Steel Partners L P : March 09, 2023 - Annual Letter

March 9, 2023

To the stakeholders of Steel Partners Holdings LP:

Steel Partners had an outstanding year in 2022, delivering record revenue as we turned the corner on the COVID pandemic. Our philosophies and strategies of hard work and persistence served us well.

After the many difficulties of the previous three years, we are reminded of how much we have to be grateful. Our employees worked to ensure customers received quality, on-time goods and services while adhering to health and safety protocols. Our board of directors provided leadership and guidance based on their vast and varied experiences to help us navigate an unprecedented global pandemic. Our unitholders stuck with us through the lows of 2020, and we continue to deliver value, which is reflected in the price of $42.80 per unit at year end.

FINANCIALS

We report our financials on a GAAP basis, as required by the SEC, which could vary significantly from real cash. For the year ended December 31, 2022, Steel Partners' revenue increased to $1.7 billion, compared to $1.5 billion in 2021. Income before income taxes and equity method investments was $275.5 million, compared with $200.9 million in 2021. Net income attributable to the Company's common unitholders for the year was $206 million, or $8.12 per diluted common unit, compared with $1321.4 million, or $4.97 per diluted common unit in 2021. The results reflect higher sales volumes across all segments, despite the divestiture of SL Power Electronics in April 2022.

Steel Partners generated $228.4 million of adjusted EBITDA in 2022, compared to $259.8 million in 2021.

As of December 31, 2022, total debt was $180.3 million, a decrease of $90.7 million, compared to December 31, 2021. As of December 31, 2021, net debt, which also includes our pension and preferred unit liabilities, less cash, and investments, totaled $47.6 million, a decrease of $177.5 million, compared to December 31, 2022. We acquired 1 | P a g e

1,093,747 common units in 2022 for a total of $45 million, and capital expenditures totaled $47.5 million.

The Company had $410.7 million in available liquidity under its senior credit agreement, as well as $60.2 million in cash and cash equivalents, excluding WebBank cash, and $309.7 million in marketable securities and long-term investments.

Total leverage (as defined in the Company's senior credit agreement) was 1.4x as of December 31, 2022 versus 1.6x as of December 31, 2021.

The book value per unit was $37.04 on December 31, 2022, compared to $31.56 as of December 31, 2021.

INVESTMENT UPDATES

AEROJET ROCKETDYNE (FORMERLY GENCORP)

OurAe ojet Rocketdyne Holdings, Inc. (NYSE: AJRD), www.rocket.com.

initial investment in Aerojet Rocketdyne was on August 4, 2000. Today, we own 4.5% of the company. We do not subscribe to the notion of being activists for the sake of being activists. For the first four years of our investment, we attempted to create value with the management team. Ultimately, before our active involvement, the company made several ill-advised acquisitions and took on excessive and unnecessary debt. In 2005, we reached an agreement with the board to place a non-voting observer on the board and add an independent director to the board. However, after three years of the board failing to make meaningful operational and management changes, we nominated a full slate of candidates to the board in 2008. After an agreement with the Board, Jim Henderson, Marty Turchin, and I joined the Board of Directors. Jim Henderson became Chairman of the Board later in 2008, and we began the transformation in 2009, which included four different CEOs and four different CFOs over 12 years.

We were able to install Scott Seymour as CEO and President in 2010. Scott was instrumental in creating the competitive improvement program and completing the IT transformation to eliminate 120 computer systems. In 2013, with Scott's leadership, we executed on the acquisition of Rocketdyne from UTC's Pratt & Whitney and refinanced the company's debt.

In 2014, we completed a $64.5 million repurchase program, and we again refinanced the company's debt. In 2015, we sold excess real estate for $57 million. Also, in 2015, Scott Seymour retired, and we hired Eileen Drake as CEO and President and promoted

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Mark Tucker to Chief Operating Officer, where he was responsible for the Competitive Improvement Program we had put in place, including footprint optimization, product affordability, and reducing administrative and overhead costs.

I was appointed Executive Chairman in 2016 to oversee the CEO role. In 2017, the company acquired Coleman Aerospace for $15 million, and we expanded the competitive improvement program with an expected annual savings of $230 million when fully implemented.

Ultimately, Tucker executed the competitive improvement programs flawlessly and delivered a footprint reduction of over 1.25 million square feet of manufacturing and office space, closed four operating facilities, established a Defense and Space business from the reduction of six separate businesses, opened new headquarters for Space in Canoga Park, California and Defense in Huntsville, Alabama, and allowed the company to win large contracts with increased efficiencies and focus on operations.

To ensure continued value creation at Aerojet Rocketdyne as a standalone public company, we nominated a slate of eight director candidates - including four sitting Aerojet Rocketdyne Board members - for election at its 2022 Annual Meeting of Shareholders. After a very public proxy and legal battle, we did achieve our goal of creating long-term value for all shareholders. After the new board was put in place, they adopted many of the measures we had advocated for during the contest and immediately began soliciting acquisition offers.

We are happy to report that in December 2022, it was announced that L3Harris Technologies would acquire Aerojet for $58 per share in an all-cash transaction valued at $4.7 billion. Clearly, this is a win for all Aerojet shareholders and an especially successful investment for Steel Partners.

When we made our first investment on August 4, 2000, the shares of Aerojet Rocketdyne (then Gencorp) were trading under $7 per share. When Steel Partners joined the Aerojet Rocketdyne board of directors in March 2008, the stock was trading at $10.50 per share. I am very proud of our work to help turn the company around and create $4.5 billion in value for shareholders.

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STEEL CONNECT

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46.00	14.00mm
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26.00	8.00mm
16.00	6.00mm
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Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) - Volume	Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) - Share Pricing

(NASDAQ: STCN), www.steelconnectinc.com, provides services

throughConnect,its whollyInc-owned. subsidiary, ModusLink Corporation. Ourinitial investment in Steel Connect was made on June 13, 2012. For fiscal year 2022, Steel Connect's consolidated revenue was $203.3 million. We currently own 49.9% of the company, including our investment in convertible preferred units and convertible debt. I continue to be the Interim CEO.

On November 15, 2022, Steel Partners terminated the merger agreement with Steel Connect after the merger was not approved by a majority of the minority, which is outstanding shares of common stock not owned, directly or indirectly, by Steel Partners.

, www.moduslink.com, is a wholly-owned subsidiary of Steel Connect andModusLinkprovides supply chain andeCommerce solutions to help customers across a diverse range of industries, including semiconductors, consumer electronics, telecommunications, computing & storage, software & content, consumer packaged goods, therapeutic devices, retail & luxury, and connected devices. Fawaz Khalil is President & CEO since June 2020. After three years of his leadership, ModusLink achieved continuous YOY revenue and profit growth. This has been achieved through growing existing large accounts and acquiring new logos across the globe. During calendar year 2022, ModusLink achieved record volumes with some of its top customers while simultaneously improving the profitability of each of its twenty plus locations. Additionally, ModusLink has

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grown its e-business with the recent landing of a major semiconductor manufacturer from a competitor.

ModusLink continues to invest in its people with new top level and mid-grade leaders throughout the company in every region. While facing uncertain economic conditions due to post-COVID pressures and geo-political incidents, ModusLink is taking proactive measures to keep both top line and bottom line growth achievable.

PENSION

We closely manage our pension plan through our Pension Investment Committee, and we continue to thank David Clay, who is a member of our Pension Investment Committee, for his diligence in keeping our pension investments on track. In 2022, the pension asset value decreased by $114.2 million. Over the prior three years, our pension returns have been -21.4% in 2022, 14.2% in 2021, and 18.6% in 2020.

As of December 31, 2021, the Company's net pension liability is $84.9 million, up from $82.4 million in 2021. In 2022, the Company contributed $12.4 million in cash.

ACQUISITIONS & DIVESTITURES

Steel Partners divested SL Power Electronics to Advanced Energy Industries on April 25, 2022 for approximately $144.5 million. Our initial investment in SL Power was in 1991, when it was part of SL Industries, and we fully acquired SL Power as part of the 2017 acquisition of Handy & Harman. We appreciate the hard work and dedication of the SL Power employees and management team over the past 30 years.

In August 2022, WebBank, through its wholly owned subsidiary, National Partners, completed the acquisition of Security Premium Finance (SPF) for a purchase price of $47.3 million. SPF provides insurance premium financing services for commercial and consumer clients to purchase property and casualty insurance products in Florida. This acquisition provides National Partners with diversification, geographic market opportunities, and a competitive advantage in the industry.

UNIT REPURCHASES
In 2022, we conducted a modified "Dutch Auction" tender offer to purchase for cash up
to $100 million in value of common units, no par value, at a price per unit of not less than
$40.00 nor greater than $42.00 per until. Approximately 361,781 common units were
tendered at the final purchase price of $42.00 per unit for a total cost of approximately
$15.2, excluding fees and expenses related to the offer.	5 | P a g e