Compounders Podcast

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Welcome to the Compounders Podcast. On this show, Host and Investor, Ben Claremon, will explore the topic of compounding from various angles, including through interviews with public and private company executives, investors who focus on compounders, and newer investment firms that are building a business they hope will become more valuable over time.

Episodes

Tuesday Dec 28, 2021

Executing a Construction Services Roll-Up with Bruce Young, CEO of Concrete Pumping Holdings, Inc. (NASDAQ: BBCP)

Tuesday Dec 28, 2021

My guest on the show today is Bruce Young, the CEO or Concrete Pumping. The company has a 485 million dollar market cap and is the largest domestic player in a niche of construction-related services that is called concrete pumping. Bruce became CEO of the company back in 2008 but started his career in this industry way back in the 1980s. Concrete Pumping provides a high margin, mission critical service to its construction partners and has the ability to deploy capital at attractive multiples as it helps the industry consolidate further. Given that Concrete Pumping is rather new to public markets, I was very curious to hear from Bruce about:

How the company generates such high margins and recognizes very high returns on incremental investments;
The ongoing roll-up opportunity the company has—as well as avenues for organic growth;
The capital allocation process the company employs when deciding between M&A and adding new equipment

This episode of Compounders: The Anatomy of a Multibagger is sponsored by Tegus, an innovative and disruptive company that is changing the way professional investors work. For more information, please visit: https://www.tegus.co/

To get all the latest updates about the podcast, see who we’ll have on next, as well as watch the video version of the pod, please follow us on twitter at @BenClaremon and subscribe to the SNN Network YouTube Channel at www.youtube.com/snnwire.

For more information about Cove Street Capital, please visit: https://covestreetcapital.com/

iTunes: https://apple.co/3xlUvPY

Spotify: https://spoti.fi/3jxkxLl

Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.

All opinions expressed by your hosts and the podcast guests are solely their own opinions and do not reflect the opinion of Cove Street Capital or any affiliates. This podcast is for informational purposes only, it is not investment advice, and should not be relied upon for any investment decisions. We are not recommending the purchase or sale of any securities. The hosts and guests may be beneficial owners of the securities discussed. You should not assume that the securities discussed are or will be profitable.

Tuesday Dec 21, 2021

Capitalizing on 155 Years of Excellence in Coatings with Robert Bryant, CEO of Axalta (NYSE: AXTA)

Tuesday Dec 21, 2021

My guest on the show today is Robert Bryant, the CEO of Axalta Coating Systems. Axalta is a 7.6 billion dollar market cap company that manufactures and distributes high performance coatings that go into the industrial, automotive and refinish end markets. The company was originally a division of DuPont that was founded in 1866 but was carved out by private equity firm Carlyle—and then taken public in 2014. Axalta is the global leader in providing coatings to auto body repair shops and is a top 3 supplier to auto OEMs. The COVID-induced lockdowns and the subsequent supply chain issues—not to mention the ongoing semiconductor shortage that is plaguing the car companies—have presented a number of challenges to the company. Given the dynamic backdrop and the recovery the company is seeing in certain markets, I thought it would be an opportune time to catch up with Robert about:

The evolution of the company since going public in 2014;
The long-term growth opportunities within the global refinish market;
What it was like to have Berkshire Hathaway as the company’s top shareholder;
How the company is navigating rapid raw material inflation and shortages

For more information about Cove Street Capital, please visit: https://covestreetcapital.com/

iTunes: https://apple.co/3xlUvPY

Spotify: https://spoti.fi/3jxkxLl

Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.

Tuesday Dec 14, 2021

Creating a Niche Global Franchise with Peter Holt, CEO of The Joint Corp. (NASDAQ: JYNT)

Tuesday Dec 14, 2021

My guest on the show today is Peter Holt, the CEO of The Joint Corp. The Joint is a 1.4 billion dollar market cap company that operates and franchises a chain of chiropractic offices. The company currently has over 600 total locations in about 35 states. Peter took the reins as CEO of The Joint in 2016 and has overseen a stock that has appreciate from under $3 in 2016 to over $90 today. In fact, the company was distinctly unprofitable when Peter became CEO but has since started generating very healthy margins with limited capital expenditures. Given all of the recent success, I was excited to talk with Peter about:

The demand drivers that have been propelling the company over the last five years;
The elements that have allowed the stock to appreciate so rapidly in recent times;
How the company tries to distinguish itself from competitors and build a moat;
How he goes about making sure the company doesn’t grow too fast; and
How Peter thinks about creating win-win relationships with franchisees.

For more information about Cove Street Capital, please visit: https://covestreetcapital.com/

iTunes: https://apple.co/3xlUvPY

Spotify: https://spoti.fi/3jxkxLl

Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.

Tuesday Dec 07, 2021

Specialty Chemical Megatrends and Wide Moats with Ben Gliklich, CEO of Element Solutions, Inc. (NYSE: ESI)

Tuesday Dec 07, 2021

My guest on the show today is Ben Gliklich, the CEO of Element Solutions (Ticker: ESI), a 5.5 billion dollar market cap specialty chemicals company. Element Solutions was formerly known as Platform Specialty Chemicals and was founded by Martin Franklin of Jarden fame—with the help of Bill Ackman from Pershing Square. The company was designed to be a roll-up but, after some initial success, it was derailed by an over-levered balance sheet. Ben became CEO in 2019 and since then has overseen a process by which Element has reduced business complexity, fixed its balance sheet, and has proven out its claims regarding its resilient margin structure.

Given that the company provides products that facilitate the fabrication of semiconductors, Element has a front row seat when it comes to all of the issues regarding the global chip shortage. Accordingly, I thought it would be a great time to talk to Ben about:

His path to becoming CEO and what he has learned about leadership along the way;
How the company is navigating all of the customer disruption tied to chip shortage;
The megatrends that are poised to propel the business over the next decade;
How the company is approaching M&A and leverage after the initial stumbles at Platform Specialty; and
From where Element Solutions derives it moat and pricing power

For more information about Cove Street Capital, please visit: https://covestreetcapital.com/

iTunes: https://apple.co/3xlUvPY

Spotify: https://spoti.fi/3jxkxLl

Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.

Tuesday Nov 02, 2021

Compounders Season 1: Highlights, Lessons and Takeaways

Tuesday Nov 02, 2021

During Season 1 of Compounders, we interviewed 12 public company executives from a variety of industries. The companies profiled ranged from two Fortune 500 insurance companies to a sub-$500 million market cap supplier to the medical device industry. In this episode, we discuss some of the key lessons and learnings from Season 1 by selecting our favorite vignettes from each episode. We also give a sneak preview of what is lining up to be an even better Season 2 of Compounders.

For more information about Cove Street Capital, please visit: https://covestreetcapital.com/

iTunes: https://apple.co/3xlUvPY

Spotify: https://spoti.fi/3jxkxLl

Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.

Tuesday Oct 26, 2021

Putting the Customer First for 25 Years with Jeff Bailly, Chairman and CEO of UFP Technologies, Inc. (NASDAQ: UFPT)

Tuesday Oct 26, 2021

My guest on the show today is Jeff Bailly, the Chairman and CEO of UFP Technologies. UFP is a 480 million dollar market cap company that specializes in designing foams, films, and plastics materials for the medical, automotive, consumer, and aerospace markets in the United States. Jeff joined the company in 1988 and became CEO in 1995.

Jeff has been instrumental in helping turn UFP into the company it is today. After years of somewhat limited growth, UFP made its largest acquisition ever in 2018—of a company called Dielectrics--and that deal has transformed the company’s margin profile and growth trajectory. And the big changes that have occurred since the deal have not gone unnoticed by the stock market. Accordingly, I thought it would be really instructive to hear from Jeff about the process that led to UFP’s recent success.

In this enlightening discussion, we will cover:

- The genesis of the Dieletrics deal and the strategy surrounding moving into medical end markets

- Jeff’s thoughts on the key elements that have allowed the stock to appreciate to a level 20 times its value when Jeff became CEO

- The benefit of being patient and having a willingness to suffer as CEO

- Areas in which UFP still has a long runway to get better

For more information about Cove Street Capital, please visit: https://covestreetcapital.com/

iTunes: https://apple.co/3xlUvPY

Spotify: https://spoti.fi/3jxkxLl

Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.

Tuesday Oct 19, 2021

Adapting to an Ever-Changing Media Landscape with Adam Symson, CEO of The E.W. Scripps Company (NASDAQ: SSP)

Tuesday Oct 19, 2021

My guest on the show today is Adam Symson, the CEO of E.W. Scripps. Scripps is a 1.45 billion dollar market cap company that owns and operates local and national television stations. The company was founded in 1878 and over the years has operated within a number of different media businesses. The company spun off its cable TV business, Scripps Networks Interactive, in 2008 and then exited the newspaper business in 2015. These transactions served to focus the company more on its local TV business.

However, since becoming CEO in 2017, Adam has led an aggressive acquisition campaign that has created a large and differentiated National Media segment whose stations mainly operate over-the-air. The Scripps management team anticipated that cable TV subscribers would continue to cut the cord and through these acquisitions has positioned the company to benefit as more people choose to watch TV via an antenna.

Given all of the M&A activity and the dynamic nature of the pay-TV environment, I was excited to talk to Adam about:

- How competition from digital ad platforms like Facebook are impacting local TV advertising;

- The value of having a background in investigative journalism;

- The rationale for the pace of acquisitions that have occurred during his tenure;

- What it is like to work for a 100+ year old, family-controlled company; and

- How Scripps develops win-win relationships with its various stakeholders

Time stamps:

- 1:18 Introduction

- 2:54 The rise of social media advertising and its effects on paid TV media

- 5:20 The state of the local broadcast TV industry in 2021

- 7:10 Building a resilient culture in a volatile industry

- 9:39 The company ethos that comes from developing a $15 billion asset

- 11:29 Suffering short-term pain for a long-term gain in the podcast space

- 15:29 Capital allocation strategy in the media industry

- 18:55 How Scripps employs value investing as a media company

- 22:28 The logic behind acquiring the Katz network

- 26:13 Taking a big M&A swing during a global pandemic

- 33:15 Investing with Berkshire Hathaway as a partner

- 35:45 Creating win-win partnerships with various industry constituents

- 38:48 Navigating the unbundling movement as a media company

- 44:13 Balancing OTA and cable viewing within the same company

- 47:34 Investor concerns regarding the traditional media industry

- 49:49 The sports rights battlefield and the future of sports on broadcast TV

- 53:54 Why regulation in media needs to evolve

- 57:38 From investigative journalist to public company CEO

- 60:09 Assessing employee fit in a competitive job market

- 61:22 How Scripps wins over the next 5 years

- 62:51 Mistakes made over the first 4 years as CEO

- 64:34 ATSC 3.0 and the technological evolution of broadcast TV

- 66:38 Preparing for the future of broadcast TV

- 67:11 The most misunderstood aspects of Scripps

For more information about Cove Street Capital, please visit: https://covestreetcapital.com/

iTunes: https://apple.co/3xlUvPY

Spotify: https://spoti.fi/3jxkxLl

Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.

Tuesday Oct 12, 2021

Leading the Future of Waste Recycling with Brian Recatto, CEO of Heritage-Crystal Clean, Inc. (NASDAQ: HCCI)

Tuesday Oct 12, 2021

My guest on the show today is Brian Recatto. Brian is the CEO of Heritage-Crystal Clean, a 670 million dollar market cap company that provides cleaning and waste removal services to customers in the US. HCCI is one of the key competitors to Clean Harbors, a company whose CEO we also interviewed on this show. Specifically, Heritage operates in 2 segments: an Environmental Service division that offers parts cleaning and containerized waste management services; and an Oil Business segment that collects, re-refines and then re-sells used motor oil.

Brian took over the CEO role in 2017 and, aside from a brief COVID-related speed bump in 2020, he has overseen consistently improving results and a higher stock price. COVID presented—and continues to present—a number of challenges for Heritage but the company’s strong balance sheet and consistent Environmental Services businesses have allowed it to weather the storm. With that as a backdrop, Brian and I had a great discussion about:

- How the company has navigated the challenging customer disruptions over the last 18 months;

- The ups and downs associated with owning and operating an oil re-refinery;

- The future of hazardous waste regulation and why HCCI is one of the good guys when it comes to environmental matters;

- The benefits of operating dense route networks and how Heritage defends its market position; and

- How the company approaches M&A and the prospect of adding a third leg to the company’s stool

Time stamps:

- 1:18 Introduction

- 3:00 Navigating COVID-19 as a waste services company

- 8:52 Why Heritage highlights individual employees on its investor relations website

- 10:45 Creating lines of communication between senior management and field employees

- 11:56 How the rise of electric vehicles will impact HCCI

- 16:19 Evolving a waste services business as customers become more ESG-focused

- 18:13 How to tell what is a great ESG story

- 21:37 Growing an underappreciated parts washing business

- 23:34 Approaching win-win relationships with regulators

- 27:25 The logic behind creating a more vertically integrated business model

- 31:27 IMO 2020 and its significant impacts on Heritage

- 34:10 Balancing competition in new and foothold markets

- 36:57 The route density network effect

- 38:43 Additional monetization opportunities at Heritage

- 40:39 Helping frontline employees become effective salespeople

- 43:06 The challenges of hiring and retaining people within a tight labor market

- 45:50 Assessing the potential of automation in a services business

- 47:06 Managing the volatility of the re-refinery business

- 51:35 Setting fair goals for employees who work in volatile business lines

- 52:56 Family influence at Heritage: appealing or concerning?

- 55:59 Balancing short-term pain for long-term gain

- 57:39 Looking back at that last 4 years as CEO of Heritage

- 58:50 Bolt-on and tuck-in acquisition opportunities

- 1:01:17 Filling in the West Coast coverage gaps at Heritage

- 1:03:18 The benefits of scale in the waste services industry

- 1:05:17 The biggest changes experienced over the last 15 years

- 1:06:45 The most misunderstood aspects of Heritage-Crystal Clean

For more information about Cove Street Capital, please visit: https://covestreetcapital.com/

iTunes: https://apple.co/3xlUvPY

Spotify: https://spoti.fi/3jxkxLl

Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.

Tuesday Oct 05, 2021

The Next 50 Years in Western Florida with Jorge Gonzalez, CEO of The St. Joe Company (NYSE: JOE)

Tuesday Oct 05, 2021

My guest on the show today is Jorge Gonzalez, the CEO of The St. Joe Company. St. Joe is a 2.53 billion dollar market cap company whose main asset is a huge landholding in Northwest Florida. A lot of investors may remember that the company has been the subject of a number of short reports over the last decade but since Jorge became CEO in 2015, St Joe has consistently grown its revenue and EBITDA—and has diversified its revenue base. Also, after a period of time in which the stock was unable to break out, over the last year it has risen to levels that had not been seen since the mid-2000s.

Given the company’s recent success, I was excited to talk to Jorge about his vision of the future of the company and what people may not be appreciating its asset base. Specifically, we discussed:

- What it means to operate as an owner-oriented company;

- The demographic trends that are fueling growth in Northwest Florida;

- What the shorts have gotten wrong over the years;

- How the company approaches the risk of hurricanes in the region; and

- What Jorge has learned from the company’s Chairman, Bruce Berkowitz of Fairholme Capital

Timestamps:

- 1:18 Introduction

- 2:36 Being named the next CEO of St. Joe

- 3:19 Shifting St. Joe’s strategy, culture, and process of execution

- 4:08 Adjusting corporate strategy to expand the total market size

- 5:18 St. Joe’s vast land holdings and unique moat

- 6:38 Florida’s demographic shifts and how that might affect St. Joe

- 8:18 How COVID has affected the trends driving St. Joe’s business

- 9:52 Handling cyclicality at a macro and geographic level

- 11:46 Building a recurring revenue stream in a traditionally cyclical business

- 15:28 Further enhancing an already improving business model

- 18:05 Balancing an expansion beyond Florida with internal investment opportunities

- 19:10 Choosing between internal development, partnerships and the sale of land assets

- 20:58 The synergies that exist between residential, commercial, and other infrastructure

- 24:04 Ensuring expertise exists within a small core team

- 25:45 What does a good partner look like for St. Joe?

- 27:36 What does St. Joe mean by “owner-oriented?”

- 29:19 Why St. Joe invests so heavily in growth over buying back shares

- 30:52 Lessons learned from Bruce Berkowitz

- 31:51 How decisions get made at St. Joe

- 34:40 How to decide which people should be on the bus

- 37:17 What factors did David Einhorn get right in his 2015 short analysis?

- 38:42 St. Joe’s remaining developable acreage

- 40:14 How St. Joe benefits from a 50-year master development plan

- 41:58 What attractions are missing from St. Joe’s core counties

- 42:58 Building win-win relationships with government stakeholders within the community

- 45:27 How St. Joe avoids being seen as “too powerful” within the community

- 46:37 Building storm resiliency in an area directly affected by environmental challenges

- 49:49 The benefits of building modern infrastructure from scratch

- 50:57 How modern community design has improved over the years

- 52:35 Futureproofing a home or community as a real estate developer

- 55:14 How an investor should approach St. Joe

- 58:31 St. Joe’s key performance indicators and measures of success

- 59:47 Why St. Joe is still a “cheap” investment

- 62:07 Looking at book value per share as an assessment of St. Joe’s progress

- 62:50 Instilling a long-term mentality within a corporate culture

- 64:14 Why mistakes are sometimes more valuable than are successes

- 65:42 The most misunderstood aspect of St. Joe

For more information about Cove Street Capital, please visit: https://covestreetcapital.com/

iTunes: https://apple.co/3xlUvPY

Spotify: https://spoti.fi/3jxkxLl

Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.

Tuesday Sep 28, 2021

Creating the Fastest Global Satellite Broadband Network with Mark Dankberg, Co-Founder and Executive Chairman of Viasat, Inc. (NASDAQ: VSAT)

Tuesday Sep 28, 2021

My guest on the show today is Mark Dankberg, the co-founder and Executive Chairman of Viasat. Viasat is a 3.8 billion dollar market cap company that provides broadband and communication products and services worldwide. Viasat started off a defense-oriented company but has since layered on consumer and business-facing offerings by developing the world’s leading high throughput geostationary satellites.

Over the next 2 years, Viasat will be launching 3 new satellites that will give the company the ability to offer global coverage to its military and in-flight WIFI customers. Additionally, Viasat is rolling out community WIFI initiatives to help people in emerging and frontier markets connect to the internet for the first time. All of this is happening while the company is facing a growing threat from low earth orbit satellite providers such as Elon Musk’s Starlink.

Given how much is going on and the fact that Mark recently went from being the CEO to assume the Executive Chairman role, I thought it would be a perfect time to talk to him about the following topics:

- The future of the global satellite broadband industry, including competition with Starlink;

- What the US military needs now from Viasat and how that may evolve over time;

- The cultural differences between the defense and commercial sides of the company;

- How Viasat can benefit from all the space-related activity going on right now; and

- Why this was the right time to shift his focus

Key takeaways:

- Deeply understanding your customers’ wants and needs is a prerequisite for success in both D2C and B2B business. But, the more intermediaries you have, the less you can really understand your end customers. Also, working with distribution partners can be difficult if the goals of the organizations are not aligned.

- Not every industry is a winner-take-all market. Network effects and multisided marketplaces can create virtuous cycles and winner-take-all markets. In industries with supply constraints, negative network effects drive competition and ensure a diverse set of offerings.

- Bandwidth demand is heavily affected by geography and low-earth-orbit (LEO) networks are geographically limited. Despite offering low latency, every incremental satellite will only spend a fraction of its time over the areas with the most demand, and far more over oceans and other low demand areas. This is why a hybrid network that includes geostationary and LEO satellites is likely the best solution for customers.

- When a company is entering new markets or introducing new products, it is imperative to be a voracious reader of business history and theory, as well as to be well-grounded in the basic math that governs the industry.

- Modern warfare requires real-time information and instant communication. Accordingly, the U.S. military will need an up-to-date network of satellites with ground stations placed in safe locations in order to process and anticipate the moves of its adversaries.

Timestamps:

1:18 - Introduction

2:56 - Diversifying into direct-to-consumer (D2C) with the 2009 WildBlue acquisition

5:06 - The organizational restructuring required when shifting towards D2C

7:06 - Building a D2C sales organization within a legacy B2B company

11:51 - Making stair-step improvements with every new satellite launch

18:50 - The process of deciding to build Viasat’s own satellite

27:30 - Satellite broadband is not a winner-take-all market

31:32 - LEOs, GEOs, hybrid networks and why there is no “best” satellite design

45:27 - Building a cohesive culture with two distinctly different business segments

51:23 - Why Viasat 3 will play a key role in the future of warfare

58:25 - How Viasat benefits from all of the excitement around space

62:40 - What Mark has learned from Baupost Group’s founder Seth Klarman

65:53 - Being confident in putting out guidance even before the Viasat 3 satellites launch

70:55 - The least understood aspects of Viasat

For more information about Cove Street Capital, please visit: https://covestreetcapital.com/

iTunes: https://apple.co/3xlUvPY

Spotify: https://spoti.fi/3jxkxLl

Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.