July 2021

Dear Partners,

In the second quarter, 1 Main Capital Partners, L.P. (the “Fund”) returned 18.6% net of fees and expenses,
bringing the year-to-date return to 40.2%1. Through the first six months of the year, the S&P 500 (SPX)
and Russell 2000 (RTY) Indexes returned 15.2% and 17.5%, respectively.
During the quarter, the 1 Main Capital family grew in the best sort of way, when Rich and I each became
first-time fathers to healthy baby boys. Moms are doing great as well. Interestingly, the newborns of today
are being dubbed Generation Alpha, which obviously bodes well for the partnership; both babies are
already starting to pitch us their favorite investment ideas and we look forward to sharing all their alpha
with our trusted partners.
On a more serious note, as much as I continue to enjoy quarters like this where our portfolio benefits from
both intrinsic value growth and market value growth, I must constantly remind myself that it is always
preferable to evaluate our results over multi-year periods as opposed to monthly or quarterly. I hope you
all do the same.
Importantly though, I continue to feel optimistic that the collection of businesses we currently hold an
interest in can continue to deliver the goods in the years ahead.
Top 5 Positions
As of June 30th, the Fund’s top 5 positions were Alphabet Inc (GOOG), KKR & Co (KKR), Mastech Digital
(MHH), Naked Wines (WINE.LN) and RCI Hospitality (RICK). Together, these holdings accounted for slightly
over 50% of assets. WINE.LN made its way into the top 5 within days of reporting its FY’21 results, after
we more than tripled our position as the market misinterpreted weak margin guidance on the back of
very sensible investments rather than a lack of demand for its products. MHH is discussed below.

Mastech Digital (MHH)

During the quarter, the fund re-initiated an investment in MHH after its stock price was cut in half from
its 2020 highs, driven by (i) a COVID-related slowdown and (ii) its removal from the Russell 2000 Index,
causing significant uneconomic selling. I previously wrote about the company in the Q2’18 letter.

Mastech is an off-the-radar, closely held IT services company that is in the process of transforming itself
from a legacy IT staffing business into a higher margin IT consulting and services business.

The company's co-founders, who together own ~60% of the company, turned their attention to value
creation at Mastech after selling iGate to Capgemini for $4 billion in 2015. A new CEO with significantly
more industry experience was hired for MHH in early 2016. This CEO made organic investments in the
staffing segment and deployed capital into two strategic acquisitions over the last several years to help

1
Performance data is presented for the Fund’s Class A Interests, and is net of any accrued incentive allocation,
management fees and other applicable expenses (as disclosed in the Fund’s Confidential Private Offering
Memorandum), include the reinvestment of dividends, interest and capital gains, and assume an investment from
inception. Returns for month-end and year to date 2021 are estimated, and un-audited. For investor specific returns,
please refer to your capital statements. Due to the format of data available for the time periods indicated, net returns
are difficult to calculate precisely. Please see the last page for important disclosure information.

1 Main Capital Management | [email protected] 1

transition the business into higher margin, higher growth consulting and services businesses (the "Data &
Analytics" or “D&A” segment).

The staffing segment is boring (2/3 of adjusted operating income). It generates low margins, though it has
low capital requirements and grows well above GDP, in-line with the growth in global IT spend. From 2011
to 2019, the staffing business grew revenue at an average annual rate of approximately 10%. However, in
2020 the staffing business had its first down year since the financial crisis - obviously due to COVID. This
business should recover nicely this year and return to growth going forward. The best evidence of this is
that the number of billable consultants finally inflected positively in Q1, which is a good forward indicator
of revenue. Below is a table of YoY growth in billable consultants for the staffing segment:

Q1'20 Q2'10 Q3'20 Q4'20 Q1'21

-4.7% -7.0% -13.4% 3.0% 9.3%

The D&A segment is less boring (1/3 of adjusted operating income). It manages high-value IT projects and
implementations for blue chip customers globally. This segment should grow revenue mid-teens or higher
organically and generate 20%+ EBIT margins at maturity.

However, the leader of the D&A segment has made some significant organic investments over the last 3
years to i) enhance the capabilities of the business and ii) increase the sales team in order to better sell
those capabilities. As such, the adjusted operating margins of this segment compressed from 28.8% in
Q4'17 to 4.5% in Q1'21. However, we will likely see meaningful operating leverage in the coming years.

Additionally, management is seeking to continue growing the D&A segment through accretive M&A,
which they have done skillfully in an environment where anything tech has traded at high valuations.

For example, when MHH acquired InfoTrellis in 2017, they paid $55 million, of which only $36 million was
paid in cash and $19 million was structured as a contingent earn-out with some aggressive growth targets
for the acquired business. The growth targets were missed so the earn-out was never paid, which led to
an effective purchase multiple of 5x 2018 EBIT.

In late 2020, MHH acquired AmberLeaf for $14 million, of which only $9 million was paid in cash with the
remainder deferred. The 2021/22 EBITDA targets that need to be hit to get the earn-out would make the
effective purchase price 5x EBITDA.

As the business continues to mix towards D&A via M&A and organic growth, and as the D&A margins
inflect upwards after a period of investment, I believe the overall operating margins of MHH will materially
inflect as well.

Between now and 2025, I believe adjusted EPS can triple to $3 per share, up from $1 currently, and by
then the operating profit contribution from Data & Analytics will exceed the contribution from the Staffing
segment, likely allowing us to benefit from multiple expansion along the way.

Eventually, I believe that the company will be sold, as the co-founders have shown a willingness to part
with their assets (when paid a good price) and are 68 and 71 years old.

ATI Physical Therapy warrants (ATIP/WS)

In the Q3’20 letter I wrote about how SPACs were being used to help companies circumvent the traditional
IPO process when coming public. In the letter, I noted how the number of SPACs was exploding and how

1 Main Capital Management | [email protected] 2

some sponsors were recklessly pursuing increasingly speculative deals at unreasonable valuations to cater
to retail speculators. However, not all sponsors were acting in this manner; in fact, some SPAC sponsors
announced mergers with good businesses at reasonable valuations.

Recently, the SPAC bubble has started to deflate. One of the byproducts of this deflation, along with the
sheer number of vehicles created is that, in some cases, the baby has been thrown out with the bath
water, creating some interesting opportunities in de-SPAC’d companies.

One such example: the warrants of ATI Physical Therapy (ATIP), which came public by merging with a
Fortress sponsored SPAC this past June. ATIP is the largest independent outpatient physical therapy (OPT)
provider in the United States with over 800 clinics in 24 states.

OPT is an attractive end market to participate in given the strong unit economics of clinics as well as the
strong outlook for demand. Specifically, an aging demographic, an emphasis on preventative care and a
more active population are providing strong secular volume tailwinds, while new OPT clinics have rapid
paybacks of around 13 months, on average. Typically, new units require around $250k of capex, $100k of
upfront startup loss absorption and then deliver around $175k of annual EBITDA at maturity – not bad.

Better yet, OPT has low per-visit costs, and therapists can diagnose and treat over 70% of musculoskeletal
conditions without any other provider. This leads to the prevention of worsening conditions as well as the
avoidance of unnecessary higher-cost medical visits, medications and surgical procedures. As such, it
makes more sense for payors to focus on shifting volume to OPT clinics rather than trying to reduce the
amount they pay to them.

Given the compelling unit economics and growing demand, it makes sense to heavily reinvest in the
business to pursue greenfield growth as well as the occasional attractive M&A opportunities. However,
due to its private equity ownership the business has historically operated with high leverage, an issue that
COVID exacerbated even further, preventing it from pursuing attractive reinvestment.

Since completing the SPAC merger in June, ATIP announced that it now has net debt of approximately
$460 million, or only 2.6x 2022E EBITDA, which should allow it to invest more aggressively going forward.

Additionally, unlike many SPACs targets, Fortress has been following ATIP for nearly a decade as a lender
to the company. Investors should take note of the fact that Fortress not only sponsored the deal but also
committed $75 million of its own capital into the deal via a PIPE and importantly agreed to restructure its
promote as an earn-out that doesn’t fully vest until the stock hits $16 per share.

Currently, ATIP is selling for less than 12x 2022 consensus EBITDA, well below its closest peer (USPH),
which sells for more than 20x 2022 consensus EBITDA. As public markets become more comfortable with
ATIP, as the company’s PE sponsor sells down its stake and as ATIP grows EBITDA by opening new clinics
and making accretive acquisitions, I expect the stock to increase significantly from current levels. If this
were to happen, our warrants will be worth many multiples of our average cost, which is below $2 per
unit.

An Update on Limbach Holdings (LMB)

The Fund’s position in Limbach Holdings (LMB) has fallen out of the top 5 due to appreciation of our other
holdings as well as inflows into the partnership. Unfortunately, I am not comfortable adding to the

1 Main Capital Management | [email protected] 3

position at this point since the company continues to relentlessly shoot itself in the foot when making key
strategic decisions and communicating with investors.

For example, in late September 2018 (with only 10 days left in the third quarter), during an investor call
organized to discuss an announced acquisition, LMB’s CEO assured investors that the company was
“progressing quite nicely” in resolving its previously disclosed problems in its mid-Atlantic region. He went
on to say:

“The work on correcting the past is well underway, on track. And we look forward to the third
quarter earnings call reporting with more detail. But I'm very happy with the progress we've made
down there in turning the branch around.”

Shortly thereafter, the company went on to report weak Q3 results and took full year EBITDA guidance
down by more than 50%, citing continued problems in its mid-Atlantic region.

In April 2019, the company’s CEO again assured investors that the 2018 issues were resolved, saying
“we're optimistic that we are moving past the write-down issues from 2018.” In May 2019, the CEO
reiterated on an earnings call that 2019 EBITDA guidance was “conservative.”

Just a few months later, in November 2019, the company again reduced its full year EBITDA guidance by
nearly 30%.

On its earnings call that same November 2019, the company’s CEO highlighted that LMB had claims that
amounted to approximately $5 per share that it was expecting to recover “in the first half of 2020.” During
2020, the company repeated this talking point several times before dropping it, and now no longer gives
updates on where it stands with respect to recovering these claims.

In January of this year, LMB’s CEO presented at an investor conference where he said that he could not
wait to report the company’s Q4 2020 results (implying a strong Q4). At the same conference, when asked
about a potential refinancing of the company’s high-cost debt, he said that there was a lot of interest and
that bankers were knocking on the company’s door to help them with a refinancing.

Less than a month later, the company surprised investors with a large equity offering, where they
purposely excluded existing investors, and subsequently reported weak fourth quarter results, which was
at odds with the messaging from merely weeks earlier. After the equity raise, the company failed to give
a reasonable explanation for the size of the raise and the suboptimal method in which it was conducted.

In May of this year, LMB issued confusing and nonsensical guidance for 2021. In this guidance, they called
for significant revenue decline in the GCR segment, driven by a planned pullback from the Los Angeles
market, which was known internally for a long time, but which was not quantified for investors until the
company could no longer avoid talking about it, despite its material size.

2021 Guidance
Low Mid High
GCR revenue growth -25.2% -22.9% -20.6%

Also, the company unnecessarily called for unrealistic and well-above-trend revenue growth in their high-
margin ODR segment – despite knowing that the first half would be abnormally weak and that they would
be relying on unpredictable hockey stick reacceleration in the second half to hit the projection.

1 Main Capital Management | [email protected] 4

 2021 Guidance
2019A 2020A Q1'21A Low Mid High
ODR revenue growth 6.3% 10.5% -2.5% 14.0% 23.8% 33.6%

Additionally, the company also inexplicably called for a significant step-up in G&A above not only its 2020
levels, but also pre-COVID levels.

Guidance
($ in millions) 2018A 2019A 2020A 2021E
SG&A $57.1 $63.2 $63.6 $68.6
% of revs 10.4% 11.4% 11.2% 13.7%

Lastly, despite giving detailed revenue and margin ranges by segment, the segment level figures did not
add up to or reconcile with the overall guidance, confusing everyone even further.

Simply put, after selling a lot of equity to new investors in a big equity raise, and with an existing investor
base already hypersensitive to communication due to prior mishaps, the company was careless with its
guidance and communication once again.

Not surprisingly, many investors have become skeptical of guidance, and it has recently come to my
attention from several investors that it sounds to them like management is talking down second quarter
expectations after an already weak Q4’20 and Q1’21.

Despite all the above, I still believe LMB’s management team knows how to run the business and is doing
a commendable job at it. However, I am starting to question whether they have shareholders’ best
interest at heart or just their own. And why should they care about holders? Despite a lagging stock price
since coming public in 2016 (as seen in the chart below)…

…the existing board continues to reward the current CEO just for showing up to work. The table below
shows Charlie Bacon’s annual compensation going back to 2015.

1 Main Capital Management | [email protected] 5

 Year Base Bonus Equity Total
2015A 530,400 477,360 - 1,007,760
2016A 572,372 549,743 - 1,122,115
2017A 600,000 363,146 1,223,375 2,186,521
2018A 618,000 - 236,425 854,425
2019A 618,000 203,000 - 821,000
2020A 600,000 600,000 165,375 1,365,375
Total 3,538,772 2,193,249 1,625,175 7,357,196

So, it makes sense that my suggestion of adding a fresh board member who has shareholder support has
been ignored. In fact, I have been told directly by the company that I am disqualified from being
considered to replace a departing board member because they feel that they need more diversity –
something that is tough for me to comprehend but seems impossible for me to overcome.

My response to this is that they should at least engage with me, or some larger shareholders, with respect
to candidate selection – so far, they have balked. After speaking with several shareholders who own >5%
of the company each, it seems as though the company has thus far neglected to engage with any of them
regarding board candidate evaluation. Existing holders should all ask themselves why the company would
willfully avoid taking such an easy step to help restore investor confidence.

Even more infuriatingly, management has been telling investors that that they believe they are being fairly
valued by the market (at 3x their 2021 EBITDA guidance, and with a net cash balance sheet). Of course, it
makes sense that it would be difficult for them to acknowledge that they are the reason the stock is
depressed. As a former holder of 20% of LMB’s outstanding shares told me last year right before he sold
all his shares, “you can’t help someone who doesn’t think they need help.”

So, why are we still involved and what’s next? As I stated in my previous letter, with the right strategic
direction LMB has the most upside potential of any of our holdings and with a below average level of
business risk. Additionally, the position size is now closer to an opportunistic investment rather than a
core position, which makes us less exposed to continued mediocrity by the company.

However, I believe that there are significant number of shareholders who share my concerns and I believe
that I would be able to win their support if I decided to go down a more forceful route with this investment
in order to enact change on the company and realize fair value.

For now, I will continue to monitor the investment and keep it sized in such a way that it cannot hurt us
too badly. In the future, I may size it up more meaningfully if and before I decide to take any action. Of
course, I also reserve the right to exit entirely if I see fit. Until I make such a decision I am just holding
tight.
Outlook
With markets currently sitting within throwing distance of all-time highs, pundits are once again searching
for reasons to call for a correction. On one hand, they say the economy is running too hot, and inflation is
about to run rampant, crushing corporate profit margins. On the other, they say that we are at peak
demand and that COVID is going to flare up again which will cause an economic slowdown. Either of these
scenarios sound unpleasant for equities.
However, the world is not static. In fact, it is very dynamic. In a slowing world, there is more stimulus
which offsets weakness. In an overheating world, the punch bowl will likely be removed by the fed via

1 Main Capital Management | [email protected] 6

tapering and higher rates. Some may say this analysis is naïve. However, I would argue that ignoring this
likely reality is the real mistake. Of course, if the facts change so will my mind.
My intuition says that currently we have just the right amount of fear in the market driven by recency bias
following the 2018 trade war and 2020 COVID selloffs. The economy should keep chugging along and an
occasional pullback in equities will allow markets to keep climbing and endless wall of worry.
Most importantly, we own a collection of solid and growing businesses that are well run and reasonably
valued, so we should do well in many different economic environments. I like to tell prospective LPs that
when I think about the risks of our holdings, they usually can usually be boiled down to a scenario where
I think we will earn 10% IRRs instead of 25%+ over our typical 3-5 year holding period. This is a risk I can
sleep with and one I will gladly take rather than sitting on cash that is being forcefully inflated away.
Other Updates

Year-to-date, we have welcomed just under 20 new LPs into the Fund. This coming month, we are
onboarding a well-known family office who will be our largest investor to date. I am appreciative of those
of you who have been sending your friends our way, and for everyone who is trusting our partnership as
a steward of their hard-earned savings.

As discussed in the Q1 letter, the Fund made its first private investment in January, in the form of
convertible preferred equity instrument that was meant to be a bridge to the investee coming public later
this year. As is typical with our opportunistic investments, which are typically kept to 1-3% of assets at
cost, we made this one with the expectation that we could make multiples of our capital within a relatively
short/defined time frame. Several months ago, the investee announced a merger with a shell company.
The announcement was well received by the market, causing the price of the shell company’s shares to
appreciate. We are now using the shell company’s stock price as the basis from which to mark this
investment, though for the sake of conservatism we are applying a 25% discount to where it is trading. I
expect the transaction will close in Q3, at which point we will fully mark the investment to market.

As always, thank you for your continued support and confidence. Please reach out with any questions at
[email protected] or 305-710-8509.

Sincerely,
Yaron Naymark

1 Main Capital Management | [email protected] 7

Monthly Performance Summary2

2021 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
1 Main Capital Partners - Gross 10.5% 10.0% 1.1% 19.0% -2.3% 5.3% 50.6%
1 Main Capital Partners - Net 8.4% 8.1% 0.9% 15.7% -2.0% 4.5% 40.2%
S&P 500 index - incl dividends -1.0% 2.8% 4.4% 5.3% 0.7% 2.3% 15.2%
Russell 2000 - incl dividends 5.0% 6.2% 1.0% 2.1% 0.2% 1.9% 17.5%

One Three Since Inception

Year Year Inception Annualized
1 Main Capital Partners - Gross 124.8% 41.3% 202.9% 38.3%
1 Main Capital Partners - Net 96.2% 32.2% 145.4% 30.0%
S&P 500 index - incl dividends 40.8% 18.7% 62.3% 15.2%
Russell 2000 - incl dividends 62.0% 13.5% 52.9% 13.2%

2
Performance Data is presented for the Fund’s Class A Interests, and are net of any accrued incentive allocation,
management fees and other applicable expenses (as disclosed in the Fund’s Confidential Private Offering
Memorandum), include the reinvestment of dividends, interest and capital gains, and assume an investment from
inception. Returns for month-end and year to date 2021 are estimated, and un-audited. For investor specific returns,
please refer to your capital statements. Due to the format of data available for the time periods indicated, net returns
are difficult to calculate precisely. Please see the last page for important disclosure information.

1 Main Capital Management | [email protected] 8

 IMPORTANT DISCLOSURES

In general. This disclaimer applies to this document and the verbal or written comments of any person
presenting it (collectively, the “Report”). The information contained in this Report is provided for
informational purposes only and does not contain certain material information about 1 Main Capital
Partners, L.P. (the “Fund”), including important disclosures and risk factors associated with an investment
in the Fund, and no representation or warranty is made concerning the completeness or accuracy of this
information. To the extent that you rely on the Report in connection with an investment decision, you do
so at your own risk. Certain information contained herein was obtained from or provided by third-party
sources; although such information is believed to be accurate, it has not been independently verified. The
information in the Report is provided to you as of the dates indicated and 1 Main Capital Management,
LLC and its affiliates (collectively, the “Manager”) do not intend to update the information after its
distribution, even in the event the information becomes materially inaccurate.

No offer to purchase or sell securities. This Report does not constitute an offer to sell, or the solicitation
of an offer to buy, and may not be relied upon in connection with the purchase of any security, including
an interest in the Fund or any other fund managed by the Manager. Any such offer would only be made
by means of such fund’s formal private placement documents, the terms of which shall govern in all
respects.

Performance Information. Unless otherwise noted, any performance numbers used in the Report are for
the Fund’s Class A Interests, and are net of any accrued incentive allocation, management fees and other
applicable expenses, include the reinvestment of dividends, interest and capital gains, and assume an
investment from inception of such Class. As such, the performance numbers do not reflect the
performance of any particular investor’s interest and you should not rely on it as a statement of your
actual return.

Past performance. In all cases where historical performance is presented, please note that past
performance is not a reliable indicator of future results and should not be relied upon as the basis for
making an investment decision.

Risk of loss. An investment in the Fund will be highly speculative, and there can be no assurance that the
Fund’s investment objective will be achieved. Investors must be prepared to bear the risk of a total loss
of their invested capital.

Portfolio Guidelines/Construction. Information contained in this Report, especially as it pertains to

portfolio characteristics, construction, profiles or investment strategies or objectives, reflects the
Manager’s current thinking based on normal market conditions, and may be modified in response to the
Manager’s perception of changing market conditions, opportunities or otherwise, in the Manager’s sole
discretion, without further notice to you. Any target strategies, objectives or parameters are not
projections or predictions and are presented solely for your information. No assurance is given that the
Fund will achieve its investment strategies, objectives or parameters.

Index Performance. The index comparisons are provided for informational purposes only. The S&P 500
Total Return Index (SPXT) is a capitalization weighted index that is designed to measure the performance
of the broad U.S. economy through changes in the aggregate market value of 500 stocks representing all
major industries. There are significant differences between the Fund and the index referenced, including,

1 Main Capital Management | [email protected] 9

but not limited to, risk profile, liquidity, volatility and asset composition. The index reflects the
reinvestment of dividends and other income, are unmanaged, and do not reflect a deduction for advisory
fees. An investor may not invest directly into an index. For the foregoing and other reasons, the
performance of the index may not be comparable to the Fund’s and should not be relied upon in making
an investment decision with respect to the Fund.

No tax, legal, accounting or investment advice. The Report is not intended to provide, and should not
be relied upon for, tax, legal, accounting or investment advice.

Logos, trade names, trademarks and copyrights. Certain logos, trade names, trademarks and/or
copyrights (collectively, “Marks”) contained herein are included for identification and informational
purposes only. Such Marks may be owned by companies or persons that are not affiliated with the
Manager or any the Manager managed fund and no claim is made that any such company or person has
sponsored or endorsed the use of such Marks in the Report.

Confidentiality/Distribution of the Report. The information in this Report is confidential. By accepting

any portion of the Report, you agree that you will treat the Report confidentially. It is intended only for
the use of the person to whom it is given and the Manager expressly prohibits its redistribution without
the Manager’s prior written consent. The Report is not intended for distribution to, or use by, any person
or entity in any jurisdiction or country where such distribution or use is contrary to law, regulation or rule.

1 Main Capital Management | [email protected] 10