Investment Pitches

Pitch Summary:
e.l.f. Beauty, a U.S.-based cosmetics company, came under pressure during the quarter. Tariff concerns, a broader slowdown in the cosmetics and beauty industry, and timing-related headwinds with retail customers resulted in slower growth than anticipated. Nonetheless, Elf maintains a compelling competitive position, benefiting from its price advantage, and could gain further market share should consumers trade down. We used the recent dislocation in the stock price as an opportunity to add to our position.

BSD Analysis:
Polen Capital added to their e.l.f. Beauty position during a period of weakness, demonstrating opportunistic value investing within their growth framework. The managers acknowledge multiple near-term headwinds including tariff concerns, industry-wide beauty slowdown, and retail timing issues that pressured the stock. However, they emphasize e.l.f.'s compelling competitive positioning, particularly its price advantage in the cosmetics market. The fund sees potential for market share gains if economic pressures lead consumers to trade down to more affordable beauty options. Polen Capital's decision to add during the dislocation suggests they view current challenges as temporary rather than structural threats to the business model. The company's value proposition becomes more attractive during economic uncertainty when price-conscious consumers seek quality alternatives. The fund appears confident in e.l.f.'s ability to navigate industry headwinds and emerge stronger. Their contrarian approach reflects belief in the company's long-term growth trajectory despite short-term volatility.

Pitch Summary:
German-listed specialty chemical company LANXESS was also a detractor for the quarter. 2023 was a difficult year for the chemical industry. Energy prices significantly weighed on margins last year, combined with low demand out of China in addition to low industrial demand and destocking globally. Picking the exact trough is an impossibility and while those headwinds abated in the first quarter, they are far from fully reversed. The good news is that management is optimistic we are in the early stages of recovery, and indeed over recent weeks we have seen the first signs of improving data. Additionally, management took the opportunity of a challenging 2023 to remove structural costs across the company. This puts the company in a strong position as demand recovers, which will flow through into high operational gearing, leading to a strong rebound in EBITDA and cash generation. We believe there is a clear path to improving previous balance sheet concerns over the next 12 months. We expect weak first quarter results in May but expect the second quarter to be stronger and then accelerate in the second half of the year as comps get easier and demand improves. The company delivering solid EBITDA generation in 2023 despite utilization rates in the 50-60% range (where historically chemical producers would have been heavily loss-making) is a testament to the structural changes made by the current management team. Given their strong operational gearing we anticipate rapid value growth as end markets stabilize and internal cost measures take effect, which is clearly not yet appreciated by the market.

BSD Analysis:
The manager presents a cyclical recovery thesis for LANXESS, emphasizing the company's improved cost structure and operational resilience during the downturn. Management's structural cost reduction during 2023's challenging environment positions the company for significant operational leverage as demand recovers. The ability to generate positive EBITDA at 50-60% utilization rates demonstrates the effectiveness of recent operational improvements, contrasting with historical industry losses at similar levels. Early signs of demand recovery and management's optimistic outlook suggest the chemical cycle may be inflecting positively. The high operational gearing inherent in the chemical business model should amplify earnings growth as volumes normalize and easier comparisons emerge in the second half of 2024. Balance sheet concerns appear manageable with a clear path to improvement over the next 12 months. The market's failure to recognize the structural improvements and cyclical positioning creates an attractive risk-adjusted opportunity as the recovery unfolds.

Pitch Summary:
Rentokil Initial Plc (RTO) is a global business services company specializing in pest control and hygiene services. These revenue streams are relatively stable and resilient, even during economic downturns. Rentokil's moat comes from its scale, network density, technology and established brand name. Rentokil typically trades for ~25x earnings but is currently available for 19x 2024E earnings and 12x our estimate of 2026E earnings. As we have described above, something must be going 'wrong' if a good business is available for a low multiple. Rentokil acquired Terminix, the largest pest services provider in the US, and has encountered some integration challenges. Our due diligence on Rentokil has led us to believe that they can successfully integrate Terminix and meet their targets. Importantly, the valuation discounts many of these issues, creating a 'heads I win, tails I do not lose much' scenario.

BSD Analysis:
White Falcon identifies Rentokil as an attractive value opportunity trading at a significant discount to historical multiples due to temporary integration challenges. The company operates in defensive, recession-resistant markets with stable revenue streams from pest control and hygiene services. Rentokil's competitive advantages include scale, network density, technology capabilities, and strong brand recognition that create meaningful barriers to entry. The investment thesis hinges on successful integration of the Terminix acquisition, which temporarily depressed valuations from the typical 25x earnings to 19x 2024E and 12x 2026E earnings. White Falcon's due diligence process gives them confidence that management can execute the integration and achieve stated targets. The current valuation provides asymmetric risk-reward characteristics, with limited downside given the discounted expectations already embedded in the stock price. This represents a classic White Falcon investment - a quality business temporarily out of favor due to execution challenges rather than fundamental deterioration. The defensive nature of the business model provides additional comfort during uncertain economic conditions.

Pitch Summary:
Globant, a U.S.-listed South American IT services company, posted disappointing Q4 FY24 results. The market was dissatisfied with FY25 revenue guidance, which fell short of expectations for accelerating growth. Results were impacted by the pull-forward of revenue from Globant's largest client, Disney, as well as overall weakness in Latin America due to political instability. Tighter IT budgets and a spending shift toward hardware are also creating headwinds across the industry. We have maintained our position, as management remains confident in Globant's ability to compound revenues at 20% per year in a healthier environment.

BSD Analysis:
Despite disappointing Q4 results and weak FY25 guidance, Polen Capital maintains their position in Globant, demonstrating conviction in the company's long-term prospects. The managers acknowledge near-term headwinds including revenue pull-forward from Disney, Latin American political instability, and industry-wide IT budget pressures. However, they emphasize management's confidence in achieving 20% annual revenue growth in a more favorable environment. The fund appears to view current challenges as cyclical rather than structural, betting on Globant's ability to navigate through the downturn. The company's exposure to digital transformation trends and its South American cost advantage remain attractive long-term drivers. Polen Capital's decision to hold through weakness suggests they believe the market is overreacting to temporary factors. The fund likely sees Globant as well-positioned to benefit when IT spending normalizes and client budgets recover. Their patience reflects confidence in the company's competitive positioning and growth algorithm.

Pitch Summary:
Korea's leading search and e-commerce platform was a detractor for the quarter. The key market concern is the increasing competition in the Korean e-commerce space from Chinese entrants like Alibaba and Pinduoduo. These entrants are growing quickly in Korea, but they are starting from a very low base. These competitors have less than 3% market share in a very fragmented market. Naver's recent deceleration in Gross Merchandise Value (GMV) growth is driven by their focus on monetization and exposure to long tail products which are more vulnerable to weak consumption sentiment. Naver is focused on profitable growth. They are increasing their take rates, with revenue growth much higher than GMV growth. Notably, this is a marketplace business with no inventory risk and the entrance of new players enriches the marketplace. As Chinese entrants come in, they will increase digital ad spend, which will benefit Naver. We continue to like Naver's competitive positioning in Search and E-commerce, and its runway for growth. We expect margins to improve as management's mindset shifts from topline growth to profitable growth.

BSD Analysis:
The manager addresses competitive concerns from Chinese e-commerce entrants while highlighting Naver's defensive moats and strategic pivot to profitability. Chinese competitors' minimal market share (sub-3%) in a fragmented market suggests limited near-term disruption risk to Naver's dominant position. The company's strategic focus on monetization over GMV growth demonstrates disciplined capital allocation, with revenue growth significantly outpacing transaction volume growth. The marketplace model's asset-light structure provides operational leverage without inventory risk, while new competitor entry actually benefits Naver through increased digital advertising spend. Management's shift from growth-at-any-cost to profitable growth should drive margin expansion and sustainable value creation. Naver's dual dominance in search and e-commerce creates cross-selling synergies and competitive advantages in the Korean digital ecosystem. The combination of market leadership, improving unit economics, and structural growth in Korean digital commerce supports the long-term investment thesis.

Pitch Summary:
One of the sectors that have most fallen out of grace has to be the Chinese private education sector, and not without. As has almost become custom, every once in a while the Chinese Communist Party (CCP) something is wrong in the world and the only solution is taking a wrecking ball and destroy the profitability of an entire sector. Usually, it then figures out it was a bit too much and then does a bit of backtracking, reviving the industry. For instance, one might remember the CCP wanted to reduce children gaming and all of a sudden banned minors from spending more than one hour a day online. Another example of regulatory overreach was the introduction of financial regulatory guidelines for the Real Estate sector. With their surprise legislation introducing the 'Three Red Lines' (2020), forcing homebuilders to respect very tight leverage ratios, the CCP triggered (or precipitated) perhaps the largest liquidity squeeze in history, bankrupting most of the real estate sector, that accounted for 30% of GDP. So pervasive is the CCP's tendency to destroy entire companies and sectors that they perceive as having committed a political 'sin', that there is even a phrase for it: "Killing the chicken to scare the monkey". Perhaps the most on-the-nose example of this was the demolition of the private education sector for children up to nineth grade (K-9). Overnight and without warning, the CCP banned the private part of the sector from raising capital, going public and making profits! Our hero of the day, China YuHua Education Group, was hit right across the nose, with their extensive K-9 offering. Overnight, YuHua Edu seized being profitable and it would continue to lose -95% of it's share value in the next three years. Most of YuHua Edu's peers shared the same fate: May-21 Jul-25 drawdown China Yuhua Education 8.19 0.53 -94% XJ Int'l Holdings 2.58 0.194 -92% China New Higher 6.4 1.06 -83% TAL Education 60 10.77 -82% JH Education Tech 4.72 0.92 -81% Edvantage 7.96 1.65 -79% China Science and Education 2.34 0.59 -75% China Xinhua 2.3 0.59 -74% New Oriental Education 120.7 34.35 -72% China Gingko Education 3.02 1.7 -44% Tianli Int'l Holdings 6.36 4.03 -37% At least 25 other Chinese education firms closed shop in 2021 after the government banned for-profit tutoring in their 'Double Reduction' policy. In short: a massacre. Interestingly though, many of the aforementioned companies weren't even a direct target of the CCP, offering vocational and/or university education, rather than the K-9 education that were in the CCP's crosshairs. But investors had seen enough and braced for the CCP expanding their scope. In the meantime, YuHua 'successfully' morphed their K-9 segment into vocational schools, abandoning K-9 education completely. After its transformation, China YuHua Education has become a company with a limited private formal high school education segment (grade 10 to 12) (<5% of revenue), and a substantial university and vocational college education segment (vocational education: schooling aimed at specific occupations such as skilled trades, software developer, accountancy, etc.), operating nine schools in mainland China. They used to own 'Stamford Thailand University', but this has been divested since last report. After the 2021 trauma, YuHua Edu has decided strategically focus on vocational teaching, as this aligns best with the CCP's policy directives. YuHua Edu's university and vocational offerings are not top notch, with universities ranking around 500th out of 1500 public & private universities. Fee structure reflect this. Admission rates hover around 40% - mid-tier among Chinese universities- positioning them as an upgrade to public offerings rather than a competition for prestigious universities. Aside from operation and CCP turmoil, YuHua has had its own specific source of drama: After borrowing overseas, YuHua faced an issue unique to Chinese companies: while having enough cash on hand within China, it was not able to get this money out of China to pay back bond owners. While this is especially problematic for bondholders, it is surprisingly enough both a curse as well as a blessing for companies such as YuHua Edu. In case of YuHua, it was the basis for what can best be described as an evil ploy to force a refinancing under very generous conditions. By threatening bankruptcy proceedings under Chinese law, YuHua was able to force a debt-for-equity swap valuing stocks over 100% above the price it was trading at. Usually, a company constraint by cash will have to agree to egregious conditions from their banks in order to stay afloat. But this is China, and things work differently there… Currently trading at 5x earnings, this multiple is set to compress to just 2.5 on projected 2025 earnings - reflecting exceptional value potential. With the debt swap behind us, debt levels have also become very manageable. The biggest question mark is the macro environment. Arguably it is also the only explanation for the cheapness of YuHua Edu. Central to this anxiety is the upcoming 'Fifth Plenum' of the CCP: The party runs in cycles of five years, within which there are seven 'plenums'. By far the most influential one is the Fifth Plenum, in which the party reveals the CCP's focus and broad strategic direction for the upcoming five years. This is scheduled for the 2nd half of 2025. The biggest fear among education investors is that Xi will announce a new set of reforms beyond the earlier banning of for-profit K-9 schools and tutoring, and also include grades 10-12 and/or vocational education and universities. Given we chose to invest in the stock, you probably have already guessed we are less convinced Xi is about to widen his net. I'll share my three reasons for this conviction: 1) The CCP always seems surprised and somewhat regretful of taking harsh action. They tend to walk back rather than double down on their actions. Their K-9 policy implementation was not without hick-ups, so there's reason to believe they'll be reluctant to repeat the same drastic measures. 2) Taking further action against private teaching doesn't align well with Xi's current focus of increasing domestic spending. Aside from the obvious that spending on private education is still [domestic spending], an extended 'Double Reduction' policy would be bad for consumption for two other reasons: 1) The first episode reportedly lead to a million layoffs, I'm sure a second episode won't be a welcome gift to an already sluggish economy either. 2) One of the reported effects of the first episode is that it led to a lot of stress among parents because they were no longer able to improve the chances of their children through spending on tutoring and such. A new episode could exacerbate this stress further, negatively impact consumer sentiment (and henceforth spending). With the economy being at center stage, I believe Xi will be reluctant to rock the boat more than necessary. 3) The CCP has promoted foreign investment in vocational training centers in the last five-year cycle. Strangling these exact same companies one cycle later would be quite the 180 (though nothing can be ruled out with the CCP). As such, YuHua Edu's focus on vocational education should provide it some cover. China YuHua Education's stock is down over -90% since the 'Double Reduction' act, all the while remaining profitable and with profits set to return to pre-2022 levels. Clearly there is an extreme fear for the sector. The complete nationalization of the sector seems all but priced in, leaving extraordinary upside for those who dare to bet on any other outcome. We believe this is another case of 'Be fearful when others are greedy and be greedy when others are fearful'. Even in most bad scenarios, YuHua Edu might survive with somewhat limited damage. But if we are proven right, the returns will be epic.

BSD Analysis:
The manager presents a contrarian deep value play on China YuHua Education, trading at 5x earnings with a projected compression to 2.5x 2025 earnings following the sector's 90%+ decline since China's 'Double Reduction' policy. YuHua successfully pivoted from banned K-9 education to vocational and university education, now operating nine schools focused on mid-tier vocational training aligned with CCP policy directives. The company executed a favorable debt-for-equity swap that significantly improved its balance sheet while trading at distressed valuations. The key risk centers on the upcoming Fifth Plenum where Xi could potentially expand education restrictions, though the manager argues this is unlikely given the CCP's focus on domestic consumption and previous regulatory overreach regrets. The investment thesis relies on extreme pessimism being overdone, with the market pricing in complete nationalization despite the company's strategic repositioning and profitable operations. This represents a classic 'blood in the streets' opportunity where any outcome short of complete sector destruction could generate substantial returns.

Pitch Summary:
Let's look at Aritzia for a typical case study. We bought a position in Aritzia in 2022 and had an average cost base of around $36 per share. Our thesis was that Aritzia is a high-ROIC business offering essential clothing, driven by a capable management team with strong founder leadership. Importantly, there was predictable growth in the business as Aritzia was just starting to expand in the US and had plans to open ~10 stores in the US every year for the foreseeable future. However, in 2023, the business encountered difficulties due to over-ordering of inventory and rising expenses. The market's dislike of uncertainty caused the stock to be punished beyond what we considered reasonable. At the bottom, our estimate was that Aritzia was trading at less than 10x our estimate of 2026E earnings. We thoroughly reviewed and verified our work, including speaking with management, former employees, and competitors; and concluded that these issues will resolve themselves over time. We took advantage of the situation and added to our position in the $22-25 price range and brought our cost base down to $28 per share. The situation recently corrected itself when Aritzia reported a good quarter and the stock recently closed at $47.50 per share. From our perspective, market volatility is a feature, not a bug - Aritzia experienced more than a 50% decline followed by more than a 100% increase - all within just two years!

BSD Analysis:
White Falcon presents Aritzia as a compelling turnaround story that exemplifies their contrarian investment approach. The manager's thesis centers on Aritzia being a high-ROIC business with predictable US expansion growth, opening approximately 10 stores annually. The investment opportunity emerged when temporary operational challenges - inventory over-ordering and rising expenses - caused the stock to trade at an attractive 10x 2026E earnings multiple. White Falcon's disciplined approach included extensive due diligence with management, former employees, and competitors before adding to their position in the $22-25 range. The investment thesis proved successful as the company reported strong quarterly results, driving the stock from their average cost of $28 to $47.50. This case study demonstrates the fund's ability to capitalize on market volatility and temporary business disruptions. The manager emphasizes that such dramatic price swings (50% decline followed by 100% recovery within two years) represent opportunities rather than risks for patient value investors. The successful outcome validates their strategy of investing at points of maximum pessimism in quality businesses.

Pitch Summary:
The largest private sector bank in India, was the top detractor for the quarter. The merger between HDFC Ltd and HDFC Bank was completed in July of last year. The first couple of quarters post-merger have been challenging as some financial metrics, like Net Interest Margin and Return on Assets, are reset in the combined entity. A key concern is their elevated loan to deposit ratio. This ratio is elevated because HDFC Ltd was a wholesale funded Non-Banking Financial Company (NBFC) coming into the merger with HDFC Bank. The company is focused on lowering this ratio, which means near-term loan book growth will trail deposit growth, which is itself constrained by tight system liquidity. Despite this near-term headwind, we continue to like HDFC for its long-term compounding potential. It has around 15% lending market share and around 11% deposit share in India. We expect merger synergies to be meaningful in terms of higher cross-selling opportunities and lower cost of funds as the bank gradually replaces legacy high-cost borrowings from HDFC Ltd with low-cost granular deposits. The cost to income ratio is elevated currently due to accelerated branch openings and should come down as these branches mature. HDFC Bank is the best-in-class banking franchise in India with unparalleled multi-decade track record of growth, margins, credit quality and returns. We added to the position during the quarter.

BSD Analysis:
The manager maintains conviction in HDFC Bank despite near-term merger integration challenges, focusing on the long-term compounding opportunity in India's growing financial services market. The elevated loan-to-deposit ratio from the HDFC Ltd merger creates temporary headwinds but positions the bank for significant synergy realization as wholesale funding is replaced with low-cost deposits. The bank's dominant market position (15% lending, 11% deposit share) provides competitive advantages and cross-selling opportunities in an underpenetrated market. Management's focus on deposit growth over loan growth demonstrates disciplined capital allocation during the integration period. The elevated cost-to-income ratio from branch expansion investments should normalize as new locations mature, creating operational leverage. The manager's decision to add to the position during weakness demonstrates conviction in the long-term value creation potential. HDFC's multi-decade track record of superior growth, margins, and credit quality supports the premium valuation thesis.

Pitch Summary:
Lottomatica, an Italian gaming operator, reported another set of compelling results, highlighting its continued momentum. The company is leveraging its number-one position in the Italian gaming market and omnichannel presence to gain market share amidst rising penetration of online gambling. Lottomatica's solid growth outlook is supporting continued margin expansion and capital returns to shareholders. We added to this position during the quarter, given its continuously improving fundamental outlook. We initiated a position in Lottomatica, which we believe is ideally positioned to benefit from the ongoing shift from offline to online gambling. This transition is driving sustainable double-digit revenue growth and EBITDA margin expansion, from the high 30s toward 40%+ over time, supporting mid-to-high-teens earnings growth. At the time of purchase, shares were trading at just 6x FY25 EBITDA—an attractive valuation relative to global gaming peers.

BSD Analysis:
Polen Capital initiated and subsequently added to their Lottomatica position, demonstrating strong conviction in the Italian gaming operator. The managers highlight Lottomatica's dominant market position in Italy and its successful omnichannel strategy that capitalizes on the structural shift from offline to online gambling. The company is achieving sustainable double-digit revenue growth while expanding EBITDA margins from the high 30s toward 40%+, translating to mid-to-high-teens earnings growth. The fund views the ongoing digitization of gambling as a powerful secular tailwind that Lottomatica is uniquely positioned to capture given its market leadership. At 6x FY25 EBITDA, Polen Capital sees compelling valuation relative to global gaming peers, suggesting significant upside potential. The company's ability to generate strong cash flows supports both margin expansion and capital returns to shareholders. The fund's decision to add to the position during the quarter reflects confidence in the continuously improving fundamental outlook.

Pitch Summary:
Leading manufacturer of tequila and whiskeys Becle contributed strongly in the quarter. The company is one of our more volatile holdings quarter-to-quarter in terms of its reported results, but not necessarily in terms of its stable and growing long-term value. The quarter saw reported results that were better than the market expected. There had been fears that the spirits industry was slowing and what that meant for its earnings power, but Becle guided for growth to continue in 2024 and beyond. After years of high agave pricing (a key input for tequila), this headwind is now abating, which should improve margins going forward. We believe the share price remains undervalued. This is a great business run by the Beckmann family who are aligned with us as big owners.

BSD Analysis:
The manager emphasizes Becle's resilient long-term value creation despite short-term earnings volatility, highlighting the importance of looking through quarterly noise. Management's guidance for continued growth in 2024 and beyond counters market concerns about spirits industry deceleration, suggesting company-specific strength. The abating agave price headwind represents a significant margin expansion catalyst, as this key input cost has pressured profitability for years. The Beckmann family's significant ownership stake ensures strong alignment with shareholders and long-term value creation focus. The manager's conviction in the undervalued stock price despite recent volatility suggests confidence in the underlying business fundamentals. Becle's position as a leading tequila manufacturer benefits from the category's premiumization trends and global expansion. The combination of improving input costs and family ownership creates an attractive risk-adjusted return profile.

Pitch Summary:
Goosehead Insurance, a U.S. insurance broker, reported stronger-than-expected results driven by higher contingent commissions and expanding EBITDA margins. Core revenues increased and management remains optimistic about accelerating growth in 2025. Goosehead's ability to balance robust top-line growth with prudent margin expansion reinforces our confidence in its long-term trajectory.

BSD Analysis:
Polen Capital expresses strong confidence in Goosehead Insurance following better-than-expected quarterly results. The managers highlight the company's ability to drive both revenue growth and margin expansion simultaneously, a combination that demonstrates operational excellence. Higher contingent commissions indicate strong performance across the company's insurance partnerships, while expanding EBITDA margins suggest effective cost management and operational leverage. Management's optimistic guidance for accelerating growth in 2025 provides additional confidence in the company's trajectory. The fund views Goosehead's balanced approach to growth and profitability as a key differentiator in the competitive insurance brokerage space. The company's franchise model appears to be scaling effectively, generating both top-line growth and improving unit economics. Polen Capital sees this as validation of their investment thesis in the company's long-term growth potential.

Pitch Summary:
French hospitality business Accor was another top contributor for the quarter, with the stock returning over 25% in local currency. Continued strong operational performance drove returns in the quarter. The hotel industry continues to shift towards the biggest and most recognized brands globally, and Accor has one of the strongest brand portfolios, particularly outside of the US. It is well placed geographically as the market leader in Asia, Latin America, and the Middle East, all of which are structural growth travel markets with strong post-Covid recoveries now apparent. Accor also has a strong, investment grade balance sheet allowing increased share buybacks of undervalued shares. Previously the company was unable to use the capital on its balance sheet for buybacks due to a need to achieve an investment grade rating. That hurdle was cleared in the second half of 2023, after which management quickly utilized cash to execute a €400 million buyback at the end of 2023 and reauthorize another €400 million at the beginning of this year (which they have already fully executed). We remain excited about the Accor brand portfolio and geographic exposure for long-term growth, alongside our confidence in CEO Sébastien Bazin and the management team.

BSD Analysis:
The manager highlights Accor's strategic positioning in the consolidating global hospitality industry, where scale and brand recognition drive market share gains. The company's geographic diversification across high-growth emerging markets (Asia, Latin America, Middle East) provides structural tailwinds as these regions experience post-COVID travel recovery. The achievement of investment grade rating unlocked significant capital return flexibility, with management executing €800 million in buybacks within months of gaining the rating. This aggressive capital allocation demonstrates management's conviction in the undervalued stock price and commitment to shareholder returns. The manager's confidence in CEO Sébastien Bazin suggests strong leadership execution. Accor's brand portfolio strength outside the US market provides differentiated exposure to international travel growth. The combination of operational leverage from travel recovery and financial flexibility from the strong balance sheet creates multiple value creation drivers.

Pitch Summary:
Sanrio, a Japanese entertainment company best known for the Hello Kitty franchise, delivered robust results during the period. Growth in licensing in the U.S. and China, driven by Hello Kitty's 50th anniversary promotions, led to substantial margin expansion. We continue to hold Sanrio in the Portfolio, given the long-term opportunities from continued growth of Hello Kitty, greater international anime penetration, and further margin gains from licensing growth in China and the U.S.

BSD Analysis:
Polen Capital maintains a bullish stance on Sanrio, highlighting the company's strong performance driven by Hello Kitty's 50th anniversary celebrations. The managers emphasize robust licensing growth in key markets including the U.S. and China, which has translated into substantial margin expansion. The investment thesis centers on Sanrio's ability to monetize its iconic character portfolio internationally, particularly Hello Kitty's enduring global appeal. The fund sees multiple growth drivers including continued Hello Kitty expansion, broader international anime penetration trends, and further margin improvements from licensing growth in major markets. The company's asset-light licensing model provides attractive scalability as it expands globally. Polen Capital views Sanrio as well-positioned to capitalize on the growing global appetite for Japanese pop culture and character-based entertainment. The 50th anniversary milestone demonstrates the franchise's lasting power and provides a platform for renewed marketing initiatives.

Pitch Summary:
International consumer goods and ingredients business Glanbia was the top contributor for the quarter. Continuing its strong performance from last year, the company reported strong full year results in the quarter. Its key brand, Optimum Nutrition, grew revenues 17% last year and is now a $1 billion brand which continues to show strong momentum in a fast-growing, underpenetrated category. The company demonstrated strong operational performance, delivering both top line growth and margin improvement ahead of market expectations. Glanbia executed significant buybacks last year and announced its intention for a further €100 million buyback in fiscal year 2024, starting with an initial €50 million. We are excited to see management continue to take the opportunity of the undervalued share price to create value for shareholders through discounted buybacks, while also actively investing in new products, expanded distribution and enhanced marketing. Over our holding period, we have engaged with management to simplify Glanbia's reporting structure. At fiscal year 2023 results, Glanbia was also able to highlight the clarified accounting treatment of the US cheese joint ventures for the first time, resulting in reported margins significantly increasing. We believe that the perception of Glanbia as a lower margin company has historically hindered its valuation, so to the casual observer this change makes the company far more attractive. With strong value growth and a management team taking active steps to address the undervaluation of the stock, we believe there is substantially more upside to come.

BSD Analysis:
The manager presents a compelling bull case for Glanbia based on strong operational momentum and strategic capital allocation. The company's flagship Optimum Nutrition brand achieved $1 billion in revenue with 17% growth, demonstrating pricing power in the underpenetrated sports nutrition market. Management's aggressive share buyback program (€100 million planned for 2024) reflects confidence in the undervalued stock price and commitment to shareholder returns. The simplified reporting structure and clarified accounting treatment of US cheese joint ventures has improved margin transparency, addressing a historical valuation headwind. The combination of organic growth investments in products, distribution, and marketing alongside opportunistic buybacks suggests a balanced capital allocation strategy. The manager's engagement with management on operational improvements demonstrates active ownership. Strong operational leverage and margin expansion ahead of expectations indicate effective cost management and pricing discipline.

Pitch Summary:
Manhattan Associates is the leading provider of software for warehouses and distribution centers. We have followed the company in our library for several years. Manhattan provides software that serves as the operating system for distribution and supply chain management. The company has a long history of leadership and innovation in this space. Almost 10 years ago, the company embarked on a SaaS transition in which it completely rebuilt its software in a subscription and cloud-based, but also modular model. The transformation has improved both the value proposition and speed of innovation, the business model, and the growth rate. The transition has also opened markets beyond Manhattan's traditional large retail customer. At the same time, as a slow-moving SaaS transition, it is not uncommon for expectations to ramp up only to reset lower as it becomes clearer that the transition will take time. These can be great buying opportunities for investors willing to look out a few years, and we believe the first quarter presented this opportunity to own Manhattan at an attractive valuation.

BSD Analysis:
Polen Capital initiated a position in Manhattan Associates, the leading warehouse and distribution center software provider, after following the company for several years. The investment thesis centers on Manhattan's successful SaaS transformation over the past decade, rebuilding its software into a subscription-based, cloud-native, modular platform. This transformation has enhanced the value proposition, accelerated innovation, improved the business model, and increased growth rates while expanding addressable markets beyond traditional large retail customers. Polen recognizes that SaaS transitions can create volatility as expectations reset, creating attractive entry opportunities for patient investors. The first quarter pullback provided such an opportunity to acquire shares at compelling valuations. Manhattan's leadership position in supply chain software, combined with the improved recurring revenue model and expanded market opportunity, aligns with Polen's quality growth investment criteria.

Pitch Summary:
Rubrik, meanwhile, is a next-generation data storage, backup and recovery provider showing strong, double-digit subscription revenue growth. We believe its cloud-based offerings have resonated with its Fortune 500 customer base, positioning it well to continue to take share from legacy data backup providers. The introduction of new AI data security products could offer an additional revenue source to Rubrik's business.

BSD Analysis:
ClearBridge participated in Rubrik's IPO, marking their first IPO investment since 2021, indicating high conviction in the opportunity. The investment thesis centers on Rubrik's next-generation cloud-based data management platform disrupting legacy backup providers. The company is demonstrating strong double-digit subscription revenue growth and has successfully penetrated Fortune 500 enterprises, indicating product-market fit at the enterprise level. The managers see a clear market share gain opportunity as enterprises migrate from legacy on-premise solutions to cloud-based data management. Additionally, Rubrik's introduction of AI-powered data security products provides a potential new revenue stream that could accelerate growth. This represents a growth play on the secular shift to cloud infrastructure and the emerging AI data security market.

Pitch Summary:
We re-initiated a position in Wingstop, a unique quick-service restaurant brand with exceptional unit economics and a long runway for growth. Wingstop's light asset model, combined with its ability to scale internationally, reinforces its attractiveness. We believe its focus on digital innovation and solid customer loyalty will support earnings growth far into the future. The stock has pulled back considerably, and we consider it attractive again.

BSD Analysis:
Polen Capital re-initiated a position in Wingstop after the stock experienced significant pullback, viewing it as an attractive entry point for a unique QSR concept. The investment thesis highlights Wingstop's exceptional unit economics and asset-light franchise model that enables efficient scaling both domestically and internationally. The company's digital innovation focus and strong customer loyalty create sustainable competitive advantages in the competitive restaurant space. Polen sees a long runway for growth driven by unit expansion opportunities and the scalable franchise model. The re-initiation suggests Polen maintained conviction in the long-term thesis despite near-term volatility, capitalizing on market weakness to re-establish exposure to this differentiated restaurant brand with superior economics and growth potential.

Pitch Summary:
We initiated a new position in online pet retailer Chewy in the consumer discretionary sector. We believe the company has exited a period of tough comparables achieved during COVID-19 and that the decline in pet products spending has begun to stabilize. The company's initiatives in warehouse automation, pharmaceutical services and private label products are strong catalysts, and Chewy has built a loyal base through peerless customer service to improve its margins as customer growth inflects positively.

BSD Analysis:
ClearBridge initiated a position in Chewy based on the thesis that the company has moved past difficult COVID-era comparisons and that pet product spending is stabilizing. The managers highlight three key operational catalysts: warehouse automation improvements, expansion into pharmaceutical services, and private label product development. They emphasize Chewy's competitive moat through exceptional customer service, which has created a loyal customer base. The investment case centers on margin expansion potential as customer growth trends turn positive. This represents a classic turnaround play on a company emerging from a challenging period with multiple operational improvements driving future profitability. The timing appears strategic as the pet retail market stabilizes post-pandemic.

Pitch Summary:
Comfort Systems is a leading mechanical, electrical, and plumbing installation and service provider. The company is a diversified provider of new building systems for new construction, replacements, and updates for existing buildings. Comfort Systems primarily focus on commercial, industrial, healthcare, and public infrastructure markets. Building systems construction is an inherently challenging business, but Comfort Systems is highly differentiated for its execution and long track record for acquisitions as it consolidates a highly fragmented industry. As a result, Comfort Systems earns over 30% free cash flow return on invested capital, and we expect the company to grow earnings at about a mid-teens rate. The company has some exposure to data centers. We took advantage of the volatility around the data center and GenAl sentiment to initiate our position.

BSD Analysis:
Polen Capital initiated a position in Comfort Systems USA, recognizing it as a leading mechanical, electrical, and plumbing contractor with exceptional execution capabilities. The managers emphasize the company's differentiated position in consolidating a highly fragmented industry through skilled acquisitions. Comfort Systems generates impressive returns with over 30% free cash flow return on invested capital, demonstrating superior capital allocation and operational efficiency. The diversified end-market exposure across commercial, industrial, healthcare, and public infrastructure provides stability, while data center exposure offers additional growth potential. Polen capitalized on market volatility around data center and AI sentiment to establish the position at attractive valuations. The mid-teens earnings growth expectation reflects the company's consolidation opportunities and operational leverage in a challenging but profitable industry segment.

Pitch Summary:
Construction Partners is the leading paving operator in the Southeast U.S. The business is most acutely tied to repairing and replacing aging road infrastructure, which tends to be driven by long-term maintenance plans controlled by local and state government projects. The business has a highly competent management team and a skilled consolidator. The company has reached a scale where its margins and returns benefit from vertical integration of the liquid asphalt terminal and hot mix asphalt plants. This allows the company to capture more industry margin while strengthening its competitive position. Despite being tied to a stable stream of maintenance projects, Construction Partners is a high-growth business due to its long runway of acquisition and industry consolidation opportunities.

BSD Analysis:
Polen Capital added Construction Partners as a new position, attracted to its leadership position in Southeast U.S. paving operations. The investment thesis centers on the company's exposure to stable, long-term infrastructure maintenance driven by government spending on aging road infrastructure. Management's consolidation expertise and vertical integration strategy through liquid asphalt terminals and hot mix plants creates competitive advantages and margin expansion opportunities. The combination of stable maintenance revenue streams with significant acquisition opportunities provides both defensive characteristics and growth potential. Polen views this as a high-quality consolidator in a fragmented industry with predictable government-funded demand. The vertical integration strategy allows Construction Partners to capture more value across the supply chain while strengthening competitive positioning in its core Southeast markets.