Investment Pitches

Pitch Summary:
Paycom sold off at the end of October as the market reacted negatively to the short-term negative impact on margins from continued investments in its platform and its "BETI" product. BETI is Paycom's self-service software that allows employees to input their own payroll data. The company has demonstrated that the use of BETI can significantly improve return on investment and has made its adoption a priority for its salesforce. While there is no immediate revenue uptick from BETI adoption, the long-term view is that it improves the return on investment of Paycom's offering and increases client retention. We maintain that Paycom is a high-quality, high-growth leader in human capital management and payroll software and should continue to take market share from long-standing incumbents. While we are still assessing the BETI adoption in more detail, as long-term investors, we can look through the short-term noise and assess the opportunity over our multi-year investment horizon.

BSD Analysis:
Polen Capital maintains a bullish long-term view on Paycom despite near-term margin pressure from strategic investments in the BETI platform. The market's negative reaction to short-term margin compression reflects concerns about the company's continued platform investments, but Polen views this as necessary for long-term competitive positioning. BETI represents a significant innovation in payroll processing, enabling employee self-service data input that improves operational efficiency and client return on investment. While BETI adoption doesn't generate immediate revenue increases, it enhances client retention and strengthens Paycom's competitive moat through improved service delivery. The company's leadership position in human capital management and payroll software provides a strong foundation for continued market share gains against established incumbents. Polen's assessment emphasizes Paycom's high-quality business model and growth trajectory, viewing current margin investments as strategic positioning for future profitability expansion. The firm's long-term investment approach allows them to look beyond short-term volatility and focus on the multi-year value creation opportunity.

Pitch Summary:
Ferguson is a leading US-focused distributor ($33B mkt cap) of plumbing and HVAC supplies that is split between non-residential (48%) and residential (52%) as well as repair/remodel (60%) and new construction (40%). Like other high-quality distributors, Ferguson benefits from a prime spot in its value chain. It has many suppliers (over 30,000), customers (~1 million), and small competitors. By providing great service and parts availability, Ferguson guides its customers to the parts they want in a timely fashion. I think last year the market was worried that Ferguson had over-earned due to rising prices and excess demand during covid. Furthermore, the company had removed its primary listing in the United Kingdom that caused some force selling among European index holders. Right Tail had the key insight that Ferguson should be able to hold onto most of its pricing and margins. With pricing likely not being the number one concern for contractors and commodity products only accounting for 15% of Ferugson's business, I thought the company's fundamentals would hang in better than others feared. While it's a short period of time to assess performance, Ferguson's stock price has appreciated ~40% since we discussed it in our Q2 2022 investor letter. I would guess that Ferguson's earnings have held up better than investors feared at many points last year. Whenever I find myself tempted to think too short term, I envision where this company might be in the next five or ten years. This is a subjective exercise based on careful research though the future is uncertain. That said, I believe one can assess the odds of the changes in a company's relevance in a given industry. Ferguson scores quite well on this litmus test. I think they'll continue to gain share in plumbing and HVAC distribution from smaller regional players. I continue to think this investment can compound at a mid-teens rate over the coming years hopefully driven by low to mid-teens growth in earnings per share mixed in with a bit of multiple expansion. Getting added to the S&P 500 index would be a nice sweetener as well.

BSD Analysis:
Right Tail Capital presents a compelling bull case for Ferguson based on the company's dominant market position and pricing power resilience. The manager correctly identified that Ferguson's diversified revenue mix, with 60% from repair/remodel activities, provides defensive characteristics against cyclical downturns. The thesis centers on Ferguson's ability to maintain pricing and margins despite post-COVID normalization concerns, supported by the fact that commodity products represent only 15% of business and contractors prioritize service over price. The 40% stock appreciation since the initial pitch validates the manager's contrarian view during forced selling from UK delisting. Ferguson's market share gains from smaller regional competitors and potential S&P 500 inclusion provide additional upside catalysts. The manager projects mid-teens compound returns driven by earnings growth and multiple expansion, reflecting confidence in the company's long-term competitive moat in plumbing and HVAC distribution.

Pitch Summary:
XPEL is the leader in the automotive paint protection film ("PPF") market. During the period, the stock sold off sharply on news that Tesla entered the market in 2 of their 100 service centers. We believe the reaction was overblown, and the combination of increasing attach rates, adjacent categories (for instance, new markets like architectural and Marine), and geographic expansion provide a long runway of growth for XPEL. However, we exited the position over the period as part of the strategy changes outlined later in the letter.

BSD Analysis:
Polen Capital acknowledged XPEL's market leadership in automotive paint protection films but ultimately exited the position during their strategy restructuring. The company faced significant stock price volatility following Tesla's entry into the PPF market at two of their 100 service centers, which Polen viewed as an overreaction by the market. Despite this competitive concern, the investment team recognized XPEL's strong growth prospects through multiple avenues including increasing attachment rates, expansion into adjacent categories like architectural and marine applications, and continued geographic expansion. The exit decision appears to have been driven more by portfolio restructuring considerations rather than fundamental concerns about the business. XPEL's market leadership position and diversification opportunities across multiple end markets suggest a solid long-term growth trajectory. However, the Tesla competitive threat highlights potential risks from large automotive manufacturers entering the aftermarket space. The company's ability to maintain market share while expanding into new categories and geographies will be critical for future performance.

Pitch Summary:
CTS Eventim, the European leader in ticketing and live entertainment event management, reported positive quarterly results with profits well ahead of expectations. Ticketing sales were particularly robust, driven by blockbuster tours such as Taylor Swift and Coldplay. Despite the robust results, management maintained their full-year guidance. CTS continues to see a significant rebound in demand, even based on pre-Covid levels, and has seen profitability improve. We believe they can compound earnings close to 15% per annum given their dominant market position and the secular trends of ticketing moving online and increased consumer spending on experiences.

BSD Analysis:
Polen Capital maintains a strong bullish position on CTS Eventim, emphasizing the company's dominant market position in European ticketing and live entertainment. The company delivered exceptional quarterly results with profits significantly exceeding expectations, driven by robust ticketing sales from major tours including Taylor Swift and Coldplay. This performance demonstrates the company's ability to capitalize on the post-COVID recovery in live entertainment demand, which has now exceeded pre-pandemic levels. The investment thesis centers on CTS Eventim's market leadership and two powerful secular trends: the digital transformation of ticketing and increased consumer preference for experiential spending over goods. Management's conservative guidance despite strong results suggests potential for upside surprises. Polen projects approximately 15% annual earnings growth, supported by the company's dominant market position and favorable industry dynamics. The combination of market leadership, secular tailwinds, and improving profitability metrics makes CTS Eventim an attractive long-term growth opportunity in the evolving entertainment landscape.

Pitch Summary:
Shift, a Japanese technology company that specializes in software testing, announced good fourth-quarter and full-year results and was boosted further by growing expectations that AI would lead to an increase in non-enterprise testing. The outsourced software testing market is vast, and an estimated 98% of the workload is handled in-house today, even though companies like Shift can deliver this service more cheaply and efficiently. The company has a robust track record of hiring, training, and retaining talented engineers, and we expect the company to continue to deliver strong organic revenue growth for the foreseeable future.

BSD Analysis:
Polen Capital views Shift as a compelling opportunity in the Japanese software testing market, benefiting from both secular trends and AI-driven demand acceleration. The company reported strong quarterly and full-year results, demonstrating execution capabilities in a rapidly evolving technology landscape. The investment thesis is anchored on a massive addressable market opportunity, with 98% of software testing currently handled in-house despite Shift's superior cost and efficiency advantages. This represents significant market share capture potential as companies increasingly outsource non-core functions. Shift's competitive advantage lies in its proven ability to attract, develop, and retain high-quality engineering talent, which is critical in the specialized testing domain. The emergence of AI technologies is expected to drive additional testing demand, particularly in non-enterprise segments, providing a tailwind for organic growth. Polen expects sustained strong revenue growth driven by market share gains and expanding testing requirements across the technology sector.

Pitch Summary:
Discount retailer Five Below recovered from Q3 weakness after it reported a better-than-expected fourth quarter. The company reported 14% year-on-year revenue growth and raised its full-year earnings and revenue guidance. As had been previously communicated, profits declined amid higher expenses, but the discount retailer continues to outperform its peers and is well positioned to capitalize on the holiday season and deliver on their goals for the year. Amidst a challenging macro backdrop, the company has executed well and benefits from consumers looking to stretch their dollar further. Looking ahead, we believe the company can compound its value at a high-teens rate over the next five years, driven by a combination of mid-teens new store expansion, mid- to low-single-digit comparable store growth, and modest margin expansion.

BSD Analysis:
Polen Capital maintains a bullish stance on Five Below, highlighting the company's resilient execution in a challenging macroeconomic environment. The discount retailer demonstrated strong fundamentals with 14% year-over-year revenue growth and raised full-year guidance, indicating management confidence. Despite margin pressure from higher expenses, the company continues to outperform peers and benefits from consumer behavior shifts toward value-oriented shopping. The investment thesis centers on a multi-year growth trajectory with high-teens value compounding potential. Key growth drivers include aggressive store expansion at mid-teens rates, steady comparable store sales growth in the mid-to-low single digits, and gradual margin improvement. The company's positioning in the discount retail space provides defensive characteristics during economic uncertainty while maintaining growth optionality. Polen's confidence in Five Below's execution capabilities and market positioning supports their long-term investment horizon.

Pitch Summary:
Microsoft: MSFT was a top contributor in the quarter following strong FY1Q24 earnings in late October. In that earnings report, MSFT delivered better-than-expected revenue (+13%) and earnings (+27%), with growth in both accelerating from the prior quarter. All three major segments grew revenue faster than expected, highlighted by 28% constant currency growth in Azure, the company's cloud offering. This marked the first quarter-over-quarter acceleration for Azure in six quarters. Operating margins (48%) were 400 basis points better than expected and earnings came in 13% ahead of expectations. Cloud-based services have become the company's largest revenue and earnings producer. The company's Azure platform alone has the potential to grow to more than $100 billion in annual revenue over the next decade. Overall, we believe that the company will continue to deliver double-digit revenue and EPS growth and generate an enormous amount of free cash flow to both return to shareholders and use for acquisitions.

BSD Analysis:
RiverPark presents a strong bull case for Microsoft following exceptional Q1 FY24 results that demonstrated accelerating growth across all business segments. The fund highlights impressive financial metrics including 13% revenue growth and 27% earnings growth, both accelerating from the prior quarter. Azure cloud services emerged as the standout performer with 28% constant currency growth, marking the first quarter-over-quarter acceleration in six quarters and reinforcing Microsoft's competitive position in the cloud infrastructure market. Operating margin expansion to 48% (400bp beat) demonstrates the company's operational leverage and pricing power. The investment thesis centers on cloud services becoming Microsoft's largest revenue and profit driver, with Azure alone positioned to reach $100B+ in annual revenue over the next decade. RiverPark expects sustained double-digit revenue and EPS growth supported by the secular shift to cloud computing and Microsoft's dominant market position. The company's substantial free cash flow generation provides flexibility for both shareholder returns and strategic acquisitions to drive future growth.

Pitch Summary:
Uber Technologies: UBER was a top contributor in the quarter following better than expected 3Q23 earnings and 4Q23 guidance. Gross bookings of $35.3 billion were up 21% year over year. Mobility gross bookings of $17.9 billion grew 30% over last year driven by a combination of product innovation and driver availability. Delivery gross bookings of $16 billion were up 16% from last year and continued to be strong throughout the quarter. 1Q Adjusted EBITDA of $1.1 billion, up $576 million year over year, was better than management's guidance of $1 billion, and the company generated $900 million of free cash flow, up from $358 million last year. Management guided to continuing growth in 4Q Gross Bookings (23.5% growth) and Adjusted EBITDA (of $1.2 billion). UBER remains the undisputed global leader in ride sharing, with a greater than 50% share in every major region in which it operates. The company is also a leader in food delivery, where it is number one or two in the more than 25 countries in which it operates. Moreover, after a history of losses, the company is now profitable, delivering expanding margins and substantial free cash flow. We view UBER as more than a ride sharing and food delivery service; we also see it as a global mobility platform with 142 million users (by comparison, Amazon Prime has 200 million members) and the ability to penetrate new markets of on-demand services, such as package and grocery delivery, travel, and hourly worker staffing. Given its $5.2 billion of unrestricted cash and $5.1 billion of investments, the company today has an enterprise value of $128 billion, indicating that UBER trades at 21x our estimates of next year's free cash flow. We trimmed our UBER position on its strength during the quarter; it is a top 10 holding in JPMC-RP.

BSD Analysis:
RiverPark maintains a bullish stance on Uber following strong Q3 results that demonstrated the company's successful transition to profitability and cash generation. The fund emphasizes Uber's dominant market position with 50%+ rideshare market share globally and top-two food delivery positioning across 25+ countries. Key financial metrics include $35.3B gross bookings (+21% YoY), with Mobility accelerating to 30% growth and Delivery maintaining 16% growth. The company exceeded EBITDA guidance at $1.1B (+$576M YoY) and generated $900M in free cash flow versus $358M prior year. RiverPark views Uber as an expansive mobility platform with 142M users, comparable to Amazon Prime's scale, positioned to penetrate adjacent on-demand markets including package delivery, travel, and staffing services. The investment case is supported by a strong balance sheet with $5.2B cash and $5.1B investments, yielding an enterprise value of $128B or 21x estimated forward free cash flow. The manager's position trimming reflects valuation discipline while maintaining conviction in the long-term growth trajectory.

Pitch Summary:
Shopify: Shopify shares were our top performer in the quarter following a strong 3Q earnings report that included better than expected revenue growth and substantial margin expansion. We wrote in October, after Shopify was our worst performer, that the stock had been volatile, despite the fact that the company's underlying business has been "steadily improving following a post-Covid e-Commerce slowdown." The most recent quarter, reported in early November, was a continuation of this steady recovery. Revenue growth of 25% was 3 percentage points better than investors expected and an acceleration over last year's 3Q growth of 22%. More impressively, SHOP reported operating income margins of 16%, 600 basis points ahead of investor expectations. Free cash flow margins were also 16%, and the company guided 4Q free cash flow margins to the "high teens." A combination of new merchants to the company's platform, increased adoption of SHOP's offerings by existing merchants, and e-commerce market share gains (SHOP merchants US sales on Black Friday grew 24% year over year vs US E-commerce in aggregate growing 7.5%) are driving this revenue growth and profitability. Last year, 10% of US retail e-commerce sales flowed through SHOP, second only to Amazon, and the company is still enjoying significant tailwinds as retail merchants of all sizes adopt SHOP's software tools to display, manage and sell their products across a dozen different sales channels. We believe that the overall growth of e-commerce, combined with the development of new products and services, such as its digital wallet Shop Pay, should continue to drive revenue growth of more than 20% per year over the next several years, accompanied by re-acceleration of operating margin growth and FCF generation.

BSD Analysis:
RiverPark presents a compelling bull case for Shopify following a strong Q3 earnings beat that demonstrated the company's recovery from post-COVID e-commerce headwinds. The fund highlights impressive fundamental metrics including 25% revenue growth (3pp above expectations), 16% operating margins (600bp beat), and 16% free cash flow margins with guidance for high-teens FCF margins in Q4. The investment thesis centers on Shopify's dominant market position as the second-largest e-commerce platform in the US with 10% market share, trailing only Amazon. Key growth drivers include new merchant acquisition, increased platform adoption by existing merchants, and market share gains evidenced by 24% Black Friday sales growth versus 7.5% for aggregate US e-commerce. The manager expects sustained 20%+ revenue growth driven by e-commerce secular tailwinds and new product development including Shop Pay digital wallet. The combination of accelerating top-line growth and expanding margins positions Shopify for continued operating leverage and free cash flow generation.

Pitch Summary:
During 2023, we discussed Transaction Capital (TCP) frequently. As we suspected, in November, management announced that they were considering spinning off WeBuyCars (WBC). This was confirmed in February 2024. We anticipate that our entry price will exceed the value of the spun-off company and we'll still have the remainder of the 'rump' consisting of the troubled SA Taxi and the resilient Nutun. WBC is the 'hidden diamond' that we've been waiting for. Management's IPO presentation has a projection that they will double their second-hand vehicle market share over the next five years from 10%-12% today - a grand target that we'll celebrate if they hit. The more alluring part for us is this growth, according to management, will require marginal capex to get there. Since Transaction Capital acquired WBC in 2020, the company has significantly increased its operational capacity, expanding parking bays from 4,000 to 10,500 and witnessing a 2.5-fold increase in vehicle sales. The profit-driving lever for this business is inventory turnover. This business model is more akin to a grocer that needs to turn fresh produce over quickly at thin margins rather than a tech SaaS business that earns high gross margins. One positive is that cars don't expire in a few days. Should WBC double its market share within the capital expenditure parameters provided, we anticipate growth in free cash flow growth exceeding sales growth by a large measure. The interesting question post-unbundling that we ponder is: what becomes of the remaining TCP business? Lenders no longer have leverage over the holding company through HoldCo debt cross-default clauses. Theoretically, if SA Taxi lenders choose not to support debt-rollover relief, TCP could simply put SA Taxi into business rescue in an orderly process rather than the voluntary workout process they're following at the date of writing. We'll know in two months how things will look post unbundling.

BSD Analysis:
SaltLight presents a complex value realization thesis on Transaction Capital centered on the anticipated spinoff of WeBuyCars (WBC), which the manager describes as a 'hidden diamond.' The fund expects their original entry price to be exceeded by the value of the spun-off WBC alone, while retaining the remaining businesses at essentially no cost. The bull case for WBC rests on management's projection to double second-hand vehicle market share from 10-12% to 20-24% over five years with minimal additional capital expenditure. SaltLight highlights WBC's operational scaling since 2020, expanding parking capacity from 4,000 to 10,500 bays while achieving 2.5x vehicle sales growth. The manager emphasizes that inventory turnover is the key profit driver, comparing the business model to a grocer requiring rapid turnover at thin margins. The fund anticipates that if WBC achieves its market share targets within stated capex parameters, free cash flow growth will significantly exceed sales growth. Post-spinoff, SaltLight sees potential value in the remaining TCP structure, noting that lenders will lose holding company leverage, potentially allowing for orderly resolution of the troubled SA Taxi business.

Pitch Summary:
AppLovin (APP) operates at the intersection of game advertisers, publishers, and over one billion game players, functioning as a pivotal monetisation enabler in the free-to-play gaming ecosystem. One of AppLovin's strengths lies in its primary use of contextual data for ad matching. While this type of data may not offer the high precision of first-party data like Meta's, it remains invaluable, especially in environments where traditional data signals are weaker. Contextual targeting becomes increasingly relevant in areas like connected TV (CTV), where direct user tracking is more challenging. Connected TV, which includes devices (smart TVs, consoles, or sticks) that stream TV content, represents a flourishing opportunity set for performance-based digital advertising. As more households move away from traditional satellite or terrestrial TV in favour of internet-connected devices, the potential for monetising this viewership grows. However, advertising on CTV is still operating in the same seventy-year-old way as linear TV - with brand advertising as the dominant part of the funnel. AppLovin sees considerable opportunity in using its capabilities in contextual game targeting to offer performance-based advertising on CTV. They are targeting a type of household rather than a specific user. This space is shifting quickly – particularly in the US – with tech companies investing in sports content and even retailers such as Walmart buying TV operating systems companies. Connected TV advertising has the potential to be a significantly larger market than the $100bn gaming market.

BSD Analysis:
SaltLight presents a bullish thesis on AppLovin based on its strategic position in mobile gaming monetization and expansion into Connected TV advertising. The manager highlights AppLovin's role as a critical intermediary connecting game advertisers, publishers, and over one billion players in the free-to-play gaming ecosystem. While acknowledging that AppLovin's contextual data may be less precise than Meta's first-party data, SaltLight views this as a competitive advantage in environments where traditional tracking is limited, particularly in Connected TV. The fund sees significant opportunity in AppLovin's expansion from gaming into CTV advertising, where the company can leverage its contextual targeting capabilities to bring performance-based advertising to a market still dominated by traditional brand advertising approaches. SaltLight emphasizes that Connected TV represents a rapidly evolving space with major tech companies and retailers investing heavily, creating a potentially larger addressable market than the $100 billion gaming sector. The investment thesis centers on AppLovin's ability to modernize CTV advertising through household-level targeting rather than individual user tracking.

Pitch Summary:
Meta's primary mission is all about capitalising on user engagement and maintaining its network effects. AI is augmenting their objectives in two ways: 1) Improving engagement time per daily active user (AI Job One) 2) Matching ad buyers (advertisers) with ad consumers (AI Job Two). Meta is in the business of making sure that when you're scrolling through your feed or watching videos, you're glued to the screen as long as possible. Why? Because the longer you watch, the more ads they can slip into your viewing experience (think of digital billboards). But these 'digital billboards' are a finite resource – only more engagement time creates them. And here's where the magic of 'AI job one' comes in - finding that perfect video that keeps you hooked - thereby increasing the time you spend on the platform. It's a cycle that feeds itself: more engagement means more opportunities to serve ads, which in turn means more revenue. Meta must earn the highest possible yield on each unit of ad inventory – or it is lost. Ad impressions are auctioned off to the highest bidder. Advertising networks play a crucial role in connecting advertisers with their target audience, aiming to optimise advertisers' marketing objectives such as audience building, brand awareness, and sales conversion. In the realm of performance marketing, the goal is to maximize the return on ad spend (ROAS) through efficient targeting. AI technology enhances this process by identifying the best match between the advertiser, the advertisement, and the consumer, ensuring that ads are delivered to the most suitable audience at the ideal time and place through a sophisticated ranking algorithm. Pre-2022, digital advertisers relied on deterministic targeting methods to track ad interactions and conversions. The landscape shifted dramatically in 2021 when Apple released iOS 14.5 disrupting deterministic targeting by limiting the ability to track users (called IDFA by the industry), significantly impacting Meta's ad targeting capabilities and consequently its share price. It took Meta eighteen months to adapt and re-tool by incorporating AI to leverage contextual and first-party data to improve ad targeting. This adaptation has not only helped Meta recover lost ad spend but also positioned it strongly against competitors. Generative AI promises a profound era of personalised and automated advertising, where ads are dynamically customised for each user. This innovation will allow advertisers to save on service providers creating multiple ad variants and reallocate savings to further advertising spend. Personalisation will likely lead to more relevant ads for users, enhancing engagement rates and the propensity of conversion - a win for Meta's revenue capture. Putting this all together, AI's role in advertising has led to increased user engagement and improved targeting accuracy, creating a beneficial scenario for all parties involved.

BSD Analysis:
SaltLight presents a compelling bull case for Meta centered on AI-driven advertising optimization and network effects. The manager argues that Meta's dual AI strategy—enhancing user engagement and improving ad targeting—creates a powerful flywheel effect where increased engagement generates more ad inventory opportunities. The fund highlights Meta's successful 18-month adaptation following Apple's iOS 14.5 privacy changes, demonstrating the company's ability to rebuild targeting capabilities using AI, contextual data, and first-party information. SaltLight emphasizes that Meta's advertising business benefits from high incremental margins (~80%) and strong network effects, where scale generates disproportionate value for both advertisers and users. The thesis suggests that generative AI will enable unprecedented personalization in advertising, allowing dynamic customization for each user while reducing advertiser costs. The manager views Meta as well-positioned to capitalize on the shift toward performance-based digital advertising, with AI serving as a key competitive moat. This investment aligns with SaltLight's broader strategy of targeting AI software applications rather than infrastructure plays.

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 initiated a position in Sealed Air, a global protective packaging leader with dominant positions across food and beverage, industrial, and e-commerce markets. The investment thesis centers on SEE's razor-and-blade business model selling both packaging equipment and consumable materials, creating recurring revenue streams. The manager highlights Cryovac as the gold standard for fresh protein packaging, where food safety requirements create customer willingness to pay premium prices for quality and reliability. High switching costs and sticky customer relationships provide defensive characteristics, while the mission-critical nature of food safety creates pricing power. The company's iconic brands like Bubble Wrap in e-commerce and industrial markets benefit from similar competitive dynamics. Sealed Air's market leadership position should benefit from secular growth in e-commerce packaging demand and increasing food safety regulations globally. The combination of defensive end markets, recurring consumables revenue, and strong brand recognition provides an attractive risk-adjusted investment opportunity.

Pitch Summary:
As you know, Starboard Value LP (together with its affiliates, "Starboard" or "we") has been an investor in GoDaddy Inc. ("GoDaddy" or the "Company") since 2021. Starboard beneficially owns more than 6% of the outstanding common stock of GoDaddy, making us one of the Company's largest shareholders. We appreciate the dialogue we have had with both of you and GoDaddy's Board of Directors (the "Board") over the past two years. As we have stated since the beginning of our engagement, our goal has been to see GoDaddy improve its combination of growth and profitability by executing on a plan focused on durable growth and meaningful margin expansion. Following two years of private dialogue and the subsequent issuance of a public letter to the Company in September 2023 outlining our specific views on opportunities for improvement in costs, margins, and free cash flow, we were pleased to see GoDaddy take a step in the right direction on its Q3 FY2023 earnings call. Specifically, management committed to improving the combination of growth and profitability and provided improved profitability targets on this call. In fact, despite lowering Q4 FY2023 revenue growth guidance from 7% to 6%, GoDaddy's share price has since outperformed, which we believe is largely attributable to the higher Adj. EBITDA margin guidance for Q4 FY2023 and future periods. This outperformance despite a lower growth forecast lends credence to our perspective that investors want to see GoDaddy better balance growth and profitability with a focus on delivering a reasonable and achievable growth rate matched with significant margin expansion and free cash flow generation. However, commentary on one earnings call and a few months of share price outperformance do not solve a multi-year problem. As shown in the chart below, despite the recent increase in share price, GoDaddy is still valued at a large discount compared to peers and its own historical trading multiple. We believe GoDaddy is a high-quality, stable, infrastructure-like business that should be able to generate solid growth, expand margins, and grow free cash flow per share across a range of different economic scenarios. We view the Company's upcoming Q4 FY2023 Earnings Call and March 2024 Investor Day ("2024 Investor Day") as key events to maintain and build upon recent momentum and to ensure that appropriate operating and financial targets are set for the near, medium, and long-term. At the 2024 Investor Day, we believe GoDaddy should, at a minimum, commit to consistent improvement in its combination of growth and profitability. We believe providing a target of at least 40% growth plus profitability for FY2025 would be in-line with peer targets and timelines and should be readily achievable through a reasonable acceleration in revenue growth and meaningful margin expansion. To be clear, we do believe GoDaddy should be able to improve its growth rate from FY2023 levels, and we are excited about the opportunities in Payments & Commerce and Airo, among others. Finally, considering the Company's robust and increasing free cash flow generation, we would like to see the Company continue its share repurchase program. We continue to believe that repurchasing undervalued shares is the best use of capital for GoDaddy at this time. Over the next three years, we anticipate GoDaddy will generate more than $4 billion of free cash flow, or nearly 30% of its current market capitalization. If the Company successfully executes against the targets we have outlined above and uses its free cash flow for share repurchases, we believe GoDaddy can generate more than $9.00 of free cash flow per share in FY2024, growing to approximately $14.00 of free cash flow per share by FY2026. Based on these numbers, GoDaddy is trading at approximately 12x FY2024 free cash flow per share and less than 8x FY2026 FCF per share. As shown in the chart below, we believe that GoDaddy's share price has significant upside potential even without multiple expansion, and should its multiple expand towards its historical or peer levels, even more upside is possible.

BSD Analysis:
Starboard Value presents a compelling activist thesis for GoDaddy, emphasizing the need for improved operational execution and margin expansion. The fund owns over 6% of shares and has been engaged with management since 2021, advocating for better balance between growth and profitability. Despite recent management commitments to margin improvement, Starboard argues the company trades at a significant discount to peers and historical multiples. The activist highlights GoDaddy's infrastructure-like business model with high recurring revenue characteristics that should support consistent free cash flow generation. Key growth drivers include Payments & Commerce and Airo initiatives, though Starboard urges conservative guidance setting after previous target misses. The fund projects robust free cash flow generation of over $4 billion over three years (30% of current market cap) and advocates for aggressive share repurchases. With projected FCF per share growing from $9 in FY2024 to $14 by FY2026, the current valuation of 12x forward FCF appears attractive. Starboard's thesis centers on operational improvements driving multiple expansion toward peer levels, creating significant upside potential.

Pitch Summary:
UnitedHealth Group is the largest health insurer in the country and also owns Optum, which is a rapidly growing healthcare services company. The health insurance business benefits from demographic and network effects as more members attract more providers and vice versa, which reinforces United's value proposition and bargaining power with each side of the network. Over the last five years, Optum has grown significantly and roughly half of United's 2022 EBIT was generated from the Optum business. Optum Health provides care for 102 million consumers and serves more than 100 health payer partners. We expect Optum to continue to grow and be a significant contributor to UnitedHealth Group's future successes.

BSD Analysis:
Vulcan Value Partners initiated a position in UnitedHealth Group, America's largest health insurer with significant exposure to the rapidly growing healthcare services sector through Optum. The investment thesis highlights UNH's powerful network effects where more members attract more providers and vice versa, creating a reinforcing cycle that strengthens bargaining power on both sides. The manager emphasizes Optum's transformation into a major growth driver, now generating roughly half of UNH's EBIT after five years of significant expansion. Optum Health's scale serving 102 million consumers and over 100 health payer partners demonstrates the breadth of the healthcare services opportunity. The combination of a stable, cash-generative insurance business with the higher-growth, higher-margin Optum services creates an attractive risk-adjusted return profile. UNH benefits from favorable demographics with an aging population requiring more healthcare services, while Optum's vertical integration provides cost advantages and improved patient outcomes.

Pitch Summary:
Texas Instruments is the world's largest designer and manufacturer of analog semiconductors. These semiconductors convert real-world signals, such as temperature, pressure, and sound, into digital data. Analog semiconductors are also used to manage power in electronic devices. We are drawn to this company because its products are mission critical, and product cost as a percentage of total system cost is low. Moreover, market positions are stable over long periods of time and barriers to entry are high. Its management team thinks strategically, in terms of decades, and focuses on maximizing free cash flow per share over the long term.

BSD Analysis:
Vulcan Value Partners initiated a position in Texas Instruments, the world's largest analog semiconductor manufacturer. The investment thesis centers on TXN's mission-critical products that convert real-world signals into digital data and manage power in electronic devices. The manager emphasizes several key competitive advantages: products represent a low percentage of total system cost, creating price insensitivity; stable market positions with high barriers to entry; and long-term strategic management focused on maximizing free cash flow per share over decades. The analog semiconductor market offers more stability than digital chips, with longer product lifecycles and less commoditization risk. TXN's dominant market position in analog chips, combined with the increasing electronic content in everything from automobiles to industrial equipment, provides a durable growth runway. The company's disciplined capital allocation and focus on free cash flow generation align well with Vulcan's investment philosophy of owning high-quality businesses with sustainable competitive advantages.

Pitch Summary:
Marriott is a company that we have owned several times in the past. The company is an asset-light global lodging franchisor and operator that benefits from strong network effects. Approximately 99% of Marriott's global rooms are managed or franchised which enables the company to generate high returns on capital. Marriott has an extensive portfolio of brands ranging from luxury brands such as The Ritz-Carlton, to premium brands such as Westin Hotels & Resorts, to select brands such as Residence Inn by Marriott. The company is doing an excellent job converting independent hotels into the Marriott system through its soft brands including the Luxury Collection, the Autograph Collection, and the Tribute Portfolio. This conversion opportunity should benefit Marriott's net unit growth in a period when new hotel development could be challenging in North American and Europe. The company generates robust free cash flow through its long-term, contracted franchise fee and management fee revenue streams. Its competitive advantages include brand strength, operational scale, direct booking systems, and loyalty programs. We sold Marriott in the first quarter of 2020 because of our concerns about the company's debt structure. Since then, Marriott has restructured its debt and improved its balance sheet. Additionally, average daily rates (ADR) on corporate travel have returned to pre-Covid levels.

BSD Analysis:
Vulcan Value Partners re-initiated a position in Marriott International, a company they have owned multiple times previously. The investment thesis focuses on Marriott's asset-light business model with 99% of rooms managed or franchised, generating high returns on capital through fee-based revenue streams. The manager highlights Marriott's strong network effects and extensive brand portfolio spanning luxury to select service segments. A key growth driver is the conversion of independent hotels through soft brands like Autograph Collection, which should support unit growth during challenging new development periods. The company's competitive moats include brand strength, operational scale, direct booking capabilities, and loyalty programs that generate robust free cash flow. Importantly, Vulcan notes that previous balance sheet concerns from 2020 have been addressed through debt restructuring, and corporate travel rates have recovered to pre-pandemic levels, removing key investment obstacles.

Pitch Summary:
Diageo is a global spirits and beer producer with over 200 brands, including Johnnie Walker, Crown Royal, Guinness, Smirnoff, Baileys, Don Julio, and Casamigos. Diageo's spirits segment generates more than 80% of the company's revenue, and the spirits segment has been taking share from beer and wine over the last decade. The company is diversified across geographies, brands, and alcohol categories. Diageo has strong margins and high returns on invested capital. Its management team has an excellent track record for brand and product innovation, moving into high-growth categories at the right time. The company has pricing power and performs well during recessions. Additionally, the premiumization trend has been a tailwind to Diageo's revenue, and we believe this trend will continue, driven by an expanding global middle class and preference for higher quality spirits.

BSD Analysis:
Vulcan Value Partners initiated a position in Diageo, highlighting the company's dominant position in the global spirits market with over 200 brands including premium labels like Johnnie Walker and Don Julio. The investment thesis centers on Diageo's structural advantages including strong pricing power, high returns on invested capital, and diversification across geographies and alcohol categories. The manager emphasizes the ongoing premiumization trend in spirits consumption, driven by an expanding global middle class seeking higher quality products. Diageo's spirits segment generates over 80% of revenue and has been gaining market share from beer and wine over the past decade. The company's recession-resistant characteristics and management's track record of successful brand innovation and category expansion provide additional confidence. The investment appears well-timed to capitalize on long-term demographic trends favoring premium spirits consumption globally.

Pitch Summary:
We also sold our shares in MariMed (OTC: MRMD). The company has been beset by numerous regulatory delays and operational delays. And worse, the company erroneously sent $700k to a fraudulent account and the CFO resigned. The stock is cheap, and the company has potential, but this was the last straw for me believing in the multi-state operator (MSO) business model. I think the idea of being a farmer, a manufacturer, a distributor, a business that needs to run a professional kitchen, while at the same time developing brands and running retail in what are effectively different countries (it's really states) with wildly different regulatory rules where products and supplies can't cross state lines seems like an impossible task and probably is.

BSD Analysis:
The manager divested MariMed following a series of operational and governance failures that undermined confidence in both the company and broader MSO business model. Regulatory and operational delays created ongoing execution challenges, while the $700,000 fraudulent transfer and CFO resignation raised serious internal control concerns. Despite attractive valuation metrics, these issues represented fundamental red flags about management quality and operational competence. The exit reflects broader skepticism about the multi-state operator model's complexity and execution challenges. The manager views the MSO structure as inherently flawed, requiring expertise across farming, manufacturing, distribution, food service, branding, and retail across disparate regulatory environments. This structural complexity creates execution risk that outweighs potential valuation upside. The sale demonstrates disciplined risk management and willingness to abandon positions when fundamental thesis breaks down.

Pitch Summary:
With the proceeds from HQI's sale, we were able to buy AYR Wellness' senior secured notes at 70 cents on the dollar last year. The yield on these bonds at these prices was 20%+ and offered incredible security by being the senior in the capital structure. Fortuitously, the company soon announced a restructuring, and these bonds will also receive common stock shares as well for pushing out the maturity date. Just hanging around the hoop when no one is paying attention is yet another example of how few professional investors inhabit the cannabis sector. These kinds of opportunities are simply not available elsewhere.

BSD Analysis:
The manager executed an opportunistic distressed debt investment in AYR Wellness, purchasing senior secured notes at a significant discount to par value. The 70-cent purchase price generated an attractive 20%+ yield while maintaining senior position in the capital structure, providing downside protection. The subsequent restructuring announcement created additional upside through equity participation alongside the extended maturity terms. This investment exemplifies the manager's thesis about inefficient cannabis markets with limited institutional participation. The distressed debt strategy demonstrates sophisticated capital allocation and risk management, capturing both current income and potential equity upside. The transaction highlights the abundance of mispriced opportunities in cannabis due to lack of professional investor attention. This approach provides multiple ways to win while limiting downside risk through senior security positioning.