent registered public accountant for the fiscal year ended December 31, 2023. The Board of Directors recommend that the shareholders vote for this proposal. We will now take any questions or comments relating to the specific agenda items. Proposal #1, the election of directors; proposal #2, the authorization for the Audit Committee selection of EisnerAmper LLP as the independent registered public accountant for the fiscal year ended December 31, 2023. Although representatives of EisnerAmper are not present in person or by phone, they are available for questions via phone. I ask that you please hold any general questions or comments until the designated question-and-comment period later in the proceedings. When you are recognized, please address your question or comment to me, and either I or another officer of the company will respond. Also, when you are recognized, please state your name and whether you're a 180 Degree shareholder or a proxy for a shareholder. And now -- the floor is now open specifically and only for your questions on Proposal 1 or Proposal 2.

[Operator Instructions] Give a second to see if there's any questions on the proxy materials. I am not seeing any questions on the proxy materials.

Thank you, Daniel. The question and comment period is concluded and the polls are now open. Remember, if you previously have voted for proxies, you do not need to vote again unless you wish to change your vote. Submission of a proxy at this meeting revokes any prior proxies that you may have submitted. Can the Inspector of Elections confirm if there are any requests to vote at this meeting received via e-mail?

Alicia's confirmed there are none.

If there are no further proxies, I declare the polls closed for the matters voted on. With the agenda items now having been voted on, I will adjourn the formal portion of this meeting. I have now received the preliminary voting report, the results of which will be confirmed later by the inspector. The preliminary report indicates that all of the Board's 5 nominees have been elected as directors, and the company has authorization to retain EisnerAmper as the independent registered public accountant for the fiscal year ended December 31, 2023. The floor is now open for general questions or any comments that you may have. After I recognize you, please state your name and identify yourself as a shareholder or a proxy or a proxy for a shareholder. Reminder that we will be reporting our results at the close of business this Thursday with a conference call to discuss the first quarter of 2023 Friday morning at 9:00. The floor is now open for general questions.

Adam, please go ahead.

Yes. Kevin and Daniel, I hope you can hear me okay.

Yes.

I want to ask a question about the current thinking with respect to the toolkit of options you have for trying to close the ongoing gap between the net asset value of the company on the one hand, and the share price on the other, this is particularly timely, I think, because of write-downs you took last year and repositioning of assets, such that the cash and liquid securities of the portfolio is a huge portion of both the net asset value and exceeds the equity market value of the stock. So what are you thinking about the relative attractiveness of the various options in your toolkit to close that? And relatedly, on the last quarterly call, you alluded to potentially doing much more frequent reporting of the NAV since it's very close to the public securities value. Could you update us on that?

So thanks for asking the question, Adam. So when we think about -- let's start the conversation by making sure that we're all aligned on the following. We run a closed-end fund with permanent capital. When we make an investment in a position, if our thesis proves out to be correct, we're looking for 100% upside over a 3-year period of time. So by definition, because of permanent capital, once you spend that permanent capital elsewhere and you can't recycle it, the hurdle rate for share repurchase is high. Having said that and stay tuned on [Technical Difficulty] well past the point where we think our share price [Technical Difficulty]. And we will have more to say on that in the not-to-distant future. It's one thing if your stock is trading at a 10% discount to its NAV, or 5% discount to its NAV or 3% to 8% discount to its NAV, but we outlined for shareholders in April, what our performance was for our public holdings for the first quarter of 2023. You guys can all do the math. And then you think about where our share price is right now. And I think the conversation is entirely different when you get this level of discount attached to the market cap of the company relative to its book value added to the fact that we're no longer the same company we were when we got here. In other words, 6 years ago, you had roughly 70, 80 [Technical Difficulty] holdings with only, let's call it, 15% to 25% of our either cash and liquid securities, which at the time was really just a [indiscernible]. We made the balance sheet so that most of [Technical Difficulty] close to 90% resides in cash and liquid securities, cash in public companies. And so we've said from day 1 that the discount should narrow just because of that. And it hasn't, and it's frustrating. And we think we've gotten well past the point where our share price reflects any sort of reality to the construct of our book value. And I think the discussion is just at a different place now than it was at any time in the past. So I would say it's a long-winded answer, Adam, let's say, and stay tuned. And remember, we'll have a conversation, a more in deep conversation on Friday when we report our earnings. You'll see that for tonight.

Yes. Fair enough. And just is that a discussion around future frequency of reporting NAV better say for Friday as well?

And we can talk about that on Friday. We've said it a thousand times. We're not opposed to report it. We've done it. 5 years ago, we couldn't have issued our press release in April about March and...

The day after.

The day after. So we certainly can do that. Investors certainly understand what we own, and they can do the math themselves as well. So we'll have a further conversation on that on Friday.

Okay. Sounds good.

Thanks for the question, Adam. Are there any other questions?

I see no other questions in the queue.

With that, the proceedings are now concluded. As I said, stay tuned for our earnings announcement Thursday evening, followed by a conference call on Friday morning. As always, we thank you and appreciate your interest and support of 180 Degree Capital.

Thank you, everyone. You can now disconnect.