Investment Pitches

Pitch Summary:
Despite better-than-expected 4Q results and strong profitability guidance for 2023, RNG shares were a top detractor for the quarter following lower than expected revenue guidance for the full year 2023. Investor concerns appear to be centered around the competitive dynamics in the space. We continue to believe that RNG remains far ahead of its competition in both product breadth and depth in what is an enormous market. RNG has consistently maintained its #1 product ranking by Gartner for Large Enterprises and continues to expand its channel partnerships with large scale telecom services firms including Alcatel-Lucent, Atos, Avaya and Mitel, giving the company a significant leg up in converting on-premises PBX customers. RingCentral is the largest and fastest growing pure play Unified Communications as a Service (UCaaS) vendor. Traditionally, business communications have been comprised of on-premises hardware-based private branch exchanges (PBX), which primarily support voice-only desktop phones. These systems do not support employees who now communicate from anywhere with any device, using voice, video, text, messaging and social media. UCaaS encompasses solutions addressing all these needs in a capital and labor light model for customers. RNG is the UCaaS market leader with two million users in an extremely fragmented market and is growing rapidly. The company started in the small-and-medium business market and has migrated to also serving larger enterprises, helped by its channel partnerships. The company's increasing scale from its growing recurring revenue should improve operating margins, allowing the company to achieve its long-term target of 20%-25% while also generating increasing FCF (which is expected to grow 150% this year).

BSD Analysis:
RiverPark maintains a bullish stance on RingCentral despite revenue guidance disappointment and competitive concerns that pressured shares. The manager emphasizes RNG's market leadership in Unified Communications as a Service (UCaaS), maintaining Gartner's #1 ranking for Large Enterprises and significant competitive moats through product breadth and depth. The investment thesis centers on the massive market opportunity as businesses transition from legacy on-premises PBX systems to cloud-based unified communications supporting modern work patterns. Strategic channel partnerships with major telecom providers including Alcatel-Lucent, Atos, Avaya, and Mitel provide competitive advantages in enterprise customer acquisition. With two million users in a fragmented market, RNG benefits from recurring revenue scale economics. The portfolio manager projects operating margin expansion toward 20-25% targets and 150% free cash flow growth as the company leverages its platform across expanding enterprise and SMB segments.

Pitch Summary:
SCHW shares were our top detractor for the quarter as bank stocks sold off aggressively following the failures of Silicon Valley Bank and Signature Bank. Despite the bulk of Schwab's $7 trillion of assets being in the brokerage business, the company does have a large deposit base on which it earns net interest income. While Schwab has seen asset growth increase as depositors look for safety, the company has seen persistent cash sorting (depositors moving cash from deposits to money market funds to generate higher yields). This sorting has two negative consequences: first, it reduces the firm's profitability because Schwab earns more in net interest income on assets on deposit than it does on management fees from money market funds, and second, it forces Schwab to sell assets held by its bank subsidiary to fund the cash transfers into money market funds. Because of the recent rapid rise in interest rates, these asset sales could cause Schwab to realize trading losses. We think this latter scenario is unlikely for two reasons: first, following historical patterns from past cycles, we believe the cash sorting trend will slow in the coming months, and second, Schwab has enough available liquidity from other sources to fund nearly 100% of its deposit base without selling marked-down securities. Schwab and TD Ameritrade (which Schwab acquired in October 2020) have been the leading share gainers in the discount brokerage industry over the last decade, with both generating substantial organic asset growth while also growing operating margins and remaining amongst the price leaders on all products. With these two businesses now combined, revenue and expense synergies should accelerate in 2023, and we believe the company will be in an even stronger position to gather assets and drive long-term margins and free cash flow in the years to come.

BSD Analysis:
RiverPark maintains conviction in Charles Schwab despite banking sector volatility following SVB and Signature Bank failures that pressured the stock. The manager acknowledges near-term headwinds from cash sorting as depositors move funds to higher-yielding money market products, reducing net interest income and potentially forcing asset sales. However, the investment thesis remains intact based on Schwab's dominant $7 trillion asset base primarily in brokerage services rather than traditional banking. The portfolio manager expects cash sorting trends to normalize following historical patterns and emphasizes Schwab's sufficient liquidity to avoid forced sales of marked-down securities. The TD Ameritrade integration provides significant revenue and expense synergies accelerating in 2023. Long-term value creation stems from the combined entity's market-leading position in discount brokerage, sustained organic asset growth, and margin expansion opportunities driving free cash flow generation.

Pitch Summary:
We re-initiated a position in UnitedHealthcare, a position we last held in January of 2022. The company's stock price had fallen roughly 17% from its peak in October 2021 on fears about Medicare reimbursement rates, and we used this dislocation to start purchasing shares of what we believe to be the most dominant and complete managed care company in the industry. With several at-scale and interconnected businesses, UNH occupies a unique position within the U.S. healthcare system. UnitedHealth has (a) a dominant managed care organization in commercial, Medicare and Medicaid markets, (b) a large and growing presence in local care delivery (OptumHealth's physicians and ambulatory service centers), (c) one of only three at-scale pharmacy benefits managers (OptumRx's PBM) and (d) a fast-growing healthcare-information technology (HCIT), consulting and revenue cycle management (RCM) business (OptumInsight). The combination of the largest MCO (UnitedHealth) with the faster-growing, higher-margin Optum services businesses positions the company to capture a large portion of the future growth opportunities in the U.S. healthcare services industry. We expect balanced growth from both health insurance and health services leading to consistent high-single-digit revenue growth for the company. With margin expansion from scale, share buybacks from its strong cash generating ability (the company currently has $30 billion in net cash), and continued strategic acquisitions, we believe the company can generate mid-teens or better earnings growth for the foreseeable future.

BSD Analysis:
RiverPark re-entered UnitedHealth following a 17% decline from October 2021 peaks driven by Medicare reimbursement concerns, viewing the dislocation as an attractive entry point. The manager emphasizes UNH's unique integrated healthcare ecosystem spanning managed care, care delivery, pharmacy benefits, and healthcare technology. The investment thesis highlights the company's dominant market position across commercial, Medicare, and Medicaid segments, combined with higher-margin Optum services businesses that provide diversified revenue streams. The portfolio manager expects consistent high-single-digit revenue growth driven by balanced contributions from insurance and services divisions. With $30 billion in net cash, the company maintains significant capital allocation flexibility for share buybacks and strategic acquisitions. Management projects mid-teens earnings growth supported by scale-driven margin expansion and the company's comprehensive healthcare services platform.

Pitch Summary:
We initiated a position in athletic apparel company Lululemon in the quarter. COVID-related supply chain bottlenecks led to over buying in 2022 resulting in a short-term inventory glut. This temporary issue gave us an opportunity to buy LULU's stock at a historically low valuation. LULU is a vertically integrated athletic apparel vendor focused on living a healthy and mindful lifestyle. The company, through its 655 stores and strong online presence (40% of sales), caters to affluent customers searching for both function and fashion. LULU has been a consistent innovator since its founding as a yoga brand in 1998 and currently offers an extensive array of men's and women's clothing options as well as yoga and fitness-related accessories. We believe that continued growth in the core women's fitness category coupled with store growth, international expansion, and increased men's sales can drive mid-teens revenue growth for the foreseeable future. The company's vertical integration allows it to manage all aspects of the product cycle from design to manufacturing to sales, including when and how to discount excess inventory, which is a current focus. This vertical orientation also yields some of the best margins and free cash flow in the industry. We believe LULU can double revenue in the coming five years, which should lead to 150% EPS and free cash flow growth.

BSD Analysis:
RiverPark initiated a position in Lululemon following COVID-related supply chain disruptions that created temporary inventory issues and drove the stock to historically attractive valuations. The manager views LULU as a premium vertically integrated athletic apparel company with strong brand positioning in the health and wellness space. The investment thesis centers on multiple growth drivers including expansion in the core women's fitness segment, international market penetration, men's category growth, and continued store expansion. The vertical integration model provides competitive advantages through margin optimization and inventory management control. Management projects the company can double revenue over five years, translating to 150% growth in both EPS and free cash flow. The 655-store footprint combined with 40% digital sales penetration demonstrates strong omnichannel execution in the affluent consumer segment.

Pitch Summary:
We re-initiated a position in UnitedHealthcare, a position we last held in January of 2022. The company's stock price had fallen roughly 17% from its peak in October 2021 on fears about Medicare reimbursement rates, and we used this dislocation to start purchasing shares of what we believe to be the most dominant and complete managed care company in the industry. With several at-scale and interconnected businesses, UNH occupies a unique position within the U.S. healthcare system. UnitedHealth has (a) a dominant managed care organization in commercial, Medicare and Medicaid markets, (b) a large and growing presence in local care delivery (OptumHealth's physicians and ambulatory service centers), (c) one of only three at-scale pharmacy benefits managers (OptumRx's PBM) and (d) a fast-growing healthcare-information technology (HCIT), consulting and revenue cycle management (RCM) business (OptumInsight). The combination of the largest MCO (UnitedHealth) with the faster-growing, higher-margin Optum services businesses positions the company to capture a large portion of the future growth opportunities in the U.S. healthcare services industry. We expect balanced growth from both health insurance and health services leading to consistent high-single-digit revenue growth for the company. With margin expansion from scale, share buybacks from its strong cash generating ability (the company currently has $30 billion in net cash), and continued strategic acquisitions, we believe the company can generate mid-teens or better earnings growth for the foreseeable future.

BSD Analysis:
RiverPark re-initiated a position in UnitedHealth Group after a 17% decline from peak levels driven by Medicare reimbursement concerns, viewing this as an attractive entry point into the most comprehensive managed care organization. The investment thesis is built on UNH's unique ecosystem of interconnected healthcare businesses spanning insurance, care delivery, pharmacy benefits management, and healthcare technology. This diversified platform creates competitive moats and positions the company to capture outsized growth in the expanding U.S. healthcare services market. The manager expects balanced growth across insurance and higher-margin Optum services to drive consistent high-single-digit revenue growth. Strong cash generation capabilities support aggressive capital allocation through share buybacks and strategic acquisitions, with the company currently holding $30 billion in net cash. The combination of scale advantages, margin expansion opportunities, and robust capital returns should generate mid-teens earnings growth over the foreseeable future.

Pitch Summary:
We initiated a position in athletic apparel company Lululemon in the quarter. COVID-related supply chain bottlenecks led to over buying in 2022 resulting in a short-term inventory glut. This temporary issue gave us an opportunity to buy LULU's stock at a historically low valuation. LULU is a vertically integrated athletic apparel vendor focused on living a healthy and mindful lifestyle. The company, through its 655 stores and strong online presence (40% of sales), caters to affluent customers searching for both function and fashion. LULU has been a consistent innovator since its founding as a yoga brand in 1998 and currently offers an extensive array of men's and women's clothing options as well as yoga and fitness-related accessories. We believe that continued growth in the core women's fitness category coupled with store growth, international expansion, and increased men's sales can drive mid-teens revenue growth for the foreseeable future. The company's vertical integration allows it to manage all aspects of the product cycle from design to manufacturing to sales, including when and how to discount excess inventory, which is a current focus. This vertical orientation also yields some of the best margins and free cash flow in the industry. We believe LULU can double revenue in the coming five years, which should lead to 150% EPS and free cash flow growth.

BSD Analysis:
RiverPark initiated a position in Lululemon following COVID-related supply chain disruptions that created temporary inventory issues and drove the stock to historically attractive valuations. The manager views LULU as a premium vertically-integrated athletic apparel company with strong brand positioning in the health and wellness space. The investment thesis centers on multiple growth drivers including expansion in core women's fitness, store growth, international expansion, and penetration of the men's market, which collectively should drive mid-teens revenue growth. The vertical integration model provides competitive advantages in margin management and inventory control while generating superior free cash flow relative to peers. Management projects the company can double revenue over five years, translating to 150% growth in both EPS and free cash flow. The combination of temporary valuation dislocation and strong long-term fundamentals creates an attractive risk-adjusted opportunity in the premium athletic apparel space.

Pitch Summary:
Ares Management Corp., is a global, diversified alternative asset manager with a focus on credit and debt funds. Among alternative asset managers, Ares has a leading market share in credit products. These credit products generate fee-related revenue, which we believe translates to stable earnings power. Ares is benefiting from increasing investor demand for private credit assets. According to industry data, the gap between current and target allocations for institutions is wider for private credit than for private equity, implying that private credit has substantial opportunity for growth. Ares has generated strong historical returns in private credit. Demand for private credit funding has increased from private equity sponsors, who are Ares's primary customers. This increased demand has resulted in market share gains for private credit against the banks and public markets, and we believe that trend will continue. We think that scale and relationships are Ares' most important competitive advantages and, to the extent these advantages lead to strong returns, this should lead to continued growth in AUM. The alternative asset management space is competitive, but we believe that Ares is well positioned.

BSD Analysis:
Vulcan Value Partners initiated a position in Ares Management, attracted by the company's leading position in the rapidly growing private credit market. The investment thesis centers on Ares' market-leading share in credit products, which generate stable fee-related revenue and predictable earnings power. The managers highlight significant secular tailwinds from institutional investor demand for private credit, noting that allocation gaps are wider for private credit than private equity, suggesting substantial growth runway. Ares has demonstrated strong historical performance in private credit, building credibility with institutional clients. Increasing demand from private equity sponsors for credit funding is driving market share gains from traditional banks and public markets. The fund emphasizes Ares' competitive advantages of scale and deep relationships, which should drive continued AUM growth and strong investment returns. While acknowledging the competitive nature of alternative asset management, the managers believe Ares is well-positioned to capitalize on the structural shift toward private credit allocation.

Pitch Summary:
Sealed Air is a global protective packaging company operating in the food and beverage, industrial, and e-commerce markets. The company sells both packaging equipment and consumable packaging. Sealed Air has a strong market position with leading technology and brands. In the food and beverage market, the Cryovac brand is the gold standard for packaging and shipping fresh, uncooked proteins. Food safety is critically important, and customers are willing to pay for quality and reliability. Additionally, switching costs are high and customer relationships are typically sticky and long term in nature. Sealed Air's brands in e-commerce and industrial include Bubble Wrap and Instapax, and the competitive advantages in these markets are largely similar.

BSD Analysis:
Vulcan Value Partners established a position in Sealed Air, recognizing the company's strong competitive position in protective packaging across food, industrial, and e-commerce markets. The investment thesis centers on Sealed Air's market-leading brands and technology, particularly the Cryovac brand which represents the gold standard for fresh protein packaging. In food applications, the critical importance of food safety creates customer willingness to pay premium prices for quality and reliability, supporting strong pricing power. High switching costs and sticky, long-term customer relationships provide revenue stability and predictability. The company's razor-and-blade model, selling both packaging equipment and consumable materials, creates recurring revenue streams. Iconic brands like Bubble Wrap and Instapax in e-commerce and industrial markets offer similar competitive advantages through brand recognition and customer loyalty. The combination of essential product applications, premium market positions, and recurring revenue characteristics makes Sealed Air an attractive defensive growth investment.

Pitch Summary:
Core & Main is a national distributor of water, wastewater, storm drainage and fire protection products to municipalities and contractors across municipal, residential, and non-residential end markets. It is one of two national distributors in the U.S. operating in an otherwise fragmented market. Core & Main holds market share in the mid-teens while approximately 70% of the market is served by regional and mom-and-pop distributors. The company's competitive advantages include national scale, buying power, and sticky customer relationships. America's aging water infrastructure provides a tailwind. The country's average pipe age is 45 years, up from 25 years in 1970, and it is estimated that the U.S. needs to spend $2.2 trillion over the next 20 years in upgrades. We think the company is well positioned to benefit from these tailwinds.

BSD Analysis:
Vulcan Value Partners initiated a position in Core & Main, attracted by the company's dominant position in the fragmented U.S. water infrastructure distribution market. As one of only two national distributors, Core & Main holds mid-teen market share while 70% of the market remains served by regional and local competitors. This market structure provides significant competitive advantages through national scale, enhanced buying power, and sticky customer relationships that smaller distributors cannot match. The investment thesis is underpinned by powerful secular tailwinds from America's aging water infrastructure crisis. With average pipe age increasing from 25 years in 1970 to 45 years currently, and an estimated $2.2 trillion infrastructure investment need over the next 20 years, Core & Main is positioned to benefit from sustained demand growth. The combination of market consolidation opportunities and infrastructure replacement cycles creates a compelling long-term growth trajectory for this specialized distribution business.

Pitch Summary:
Acuity Brands is the leading provider of lighting and building management solutions in North America. The company's competitive moat is its scale in manufacturing, distribution, product breadth, product innovation, supply chain, customer servicing and some exclusive supply agreements. Acuity has been able to increase prices to pass through cost increases. Gross margins have been stable in the 40% range for several years. Acuity generates significant free cash flow. We believe the management team are good capital allocators, and the company has repurchased 20% of outstanding shares since 2020.

BSD Analysis:
Vulcan Value Partners established a position in Acuity Brands, recognizing the company's leading market position in North American lighting and building management solutions. The investment thesis highlights Acuity's comprehensive competitive moat built on manufacturing scale, distribution reach, product breadth, innovation capabilities, supply chain efficiency, customer service excellence, and exclusive supply agreements. The company has demonstrated pricing power by successfully passing through cost increases while maintaining stable gross margins around 40% for several years. Strong free cash flow generation supports the managers' confidence in the business model's cash conversion capabilities. Management's capital allocation track record appears solid, having repurchased 20% of outstanding shares since 2020, demonstrating commitment to shareholder returns. The combination of market leadership, operational efficiency, pricing power, and shareholder-friendly capital allocation creates an attractive investment profile in the industrial technology space.

Pitch Summary:
We purchased Curtiss-Wright, a company we have owned a number of times over the last decade. The company is a leading provider of highly engineered and mission critical technologies across aerospace and defense, commercial power, and process and industrial markets. These technologies range from propulsion equipment for nuclear submarines to electronics used on aircraft carriers and commercial planes to sensors used in general industrial applications. We have long been attracted to Curtiss-Wright's deep technical expertise, where it holds either the number one or number two positions in the industry across the majority of its niche markets. Two-thirds of its end market exposure is in the aerospace and defense market, with the remainder being tied to commercial markets. Within defense, Curtiss-Wright maintains stable positions with long-term visibility on key U.S. platforms such as aircraft carriers, submarines, and fighter jets. These stable positions are reinforced by the fact that over 50% of its defense revenue is derived from sole source positions. In our opinion, strong secular trends continue to provide tailwinds to its defense business as elevated geopolitical risk is driving urgency for global defense spending and strong shipbuilding activity.

BSD Analysis:
Vulcan Value Partners re-initiated a position in Curtiss-Wright, a company they have owned multiple times over the past decade. The investment thesis centers on the company's dominant market positions in highly specialized, mission-critical technologies across aerospace, defense, and industrial markets. Curtiss-Wright holds number one or two positions in most of its niche markets, providing significant competitive moats through technical expertise and customer relationships. The defense exposure (two-thirds of revenue) offers stability and visibility through long-term platform positions on aircraft carriers, submarines, and fighter jets. Over 50% of defense revenue comes from sole-source positions, highlighting the company's irreplaceable technology capabilities. The managers see strong secular tailwinds from elevated geopolitical tensions driving increased global defense spending and shipbuilding activity. This combination of market-leading positions, sole-source relationships, and favorable defense spending trends creates an attractive long-term investment opportunity.

Pitch Summary:
We purchased United Parcel Service (UPS) during the quarter. UPS is a global parcel shipment and logistics company which competes in a global oligopoly with high barriers to entry. UPS' integrated network is more efficient than its closest peer, as evidenced by its margin profile, free cash flow conversion, and returns on invested capital. The company's management team is focusing on profitable growth through its Better, not Bigger strategy which should improve margins and future opportunities for the company. The stock price was down due to market concerns about customer concentration and Amazon's potential entry into the parcel delivery and logistics market. Additionally, UPS Teamsters' labor agreement expires on July 31, 2023. The market fears a potential labor strike, significant wage inflation, and shippers moving volume to competitors due to concerns around potential service disruptions. We have incorporated these risks into our value, and we believe its stock price is still discounted.

BSD Analysis:
Vulcan Value Partners established a new position in UPS, capitalizing on market concerns to acquire shares at attractive valuations. The fund emphasizes UPS's competitive advantages within the global logistics oligopoly, highlighting superior operational efficiency versus peers through better margins, free cash flow conversion, and capital returns. Management's 'Better, not Bigger' strategy focuses on profitable growth and margin expansion rather than pure volume growth. The investment thesis acknowledges significant near-term risks including Amazon's competitive threat, customer concentration concerns, and the July 2023 Teamsters labor contract expiration. Market fears around potential strikes, wage inflation, and service disruptions have created the valuation opportunity. The managers believe they have appropriately discounted these risks in their valuation analysis while recognizing UPS's structural competitive position and integrated network advantages remain intact for long-term value creation.

Pitch Summary:
During the quarter, we purchased InterContinental Hotels Group, a company we have owned in the past. IHG is the world's third largest hotel chain with more than 6,000 hotels in more than 100 countries across 18 brands, including Holiday Inn & Holiday Inn Express, InterContinental, and Crowne Plaza. IHG has strong brand recognition, the industry's third largest loyalty program, and global scale. Growth in net rooms is driven by a long-term trend of consolidation around large hotel brands. We admire its asset-light business model where 99% of profits are derived from its managed and franchised hotels, while less than 1% of profits come from its owned and leased hotels portfolio. Long-term revenue per available room (RevPAR) growth is being driven by a rising global middle class with a desire to travel. IHG has a robust pipeline of approximately 280,000 rooms of which 40% are currently under construction. We had the opportunity to purchase IHG again as concerns around a macroeconomic downturn and a long-term impairment of business travel have negatively impacted the company's stock price. Even after taking these headwinds into account, we believe we own the company with a margin of safety.

BSD Analysis:
Vulcan Value Partners initiated a position in InterContinental Hotels Group, viewing it as an attractive opportunity amid macro concerns. The fund highlights IHG's dominant market position as the world's third-largest hotel chain with over 6,000 properties across 18 brands globally. The investment thesis centers on IHG's asset-light business model, generating 99% of profits from managed and franchised properties rather than owned real estate. This approach provides scalable growth with minimal capital intensity. The managers emphasize secular tailwinds including global middle-class expansion driving travel demand and industry consolidation favoring large branded operators. With a development pipeline of 280,000 rooms (40% under construction), IHG is positioned for meaningful organic growth. The fund capitalized on market pessimism regarding business travel recovery and macro headwinds to establish the position at what they believe represents a significant margin of safety.

Pitch Summary:
Ares Management Corp., is a global, diversified alternative asset manager with a focus on credit and debt funds. Among alternative asset managers, Ares has a leading market share in credit products. These credit products generate fee-related revenue, which we believe translates to stable earnings power. Ares is benefiting from increasing investor demand for private credit assets. According to industry data, the gap between current and target allocations for institutions is wider for private credit than for private equity, implying that private credit has substantial opportunity for growth. Ares has generated strong historical returns in private credit. Demand for private credit funding has increased from private equity sponsors, who are Ares's primary customers. This increased demand has resulted in market share gains for private credit against the banks and public markets, and we believe that trend will continue. We think that scale and relationships are Ares' most important competitive advantages and, to the extent these advantages lead to strong returns, this should lead to continued growth in AUM. The alternative asset management space is competitive, but we believe that Ares is well positioned.

BSD Analysis:
Vulcan Value Partners initiated a position in Ares Management, recognizing the company's leadership position in the rapidly growing private credit market. The investment thesis centers on Ares' dominant market share in credit products among alternative asset managers, generating stable fee-related revenue that provides predictable earnings power. The fund identifies a significant structural opportunity as institutional investors have a wider allocation gap for private credit versus private equity, indicating substantial room for growth in Ares' core competency. Strong historical returns in private credit have established Ares' track record and competitive positioning. The managers highlight increasing demand from private equity sponsors (Ares' primary customers) for private credit funding, driving market share gains against traditional banks and public markets. This secular shift toward private credit creates a powerful tailwind for specialized managers like Ares. The fund views scale and relationships as Ares' key competitive advantages, creating a virtuous cycle where strong performance drives AUM growth, which enhances scale benefits and relationship depth. Despite competitive pressures in alternative asset management, Ares' specialized focus, market leadership, and strong performance track record position it well to capitalize on the private credit opportunity.

Pitch Summary:
Sealed Air is a global protective packaging company operating in the food and beverage, industrial, and e-commerce markets. The company sells both packaging equipment and consumable packaging. Sealed Air has a strong market position with leading technology and brands. In the food and beverage market, the Cryovac brand is the gold standard for packaging and shipping fresh, uncooked proteins. Food safety is critically important, and customers are willing to pay for quality and reliability. Additionally, switching costs are high and customer relationships are typically sticky and long term in nature. Sealed Air's brands in e-commerce and industrial include Bubble Wrap and Instapax, and the competitive advantages in these markets are largely similar.

BSD Analysis:
Vulcan Value Partners established a position in Sealed Air, attracted to the company's dominant market positions in protective packaging across food & beverage, industrial, and e-commerce markets. The investment thesis is anchored by Sealed Air's leading technology and brand portfolio, particularly the Cryovac brand which represents the gold standard for packaging fresh proteins in the food industry. The fund emphasizes the critical importance of food safety, where customers prioritize quality and reliability over price, creating significant pricing power for market leaders. High switching costs and the mission-critical nature of packaging solutions result in sticky, long-term customer relationships that provide revenue stability and predictability. The company's diversification across multiple end markets, including iconic brands like Bubble Wrap and Instapax in e-commerce and industrial applications, provides similar competitive advantages and customer stickiness. Sealed Air's dual revenue model of equipment sales and consumable packaging creates recurring revenue streams and deeper customer relationships. The combination of market-leading brands, high switching costs, pricing power in mission-critical applications, and diversified end market exposure creates a resilient business model with strong competitive moats.

Pitch Summary:
Core & Main is a national distributor of water, wastewater, storm drainage and fire protection products to municipalities and contractors across municipal, residential, and non-residential end markets. It is one of two national distributors in the U.S. operating in an otherwise fragmented market. Core & Main holds market share in the mid-teens while approximately 70% of the market is served by regional and mom-and-pop distributors. The company's competitive advantages include national scale, buying power, and sticky customer relationships. America's aging water infrastructure provides a tailwind. The country's average pipe age is 45 years, up from 25 years in 1970, and it is estimated that the U.S. needs to spend $2.2 trillion over the next 20 years in upgrades. We think the company is well positioned to benefit from these tailwinds.

BSD Analysis:
Vulcan Value Partners initiated a position in Core & Main, recognizing the company's strategic position in a fragmented but essential infrastructure market. The investment thesis centers on Core & Main's status as one of only two national distributors in the U.S. water infrastructure market, competing against a highly fragmented landscape where 70% of the market is served by regional and local players. This scale advantage provides significant competitive benefits including national reach, enhanced buying power, and the ability to serve large municipal and contractor customers across multiple markets. The fund identifies a powerful secular tailwind from America's aging water infrastructure crisis, with average pipe age increasing from 25 years in 1970 to 45 years currently. The infrastructure investment opportunity is massive, with an estimated $2.2 trillion needed over the next 20 years for upgrades and replacements. Core & Main's national distribution network, sticky customer relationships, and scale advantages position it to capture disproportionate share of this infrastructure spending wave. The combination of market consolidation opportunities and massive infrastructure investment needs creates a compelling long-term growth trajectory for this essential services distributor.

Pitch Summary:
Acuity Brands is the leading provider of lighting and building management solutions in North America. The company's competitive moat is its scale in manufacturing, distribution, product breadth, product innovation, supply chain, customer servicing and some exclusive supply agreements. Acuity has been able to increase prices to pass through cost increases. Gross margins have been stable in the 40% range for several years. Acuity generates significant free cash flow. We believe the management team are good capital allocators, and the company has repurchased 20% of outstanding shares since 2020.

BSD Analysis:
Vulcan Value Partners invested in Acuity Brands, recognizing the company's dominant position as the leading provider of lighting and building management solutions in North America. The investment thesis is built on Acuity's comprehensive competitive moat encompassing manufacturing scale, distribution network, product breadth, innovation capabilities, supply chain efficiency, customer service excellence, and exclusive supply agreements. This multi-faceted competitive advantage has enabled the company to successfully pass through cost increases via pricing power, maintaining stable gross margins around 40% over several years. The fund values Acuity's strong cash generation capabilities and views management as effective capital allocators, evidenced by the repurchase of 20% of outstanding shares since 2020. This aggressive share buyback program demonstrates management's confidence in the business and commitment to returning capital to shareholders. The combination of market leadership, pricing power, stable margins, strong free cash flow generation, and shareholder-friendly capital allocation creates an attractive investment profile in the essential lighting and building management market.

Pitch Summary:
We purchased Curtiss-Wright, a company we have owned a number of times over the last decade. The company is a leading provider of highly engineered and mission critical technologies across aerospace and defense, commercial power, and process and industrial markets. These technologies range from propulsion equipment for nuclear submarines to electronics used on aircraft carriers and commercial planes to sensors used in general industrial applications. We have long been attracted to Curtiss-Wright's deep technical expertise, where it holds either the number one or number two positions in the industry across the majority of its niche markets. Two-thirds of its end market exposure is in the aerospace and defense market, with the remainder being tied to commercial markets. Within defense, Curtiss-Wright maintains stable positions with long-term visibility on key U.S. platforms such as aircraft carriers, submarines, and fighter jets. These stable positions are reinforced by the fact that over 50% of its defense revenue is derived from sole source positions. In our opinion, strong secular trends continue to provide tailwinds to its defense business as elevated geopolitical risk is driving urgency for global defense spending and strong shipbuilding activity.

BSD Analysis:
Vulcan Value Partners re-initiated a position in Curtiss-Wright, a company they have owned multiple times over the past decade, highlighting their familiarity with the business model and management team. The investment thesis centers on Curtiss-Wright's dominant market positions in highly specialized, mission-critical technologies across aerospace, defense, and industrial markets. The company's competitive moat is built on deep technical expertise and market-leading positions (#1 or #2) in most of its niche markets, creating significant barriers to entry. The defense exposure (two-thirds of revenue) provides stability and visibility through long-term contracts on key U.S. military platforms including aircraft carriers, submarines, and fighter jets. Critically, over 50% of defense revenue comes from sole-source positions, demonstrating the company's irreplaceable role in critical defense systems. The fund sees strong secular tailwinds from elevated geopolitical tensions driving increased global defense spending and robust shipbuilding activity. This combination of market dominance, sole-source positions, and favorable defense spending trends creates a compelling long-term investment opportunity in a high-quality industrial franchise.

Pitch Summary:
We purchased United Parcel Service (UPS) during the quarter. UPS is a global parcel shipment and logistics company which competes in a global oligopoly with high barriers to entry. UPS' integrated network is more efficient than its closest peer, as evidenced by its margin profile, free cash flow conversion, and returns on invested capital. The company's management team is focusing on profitable growth through its Better, not Bigger strategy which should improve margins and future opportunities for the company. The stock price was down due to market concerns about customer concentration and Amazon's potential entry into the parcel delivery and logistics market. Additionally, UPS Teamsters' labor agreement expires on July 31, 2023. The market fears a potential labor strike, significant wage inflation, and shippers moving volume to competitors due to concerns around potential service disruptions. We have incorporated these risks into our value, and we believe its stock price is still discounted.

BSD Analysis:
Vulcan Value Partners established a position in UPS, capitalizing on market concerns that have pressured the stock price below intrinsic value. The fund's investment thesis is built on UPS's competitive advantages within a global oligopoly characterized by high barriers to entry and network effects. The managers emphasize UPS's operational superiority over competitors, evidenced by superior margins, free cash flow conversion, and returns on invested capital from its integrated logistics network. Management's "Better, not Bigger" strategy focuses on profitable growth and margin expansion rather than pure volume growth, which should enhance long-term value creation. The fund acknowledges significant near-term risks including customer concentration concerns, Amazon's potential competitive threat in logistics, and the July 2023 Teamsters labor contract expiration that could result in strikes or wage inflation. However, Vulcan believes these risks are already reflected in the discounted valuation, providing an attractive risk-adjusted entry point for a dominant player in an essential industry with strong competitive moats.

Pitch Summary:
During the quarter, we purchased InterContinental Hotels Group, a company we have owned in the past. IHG is the world's third largest hotel chain with more than 6,000 hotels in more than 100 countries across 18 brands, including Holiday Inn & Holiday Inn Express, InterContinental, and Crowne Plaza. IHG has strong brand recognition, the industry's third largest loyalty program, and global scale. Growth in net rooms is driven by a long-term trend of consolidation around large hotel brands. We admire its asset-light business model where 99% of profits are derived from its managed and franchised hotels, while less than 1% of profits come from its owned and leased hotels portfolio. Long-term revenue per available room (RevPAR) growth is being driven by a rising global middle class with a desire to travel. IHG has a robust pipeline of approximately 280,000 rooms of which 40% are currently under construction. We had the opportunity to purchase IHG again as concerns around a macroeconomic downturn and a long-term impairment of business travel have negatively impacted the company's stock price. Even after taking these headwinds into account, we believe we own the company with a margin of safety.

BSD Analysis:
Vulcan Value Partners initiated a position in InterContinental Hotels Group, viewing it as an attractive opportunity amid market concerns about macroeconomic headwinds and business travel impairment. The fund's thesis centers on IHG's dominant market position as the world's third-largest hotel chain with over 6,000 properties across 18 brands globally. The investment case is anchored by IHG's asset-light business model, generating 99% of profits from managed and franchised properties rather than owned real estate, which provides superior capital efficiency and lower risk. The managers highlight secular growth drivers including industry consolidation toward large brands and rising global middle-class travel demand driving long-term RevPAR growth. With a robust development pipeline of 280,000 rooms (40% under construction) and the industry's third-largest loyalty program, IHG is well-positioned to capture market share. The fund believes the recent stock price weakness has created a compelling entry point with an adequate margin of safety despite near-term macro uncertainties.