Investment Pitches

Pitch Summary:
ASML is a dominant player in the semiconductor industry, holding a monopoly on EUV lithography systems, which are crucial for producing advanced chips. The company's growth is driven by the increasing demand for AI infrastructure, sovereign chip ambitions, and the shift towards smaller process nodes. ASML's High-NA EUV systems are set to initiate a new upgrade cycle, further boosting its growth prospects. The company's financial health is robust, with high free cash flow margins and a strong balance sheet. ASML's strategic position in the supply chain and its ability to generate significant cash flow make it a compelling long-term investment.

BSD Analysis:
ASML's recent Q1 results underscore its strong market position, with net sales reaching €8.8 billion, surpassing expectations. The company's revenue growth is fueled by a higher average selling price of EUV systems, despite a decrease in unit sales. ASML's installed base revenue is a key growth driver, benefiting from strong demand for system upgrades. The company's backlog and waitlist highlight the high demand for its products, while export restrictions to China pose a potential risk. However, the reduction in Chinese exposure mitigates some of this risk, potentially enhancing investor confidence and valuation.

Pitch Summary:
Plug Power has historically struggled with financial performance and shareholder dilution, but recent strategic changes suggest a positive turnaround. Under new CEO Jose Luis Crespo, the company is shifting focus from dilution to profitability, aiming for positive EBITDAs by Q4 2026. A significant growth driver is their electrolyzer business, highlighted by a major contract with Hy2gen Canada and a collaboration with VSparticle to reduce iridium usage. The company is also expanding its partnerships with major clients like Amazon and Walmart, leveraging the reinstatement of the Investment Tax Credit. Plug Power's gigafactory and strategic projects in Europe and Australia position it well for future growth.

BSD Analysis:
Plug Power's strategic pivot under new leadership is promising, particularly with its focus on cost reduction and profitability. The company's Project Quantum Leap initiative has already achieved gross margin positivity, and its capital strategy now emphasizes non-dilutive funding. The electrolyzer business, with its potential to provide grid services and reduce energy costs, is a key differentiator. Additionally, Plug Power's expansion into AI data centers and aerospace, including a contract with NASA, underscores its innovative approach to market expansion. The company's ability to scale manufacturing capacity rapidly further strengthens its competitive position in the renewable energy sector.

Pitch Summary:
We've fully exited our position in Peloton ("PTON"). After a lackluster quarterly report, share prices declined from $6.16/share at the start of the year to $4.10/share, where we exited. Yes, we took the loss on the position that in our folly had sized-up during the quarter. This was our self-inflicted wound, so we'll have to triage it and stem the bleeding. Frankly, we still think the company has promise and may reenter the position later. Our models were to optimistic on subscriber counts, and heading into the quarter, we forecasted lower subscriber losses than the company had guided to. Since most management teams know to underpromise and overdeliver to Wall Street, investors (including us) had anticipated better numbers. Well, turns out the company's guidance was on point. When the numbers fell short, the stock promptly fell by 30%. Normally, we would've held the position and even increased it to let the story play out (new growth initiatives and refinancing). As discussed above, however, we're not sure how energy costs play out here as the full impact of the conflict ripples. If the economy and consumers weaken because of high energy prices, PTON with its $2,000 bikes and $50/month subscription price will have a tougher time attracting and retaining subscribers. In looking at tangential March data, there also appears to be softer sales in the coming weeks, so perhaps our caution is warranted. We shall see. Although we're still bullish on the company's overall prospects, the economic backdrop gives us pause. So in an abundance of caution, we've sold. We'll lick our wounds and stay patient until the conflict and its repercussions are better understood. Don't be surprised if we layer back into the name as we still think the company and its new management team can achieve success.

BSD Analysis:
Open Square Capital executed a tactical exit from Peloton following disappointing quarterly results and broader macroeconomic concerns stemming from the Iran conflict. The fund initially increased its position size during the quarter but was forced to exit at $4.10/share after the stock declined 30% post-earnings from $6.16/share. The manager's models proved overly optimistic on subscriber retention, with actual results matching management's conservative guidance rather than beating expectations as typically occurs. While the fund maintains long-term confidence in Peloton's turnaround potential under new management, rising energy costs from the geopolitical crisis create headwinds for discretionary spending on $2,000 bikes and $50/month subscriptions. Early March sales data suggests consumer softening, validating the cautious approach. The exit reflects prudent risk management given economic uncertainty, though the manager signals potential re-entry once the conflict's impact becomes clearer. The position represents a learning experience in position sizing and the importance of considering macroeconomic factors when investing in consumer discretionary names during volatile periods.

Pitch Summary:
As we discussed in our last letter, we began redeploying our MEG Energy proceeds this quarter. With that, we welcome our newest positions, Valaris ("VAL"). VAL is a US company that owns and leases out 15 drillship and 31 jackups to energy producers worldwide. Think of these platforms as giant floating drilling machines that sail or are towed out to and parked over a client deepwater oil fields. Once positioned, they'll begin to drill in the ocean floor to tap the underground reservoirs. The lease contracts vary in length, and the business is dependent on the capital expenditures of major oil companies. Our purpose for purchasing VAL is to really own Transocean ("RIG"), VAL's closest competitor in the sector, which also owns and leases ultra-deepwater and harsh environment floaters (27 in total). This all changed, however, when RIG announced the transformative acquisition of VAL on February 9th. Under the proposed transaction, VAL shareholders will receive 15.235 RIG shares for every share of VAL. When the dust settles, existing RIG owners will own 53% of the combined company and VAL shareholders 47%. The transaction essentially slams two similarly sized companies together, one highly indebted (RIG), but with more valuable and advanced drillship that command higher rents, with a lightly indebted company (VAL) with fewer drillship and cheaper/cash flowing jackups. The acquisition will effectively deleverage RIG, and the surviving entity will be on much better financial footing. RIG comes into the marriage with ~$5B of net debt and ~$700M in FCF last year, whereas VAL brings only $0.5B of net debt and ~$340M of FCF. In total, we're looking at a $13B market cap company, with $5.5B in net debt. New-RIG is also projected to earn $1.4B in FCF after certain internal cost savings and synergies are achieved, giving shareholders a 11% FCF to market cap yield. The balance sheet delevers significantly as Net Debt to Adjusted EBITDA falls from 3.7x to 2.6x. RIG anticipates paying debt down further using its reinvigorated cash flow to pay debt down even further, and expects to achieve a 1.5x ratio in 24 months. The drillship are the key to this transaction. By further consolidating the drillship space, the company should have more control over pricing and utilization. VAL historically was known to prioritize utilization and not pricing. Once RIG closes the transaction, it can better control the economics of the larger fleet and attempt to raise prices as producers increase production following the war. Gaining market leverage should improve RIG's profitability, utilization, day rates, and overall fleet metrics as offshore capex spend is projected to grow. The merger is expected to close in H2 2026, and since VAL stock was trading at a slight discount to RIG (but will eventually be converted to RIG shares), we've acquired the VAL stock in anticipation that the merger will happen. We acquired the shares on February 9th at an average price of $81.10/share. Given the 15.235 exchange ratio, we've effectively bought RIG at $5.32/share once the merger closes. We also acquired some VAL warrants that allow us to leverage the position slightly. The warrants have an expiration date in April 2028, and once converted to RIG warrants allows us to buy RIG at $8.65/share.

BSD Analysis:
Open Square Capital's investment in Valaris represents a strategic play on the pending merger with Transocean, creating a compelling arbitrage opportunity with significant operational synergies. The fund acquired VAL shares at $81.10 with a 15.235 exchange ratio, effectively purchasing RIG at $5.32/share post-merger. The transaction combines RIG's premium drillship fleet commanding higher day rates with VAL's cash-flowing jackups and stronger balance sheet. The merged entity will have $1.4B in projected FCF, representing an 11% FCF yield on the $13B market cap, while dramatically improving leverage from 3.7x to 2.6x Net Debt/EBITDA. The consolidation creates pricing power in the drillship market, as VAL historically prioritized utilization over pricing, which the combined entity can optimize. With offshore capex expected to grow post-conflict and the combined fleet providing better market control, the merger should drive improved day rates and utilization. The fund also holds VAL warrants expiring April 2028, providing additional leverage to the thesis. The transaction addresses RIG's historical debt burden while creating a financially robust offshore drilling leader positioned to benefit from increased deepwater activity.

Pitch Summary:
As we hoped, OXY finally showed what it's capable of, demonstrating the company's ability to leverage its vast operations and generate significant cash flow. More importantly, this management team finally got out of its own way, shelving its original capex plans for growth, and instead slashed budgets so that it would generate an extra $1.2B of FCF in 2026 (assuming the same oil price as 2025). After finding religion, the market rewarded the decision and sent the stock up 10% in February to ~$50/share. Given our levered position (as we hold OXY warrants), we did slightly better. Interestingly, all of this occurred prior to the Iranian conflict. The war's impact further rallied the shares, and it ended the quarter at $65/share. It's since retreated to ~$55/share, but we think this is temporary as oil prices should remain elevated post-conflict. From what we can tell, OXY has positioned itself to generate enough cash flow with WTI at $65/barrel (WTI's average price in 2025) to pay down its debts, build cash to retire the Berkshire Hathaway preferred shares in 2029, and increase its dividend regularly. At $65/barrel, OXY will generate about $5.2B in free cash flow ("FCF"), and at a 10x multiple, it justifies the $50 market cap (and $50/share price given 1B shares outstanding) the stock reached in February. That's the base case. So as the repercussions from the Iranian conflict plays out, we think the upside here is significant. For simplicity, every $10/barrel increase in oil prices translates to ~$2.5B in FCF (i.e., 50% more cash). Multiply that additional cash flow by a conservative 6-8x multiple, and you're looking at an increase of $15B in market cap (i.e., $15/share on the low end). Again with a 1B shares outstanding, the stock should increase from $50/share to $65/share. You can see that if oil settles long-term at ~$80/barrel, we're looking at an $80/share OXY stock. The warrants, which allows us to buy the OXY shares for $22/share would increase ~60% from today's $35 to $58. Again much depends on where oil settles post-conflict, but we think it'll very likely be somewhere with an "8-9" handle, and potentially more if the disrupted production doesn't return in short-order. In any event, the additional capital would be used to accelerate debt repayments, increasing dividend payments, and perform share buybacks. Given this backdrop, the shares have room to rise, so as oil prices climbed we added to our holdings this quarter.

BSD Analysis:
Open Square Capital presents a compelling bull case for Occidental Petroleum based on management's strategic pivot toward capital discipline and cash flow generation. The fund highlights OXY's decision to slash capex budgets, generating an additional $1.2B in free cash flow for 2026, which represents a fundamental shift in the company's capital allocation strategy. At $65/barrel WTI, OXY is positioned to generate $5.2B in FCF, sufficient to service debt, retire Berkshire Hathaway preferred shares by 2029, and increase dividends. The manager's sensitivity analysis shows that every $10/barrel increase in oil prices translates to $2.5B in additional FCF, creating significant operating leverage. With oil potentially settling at $80/barrel post-conflict, OXY could generate nearly double its current FCF, justifying an $80/share valuation. The fund's use of warrants provides additional leverage to this thesis, with warrants allowing purchase at $22/share potentially increasing 60% if the stock reaches target levels. The investment thesis is underpinned by OXY's improved balance sheet positioning and management's commitment to shareholder returns through debt reduction, dividend increases, and share buybacks.

Pitch Summary:
AppFolio provides cloud-based multi-property management software. The company has been gaining share against legacy suppliers while delivering strong margins and cash flow. Investor concerns have emerged around AI tools potentially replacing proprietary solutions like the ones provided by AppFolio. We believe the company's deep industry expertise. The importance of its software in managing the complexity of running thousands of rental units, the potential financial consequences, and AppFolio's relatively low-cost offering together are enough to dissuade customers from using rudimentary AI-based tools.

BSD Analysis:
The fund manager presents a bullish thesis on AppFolio based on its competitive moat and defensive characteristics against AI disruption concerns. The company's cloud-based property management software continues gaining market share from legacy suppliers while maintaining strong margins and cash flow generation. Despite investor fears about AI tool displacement, the manager argues that AppFolio's deep industry expertise creates significant switching costs and customer loyalty. The complexity of managing thousands of rental units requires sophisticated, purpose-built software rather than generic AI tools, given the substantial financial consequences of operational errors. AppFolio's relatively low-cost offering provides additional customer retention benefits, making it economically unattractive for customers to experiment with unproven AI alternatives. The company's specialized focus on property management creates domain expertise that generic AI tools cannot easily replicate. Strong operational metrics including margin expansion and cash flow generation demonstrate the business model's resilience. The property management software market continues consolidating toward cloud-based solutions, favoring established players like AppFolio.

Pitch Summary:
Credo Technology provides specialized cables used in AI data centers. The company has been growing very rapidly, but investors have become concerned about replacement risks from both increased competition and evolving data center architecture potentially reducing demand for its specialized cables. While we acknowledge the risk from technological change, we view it as unlikely to impact the business in the immediate to mid term. The massive spending in data centers as telecasted by hyperscalers should benefit all suppliers, even with some market share shifts.

BSD Analysis:
The fund manager maintains a bullish stance on Credo Technology despite investor concerns about competitive and technological risks in the AI data center market. The company's specialized cables serve critical connectivity functions in rapidly expanding AI infrastructure, positioning it as a direct beneficiary of massive hyperscale capital expenditure plans. While acknowledging legitimate concerns about increased competition and evolving data center architecture, the manager views these risks as longer-term considerations unlikely to materially impact near-to-medium term performance. The sheer scale of hyperscale spending on AI infrastructure should provide sufficient market growth to benefit all suppliers, even accounting for potential market share shifts. Credo's rapid growth trajectory reflects strong underlying demand for high-speed connectivity solutions in AI applications. The company's specialized technology and customer relationships provide some competitive protection against new entrants. The massive investment cycle in AI data centers creates a rising tide that should lift all connectivity solution providers. Current investor pessimism appears overdone relative to the fundamental growth opportunity.

Pitch Summary:
iRhythm Technologies is a digital healthcare company that develops wearable, AI-driven cardiac monitoring devices. The stock struggled despite delivering beat-and-raise results. Broader weakness in the healthcare equipment and supplies industry, as investors rotated into cyclical and technology stocks, weighed on performance. Additional pressure came from a US Department of Justice Civil Investigative Demand (DOJ CID) received in December related to mobile cardiac telemetry services rendered in 2023 via iRhythm's Zio AT recording device. This inquiry is limited in scope as it only accounts for a small portion of total sales and the risk has already been priced in. We don't read too much into the company's recent change of auditors.

BSD Analysis:
The fund manager maintains a bullish outlook on iRhythm Technologies despite recent stock underperformance, viewing current weakness as a temporary disconnect from strong fundamentals. The company's beat-and-raise quarterly results demonstrate solid operational execution in the growing digital healthcare market. Broader sector rotation away from healthcare equipment toward cyclical and technology stocks appears to be the primary driver of underperformance rather than company-specific issues. The DOJ Civil Investigative Demand represents a limited regulatory overhang, affecting only a small portion of total sales and appearing already reflected in the stock price. Management's recent auditor change appears to be a non-material administrative decision rather than a red flag. iRhythm's AI-driven cardiac monitoring devices address a large and growing market as healthcare systems increasingly adopt remote monitoring technologies. The company's wearable cardiac monitoring platform provides superior patient outcomes and cost efficiencies compared to traditional monitoring methods. Strong fundamentals and market leadership position should drive stock recovery as sector sentiment improves.

Pitch Summary:
Genius Sports provides sports data, technology, and media services that power betting, broadcasting, and fan engagement. The stock sold off dramatically following the market's negative reaction to its announced plan to acquire a provider of ticketing, sponsorship, and merchandising services for sports and entertainment venues. The underlying data and media business continues to perform well, and we do not share the market's overly pessimistic view of the deal. We look forward to the close of the acquisition in the second quarter and believe strong fundamentals could drive the stock from here.

BSD Analysis:
The fund manager maintains a bullish stance on Genius Sports despite significant market volatility surrounding its acquisition announcement. The company's core sports data, technology, and media services business continues demonstrating strong operational performance, powering critical functions across betting, broadcasting, and fan engagement. The market's dramatic negative reaction to the acquisition appears overdone, creating a potential value opportunity for contrarian investors. Management's strategic decision to acquire ticketing, sponsorship, and merchandising capabilities represents vertical integration that could enhance customer relationships and revenue per client. The fund manager's confidence in the deal's strategic merit contrasts sharply with market sentiment, suggesting potential upside as fundamentals reassert themselves. The sports betting and media industries continue experiencing robust growth, providing a favorable backdrop for Genius Sports' technology platform. The company's data and technology infrastructure serves as critical infrastructure for sports organizations and betting operators. Strong underlying fundamentals should drive stock recovery following acquisition completion in the second quarter.

Pitch Summary:
Vital Farms produces and markets pasture-raised eggs and dairy products sourced from a network of small family farms. The stock came under pressure after the company lowered its revenue guidance. Vital Farms faces a temporary supply glut in the egg market after last year's avian influenza outbreak quickly subsided. This dynamic, coupled with adverse weather, reduced its revenue outlook.

BSD Analysis:
The fund manager expresses a bearish near-term outlook for Vital Farms due to challenging market dynamics affecting the specialty egg producer. The company's revenue guidance reduction signals management's acknowledgment of deteriorating operating conditions. The temporary supply glut in the egg market represents a significant headwind, as the rapid subsidence of last year's avian influenza outbreak led to oversupply conditions. This market dynamic pressures pricing power for Vital Farms' premium pasture-raised products. Adverse weather conditions compound the operational challenges, further impacting the company's revenue outlook. While Vital Farms operates in the growing premium/organic food segment, the cyclical nature of agricultural markets creates periodic oversupply situations. The company's reliance on a network of small family farms may limit its ability to quickly adjust supply in response to market conditions. The combination of supply glut and weather-related challenges suggests near-term margin pressure and revenue volatility for this premium food producer.

Pitch Summary:
Archrock, an energy infrastructure company focused on midstream natural gas compression, performed well as improving oil prices supported expectations for modestly stronger US production growth in the near term. Given that its earnings are closely tied to natural gas volumes, this shift in outlook benefited sentiment. Archrock is well positioned longer term to capitalize on the robust sustained growth in domestic natural gas production. This is driven by expanding LNG export capacity and ever-increasing power demand associated with the buildout of artificial intelligence infrastructure.

BSD Analysis:
The fund manager presents Archrock as a strategic beneficiary of multiple converging trends driving natural gas demand growth. The company's midstream compression services are directly tied to natural gas volumes, creating operating leverage as production increases. Improving oil prices support near-term US production growth expectations, benefiting Archrock's earnings outlook. The long-term thesis centers on two powerful demand drivers: expanding LNG export capacity and surging power demand from AI infrastructure buildout. LNG exports provide a structural growth driver as domestic natural gas production scales to meet global demand. Simultaneously, the massive power requirements for AI data centers create additional demand for natural gas-fired power generation. Archrock's infrastructure-like business model provides stable, fee-based revenues with limited commodity price exposure. The company's positioning in midstream compression services creates a toll-road dynamic on growing natural gas volumes. This dual demand catalyst from LNG exports and AI power consumption should drive sustained volume growth and earnings expansion.

Pitch Summary:
Solstice Advanced Materials, a diversified global advanced materials provider, performed well as it continued to establish its standalone investment case following its recent spin-off from a larger industrial conglomerate. Management has effectively highlighted several underappreciated secular growth drivers that were previously overlooked by investors of the prior parent company. The company is seeing accelerating momentum in key strategic areas, including uranium conversion services, where it is the sole US provider at utility scale. Strengthening demand visibility has extended well into the future, prompting Solstice to announce capacity expansion initiatives to support sustained growth.

BSD Analysis:
The fund manager presents Solstice Advanced Materials as an undervalued spin-off story with unique strategic positioning in critical materials markets. The company's recent separation from its parent conglomerate has allowed management to highlight previously obscured secular growth drivers and establish a clearer investment thesis. Solstice's position as the sole US provider of utility-scale uranium conversion services represents a significant competitive moat in an increasingly strategic industry. The strengthening demand visibility extending into the future provides exceptional revenue predictability, while capacity expansion initiatives demonstrate management's confidence in sustained growth. The spin-off structure often creates temporary valuation dislocations as investors focus on the parent company rather than the subsidiary's standalone merits. Solstice's diversified advanced materials portfolio serves critical end markets including nuclear, aerospace, and defense, providing defensive characteristics and pricing power. The company's strategic importance in uranium conversion services aligns with growing energy security concerns and nuclear power renaissance.

Pitch Summary:
Powell Industries, a provider of custom-engineered electrical equipment and systems, was a notable strong performer. The company secured several large data center wins, complementing a steady stream of utility-related awards in recent periods. Powell is well positioned to benefit from ongoing liquefied natural gas (LNG) export infrastructure development along the Gulf Coast. Management announced plans to expand production capacity, signaling confidence in a meaningful ramp-up in demand and providing increased visibility into future growth.

BSD Analysis:
The fund manager highlights Powell Industries as a multi-faceted beneficiary of several infrastructure megatrends, positioning it for sustained growth. The company's success in securing large data center contracts demonstrates its competitive positioning in the rapidly expanding AI infrastructure market, while its steady utility awards provide a stable revenue foundation. Powell's exposure to LNG export infrastructure development along the Gulf Coast represents a significant long-term growth driver as domestic natural gas production continues expanding. Management's decision to expand production capacity signals strong demand visibility and execution confidence across multiple end markets. The company's custom-engineered electrical equipment serves mission-critical applications, providing pricing power and customer stickiness. The convergence of data center growth, utility infrastructure investment, and LNG export capacity expansion creates multiple revenue catalysts. Powell's diversified exposure across these high-growth infrastructure segments should drive sustained earnings growth and margin expansion.

Pitch Summary:
Modine Manufacturing provides mission-critical thermal management solutions. It delivered strong performance driven by its growing exposure to data center cooling. The company is well positioned to benefit from accelerating investment in high-performance computing and artificial intelligence infrastructure. Management raised expectations during the quarter, indicating they now expect to significantly exceed their recently issued multi-year data center revenue targets. The announced sale of its Performance Technologies segment – serving lower-growth, lower-margin automotive and transportation markets – transforms the company into a more focused, higher-growth pure play on data centers and commercial heating, ventilation, and air conditioning (HVAC). This enhances its long-term growth profile.

BSD Analysis:
The fund manager presents a compelling transformation story for Modine Manufacturing, highlighting its strategic pivot toward high-growth data center cooling markets. The company's thermal management solutions are becoming increasingly critical as AI and high-performance computing generate substantial heat loads requiring sophisticated cooling systems. Management's decision to exceed previously issued multi-year revenue targets signals strong underlying demand momentum and execution confidence. The divestiture of the Performance Technologies segment represents a strategic portfolio optimization, eliminating lower-margin automotive exposure while creating a pure-play on data centers and commercial HVAC. This business model transformation should drive margin expansion and revenue growth acceleration. The timing aligns perfectly with massive hyperscale capital expenditure plans for AI infrastructure. Modine's mission-critical positioning in data center thermal management provides defensive characteristics and pricing power in a rapidly expanding market.

Pitch Summary:
Applied Optoelectronics supplies fiber-optic networking products used in high-speed cable networks and increasingly used in artificial intelligence (AI) data centers. The company reported a healthy quarter and discussed winning major new orders from large hyperscale customers. The company also has made progress on a new US-based facility that is expected to increase its capacity to serve other hyperscale customers next year.

BSD Analysis:
The fund manager presents a bullish thesis on Applied Optoelectronics based on its strategic positioning in the rapidly expanding AI data center market. The company's fiber-optic networking products are experiencing strong demand from hyperscale customers, evidenced by major new order wins during the quarter. Management's progress on expanding US-based manufacturing capacity demonstrates confidence in sustained demand growth and positions the company to capture additional market share. The timing appears favorable as hyperscale operators are significantly increasing capital expenditures for AI infrastructure. The company's exposure to both traditional high-speed cable networks and the emerging AI data center market provides diversified revenue streams. The new facility expansion should provide operational leverage as demand scales. This positions Applied Optoelectronics as a direct beneficiary of the multi-billion dollar AI infrastructure buildout.

Pitch Summary:
Planet Fitness is the largest fitness franchise in the United States, operating a high-value, low-cost gym model that has attracted over twenty million members through its accessible pricing and welcoming, judgment-free environment. The company generates revenue through franchise royalties, membership fees at corporate-owned clubs, and equipment sales to franchisees, creating a capital-light business model with strong recurring cash flow characteristics. We believe Planet Fitness benefits from a long runway of domestic and international unit growth, with management targeting a significantly larger club footprint over time. During the quarter, shares detracted from performance despite the company delivering better-than-expected fiscal fourth-quarter results on both revenue and earnings. The primary headwind was management's full-year guidance, which pointed to a deceleration in revenue growth relative to the prior year, falling short of consensus estimates and raising investor concerns about the pace of the company's expansion trajectory. Weakening consumer sentiment and growing competition in the value fitness segment further weighed on the stock. Despite the near-term pressure, we believe Planet Fitness's brand strength, considerable scale advantages, and continued unit growth provide a solid foundation for long-term value creation.

BSD Analysis:
Despite recent underperformance, the fund maintains conviction in Planet Fitness's long-term growth trajectory, emphasizing the company's market-leading position and differentiated business model. The manager highlights Planet Fitness's unique value proposition combining accessible pricing with a judgment-free environment, attracting over 20 million members and establishing strong brand loyalty. The capital-light franchise model generates recurring cash flows through royalties, membership fees, and equipment sales, providing attractive unit economics and scalability. While acknowledging near-term headwinds including guidance disappointment and competitive pressures, the fund focuses on structural advantages including brand strength, scale benefits, and significant unit growth runway both domestically and internationally. Management's target for substantially larger club footprint indicates confidence in market opportunity and expansion potential. The investment thesis centers on Planet Fitness's ability to democratize fitness through affordable pricing while maintaining operational efficiency through the franchise model. This represents a defensive growth play on health and wellness trends, with the company positioned to capture market share in the value fitness segment despite cyclical consumer pressures.

Pitch Summary:
StepStone Group is a global private markets investment firm that provides customized investment solutions, advisory services, and data analytics to institutional investors, including pension funds, sovereign wealth funds, endowments, and family offices. The company invests across private equity, real estate, infrastructure, and private debt, offering clients access to these asset classes through commingled funds, separately managed accounts, and secondary market transactions. During the quarter, shares detracted from performance despite the company reporting record fee revenues and continued growth in assets under management. The primary headwinds were lower performance-related earnings relative to the prior year, driven by the timing of transaction closes and a significant decline in retroactive fee contributions. Broader market concerns around the pace of private market realizations and a risk-off environment for alternative asset managers further weighed on sentiment. Despite the challenging near-term backdrop, we believe StepStone's expanding platform, growing private wealth business, and deepening client relationships position the company for durable fee-related earnings growth over time.

BSD Analysis:
The fund maintains a constructive long-term view on StepStone Group despite recent performance headwinds, emphasizing the firm's diversified private markets platform and strong client relationships. The manager acknowledges near-term challenges including lower performance-related earnings due to transaction timing and reduced retroactive fee contributions, along with broader industry concerns about realization pace. However, the investment thesis focuses on StepStone's record fee revenues and continued AUM growth, indicating strong underlying business momentum. The fund highlights three key growth drivers: platform expansion across multiple private market asset classes, growing private wealth business capturing retail demand, and deepening institutional client relationships driving wallet share gains. StepStone's diversified revenue model spanning private equity, real estate, infrastructure, and private debt provides stability and growth optionality. The company's focus on customized solutions and advisory services differentiates it from traditional asset managers. This represents a quality play on the secular growth of private markets allocation by institutional and high-net-worth investors, with StepStone positioned to capture increasing demand for alternative investment access.

Pitch Summary:
Casella Waste Systems is a vertically integrated solid waste services company operating primarily in the Northeastern United States, providing collection, transfer, disposal, and recycling services across residential, commercial, and industrial markets. We believe the company has a commanding position as a regional consolidator in an industry characterized by high barriers to entry, recurring revenue, and favorable pricing dynamics, with a long runway to acquire smaller operators and expand its geographic footprint. During the quarter, shares detracted from performance despite the company delivering solid results that extended its track record of double-digit growth in revenue, earnings, and free cash flow to a fifth consecutive year. Investor concerns centered on muted volume growth across the broader waste industry, a leadership transition as the company's president was elevated to CEO, and ongoing integration challenges associated with operations acquired from a large industry peer in the Mid-Atlantic region. We believe the company has largely worked through these issues.

BSD Analysis:
Despite recent underperformance, the fund maintains conviction in Casella Waste Systems as a regional consolidator with significant competitive advantages. The manager emphasizes the company's commanding market position in the Northeast, supported by high barriers to entry, recurring revenue streams, and favorable pricing dynamics inherent to the waste industry. Casella's impressive five-year track record of double-digit growth in revenue, earnings, and free cash flow demonstrates consistent execution and market share expansion. The fund views current headwinds as temporary, including industry-wide volume growth concerns, leadership transition, and Mid-Atlantic integration challenges. The investment thesis centers on Casella's long runway for acquiring smaller operators and expanding geographic footprint, leveraging its scale advantages and operational expertise. The company's vertically integrated model provides cost control and margin expansion opportunities. Management's proven ability to successfully integrate acquisitions and drive synergies supports the consolidation strategy. This represents a defensive growth play on essential waste services with predictable cash flows and expansion optionality through M&A.

Pitch Summary:
Legence is a specialty services company that provides engineering, consulting, installation, and maintenance for mission-critical building systems, serving customers across data centers, government facilities, life sciences, and other complex commercial environments. We believe the company is well positioned at the intersection of several durable demand drivers, as the growing complexity of modern building infrastructure requires increasingly specialized expertise. During the quarter, shares contributed positively to performance after the company delivered strong results highlighted by accelerating revenue growth, robust earnings expansion, and solid free cash flow generation. Management raised its full-year guidance meaningfully, reinforcing confidence in the trajectory of the business. Data center-related projects continued to be the primary driver of upside, while management noted encouraging strength in its government and life sciences end markets as well.

BSD Analysis:
The fund maintains a bullish outlook on Legence Corp, emphasizing the company's strategic positioning at the convergence of multiple durable demand drivers in mission-critical building systems. The manager highlights how increasing complexity in modern building infrastructure creates sustained demand for specialized expertise, providing Legence with a defensive moat. Strong quarterly results demonstrated accelerating revenue growth, robust earnings expansion, and solid free cash flow generation, indicating operational excellence and market share gains. Management's meaningful guidance raise reinforces confidence in business trajectory and execution capabilities. The fund particularly values the data center exposure, which serves as the primary growth driver amid AI infrastructure buildout. Diversification across government facilities and life sciences provides additional stability and growth vectors. The investment thesis centers on Legence's specialized expertise in complex commercial environments, positioning the company to benefit from secular trends in data center expansion, government infrastructure modernization, and life sciences facility development. This represents a quality growth play on essential building systems services with strong cash generation characteristics.

Pitch Summary:
DigitalOcean is a cloud infrastructure provider that offers scalable computing, storage, and networking solutions tailored to startups, small and mid-sized businesses, and individual developers. The company has differentiated itself by delivering a simplified, developer-friendly platform that lowers the barrier to cloud adoption for customers who may be underserved by the larger hyperscale providers. During the quarter, shares contributed positively to performance after the company delivered a strong fiscal fourth-quarter report that exceeded expectations on both revenue and profitability. Net new annual recurring revenue reached a record level, net revenue retention accelerated, and the company's largest customers emerged as an increasingly meaningful growth driver — reinforcing a business that we believe is steadily moving up the quality curve. Additionally, management outlined an encouraging multi-year growth framework.

BSD Analysis:
The fund expresses strong conviction in DigitalOcean's differentiated positioning within the cloud infrastructure market, specifically targeting underserved SMBs and developers with a simplified, developer-friendly platform. The manager highlights the company's competitive moat through its focus on customers overlooked by hyperscale providers like AWS and Microsoft Azure. Strong Q4 results exceeded expectations on both revenue and profitability metrics, with record net new ARR and accelerating net revenue retention indicating healthy customer expansion. The emergence of larger customers as a meaningful growth driver suggests successful market expansion and customer maturation. Management's multi-year growth framework provides visibility into sustained expansion opportunities. The fund views DigitalOcean as 'moving up the quality curve,' indicating improving business fundamentals and market positioning. This represents a growth play on cloud infrastructure democratization, with the company capturing market share through superior developer experience and customer service in the mid-market segment. The strong recurring revenue model and customer expansion metrics support the bullish thesis.