Investment Pitches

Pitch Summary:
The company is the leading platform-based cybersecurity vendor for small and medium-sized businesses ("SM8") which represents approx. 70% of the business volume. As Fortinet manages the whole security set-up through an operating system (FortiOS) and due to its deep entrenchment within its clients' IT networks, we view its business as being very sticky thanks to high switching costs. What's more, the company's Fortinet Security Fabric platform, with hundreds of partner companies, creates network effects from the deep integration in customers' networks and the growing volume of data analyzed. Growing cybersecurity risks and increasing complexity create a push towards security platforms as IT security teams, particularly from SMBs, increasingly look for platforms that offer a more holistic security coverage. Recent company results and channel checks indicate that Fortinet's integrated product approach is resonating with customers, not only with their core SMB customers but, more and more with larger enterprises. We are particularly encouraged by the recent strength in large enterprise demand. What's more, thanks to its deep integration with their customers' core IT systems and the vast data set of attack attempts optimizes its own AI to counter the growing number of threats, Fortinet only faces relatively low risks of disruption from AI. While some investors might have been expecting a bigger boost to growth rates from the move to the cloud and AI, we see FTNT more as a rock-solid and fairly steady compounder in the low- to mid-teens range at the OEPS level, which is a welcome feature in this volatile market, which is not adequately reflected in the stock's multiple.

BSD Analysis:
The manager presents a compelling bull case for Fortinet based on its dominant position in the SMB cybersecurity market and platform-based approach. The thesis centers on high switching costs from deep IT integration and network effects through the Security Fabric platform with hundreds of partners. The fund highlights encouraging expansion into enterprise markets beyond their core SMB base, supported by recent results and channel checks. A key differentiator is Fortinet's AI-enhanced threat detection capabilities, which the manager believes provides protection against AI disruption rather than vulnerability. The investment is positioned as a steady compounder with low-to-mid teens growth expectations, offering stability in volatile markets. The manager suggests the stock trades at an attractive multiple relative to its defensive characteristics and consistent growth profile.

Pitch Summary:
In this K-shaped recovery, shares of Wyndham Hotels (WH) have been punished as revenues for hotels that operate in the midscale and economy space have lagged behind upscale peers such as Marriott or Hilton. This isn't so surprising, as inflation has eaten into the consumer budgets while the weak manufacturing economy also impacted Wyndham's grey and blue collar business travel base. Yet a broadening economy and improving PMI should benefit Wyndham's base of business travelers and middle income customers. The global franchisor of hotels such as Wyndham, Days Inn, Laquinta, Ramada, and Super 8 should also see an incremental boost in demand in some of its key markets thanks to key events this year, including the World Cup in North America, the 250th birthday celebration for the U.S., and the 100th anniversary of Route 66. Wyndham shares are valued at just 11-12x EBITDA, which compares favorably to Marriott and Hilton, which trade at 17-20x EBITDA. Even better, management has been actively buying back the company's shares while consistently boosting its dividend payout, hitting two of our three capital allocation priorities.

BSD Analysis:
Heartland identifies Wyndham Hotels as a compelling value play positioned to benefit from economic broadening after being disproportionately impacted by the K-shaped recovery. The manager's thesis centers on the company's exposure to middle-income consumers and blue-collar business travelers who have faced headwinds from inflation and weak manufacturing activity. Improving PMI readings and economic broadening should drive recovery in Wyndham's core customer base. The investment case is strengthened by several demand catalysts including major events like the World Cup, U.S. 250th anniversary, and Route 66 centennial. At 11-12x EBITDA, Wyndham trades at a significant discount to premium peers Marriott and Hilton (17-20x), creating an attractive valuation gap. Management's capital allocation through active share buybacks and consistent dividend increases demonstrates confidence and shareholder-friendly policies. This combination of cyclical recovery potential, event-driven demand catalysts, attractive valuation, and strong capital allocation makes Wyndham an appealing contrarian value opportunity.

Pitch Summary:
In this K-shaped recovery, shares of Wyndham Hotels (WH) have been punished as revenues for hotels that operate in the midscale and economy space have lagged behind upscale peers such as Marriott or Hilton. This isn't so surprising, as inflation has eaten into the consumer budgets while the weak manufacturing economy also impacted Wyndham's grey and blue collar business travel base. Yet a broadening economy and improving PMI should benefit Wyndham's base of business travelers and middle income customers. The global franchisor of hotels such as Wyndham, Days Inn, Laquinta, Ramada, and Super 8 should also see an incremental boost in demand in some of its key markets thanks to key events this year, including the World Cup in North America, the 250th birthday celebration for the U.S., and the 100th anniversary of Route 66. Wyndham shares are valued at just 11-12x EBITDA, which compares favorably to Marriott and Hilton, which trade at 17-20x EBITDA. Even better, management has been actively buying back the company's shares while consistently boosting its dividend payout, hitting two of our three capital allocation priorities.

BSD Analysis:
Heartland identifies Wyndham Hotels as a compelling value play positioned to benefit from economic broadening after being disproportionately impacted by the K-shaped recovery. The manager's thesis centers on the company's exposure to middle-income consumers and blue-collar business travelers who have faced headwinds from inflation and weak manufacturing activity. Improving PMI readings and economic broadening should drive recovery in Wyndham's core customer base. The investment case is strengthened by several demand catalysts including major events like the World Cup, U.S. 250th anniversary, and Route 66 centennial. At 11-12x EBITDA, Wyndham trades at a significant discount to premium peers Marriott and Hilton (17-20x), creating an attractive valuation gap. Management's capital allocation through active share buybacks and consistent dividend increases demonstrates confidence and shareholder-friendly policies. This combination of cyclical recovery potential, event-driven demand catalysts, attractive valuation, and strong capital allocation makes Wyndham an appealing contrarian value opportunity.

Pitch Summary:
NICE Ltd. is a Contact Center-as-a-Service (CCaaS) provider, maintaining dual headquarters in Israel and the United States, with a customer base that is predominantly in the U.S. NICE has evolved alongside changing technology and customer requirements. Historically, the company provided software and services to help enterprises manage on-premise customer contact centers. In this capacity, NICE was one of several software and hardware vendors offering tools to staff, manage, measure and evaluate call center operations. The company was particularly strong in workforce engagement management (WEM) software, a critical component for effective contact center operations. In recent years, CCaaS offerings have been increasingly adopted because they lower total cost of ownership, better integrate customer service channels and leverage automation, including AI. All of this enables a superior customer experience that can be applied to other areas of a business. NICE responded to this shift by acquiring a leading CCaaS provider, inContact, in 2016. This acquisition gave NICE a nearly complete CCaaS solution, and as cloud-based offerings grew at the expense of on-premise systems, NICE benefited from higher revenue per licensed seat. The market rewarded this industry-leading position with strong valuation multiples. However, in 2025 rapid advances in AI capability and adoption began to cloud NICE's outlook. On one hand, improving AI functionality has accelerated the shift toward CCaaS solutions and away from on-premise deployments. On the other, the pace of change has intensified competition among CCaaS providers and has driven increased investment to incorporate advanced AI features. NICE has indicated that this heightened investment, including the approximately $1-billion acquisition of Cognigy, will put pressure on its earnings over the next year. This uncertainty contributed to a sharp correction in the share price, pushing it to multi-year lows and compressing valuation multiples to near all-time lows. While it is impossible to predict definitive winners and losers in the AI arms race, NICE remains favorably positioned as an established incumbent in the CCaaS market with a well-capitalized balance sheet. AI-enhanced contact center functionality could meaningfully expand the overall market size over time. We will continue to monitor the competitive landscape for evidence of NICE's performance in navigating this transition. For the patient, long-term investor, the current opportunity in NICE appears attractive.

BSD Analysis:
Brandes initiated a position in NICE Ltd, a leading Contact Center-as-a-Service provider, following a sharp correction driven by AI disruption concerns. The manager recognizes NICE's strong historical position in workforce engagement management and successful transition to cloud-based CCaaS solutions through the strategic inContact acquisition in 2016. While acknowledging near-term earnings pressure from the $1 billion Cognigy acquisition and increased AI investment, Brandes views the current valuation compression to multi-year lows as creating an attractive entry point. The investment thesis centers on NICE's established incumbent position, well-capitalized balance sheet, and potential for AI-enhanced functionality to expand the overall market size. Despite intensified competition and uncertainty around AI disruption, the manager believes patient long-term investors can benefit from the current dislocation, though they will monitor competitive positioning closely.

Pitch Summary:
Mohawk Industries is the world's largest flooring manufacturer. With a leading position on ceramic tile, carpet, laminate, vinyl and stone products, the company serves residential remodeling, new construction and commercial markets. Its global manufacturing and distribution footprint provides substantial scale advantages, broad product reach and cost efficiency across cycles. The market is currently focused on near-term headwinds facing Mohawk, including slowing home-remodeling demand, elevated input costs and margin pressure after an unusually strong post-COVID rebound. While cycle risks are still elevated, the company benefits, in our opinion, from a strong balance sheet and a free-cash-flow profile that has stayed positive throughout this period. Additionally, management owns a meaningful equity stake and has shown a willingness to deploy capital opportunistically through share repurchases and acquisitions during times of industry stress. In our view, Mohawk trades at a valuation that can withstand a prolonged downturn scenario. Based on our assessment of normalized earnings power and balance sheet strength, we believe its shares offer an attractive margin of safety and favorable long-term return potential.

BSD Analysis:
Brandes initiated a position in Mohawk Industries, viewing the world's largest flooring manufacturer as an attractive value opportunity amid cyclical headwinds. The manager acknowledges near-term challenges including slowing home remodeling demand and margin pressure but emphasizes the company's structural advantages including global scale, broad product portfolio, and cost efficiency. Key investment merits include a strong balance sheet that has maintained positive free cash flow throughout the downturn and management's opportunistic capital allocation through share buybacks and acquisitions during industry stress. The manager believes current valuations provide significant downside protection and can withstand a prolonged downturn scenario. With meaningful management ownership aligning interests and normalized earnings power assessment supporting the thesis, Brandes sees attractive long-term return potential despite elevated cyclical risks.

Pitch Summary:
SAP is one of the largest enterprise software providers in the world and a global leader in enterprise resource planning. The Germany-based company provides solutions that form the backbone of its clients' technology infrastructure, leading to recurring revenue streams and very low churn rates. Recently, SAP has accelerated the rate of client migrations from on-premise to cloud systems, a trend we expect to improve growth and reduce costs. However, those benefits have not resonated in a market concerned that artificial intelligence will obscure the need for enterprise software. We believe that narrative underestimates the scale, data ownership, and definition of client workflows that make SAP an irreplaceable piece of its clients' tech ecosystems. Moreover, we have confidence that this management team—led by a tested CEO and prudent, disciplined CFO—can steer SAP through the artificial intelligence era. We have invested successfully in SAP before and were excited to buy back in at what we view as a considerable discount to our estimate of intrinsic value.

BSD Analysis:
The managers returned to SAP, leveraging their previous successful investment experience with the enterprise software leader. They emphasize SAP's dominant position in enterprise resource planning and its role as backbone infrastructure for clients, generating recurring revenues with very low churn rates. The investment thesis centers on SAP's accelerating cloud migration, which should improve growth and reduce costs over time. The managers view market concerns about AI disruption as misplaced, arguing that SAP's scale, data ownership, and deep integration into client workflows make it irreplaceable rather than vulnerable to AI displacement. They express confidence in management's ability to navigate the AI transition, highlighting the tested CEO and disciplined CFO. The opportunity arose from market pessimism creating what they view as a considerable discount to intrinsic value, allowing them to re-enter a familiar, high-quality position at attractive valuations.

Pitch Summary:
Netflix is the leading streaming entertainment service with over 325 million subscribers and $45 billion of revenue. This scale creates a valuable moat, in our view. Netflix buys more content than its competitors in aggregate but pays less per subscriber, creating a valuable customer proposition as the business grows. Still, the stock declined significantly over the past several months as market participants focused on slowing engagement and the company's approach to buy Warner Bros, creating an attractive buying opportunity in our view. We are confident that Netflix's engagement remains strong and believed that the shares looked attractive with or without the acquisition. We find the business attractive as it is trading for its lowest relative valuation since 2022, a period that produced strong subsequent returns.

BSD Analysis:
The managers initiated a position in Netflix, emphasizing the company's scale advantages as a competitive moat with over 325 million subscribers and $45 billion in revenue. They highlight Netflix's ability to buy more content than competitors while paying less per subscriber, creating a virtuous cycle that strengthens the value proposition as the business grows. The investment opportunity arose from market concerns about slowing engagement and the company's approach to acquiring Warner Bros, which the managers view as creating an attractive entry point. They maintain confidence in Netflix's engagement metrics and view the shares as attractive regardless of acquisition outcomes. The managers note that current valuations represent the lowest relative levels since 2022, a period that subsequently generated strong returns, suggesting potential for significant upside from current levels.

Pitch Summary:
Hamamatsu Photonics is Japan's premier photon specialist, supplying detectors and light sources that enable complex machines to see what the human eye cannot and detect nanometer-scale defects. Hamamatsu is widely regarded as the preferred industry supplier and commands leading market share position across its major product categories. The company's partnerships with its customers often begins in the concept stage of development, which has led to sticky, long-term relationships. Despite these strengths Hamamatsu's share price has underperformed more recently due to primarily cyclical factors. This provided us the opportunity to initiate a position in a dominant company with improving shareholder returns that is trading at a significant discount to our estimate of intrinsic value.

BSD Analysis:
The managers initiated a position in Hamamatsu Photonics, viewing it as Japan's premier photon specialist with dominant market positioning. They highlight the company's specialized technology in detectors and light sources that enable nanometer-scale defect detection, capabilities that are difficult to replicate. The investment thesis emphasizes Hamamatsu's preferred supplier status and leading market share across major product categories, supported by sticky customer relationships that often begin at the concept development stage. The managers attribute recent underperformance to cyclical factors rather than structural issues, creating an attractive entry opportunity. They emphasize the company's improving shareholder returns and view current valuations as representing a significant discount to intrinsic value. The specialized nature of Hamamatsu's technology and its entrenched customer relationships suggest strong competitive moats in precision optical equipment markets.

Pitch Summary:
Compass Group is the world's leading contract foodservice provider. We know the company well, having invested in it successfully in the past, and value its demonstrated ability to generate resilient, recurring revenues through long-term outsourcing partnerships across core end markets, including business, healthcare, education and leisure. In our view, its scale, operational excellence, and decentralized operating model position it well to capitalize on the ever-growing addressable market and see consistent growth and margin progression over time. Despite strong fundamentals, the stock has underperformed the broad market since we sold out of it, as it has experienced multiple compression due to investor concerns over the end of the post-COVID recovery and AI-related employment disruption. This created the opportunity to invest alongside a strong management team in a company that we believe is poised to expand its business and generate solid shareholder returns.

BSD Analysis:
The managers are returning to a familiar investment in Compass Group, leveraging their previous successful experience with the company. They emphasize Compass's market-leading position in contract foodservice and its ability to generate resilient, recurring revenues through long-term outsourcing partnerships across diverse end markets. The investment thesis centers on the company's scale advantages, operational excellence, and decentralized operating model, which position it to capitalize on an expanding addressable market. The managers view the recent underperformance as creating an attractive entry point, attributing multiple compression to investor concerns about post-COVID recovery normalization and AI-related employment disruption. They maintain confidence in management's ability to drive consistent growth and margin expansion, viewing current valuations as disconnected from the company's strong fundamental positioning.

Pitch Summary:
Dassault Systèmes, the French-headquartered software company, was the top detractor during the quarter. The stock de-rated after reporting soft Q4 2025 results alongside cautious 2026 guidance, driven in part by cyclically weak demand across its Life Sciences and Industrial/Automotive segments—headwinds we believe are largely transitory. The selloff was compounded by the broader "SaaSpocalypse" narrative weighing on enterprise software multiples. While we take the AI disruption risk seriously, we believe it is largely misapplied here: Dassault's software simulates physical reality rather than purely managing information flows, a distinction generic LLMs cannot easily bridge, as doing so requires deep, proprietary simulation datasets only established CAD providers possess. Dassault is also rolling out multimodal AI capabilities, leveraging its physics-based layer to power agentic and generative experiences across their 3DEXPERIENCE cloud platform. With multiples near decade lows and conservative guidance now embedded in expectations, we believe the risk/reward is compelling.

BSD Analysis:
Despite being a top detractor, the managers maintain conviction in Dassault Systèmes, viewing the recent selloff as a compelling buying opportunity. They attribute the stock's underperformance to cyclical weakness in Life Sciences and Industrial/Automotive segments, which they consider transitory headwinds. The managers differentiate Dassault from generic enterprise software companies, emphasizing its physics-based simulation capabilities that cannot be easily replicated by large language models. They highlight the company's proprietary simulation datasets and established CAD market position as defensive moats. The investment case is strengthened by Dassault's development of multimodal AI capabilities within its 3DEXPERIENCE platform, suggesting the company is adapting to rather than being disrupted by AI trends. With valuations at decade lows and conservative guidance embedded, the managers see attractive risk-adjusted returns.

Pitch Summary:
Samsung Electronics was the top contributor during the quarter. The South Korea-headquartered technology company's stock price rose as it reported strong fourth-quarter 2025 results that benefited from the ongoing Memory super cycle. We believe 2026 is likely to be the most profitable year yet for Samsung's memory business as there is a significant shortage of memory chips driven by what seems like an insatiable demand due to AI. We are encouraged by these thesis-affirmative results and continue to believe Samsung is one of the world's leading semiconductor companies with a long runway for future growth.

BSD Analysis:
The managers maintain a bullish stance on Samsung Electronics, driven by the company's strong positioning in the memory semiconductor super cycle. They highlight Samsung's Q4 2025 results as thesis-confirming, with the memory business benefiting from AI-driven demand creating significant chip shortages. The fund views 2026 as potentially Samsung's most profitable year for memory operations. The investment thesis centers on Samsung's market-leading position in semiconductors and the structural tailwinds from AI adoption driving insatiable memory demand. The managers emphasize Samsung's long-term growth runway, suggesting confidence in the company's ability to capitalize on the ongoing digital transformation and AI infrastructure buildout.

Pitch Summary:
Salesforce is a leading technology company that offers a collection of software products aimed at providing businesses with a full front office productivity suite. We believe Salesforce is a solid business going through a transformation into a profitable, shareholder-focused enterprise. Since management announced their renewed focus on operating discipline a couple years ago, Salesforce's margins have increased substantially. In our view, there is further room to improve as the company leverages its unique position to help businesses deploy AI and continues to restructure its sales organization. Despite the strong outlook, Salesforce's stock price has declined significantly due to AI fears, creating an opportunity to purchase shares at a discount to our estimate of intrinsic value.

BSD Analysis:
The fund managers view Salesforce as undergoing a fundamental business transformation toward greater profitability and shareholder focus. The investment thesis highlights management's successful execution of operational discipline initiatives, evidenced by substantial margin expansion over recent years. The managers see additional improvement potential through AI integration and sales organization restructuring, positioning Salesforce to capitalize on its market-leading CRM platform. The company's comprehensive front office productivity suite provides competitive advantages and customer stickiness in the enterprise software market. Recent stock price weakness driven by AI-related concerns has created an attractive valuation opportunity relative to intrinsic value estimates. The managers appear confident in Salesforce's ability to benefit from rather than be disrupted by AI trends. The transformation narrative from growth-at-any-cost to profitable growth aligns with current market preferences for operational efficiency and shareholder returns.

Pitch Summary:
Compass Group is the world's leading contract foodservice provider. We know the company well, having invested in it successfully in the past, and value its demonstrated ability to generate resilient, recurring revenues through long-term outsourcing partnerships across core end markets, including business, healthcare, education and leisure. In our view, its scale, operational excellence, and decentralized operating model position it well to capitalize on the ever-growing addressable market and see consistent growth and margin progression over time. Despite strong fundamentals, the stock has underperformed the broad market since we sold out of it, as it has experienced multiple compression due to investor concerns over the end of the post-COVID recovery and AI-related employment disruption. This created the opportunity to invest alongside a strong management team in a company that we believe is poised to expand its business and generate solid shareholder returns.

BSD Analysis:
The fund managers are returning to a familiar investment in Compass Group, leveraging their historical knowledge and previous successful experience with the company. The investment thesis centers on Compass's dominant market position and resilient business model built on long-term outsourcing contracts across diversified end markets. The managers emphasize the company's operational advantages, including scale benefits, execution capabilities, and a decentralized structure that enables local market responsiveness. The recurring revenue profile provides stability and predictability, while the expanding addressable market offers growth opportunities. Recent underperformance has created an attractive entry point, with multiple compression driven by post-COVID recovery concerns and AI-related employment fears. The managers view these concerns as temporary headwinds rather than structural threats. Strong management quality and the company's market-leading position support expectations for business expansion and shareholder value creation.

Pitch Summary:
IQVIA Holdings was the top detractor during the quarter. The U.S.-headquartered provider of clinical research services, analytics, and solutions saw the price of its stock decline on AI-related fears despite reporting an in-line fourth quarter and 2026 outlook. Management believes the demand environment has stabilized and leading growth indicators, such as bookings and win rates, are encouraging. They expect IQVIA to be a net beneficiary of AI due to proprietary data, domain expertise, and regulatory and compliance barriers, among other factors. We continue to view IQVIA as a stable, long-cycle business that will benefit from a recovery in client spending in the coming quarters.

BSD Analysis:
Despite recent underperformance, the fund managers maintain conviction in IQVIA's long-term prospects, viewing current AI-related concerns as misplaced. The investment thesis rests on IQVIA's defensive business characteristics, including proprietary data assets and regulatory expertise that create competitive moats. Management's confidence in demand stabilization is supported by improving leading indicators such as bookings and win rates, suggesting operational momentum. The managers believe IQVIA is positioned to benefit from AI adoption rather than be disrupted by it, citing the company's data advantages and domain expertise. The characterization as a 'stable, long-cycle business' emphasizes the recurring revenue nature and client relationship durability. Expected recovery in client spending provides a near-term catalyst for performance improvement. The contrarian positioning during market pessimism aligns with the fund's value-oriented investment approach.

Pitch Summary:
ConocoPhillips was the top contributor during the quarter. The U.S.-headquartered oil and gas company's stock price rose as it benefitted from a favorable macroeconomic backdrop and results consistent with our expectations. Rising energy prices due to geopolitical conflict were the most significant driver of the stock performance. We continue to believe Conoco has some of the industry's highest quality assets managed by a team of strong operators and capital allocators.

BSD Analysis:
The fund managers maintain a bullish stance on ConocoPhillips, highlighting the company's strong operational performance and capital allocation discipline. The investment thesis centers on the quality of Conoco's asset base and management team's execution capabilities. The recent outperformance was driven by favorable energy price dynamics stemming from geopolitical tensions, which benefited the company's revenue profile. The managers emphasize Conoco's competitive positioning within the independent E&P sector, citing superior asset quality compared to peers. The company's demonstrated ability to generate consistent results aligns with management's expectations, reinforcing confidence in the investment. The focus on operational excellence and disciplined capital allocation suggests sustainable competitive advantages. This positioning appears well-suited to capitalize on energy market volatility and long-term demand fundamentals.

Pitch Summary:
Chiron Real Estate (XRN) is another example of how important management can be to our decision-making process. This real estate investment trust manages a portfolio of medical-related real estate primarily consisting of outpatient medical and inpatient rehab. XRN was known as Global Medical REIT when we initiated the position last year, at around the time the company named Mark Decker, Jr., as CEO. He had previously turned around another REIT we followed and moved swiftly to cut out non-core assets, expand the portfolio into better performing subsectors, and align himself with shareholders. After outlining his vision and strategy for the company, Decker personally initiated an open market purchase of over $1 million and swiftly established a share repurchase program. In our view, the management change and insider buying was a strong positive. The executive officers, directors, and employees who now collectively control 8.3% of XRN's equity, understand how undervalued XRN is at 12x EV/EBITDA, well below the 14-17x range for most of its Healthcare REIT peers. We believe the recent CEO buys also validate our view that the stock is priced well below the intrinsic value of Chiron's Real Estate. The stock currently trades close to a 30% discount to analysts' consensus estimate of NAV, and we think that gap will close as management continues to execute on its vision and strategy.

BSD Analysis:
Heartland's investment in Chiron Real Estate centers on a compelling management turnaround story under new CEO Mark Decker Jr. The fund initiated the position when Decker was appointed, given his successful track record turning around another REIT in their coverage universe. Decker quickly demonstrated shareholder alignment through strategic actions including divesting non-core assets, expanding into higher-performing healthcare subsectors, and establishing a share repurchase program. His personal $1 million open market purchase signals strong conviction in the company's undervaluation. Management and insiders now control 8.3% of equity, creating meaningful alignment with shareholders. At 12x EV/EBITDA, Chiron trades at a significant discount to healthcare REIT peers in the 14-17x range. The stock also trades at approximately 30% below consensus NAV estimates, providing multiple paths to value realization as management executes their strategic vision.

Pitch Summary:
There has been a lot of carnage in the software industry lately, on fears that AI bots will take over the business. i3 Verticals (IIIV) hasn't been immune. The company, which makes enterprise software for the public sector, including school payment systems, has been pressured by the broader narrative that AI will upend its software business models. Its shares have slumped to the low thirties last fall and closed the quarter at $22. In our view, this is a case where the market has over generalized the risk. For starters, i3 provides embedded software and payments solutions for niche verticals, such as school cafeteria and tuition payments systems. The retention rate for these types of contracts has historically been very high and switching vendors can be complex. Municipalities and school districts are not in the habit of frequently putting out Requests for Proposals to change systems. Yet the company's cash flow characteristics, sticky customer base, and potential for eventual strategic interest do not seem to be fully reflected in current valuations. We believe IIIV is worth 16x EBITDA, which would return the stock to around $32 a share. Even if it were to hit that multiple, though, it would still be trading at a steep discount to its largest peer, which trades at 19x EBITDA.

BSD Analysis:
Heartland views i3 Verticals as a misunderstood software company caught in the broader AI-driven selloff affecting the sector. The fund believes the market has overgeneralized AI disruption risks to i3's niche vertical markets. The company provides embedded software and payment solutions primarily to public sector clients, including school cafeteria and tuition payment systems. These contracts exhibit high retention rates due to switching complexity and the conservative nature of municipal and school district procurement processes. The fund emphasizes the sticky nature of i3's customer base and strong cash flow characteristics that aren't reflected in current valuations. At $22 per share, the stock trades at a significant discount to the fund's 16x EBITDA target valuation of $32. Even at that level, i3 would trade below its largest peer at 19x EBITDA, suggesting further upside potential.

Pitch Summary:
When identifying companies that fit our process, it is important that management demonstrate the ability to course correct, even if they have hit certain hurdles in the past. Case in point: Allegiant (ALGT). We initiated a position in the ultra low cost airline last year, when the shares were depressed and its story was obscured by a non core hotel project that consumed capital and complicated the narrative. The airline ultimately sold the hotel asset, took the financial hit, and refocused on the core business—a prime example of management taking its lumps and working to improve capital allocation. The stock subsequently rallied significantly from the lows, driven by this refocus, improved execution, and the carrier's low cost model. Allegiant is facing renewed pressure as oil and jet fuel prices climbed after the start of the war in Iran, reminding investors of the sector's sensitivity to energy. Recently, we reallocated capital from other airline exposure into ALGT to ensure we held the name that had the most compelling risk/reward outlook, even if its story is masked by near-term macro headwinds centered on fuel costs. This carrier enjoys a real niche, as it is focused on leisure travel and 75% of its routes do not have non-stop competition. This model has held up well during past slowdowns and fuel spikes, and we expect it will again. Yet the stock closed the quarter at $83 a share. Longer-term, we believe that the ALGT could trade at 1.75x EV/Sales, which would value the shares at more than $200.

BSD Analysis:
Heartland initiated a position in Allegiant when shares were depressed due to a non-core hotel project that distracted from the airline's core business. Management demonstrated strong capital allocation discipline by divesting the hotel asset and refocusing on the ultra-low-cost carrier model. The fund views this as a compelling turnaround story with management that can course-correct effectively. Allegiant operates in a defensible niche, focusing on leisure travel with 75% of routes having no non-stop competition. This competitive moat has historically provided resilience during economic downturns and fuel price spikes. Despite near-term headwinds from rising oil prices due to geopolitical tensions, the fund believes the business model remains intact. At $83 per share, Allegiant trades at a significant discount to the fund's target valuation of 1.75x EV/Sales, implying upside to over $200 per share.

Pitch Summary:
Vivendi was a significant detractor in March and has been a thorn in our side since last summer. The shares topped out in late July 2025 and have subsequently declined -50%, as the NAV has declined -38% and the discount has gone from 36% to 49% (a return of -20%). As we discussed in the November 2025 newsletter, the proximate cause of the widening discount was a court ruling in favour of Vincent Bollore, thereby largely eliminating the chance of him being forced to buy Vivendi minorities out in the near-term. Since this point however, there has also been considerable pain on the NAV side of the equation, as UMG shares have de-rated to a record low valuation and share price. As we described in the July 2025 newsletter, since IPO, UMG has performed poorly as a stock in both absolute terms but particularly in relative terms – where its market cap has gone from parity with that of Spotify to c.1/3rd. Whilst growth has exceeded expectations, there has been considerable debate and disappointment around margins, free cash flow and capital allocation, with a further distraction of Bollore and a perceived overhang. The full year results, published in March, in many ways encapsulated this, with much stronger than anticipated revenue growth, offset by weaker margins, and €404m of Royalty Advances and €280m of catalogue investments. We do not believe management have done a good job of explaining capital allocation (particularly with regard to Advances – which we view as more akin to growth capex), and nor always done a good job at allocating capital itself (particularly with regard to catalogue investments – which we believe should be the preserve of more specialist vehicles with more suitable structures and costs of capital). Whilst we have sympathy for the bears' grievances and believe the company could be run in a much more shareholder friendly manner, we believe investors have become too despondent, with – at the end of March 2026 – the shares trading at c.13x 2026e earnings net of the stake in Spotify. We believe this value to simply be too cheap given UMG's structural position in the music value chain and the attractive tailwinds from the re-monetisation of music. It would appear others agree. In late March the company launched an inaugural €500m buyback programme; and in early April Bill Ackman/Pershing Square ("PS") launched a proposed offer for the company at an ostensible +78% premium, by way of a proposed merger with Pershing Square SPARC Holdings, a blank cheque acquisition company. The offer consists of 1) €5.05 per share of cash (equivalent to c.30% prior close price); and 2) 0.77 NYSE-listed New UMG shares – which PS "value" at €25. This latter value is predicated on New UMG trading at 25x 2027e EPS post accretion of cancelling 17% of shares outstanding as part of the proposed transaction. To state the obvious, the offer value is higher/lower if one assumes a higher/lower target PE multiple and as such, there is a certain degree of scepticism as to the value of this largely paper offer – as is reflected in UMG shares languishing <€20. Alternatively, investors can elect a cash offer of €22. What happens next comes down to Bollore, who through Bollore SE and Vivendi controls c.28% of UMG. He is notoriously difficult to predict, and we will refrain from attempting to do so. Rather, what we can say, is that the Pershing Square proposal highlights UMG's deep undervaluation and the significant self-help measures the company has at its disposal to unlock and create shareholder value. Vivendi has been a bruising investment but not one we would consider to be a mistake. When a stock is becoming demonstrably cheaper in discount terms and the NAV fundamentals are solid, whilst also becoming cheaper, one can afford to be patient. Exactly what happens next is hard to predict, but Vivendi at close to a 50% discount and UMG deeply undervalued, the ingredients for attractive long-term returns are in place. The most obvious risk, from the perspective of Vivendi shareholders, would be for Bollore to accept a €22 offer and retain or re-invest capital within Vivendi, however such a scenario seems reasonably well discounted in the price.

BSD Analysis:
Despite significant underperformance, the manager maintains conviction in Vivendi, viewing recent weakness as creating an attractive entry point rather than a fundamental deterioration. The investment thesis centers on UMG's structural position in the music value chain and re-monetization tailwinds, with shares trading at only 13x 2026e earnings net of Spotify stake. The manager acknowledges management's poor capital allocation communication and execution, particularly regarding royalty advances and catalogue investments, but believes the market has become overly pessimistic. Bill Ackman's takeover proposal at a 78% premium validates the deep undervaluation thesis, though the manager remains cautious about the largely paper offer structure. With Vivendi trading at nearly 50% discount to NAV and UMG fundamentally undervalued, the manager sees compelling long-term return potential despite near-term uncertainty around Bollore's decision-making. The €500m buyback program and external validation from sophisticated investors like Pershing Square provide additional catalysts for value realization.

Pitch Summary:
At the other end News Corp (+30bps) was the only meaningful contributor. During the month Dow Jones (45% News Corp NAV) held a Capital Markets Day, which set out plans to grow EBITDA from $558m in FY2025 to >$1bn over the next five years (c.14% above consensus). We came away highly impressed, adding further fortitude to our belief in the value of the Professional Information Business the company has built. This comes after a period of significant market worry about the perceived threat of AI for data-related companies. We believe the effects of AI disruption will not be evenly distributed, and that proprietary data assets with high degrees of workflow integration and high switching costs (such as Risk & Compliance), or where trust and market standard setting is important (such as OPIS), will not only survive but prosper. The onus remains on News Corp management and the family to unlock latent value for shareholders.

BSD Analysis:
The manager maintains a bullish stance on News Corp following an impressive investor day by Dow Jones, which represents 45% of News Corp's NAV. Management outlined ambitious plans to nearly double EBITDA from $558m to over $1bn over five years, representing 14% growth above consensus expectations. The fund manager believes News Corp's Professional Information Business possesses significant competitive advantages that will protect it from AI disruption. Specifically, they highlight proprietary data assets with high workflow integration, switching costs, and trust-based market positioning in areas like Risk & Compliance and OPIS. The manager views these characteristics as creating sustainable moats that will allow the business to prosper rather than merely survive technological disruption. The investment thesis centers on management's ability to unlock latent shareholder value, with the recent investor day reinforcing confidence in the underlying business quality. The position contributed positively to performance during a challenging month for the broader portfolio.