Investment Pitches

Pitch Summary:
Live Nation is the world's largest live entertainment company. The live entertainment industry has grown in the high single-digits over the last two decades, and demand continues to exceed supply. Live Nation is a dominant player and offers a complimentary suite of services including concert promotion, venue operations, ticketing, and artist management businesses. Artists today make 90% of their revenue on tour as album sales and royalties become less important. Tours are increasingly global, and there are an increasing number of shows per tour. Live Nation's comprehensive offerings and scale enable its concert promoters to make better decisions on pricing and venue organization which benefits artists, venues, and fans. We expect Live Nation to continue to grow in the high single-digits over our long-term time horizon.

BSD Analysis:
Vulcan Value Partners initiated a position in Live Nation Entertainment, viewing it as a dominant player in the structurally growing live entertainment industry. The manager's thesis centers on the secular shift in artist revenue models, where touring now represents 90% of artist income versus traditional album sales and royalties. This fundamental change creates a powerful tailwind for Live Nation's integrated platform of concert promotion, venue operations, ticketing, and artist management services. The company's scale advantages enable superior pricing decisions and venue optimization that benefit all stakeholders in the ecosystem. With demand consistently exceeding supply in live entertainment and tours becoming increasingly global with more shows per tour, Vulcan expects the company to sustain high single-digit growth over their long-term investment horizon. The investment reflects confidence in Live Nation's market-leading position and the structural growth dynamics of the live entertainment industry.

Pitch Summary:
J.B. Hunt Transportation Services, Inc. (JBHT) was our Strategy's worst performer during the quarter, down almost 19%. But this is another example where self-help could set the stage to benefit from potential secular tailwinds. J.B. Hunt is a leading intermodal shipping company. Customers hire Hunt to move freight using a variety of transportation modes to reduce cost and fuel consumption. This "agnostic" approach stands in contrast to most competitors who utilize a single mode of transportation. The company missed first quarter expectations, causing the stock to sell off in April. The truck load (TL) market is in a deep recession due to weak demand and too much capacity. Because TL is a substitute market for intermodal (normally a much-less-efficient substitute at that), the irrationally priced spot market, which tracks the cost to move single shipments by truck at current prices, has cut Hunt's intermodal margins to their lowest levels in more than 20 years while forcing management to walk away from some contracted business as renewals occur. With profit expectations down around 25% from peak, Hunt seems to be underearning. Management is planning to increase Hunt's intermodal capacity 40% by the end of 2025 versus 2021 levels, improving asset density and efficiency, while driving further market share gains. In recognition of the soft freight market, management has elected to moderate capital spending with the goal of improving asset utilization. Importantly, we believe that a cyclical recovery is only the beginning of the story, with the company uniquely poised to structurally gain market share for the rest of the decade driven by a cost advantage relative to TL. In the meantime, JBHT trades at 9.6 times consensus next-12-month Enterprise Value to EBITDA, representing a 30% discount to the Industrials sector, even though Hunt normally trades at parity or a slight premium when economic growth is accelerating. The company's balance sheet is in solid shape with a leverage ratio of less than 1X. We believe Hunt can fund network investments through a recession using internal cash generation without stressing the company's balance sheet.

BSD Analysis:
Despite being the fund's worst performer in Q2 with a 19% decline, Heartland maintains conviction in J.B. Hunt as a self-help story positioned for secular growth. The managers view JBHT as a leading intermodal shipping company with a unique "transportation agnostic" approach that differentiates it from single-mode competitors. While the truckload market recession has pressured intermodal margins to 20-year lows and forced profit expectations down 25% from peak, Heartland believes the company is underearning. Management's plan to increase intermodal capacity 40% by 2025 should improve asset density and efficiency while capturing market share gains. The investment thesis relies on JBHT's structural cost advantage over truckload competitors positioning it for market share gains throughout the decade. At 9.6x EV/EBITDA, the stock trades at a 30% discount to industrials despite historically trading at parity during growth periods. With leverage below 1x and strong cash generation, the company can fund network investments without balance sheet stress.

Pitch Summary:
NextNav Inc. (NN) - NextNav, our next generation GPS / wireless spectrum investment is our largest position, and was the largest drag on our performance over the last few months. This is not overly surprising, as I mentioned in our YE'24 letter that I believed that two different venture capital funds that owned NextNav stock – one a 2005 vintage, and one a 2012 vintage – had reached the end of their fund lives, and were thus aggressively selling shares. Likely also contributing to the recent weakness is the fact that NextNav's GAAP financials give no indication of the value of the Company's spectrum licenses. In fact, the GAAP financials are a mess, and likely cause NextNav to appear on any quantitative screen meant to identify candidates for short selling. Given recent market turmoil, I suspect quite a few of those screens are being run. This type of selling – and the resulting stock price weakness – should not concern us. Rather, we should stay focused on NextNav's relationship with the Federal Communications Commission, and the Company's efforts to change the rules that govern the 900 MHz spectrum band. On that front, recent developments have been undeniably positive, and in my view, the odds that NextNav's petition for rule making is approved have gone up considerably. First, in early March newly appointed FCC Chairman Brendan Carr published a blog post called "Boosting GPS and 911 for the USA" that detailed plans to explore alternatives to GPS and improve the accuracy of the 911 system by strengthening the vertical location accuracy requirements. While Nextnav was not mentioned by name, Nextnav is the only company whose technology focuses on these two things. Carr also noted that there is bi-partisan support for these measures and indicated that a Notice of Inquiry (NOI) would be voted on in the March FCC meeting. Nextnav is mentioned specifically by name in that NOI, and support at the meeting from the FCC commissioners was unanimous, with each of them noting the need for a "system of systems" to address the United States' GPS problem. While not unique to NextNav, this is the same term that the company uses, and it clearly indicates that this is a problem without a sole source solution. In other words, NextNav does not have to "win" all alone at the expense of other options. They only need to be part of a solution that may also include other options. This increases the odds of success for NextNav. Importantly, following the meeting Chairman Carr posted on "X" / twitter that he intended to "move on Trump Time" to implement his agenda. In my view, the NOI and the reference to "Trump Time" are both extremely important, because historically the big risk when dealing with the FCC has been that perhaps your proposal winds up stuck in a drawer for five years. That is clearly not the case here. In fact, the timing of the NOI suggests that Carr put this process in motion during his first week on the job: this is a clear priority for him. My best guess going forward is that inclusive of the time required for the NOI process and drafting a Notice of Proposed Rule Making (NPRM), we could see a NPRM by early fall of this year. However, if we are really on Trump Time, it is possible that the NPRM process could run concurrent to the NOI process and accelerate the timeline significantly. I would not be surprised to see NextNav shares double or more on the filing of an NPRM, as this would be a clear sign that NextNav will be well positioned to monetize its spectrum in the not-too-distant future. There is reason to believe that this spectrum could be worth anywhere from 3-5x where NN stock is valued. Second, in mid-March NextNav announced they had re-financed their debt with a $190M 5% convertible note and related warrants that would allow them to repay their existing $70M 10% notes due in December of 2026. Quite frankly, I was surprised by the timing of this transaction as in theory an NPRM should drop with plenty of time to complete a refinancing before the maturity of the existing debt. At the same time, this extra capital provides NextNav with a war chest which can be used to deal with any opposition to their spectrum goals: effectively by paying the opposition to go away. This too theoretically accelerates the timeline. Additionally, the investors that participated – including insiders – are very strong strategic investors that bring more to this transaction than just capital. For example, consider M-Corp, Michael Milken's family office, which is led by Josh Lobel, who was recently named to Trump's National Intelligence Advisory Board. The national security and economic case for using NextNav's technology to improve the United States' GPS system is clear by itself, but it can only help to have someone in Trump's inner circle as part of the NextNav ecosystem. In sum, our investment in NextNav is responsible for a large portion of our year-to-date decline. However, the fundamental developments here have been undeniably positive, and have set us on an accelerated timeline toward success. It is also worth noting that this investment has very little attachment to the real economy, and over time should prove to be completely uncorrelated to the stock market. Those are attractive qualities during times of uncertainty.

BSD Analysis:
The manager's thesis centers on NextNav's valuable 900 MHz spectrum licenses and regulatory approval for rule changes that would unlock significant value. Recent stock weakness is attributed to VC fund liquidations and poor GAAP financials that don't reflect spectrum value, creating short-selling opportunities. However, regulatory developments have been "undeniably positive" with new FCC Chairman Brendan Carr prioritizing GPS alternatives and 911 system improvements - areas where NextNav is the only focused player. The unanimous FCC support for a "system of systems" approach increases NextNav's odds since they don't need to be the sole solution. Carr's "Trump Time" commitment suggests accelerated timelines, with a potential NPRM by early fall that could double the stock price. The $190M refinancing provides a war chest to eliminate opposition and includes strategic investors like Michael Milken's family office, whose leader Josh Lobel sits on Trump's National Intelligence Advisory Board. The manager believes the spectrum could be worth 3-5x current valuation and offers attractive uncorrelated returns during uncertain times.

Pitch Summary:
Stericycle, Inc. (SRCL), a leading medical waste disposal and compliance company in the country, is an example where self-help has come to fruition. After undertaking a variety of self-help strategies — including divesting 12 non-core operations over roughly six years to focus on its core medical waste disposal and document destruction businesses while reducing debt — Stericycle agreed to be acquired by Waste Management for $62 per share, valuing the deal at $7.2 billion. This is SRCL's reward for changing its game plan, turning what was a company that sought growth through aggressive M&A into a business focused on organic growth while seeking to optimize margins, capital allocation, and returns on investment. When we wrote about this stock a year ago, we referred to this as a metamorphosis from 'holding company' to 'operating company' with a better chance for rewarding shareholders. When Waste Management announced the acquisition, Stericycle was well into the process of implementing plans to improve revenue quality (through steps such as implementing better pipeline management processes) and operating efficiency (through modernization and innovation). Before the deal, we had assigned Stericycle a price target of $63 a share, which was near the takeout price. Waste Management seemed to agree with what we concluded: SRCL had been trading at a discount to its own history and to its waste industry peers that operate bond-like business models.

BSD Analysis:
Heartland's investment in Stericycle represents a successful turnaround story that culminated in a $7.2 billion acquisition by Waste Management at $62 per share. The fund managers had previously assigned a $63 price target, demonstrating strong analytical precision. The investment thesis was based on SRCL's transformation from an acquisition-focused holding company to an operationally-focused business. Over six years, management divested 12 non-core operations to concentrate on core medical waste disposal and document destruction while reducing debt. The company shifted from aggressive M&A growth to organic growth strategies, optimizing margins and capital allocation. Heartland viewed this as a metamorphosis that would better reward shareholders through improved operational efficiency and revenue quality initiatives. The acquisition validated their thesis that SRCL was trading at a discount to both its historical valuation and waste industry peers with bond-like business characteristics.

Pitch Summary:
Lifecore Biomedical Inc (LFCR) - Lifecore, our fill-finish CDMO, remains an ugly duckling. However, new leadership has fixed up under-managed CDMOs in the past, and is making progress. The balance sheet has been strengthened, the sales force has been improved, and new customer wins are being announced. As management continues to execute, capacity utilization will improve, and with it will come tremendous operating leverage and ultimately free cash flow. A recent filing from the company indicates that internally they believe there is an 80% chance the business will be sold within the next 3 years. There is an argument that Lifecore deserves a higher multiple than what Avid Bioservices was recently purchased for, but if Lifecore were to trade at the same multiple as the Avid transaction, shares would be in the low to mid double digits today. Theoretically Lifecore should be a beneficiary of tariffs.

BSD Analysis:
The manager views Lifecore as an "ugly duckling" turnaround story with new leadership that has a track record of fixing under-managed CDMOs. The company has made operational progress including strengthening the balance sheet, improving the sales force, and announcing new customer wins. The investment thesis centers on improving capacity utilization driving operating leverage and free cash flow generation as management executes. A recent company filing indicates management believes there's an 80% probability of a sale within three years. The manager believes Lifecore deserves a higher valuation multiple than Avid Bioservices' recent acquisition, but even at the same multiple, shares would trade in the low-to-mid double digits. The manager also notes Lifecore could theoretically benefit from tariff policies. The combination of operational improvements and potential sale optionality provides multiple paths to value realization.

Pitch Summary:
In the second quarter, we started a new position in Fidelity Information Services, Inc. (FIS). FIS is one of three major suppliers of core processing software and services utilized by banks, capital market participants, and corporations. Whenever you log into your mobile phone banking app, pay a bill, or transfer money, there is a decent chance that FIS enables that transaction. Given the contractual nature of its business, 80% of the company's revenues are recurring providing better revenue visibility and less profit volatility than sector peers. FIS is a classic self-help story about strategic course correction and capital allocation. The company's prior management team took a wrong turn by following competitor Fiserv into the merchant acquiring industry — the intermediaries that stand between credit card networks like Visa or Mastercard and card issuers like Capital One or Citi — when it overpaid for Worldpay in 2019. Rather than boosting FIS's growth as planned, the acquisition was a distraction as software startups began taking share from incumbents, including Worldpay. Starting in 2022, new CEO Stephanie Ferris began to change course, selling a majority stake in Worldpay and using the proceeds to pay down debt, taking leverage down from more than 4 times Net Debt to EBITDA to below 2 times. At the same time, she refocused the business by shifting sales incentives away from new client wins and toward selling additional services to existing customers to make the business stickier and more profitable. We initiated a position in FIS because we believe the fruits of this self-help strategy have yet to fully ripen. We expect accelerating revenue growth through improved sales incentives and increased technology needs for banks. Meanwhile, margin expansion should be driven by cross selling additional services, streamlining costs, and eliminating the Worldpay distractions. The company is trading at 11 times next-12-month Enterprise Value to EBITDA (after backing out the value of FIS's minority Worldpay stake), while competitors Fiserv and Jack Henry & Associates trade at 11.7 and 16.2 times EV/EBITDA, respectively. FIS also trades near parity with the Russell Midcap® Value Index even though it has traded at around a 10% premium to the benchmark for the past two decades.

BSD Analysis:
Heartland initiated a new position in FIS, viewing it as a compelling turnaround story with significant self-help potential. The fund managers highlight FIS's dominant position as one of three major core banking software providers, with 80% recurring revenue providing stable cash flows. The investment thesis centers on new CEO Stephanie Ferris's strategic refocus since 2022, including divesting the problematic Worldpay acquisition and reducing leverage from 4x to below 2x Net Debt/EBITDA. The managers expect accelerating revenue growth through improved sales incentives and cross-selling to existing customers, while margin expansion should come from cost streamlining and elimination of Worldpay distractions. At 11x EV/EBITDA, FIS trades at a discount to competitors and near parity with the Russell Midcap Value Index despite historically trading at a 10% premium. The pitch emphasizes the company's strategic course correction and improved capital allocation as key catalysts for future outperformance.

Pitch Summary:
Avid Bioserves (CDMO) – We had owned shares in Avid at various sizes for most of the existence of LWC. Most recently, I bought a large amount of shares following management's disastrous refinancing of a convertible bond in March of 2024, which I detailed in our Q1'24 letter. In February, the acquisition of Avid by private equity buyers at $12.50 per share was completed. For a few years now the thesis had been that the company had invested heavily in capacity, but capacity had not yet been filled up. As additional revenue came online, it would come with tremendous operating leverage as capacity was utilized. Avid's proxy statement related to the acquisition contained a sensitivity analysis that projects that our thesis will play out exactly as envisioned. Specifically, the analysis shows revenue increasing by 47% and EBITDA by 100% for fiscal year 2026, which for them starts in May of 2025, and then EBITDA doubling again by fiscal 2029 (effectively calendar 2028). That would be a quadrupling of EBITDA well within our prospective investment horizon, and that EBITDA should convert to free cash flow at very high levels as the company would have been debt free (assuming conversion of convertible bonds), not have to pay much in the way of cash taxes due to the NOLs that were "earned" during our tenure, and not have much in the way of Cap Ex due to the virtually brand new facilities that were paid for during our tenure. There is of course no guarantee the company will hit these numbers; this business can be lumpy. However, pharmaceutical companies tend to have a fairly good idea of what their ordering needs will be well in advance, and recent commentary from industry suppliers has clearly indicated that demand is accelerating. Hitting these numbers is well within the realm of possibility. Thus in my opinion it looks like management and the board sold our company at the bottom of the cycle at a panic price. If the company executes anywhere near as well as the proxy suggests that they think they can, the private equity buyers have taken a home run out of our hands and claimed it as their own. A key part of my investment process is related to understanding the incentives of the people involved, and in this instance I got the people wrong. When we first invested years ago there were activists involved that were theoretically protecting our interests. Those activists exited long ago, and leading up to the sale neither management nor the board had enough skin in the game to protect the interests of small common shareholders like us. Making matters worse, this sale will come with short term taxable gains for us.

BSD Analysis:
The manager's thesis was based on Avid's significant capacity investments that had not yet been fully utilized, creating potential for tremendous operating leverage as revenue filled the excess capacity. The investment was made following a disastrous convertible bond refinancing in March 2024, which the manager viewed as a buying opportunity. The company was acquired by private equity at $12.50 per share in February 2025, which the manager believes was a "panic price" at the bottom of the cycle. Proxy statements revealed management's internal projections showing 47% revenue growth and 100% EBITDA growth by fiscal 2026, with EBITDA doubling again by 2029 - effectively quadrupling EBITDA within the investment horizon. The manager believes this EBITDA would convert to free cash flow at high rates due to the debt-free structure, NOLs, and minimal capex needs from recently built facilities. The manager admits to misjudging management and board incentives, as neither had sufficient skin in the game to protect minority shareholders.

Pitch Summary:
Xponential Fitness (XPOF) - Xponential fitness, a franchisor of boutique fitness concepts, was first introduced in our 1H'24 letter. The thesis was simple: Xponential's crown jewel, Club Pilates, was likely more valuable than the enterprise value of the entire company, essentially giving no value to the company's other fitness concepts. Shares were mispriced due to a short report – much of which was ill founded – that led to the removal of the company's founder and CEO, and a regulatory review. Future growth is very likely because several years' worth of franchise development agreements have already been sold. A new – and highly experienced – management team was brought in to right the ship, and with time the regulatory issues would be cleared, and business would return to "normal." Our investment started as a small position, and the thesis was playing out well as the new management team began to detail the changes that needed to be made (essentially professionalizing systems and processes) and the regulatory clouds began to clear, first with the California Department of Financial Protection and Innovation closing their inquiry with a slap on the wrist, and next with hints that an SEC investigation would resolve similarly. The stock had moved up in price quite a bit, but in my view the situation had also been de-risked materially, so I increased our position size considerably, and made XPOF a top 5 position in Q1. Status as a top 5 position however was very short lived as when XPOF reported earnings in mid-March they indicated store openings were below expectations and provided disappointing guidance going forward. Shares were quickly cut in half from where they were trading just a few weeks before. Despite these negatives, all is not lost. Club Pilates continues to execute well, and management has shown an increasing interest in disposing of subscale brands. Further, the company will be hosting an investor day in May, which rarely happens unless a company has good news to share, so it seems possible that this was a "kitchen sink" quarter for a new management team. Nevertheless, it was a mistake to aggressively upsize the position based on positive regulatory developments while not also seeing positive operational developments.

BSD Analysis:
The manager's thesis centers on Xponential's crown jewel Club Pilates being undervalued relative to the entire enterprise value, creating a sum-of-the-parts opportunity. The investment was initially driven by regulatory overhang from a short report and management turnover, which the manager viewed as temporary headwinds. New experienced management was brought in to professionalize operations, and regulatory issues began clearing with California's inquiry closing with minimal penalties. However, the manager admits to a timing error by aggressively increasing position size based on regulatory progress without corresponding operational improvements. Recent earnings disappointed with lower store openings and weak guidance, causing shares to halve. Despite setbacks, the manager remains cautiously optimistic citing Club Pilates' continued execution, management's focus on divesting subscale brands, and an upcoming investor day in May which typically signals positive developments.

Pitch Summary:
We see a similar opportunity in Science Applications International Corp. (SAIC), which offers a range of IT services to its customers. SAIC has faced recent challenges with lower-than-average government contract renewals and lower demand for their IT services, prompting the appointment of new management to address business development concerns. We purchased shares of SAIC in the second quarter on the premise that the new management team, led by a CEO previously with Microsoft, will be able to succeed in two key self-help efforts: increasing the volume of SAIC bids and improving the firm's below-average industry "recompete rates," which consist of rebidding on previously awarded expiring government contracts that are typically 5 years in length. These efforts, coupled with internally focused capital allocation strategies that include dividend growth and active share buybacks, are likely to drive price appreciation for the stock. In the meantime, SAIC shares trade at a modest 13 times forecast earnings with a strong 8% free cash flow/enterprise value yield. Additionally, SAIC's newly appointed CEO and CFO purchased shares during the quarter — suggesting to us the management team is confident in future prospects at SAIC.

BSD Analysis:
Heartland initiated a position in SAIC based on a management-driven turnaround thesis following recent operational challenges. The fund believes new leadership, including a CEO with Microsoft experience, can address the company's below-average contract recompete rates and increase bid volume for government contracts. At 13x forward earnings with an attractive 8% free cash flow yield, the valuation appears compelling for a government IT services provider. The investment case is strengthened by strong capital allocation including dividend growth and active buybacks, plus significant insider buying from both the new CEO and CFO. Heartland views this as a classic self-help story where operational improvements under new management could drive meaningful value creation in the government contracting space.

Pitch Summary:
These are companies like Kennametal, Inc. (KMT), the manufacturer of industrial cutting tools and components that we mentioned in our Q1 commentary. The company is emerging from trough demand and has seen EBITDA contract on a year-over-year basis in 5 of the last 7 quarters. But the company has been undergoing extensive self-help during the past 5 years, taking out $200 million in structural costs, cutting its headcount by 20%, and closing 6 plants as part of an extensive restructuring. The heavy lifting/investment phase seems to now be in the rearview mirror. While demand has not yet inflected higher, sales are stabilizing. If Kennametal sees even a slight pickup in demand in its end markets, that could provide an immediate and robust boost to its operating margins. Furthering our confidence, KMT's newly appointed CEO purchased shares in the quarter and the company is active on its buyback program.

BSD Analysis:
Heartland presents a compelling turnaround thesis for Kennametal, emphasizing the company's extensive restructuring efforts over the past five years. The manager highlights significant cost reduction achievements including $200 million in structural cost savings, 20% headcount reduction, and closure of six plants. With the heavy investment phase now complete and sales beginning to stabilize, the fund sees potential for substantial operating leverage if demand improves even modestly. The bullish case is reinforced by strong insider alignment, with the new CEO purchasing shares and active share buybacks demonstrating management confidence. The fund views KMT as positioned at trough earnings with significant upside potential as industrial demand recovers. This represents a classic value play on operational improvement and cyclical recovery.

Pitch Summary:
Precipio is a microcap specialty cancer diagnostics company offering both molecular assay kits and pathology services. Its core product lines include HemeScreen molecular assays, and IV-Cell Culture media, as well as operating its own clinical laboratory. HemeScreen is a set of proprietary molecular tests for hematologic malignancies (i.e., blood cancers). IV-Cell culture media is a universal cytogenetic culture media used for testing of hematologic cancers (i.e., Leukemia). Both products utilize proprietary chemical assays that have been developed over the years and are kept as trade secrets by the company, providing them protection from anyone trying to copy their products. Precipio's estimated market share remains under 1% of its total addressable market in their current products. Both product end markets are growing within the broader $115B oncology diagnostics market. With the help of their key product distributors, including Thermo Fisher, McKesson, Medline, and Cardinal Health, the company has an excellent path to growth within their current product portfolio and the ability to launch similar new cancer diagnostic products into adjacent markets. The company has been on a multi-year path to get to cashflow and EBITDA breakeven. Through a combination of cost-cutting efforts and scaling efficiencies, they have been able to improve their pathology services gross margins from the mid-20s to the mid-40s over the last 3 years. CEO Ilan Danieli noted in their Q4 2024 results that they are past the point of needing outside capital, saying, "Managing a company that no longer relies on outside capital infusions for its survival enables us to make decisions based on growth and value creation without the constraints imposed by cash conservation concerns." The last three quarters further underscore their progress toward a positive cash flow, in which in each quarter they generated near zero EBITDA. In the last 2 years there have been two industry-related issues that have negatively impacted their business, which seem to be behind the company. Firstly, there was a hack at Change Healthcare, the country's largest clearinghouse which facilitates the majority of insurance billing nationwide. In February of 2024 that hack caused significant billing and payment delays into late 2024 for most healthcare providers in the country. The company relied on Change Healthcare's temporary funding assistance program in 2024 to help stabilize the company's balance sheet. This hack was resolved in late 2024, and the cash flow from payors that Precipio relies on has been fully restored. Secondly, in late 2024, the FDA provided a final rule regulating laboratory development tests (LDTs) as medical devices, which could have negatively impacted the entire diagnostic field's regulatory requirements by imposing extremely stringent, complex and costly regulations on laboratories in the US. This caused significant uncertainty among laboratories as to their ability to purchase assays such as HemeScreen, and as a result, many laboratories placed on hold all efforts to explore new products, impacting Precipio's Products Division growth. The rule was struck down in Q1 by a federal court in Texas, which vacated the rule, making it no longer legally binding. This uncertainty in the industry has been lifted from the company, and shortly after, Precipio saw numerous laboratories resume their interest in the company's products. Precipio currently has "going concern" language in their financial audit due to recurring operating losses and concerns about its ability to meet financial obligations without raising additional capital. This language reflected historical cash burn and uncertainty exacerbated by external disruptions such as the Change Healthcare cyberattack and the FDA ruling. However, in its most recent quarters, the company has demonstrated a meaningful shift toward financial stability, reporting positive operating cash flow and significantly improved revenue performance. On a recent call I had with the company's CEO, Ilan Danieli, he expressed a belief that continued cash flow positivity, combined with cost controls and increased customer demand, strengthens Precipio's financial position and will likely lead to the removal of the going concern language in upcoming filings.

BSD Analysis:
The manager presents a compelling turnaround story for Precipio, a microcap cancer diagnostics company positioned at an inflection point toward profitability. The investment thesis centers on proprietary HemeScreen molecular assays and IV-Cell culture media that address underserved niches in hematologic cancer testing, with trade secret protection providing competitive moats. Key catalysts include recent MolDx Medicare approval expected to generate $1M in annual high-margin revenue, resolution of regulatory overhang from FDA LDT rules, and recovery from Change Healthcare billing disruptions. The company has demonstrated operational leverage with pathology gross margins expanding from mid-20s to mid-40s over three years while approaching EBITDA breakeven. Management's capital discipline is evident through minimal equity raises and performance-based compensation structures. At 1x EV/revenue versus peers trading at 3-11x, the valuation appears compelling if the company executes on its path to sustained profitability and removes going concern language.

Pitch Summary:
We believe Xometry (NAS: XMTR) is the leading disruptor in digital manufacturing and is in the early innings of a significant secular growth story. Xometry connects businesses needing custom parts with a global network of manufacturers capable of producing them, offering a one-stop solution for processes like CNC machining, sheet metal fabrication, prototyping, low-volume injection molding, 3D printing, and tubing. Despite the industry's slow adaptation to change, digital marketplaces like Xometry are gaining respect and recognition for their resilience. We expect this transition to be gradual but inevitable, as digital marketplaces enhance traceability, quality, and efficiency. Xometry is at the forefront, utilizing AI and machine learning for pricing, leveraging their industry-leading data sets to train their models.

BSD Analysis:
Pernas Research presents Xometry as a compelling digital transformation play in the manufacturing sector, positioning the company as the leading disruptor in an industry traditionally resistant to change. The manager's thesis centers on Xometry's marketplace model connecting businesses with manufacturers for custom parts production across multiple processes including CNC machining, 3D printing, and injection molding. The investment rationale emphasizes the inevitable secular shift toward digital marketplaces in manufacturing, driven by enhanced traceability, quality, and efficiency benefits. A key differentiator highlighted is Xometry's AI and machine learning capabilities for pricing optimization, powered by proprietary industry datasets. The manager views this as an early-stage secular growth opportunity, suggesting significant upside potential as the manufacturing industry gradually adopts digital solutions. The timing appears strategic, as Pernas believes digital marketplaces are gaining industry recognition and respect for their operational resilience. This aligns with their broader AI investment theme, targeting companies with strong distribution, proprietary data, and tech culture positioned to benefit from AI advancement.

Pitch Summary:
Visa operates the world's largest payments network, which facilitates the movement of money between merchants, financial institutions, consumers, businesses, and governments. The company is best known for enabling consumers to make debit and credit card payments. In the year to September 2023, 4.3 billion Visa cardholders made 213 billion transactions on its network, to a total value of US$12.1 trillion. Compared to cash and cheques, which are still widely used around the world, Visa's network is a more convenient, secure, and ubiquitous way for consumers to pay. Visa has invested to reduce friction and fraud in the payments experience, to the benefit of both merchants and consumers. Consider as a consumer the ease of making a payment by tapping your smartphone on a terminal, compared to swiping your card, signing a receipt, or paying in cash. Card payments also save merchants the costs and administrative burden of counting and handling cash. Visa's network has become more valuable as the number of places and ways in which it can be used has risen. Over the last 10 years, the number of merchants accepting Visa's network has grown from 25 million to 130 million. Some examples of ways that Visa's network can be used today that weren't the case 10 years ago are: - Payments can be made to or from a bank account - Mobile devices can be used as terminals to accept Visa payments, as well as making payments themselves - Visa's network is being used to disburse wages, government benefits, and insurance payouts. Visa charges a small fee relative to all the benefits its network provides, of around 0.25% of each transaction (that's 25c per $100 spent). Remarkably this fee has been stable over time, even though the payments experience has substantially improved. Visa primarily grows by capturing a greater share of global payment volume. The company has grown its revenue at a double-digit rate for many years, and it earns a high and steadily rising operating profit margin of over 60%. We believe Visa can continue to grow profitably and at a healthy rate for the foreseeable future. A great example from the Aoris portfolio of a company that has improved the value it delivers relative to the cost it charges over time is Visa. Over the last 15 years, the mundane process of making a credit or debit payment using your Visa card has become immensely easier. It's evolved from swiping your card and signing a piece of paper, to entering a 4-digit PIN, to tapping your card, to now tapping your phone or watch. The value Visa provides to the merchants who accept cards, the banks who issue them, and consumers who spend with them, has increased dramatically over the last 15 years, yet the company's fee has remained constant at about 0.25c per $1 spent. Visa's management has demonstrated a long-term mindset through its pricing decisions, and this has helped it to fight the fade. Visa is far more relevant to far more users and is a much more valuable business because it has chosen to deliver great value at scale.

BSD Analysis:
Aoris presents a strong bull thesis for Visa centered on its dominant network effects and disciplined value creation strategy. The fund emphasizes Visa's massive scale with 4.3 billion cardholders processing $12.1 trillion in annual transaction volume, creating an unassailable competitive moat. Management highlights the company's merchant network expansion from 25 million to 130 million over the past decade, demonstrating accelerating adoption and network value. Visa's pricing discipline stands out, maintaining stable 0.25% transaction fees while dramatically improving payment convenience and security through technological innovation. The business model generates exceptional profitability with over 60% operating margins and consistent double-digit revenue growth. Aoris views Visa as a prime example of management fighting competitive fade through continuous innovation and customer value enhancement. The expansion into new payment use cases including wage disbursements and government benefits suggests significant runway for continued growth in global payment volume capture.

Pitch Summary:
Two of our top positions are Tidewater (TDW) and Builders FirstSource (BLDR). Both companies are in cyclical businesses, which Mr. Market continually falls in and out of love with. For BLDR, the market goes through periods where they believe cash flows will implode leading to a market price that reflects these expectations. Expectations often change, sometimes quickly, and frequently the expectations are overshot. At times, they get it right but then price in a transitory cycle as the new norm. Eventually the economic reality manifests and often drives valuations to readjust, lock and step. Last week two public homebuilders, Pulte & D.R. Horton, were up 12% and 16% respectively in just one day. Dragged along with the road flares, BLDR was up 6%. Results have not been as bad as originally feared. Once again, the market overshot.

BSD Analysis:
Robotti positions Builders FirstSource as a top holding benefiting from market inefficiencies in cyclical housing-related businesses. The manager describes how Mr. Market repeatedly misprices BLDR based on fears that cash flows will collapse, leading to oversold conditions when expectations become too pessimistic. The recent performance validates this thesis, with BLDR gaining 6% in a single day alongside homebuilders Pulte and D.R. Horton, which surged 12% and 16% respectively. Robotti emphasizes that actual results have proven less dire than market fears, demonstrating another instance where the market overshot on the downside. The pitch illustrates their strategy of capitalizing on sentiment-driven mispricing in cyclical sectors. The manager views these emotional swings as recurring opportunities where patient investors can benefit from the market's tendency to price transitory cycles as permanent conditions.

Pitch Summary:
JOE owns approximately 167,000 acres in the Florida Panhandle. It has been widely known that JOE traded for a tiny fraction of its liquidation value for years, but without a catalyst, it was always perceived to be "dead money." Over the past few years, the population of the Panhandle has hit a critical mass where the Panhandle now has a center of gravity that is attracting people who want to live in one of the prettiest places in the country, with zero state income taxes and few of the problems of large cities. The oddity of the current disdain for so-called "value investments" is that many of them are growing quite fast. I believe that JOE may grow revenue at a rapid rate for the foreseeable future, with earnings growing at a much faster clip. Meanwhile, I believe the shares trade at an attractive multiple on Adjusted Funds from Operations (AFFO), while substantial asset value is tossed in for free. Besides the valuation, growth, and high Return on Invested Capital (ROIC) of the business, why else do I like JOE? For starters, land tends to appreciate rapidly during periods of high inflation. More importantly, I believe we are witnessing a massive population migration as people with means choose to flee big cities for somewhere peaceful. I suspect that every convulsion of urban chaos and/or tax-the-rich scheming will launch JOE shares higher, and it will ultimately be seen as the way to "play" the stream of very wealthy refugees fleeing for somewhere better.

BSD Analysis:
The manager presents a compelling transformation story for St. Joe, highlighting the catalyst that has unlocked value in what was previously considered "dead money." The thesis centers on the Florida Panhandle reaching critical population mass, creating gravitational pull for affluent migrants seeking attractive living conditions with zero state income taxes. The manager emphasizes the paradox of value investments actually growing rapidly, with JOE positioned for accelerating revenue and earnings growth. Valuation appears attractive on AFFO metrics while substantial asset value provides downside protection. The investment benefits from multiple tailwinds including land appreciation during inflationary periods and demographic migration from urban areas. The manager views each episode of urban unrest or tax increases as potential catalysts for further appreciation. The thesis positions JOE as the optimal vehicle to capitalize on wealthy migration trends toward peaceful, tax-advantaged locations.

Pitch Summary:
MSCI is a leading provider of data and analytics for the investment industry. The company is best known for the indices that bear its name, which are used to construct and benchmark portfolios of international equity funds. It also provides analytical tools and data that help investors understand the performance, risk and ESG characteristics of their portfolios. Currently, $14 trillion of actively managed assets are benchmarked to MSCI's indices and over $1.6 trillion of ETFs are linked to its indices. Its customers couldn't operate their investment products without its data, which is reflected in a retention rate for its index customers of above 95%. The index business is highly profitable because once MSCI creates a new product, it can sell this intellectual property to many customers for little additional cost. MSCI has consistently invested in new indices that meet evolving investment needs, such as those that track a particular sector, market theme, or particular criteria for a customer. It also earns revenue and grows in relevance with the increasing volume of futures and options contracts that are traded based on its indices. MSCI also has a suite of analytical software to help asset managers construct and manage their portfolios. Two of its industry-leading solutions are MSCI Barra, which is used to report and analyse a fund's performance, and MSCI RiskMetrics, which is used to analyse portfolio risk. We believe MSCI's relevance to financial market participants will continue to grow, and its earnings will rise at an attractive rate for many years to come. As described in more detail on page 9, MSCI is best known for the international equity indices that bear its name, where it is the global leader. Its indices are the industry standard, used by asset managers and owners to benchmark the performance of international and emerging-market equity funds. It also provides analytical tools and data that help investors understand the performance, risk and ESG characteristics of their portfolios. The business is highly profitable and resilient, as it earns most of its revenue from subscription contracts that have a client retention rate of 95%. We believe MSCI can continue to grow its earnings at a rate of around 10% p.a. for many years to come. We previously owned MSCI and sold it from the portfolio for valuation reasons in 2021. During the 2024 June quarter, we invested in the business at a material discount to our appraisal of intrinsic value.

BSD Analysis:
Aoris presents a compelling bull case for MSCI based on its dominant market position in financial indices and data analytics. The fund highlights MSCI's exceptional moat through its 95% client retention rate and the mission-critical nature of its services, with $14 trillion in actively managed assets benchmarked to its indices. The business model demonstrates strong scalability, as MSCI can sell intellectual property to multiple customers with minimal incremental costs. Management expects sustainable earnings growth of approximately 10% annually, supported by expanding relevance in financial markets and growing derivatives trading volumes. The investment represents a strategic re-entry after previously selling for valuation reasons in 2021, suggesting disciplined capital allocation. Aoris acquired the position at what they consider a material discount to intrinsic value during Q2 2024. The combination of recurring subscription revenue, high switching costs, and continuous product innovation positions MSCI for durable competitive advantages.

Pitch Summary:
Two of our top positions are Tidewater (TDW) and Builders FirstSource (BLDR). Both companies are in cyclical businesses, which Mr. Market continually falls in and out of love with. As for TDW, we have seen shares soar from $30 to over $100 over the last 2 years, only to road trip back down below $40. All along, cash flows have continued to grow. Today, shares trade at $50, with a 15% free cash flow yield. Not bad, especially given the 4.4% 10-year treasury yield. As for the opportunities market volatility provides for good capital allocation, TDW bought back $90m worth of their shares at $39 so far this year.

BSD Analysis:
Robotti presents Tidewater as a compelling value opportunity in the cyclical offshore services sector, emphasizing the company's resilient cash flow generation despite extreme share price volatility. The manager highlights TDW's dramatic price swings from $30 to over $100 and back to $50, while cash flows continued growing throughout this period. At current levels around $50, the stock offers an attractive 15% free cash flow yield, significantly higher than the 4.4% 10-year treasury. The company has demonstrated disciplined capital allocation by repurchasing $90 million in shares at $39 this year, taking advantage of market mispricing. Robotti views this volatility as characteristic of cyclical businesses where Mr. Market's emotional swings create opportunities for patient investors. The pitch exemplifies their strategy of buying cash flows at discounted prices when market sentiment overshoots fundamentals.

Pitch Summary:
We own a collection of offshore services companies (drillships, jack-ups and OSVs), in the belief that offshore spending will increase in the future as a percentage of overall oilfield spending. This is due to the fact that many offshore fields have lower breakevens when compared to onshore shale fields, and better economics. These positions were all purchased at substantial discounts to the replacement cost of the assets, at a time when they have strong balance sheets and substantial backlogs. The shares have declined recently due to a fear of reduced spending in the near-term. I believe this represents an opportunity within a larger multi-year trend of increased spending.

BSD Analysis:
Noble Corporation represents the third component of the manager's concentrated offshore drilling services thesis, emphasizing the structural shift toward offshore spending based on superior project economics. The investment rationale highlights offshore fields' lower breakeven costs compared to onshore shale, creating a competitive advantage that should drive future capital allocation. Noble was purchased at a substantial discount to asset replacement cost during a period of strong balance sheet positioning and healthy contract backlogs. Recent share price declines are attributed to near-term spending concerns rather than fundamental deterioration, creating what the manager views as an attractive opportunity. The thesis depends on a multi-year trend of increasing offshore spending as a percentage of total oilfield capex. The basket approach across drilling contractors suggests conviction in the sector's cyclical recovery and structural advantages.

Pitch Summary:
Limoneira, a company with a rich history dating back to 1893, stands out not only for its longevity but also for its commitment to environmental stewardship and sustainable business practices. We believe the company's stock is significantly undervalued, with potential upside of 50-100%. While the business itself might not seem exciting at first glance, its longevity and 15% market share in the US lemon industry—up from just 4% in 2011—speaks volumes about the quality of its operations. However, the primary reason for our enthusiasm is that the market has not appropriately valued their extensive holdings of land and water rights. Limoneira has publicly stated that the value of their agricultural land and water rights is between $450-$550 million. Additionally, the sale of less productive agricultural land to developers, along with their development joint venture, is expected to be worth another $100-$150 million over the next six years. The company also holds close to $100 million in equity in their real estate JV, with $15 million of that expected to be distributed. Considering these assets at fair value, Limoneira's total value could reach as much as $800 million. After subtracting debt, this translates to approximately $41 per share, significantly higher than the current market price of around $20. To address the significant discount at which the company trades relative to its fair market value, the board of directors has engaged investment banker Stephens Inc. to explore strategic alternatives. We anticipate an announcement before year-end, as the company initiated this process last December. Even without a transaction, we see upside potential as the management team focuses on improving operations, monetizing non-core real estate assets, and enhancing cash flows. As part of this effort, they have modernized their packing facility to transition from growing their own lemons to packaging and marketing lemons for third parties. While revenues remain the same, this transition aims to provide more stable and consistent cash flows. Limoneira is also pivoting towards avocado production, a more profitable segment with growing demand in the United States. Over the past ten years, US avocado consumption has grown at a 4.4% CAGR, reaching 8.7 pounds per person annually. In comparison, avocado consumption in Mexico is 23.5 pounds per person per year! While it is unlikely that the US will reach Mexico's consumption rate in the near future, we believe that US avocado consumption will continue to increase. The management team has outlined various operational initiatives that they believe could potentially improve cash flows by up to $30 million over the next seven years. If these improvements materialize, a 50% increase in cash flows within three years seems achievable, potentially translating to a 50% increase in stock value. We also commend Limoneira's commitment to sustainability, with 44% of its operations now powered by renewable energy, up from over 30% the previous year. Additionally, the company uses high-efficiency irrigation systems for 85% of its water usage, conserving water and supporting sustainable agricultural practices. Limoneira exemplifies the potential for a company to achieve both financial success and positive environmental impact. We believe the company's focus on renewable energy, efficient water use, and strong management make it a compelling long-term investment opportunity.

BSD Analysis:
Riverwater Partners presents a classic asset-rich value play in Limoneira, arguing the market significantly undervalues the company's land and water rights relative to its agricultural operations. The manager's sum-of-the-parts analysis suggests fair value of $41 per share versus the current $20 market price, representing 100% upside potential. The investment thesis centers on hidden asset value, with $450-550 million in agricultural land and water rights, plus $100-150 million in development opportunities and $100 million in real estate JV equity. The strategic review process initiated with Stephens Inc. provides a potential catalyst for value realization by year-end. Beyond the asset play, the manager highlights operational improvements including the transition to third-party packaging for stable cash flows and expansion into higher-margin avocado production, benefiting from 4.4% annual US consumption growth. Management's projection of $30 million in cash flow improvements over seven years, combined with sustainability initiatives, supports the long-term value creation narrative. The 15% US lemon market share growth from 4% in 2011 demonstrates operational excellence, while the strategic review provides near-term catalyst potential.

Pitch Summary:
We own a collection of offshore services companies (drillships, jack-ups and OSVs), in the belief that offshore spending will increase in the future as a percentage of overall oilfield spending. This is due to the fact that many offshore fields have lower breakevens when compared to onshore shale fields, and better economics. These positions were all purchased at substantial discounts to the replacement cost of the assets, at a time when they have strong balance sheets and substantial backlogs. The shares have declined recently due to a fear of reduced spending in the near-term. I believe this represents an opportunity within a larger multi-year trend of increased spending.

BSD Analysis:
The manager's thesis on Tidewater mirrors the broader offshore services strategy, focusing on the company's role as a leading OSV provider in an improving sector dynamic. The investment case is built on the structural advantage of offshore fields having superior economics compared to onshore shale, with lower breakeven costs driving future capital allocation. Tidewater was acquired at a significant discount to replacement cost during a period of balance sheet strength and robust contract backlogs. The manager views recent price weakness as sentiment-driven rather than fundamental, creating an attractive entry point. The multi-year thesis anticipates offshore spending gaining share within total oilfield capex as operators prioritize higher-return projects. The concentrated basket approach suggests high conviction in the sector's cyclical inflection point.