Investment Pitches

Pitch Summary:
ICON is an Ireland-domiciled global provider of outsourced development and commercialization services to pharmaceutical, biotechnology and medical-device companies. ICON is one of the largest providers of clinical-trial and related services to support the development of new medicines and devices. Services include the management of clinical trials across all phases (I to IV) needed to collect and analyze data, establishing product efficacy and safety for regulatory filings, bioanalytical and clinical lab services, data analytics and technology for trial design, regulatory consulting and marketing strategies. We have owned ICON in the International All Company strategy for more than a decade. Icon was also a leading detractor in the March quarter. Weak earnings results and an uncertain outlook again drove underperformance in the June quarter. Top-line growth declined 4% year-over-year and earnings per share contracted 15.6%. Management also revised its revenue guidance for the year from flattish growth at the midpoint of the range to -4% at the midpoint. While ICON continues to solidify its position as one of the top three contract research organizations (CROs), there is significant near-term uncertainty surrounding the industry. Among the unknowns are the Inflation Reduction Act's impact on ICON's drug company customers, changing U.S. Food and Drug Administration policies, and fluctuating governmental and industry funding. We still believe that the company can return to 7% to 10% revenue growth and 10% to 14% earnings per share growth, but the current industry uncertainty makes it a low probability that it will meet these growth ranges over the next 12 to 24 months.

BSD Analysis:
Brown Capital Management expresses growing concerns about ICON despite their decade-long investment in this top-three contract research organization. The fund's bearish stance reflects deteriorating fundamentals with 4% revenue decline and 15.6% earnings contraction, representing a significant departure from historical growth patterns. Management's guidance revision from flat growth to -4% revenue decline signals deeper structural challenges beyond typical cyclical headwinds. The investment case faces multiple regulatory and policy headwinds including the Inflation Reduction Act's impact on pharmaceutical customers, evolving FDA policies, and uncertain government funding for drug development. While ICON maintains its competitive position among the largest CROs providing comprehensive clinical trial services across all phases, near-term visibility remains poor. The fund acknowledges the company's long-term potential to achieve 7-10% revenue growth and 10-14% EPS growth but assigns low probability to meeting these targets over the next 12-24 months. This represents a classic value trap scenario where a quality company faces temporary but potentially prolonged industry headwinds that could persist longer than initially anticipated.

Pitch Summary:
AJ Bell is a U.K-based wealth-management platform, providing both independent financial advisors and do-it-yourself retail investors with tools for planning, integrating and monitoring a variety of stock and fund investments. Think of it as a small Charles Schwab in the U.K. AJ Bell enjoys high profitability (40% operating margins) and returns (45% return on equity), providing the resources necessary to fund long-term revenue and earnings growth of 20%. At March 31, the dual-channel platform serves 593,000 customers and the assets under administration (AUA) are £90.4 billion. The opportunity remains significant, with AJ Bell's assets under administration representing just 9% of a £1 trillion platform market in the U.K. Additionally, we think there is another £2 trillion in retirement assets in the U.K. that may find its way to platforms such as AJ Bell over the long term. We first bought AJ Bell in 2020. During the quarter, AJ Bell released both a trading statement on the March quarter, and later in the quarter reported first half year earnings ending March. Both reports were strong and well received by the marketplace. The trading statement showed new customer growth of 18% year over year. Net inflows in the quarter were £1.9 billion, up 19% year over year. The company followed this trading update with a strong earnings report. The top line was £153.2 million, 17% year over year growth. Profit margins before taxes were 44.9%, down from 46.8% year over year. Management raised its guidance for profit margins before taxes for the year from over 40% to over 42%, and also announced a new stock buyback plan of £25 million. We continue to like AJ Bell's market position and growth prospects.

BSD Analysis:
Brown Capital Management positions AJ Bell as the UK's equivalent to Charles Schwab, operating a dual-channel wealth management platform serving both financial advisors and retail investors. The investment case is built on exceptional profitability metrics with 40% operating margins and 45% return on equity, generating substantial cash flows to fund 20% long-term growth targets. AJ Bell's market opportunity appears substantial, currently capturing only 9% of the £1 trillion UK platform market, with an additional £2 trillion in retirement assets potentially migrating to digital platforms over time. Recent operational performance demonstrates strong momentum with 18% customer growth, 19% net inflow growth to £1.9 billion, and 17% revenue growth to £153.2 million. Management's confidence is reflected in raised profit margin guidance from 40% to 42% and a new £25 million share buyback program. The platform currently serves 593,000 customers with £90.4 billion in assets under administration, providing a scalable foundation for continued expansion. The fund's 2020 initial investment timing suggests they identified this growth opportunity early in the UK's digital wealth management transformation.

Pitch Summary:
MercadoLibre is a Uruguay-based marketplace model company that operates the leading e-commerce shopping platform in Latin America (like Amazon) and provides payment and credit services (like PayPal). Although Latin America is a large market with a population of 650 million, it still has low e-commerce penetration compared to most developed markets. We first bought MercadoLibre in our International Small Company portfolio in 2013, and it graduated to the International All Company portfolio in 2020. Currently, about half of MercadoLibre's business is in Brazil and just under a quarter is in each of Mexico and Argentina. Long-term investments in the marketplace and its rapid-shipping solutions provide significant barriers to entry for competitors. MercadoLibre ships about half of its orders with same-day or next-day arrival to more than 67 million unique active buyers. We also like the potential in the company's newer fintech businesses, where 64 million monthly active users benefit from MercadoLibre's payment-processing services, credit cards, loans and savings accounts. During the quarter, the company reported 37% year-over-year revenue growth to $5.9 billion (USD) and 44% year-over-year earnings per share growth to $9.74. These results easily beat consensus expectations, suggesting that MercadoLibre remains a healthy and growing franchise. Note that the company was a leading contributor in the March quarter as well. We believe that MercadoLibre's e-commerce and fintech marketplace model provides a unique competitive advantage, leaving the company with a long runway for growth.

BSD Analysis:
Brown Capital Management presents a compelling bull case for MercadoLibre as Latin America's dominant e-commerce and fintech platform. The investment thesis centers on the company's dual marketplace model combining Amazon-like e-commerce with PayPal-style financial services across a 650 million person market with low digital penetration. MercadoLibre's operational excellence is evident in its logistics capabilities, delivering same-day or next-day shipping to over 67 million active buyers, creating significant competitive moats. The company's financial performance demonstrates strong momentum with 37% revenue growth to $5.9 billion and 44% EPS growth, both exceeding consensus estimates. Geographic diversification across Brazil (50%), Mexico and Argentina (25% each) provides multiple growth vectors while the fintech segment serves 64 million monthly active users with comprehensive financial services. The fund's long-term conviction is reflected in their 12-year holding period, upgrading the position from small-cap to all-cap portfolios. Management views the low e-commerce penetration in Latin America as providing substantial runway for continued expansion and market share gains.

Pitch Summary:
During the quarter, one of the management teams we met with was that of REA Group. REA Group owns and manages Australia's leading real estate online portal, a marketplace model for buying and selling homes. This was a routine business update with CEO Owen J. Wilson, who will be retiring later in the calendar year, and CFO Janelle Hopkins. Reflecting on REA and the industry, Wilson shared that there are more than 120 real estate marketplace models around the world, and that he has not found one example of a model in a mature market that lost its leadership position. This does not mean that hard work is no longer required once a company gains the pole position as a marketplace. A commitment to innovation and growth through investments in sales and marketing, new product offerings and R&D is still essential. However, when the market leader protects its franchise with these investments, it becomes extremely difficult to be overtaken by second-tier competitors, or new market entrants.

BSD Analysis:
Brown Capital Management highlights REA Group as Australia's dominant real estate marketplace, emphasizing the structural advantages of market-leading platforms. The fund manager's thesis centers on the durability of marketplace leadership positions, citing CEO Wilson's observation that no mature real estate marketplace has ever lost its dominant position globally. This creates significant competitive moats through network effects, where buyers and sellers gravitate toward the platform with the most activity. REA's marketplace model generates recurring revenue streams with high margins, as the company charges fees for listings and additional services. The investment case relies on REA's ability to maintain its leadership through continued innovation and strategic investments in technology and marketing. Management's commitment to R&D and new product development should help defend against potential competitors while expanding revenue per user. The fund views REA as a classic example of their Exceptional Growth Company criteria, combining durable revenue streams with defensible market positioning.

Pitch Summary:
Magnite is the largest independent programmatic Sell-Side Platform (SSP), an entity that provides technology solutions to automate the purchase and sale of digital advertising inventory on behalf of publishers. The company arose from the merger of The Rubicon Project and Telaria in 2020. It then acquired a CTV competitor SpotX in early 2021 to become the third-biggest CTV SSP, after Comcast's Freewheel and the Darth Vader of the AdTech world, Google. Critically, Magnite stands today as the key enabler of Connected TV (CTV) advertising for streaming platforms, an increasingly crucial revenue source for media parent companies around the world. The company's contract win with Netflix is proof of its differentiation in the space, and was something we expected after hearing back in early 2023 that Microsoft's Xandr ad tech stack wasn't capable of true CTV ad delivery. The company has impressive incremental EBITDA margins (75%+), and after spending the last few years consolidating its acquisitions, is in a place to capitalize on growth opportunities, generating cash flow far in excess of current market expectations. Nonetheless, the company trades on a single-digit multiple of this year's estimated EBITDA, with minimal credit applied to Netflix onboarding programmatic advertising. That's strange, if only because we believe the Netflix ad tier is likely to deliver $6 billion in ad spend next year, and half of that may go through Magnite with low-single-digit take rates (3.5 to 5.0%). Should this occur with incremental margins they have shown in the past, the company could see EBITDA rise by over $70 million next year, implying 30%+ growth from Netflix alone. Better yet, with the success of Netflix's programmatic endeavors, other media customers may accelerate adoption of the same type of programmatic infrastructure/services with MGNI that were previously just tertiary monetization activities. Meanwhile, Magnite DV+, the company's open internet SSP division, should continue its modest growth. However, it also has a potentially massive call option in Google's forced divestment of its ad tech stack (Google Networks). We published our first writeup on the situation in September 2023 before the search trial, highlighting investor complacency about a breakup risk for both search and ad tech trials. With (1) Google's loss in the search trial and (2) there still being an opportunity for the beneficiaries in the ad tech case, we published an update to that thesis in September 2024. The ad tech trial concluded in November and the ruling was delivered on April 17th. As we contended from the beginning, the judge ruled that Google monopolized the supply side of the display advertising market. With the ruling out of the way, we expect the judge to deliver remedies shortly, which should provide greater clarity to investors who are just now starting to wake up to the thesis we've held for years. As for remedies, as long as the supply side of Google's ad tech stack is separated from the demand side, the resulting breakup would have independent SSPs, like Magnite, able to mop up market share. And as we pointed out previously, for the first time in Google's history, its open internet DSP, DV360, announced direct integration with MGNI DV+ to streamline ad transactions. We saw that action as a canary in the coal mine, lo and behold that assertion proved correct. After remedies in the DOJ ad tech case, the second shot on goal is the Texas ad tech trial with a handful of States Attorney's General, which should start later in 2025. What are we really playing for? Market share stats usually measure impressions, not revenue. Google's AdX may command over 50% of impressions, but that overlooks the real story: Google keeps the highest-paying inventory for itself, with CPMs up to 50% higher than competitors. When you look at dollars-weighted impressions and add on Google's 90% ad server share – the true opportunity becomes clear, tens of billions generated from their elevated take rates. The focus on impressions hides just how much value Google controls, and how much is left on the table for challengers, the chart below should be self-evident. In the event of a breakup of Google's ad tech stack, Magnite stands to see its DV+ market become competitive again and gain share from Google, potentially resulting in 5-10x upside in MGNI's equity and fare more asymmetric upside in the LEAPs. In fact, remedies don't even have to take effect to see a change in earnings prospects, publishers with 80% of their ad revenue tied to Google will be looking to protect that revenue from any internal disruption. Again, this thesis is completely independent from a compelling setup in the stock itself. That's our kind of setup, to say the least.

BSD Analysis:
Crossroads views Magnite as the largest independent programmatic sell-side platform positioned to benefit from two major catalysts: Netflix's programmatic advertising adoption and potential Google ad tech breakup. The Netflix partnership represents significant upside, with the fund estimating $6 billion in Netflix ad spend next year, potentially half flowing through Magnite at 3.5-5.0% take rates, driving over $70 million in incremental EBITDA and 30%+ growth. The company's 75%+ incremental EBITDA margins provide substantial operating leverage as volumes scale. The second catalyst involves Google's antitrust ruling, where the judge determined Google monopolized display advertising supply-side markets. The fund believes remedies requiring separation of Google's supply and demand-side operations would allow independent SSPs like Magnite to capture significant market share, potentially delivering 5-10x equity upside. Google's recent direct integration with Magnite's DV+ platform signals early preparation for this scenario. Trading at single-digit EBITDA multiples despite these catalysts, Magnite offers compelling risk-adjusted returns with multiple paths to substantial value creation.

Pitch Summary:
UK homebuilder Vistry Group is transitioning to a pure-play "partnerships" business model that combines the financial and land resources of local authorities and housing associations, the UK central government, and even financial institutions with Vistry to create a capital-light home construction enterprise at the center of a virtuous circle for all stakeholders. Unlike traditional homebuilders, Vistry's "partnerships" model pre-sells over 50% of its homes at affordable prices (mostly to cycle-agnostic local councils or housing associations), shortening cash collection times and considerably reducing the business's cyclicality and interest rate sensitivity. Vistry's shift from a hybrid traditional/partnerships housebuilder to a partnerships "pure play" will not only make it the UK's largest affordable housing manufacturer but will also drastically improve the predictability of its financial and operational results, radically increasing its revenue visibility, return on capital, and earnings potential in lockstep. The best analogy, valuation comp, and example of expected returns that we see for Vistry is US-listed NVR. For those unfamiliar with NVR, it's a slow-growing, capital-light US housebuilder that's repurchased more than 75% of its shares over the last 30 years. Vistry continues to repurchase its shares as it reaches the late stages of its ongoing business transformation. The company should complete ~17k homes this year and will be delayed in reaching its 20k Partnerships completion and £800 million operating profit targets as part of the issues. Mind you, we still view both targets as very achievable, as their issues to date have been Housebuilding related, which is in wind-down and ultimately irrelevant to our long-standing thesis. Though the pace of the wind-down is contingent on open market housing sales, the release of this trapped working capital will be material, not to mention a matter of when, not if it can be returned to shareholders. . To that end, the company has stuck to a 40% ROCE,12%+ operating margins and revenue growth of 5%-8% per annum. The UK Labour government has also prioritized affordable housing and should debut a new, larger, funding program in June/July. Moreover, both management and the Board of Directors, as well as the company's major shareholders, continue to show conviction in Vistry as they've been adding to their collective investments meaningfully in the face of recent weakness. The company has put out a level-headed set of expectations for 2025 with a few key markers to show progress on their delayed transformation into a capital-light homebuilder, namely a reduction in work in progress (WIP) in the second half of the year As Vistry makes both amends and progress in the transformation the discount applied to them should evaporate. At present, the name trades at ~4x EBIT on reasonable 2026 expectations of £500 million in operating profit, while comparable firms trade 3x-4x higher.

BSD Analysis:
Crossroads views Vistry as executing a compelling transformation from a traditional homebuilder to a capital-light "partnerships" model focused on affordable housing. The company pre-sells over 50% of homes to cycle-agnostic local councils and housing associations, dramatically reducing cyclicality and interest rate sensitivity while improving cash collection times. The fund draws comparisons to NVR, a successful US capital-light homebuilder that has repurchased 75% of its shares over 30 years, suggesting similar shareholder return potential. While Vistry faces delays in reaching 20,000 partnership completions and £800 million operating profit targets, the fund believes these issues stem from the legacy housebuilding division being wound down rather than core partnership operations. The UK Labour government's prioritization of affordable housing should provide additional tailwinds through new funding programs expected in mid-2025. With management, board members, and major shareholders adding to positions during recent weakness, the fund sees strong insider conviction. Trading at approximately 4x EBIT on 2026 expectations of £500 million operating profit, Vistry appears significantly undervalued compared to peers trading 3-4x higher multiples.

Pitch Summary:
Our thesis on Nintendo, the Godzilla of video gaming, is quite simple. Armed with its Apple-like iterative hardware model and software-based ecosystem, as well as a growing active player base and ever-increasing digital sales, the company should generate substantial earnings growth that is de-coupled from the past "boom-bust" console cycles it previously underwent. Indeed, for the first time ever, the new Switch will slide right into an existing software ecosystem, kickstarting an upgrade cycle from a profit base of nearly $4 billion rather than starting from zero, as it has with every other major console changeover in its multi-decade history in the video game space. With that, Nintendo is set to begin the final stage of its ongoing business model transformation we first laid out to you all the way back in 2019. Better yet, with an active playing base of 129 million users, the largest and most diverse integrated hardware/software ecosystem in all gaming, and over 34 million NSO subscribers, sticking the landing is all but certain. After all, Nintendo has an industry-leading (and historically under-monetized) IP library that continues to shine, getting new life in a rapidly expanding number of movies, theme parks, retail stores, general merchandise, and (we strongly suspect) a whole new crop of perpetual first-party live service games in the months and years ahead. All that said, the company officially debuted the Switch 2 in early January, which should go on pre-sale on April 24th, with delivery sometime in June. With the official launch of the Switch 2, the company is embarking on a new era that should see massive and consistent growth that consensus continues to miss. For example, consider the Switch 2's enhanced hardware, which is allowing developers to bring over more technically demanding games to the Switch platform in true fidelity to their intended gameplay right out of the gate. In other words, unlike the OG Switch era, the Switch 2 will be the first Nintendo console with comprehensive AAA third-party support in decades and is expected to receive major AAA titles such as Activision's Call of Duty, Take-Two's Grand Theft Auto 6, and EA's Madden Football within the new console's launch window. This step-change increase in third-party "system selling" game availability will be further bolstered by the fact that all these games do an excellent job of monetizing in-game microtransactions in a recurring, annuity-like fashion, opening Nintendo's ecosystem to not just third-party AAA games but an entirely new cohort of higher-spending gamers. And that's just one driver of returns. The Switch 2's innovative use of AI (thanks to NVIDIA's DLSS), added mouse functionality, and innovative online chat features should certainly do their part in converting the 100 million + PlayStation and Xbox users still gaming on prior-generation consoles, not to mention the 1.86 billion global PC gamers that will finally have a real (highly compelling) reason to consider a Nintendo console for the first time. If that wasn't enough, the global blockbuster Super Mario movie has the company embarking on the next leg of its journey in visual content, i.e., a multi-film, Marvel-esque "Nintendo Cinematic Universe," with the company aiming to build up to a one-movie-per-year pace over the next five years. New movies for Mario, Zelda, and others are in development. And the company's venues at Universal Parks continue to gain traction, with the Japan and LA locations already open, Orlando opening in May later this year, and Singapore following shortly thereafter. We anticipate strong Switch 2 sales starting in May/June of 2025 (FY 2026), alongside an impressive lineup of first- and third-party software and higher prices for NSO and all AAA games sold on Nintendo's App Store-like eShop platform. Furthermore, with reports of Nintendo's supply chain preparing 20 million + Switch 2s for sale this year and a $450 per unit price, consensus FY 2026 revenue estimates of ~¥1.9 trillion would be off by almost ¥1 trillion. Incredibly, we think consensus on software is off by an even larger order of magnitude than the streets deluded hardware takes, but more on all that in the next month or so. For now, it is safe to say that a console release of this importance, plus spring-loaded game sales and a modest valuation of less than 12x normalized earnings (less cash) puts Nintendo's forward risk-adjusted return profile into rarified air over the next three to five years.

BSD Analysis:
Crossroads views Nintendo as undergoing a fundamental business model transformation from cyclical console cycles to a sustainable, Apple-like ecosystem model with the Switch 2 launch. The fund emphasizes this is the first Nintendo console transition building upon an existing software ecosystem rather than starting from zero, leveraging a $4 billion profit base and 129 million active users. The Switch 2's enhanced hardware capabilities enable comprehensive AAA third-party support for the first time in decades, including major franchises like Call of Duty and Grand Theft Auto 6, which should attract higher-spending gamers and recurring microtransaction revenue. Beyond gaming, Nintendo is expanding into a "Nintendo Cinematic Universe" with annual movie releases and Universal theme park venues globally. The fund believes consensus estimates are dramatically understating both hardware and software revenue potential, with supply chain reports suggesting 20+ million Switch 2 units at $450 each versus consensus estimates nearly ¥1 trillion below reality. Trading at less than 12x normalized earnings, Nintendo offers exceptional risk-adjusted returns over the next 3-5 years as this ecosystem transformation accelerates.

Pitch Summary:
Crown Holdings is the second largest manufacturer of aluminum beverage cans globally. We own its larger competitor, Ball Corp., in our Large Cap portfolio. Our investment case for the two companies is broadly similar. The beverage can industry is a consolidated and rational industry with high barriers to entry. The industry structure, scale, and long-term contracts with inflationary pass-throughs result in solid and stable margins, high returns on capital, and robust free cash flow. In addition, aluminum cans are taking share from other substrates, most notably plastic, as aluminum is considered a more sustainable product. This transition to aluminum is driving volume growth for Crown. Recently, demand for its products has been weak due to current macro factors. We expect growth to normalize over time.

BSD Analysis:
Vulcan Value Partners presents a bull case for Crown Holdings based on attractive industry structure and secular sustainability trends. The manager emphasizes the beverage can industry's consolidated and rational competitive dynamics with high barriers to entry, creating stable operating conditions. The investment thesis centers on the industry's structural advantages including scale benefits, long-term contracts with inflationary pass-throughs, resulting in stable margins, high returns on capital, and robust free cash flow generation. A key secular tailwind is aluminum cans gaining market share from plastic substrates driven by sustainability considerations, providing volume growth for Crown. The manager acknowledges current demand weakness due to macro factors but expects normalization over time. The similarity to their Ball Corp. investment in the Large Cap portfolio suggests confidence in the industry dynamics and Crown's competitive position as the second-largest global player in aluminum beverage cans.

Pitch Summary:
We are pleased to have purchased Starbucks in the first quarter. We have owned the company in the past, and it was a good investment for us. The company has strong brand recognition, global distribution, and outstanding retail real estate. The company generates robust free cash flow and has high returns on invested capital as well as a strong balance sheet. Starbucks has used its financial resources to strengthen its brand and enhance customer loyalty. Additionally, the company has continued to see attractive returns from opening new stores. Stock price volatility over the last year is likely due to management changes, disappointing short-term results, and general hesitancy about consumer spending. We believe that Starbucks' competitive position remains intact, and its value will continue to compound over our five-year plus time horizon.

BSD Analysis:
Vulcan Value Partners presents a bull case for Starbucks based on enduring competitive advantages and temporary market concerns creating an attractive entry point. The manager emphasizes the company's strong brand recognition, global distribution network, and premium retail real estate locations as sustainable competitive moats. The investment thesis highlights Starbucks' robust free cash flow generation, high returns on invested capital, and strong balance sheet providing financial flexibility for brand investment and customer loyalty enhancement. The firm views continued attractive returns from new store openings as evidence of the business model's durability. Importantly, the manager attributes recent stock price volatility to temporary factors including management changes, short-term operational disappointments, and broader consumer spending concerns rather than fundamental competitive deterioration. With their five-year-plus investment horizon, Vulcan expects the company's intrinsic value to compound as these temporary headwinds subside.

Pitch Summary:
In our last letter, we issued what was essentially an ultimatum. For reference we wrote, "Calumet's current $15 stock price is nothing short of lunacy as long as management can competently execute the rest of the playbook and, in doing so, rehabilitate the reputation of a C-suite and BoD suffering from several unforced errors and related credibility issues. The 64k dollar question at this point is will the center hold?" To that last question, the answer was no – and we exited the equity early in the quarter in the low 20s, though we still maintain some exposure via call options. On paper, we saw a clear line of sight to well over $30/share in near-term intrinsic value, but realizing that upside was always going to hinge on management execution – not just in operations, but in clearly communicating a transparent and compelling thesis to the investment community. Post-DOE loan, even after direct coaching from shareholders, management still failed to articulate both the thesis and the underlying facts that would have made it obvious normalized earnings were well above where the street had penciled them in. As just one example of our exasperation, management's inability to simply and credibly detail that contracted offtake agreements for SAF are at a $1.50–$2/gal premium to renewable diesel – like peers at Darling Ingredients – remains baffling. Remarkably, the core points of our thesis proved correct: non-core asset sales are complete, and the much-maligned ATM is out of the picture, never having been drawn on. Yet, many who have reached out to us as they start to do the work on the name have asked, "Why can't these guys just be straight with me? What are they hiding? What am I missing here?" Our view is that they're not hiding anything; they simply don't understand what public market investors need to underwrite a position. Despite our rough words, just because public market investors don't see the value doesn't mean a strategic buyer won't. Large shareholders have constructively engaged with the company and refreshed the board, and we think the best outcome here is a sale – likely one buyer for the core business and another for MRL. Additionally, we still see a credible path to a re-rate into the upper $20s in the near term, contingent on an industry-friendly EPA setting a new RVO limit in the next month or two, which we believe would raise renewable diesel margins from $0.70/gal to over $2.00/gal almost overnight. Cash flows should rapidly snowball from there. So for those reasons and as noted above, we maintain a small position in long call options to capture any much-needed catch-up in the share price. But, for us, the opportunity cost is too high to continue to hold the equity for the long term, waiting for management to see the light or, more likely, for the firm to get sold. That mindset, of not letting sunk costs dictate future exposure, proved beneficial when FTAI Aviation ("FTAI") underwent its own bout of turmoil early in the quarter.

BSD Analysis:
Crossroads exited their equity position in Calumet Specialty Products due to management's persistent inability to effectively communicate the investment thesis to public markets, despite the fundamental story remaining intact. The fund had previously identified intrinsic value exceeding $30 per share based on the company's renewable diesel operations and contracted SAF offtake agreements at $1.50-$2/gallon premiums. While the operational thesis proved correct with completed asset sales and unused ATM facilities, management failed to articulate key value drivers like SAF pricing premiums that would justify higher normalized earnings estimates. The fund believes management simply lacks understanding of public market investor requirements rather than hiding material information. Despite exiting the equity position in the low $20s, Crossroads maintains call option exposure to capture potential upside from either a strategic sale or EPA regulatory changes that could increase renewable diesel margins from $0.70/gallon to over $2.00/gallon. The fund views the best outcome as a strategic acquisition, with board refreshment by large shareholders supporting this scenario.

Pitch Summary:
CarMax is the largest used car retailer in the United States. The company has the third largest wholesale business in the United States and a large captive finance business. We believe that CarMax's omnichannel approach is a competitive advantage that will enable the company to continue taking market share in a highly fragmented market. This strategy enables the company to generate higher and more stable levels of profit per used vehicle sold and generate solid returns on capital. A significant portion of the used car market is made up of small independent dealerships without resources to invest in digital infrastructure. Another significant portion of the market is made up of digital-only retailers, who are now focused on profitability at the expense of volume. CarMax continues to invest in its digital infrastructure which has improved its customer experience. These investments have made it easier to buy, sell, and finance vehicles. Over the last two years, management has focused on de-leveraging the company's balance sheet and right sizing the firm, which has significantly de-risked the business and positioned CarMax extremely well for when volumes normalize. We believe that the combination of a leaner cost structure and an improved competitive position will strengthen the company's prospects.

BSD Analysis:
Vulcan presents a strong bull case for CarMax based on competitive positioning and operational improvements during a challenging market cycle. The manager emphasizes CarMax's market leadership as the largest used car retailer with significant wholesale and captive finance operations. The investment thesis centers on the company's omnichannel approach providing sustainable competitive advantages in a highly fragmented market against under-resourced independent dealers and struggling digital-only competitors. The manager highlights CarMax's continued digital infrastructure investments improving customer experience across buying, selling, and financing. Critically, the firm views the recent two-year period of balance sheet deleveraging and operational right-sizing as positioning CarMax exceptionally well for volume normalization. The combination of a leaner cost structure with enhanced competitive positioning through digital capabilities should drive stronger profitability and market share gains as industry conditions improve.

Pitch Summary:
Every so often, an external shock creates a rare opening to invest in a high-quality business undergoing a value-unlocking transition, where the predictability of the end game draws us in with conviction. In this instance, a Muddy Waters short report published in January triggered just such an event, sending shares tumbling and sentiment into a tailspin. We entered into a position in the midst of this fallout. FTAI, once a hodgepodge of transportation assets under Fortress Investment Group, has now executed what we believe is one of the sharpest pivots in the industrial landscape. In the span of a couple of years, FTAI shed both its MLP structure and non-core infrastructure, emerging as a pure-play aerospace platform. Management has built the first leg of their platform around the CFM56 engine – the workhorse of global narrow-body aviation – unlocking value by treating the engine not as a monolith, but as a set of interchangeable, high-value modules. By building the largest pool of CFM56 modules and internalizing MRO, we believe FTAI has created a network effect: the more modules it owns, the more efficiently it can service, repair, and exchange engines across the industry. With OEMs looking at close to a decade of backlog, the aftermarket is expected to have a long tailwind. Additionally, the company's $4 billion Strategic Capital Initiative (SCI) is now in place, providing the dry powder to acquire aircraft and engine modules, all run through FTAI's own platform for capital-light, recurring earnings. Early estimates show that FTAI could generate over $250 million in EBITDA per $4 billion in capital deployed through the SCI. With SCI deployment, FTAI is positioned to deliver robust, uncorrelated growth – regardless of the macro backdrop. In fact, the tariff rules, as currently written, do not impact FTAI and MRO activity, as of the second week of April, has continued at the same pace as early in the year. If anything, the recent weeks' tariff actions stand to further complicate the aerospace supply chain, aiding the aftermarket players. Lastly, we are expecting FAA approval for FTAI's third (of five) PMA part in the coming months, which should structurally raise margins. Of course, the market still sees a lessor, and an economically sensitive one at that; we see an emerging aerospace compounder underpinned by a much more stable MRO backdrop, with a capital-light growth vehicle, network effects, and scale that should only deepen as the platform matures. Our kind of set up to be sure.

BSD Analysis:
Crossroads initiated a position in FTAI Aviation following a Muddy Waters short attack that created an attractive entry point. The fund views FTAI as having executed a successful transformation from a diversified transportation asset company to a pure-play aerospace platform focused on CFM56 engine aftermarket services. The investment thesis centers on FTAI's creation of network effects through building the largest pool of CFM56 modules and internalizing MRO operations, positioning the company to benefit from OEM backlogs extending nearly a decade. The $4 billion Strategic Capital Initiative provides significant dry powder for capital-light growth, with management estimating over $250 million in EBITDA generation per $4 billion deployed. The fund believes FTAI is insulated from current tariff uncertainties and may actually benefit from supply chain complications that favor aftermarket players. With FAA approval expected for additional PMA parts, the company should see structural margin improvements while transitioning from a cyclical lessor to a stable aerospace services compounder.

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 presents a compelling bull case for Live Nation based on structural industry tailwinds and the company's dominant market position. The manager highlights that the live entertainment industry has demonstrated consistent high single-digit growth over two decades, with demand persistently exceeding supply. The investment thesis centers on Live Nation's comprehensive service offering across concert promotion, venue operations, ticketing, and artist management, creating a vertically integrated ecosystem. The manager emphasizes a key secular shift where artists now derive 90% of revenue from touring versus traditional album sales, with tours becoming increasingly global and featuring more shows per tour. This structural change benefits Live Nation's scale advantages in pricing optimization and venue organization. The firm expects continued high single-digit growth over their long-term investment horizon, supported by the company's market-leading position and operational synergies across its business segments.

Pitch Summary:
Crown Holdings is the second largest manufacturer of aluminum beverage cans globally. We own its larger competitor, Ball Corp., in our Large Cap portfolio. Our investment case for the two companies is broadly similar. The beverage can industry is a consolidated and rational industry with high barriers to entry. The industry structure, scale, and long-term contracts with inflationary pass-throughs result in solid and stable margins, high returns on capital, and robust free cash flow. In addition, aluminum cans are taking share from other substrates, most notably plastic, as aluminum is considered a more sustainable product. This transition to aluminum is driving volume growth for Crown. Recently, demand for its products has been weak due to current macro factors. We expect growth to normalize over time.

BSD Analysis:
Vulcan Value Partners added Crown Holdings to their Small Cap portfolio, viewing it as an attractive play on the consolidated aluminum beverage can industry with similar characteristics to their existing Ball Corp. position. The manager's thesis emphasizes the industry's rational competitive structure with high barriers to entry, scale advantages, and long-term contracts featuring inflationary pass-throughs that generate stable margins and robust free cash flow. A key secular tailwind is aluminum cans gaining market share from plastic substrates due to sustainability considerations, driving structural volume growth for Crown. While near-term demand has been weak due to macro factors, Vulcan expects growth to normalize over time. The investment reflects confidence in Crown's position as the second-largest global player in a consolidated industry with attractive economics, sustainable competitive advantages, and exposure to the ongoing shift toward more environmentally friendly packaging solutions.

Pitch Summary:
We are pleased to have purchased Starbucks in the first quarter. We have owned the company in the past, and it was a good investment for us. The company has strong brand recognition, global distribution, and outstanding retail real estate. The company generates robust free cash flow and has high returns on invested capital as well as a strong balance sheet. Starbucks has used its financial resources to strengthen its brand and enhance customer loyalty. Additionally, the company has continued to see attractive returns from opening new stores. Stock price volatility over the last year is likely due to management changes, disappointing short-term results, and general hesitancy about consumer spending. We believe that Starbucks' competitive position remains intact, and its value will continue to compound over our five-year plus time horizon.

BSD Analysis:
Vulcan Value Partners re-initiated a position in Starbucks, viewing recent stock price volatility as a compelling entry opportunity for a high-quality business with enduring competitive advantages. The manager's thesis centers on Starbucks' strong brand recognition, global distribution network, and prime retail real estate portfolio that generates robust free cash flow and high returns on invested capital. Despite near-term headwinds from management changes, disappointing short-term results, and consumer spending concerns, Vulcan believes the company's fundamental competitive position remains intact. The firm's confidence stems from Starbucks' continued ability to generate attractive returns from new store openings and its track record of using financial resources to strengthen brand equity and customer loyalty. With a strong balance sheet providing financial flexibility, Vulcan expects the company's intrinsic value to compound over their five-year-plus investment horizon as temporary challenges subside.

Pitch Summary:
CarMax is the largest used car retailer in the United States. The company has the third largest wholesale business in the United States and a large captive finance business. We believe that CarMax's omnichannel approach is a competitive advantage that will enable the company to continue taking market share in a highly fragmented market. This strategy enables the company to generate higher and more stable levels of profit per used vehicle sold and generate solid returns on capital. A significant portion of the used car market is made up of small independent dealerships without resources to invest in digital infrastructure. Another significant portion of the market is made up of digital-only retailers, who are now focused on profitability at the expense of volume. CarMax continues to invest in its digital infrastructure which has improved its customer experience. These investments have made it easier to buy, sell, and finance vehicles. Over the last two years, management has focused on de-leveraging the company's balance sheet and right sizing the firm, which has significantly de-risked the business and positioned CarMax extremely well for when volumes normalize. We believe that the combination of a leaner cost structure and an improved competitive position will strengthen the company's prospects.

BSD Analysis:
Vulcan Value Partners sees CarMax as well-positioned to gain market share in the highly fragmented used car retail market through its omnichannel competitive advantage. The manager's thesis emphasizes CarMax's superior digital infrastructure investments compared to small independent dealers who lack resources for technology upgrades, and digital-only competitors now prioritizing profitability over volume growth. The company's integrated approach combining retail, wholesale, and captive financing generates higher and more stable profit per vehicle while delivering solid returns on capital. Management's recent focus on balance sheet deleveraging and operational right-sizing has significantly de-risked the business model. Vulcan believes the combination of a leaner cost structure, enhanced digital customer experience, and improved competitive positioning creates a compelling setup for when used car volumes normalize. The investment reflects confidence in CarMax's ability to continue taking share in a fragmented market while generating superior unit economics through its differentiated omnichannel platform.

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:
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:
Nilorn designs and delivers tags and labels for European clothing brands. The company combines just-in-time delivery with quality design that can elevate the customer's products in the eyes of the end consumer. Management uses free cash flow to grow the business and pay a dividend. The company's returns on capital are about 30%. Nilorn currently trades at an attractive upside-to-downside ratio.

BSD Analysis:
Curreen Capital holds Nilörn Group as a specialized provider of tags and labels for European clothing brands, operating a high-return business model with exceptional capital efficiency. The company's returns on capital of approximately 30% indicate a highly profitable niche business with strong competitive positioning in the fashion accessories market. The manager values the company's combination of just-in-time delivery capabilities with quality design services that add tangible value to customers' products and enhance end-consumer perception. This value-added approach likely creates customer stickiness and pricing power in what could otherwise be a commoditized business. Management's balanced capital allocation between business growth and dividend payments suggests confidence in the sustainability of cash generation while returning excess capital to shareholders. The focus on European clothing brands provides geographic diversification while serving a large and established market. The attractive upside-to-downside valuation combined with the exceptional returns on capital suggests the market may be undervaluing this specialized, high-margin business. This represents a quality small-cap investment in a niche market with strong fundamentals and shareholder-friendly management.

Pitch Summary:
GetBusy provides online document exchange systems—primarily for accountants. GetBusy spun out of Reckon in August 2017, and has continued to grow since then. GetBusy does not earn money, investing through higher expenses to grow its existing businesses and attempting to launch new products. The underlying businesses are profitable and sustainable in the U.K. and U.S.

BSD Analysis:
Curreen Capital maintains a position in GetBusy, a specialized software provider focused on document exchange systems for accounting professionals. The company spun out from Reckon in August 2017 and has demonstrated consistent growth in its core markets since independence. While the company currently operates at a loss due to strategic investments in growth and new product development, the manager emphasizes that the underlying businesses in both the U.K. and U.S. markets are profitable and sustainable. This suggests the current losses are driven by deliberate reinvestment rather than fundamental business model issues. The company's focus on the accounting vertical provides a defensible niche with recurring revenue characteristics and high switching costs. The manager's confidence in the underlying business profitability indicates belief that current growth investments will eventually translate to overall profitability. This represents a growth investment in a specialized software company with proven market traction that is temporarily sacrificing profitability for market expansion and product development. The spinoff structure may have created an overlooked opportunity in a niche but stable market segment.