The mutual fund we manage in our Small-Cap Opportunistic Value Strategy, Royce Small-Cap Opportunity Fund, uses an opportunistic approach to invest in companies are categorized into themes: Turnarounds, Unrecognized Asset Values, Undervalued Growth, and Interrupted Earnings. The management team identifies a catalyst for future earnings growth in the form of new management, more favorable business cycle, product innovation, and/or margin improvement. What follows is a look at 4 key positions in the Fund.

We think Aviat Networks (Nasdaq: AVNW) is well-positioned for a significant recovery and sustained growth following a transitional period marked by regional project delays and a challenging macroeconomic environment. Aviat is a telecommunications equipment company specializing in wireless transport and access networking. Its equipment allows customers to wirelessly transmit large amounts of data over long distances, as an alternative or complement to fiberoptic networks.

The company’s recent report for fiscal year 2026 demonstrates a successful rebound, characterized by a substantial revenue beat and a return to positive momentum in key Tier 1 telecommunications markets. Our confidence in Aviat’s return to growth and improved profitability is anchored in the commercialization of several high-value catalysts that are just beginning to impact the company’s bottom line.

We are particularly encouraged by the execution of the Multi-Dwelling Unit (MDU) program with a major Tier 1 carrier, which is shifting from technical validation to live deployment across multiple markets. This program represents a high-margin, “8-figure” annual revenue opportunity that provides a clear bridge to the company’s fiscal year 2027 targets. The integration of recent acquisitions, specifically 4RF and Pasolink, has further transformed Aviat from a niche microwave radio specialist into an end-to-end wireless transport provider. This expanding portfolio allows the company to capture a larger share of wallet within the private network and utility segments, where demand remains robust due to ongoing infrastructure modernization.

Aviat Networks (Nasdaq: AVNW)
12/31/25-8/31/26

Source: FactSet.
Past performance is no guarantee of future results.

Aviat’s management is intensely focused on driving operating leverage through its dedicated operating model. By prioritizing high-margin software sales and industrial router bookings—which are currently seeing growth of more than 50%—the company is set to improve its overall gross margin profile. Additionally, aggressive working capital management and the sequential reduction of inventory levels are expected to result in free cash flow that exceeds adjusted EBITDA (earnings before interest, taxes, depreciation & amortization) in the coming fiscal year.

Liberty Energy Cl. A (NYSE: LBRT) was historically an oilfield services company that provided hydraulic fracturing and other engineering services to oil & gas producers. Over the past few years, however, Liberty has been building on its pioneering expertise in running an electric frac fleet to diversify itself into a distributed power provider for data centers and other industrial end markets. These markets are seeing elevated demand for electricity but are also facing delays in sourcing power from the grid and/or sourcing gas turbines to construct their own power plants.

When we first invested, the oil & gas end market was in a downturn and Liberty was underearning relative to the mid-cycle earning power of its oilfield services business peers. The distributed power opportunity that it was pursuing was a free option in addition to the mean reversion potential of its oilfield services business. As the market began to recognize Liberty’s ability to be a potential winner in the distributed power space, its shares increased quite meaningfully, despite the tepid demand environment for its oilfield service business. The company then enjoyed even more share price gains when the war with Iran broke out, leading us to book significant profits at that time.

In recent months, its shares have again been pressured because Liberty investing heavily in its power business, and related economic gains will likely not materialize for 12-18 months, causing poor earnings visibility. In the meantime, the market at large is trying to determine if the AI rollout will generate adequate returns for the AI ecosystem. The combination of these factors has investors questioning the ROI on Liberty’s power investments, which is weighing on its share price.

Liberty Energy Cl. A (NYSE: LBRT)
12/31/25-8/31/26

Source: FactSet.
Past performance is no guarantee of future results.

However, we believe that its s valuation has once again become quite attractive. For example, recent prices do not reflect the midcycle earning power of its oilfield services business or a reasonable, risk-adjusted value for its power business. We have thus been using the weakness to add to our position.

The next two holdings are in the same industry.

We think Lincoln Educational Services (Nasdaq: LINC) represents an attractive investment opportunity that sits at the intersection of a worsening skilled labor shortage in the U.S. and a shift in how families evaluate the return on investment (ROI) of postsecondary education. It’s a position we recently reinitiated.

Vocational schools like Lincoln offer students a high-ROI, fast-track alternative to costly four-year college programs. The company specializes in hands-on, career-oriented training in technical fields and is seeing continued growth in trades, automotive, and healthcare enrollment. Trades-focused enrollment tends to be driven by local factors, such as high school pipelines and direct employer relationships, rather than web search funnels.

This trade-school path represents a compelling growth opportunity as skepticism over the value proposition of traditional four-year degrees continues to grow. This dynamic positions Lincoln to capture a larger share of high school graduates seeking faster, more direct routes to high-paying technical careers. The company is also benefiting from powerful, non-cyclical secular trends, including persistent skilled labor shortages across both the trades and healthcare, broad social acceptance of the trades, and rising federal infrastructure and industrial investments. For example, major industrial and automotive companies have repeatedly flagged thousands of open roles they cannot yet fill while the AI data center boom is generating robust demand for electricians, HVAC technicians, plumbers, and welders.

Lincoln’s ongoing implementation of its ‘Lincoln 10.0’ hybrid learning model looks like a major catalyst for margin expansion, driving instructional cost savings and higher utilization. Under this model, students complete approximately 30% of their curriculum online and 70% in hands-on campus labs, allowing Lincoln to expand enrollments without requiring proportional investments in physical real estate. This strategy is projected to drive significant operating efficiencies, supporting target revenue of $550 million and Adjusted EBITDA of $90 million in fiscal year 2027.

We are confident in Lincoln’s growth prospects due to several the following operational and strategic indicators: the company’s near-term enrollment pipeline remains robust—despite minor disruptions, August 2026’s student cohort is among the largest in the company’s 80-year history. Lincoln also has immediate, visible growth catalysts with the opening of its state-of-the-art Hicksville, New York campus in late 2026 and its Rowlett, Texas campus in the first quarter of 2027, both of which expand its presence in high-demand metro areas. In addition, Lincoln is operating with massive untapped capacity, currently utilizing only about 57% of its practical campus network, which provides an organic runway to nearly triple revenue without adding physical space. Finally, management’s clear, self-funded roadmap to 2030 targets $850 million in revenue and $150 million in Adjusted EBITDA, backed by a strong, debt-free balance sheet and a newly expanded $125 million credit facility.

Lincoln Educational Services (Nasdaq: LINC)
12/31/25-8/31/26

Source: FactSet.
Past performance is no guarantee of future results.

While the company has been trading at a premium to standard postsecondary peers, its valuation is also aligned with its closest trade school peer, Universal Technical Institute, and in our view is justified by its clean balance sheet and enviable execution track record.

Universal Technical Institute (NYSE: UTI) is a for-profit postsecondary education and workforce-training company that focuses on preparing students for skilled trade and healthcare careers. We think the company presents a compelling long-term growth opportunity centered on its North Star Phase 2 strategy—despite recent execution challenges that have pressured the fiscal 2026 outlook.

The company is aggressively transforming itself from a legacy automotive-focused school into a diversified provider of skilled trades and healthcare education, a transition evidenced by the November 2025 launch of a co-branded campus with Heartland Dental for dental hygiene and assistant programs. While fiscal 2026 revenue guidance was recently adjusted to a range of $893 million to $900 million, management remains committed to achieving over $1.2 billion in revenue and nearly $220 million in adjusted EBITDA by fiscal 2029.

Universal Technical Institute is currently executing an accelerated expansion plan that includes the launching of up to five new campuses and approximately 20 new programs annually across its UTI and Concorde divisions. This growth is being supported by a significant increase in capital expenditures, now expected to reach $110 million for fiscal 2026 to ensure the on-time launch of fiscal 2027 initiatives.

The company recently faced a temporary headwind in its high school enrollment channel due to internal execution issues regarding field representative staffing. However, management has already implemented a restructuring plan to simplify operations and improve student acquisition, noting that the underlying demand for skilled trades remains robust and search volumes for their programs are actually increasing.

While near-term performance has been impacted by a student mix shift toward shorter, trades-focused programs—which are currently marginally less profitable than traditional auto-diesel courses—the long-term trajectory remains intact. We are confident that the company can return to growth and improved profitability because the recent guidance revision is rooted in addressable internal execution issues rather than a decline in market demand.

Universal Technical Institute (NYSE: UTI)
12/31/25-8/31/26

Source: FactSet.
Past performance is no guarantee of future results.

The company’s search volume is up significantly—18% for UTI and 23% for Concorde—indicating that student interest remains at record levels. Furthermore, ongoing capacity expansion, which includes six new campuses over the next two years representing roughly 30% growth, provides a clear path for revenue acceleration as these facilities scale to their full potential. Management expects fiscal 2027 revenue growth to exceed fiscal 2026 levels as these strategic investments begin to yield higher-margin returns.

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