Co-CIO Francis Gannon plays an important role in our flagship fund—Royce Small-Cap Fund— monitoring and, from time to time, adjusting allocations across various segments of the Fund’s portfolio. Here, he talks about four holdings—two that enjoyed success over the 1-year period ended 1/31/25 and two that we expect to rebound over the long run.

PAR Technology is a leader in enterprise restaurant technology, offering a best-in-class product suite that generates revenue streams diversified across several platforms including Subscription Services, Guest Engagement, Operator Solutions, Back-Office Solutions, Hardware, and Professional Services. The enterprise end-market among restaurant customers is increasingly moving away from complex point solutions and/or costly internally developed technology, a move that benefits PAR’s broad and integrated cloud platforms. In 2024, the company showcased remarkable sales momentum with both new brand and location wins, as well as expansion with existing customers, most notably, Burger King and Wendy’s. In 2024, PAR further expanded its market by acquiring Stuzo, TASK, and, most recently, Delaget, which enhances back-office capabilities. We think PAR is positioned to capture market share from incumbent providers as “QSRs”—quick service restaurants—transition from legacy on-premises point of sale systems to cloud-based solutions and is poised to outpace its competition and capitalize on the digitalization of the restaurant and retail sectors while fundamentals improve meaningfully from its favorable product mix shift and cross selling opportunities.

PAR Technology (NYSE: PAR)
1/31/24-1/31/25

Past performance is no guarantee of future results.

Coherent is an engineered materials and laser technology company. While its offerings cover many different types of products and end markets, we see as producers of the foundational technologies that enable many technology growth trends, including electric vehicles, accelerating broadband speeds and capacity, autonomous driving, advanced display technologies, and semiconductor capital equipment, among others. One area that has been driving the company’s most recent positive financial results is its datacom transceivers offering, essentially selling the lasers that send optical communications across fiber channels. The datacom networking space has been experiencing unprecedented demand due to AI computer power driving massive expansion of bandwidth requirements. While this was the main contributor to the stock’s outperformance in 2024, the market also started to price in the future potential of many exciting strategic initiatives announced by Coherent’s new CEO, which should drive fundamental growth in addition to the overall end market growth.

Coherent (Nasdaq: COHR)
1/31/24-1/31/25

Past performance is no guarantee of future results.

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Enovis Corporation is an orthopedic-focused, medical technology company with leading a global market share in Prevention & Recovery (braces and other rehabilitation products) and a growing Reconstruction segment (e.g., surgical implants for extremities). The stock has been under pressure, however, since Enovis closed its acquisition of Lima in 2024, the company’s largest-ever deal. The strategic fit and valuation of the deal made sense to us, but the stock was hurt by near-term concerns about integration and sales dis-synergies, especially with the elevation of new leadership in the Reconstruction segment. Yet management actually delivered results consistent with what it had outlined and entered 2025 with most of these headwinds behind it. With several new product introductions in the pipeline and a sales force that is now focused on driving cross-selling across the combined customer base, Enovis should be positioned to deliver on its target model of high-single-digit annual organic growth and annual EBITDA margin expansion, while applying excess free cash flow to reduce debt.

Enovis Corporation (Nasdaq: ENOV)
1/31/24-1/31/25

Past performance is no guarantee of future results.

OneWater Marine is a marine retailer with 96 dealership locations in the Southeast, Gulf Coast, Mid-Atlantic and Northeast U.S., as well as a distributor of marine-related parts and accessories. As a seller of a highly discretionary product, albeit one targeted at higher-end consumers, the company is exposed to macroeconomic factors and consumer sentiment, which have been choppy over the past three quarters. In addition, buyers typically finance more than 75% of new boat purchases, which makes OneWater sensitive to interest rate changes. Its business was adversely impacted by Hurricanes Helene and Milton given their significant store footprint in the Gulf Coast region, which led management to slash earnings per share guidance for fiscal 2025 by 45% and in turn have caused its stock to underperform over the last several months. In response to these developments, OneWater has taken cost actions and continues to maintain a conservative inventory position as it navigates through this challenging market. We added shares during the second half of 2024 at what we thought were attractive prices.

OneWater Marine (Nasdaq: ONEW)
1/31/24-1/31/25

Past performance is no guarantee of future results.

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