Investment Pitches

Pitch Summary:
Warby Parker, a U.S.-based omnichannel retailer of eyewear products with a unique vertically integrated direct-to-consumer business model, reported encouraging quarterly results. The company experienced robust growth in its glasses business and continued momentum in contact lenses and optometry. The company's substantial investment in optometrists is yielding results, driving improved gross margins through enhanced utilization. Warby Parker appears to be emerging from a challenging period that was adversely impacted by post-pandemic changes in consumer behavior. Management's steps to reduce costs appear to be paying off. More recently we've seen fundamentals improve, with marketing spend recovering now that margins have settled. We believe the company can potentially enhance its profitability as demand recovers and it completes and capitalizes on heavy investments in areas such as optometry services, which previously weighed on margins.

BSD Analysis:
Polen Capital views Warby Parker as emerging from a challenging post-pandemic period with improving fundamentals and operational momentum. The manager highlights the company's substantial investment in optometry services as a key driver of improved gross margins through enhanced utilization. Management's cost reduction initiatives are yielding positive results, with marketing spend recovering as margins stabilize. The vertically integrated direct-to-consumer model provides competitive advantages in the eyewear market. Polen expects continued profitability enhancement as demand recovers and the company capitalizes on its heavy investments in optometry services. The bull thesis centers on operational improvements, margin expansion, and the completion of strategic investments that previously pressured profitability.

Pitch Summary:
Dutch Bros, a drive-through coffee and beverage company with nearly 1,000 locations, reported compelling quarterly results, raising its full-year revenue and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) guidance. Robust same-store sales and steady unit growth have driven top-line growth of +28% year-over-year. Earnings growth appears poised to accelerate as the company ramps up unit growth in 2025, innovates its menu (into the untapped opportunity to drive food sales), and margins inflect higher with scale. We believe it's still early days for Dutch Bros, which has a unique concept and is just starting to tap into proven value drivers like online ordering and food. We believe Dutch Bros has the potential to be a substantially long-duration EPS (earnings per share) growth business.

BSD Analysis:
Polen Capital initiated a position in Dutch Bros based on the company's compelling quarterly results and raised full-year guidance for both revenue and EBITDA, demonstrating strong operational momentum. The fund emphasizes the company's robust same-store sales performance and steady unit growth driving impressive 28% year-over-year top-line growth. Polen's investment thesis centers on Dutch Bros' unique drive-through coffee concept with nearly 1,000 locations and significant expansion runway ahead. The fund expects earnings growth acceleration as the company ramps unit growth in 2025, innovates its menu to capture untapped food sales opportunities, and achieves margin expansion through scale benefits. Polen views Dutch Bros as still in early stages of development with substantial potential to leverage proven value drivers like online ordering and food offerings. The fund believes the company has the characteristics of a long-duration EPS growth business with sustainable competitive advantages. Polen's conviction reflects their belief in Dutch Bros' ability to execute on expansion plans while maintaining strong unit economics and capturing additional revenue streams through menu innovation and digital capabilities.

Pitch Summary:
Willscot Holdings provides turnkey space and storage solutions with leading market share in North America, serving customers through 250 branch locations. The company offers mobile offices, portable storage containers, climate-controlled storage, clear-span structures, and associated services, including delivery and installation. The business model is highly predictable as assets are leased with an average duration of three years—this stability has enabled management to allocate capital effectively. Construction markets (industrial, non-residential, and residential) have been sluggish over the last few years, and we anticipate an improved volume backdrop ahead. We expect this, combined with continued pricing gains through higher attach rates of their Value-Added Services, to lead to mid-teens EPS growth over the next five years.

BSD Analysis:
Polen Capital initiated a position in Willscot Holdings based on the company's leading market position in North American turnkey space and storage solutions with 250 branch locations providing extensive geographic coverage. The fund emphasizes the highly predictable business model with three-year average lease durations, which provides revenue stability and enables effective capital allocation by management. Polen's investment thesis centers on the company's comprehensive service offering including mobile offices, storage containers, and value-added services with delivery and installation capabilities. The fund expects construction market recovery from recent sluggishness across industrial, non-residential, and residential segments to drive improved volume growth. Polen projects mid-teens EPS growth over the next five years, driven by volume recovery and continued pricing gains through higher attach rates of Value-Added Services. The fund views Willscot's market-leading position and predictable cash flows as competitive advantages in capturing share of construction market recovery. Polen's conviction reflects their belief in the company's ability to leverage its established infrastructure and service capabilities to benefit from improving construction activity and pricing power through enhanced service offerings.

Pitch Summary:
Pure Storage provides data storage solutions primarily to enterprise customers with private clouds and, more recently, hyperscalers. Pure stands out as a high-performance, all-flash storage provider with no legacy hard disk business. Its competitive advantage stems from its DirectFlash modules, the custom-built NAND flash chips managed by the company's proprietary Purity software. DirectFlash's advantages include higher storage capacity, longer life span, and better performance with lower latency. This translates to a premium, high-performance offering that generates high gross margins of ~70%, which we expect to grow over time. Although enterprise data storage demand has been muted compared to computing or server demand, we believe storage demand will accelerate, driven by GenAI and overall IT spending recovery. Historically, enterprise customers have been willing to pay up for performance, while hyperscalers opted for low-cost, bulk storage solutions. This dynamic is shifting as Pure's all-flash storage system allows for superior energy savings compared to traditional hard disc storage. As a result, Pure has won its first hyperscaler contract, and we expect such success to continue. The net result is growing EPS and cash flow. We expect Pure's earnings to grow at a 20% CAGR with increasing returns on invested capital.

BSD Analysis:
Polen Capital initiated a position in Pure Storage based on the company's differentiated position as a high-performance, all-flash storage provider without legacy hard disk business constraints. The fund emphasizes Pure's competitive advantage through DirectFlash modules and proprietary Purity software, which deliver superior storage capacity, longevity, and performance with lower latency. Polen's investment thesis centers on the company's premium positioning generating high gross margins around 70% with potential for further expansion. The fund expects storage demand acceleration driven by GenAI and IT spending recovery, creating significant tailwinds for Pure's solutions. Polen highlights the shifting dynamics in hyperscaler purchasing behavior, where energy efficiency considerations are driving adoption of Pure's all-flash systems over traditional hard disk storage. The fund views Pure's first hyperscaler contract win as validation of this trend and expects continued success in this market segment. Polen projects 20% earnings CAGR with increasing returns on invested capital, reflecting confidence in the company's ability to capitalize on growing storage demand and market share gains across both enterprise and hyperscaler segments.

Pitch Summary:
Insight Enterprises is a global provider of IT solutions to small- and medium-sized businesses across various end markets. Insight has developed capabilities in hardware management and software and services and has demonstrated an impressive long-term track record of double-digit returns on invested capital and robust free cash flow generation. The company has cemented itself as a critical partner to its clients' digital transformation initiatives. Our research suggests Insight will benefit from a return to normal IT spending levels in the coming years as companies prioritize hardware upgrades and continue to migrate workloads to the cloud. We estimate Insight will compound earnings per share at 18% over the next 5 years, driven by its deep customer relationships and leading cloud services business.

BSD Analysis:
Polen Capital initiated a position in Insight Enterprises based on the company's strong positioning as a global IT solutions provider to small and medium-sized businesses. The fund emphasizes Insight's impressive long-term track record of generating double-digit returns on invested capital and robust free cash flow, indicating efficient capital allocation and operational excellence. Polen's investment thesis centers on the company's role as a critical partner in clients' digital transformation initiatives, providing essential hardware, software, and services capabilities. The fund expects Insight to benefit from the normalization of IT spending as companies prioritize hardware upgrades and cloud migration, representing a significant tailwind. Polen projects 18% annual EPS growth over the next five years, driven by deep customer relationships and the company's leading cloud services business. The fund views Insight's comprehensive IT solutions platform and established customer base as competitive advantages in capturing share of recovering IT spending. Polen's conviction reflects their belief in Insight's ability to capitalize on the ongoing digital transformation trends and IT infrastructure modernization cycles.

Pitch Summary:
Bentley Systems is a long-established leader in infrastructure engineering software—specifically horizontal infrastructure networks such as roads, bridges, rail and transit, water and wastewater, utility grids, and the resources sector. Over 40 years, Bentley has developed comprehensive solutions for infrastructure engineering, covering all aspects of a project lifecycle. The company is actively extending its moat by investing in new technologies like digital twins (virtual models of a physical object, process, or system that uses real-time data to simulate its behavior in the real world) and AI to enhance its offerings and address the growing demand for infrastructure and asset intelligence. Bentley only went public in late 2020 but has a long track record as a classic compounder, achieving a +8% CAGR (Compound Annual Growth Rate) in total revenues over more than 20 years. Bentley boasts high and expanding operating and free cash flow margins, a resilient balance sheet, robust returns on capital, and a highly recurring revenue model. We believe we are paying a fair FCF (free cash flow) multiple for a mission-critical, stable business benefitting from several secular tailwinds and guided by an aligned, long-term-oriented management team.

BSD Analysis:
Polen Capital initiated a position in Bentley Systems based on the company's established leadership in infrastructure engineering software with over 40 years of market presence. The fund emphasizes Bentley's comprehensive solutions covering the entire project lifecycle for critical infrastructure including roads, bridges, utilities, and resources sectors. Polen's investment thesis centers on the company's strategic investments in emerging technologies like digital twins and AI, which extend its competitive moat and address growing demand for infrastructure intelligence. The fund highlights Bentley's impressive long-term track record as a compounder with 8% revenue CAGR over 20+ years, demonstrating consistent execution. Polen values the company's high and expanding margins, strong balance sheet, robust returns on capital, and highly recurring revenue model. The fund believes they are paying a fair free cash flow multiple for a mission-critical business positioned to benefit from secular infrastructure investment tailwinds. Polen's confidence reflects their view of Bentley as a stable, well-managed company with aligned leadership and strong competitive positioning in essential infrastructure software markets.

Pitch Summary:
Entegris is a leading supplier of materials and process solutions focused primarily on the semiconductor industry. The company has developed expertise in various chemicals, gases, and filtration solutions that support the most advanced semiconductor manufacturing processes. The business has recently seen weaker-than-expected growth in its mature nodes business, which we expect to normalize into 2025 and 2026. Overall, we think materials, gas filtration, and handling—all Entegris core competencies—will be increasingly important in enabling semiconductor industry advances. We expect Entregris to deliver sustainable high-teens EPS growth on the back of double-digit revenue growth and margin expansion from operating leverage.

BSD Analysis:
Polen Capital initiated a position in Entegris based on the company's leading position in critical semiconductor materials and process solutions. The fund recognizes temporary weakness in the mature nodes business but expects normalization in 2025-2026, demonstrating confidence in the cyclical nature of this headwind. Polen's investment thesis centers on Entegris's core competencies in materials, gas filtration, and handling becoming increasingly critical as semiconductor manufacturing processes advance and become more complex. The fund projects sustainable high-teens EPS growth driven by double-digit revenue growth and margin expansion through operating leverage. Polen views Entegris as well-positioned to benefit from the ongoing semiconductor industry evolution, particularly as advanced node manufacturing requires more sophisticated materials and process solutions. The company's expertise in contamination control and specialty chemicals provides essential support for cutting-edge semiconductor fabrication. Polen's conviction reflects their belief in Entegris's ability to capitalize on the increasing complexity and precision requirements of modern semiconductor manufacturing.

Pitch Summary:
Rambus plays a foundational role in fueling innovation in the data center and server environments, serving large memory OEMs (Original Equipment Manufacturers) and hyperscalers. With its fabless model, Rambus generates robust free cash flow while maintaining a steady R&D reinvestment to sustain its industry-leading memory interface chips and silicon IP solutions. We estimate Rambus is well-positioned to compound earnings and free cash flow per share at a high-teens rate through the cycle.

BSD Analysis:
Polen Capital initiated a position in Rambus based on the company's foundational role in data center and server innovation, particularly serving large memory OEMs and hyperscalers. The fund emphasizes the attractiveness of Rambus's fabless business model, which generates robust free cash flow while maintaining strategic R&D investments in industry-leading memory interface chips and silicon IP solutions. Polen's investment thesis centers on the company's ability to compound earnings and free cash flow at high-teens rates through market cycles, indicating confidence in the sustainability of the business model. The fund views Rambus as well-positioned to benefit from the ongoing data center expansion and server modernization trends driven by AI and cloud computing demands. The company's focus on memory interface technology and silicon IP provides exposure to critical infrastructure components with high switching costs and long design cycles. Polen's conviction reflects their belief in Rambus's competitive moat in memory technology and its ability to capitalize on secular growth trends in data center infrastructure.

Pitch Summary:
Goosehead Insurance, a digitally enabled insurance brokerage business, was a top contributor on the back of positive earnings results including a rising 2024 revenue guidance. The company continues to execute well amidst a challenging macro backdrop, driving robust expense management, higher productivity, and compelling agent headcount growth.

BSD Analysis:
Polen Capital maintains a bullish view on Goosehead Insurance, emphasizing the company's strong execution capabilities in a challenging macroeconomic environment. The fund highlights management's effective expense management and productivity improvements as key drivers of outperformance. The digital enablement of the insurance brokerage model provides operational leverage and scalability advantages over traditional competitors. Polen's confidence is reinforced by the company's ability to grow agent headcount while maintaining productivity gains, indicating a sustainable growth model. The upward revision to 2024 revenue guidance demonstrates management's visibility into business momentum and execution confidence. The fund's positive stance reflects their belief in Goosehead's differentiated technology platform and its ability to capture market share in the fragmented insurance brokerage industry. Polen views the combination of digital capabilities, agent network expansion, and operational efficiency as creating a compelling long-term growth trajectory.

Pitch Summary:
Warby Parker, a U.S.-based omnichannel retailer of eyewear products with a unique vertically integrated direct-to-consumer business model, reported encouraging quarterly results. The company experienced strong growth in its glasses business and continued momentum in contact lenses and optometry. Investment in optometrists is yielding results, driving improved gross margins through enhanced utilization. Warby Parker appears to be emerging from a challenging period where it was adversely impacted by post-pandemic changes in consumer behavior. Company management's steps to reduce costs appear to be paying off. More recently, we've seen fundamentals improve, with marketing spend recovering now that margins have settled. We believe the company has the potential to enhance its profitability as demand continues to recover and it completes and capitalizes on heavy investments in areas such as optometry services, which previously weighed on margins.

BSD Analysis:
Polen Capital expresses strong conviction in Warby Parker's turnaround story, highlighting the company's successful navigation through post-pandemic consumer behavior shifts. The fund emphasizes the effectiveness of management's cost reduction initiatives and strategic investments in optometry services, which are now driving improved gross margins through enhanced utilization. The vertically integrated direct-to-consumer model provides competitive advantages in the eyewear market, allowing for better margin control and customer experience. Polen's thesis centers on the company's emerging from a challenging period with strengthened fundamentals, evidenced by strong growth across glasses, contact lenses, and optometry segments. The recovery in marketing spend, now that margins have stabilized, indicates management's confidence in sustainable profitability improvements. The fund views the heavy investments in optometry services as a strategic moat that will drive long-term margin expansion as demand normalizes. Polen's optimistic outlook reflects their belief in Warby Parker's ability to capitalize on its unique market position and operational improvements.

Pitch Summary:
Revolve Group, an online apparel retailer targeting primarily Millennial and Gen Z demographics, was the top performer after demonstrating improving fundamentals following a challenging period, with the stock's total return up over 100% for the year. While the consumer environment remains under pressure, we are encouraged by the company's efforts to drive cost efficiencies, reduce return rates, expand product lines, and continue its international push. We believe Revolve is well-positioned to grow earnings at an accelerating rate over the near term while the long-term outlook remains intact.

BSD Analysis:
Polen Capital maintains a bullish stance on Revolve Group following its exceptional 100%+ return in 2024, driven by improving operational fundamentals after a challenging period. The fund managers highlight the company's successful execution of cost efficiency initiatives, return rate reduction, and product line expansion as key drivers of the turnaround. Despite ongoing consumer environment pressures, management's strategic focus on international expansion and operational improvements positions the company for accelerating earnings growth. The investment thesis centers on Revolve's strong positioning within the millennial and Gen Z demographics, which represent a growing and digitally-native consumer base. Polen's confidence in the near-term earnings acceleration trajectory, combined with their positive long-term outlook, suggests they view current operational improvements as sustainable competitive advantages. The fund's emphasis on the company's ability to navigate challenging macro conditions while executing strategic initiatives demonstrates their conviction in management's execution capabilities.

Pitch Summary:
Brink's Company (BCO), a leading global provider of cash and valuables management, digital retail solutions (DRS), and ATM managed services (AMS), was a top detractor in the SMID Cap strategy for the quarter after being a top contributor last quarter. In the third quarter, the company delivered 26% organic growth in AMS and DRS while continuing to stimulate customer demand for outsourcing with financial institutions and convert whitespace opportunities in retail. These higher-margin, recurring revenue businesses now represent over 23% of total company revenue and are expected to deliver over 20% organic growth in 2024. This growth was partially offset by a strengthening U.S. dollar as well as cyclical market headwinds in the global services business. Management and the board continue to prioritize organic growth and returning cash to shareholders while margins and cash flow continue on a positive trajectory for the foreseeable future, in our opinion. We spent time with management in Dallas during the quarter with much of the focus on new hires, talent around the organization, leadership philosophies, and driving operational and commercial excellence. We believe the current price affords share owners a nice opportunity to compound double digit returns over our investment time horizon with solid base support in the business, growth drivers and a multitude of options in management's control to drive results.

BSD Analysis:
SouthernSun maintains a bullish long-term view on Brink's despite short-term headwinds that caused the stock to detract in Q4. The investment thesis centers on the company's successful transformation toward higher-margin, recurring revenue streams through digital retail solutions and ATM managed services. These growth businesses delivered impressive 26% organic growth in Q3 and now represent over 23% of total revenue with expectations for over 20% growth in 2024. While currency headwinds and cyclical pressures in global services created near-term challenges, the fund believes the underlying business momentum remains strong. Management's focus on talent acquisition, operational excellence, and capital allocation discipline supports the long-term value creation story. The fund's direct engagement with management in Dallas reinforced confidence in the strategic direction and execution capabilities, viewing current valuation as an attractive entry point for double-digit returns.

Pitch Summary:
MGP Ingredients, Inc. (MGPI) was the top detractor in the fourth quarter in the SMID Cap strategy. In early October, MGPI provided preliminary third quarter sales estimates that were significantly lower than we expected, driven by a significant and unexpected decline in its brown goods distilling business. During the subsequent quarterly earnings release, management indicated that they expect the distilling business to remain under pressure for the foreseeable future as demand for aged whiskey has declined sharply. We were surprised by the magnitude of and the speed at which the demand for distilled brown goods declined. Perhaps more alarming was management's lack of visibility into the market. In December, MGPI announced that David Bratcher, who took over as CEO at the beginning of 2024, was stepping down and the current CFO, Brandon Gall, will serve as interim CEO while the board conducts a search for a permanent replacement. Given the rapid changes in the business and the leadership team, we decided to exit our position and deploy the capital into businesses that we believe offer more attractive opportunities.

BSD Analysis:
SouthernSun exited MGP Ingredients following a series of negative developments that undermined their investment thesis. The fund was caught off-guard by significantly lower Q3 sales driven by an unexpected collapse in brown goods distilling demand. Management's guidance for continued pressure in the distilling business as aged whiskey demand declined sharply raised fundamental concerns about the business model. The speed and magnitude of the demand deterioration surprised the fund, but management's apparent lack of market visibility was particularly concerning. Leadership instability compounded these issues when CEO David Bratcher stepped down in December after less than a year in the role, with CFO Brandon Gall serving as interim replacement. The combination of deteriorating fundamentals, poor management visibility, and leadership turnover prompted the fund to exit and redeploy capital to more attractive opportunities.

Pitch Summary:
Armstrong World Industries, Inc. (AWI), the leader in the commercial ceiling tile and grid business in the U.S., was one of the top contributors in the SMID Cap strategy. When fully tallied, Armstrong's 2024 results are expected to show double digit revenue and earnings growth made possible by strong pricing, partially offset by modestly lower volumes. We continue to be impressed by the company's ability to maintain and expand its customer value proposition, despite an end market demand environment that has been choppy in the last few years. As an example of continued new product innovation, the company is expanding the market presence of its TEMPLOK energy efficient ceiling tiles and its low embodied carbon ceiling tiles. In addition to growth from new product innovation, Armstrong continued to execute an acquisition program in the architectural specialties division of its company during 2024, completing three bolt-on acquisitions (including one via its WAVE joint venture). We believe this acquisition program, initiated in 2016, has strengthened the company's competitive advantage by building out its product line offerings made available to commercial architects and designers. Even after investments in new products and acquisitions, Armstrong continued to return significant cash to shareholders in the form of share buybacks and dividends, and maintained a strong balance sheet. Armstrong demonstrated strong growth and resilience in 2024, driven by pricing strategies, product innovation, strategic acquisitions, and shareholder returns, reinforcing its leadership in the commercial ceiling market.

BSD Analysis:
SouthernSun expresses strong conviction in Armstrong World Industries as the dominant U.S. commercial ceiling tile and grid leader. The manager expects double-digit revenue and earnings growth in 2024 driven by effective pricing power that more than offset modest volume declines. Armstrong's resilience in choppy end markets demonstrates pricing discipline and customer value proposition strength. Innovation remains a key differentiator with TEMPLOK energy-efficient and low-carbon ceiling tiles expanding market presence. The strategic acquisition program since 2016 has enhanced competitive positioning by broadening product offerings for architects and designers. Capital allocation excellence is evident through continued shareholder returns via buybacks and dividends while maintaining balance sheet strength. The combination of market leadership, innovation, strategic acquisitions, and disciplined capital allocation reinforces Armstrong's competitive moat.

Pitch Summary:
SEI Investments Company (SEIC) was the top contributor in the SMID Cap strategy. During the third quarter, SEI reported record net sales events and strong operational results, signs that the new leadership's playbook is bearing fruit. As a reminder, CEO Ryan Hicke replaced SEI's founder and longtime CEO Al West in 2022. Mr. Hicke's early actions included re-organizing the leadership team, consolidating certain operations, and refocusing the company's capital allocation and collective energy on the weightiest value-add opportunities. The company enjoys leading market positions, a strong balance sheet, a highly profitable business model, and core competencies that provide a "right to play" across a number of growth opportunities. We expect solid growth in value in the medium term, as a reinvigorated leadership team continues to execute against its strategy.

BSD Analysis:
SouthernSun maintains a bullish stance on SEI Investments following strong Q3 performance under new CEO Ryan Hicke's leadership transformation. The manager highlights record net sales events and operational improvements as evidence that Hicke's strategic overhaul is delivering results. Key leadership changes since 2022 include organizational restructuring, operational consolidation, and refocused capital allocation toward high-value opportunities. The investment thesis centers on SEI's competitive moats including leading market positions, strong balance sheet, and highly profitable business model. Management's core competencies provide optionality across multiple growth vectors. The fund expects sustained value creation as the reinvigorated leadership team continues executing their strategic playbook in the medium term.

Pitch Summary:
MercadoLibre is Latin America's leading e-commerce and fintech platform, holding dominant positions in Brazil, Mexico, and Argentina but it also operates in 17 other countries. Despite competition from global e-commerce players, the company has successfully maintained and expanded its market share. MercadoLibre has leveraged its strengths in customer data and distribution to drive rapid growth in its profitable advertising and fintech segments. In our view, the company's success is largely driven by strong network effects in e-commerce and logistics, data and distribution advantages in fintech, and a rapidly growing advertising business. As more buyers and sellers join the platform, the marketplace becomes more valuable, attracting even more users. This expanding user base enhances its logistics and payment services, making transactions smoother and more reliable, further drawing in additional users. The growing ecosystem also generates more data, enabling improved personalization, advertising, and fintech services. In our view, these network effects create a virtuous cycle, reinforcing MercadoLibre's market position and making it increasingly difficult for competitors to challenge them. Shares detracted from performance during the quarter following an unexpected fiscal third-quarter earnings miss. The earnings weakness was primarily due to faster credit card growth and a shift toward upmarket consumer lending, which pressured operating margins.

BSD Analysis:
Alger maintains a bullish long-term view on MercadoLibre despite quarterly underperformance, emphasizing the company's dominant market position and powerful network effects across Latin America. The manager highlights MercadoLibre's successful defense against global e-commerce competition while expanding market share across 17 countries. The company's diversified revenue streams from e-commerce, fintech, and advertising create multiple growth drivers and reduce dependence on any single segment. Alger emphasizes the virtuous cycle of network effects, where expanding user bases enhance logistics, payments, and data capabilities, creating competitive moats. The manager views the company's data and distribution advantages as key differentiators in the fintech segment. While acknowledging the earnings miss due to faster credit card growth and upmarket lending shifts pressuring margins, Alger appears to view this as a temporary margin compression from strategic investments. The network effects and market leadership position support the manager's confidence in MercadoLibre's ability to maintain competitive advantages and drive long-term value creation.

Pitch Summary:
Eli Lilly is a global pharmaceutical company with core franchises in diabetes, obesity, neurology, and oncology. Its portfolio includes innovative drugs like Mounjaro, Zepbound, Trulicity, Jardiance (diabetes and obesity), Taltz (psoriasis), Emgality (migraines), and Verzenio (breast cancer). Shares detracted from performance during the quarter after the company reported fiscal third-quarter revenues below analyst estimates. The revenue shortfall was attributed to inventory destocking in the wholesaler channel for Mounjaro and Zepbound, following inventory building in the prior quarter, which led to an 11% miss in obesity drug revenues. Management slightly lowered fiscal 2024 guidance but emphasized that demand for its obesity drugs remains strong. They also moderated promotions during the quarter to manage supply and ensure patient continuity. While shares detracted from performance, we believe the revenue miss was largely due to temporary inventory dynamics and moderated promotion activity.

BSD Analysis:
Alger maintains a bullish stance on Eli Lilly despite quarterly underperformance, viewing recent weakness as driven by temporary inventory dynamics rather than fundamental demand issues. The manager emphasizes Lilly's diversified pharmaceutical portfolio across high-growth therapeutic areas including diabetes, obesity, neurology, and oncology. The company's obesity franchise, anchored by Mounjaro and Zepbound, represents a significant growth driver despite the 11% revenue miss attributed to wholesaler inventory destocking. Alger interprets management's emphasis on strong underlying demand as validation of the long-term growth trajectory for obesity treatments. The moderation of promotional activities and slight guidance reduction appear tactical rather than strategic, aimed at managing supply constraints and ensuring patient access. The manager views the inventory normalization as a temporary headwind that should resolve in subsequent quarters. Lilly's innovative drug pipeline and leadership in the rapidly expanding obesity market support the continued bullish investment thesis despite near-term volatility.

Pitch Summary:
Microsoft is a beneficiary of corporate America's transformative digitization. The company operates through three segments: Productivity and Business Processes (Office365, LinkedIn, and Dynamics), Intelligent Cloud (Server Products and Cloud Services, Azure, and Enterprise Services), and More Personal Computing (Windows, Devices, Gaming, and Search). During the quarter, Microsoft delivered better-than-expected fiscal first-quarter revenues, beating analyst estimates across all three segments. In the Intelligent Cloud business, Azure revenue grew 34% year-over-year, slightly above consensus, with AI Services contributing 12% to Azure's growth, up from 11% in the previous quarter, as demand for AI continues to outpace capacity. However, shares declined after management signaled a potential deceleration in Azure growth for the next quarter and highlighted a negative earnings impact from OpenAI-related losses. Additionally, concerns over significantly increased AI-related capital expenditures (CapEx) raised questions about short-term profitability despite the long-term growth potential. While these near-term challenges led to shares detracting from performance for the quarter, we remain confident in Microsoft's ability to maintain its leadership in AI.

BSD Analysis:
Alger maintains a bullish long-term view on Microsoft despite near-term headwinds, positioning the company as a primary beneficiary of corporate digitization trends. The manager emphasizes Microsoft's diversified revenue streams across productivity, cloud, and computing segments, which delivered broad-based outperformance versus analyst estimates. Azure's 34% year-over-year growth with accelerating AI Services contribution demonstrates the platform's competitive positioning in the cloud infrastructure market. However, Alger acknowledges near-term challenges including potential Azure growth deceleration and OpenAI-related losses impacting earnings. The significant increase in AI-related capital expenditures raises short-term profitability concerns, though the manager views this as necessary investment for long-term competitive advantage. Despite quarterly underperformance, Alger expresses confidence in Microsoft's AI leadership position and ability to monetize its substantial infrastructure investments. The manager appears to view current weakness as temporary given Microsoft's strong market position and execution capabilities.

Pitch Summary:
Amazon.com is a renowned online retailer and leader in cloud computing. The company's Amazon Web Services (AWS) division offers utility-scale cloud solutions that support corporate America's digital transition. During the quarter, Amazon's shares contributed to performance as the company reported better-than-expected fiscal third-quarter results, with revenues and earnings beating analyst estimates. Operating margins expanded to 11%, driven by efficiency gains in logistics and robust AWS performance. Notably, AWS revenue growth accelerated during the quarter, along with recording its highest-ever operating margin of 38.1%, driven by easing cloud cost optimizations, renewed workload migrations, and an increasing contribution from AI workloads. On their earnings call, management highlighted plans to increase capital expenditures to enhance their technology infrastructure, catering to the surging demand for AI-driven computing.

BSD Analysis:
Alger presents a bullish case for Amazon focused on the company's dual leadership in e-commerce and cloud computing, with particular emphasis on AWS's accelerating growth trajectory. The manager highlights Amazon's role in supporting corporate America's digital transformation through utility-scale cloud solutions. Strong operational performance validates the investment thesis, with operating margins expanding to 11% driven by logistics efficiency improvements and robust AWS execution. AWS achieved a record 38.1% operating margin while accelerating revenue growth, demonstrating the division's scalability and pricing power. The manager views the easing of cloud cost optimizations and renewed workload migrations as positive inflection points for sustained growth. Amazon's strategic capital expenditure increases to enhance AI-driven computing infrastructure position the company to capitalize on surging AI demand. The combination of operational leverage in retail and AWS's margin expansion creates multiple drivers for earnings growth.

Pitch Summary:
Nvidia Corporation is a leading supplier of graphics processing units (GPUs) for a variety of end markets, such as gaming, PCs, data centers, virtual reality, and high-performance computing. The company is leading in most secular growth categories in computing, and especially artificial intelligence and super-computing parallel processing techniques for solving complex computational problems. In our view, Nvidia's computational power is a critical enabler of AI and therefore essential to AI adoption. Shares contributed to performance during the quarter, driven by strong demand for its data center products, especially the Hopper H200 chips, which generated double-digit billions in revenue, marking the fastest product ramp in the company's history. Management provided fiscal fourth-quarter revenue guidance above analyst estimates, along with resilient operating margins supported by robust demand and limited competition. In our view, Nvidia's leadership in scaling AI infrastructure, including advancements in inference and test-time scaling (i.e., reasoning during inference), is driving adoption among enterprises and startups, providing continued demand for its high-performance chips and software solutions. As older-generation chips are repurposed for inference and new clusters are deployed, we believe Nvidia is well-positioned to capitalize on growing compute needs across AI applications.

BSD Analysis:
Alger maintains a strong bullish stance on NVIDIA, positioning the company as the essential enabler of AI adoption through its computational leadership. The manager highlights NVIDIA's dominance across multiple secular growth categories, particularly artificial intelligence and high-performance computing applications. The Hopper H200 chips represent a significant catalyst, generating double-digit billions in revenue and achieving the fastest product ramp in company history. Strong fundamental metrics support the investment thesis, with management guidance exceeding analyst estimates and operating margins remaining resilient despite massive scale. Alger emphasizes NVIDIA's technological moat in AI infrastructure scaling, including advanced inference capabilities and test-time scaling innovations. The manager sees sustained demand drivers from both enterprise and startup adoption of AI applications. Limited competition and robust demand dynamics create a favorable operating environment for continued market share expansion and pricing power.