Here's a summary of today's meeting (with some help from my AI mate Claude)

Close the Loop operates in the "circular economy", with a mission to minimize landfill waste by recycling materials into new products and packaging. Founded in 2001 as a specialist collector and recycler of printer cartridges, the company has significantly expanded its scope to include a wide range of materials such as soft plastics, batteries, cosmetics, and electronics. In late 2021, Close the Loop merged with OF Packaging and listed on the ASX, marking a significant milestone in its growth journey.

The company's core focus is on keeping products in circularity through refurbishing, remanufacturing, and recycling. Something that is seen as increasingly important by consumers and corporates that are facing increasing ESG pressures.

The company has established an extensive network of over 200,000 collection sites in North America, 60,000 in Australia, and more than 40,000 across Europe. By working closely with major OEMs (Original Equipment Manufacturers), the company collects and refurbishes products like printer cartridges and consumer electronics, helping these OEMs meet their sustainability targets and comply with increasing regulatory requirements, especially in Europe.

One of Close the Loop's key strengths is its ability to scale up operations without significant capital expenditure. The company's existing facilities have ample capacity, and by adding extra shifts, they can substantially increase processing volumes. This operational leverage allows Close the Loop to improve margins as volumes grow -- that at least is the theory.

Acquisitions have played a crucial role in its growth strategy. The company seeks out businesses that fit within the circular economy and can be integrated with their existing operations, and are judged on a pro-forma basis (but they have tended to pay 3-4x EBITDA anyway). They Stressed several times that they were NOT a roll up.

The CEO sees tremendous growth potential for Close the Loop, particularly in the North American market, with the company well-positioned to capitalize on the growing demand for recycling and refurbishing consumer electronics, driven by both consumer sentiment and regulatory pressures. By leveraging its strong relationships with major OEMs and its expertise in the circular economy, Close the Loop aims to become a half-billion-dollar business within the next 2-3 years.

We also touched on the company's capital allocation strategy, with management emphasizing the importance of maintaining flexibility and choosing the most appropriate funding option based on the opportunity at hand. Close the Loop's strong free cash flow generation provides afoundation for both organic growth and strategic acquisitions.

When asked "what does the market misunderstand" (shares are on a very low earnings multiple as others have noted), they said investors may not fully grasp the scope and scale of their operations in North America, particularly in the consumer electronics recycling space. They highlight the company's ability to refurbish and remanufacture products within a 30-day window, a concept that is not well-established in the Australian market, making it challenging for investors to draw comparisons.

There was also some underappreciation of the depth and strength of relationships with key customers, such as major OEMs. They also said investors may not fully appreciate their ability to significantly increase production volumes without substantial capital investment.

All told, I personally find it good to see the leadership team with significant skin in the game, and a lot of industry experience (the CEO was the co-founder of OF Packaging that was acquired by CLG when it listed). And there really does seem to be a very big disconnect between the growth potential and the market multiple -- although perhaps that's not unreasonable given that much of the growth as a listed company has been nullified on a per share basis due to the issue of new shares. But if we even see a modicum of growth on a EPS basis in the coming years, it's easy to see the potential for a meaningful re-rate.

On the other side of things, they didn't really answer my question on the economic rationale for customers. Is it just good vibes and ESG virtue signalling that is driving sales, or is there a genuine economic driver for their customers?

The CFO said they work with OEMs to develop "takeback programs" for products like laptops, ensuring that Close the Loop can refurbish and remanufacture these products as soon as they are returned, sometimes within hours of a new product launch. Also, customers benefit from Close the Loop's expertise and infrastructure, which allows them to focus on their core business (e.g., sales, marketing, and R&D) while Close the Loop handles the complex reverse logistics and recycling processes.

Anyway, it's one i'm adding to my watchlist.