Investment Pitches

Pitch Summary:
Apple shares were a top detractor in the quarter. The company's stock was pressured by negative news items including a government antitrust case, an Apple Watch patent dispute, and slowing China iPhone sales. Ultimately the company's fiscal 1Q24 earnings report delivered a slightly better than expected quarter, but with guidance that disappointed investors. 1Q24 revenue and gross margin were better than feared, buoyed by stronger than expected worldwide iPhone sales which grew 6% despite a slight decline in China iPhone sales. Services revenue in the quarter was as expected and signaled the third quarter in a row of accelerating growth. Gross margins were also stronger than expected at 45.9%, the highest level in more than a decade. Guidance of $90 billion of revenue for 2Q24 was light however, due to weaker than expected iPhone sales in the current period and year-over-year declines in other hardware products facing difficult year-over year comps. Although near-term trends are a bit muted, Apple is carrying lean inventory into an iPhone refresh cycle later this year. With an installed base of 2.2 billion active devices and significant growth of the company's recurring revenue Services segment, we believe that Apple remains one of the most innovative, best positioned and most profitable companies in the mobile technology industry.

BSD Analysis:
RiverPark maintains a constructive view on Apple despite near-term headwinds and stock underperformance in Q1 2024. The fund acknowledges external pressures including antitrust concerns, patent disputes, and China market weakness, but emphasizes solid Q1 2024 fundamentals with revenue and margins exceeding expectations. iPhone sales grew 6% globally despite China softness, while Services revenue showed accelerating growth for the third consecutive quarter. Gross margins reached 45.9%, the highest level in over a decade, demonstrating Apple's pricing power and operational efficiency. While Q2 2024 revenue guidance of $90 billion disappointed due to hardware product cycles, RiverPark views this as temporary cyclical weakness. The fund highlights Apple's massive installed base of 2.2 billion active devices as a foundation for recurring Services revenue growth and future hardware upgrades. With lean inventory levels entering an anticipated iPhone refresh cycle, Apple is well-positioned for a product-driven recovery. RiverPark emphasizes Apple's innovation leadership, market positioning, and profitability profile as key competitive advantages in the mobile technology ecosystem, supporting long-term value creation despite current macro and competitive challenges.

Pitch Summary:
SNAP was our top detractor in the quarter despite reporting fourth quarter results generally in line with or better than expectations. Revenue growth of 5% was roughly in line with investor estimates and at the high end of guidance, and EBITDA of $159 million was $49 million better than estimates. Daily Active Users (DAUs) were also ahead of investor expectations, ending the quarter at 414 million (about 2 million better), driven by continued innovation in Snap's offerings. Revenue guidance for 1Q24 was also roughly in line with investor estimates, but EBITDA guidance of negative $55-95 million was well below estimates. The company pointed to increased infrastructure costs and a US focused marketing campaign for the lower-than-expected margin guidance. Although the company continues to face near-term macro headwinds, we believe SNAP can accelerate its revenue growth over the next several years. With 2023 revenue expected to be $4.6 billion (as compared with Meta's $134 billion), we believe SNAP has a long runway for both revenue growth and expanded profitability as it improves platform functionality, continues to grow its audience (daily active users continue to grow at a double-digit rate), and expands its monetization.

BSD Analysis:
RiverPark maintains a bullish long-term view on Snap despite near-term margin pressure and stock underperformance in Q1 2024. The fund highlights solid Q4 2023 fundamentals with revenue growth of 5% meeting guidance and EBITDA of $159 million exceeding estimates by $49 million. Daily active users reached 414 million, surpassing expectations by 2 million and demonstrating continued platform innovation and user engagement. While Q1 2024 EBITDA guidance disappointed due to infrastructure investments and marketing spend, RiverPark views this as temporary margin compression. The fund emphasizes Snap's significant growth runway, noting 2023 revenue of $4.6 billion compared to Meta's $134 billion, suggesting substantial market share opportunity. Double-digit DAU growth rates support the platform's expanding reach and engagement among younger demographics. RiverPark expects revenue acceleration over the coming years driven by improved platform functionality, continued audience growth, and enhanced monetization capabilities. The fund views current macro headwinds as transitory, positioning Snap for meaningful revenue growth and margin expansion as the advertising market recovers and the company scales its operations.

Pitch Summary:
DIS was a top contributor in the quarter following strong FY1Q24 earnings that included operating income 12% higher than expected and 24% better EPS. Operating income for all three segments (Entertainment, Sports, and Experiences) was better than investor expectations and the company reiterated guidance for $8 billion of free cash flow in 2024. The company's direct to consumer (DTC) business was a particular bright spot with improving losses and guidance for Disney+ net adds in FY2Q24 of 5.5-6 million, ahead of expectations of 2.2 million. DIS is blessed with a deep library of unique content that includes both live sports (providing large, non-time shifted audiences) and incomparable brands, including Disney, Marvel, Pixar and Lucasfilm, as well as the ABC network, which make it among the best-positioned media companies in the new landscape to combine multi-channel and DTC distribution. In addition, its theme park, cruise and theatrical businesses continue to be generational rites of passages for children and young adults around the world. We think CEO Bob Iger is doing a steady job rationalizing investments in each of the company's segments, which should lead to higher and more consistent profitability at the theme parks, better value realization in the linear assets, and consolidation of the company's DTC assets leading to higher profitability sooner. We therefore expect DIS to grow its free cash flow significantly over the next 3-4 years, from its depressed $1 billion in 2022, to more than double 2023's $4.9 billion, exceeding its previous $10 billion peak in 2018.

BSD Analysis:
RiverPark presents a compelling turnaround thesis for Disney, highlighting strong Q1 2024 results that exceeded expectations across all business segments. The fund emphasizes operating income beating estimates by 12% and EPS outperforming by 24%, with management reiterating $8 billion free cash flow guidance for 2024. Disney's direct-to-consumer business showed particular strength with improving losses and Disney+ subscriber additions expected to significantly exceed consensus estimates. The fund values Disney's unparalleled content library spanning Disney, Marvel, Pixar, and Lucasfilm franchises, combined with live sports programming that provides non-time-shifted viewing audiences. RiverPark credits CEO Bob Iger's strategic rationalization across business segments as a catalyst for improved profitability and operational efficiency. The theme parks and experiences division continues to benefit from its status as generational entertainment destinations with strong pricing power. The fund projects substantial free cash flow growth over the next 3-4 years, expecting a recovery from the depressed $1 billion in 2022 to potentially exceed the previous $10 billion peak achieved in 2018, representing a compelling value opportunity.

Pitch Summary:
Meta was a top contributor in the quarter following fourth quarter earnings results in which the company reported accelerating revenue growth and expanding margins driven by a rebound in online advertising and strong user growth. On February 2nd, Meta reported 4Q23 revenue of $40.1 billion (+25% y/y up from +23% in 3Q23) and EPS of $5.33 (+203% y/y), and the midpoint of 1Q24 revenue guidance was $35.8 billion (+25% y/y), all well ahead of investors' expectations. The company reported impressive revenue acceleration in its core advertising businesses, including new products like Reels and Threads. Advertiser adoption of Meta's AI targeting tools helped drive strong ROI and higher spend across multiple categories. META owns multiple social media platforms, each with more than one billion users, has an 81% gross margin, and generated $44 billion of FCF in 2023. Both its Facebook and its Instagram franchises have more than 2 billion Daily Active Users and generate the bulk of the company's revenue. Recently, the company's short form video offering, Reels, and public text-sharing app, Threads, achieved mass user engagement and growing advertiser adoption which have helped return the company to strong revenue and free cash flow growth. Even after the recent stock price advance, META shares trade at 20x Wall Street's consensus estimates for 2025 EPS, estimates that we think could prove to be too low.

BSD Analysis:
RiverPark maintains a bullish stance on Meta Platforms, citing accelerating revenue growth and margin expansion driven by advertising market recovery and user engagement gains. The fund highlights Meta's Q4 2023 performance with revenue growing 25% year-over-year to $40.1 billion and EPS surging 203% to $5.33, both exceeding expectations. The company's massive scale advantage is evident with Facebook and Instagram each boasting over 2 billion daily active users, generating substantial advertising revenue at an impressive 81% gross margin. Meta's newer products, including Reels and Threads, are gaining significant traction and contributing to revenue acceleration through improved advertiser adoption. The fund emphasizes Meta's AI-powered targeting tools as a key driver of advertiser ROI and increased spending across categories. With $44 billion in free cash flow generation in 2023, Meta demonstrates strong cash conversion and capital efficiency. RiverPark views the current 20x forward P/E multiple as attractive, believing consensus 2025 EPS estimates are conservative given the company's improving fundamentals and product innovation momentum.

Pitch Summary:
NVDA shares were our top contributor in the quarter following blowout 4Q results and 1Q guidance driven by strong data center sales. The company reported quarterly revenue of $22.1 billion, up 265% year-over-year, and EPS in the quarter of $5.16, up 487% year-over-year and 12% ahead of expectations. Revenue guidance for 1Q of $24 billion was 8% above very high expectations. The artificial intelligence arms race kicked-off by ChatGPT and Alphabet's Bard, among others, has generated tremendous demand for Nvidia's next generation graphic processors. NVDA is the leading designer of graphics processing units (GPU's) required for powerful computer processing. Over the past 20 years, the company has evolved through innovation and adaptation from a predominantly gaming-focused chip vendor to one of the largest semiconductor/software vendors in the world. Over the past decade, the company has grown revenue at a compound annual rate of over 20% while expanding operating margins and, through its asset light business model, producing ever increasing amounts of free cash flow. Following recent results, Jensen Huang, founder and CEO of NVIDIA stated in the company's press release, "a trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process."

BSD Analysis:
RiverPark presents a compelling bull case for NVIDIA based on exceptional Q4 2023 results and strong AI-driven demand. The fund highlights NVIDIA's transformation from a gaming-focused chip vendor to a dominant AI infrastructure provider, with quarterly revenue surging 265% year-over-year to $22.1 billion and EPS jumping 487% to $5.16. The company's forward guidance of $24 billion for Q1 2024 exceeded already elevated expectations by 8%, demonstrating sustained momentum in data center sales. NVIDIA's competitive moat in GPU design for AI workloads positions it as the primary beneficiary of the generative AI revolution. The fund emphasizes the company's asset-light business model and consistent 20%+ revenue CAGR over the past decade, which has driven expanding operating margins and free cash flow generation. CEO Jensen Huang's projection of a trillion-dollar infrastructure transition from general-purpose to accelerated computing validates the massive addressable market opportunity. RiverPark's conviction appears well-founded given NVIDIA's technical leadership and the structural shift toward AI-powered applications across industries.

Pitch Summary:
NFLX was a top contributor in 1Q24 following strong fourth quarter earnings and 2024 guidance driven by better-than-expected subscriber adds (+13.1 million versus estimates of +8.9 million). The company's subscriber growth continued to accelerate following the company's crack down on password sharing and the rollout of the lower cost, advertising supported subscriber offering known as the Ad Tier. ARPU came in below expectations, but recently announced price increases in the US, UK and France showed signs of moving ARPU higher. NFLX guided 2024 operating margins to 24%, ahead of prior guidance of 22-23%, and guided to 2024 free cash flow of $6 billion. The recent re-acceleration of subscriber growth, plus price increases on premium memberships and a stabilization of content investments, should position the company for low double digit annual revenue growth over the next few years while driving improved operating margin to more than 25%. We also believe that the stabilization of content spend should allow the company to continue to scale its FCF.

BSD Analysis:
The manager presents a bullish outlook for Netflix based on accelerating subscriber growth and improving profitability metrics. The company significantly exceeded subscriber addition expectations with 13.1 million net adds versus 8.9 million estimates, driven by successful password sharing crackdowns and the introduction of an ad-supported tier. While ARPU initially declined, recent price increases across key markets signal pricing power recovery. Netflix guided 2024 operating margins to 24%, above previous guidance, and projected $6 billion in free cash flow. The manager expects the combination of subscriber growth acceleration, premium pricing increases, and content spend stabilization to drive low double-digit revenue growth with operating margins expanding beyond 25%. The stabilization of content investments should enable continued free cash flow scaling, supporting the investment thesis for sustained profitability growth.

Pitch Summary:
UBER was a top contributor in the quarter following better than expected 4Q23 earnings and 1Q24 guidance. Gross bookings of $37.6 billion were up 22% year over year. Mobility gross bookings of $19.3 billion grew 29% over last year driven by a combination of product innovation and driver availability. Delivery gross bookings of $17 billion were up 19% from last year and continued to be strong throughout the quarter. 4Q Adjusted EBITDA of $1.3 billion, up $618 million year over year, was better than management's guidance of $1.2 billion, and the company generated $768 million of free cash flow, up from a cash loss of $303 million last year. Management guided to continuing growth in 1Q Gross Bookings (20% growth) and Adjusted EBITDA (of $1.3 billion). The company hosted a well-received analyst day in February during which it guided to three year compounded annual growth rates for gross bookings of mid-to-high single digits and EBITDA of 30-40%, both above investor expectations. The company also guided to free cash flow conversion of 90% of EBITDA. UBER remains the undisputed global leader in ride sharing, with a greater than 50% share in every major region in which it operates. The company is also a leader in food delivery, where it is number one or two in the more than 25 countries in which it operates. Moreover, after a history of losses, the company is now profitable, delivering expanding margins and substantial free cash flow. We view UBER as more than a ride sharing and food delivery service; we also see it as a global mobility platform with 142 million users (by comparison, Amazon Prime has 200 million members) and the ability to penetrate new markets of on-demand services, such as package and grocery delivery, travel, and hourly worker staffing. Given its $5.4 billion of unrestricted cash and $4.8 billion of investments, the company today has an enterprise value of $165 billion, indicating that UBER trades at 21x our estimates of next year's free cash flow.

BSD Analysis:
The manager presents a strong bull case for Uber based on its transformation from a loss-making startup to a profitable platform with expanding margins and substantial free cash flow generation. The company delivered impressive Q4 results with 22% gross bookings growth and $1.3 billion in adjusted EBITDA, exceeding guidance. Uber maintains dominant market positions with over 50% market share in ride-sharing across major regions and top-two positions in food delivery across 25+ countries. The platform's 142 million users provide a foundation for expansion into adjacent on-demand services including package delivery, travel, and staffing. Management's three-year guidance calls for mid-to-high single-digit gross bookings growth and 30-40% EBITDA growth, with 90% free cash flow conversion. The manager views the current valuation of 21x estimated next year's free cash flow as attractive for a global mobility platform with significant expansion opportunities.

Pitch Summary:
DIS was a top contributor in the quarter following strong FY1Q24 earnings that included operating income 12% higher than expected and 24% better EPS. Operating income for all three segments (Entertainment, Sports, and Experiences) was better than investor expectations and the company reiterated guidance for $8 billion of free cash flow in 2024. The company's direct to consumer (DTC) business was a particular bright spot with improving losses and guidance for Disney+ net adds in FY2Q24 of 5.5-6 million, ahead of expectations of 2.2 million. DIS is blessed with a deep library of unique content that includes both live sports (providing large, non-time shifted audiences) and incomparable brands, including Disney, Marvel, Pixar and Lucasfilm, as well as the ABC network, which make it among the best-positioned media companies in the new landscape to combine multi-channel and DTC distribution. In addition, its theme park, cruise and theatrical businesses continue to be generational rites of passages for children and young adults around the world. We think CEO Bob Iger is doing a steady job rationalizing investments in each of the company's segments, which should lead to higher and more consistent profitability at the theme parks, better value realization in the linear assets, and consolidation of the company's DTC assets leading to higher profitability sooner. We therefore expect DIS to grow its free cash flow significantly over the next 3-4 years, from its depressed $1 billion in 2022, to more than double 2023's $4.9 billion, exceeding its previous $10 billion peak in 2018.

BSD Analysis:
The manager presents a compelling turnaround story for Disney based on improving operational performance and strategic repositioning under CEO Bob Iger. The company delivered strong Q1 results with operating income 12% above expectations and 24% better EPS across all three business segments. The direct-to-consumer business showed particular strength with Disney+ subscriber additions significantly exceeding expectations. Disney's competitive advantages include an unparalleled content library featuring iconic brands like Disney, Marvel, Pixar, and Lucasfilm, plus live sports content that provides non-time-shifted audiences. The theme park and cruise businesses maintain their position as generational experiences with strong pricing power. The manager expects significant free cash flow growth over the next 3-4 years, projecting a recovery from the depressed $1 billion in 2022 to potentially exceed the previous $10 billion peak by 2027.

Pitch Summary:
Meta was a top contributor in the quarter following fourth quarter earnings results in which the company reported accelerating revenue growth and expanding margins driven by a rebound in online advertising and strong user growth. On February 2nd, Meta reported 4Q23 revenue of $40.1 billion (+25% y/y up from +23% in 3Q23) and EPS of $5.33 (+203% y/y), and the midpoint of 1Q24 revenue guidance was $35.8 billion (+25% y/y), all well ahead of investors' expectations. The company reported impressive revenue acceleration in its core advertising businesses, including new products like Reels and Threads. Advertiser adoption of Meta's AI targeting tools helped drive strong ROI and higher spend across multiple categories. META owns multiple social media platforms, each with more than one billion users, has an 81% gross margin, and generated $44 billion of FCF in 2023. Both its Facebook and its Instagram franchises have more than 2 billion Daily Active Users and generate the bulk of the company's revenue. Recently, the company's short form video offering, Reels, and public text-sharing app, Threads, achieved mass user engagement and growing advertiser adoption which have helped return the company to strong revenue and free cash flow growth. Even after the recent stock price advance, META shares trade at 20x Wall Street's consensus estimates for 2025 EPS, estimates that we think could prove to be too low.

BSD Analysis:
The manager presents a strong bull thesis for Meta based on accelerating revenue growth and margin expansion driven by advertising recovery and user engagement. The company delivered impressive Q4 results with 25% revenue growth acceleration and 203% EPS growth, significantly exceeding expectations. Meta's competitive moat is evident through its massive user base with over 2 billion daily active users across Facebook and Instagram platforms. The 81% gross margin and $44 billion in free cash flow generation demonstrate exceptional profitability and cash conversion. New product launches including Reels and Threads are gaining traction with advertisers, while AI-powered targeting tools are driving higher ROI and increased advertiser spending. The manager believes the stock remains attractively valued at 20x 2025 consensus EPS estimates, suggesting potential upside if earnings estimates prove conservative.

Pitch Summary:
NVDA shares were our top contributor in the quarter following blowout 4Q results and 1Q guidance driven by strong data center sales. The company reported quarterly revenue of $22.1 billion, up 265% year-over-year, and EPS in the quarter of $5.16, up 487% year-over-year and 12% ahead of expectations. Revenue guidance for 1Q of $24 billion was 8% above very high expectations. The artificial intelligence arms race kicked-off by ChatGPT and Alphabet's Bard, among others, has generated tremendous demand for Nvidia's next generation graphic processors. NVDA is the leading designer of graphics processing units (GPU's) required for powerful computer processing. Over the past 20 years, the company has evolved through innovation and adaptation from a predominantly gaming-focused chip vendor to one of the largest semiconductor/software vendors in the world. Over the past decade, the company has grown revenue at a compound annual rate of over 20% while expanding operating margins and, through its asset light business model, producing ever increasing amounts of free cash flow. Following recent results, Jensen Huang, founder and CEO of NVIDIA stated in the company's press release, "a trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process."

BSD Analysis:
The manager presents a compelling bull case for NVIDIA based on exceptional financial performance and positioning in the AI revolution. The company delivered explosive growth with 265% year-over-year revenue growth and 487% EPS growth, significantly beating expectations. NVIDIA's dominance in GPU technology positions it as the primary beneficiary of the AI infrastructure buildout, with management guidance suggesting continued strong demand. The fund highlights NVIDIA's successful transformation from a gaming-focused company to a diversified semiconductor leader with over 20% revenue CAGR over the past decade. The asset-light business model generates substantial free cash flow while expanding operating margins. CEO Jensen Huang's commentary about a trillion-dollar data center infrastructure transition underscores the massive addressable market opportunity ahead.

Pitch Summary:
Year to date, HDFC Bank Ltd has been a drag on our performance in India, a market that continues to do well. This is a self-inflicted but short-run issue specific to the interest rate cycle. The Indian central bank has left rates high and unchanged and is unlikely to cut rates in the near-term, instead focusing on the last mile of disinflation. They are not promising cuts around the corner, either (like the U.S. central bank). This is having a cyclical impact on HDFC Bank, as lower margins (from higher borrowing costs) and slowing growth (from higher interest rates on loans) push back expectations for the bank's growth. Yet the long-term potential for the bank has not changed. In addition, the valuation is now at multi-year lows. We think when India cuts rates (or loosens liquidity, which could come sooner than rate cuts) the bank is spring-loaded to grow. We are holding our position but still waiting to add. We don't see any major long-term fundamental problems with the company.

BSD Analysis:
The manager maintains a constructive long-term view on HDFC Bank despite recent underperformance, framing current weakness as a cyclical headwind rather than structural deterioration. The investment thesis centers on the bank being negatively impacted by India's restrictive monetary policy, which has compressed net interest margins through higher funding costs while simultaneously slowing loan growth via elevated lending rates. The manager emphasizes that HDFC Bank's fundamental business quality remains intact, with no structural issues identified. They highlight the attractive entry point created by multi-year low valuations and position the bank as 'spring-loaded' for growth once monetary conditions ease. The strategy involves maintaining current exposure while waiting for better entry points to add to the position. This reflects confidence in India's long-term banking sector growth potential and HDFC Bank's market-leading franchise.

Pitch Summary:
We often wonder why Taiwan Semiconductor (TSMC) doesn't squeeze the designers of chips (like Nvidia). There really are very few alternatives to Taiwan Semiconductor's foundry for AI in the short run (and in accordance with Moore's Law, it will be hard to catch Taiwan Semiconductor in the long run as well). Perhaps, it was simply Taiwan elections holding the stock back relative to Nvidia. Now TSMC's stock is off to the races following a benign election. It remains our largest position. It trades at a big discount to Nvidia, but we think it is one of the world's most important companies (yet for risk management we still won't hold it at the index weight, as a war with China would devastate the company). We get the upside. It is a tremendous company.

BSD Analysis:
The manager presents a compelling bull case for TSMC centered on its monopolistic position in advanced semiconductor manufacturing. They highlight TSMC's irreplaceable role in the AI supply chain with few viable alternatives for cutting-edge chip production. The investment thesis emphasizes TSMC's structural competitive advantages and adherence to Moore's Law, making it difficult for competitors to catch up technologically. The manager notes that TSMC trades at a significant discount to Nvidia despite being equally critical to the AI ecosystem. Political risk from Taiwan elections appears to have been a temporary headwind that has now cleared. While acknowledging geopolitical risks from potential China conflict, they maintain TSMC as their largest position, viewing it as one of the world's most strategically important companies with tremendous long-term value creation potential.

Pitch Summary:
Meanwhile industrial lighting supplier Acuity Brands finished higher after reporting strong earnings that included rising gross margins and strong free cash flow. The company has the number one market share in lighting fixtures and controls in North America and is a leading supplier of energy efficient retrofit solutions for commercial buildings.

BSD Analysis:
Sound Shore highlights Acuity Brands' strong operational performance, with the company delivering robust earnings characterized by expanding gross margins and strong free cash flow generation. The fund emphasizes Acuity's dominant market position as the number one provider of lighting fixtures and controls in North America, providing competitive advantages and pricing power. The company's leadership in energy-efficient retrofit solutions for commercial buildings positions it well for the ongoing trend toward building efficiency and sustainability. Rising gross margins suggest successful pricing discipline and operational leverage, while strong free cash flow generation demonstrates the quality of the business model. Acuity's market-leading position in lighting controls and fixtures provides a stable foundation for growth as commercial real estate continues to modernize lighting infrastructure.

Pitch Summary:
The diverse mix of names that drove our portfolio's first quarter performance included drug maker Teva Pharmaceutical. Still trading at a double digit free cash flow yield, the stock advanced after 2024 guidance was above expectations. Teva develops, manufactures and markets generic drugs as well as specialty drugs focused on neurological and respiratory diseases. We believe management has positioned the company for renewed growth, driven by its most promising branded drug pipeline in years.

BSD Analysis:
Sound Shore maintains a bullish stance on Teva Pharmaceutical, highlighting the company's attractive valuation at a double-digit free cash flow yield. The stock gained momentum after management issued 2024 guidance that exceeded market expectations, signaling operational improvements. Teva operates in both generic and specialty pharmaceutical markets, with particular strength in neurological and respiratory therapeutic areas. The fund emphasizes management's strategic positioning for renewed growth, citing what they view as the company's most promising branded drug pipeline in years. This pipeline strength suggests potential for higher-margin specialty revenue growth beyond the traditional generic drug business. The combination of attractive valuation metrics and improving growth prospects from the branded pipeline makes Teva an appealing value investment in the healthcare sector.

Pitch Summary:
Two companies that led our best contributors list embody this resilience: independent power producers Vistra and Constellation Energy. Both stocks surged along with rising electricity prices reflecting an improving demand environment. However, this performance was years in the making as each company prepared their assets for a dynamic market while maintaining strong balance sheets in order to take advantage of the resulting volatility. Similarly, Midwest focused Constellation is the biggest producer of carbon-free electricity in the US with nuclear power plants representing the majority of its capacity. We added the name in January 2023 when the stock was trading at an attractive 15 times earnings with clear line of sight to improved earnings and cash flow. Our research identified an upside to earnings power from maturing hedges and regulatory changes, including the Inflation Reduction Act's nuclear credit. A spinout from Exelon Corp, we viewed the strength of Constellation's clean, reliable baseload power model as appealing for residential and commercial customers. Demand for electricity is growing and notably, load peaks are changing as well. As the country brings on more renewables and adjusts to greater demand later in the day due to increased use of electric heat pumps and electric car charging, reliable clean power is at a premium. Moreover, data center demand is also now becoming an important driver and the company's contract to supply Microsoft at premium power prices is evidence of the opportunity.

BSD Analysis:
Sound Shore initiated a position in Constellation Energy in January 2023 at an attractive 15x earnings multiple, identifying multiple catalysts for earnings growth. The fund recognized upside potential from maturing hedges and regulatory tailwinds, particularly the Inflation Reduction Act's nuclear credits. As the largest US producer of carbon-free electricity, Constellation benefits from structural demand shifts including electric vehicle charging, heat pump adoption, and data center growth. The company's nuclear-heavy generation portfolio provides reliable baseload power that commands premium pricing, evidenced by their Microsoft supply contract. Sound Shore views the Exelon spinoff as unlocking value in Constellation's clean energy model. The changing electricity demand profile, with peak usage shifting later in the day due to electrification trends, favors Constellation's reliable nuclear capacity over intermittent renewables.

Pitch Summary:
Two companies that led our best contributors list embody this resilience: independent power producers Vistra and Constellation Energy. Both stocks surged along with rising electricity prices reflecting an improving demand environment. However, this performance was years in the making as each company prepared their assets for a dynamic market while maintaining strong balance sheets in order to take advantage of the resulting volatility. In our 2023 year-end letter we detailed Vistra's strategic position to supply power to the company's markets.

BSD Analysis:
Sound Shore highlights Vistra as a top contributor that exemplifies operational resilience in the power generation sector. The fund emphasizes that Vistra's strong performance was not merely opportunistic but the result of years of strategic preparation for market volatility. The company positioned its assets strategically while maintaining balance sheet strength to capitalize on dynamic market conditions. Rising electricity prices and improving demand fundamentals drove the stock's surge, validating management's positioning strategy. The fund previously detailed Vistra's strategic market position in their 2023 year-end letter, suggesting ongoing conviction in the investment thesis. This performance demonstrates the value of companies that can adapt and execute effectively in evolving market landscapes.

Pitch Summary:
Among our buys during the first quarter, we added Agilysys, Inc. (AGYS), which develops application software for point-of-sale, property-management, inventory and procurement applications. The company specializes in the hospitality and retail industries world-wide, and its solutions can be implemented on wireless and mobile devices. Agilysys recently modernized its software, which has proved fortuitous as post-pandemic consumer and business travel has accelerated. Late in 2022, the company announced an agreement to deploy its cloud-based property-management software across Marriott's luxury, premium and select service hotels in the United States and Canada. Beyond the incremental earnings and cash flows related to Marriott, the agreement should help Agilysys win new customers on an ongoing basis. In a recent report, Agilysys highlighted strong growth rates across several markets including hotels, cruise ships and non-gaming resorts.

BSD Analysis:
Wasatch initiated a new position in Agilysys, attracted by the company's specialized hospitality software solutions and strategic positioning in the post-pandemic travel recovery. The managers appreciate Agilysys's comprehensive software suite covering point-of-sale, property management, and procurement applications with mobile and wireless capabilities. The company's recent software modernization efforts proved well-timed as travel demand accelerated following pandemic restrictions. The landmark Marriott partnership represents a significant validation of Agilysys's cloud-based property management platform across luxury, premium, and select service hotels in North America. This agreement provides both immediate revenue visibility and a powerful reference for winning additional enterprise customers. The managers view the Marriott relationship as a catalyst for broader market penetration and sustained growth. Recent company reports highlighting strong growth across hotels, cruise ships, and non-gaming resorts demonstrate the breadth of Agilysys's market opportunity and execution capabilities. The combination of travel industry recovery, software modernization, and marquee customer wins positions Agilysys for sustained growth in the hospitality technology market.

Pitch Summary:
Another significant detractor was Five9, Inc. (FIVN), which offers cloud-based software to help contact centers more efficiently interact with customers and prospects. We own the company for its competitive advantages in a "remote" world where contact centers are strategically more important as the key points of customer engagement. Even with its growth rate slowing somewhat, Five9 has continued to generate strong operating results. We think the stock was down primarily on investor concerns that AI may pose a threat to the company. In fact, Five9 is already using AI to handle some interactions and the results have been positive. As part of our ongoing research, we're analyzing both sides of the AI debate and how our companies could be affected by AI over the long term.

BSD Analysis:
Wasatch maintains conviction in Five9 despite recent stock weakness driven by AI-related concerns. The managers value Five9's competitive positioning in cloud-based contact center software, particularly as remote work trends have elevated the strategic importance of contact centers as primary customer engagement points. While acknowledging some growth rate deceleration, they emphasize that Five9 continues delivering strong operating results, suggesting underlying business fundamentals remain solid. The managers view recent stock weakness as primarily driven by investor fears about AI disruption rather than fundamental deterioration. Importantly, they note that Five9 is already successfully implementing AI to enhance interactions, positioning the company as a beneficiary rather than victim of AI adoption. Their ongoing research into AI's long-term impact on portfolio companies demonstrates thorough risk assessment. Five9's established market position, strong operating performance, and early AI integration suggest the company is well-positioned to adapt to technological changes while maintaining its competitive advantages in the evolving contact center landscape.

Pitch Summary:
Clearwater Analytics Holdings, Inc. (CWAN) was also a major detractor. The company develops cloud-native software that allows clients to simplify their investment-accounting operations. Although management projected robust revenue growth of about 18% for the 2024 calendar year, analysts had been hoping for even better growth. As a result, the stock sold off. In our experience, Clearwater's management team tends to underpromise and then overdeliver. As a result, we bought more shares on the stock-price weakness. And we still expect annual revenue growth to exceed 20% for the next several years.

BSD Analysis:
Wasatch maintains strong conviction in Clearwater Analytics despite recent stock weakness following management's 2024 guidance. The managers appreciate the company's cloud-native investment accounting software platform that simplifies complex operations for institutional clients. While management's 18% revenue growth projection for 2024 disappointed analysts expecting higher growth, Wasatch views this as characteristic conservatism from a management team with a track record of underpromising and overdelivering. The managers used the stock price weakness as an opportunity to add to their position, demonstrating confidence in their fundamental analysis. Their expectation for annual revenue growth exceeding 20% over the next several years suggests they believe management's guidance is conservative and that the underlying business momentum remains strong. The SaaS model provides recurring revenue visibility, and the specialized nature of investment accounting software creates switching costs and competitive moats. Wasatch's contrarian approach of buying during temporary weakness reflects their conviction in Clearwater's long-term growth trajectory and management's execution capabilities.

Pitch Summary:
The greatest detractor from strategy performance during the first quarter was YETI Holdings, Inc. (YETI), which designs, markets and distributes drinkware, coolers, and other outdoor and recreational gear. Although YETI's drinkware segment has performed reasonably well and its rollout of YETI-branded stores has shown promise, strong competitive threats have recently emerged in the drinkware space. So while YETI's stock price is attractive, we're maintaining a small position as we weigh whether the company can offset its slowing U.S. growth by successfully expanding internationally.

BSD Analysis:
Wasatch expresses cautious optimism about YETI while acknowledging significant competitive pressures in the drinkware market. The managers recognize positive developments including reasonable performance in the drinkware segment and promising early results from YETI-branded retail stores. However, they are concerned about intensifying competition in the core drinkware category, which represents a key growth driver for the company. The managers note slowing U.S. growth as a headwind that requires successful international expansion to offset domestic challenges. Their decision to maintain only a small position reflects uncertainty about YETI's ability to navigate competitive pressures while executing international growth strategies. The attractive stock price provides some downside protection, but the managers appear to be in a wait-and-see mode regarding the company's competitive positioning. YETI's brand strength and retail expansion provide potential catalysts, but execution risks around international growth and domestic market share defense create investment uncertainty that justifies the reduced position size.