Investment Pitches

Pitch Summary:
Phinia was a spin-off from BorgWarner (BWA) and consists of that company's fuel systems and after-market businesses. What attracted me to do further work was the language that management used on their calls. For example, here is what the CEO said on a recent call about executive compensation: "... we are managing the business with a laser focus on generating economic value, or EV, and free cash flow. The 2024 annual cash incentive will be based on the company's achievement of two equally weighted performance metrics; EV and free cash flow. This program sends a clear message throughout our organization that investment decisions are made through the lens of earning an adequate return on capital. Our 2024 long-term equity incentive will be solely based on the company's relative total shareholder returns compared to that of a peer group company." Early in my career I used to think that incentives at public companies primarily serve to drive behavior. While that might still be true to a degree, my experience has led me to believe that they primarily reflect management's values and integrity. In theory the Board is independent and sets incentives. In practice, often-times it's the CEO who chooses how he or she will get compensated with a rubber stamp from the usual compensation consultants and the Board. To have a CEO choose to be compensated on Economic Value Added and free cash flow reflects that this person is thinking about capital allocation in a way that aligns with my views. Since EVA is reduced by the cost of capital used, someone choosing to get paid this way is putting his wallet on the line that he thinks he will deploy shareholders' capital wisely rather than throw it away on exciting but uneconomical acquisitions. Further work led me to realize that half of the company's profits come from the aftermarket business which is much less impacted by the transition from internal combustion engine (ICE) vehicles to EVs. Of the other half, a minority of profits is from commercial vehicles which are much less impacted by the EV transition for the time being. While the fuel systems business is under secular pressure, the industry has consolidated as many suppliers have exited the business. So, it's possible that Phinia can gain some share, albeit in a declining market. Putting all of this together, I think the business is being priced as a declining business whereas I view it as a company capable of low single-digit growth. Furthermore, it was reassuring to hear from multiple sources that the CEO has an excellent reputation in the industry, and that the economics of the aftermarket business are attractive and represent an area where the company can do value-accretive small acquisitions. While anecdotal, having several industry sources provide positive feedback in conjunction with the above positive initial impression of the way that the CEO is thinking supports my favorable initial opinion of the management. Finally, the balance sheet is very safe, with Net Debt/EBITDA below 1x. The company is using its free cash flow to return capital to shareholders, both in the form of dividends and share buybacks. I sourced a portion of the funds to purchase Phinia from cash and the rest via reducing our Garrett Motion (GTX) investment. While I still think that GTX is undervalued, PHIN has a much higher weighting in the better after-market business, has a less levered balance sheet and is less likely to pursue larger deals which GTX might choose to do in the EV-related space. Since both companies are automotive suppliers and are exposed to the secular risk of ICE vehicles declining faster than expected, I wanted to cap the combined position size at 10%, and so I believe that two ~ 5% positions is a good way to do that at these prices.

BSD Analysis:
The manager initiated a new position in Phinia, a BorgWarner spinoff focused on fuel systems and aftermarket automotive parts. The investment thesis centers on management quality, with the CEO's compensation structure tied to Economic Value Added and free cash flow generation, signaling disciplined capital allocation. The manager views the market as overly pessimistic, pricing Phinia as a declining business when it's actually positioned for low single-digit growth. Half of profits derive from the resilient aftermarket business, which is less exposed to the EV transition and offers acquisition opportunities. The remaining exposure to commercial vehicles provides some insulation from passenger car electrification trends. With Net Debt/EBITDA below 1x and active capital returns through dividends and buybacks, the balance sheet provides downside protection. The manager sized this as a 5% position, paired with a reduced Garrett Motion stake to limit automotive supplier exposure to 10% of the portfolio.

Pitch Summary:
The court ruled against the company's key monopolistic protection and it was not disclosed to investors; the company concealed this material information and now it will compete against others;

BSD Analysis:
Insulet develops the Omnipod, a tubeless insulin pump. While adoption continues, the short thesis highlights a stretched valuation given intensifying competition from Medtronic, Tandem, and Dexcom’s integrated systems. Margins face pressure from reimbursement dynamics and heavy R&D spending required to maintain differentiation. International expansion adds execution risk, with regulators scrutinizing device safety and pricing. The stock trades at a premium that leaves little room for missteps.

Pitch Summary:
Alphabet is the holding company for Google, one of the preeminent businesses in the world, as well as a collection of other, smaller companies, such as Access (broadband internet), Calico (life sciences), Verily (life sciences), and Waymo (autonomous vehicles), among others. Google has numerous core products that are used on a regular basis by more than a billion users around the world, including Google Search, Android, Chrome, Gmail, Google Maps, Google Play Store, Google Photos and YouTube. Google accounts for more than 99% of Alphabet's revenue and profits. Google experienced a binge of growth in the immediate aftermath of the pandemic due to abrupt and favorable changes in user behaviors. Its revenue growth accelerated from 17.9% for fiscal 2019 to a peak of 62.4% for the second quarter of 2021 and 41.3% for all of 2021. Profits exploded as well. For fiscal 2021, Google's operating income grew a whopping 81.1%. Then came the inevitable hangover. User behaviors began to revert back toward pre-pandemic norms just as Google started to lap its pandemic-juiced results. From the second quarter of 2021 through the fourth quarter of 2022, Google's year-over-year revenue growth steadily slowed from 62.4% to just 0.3%. At the same time, Google's expense budgets and hiring plans were based on the flawed premise that the abnormally strong revenue trends it experienced in late 2020 and early 2021 were sustainable. The combination of flagging revenue growth and ballooning costs dealt a blow to profits and cash flow. Google's operating income declined roughly 20% year-over-year for the second half of 2022. That is a relatively modest setback in the grand scheme of things, but it was far from Google's usual form. Since late 2022, Google has been hard at work to shake off its hangover and regain its stride. The fruits of those efforts are abundantly clear in Google's results for the first quarter of 2024. After hitting a nadir of 0.3% in the fourth quarter of 2022, Google's year-over-year revenue growth accelerated for five straight quarters, reaching 15.2% in the first quarter of 2024. Most of that improvement came from Google's core services businesses, such as Google Search and YouTube. Google's efforts to "durably reengineer [its] cost base" in the words of its Chief Financial Officer, Ruth Porat, are bearing fruit as well. Notwithstanding the healthy revenue increase for the first quarter of 2024, total Alphabet headcount was down roughly 5.2% year-over-year to 180,895. The combination of strong revenue growth and cost reductions drove adjusted operating income for the Google segment up 31.3% year-over-year in the first quarter of 2024. Google's pandemic hangover is unequivocally a thing of the past. One of the first lines in Alphabet's press release announcing its results for the first quarter of 2024 was the following quote from CEO Sundar Pichai: "Our leadership in AI research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation." For those familiar with Google's business, that quote provides a succinct yet poignant case for Google being one of the main beneficiaries of innovation in artificial intelligence over the coming years and decades. While advances in AI come with some risks to Google's business, those risks are far outweighed by the opportunities and Google's inherent advantages in realizing those opportunities. Through the end of April, our position in GOOG has delivered a 21.1% internal rate of return over our nearly seven year holding period. That is well above Hinde Group's 15% investment hurdle rate. Notwithstanding the strong returns our investment in GOOG has already delivered, prospective returns continue to be bright.

BSD Analysis:
Hinde Group presents a compelling bull case for Alphabet, emphasizing the company's successful recovery from pandemic-induced volatility and positioning for AI leadership. The manager highlights Google's dominant market position with over a billion users across core products and its 99% contribution to Alphabet's revenue and profits. The investment thesis centers on operational efficiency improvements, with headcount reduced 5.2% year-over-year while revenue growth accelerated to 15.2% in Q1 2024, driving 31.3% operating income growth. The fund views Google's AI capabilities and infrastructure as key competitive advantages for capturing future innovation waves. With a 21.1% IRR over nearly seven years, the position has significantly exceeded the fund's 15% hurdle rate. The manager expresses confidence in continued strong performance, viewing the pandemic hangover as definitively resolved. The combination of cost discipline, revenue acceleration, and AI positioning supports the bullish outlook for sustained value creation.

Pitch Summary:
Taiwan Semiconductor Manufacturing Company (TSM US, 2330 TT) We remain optimistic about the company's long-term prospects and envision ourselves holding shares for an extended period. As we've previously discussed, we believe the company's two key competitive advantages - consistently manufacturing cutting-edge semiconductor chips while offering highly competitive pricing - will drive robust profits for years to come. These advantages position the company for sustained success, and we're confident in its ability to maintain its leadership in the industry. The past two years have seen the company coming off a difficult semi-con downcycle period, as the industry worked off the excess inventories manufactured during the Covid-19 years. We believe TSMC is now in a good position to experience a combination of both cyclical recovery and structural growth in an increasingly high computing era. We view the company as the “Toll Road” of the semi-con industry, particularly for Artificial Intelligence (AI) computing. This perspective is succinctly captured by TSMC's CEO, Mr. C.C. Wei, when he was asked by an analyst during a result briefing, 'Which company will win the AI race?' He answered, “No matter who wins, most of them are already all our customers.” In 2024, TSMC anticipates that revenue from AI-related revenue will comprise a modest percentage of their overall earnings, falling in the low-teens range. However, their projections for the subsequent five years paint a more dynamic picture, with an anticipated CAGR of 50%. This trajectory points towards AI-related revenue contributing to over 20% of TSMC's total revenue by 2028. Such growth is underpinned by substantial capital investments, notably from tech giants like Microsoft, Google, Meta, and Amazon. These companies are intensifying their efforts to design and produce bespoke AI processors, tailored to meet their burgeoning computational demands. TSMC, boasting a dominant 90% share in manufacturing leading-edge nodes, stands poised to capitalize significantly as the preferred and reliable manufacturing partner for these hyperscalers. We are closely monitoring Intel's efforts to reenter the foundry market, an area of concern for some. From a manufacturing expertise perspective, we believe it's unlikely that Intel can challenge TSMC's current dominance. The capital expenditure requirements to sustain R&D and manufacturing leadership are enormous (TSMC will spend approximately US$30B in capex this year, twice Intel's projected EBITDA). Furthermore, Intel's internal systems and manufacturing processes, shaped by its narrow product focus over the past few decades, are not well-suited for the foundry business. In contrast, TSMC has been a pure-play foundry since its inception in 1987, serving external clients and their diverse products. This has enabled TSMC to assemble over 70,000 design systems related IP solutions in its Open Innovation Platform. This provides a vast library of knowledge, offering a comprehensive design technology infrastructure, that streamlines chip design, reduces barriers, and increases first-time silicon success rates for its partners. This capability is a significant advantage that Intel currently lacks, and catching up will likely require substantial time and effort. Nonetheless, we will continue to closely monitor Intel's progress, as well as Samsung's developments, in this area.

BSD Analysis:
TSMC enters 2026 with an unprecedented revenue growth forecast of nearly thirty percent, fueled by insatiable global demand for advanced AI and high-performance computing chips. As the sole manufacturer of the world’s most sophisticated logic chips for Apple and NVIDIA, the company holds a near-monopoly position at the leading edge of the 2-nanometer and 3-nanometer nodes. Management’s revised long-term guidance points to a 25 percent compound annual growth rate through 2029, a remarkable feat for a company of its massive scale. Despite geopolitical tensions, TSMC’s expansion of manufacturing capacity in the United States and Japan is diversifying its operational risk and securing its role in the global supply chain. Trading at a discount to many of its big tech customers, the stock remains one of the most compelling value propositions in the technology sector.

Pitch Summary:
CEO's degree claims are misleading; the company's executives and directors are associated with financial scandals; false claims that the company is expanding its physical stores; up to 50% downside;

BSD Analysis:
Boot Barn specializes in western and workwear apparel. Bears argue the company is overextending store growth in a niche category that may not support national scale. Same-store sales have slowed, suggesting demand saturation in core regions. Gross margins are vulnerable to discounting, while inventory expansion raises working capital risk. In a discretionary downturn, expansion plans could amplify downside.

Pitch Summary:
Hindenburg's Nate tweeted: We’ve had a flood of 15+ inbounds in the past week asking us to look at potential accounting fraud at $CVNA. More than I've ever seen in so short a span of time, many that describe granular red flags.

BSD Analysis:
Carvana operates an online used car marketplace with a capital-intensive logistics network. The short case emphasizes extremely high leverage, reliance on securitizing subprime loans, and exposure to volatile used car pricing. Operational improvements have reduced losses, but the company remains highly dependent on favorable credit conditions. A downturn in auto credit markets or consumer demand could rapidly destabilize liquidity, making equity value fragile.

Pitch Summary:
Blue Label Telecoms (BLU) continues its path of self-healing. BLU announced that it received approval from the Competition Commission to take control of Cell C. This is a subtle but essential development to unlock shareholder value. The remaining impediment is the telecoms regulator. Despite BLU trading at single-digit multiples of its core business earnings, investor interest has been subdued. A significant reason for this hesitancy is the complexity associated with Cell C—an overhang that has muddled BLU's financials and made the business difficult for investors to understand. For many, this places BLU in the 'too hard' pile, leading to its neglect. Gaining "control" of Cell C should simplify matters considerably. Once Cell C is consolidated into BLU's accounts, the financial statements will become less complex and feature a manageable external debt balance. The transformation under the new management at Cell C cannot be understated. They have shifted the business from a seemingly hopeless situation to one where merely achieving a break-even point would be sufficient for BLU to prosper. Additionally, Cell C's management has renegotiated their roaming agreement with MTN on very favourable terms, reducing cash burn and positioning Cell C for growth as a wholesaler of mobile communications. The consolidated external debt position is the last remaining piece of the puzzle that must fall into place. During the Cell C recapitalisation, lenders leveraged BLU's robust core business as credit enhancement to offset their risk. This strategy, while necessary, imposed a substantial debt load on BLU, a point that continues to be a significant concern in the market. However, what seems underappreciated by the market is the expected repayment of this debt by the third quarter of this year. This repayment milestone is crucial as it would improve BLU's balance sheet and restore management's capacity to undertake shareholder-friendly actions, such as share buybacks or dividend distributions. Assuming Cell C reaches a point where it no longer has a negative operating cash flow, BLU stands to generate significant excess free cash flow (FCF). Given the current stock valuation multiples, BLU could aggressively repurchase shares, potentially reducing its share count by a substantial margin within 3-4 years. This scenario would demonstrate a solid financial turnaround and enhance future profitability, making BLU an increasingly attractive investment for current and potential new investors. Such an event could recalibrate market perceptions and spotlight BLU as a compelling comeback story in the telecom sector.

BSD Analysis:
SaltLight Capital presents Blue Label Telecoms as a compelling turnaround story centered on gaining control of Cell C and simplifying the business structure. The manager identifies BLU as trading at single-digit multiples due to investor confusion over Cell C's complex financials, creating a 'too hard pile' situation. The key catalyst is regulatory approval to consolidate Cell C, which would simplify financial statements and unlock value. Cell C's transformation under new management has been remarkable, moving from a hopeless situation to near break-even, with favorable MTN roaming agreements positioning it for growth as a mobile wholesaler. The critical inflection point is the expected Q3 debt repayment, which would restore BLU's financial flexibility for shareholder returns. Once Cell C achieves positive operating cash flow, BLU could generate substantial excess free cash flow and aggressively repurchase shares, potentially reducing share count significantly over 3-4 years. This represents a classic 'self-healing' investment where operational improvements and capital allocation could drive substantial returns as market perceptions recalibrate.

Pitch Summary:
Transaction Capital (TCP) completed its spin-off of WeBuyCars (WBC) during the quarter – an event we've written about many times. We've previously expressed our belief that WBC has ample room to grow over the next few years. The market often misunderstands the dynamics of "aggregators" and, as a result, underestimates WBC's potential value. Through economies of scale, aggregators tend to capture significant portions of the "industry pools of profit." Our research of other aggregators across various industries bolsters our confidence in maintaining our position in WBC. The forthcoming year presents a particularly intriguing opportunity with the remaining TCP 'rump', which includes Nutun and the troubled SA Taxi. In our fourth-quarter 2023 letter, we posed a critical question post-unbundling: "What becomes of the remaining TCP business? Lenders no longer have leverage over the holding company through HoldCo debt cross-default clauses. Theoretically, if SA Taxi lenders choose not to support debt-rollover relief, TCP could simply put SA Taxi into business rescue in an orderly process rather than the voluntary workout process they're following at the date of writing. We'll know in two months how things will look post-unbundling." We hypothesised that a contingent of investors (retail and wealth managers) would likely want to own the 'clean' and 'exhilarating' WeBuyCars business over TCP's complex, troubled remains (likely to avoid the complications of explaining a potential credit event to their clients). True to expectations, we observed a rapid sell-off of TCP shares post-spin-off. This is a classic spin-off special situation, so we increased our holdings. Over the years, engaging in such spin-off opportunities has yielded excellent, non-correlated returns for us. While the timing of these developments can vary, often taking 6-12 months to unfold, each situation is unique. The next significant catalyst will be clarity around the SA Taxi debt situation.

BSD Analysis:
SaltLight Capital identifies Transaction Capital as a classic spin-off special situation following the separation of WeBuyCars. The manager's thesis centers on the market's preference for the 'clean' WeBuyCars business over TCP's remaining complex operations, creating a temporary valuation disconnect. The remaining TCP entity includes Nutun (unsecured lending) and the troubled SA Taxi division, with the key catalyst being resolution of SA Taxi's debt situation. The manager notes that post-spin-off, lenders no longer have cross-default leverage over the holding company, providing TCP with more flexibility in handling SA Taxi's issues, including potential business rescue proceedings. This structural change removes a significant overhang that previously constrained the holding company. SaltLight has increased their position following the predictable post-spin-off sell-off, viewing this as a non-correlated opportunity with 6-12 month catalysts. The investment relies on the manager's successful track record in spin-off situations and the eventual clarity around SA Taxi's debt resolution.

Pitch Summary:
During the quarter, we reinvested back in Tencent (and proxy Prosus) primarily because we're observing another pattern from our playbook that we cited in our last letter: the idea that advertising is a helpful 'switch' that can be 'turned on' to enhance margins when they're required. Tencent's WeChat is used daily by 1 billion people in China. Still, Tencent has historically under-monetised the advertising potential of its vast social network, relying on in-game purchases and fintech take rates. Then came TikTok (Douyin in China), where engagement was determined not by what your friends were doing but through an omnipotent algorithm delivering personalised short-form video content. Social network effects became less relevant, and eyeballs moved elsewhere. Seeing this as a competitive threat, Tencent launched its own short-form video—much as Meta had done through Reels. Similarly to Facebook and Instagram, with Tencent's daily ubiquity and existing network effects, video took off rapidly as a complement to engagement time. Once they reached a sufficient scale, management started monetising the content. Our thesis is that AI is likely to enhance the opportunity by 1) improving video engagement through surfacing more personal content to users (providing more monetisable ad inventory) and 2) improving ad targeting (more relevant ads that lead to higher click-through rates) in the same way it has benefited AppLovin and Meta Platforms. Independent of AI. If Tencent gets these elements right, each is combinatorial to growing profitability, but AI is a force multiplier. Despite this positive backdrop, Tencent's promising narrative is somewhat overshadowed by broader negative sentiment towards Chinese investments, which has pressed Tencent's valuation multiples to historically low levels. In this environment, Tencent is compelled to self-heal. In response, Tencent is deploying its increasing profitability by returning capital to shareholders by boosting dividends by 42% and doubling its share repurchases over the coming year. There is a financial link to its shareholder Prosus here. In the past, Tencent's repurchases had little impact on their share price and were primarily a mechanism to 'sterilise' share sales from Prosus in its own value unlock programme. We think there is a good chance that Prosus will also step up its own repurchases. To give some sense of the scale of the repurchases, Prosus' market cap is $75bn, and Tencent has announced $12bn in repurchases over the next year. You'll notice that our thesis does not rely on Chinese macroeconomic conditions. We think a combination of 'self-healing' and low valuations should generate a favourable return for us.

BSD Analysis:
SaltLight Capital presents a compelling bull case for Tencent centered on the company's ability to monetize its massive WeChat user base through advertising. The manager identifies Tencent's historical under-monetization of its 1 billion daily WeChat users as a significant opportunity, particularly as the company launches short-form video content to compete with TikTok. The thesis hinges on AI-driven improvements in both content engagement and ad targeting, which could create a multiplicative effect on profitability. At current ad loads of only 3% compared to Western counterparts at ~10%, there's substantial room for revenue expansion. The investment benefits from Tencent's 'self-healing' approach through aggressive capital returns - a 42% dividend increase and doubled share repurchases totaling $12 billion annually. With Tencent trading at historically low valuations due to broader Chinese market sentiment, the manager sees an asymmetric opportunity where fundamental improvements in monetization could drive significant returns independent of macroeconomic conditions.

Pitch Summary:
Over the past nine months we have been able to build up a decent size position in ENDI Corp (ENDI) at around $4 per share, or two times earnings net of cash. It has since climbed to above $6.50 per share. ENDI Corp, formerly known as Enterprise Diversified and prior to that Sitestar, has been quite a ride for long-term shareholders. Eight years ago, the company was taken over by private investor Jeff Moore and Steven Kiel of Arquitos Capital. The company invested into Alluvial Fund, managed by Dave Waters. Then the wheels came off. An investment into an Arizona HVAC company failed miserably. The real estate investment, Mt. Melrose, grew too quickly and spent capital buying more homes than they could rehab and market in a reasonable amount of time, and was eventually sold. Then the Alluvial investment, the only major part of the business performing well, grew too big and triggered Investment Co. Act of 1940 regulatory issues. Management decided to fully redeem the investment and by late 2021 ENDI was left with a pile of cash, a small yet profitable internet dial up business, Sitestar, and Willow Oak Asset Management which had small revenue shares from a few small hedge funds along with offering administrative and compliance services to a handful of funds. In late December 2021 they announced a merger with CrossingBridge Advisors and Cohanzick Management, an investment advisory firm led by David Sherman that focused on mutual funds with shorter term debt instruments. Prior to starting Cohanzick and CrossingBridge, Mr. Sherman was a senior executive and Treasurer of insurance operations at Leucadia. The deal closed in August 2022. The end result was a "new company" and new management albeit with the same ticker – ENDI (note: older SEC filings are under Sitestar while newer ones are under ENDI Corp.). As part of the deal, CrossingBridge contributed some of its advisory agreements in exchange for shares valued at $8 per share, leaving the new entity with a large amount of cash and a profitable asset management business. The costs of closing the deal hurt results in 2022 yet they still reported $0.66 in EPS. In 2023 ENDI reported EPS of $0.46 per share. The share price was languishing around $4 per share. You might think things were trending in the wrong direction. Not at all! In fact, a number of positive events occurred in 2023 and even more in early 2024. On May 12, 2023, the company closed on agreement to acquire RiverPark Strategic Income Fund, which was sub-advised by David Sherman and Cohanzick. Essentially ENDI would own the full revenue stream from the advisory fees and pay RiverPark up to 50% of the revenue for the next three years and then 20% of revenue in years four and five. On October 23, 2023, ENDI launched a UCITS fund, the CrossingBridge Low Duration High Income Fund. The fund is similar to its US Low Duration High Income Fund but is intended for investors outside North America. The fund had reached $59 million in assets under management (AUM) by December 31, 2023, and over $80 million by March 31, 2024. According to the April 19, 2024, conference call this was accomplished without a seeder, and they are yet to target large family offices. On January 12, 2024, the company filed Form 15 to deregister with the SEC. This should reduce professional fees. On March 9, 2024, Crossing Bridge replaced Cohanzick as sub advisor to the RiverPark Short Term High Yield Fund as part of a deal for ENDI to acquire all remaining assets of Cohanzick for a $10 million note yielding 8%. This increased AUM by roughly $800 million. ENDI has 5.47 million shares outstanding. A current price of roughly $6.50 per share, for a $36 million market cap. Insiders own about 53%. What we felt the market was missing was that the company was no longer what it was, and more importantly it significantly increased earnings power based on the recent growth in AUM. Assets under management are currently $2.9 billion versus $1.8 billion at the end of 2023 and $1.5 billion at the end of 2022. Due to the March acquisition, true earnings power will not be reflected until the June quarter, but we estimate 2024 earnings at $0.86 per share. What made ENDI even more attractive was that they had cash and investments of $16.7 million, or $3.06 per share, as of the end of 2023. The most recent deal added $10 million of debt so net cash has subsequently decreased to $1.25 per share, but cash should build faster than earnings due to ENDI not being a full tax payer. We estimate March 2024 cash and investments at nearly $1.50 per share. At $6.50 per share ENDI is trading at just six times earnings net of cash. We think shares of ENDI are worth eight to ten times current earnings plus net cash, or $8.35 to $10 per share today with that value growing $0.25 per share every quarter. Thus, by the end of the year we see fair value being $9.75 to $11.50 per share based on slightly higher earnings run rate and an estimated cash balance of $2.30 per share. Unfortunately, due to ENDI's small size, it will be a smaller position for the fund, but big enough to be meaningful. We should note the stock has not had much liquidity the last month or so.

BSD Analysis:
The manager presents a compelling turnaround story for ENDI Corp, an asset management company that has transformed from a troubled conglomerate into a focused financial services business. The investment thesis centers on the company's dramatic AUM growth from $1.5 billion to $2.9 billion through strategic acquisitions, particularly the March 2024 Cohanzick deal that added $800 million in AUM. At 6x earnings net of cash, the valuation appears attractive for an asset manager with growing fee income streams. The manager's $8.35-$10 target price implies 8-10x earnings plus net cash, which seems reasonable for a profitable asset manager. Key catalysts include continued AUM growth, cost synergies from acquisitions, and the company's tax-advantaged structure that should accelerate cash generation. However, liquidity concerns and the company's complex corporate history present risks. The 53% insider ownership provides alignment but may limit trading liquidity for institutional investors.

Pitch Summary:
One position in the portfolio we have not discussed much in our earlier letters to investors is our 6% investment in OCI, which we started in April 2023. Despite important catalysts, the stock is currently trading at our entry price. On a total return basis, we are up 16.1% in the position due to regular and special dividends paid out last year. We expect to receive another significant special dividend this year, as outlined below. For those unfamiliar with the company, OCI is a European-listed, global fertilizer business focused on the "3 F's" of fuel, food, and feedstock. This company is essential to food supply chains and owns a strategically valuable, global asset base that would be difficult to replicate. The firm is the world's largest exporter of nitrogen fertilizer products and the only major producer with international production, distribution, and storage capacity in the US, Europe, and the MENA regions. The firm is a "family business," now helmed by the second generation of the Egyptian Sawiris family. Our initial interest in the business started in 2022. At the time, we were reviewing the fertilizer industry for potentially interesting short opportunities, as fertilizer prices were trading at what we judged to be cyclical peaks. While we did not find any short opportunities we liked, our sum-of-parts analysis suggested that OCI could be worth €50 per share vs. its 2022 peak of ~€43 per share with a downside of €20 per share. We judged the valuation discount insufficient to justify an investment at the time but enough to put it on a watch list. By March/April 2023, the stock had fallen by roughly 50% relative to its 2022 high due to a nearly 80% collapse in Middle Eastern ammonia prices (the core nitrogen fertilizer medium relevant to OCI). With that price fall, we accumulated a 6% position. We were rewarded in December of last year with the announcement from OCI that it was making two significant asset sales as part of a strategic review prompted by activist investor Jeff Ubben's 2022 prodding: The first announcement was the firm's $3.6 billion sale of its controlling interest in Fertiglobal PLC, the Abu Dhabi-based fertilizer venture with the Abu Dhabi National Oil Company (ADNOC). The second announcement was the sale of the firm's 100%-owned Iowa Fertilizer Company, OCI's US nitrogen fertilizer business, to Koch Ag and Energy Solutions for $3.6 billion. In December of last year, the firm announced asset sales, net of debt, of $6.2 billion, or roughly the firm's market capitalization at the end of 2023. The firm has traded down in 2024 and is currently sitting at a discount of ~6% to the cash we expect the business to receive at some point this year for the assets it has sold. Management has noted that they expect to return "a substantial amount of capital to shareholders…in a very tax efficient manner." Why the stock is now trading below the cash value of the two deals, especially given the remaining assets the firm owns and management's good track record of creating value, is a mystery. If management had a history of destroying shareholder value, we could understand; after all, many management teams have bungled the capital allocation job when confronted with a large pile of cash, but this is not the case with OCI. Furthermore, the business has other assets, specifically its European Nitrogen business, Methanol operations, and a currently under-construction ammonia plant in Texas, expected to be up and running in 2025. Finally, as Management noted in the FY2023 call in February, they intend a 2024 capital return of about ~€12 per share. Management also outlined on the same call that, in addition to the $3 billion capital return, they intend to use proceeds from the asset sales to pay down debt (~$2 billion) and fully finance the remaining CapEx on the firm Texas facility (~$500 million). This leaves the firm with a net cash position of $700 million at the end of 2024 if everything runs smoothly. According to management, the firm's post-transaction assets generate roughly $500 million in mid-cycle EBITDA, and the Texas ammonia facility is expected to generate mid-cycle EBITDA of $100 to $200 million. Assuming the business trades at a 5-year historical EV/EBITDA of 6x and generates $600 million in EBITDA in 2026, the post-transaction equity stub is worth roughly €18 per share. Put another way, assuming a hard cash return of €12 in 2024, the market is pricing the ongoing business at ~€13 per share, a 38% discount to our estimate of the value of the remaining assets. Although we do not believe there is strong evidence to support the idea that public markets will value the equity stub at the current 8x EV/EBITDA multiple the firm is trading for, management did sell the Iowa operations to Koch Industries at an 8x EV/EBITDA multiple. Assuming an 8x multiple, the post-transaction business is worth €23 per share. At a 3x multiple, the five-year low, the post-transaction business is worth €11 per share, implying a ~8% downside from the current share price after netting out the expected ~€12 per share capital return. Although this investment has become complicated, and we are unconvinced a breakup was the route to the highest investor returns, we are satisfied with how this investment is unfolding. If the firm price falls by €12 on the day of the abnormally large capital return, we will have a mark-to-market loss on the core equity position of 48%. However, we will also have received 65% of our original investment back in cash. If the remaining equity position rerates to between €18 and €23, we will still have a mark-to-market loss but a total return inclusive of dividends/capital returns of between 37% and 57%—a potentially tidy little investment and an interesting tax situation for us to consider.

BSD Analysis:
Massif Capital presents a compelling value opportunity in OCI, a global fertilizer producer trading at a significant discount to its asset value following major divestitures. The manager initiated the position in April 2023 after the stock fell 50% from its 2022 highs due to collapsing ammonia prices, creating an attractive entry point. OCI announced $6.2 billion in asset sales (roughly equal to its market cap) including its Abu Dhabi fertilizer venture and Iowa operations, with management committing to return approximately €12 per share to shareholders in 2024. The stock currently trades at a 6% discount to the expected cash proceeds alone, ignoring the value of remaining assets including European nitrogen operations, methanol business, and a new Texas ammonia facility. Using conservative 6x EV/EBITDA multiples on the remaining $600 million EBITDA business, the equity stub appears worth €18 per share, representing a 38% discount to current pricing. Even in a downside scenario using 3x multiples, total returns including the €12 capital return could range from 37-57%, making this an asymmetric risk-reward proposition with limited downside protection.

Pitch Summary:
AGNC is an internally managed REIT focused on the agency RMBS sector. As the best of breed RMBS REIT, AGNC trades at a discount to tangible book value and offers a mid-teens dividend yield. With MBS spreads at a 3+ standard deviation from the mean, investors in AGNC will benefit from a normalization of mortgage credit spreads. While we wait for agency mortgage spreads to normalize, Appleseed Fund clips a ~1.3% dividend each month.

BSD Analysis:
Appleseed Fund views AGNC as the premier agency RMBS REIT, trading at an attractive discount to tangible book value while offering compelling income generation through mid-teens dividend yields. The investment thesis centers on mean reversion of mortgage-backed securities spreads, which are currently trading at extreme levels more than three standard deviations from historical norms. This statistical anomaly suggests significant upside potential as spreads normalize to historical averages. The fund benefits from immediate income generation through monthly dividends of approximately 1.3%, providing attractive carry while waiting for the normalization catalyst. AGNC's focus on agency RMBS provides government backing and reduced credit risk compared to non-agency alternatives. The internally managed structure eliminates external management fees, improving cost efficiency and shareholder alignment. This position reflects Appleseed's strategy of capturing dislocated opportunities in fixed income markets while generating substantial current income.

Pitch Summary:
Humana is one of several U.S. large managed care organizations and is primarily focused on government health insurance. Humana's share price has fallen over 40.0% from post-COVID highs due to the recent emergence of elevated medical loss ratios. In our view, Humana's stock has been severely punished and the stock was quite attractive at the time when Appleseed Fund took a position.

BSD Analysis:
Appleseed Fund initiated a position in Humana following a significant 40% decline from post-COVID highs, viewing the selloff as creating an attractive entry point. The fund managers believe the market has overreacted to elevated medical loss ratios, which represent temporary headwinds rather than structural issues. As one of the largest managed care organizations focused on government health insurance, Humana benefits from demographic tailwinds including an aging population and Medicare Advantage growth. The company's established market position and government contract relationships provide defensive characteristics during economic uncertainty. However, the investment thesis relies on medical cost normalization and margin recovery, which may take time to materialize. The fund's contrarian approach suggests confidence in Humana's ability to navigate current challenges and return to historical profitability levels. This value-oriented investment aligns with Appleseed's defensive positioning strategy.

Pitch Summary:
For readers in the habit of using quantitative screens to identify investment ideas, NN will likely cause you to turn the other cheek. At first glance, this business does not look pretty. Under the hood, there is a lot to like. The fact patterns here along with management efforts are very similar to our investment in Bel Fuse. Like Bel Fuse, NNBR possesses strong technical expertise, a large manufacturing footprint, and long-dated customer relationships. Also, like Bel Fuse, NN was historically mismanaged, which shows up in the areas of pricing, manufacturing overhead and new business wins. NN, Inc. is a precision parts manufacturer that specializes in the development of plastic and metal components for various end markets. The company operates through two segments, Mobile Solutions and Power Solutions. Mobile Solutions manufactures parts primarily for the automotive market in power steering, braking, and fuel systems, while Power Solutions makes parts for general industrial, electronics, and medical markets. Specifically, NNBR manufactures parts that help other machinery spin, turn, and rotate. This other machinery is made up of everything from power steering systems to surgical devices to aerospace components. The company has a history dating back to the 1980's as a manufacturer of metal balls and rollers for the oil and gas industry, and today their precision capabilities and blue-chip customer base means they manufacture a wide variety of SKUs leading to a stable base of $500mm in revenues. The performance and durability required of NNBR's parts means that they have a high cost of failure, making them critical components despite their low cost to end customers. This has led to long-standing relationships with their customers, along with many of these components being sole source, making NNBR's competitive position quite strong. This helps partially explain how, despite NN losing its way recently, the customer base has held up well, despite a history of poor acquisitions, too much leverage and an incredibly weak culture. Thankfully, our involvement is recent, following multiple positive changes that the market has yet to price in, despite the 'why now' part of the investment thesis being more evident today than at any point in the past few years. As management continues to execute, I believe NNBR is rapidly approaching a more normalized cash flow profile that will reveal the future is going to be much different than the past. As you've likely seen with good businesses that besmirch their public market reputation, the prior management team took on significant leverage to make a string of bad acquisitions that didn't contribute meaningfully to profitability nor provide any cost savings or manufacturing synergies. Companies can sometimes hide behind bad deals, but when COVID hit, NN was forced to take drastic action in the form of unfavorable capital raises along with the sale of one of their other business segments in order to pay down debt. Today is a new day at NN as there is an incredibly high-quality management team and Board in place, spearheaded by two activist funds, also the largest shareholders of the business. Current CEO Harold Bevis is an industry veteran who has been there, done that in previous roles, having spent the last twelve years at two different public companies, Xerium (XRM) and Commercial Vehicle Group (CVGI), both of which left shareholders much better off than before he arrived. In line with my comments above about people and incentives, Harold recruited some old team members to join him at NN, where each have the opportunity to earn many multiples of their base salaries if successful. In fact, Harold dumped his prior role at CVGI to take the CEO job at NN, which should bode well for us as one source described Harold as someone who will 'run you right over' if you get in his way. Since their hiring, management has laid out several key strategic pillars on which they will focus and have already made remarkable progress in a short period of time. These pillars include strengthening the leadership team, addressing unprofitable business, expanding margins, delivering consistent free cash flow, and increasing new business wins. While that sounds like a tall order, most of these initiatives only require adopting common sense operational tactics. Importantly, there is valuation upside even before new business wins take place or top line growth resumes. In other words, there is plenty of low-hanging fruit to lower costs and expand margins, the bulk of which is being undertaken as I write this letter. Some of these items include addressing unprofitable business, implementing better pricing practices, and instituting a more centralized system to purchase raw materials. If I am correct about the cost improvements for each one of these items, the permanent flow through to EBITDA would be tremendous. While there is execution risk, and NNBR is still a show me story, I'm confident that in the near-term that management's efforts will start to show up in the company's financials and reveal NNBR to have much greater earnings power than is currently being demonstrated. Management has guided to $47-55mm of EBITDA for FY24, and there is likely a significant amount of upside to that figure as early as this year. Then, as new business wins contribute to improved top line growth, operating leverage should also kick in, presenting the opportunity for increased free cash flow conversion over time. This should help change the perception of NNBR, which will be very powerful for our returns.

BSD Analysis:
Greystone identifies NN, Inc. as a classic turnaround opportunity where new management is addressing years of operational mismanagement at a precision parts manufacturer. The investment thesis hinges on CEO Harold Bevis's proven track record of value creation at Xerium and Commercial Vehicle Group, combined with activist fund backing and aligned incentive structures. Despite poor historical performance due to bad acquisitions and excessive leverage, the company maintains strong competitive positioning through mission-critical components, sole-source relationships, and high switching costs across automotive, medical, and industrial end markets. Management's strategic pillars focus on operational improvements including better pricing practices, centralized procurement, and elimination of unprofitable business segments. With $500mm in stable revenues and management guidance of $47-55mm EBITDA for FY24, the company trades at attractive valuations before considering potential upside from operational leverage and new business wins. The investment offers significant earnings power normalization as cost structure improvements flow through to EBITDA, supported by a defensible market position in precision manufacturing.

Pitch Summary:
Innovative Food Holdings is a specialty food distributor with a niche service offering and a history of strong organic growth. The company distributes over 7,000 perishable and specialty food and food related products, with expertise in selection, sourcing, and logistics. The business was founded and run for nearly twenty years by the former CEO who was both overpaid and had a history of chasing pet projects to the company's detriment. Despite following IVFH for years and liking the core business, the company was un-investable under the prior management team. That is no longer the case. With a highly competent and experienced management team now in place, along with an aligned and incentivized Board, shareholders finally own a food distribution business that will focus on its core customer and has the opportunity for revenue growth and margin expansion. However, as the result of questionable strategic decisions, the past few years of financials reveal a business that is under-earning, with true earnings power being masked by an unnecessarily high-cost structure due to an unprofitable e-commerce segment that is in the process of being wound down. Innovative Foods has three core offerings: a direct-to-chef specialty food service platform, an asset-light drop shipping distribution business where IVFH partners with broadline distributors such as US Foods to drop ship directly to end customers, and a specialty food distribution business that serves professional chefs in the Chicago area through their subsidiary, Artisan Foods. Food distributed by IVFH ranges from familiar to completely esoteric, where they've carved out a niche for themselves due to their relationships with hundreds of small food producers, including small farms, boats, and ranches. Specialty food distributors, and IVFH in particular, serve a critical need in the food distribution ecosystem by providing an important add-on offering for broadline food distributors, sourcing quality in-demand fresh foods for professional chefs, and providing capabilities for broadline distributors to plug IVFH's offerings directly into their ordering and billing systems. Companies like IVFH and other regional specialty food distributors have often been ignored by competition given the difficulty in building out these capabilities, as it doesn't make sense from a cost or profitability standpoint for a US Foods or United Natural Foods to develop a specialty offering. As a result of this niche along with higher priced specialty items, IVFH has historically posted strong organic growth figures along with gross margins well in excess of broadline distributors. Given the asset lite nature of this business along with good incremental margins, the cash flow profile for food distribution is also strong. Unfortunately, despite the profitable food distribution business growing 20% per year from 2015 until 2020, prior management started spending more time on a direct-to-consumer e-commerce offering that was low margin and expensive to scale. This dragged down the profitability of the entire business due to elevated customer acquisition costs and bloated SG&A. Following years of disappointment and a business under-earning on its potential, members of the Board were successful in replacing the former CEO with new CEO Bill Bennett, an industry veteran who spent time with both Wal-Mart and more recently Kroger, where he oversaw their $10 billion e-commerce business. Once at IVFH, Bill's first tasks were to prioritize cash flow and reduce costs, by examining every single dollar that went out the door, including what IVFH pays to landscape the small patch of grass outside of headquarters. This is my kind of CEO. As you'll see with NN Inc., it's remarkable what Bill and the team have achieved since their hiring, winding down unprofitable e-commerce operations, divesting non-core assets, reducing SG&A, and securing additional broadline distributor relationships for the Professional Chef business. However, we are still in the first inning of management's strategic plan to stabilize the business, lay the foundation for growth, and then build and scale. Management is incentivized to do two things, above all else: increase profitability and deliver strong shareholder returns. If successful, management will own a large chunk of the business through their compensation package, and we are betting on their success. We didn't pay up for it either. Although there are a lot of moving parts, IVFH finished FY23 having generated $2.5mm in EBITDA, which is likely a trough figure. Low hanging fruit can double this number in the near term before any growth initiatives take place, and there is a mid-term goal to increase the top line to $100mm in revenues with a 10% EBITDA margin profile. While not quite there yet, as non-core assets continue to get sold, IVFH will be a $50mm market cap business with around $10-12mm in net cash on the balance sheet, a sustainable $5-6mm EBITDA profile, limited capex and high returns on capital. This is all before any new business growth. There are levers to pull to help uncover latent earnings power, and I'm betting on this management team to execute on the opportunity. A renewed focus, and various avenues for growth also means that the company can build scale in food distribution for the first time in years. If the core business returns to 20% annual growth, we will win big. Further optionality exists with IVFH being able to develop a platform for specialty food M&A, for which the industry is rife with such activity. Private equity is leaning hard into specialty food distribution M&A, and the fragmented industry provides opportunities to grow products, geographies, and customers. IVFH could find itself on the receiving end of a takeout offer as well. There will be bumps in the road on our way to success, but I'm excited to see what Bill and his team can accomplish during the next few years.

BSD Analysis:
Greystone presents a compelling turnaround story in Innovative Food Holdings, a specialty food distributor that has been hampered by poor management decisions but now benefits from experienced leadership. The manager's thesis centers on new CEO Bill Bennett's ability to unlock latent earnings power by eliminating unprofitable e-commerce operations and focusing on the core specialty food distribution business that historically grew 20% annually. The company operates in a defensible niche serving professional chefs with hard-to-source specialty items, creating competitive moats through supplier relationships and integration with broadline distributors. With $2.5mm in trough EBITDA for FY23, management believes low-hanging fruit can double profitability near-term, targeting $100mm revenues with 10% EBITDA margins. The investment offers attractive risk-adjusted returns at a $50mm market cap with $10-12mm net cash, minimal capex requirements, and potential M&A optionality in a consolidating industry. Management incentives are well-aligned through equity compensation, and the asset-light model should generate strong cash flow conversion as operational improvements take hold.

Pitch Summary:
I recently had the opportunity to pitch a best idea at the BTIG Value Investing event in Omaha as part of the Berkshire Hathaway pilgrimage weekend. I pitched REVG, which is a manufacturer of primarily fire trucks and ambulances. We believe this is a very compelling industry due to current three-year backlogs for demand, significant price increases which have yet to fully flow through the P&L, and an oligopoly industry structure. Moreover, we believe REVG's new management team is well positioned to execute self-help initiatives to significantly increase EBITDA margins from current levels.

BSD Analysis:
Alta Fox identifies REV Group as a compelling value opportunity in the specialty vehicle manufacturing sector, particularly fire trucks and ambulances. The investment thesis centers on favorable industry dynamics including three-year demand backlogs that provide revenue visibility and pricing power. Significant price increases implemented by REVG have yet to fully flow through the P&L, suggesting near-term margin expansion potential as higher-priced orders are delivered. The oligopolistic industry structure provides competitive advantages and barriers to entry that support sustainable profitability. Alta Fox expresses confidence in REVG's new management team and their ability to execute operational improvements and self-help initiatives. The fund anticipates meaningful EBITDA margin expansion from current levels through management's strategic initiatives. REVG's position as a leading manufacturer in essential emergency vehicle markets provides defensive characteristics while benefiting from municipal spending on critical infrastructure. The combination of industry tailwinds, pricing power, and operational improvement potential supports Alta Fox's bullish investment case.

Pitch Summary:
Humble Group AB was the biggest detractor in the quarter, as it gave up some of its Q4 gains. We believe the thesis is on track and that this company remains one of the cheapest stocks in our portfolio. We see the potential for it to double over the next 12 months. Humble (full thesis here) has traded down in sympathy with the Swedish First North index as the institutional investor community increasingly abandons the venue in favor of the premiere Nasdaq Stockholm exchange. Over the last six months, Humble's adjusted beta vs the FN25 index has been 1.04. This has caused the group's forward EBITDA multiple to compress from 8.4x to 7.4x, implying a FY24 free cash flow yield of ~12.5% on our estimates. We are unaware of any consumer staples company trading in the public markets at a double-digit free cash flow yield while producing mid-teens organic revenue growth rates alongside strong operating leverage. Humble is "uplisting" from the First North exchange to the Nasdaq Stockholm exchange within the next six months. We believe this could be a catalyst for shares. However, if the company continues to trade at such low valuation levels, we believe Humble is likely to be acquired by a financial sponsor or strategic consumer staples company. This industry lends itself to acquisitions given the significant distribution and cost synergies of larger strategic acquirers.

BSD Analysis:
Alta Fox views Humble Group as an exceptional value opportunity in consumer staples, trading at compressed multiples due to institutional abandonment of the Swedish First North exchange. The company exhibits rare characteristics of mid-teens organic revenue growth combined with strong operating leverage while trading at only 7.4x forward EBITDA. Alta Fox estimates a 12.5% free cash flow yield for FY24, which appears anomalous for a consumer staples company demonstrating such robust growth metrics. The pending uplisting to Nasdaq Stockholm within six months represents a potential catalyst for multiple expansion and institutional re-engagement. Alta Fox identifies acquisition potential from financial sponsors or strategic acquirers seeking distribution synergies and cost optimization opportunities. The fund's 12-month doubling potential target reflects confidence in either multiple expansion through the uplisting or strategic acquisition at higher valuations. Despite Q1 underperformance, Alta Fox maintains conviction in the fundamental thesis and views current levels as attractive entry points.

Pitch Summary:
Daktronics was another large contributor in the first quarter. We will refrain from rehashing the thesis, as we have fully covered this in previous letters. However, we believe the thesis is very much on track and that DAKT remains significantly undervalued. The stock still trades for <6x our estimate of EBITDA, implying a double-digit free cash flow yield. We believe there remains underappreciated growth and self-improvement levers at DAKT and remain long the stock.

BSD Analysis:
Alta Fox maintains a bullish stance on Daktronics, viewing the electronic display manufacturer as significantly undervalued despite strong Q1 performance. The fund's valuation analysis suggests DAKT trades at less than 6x estimated EBITDA, generating a double-digit free cash flow yield that appears attractive relative to the company's growth prospects. Alta Fox identifies multiple underappreciated catalysts including organic growth opportunities and operational improvement initiatives that could drive value creation. The fund's continued confidence in the investment thesis, despite previous detailed coverage in prior letters, suggests strong conviction in the company's fundamental trajectory. DAKT's position as a leading provider of electronic display systems for sports venues and commercial applications provides exposure to secular growth trends in digital signage and sports facility upgrades. The combination of attractive valuation metrics and multiple value creation levers supports Alta Fox's long-term bullish outlook.

Pitch Summary:
Alta Fox has followed EML Payments for over five years. It started as a payments company focused on the gift and incentive card program management industry. Alta Fox was briefly invested in the company with the thesis that the business operated in a uniquely profitable payments niche and the company was cheap on normalized earnings. The company "diworsified" in 2020, at the worst possible time, by acquiring PFS, a European payments company focused on reloadable cards that, unlike EML, owned its own European banking license. In general, Alta Fox is highly skeptical of transformative M&A, particularly at aggressive valuation multiples. We exited our shares at the time, but continued to watch the stock from the sidelines. The acquisition turned out to be worse than even we could have foreseen. In addition to acquiring the company at an excessive valuation level, PFS's largest operating company, PCSIL, nearly immediately began to run into serious regulatory problems, resulting in significantly negative free cash flow from this entity. EML's stock fell over 90% from peak levels. During this tumultuous period, EML was approached by both Bain and Nuvei offering to take the business private at materially higher prices - the Board declined to bring either offer to shareholders and the founding CEO resigned out of frustration. To add to boiling shareholder frustration, the Board appointed a new CEO from the existing Board without interviewing outside candidates. Alta Fox saw an opportunity. The company still had a very profitable and valuable gift & incentive card management business. Moreover, this business should be much more valuable today given the company is a significant beneficiary of higher interest rates, as they earn the majority of interest on the float of customers' card balances. However, we had zero faith in the current strategy of the Board and management team to fix the mess. Alta Fox became the company's second largest shareholder and worked behind the scenes to dramatically alter the company's future. Within six weeks of our official involvement, half of the Board had been replaced by me and two other recruited industry experts, the CEO resigned, and we began the extremely hard work to turn around a business with valuable parts but no cohesive direction. The day we joined the Board, the stock closed at $0.40 AUD/share. ~13 months later, Alta Fox successfully helped EML liquidate their problematic PCSIL business, launch a cost-cutting effort, and maximize interest revenue on their large and valuable float. This was a heavy lift that required late night Board meetings, numerous brainstorming sessions, and becoming intimately familiar with the European payment regulatory regime. Alta Fox exited our full position at $0.95, well over 100% higher than the day we joined the Board. The company, in our view, is also much healthier with stronger leadership than when we joined the Board.

BSD Analysis:
Alta Fox executed a successful activist turnaround at EML Payments, transforming a distressed payments company through board restructuring and strategic asset divestiture. The fund identified value in EML's core gift and incentive card management business, which benefits significantly from higher interest rates through float income generation. EML's problematic 2020 acquisition of PFS created regulatory issues and cash flow problems that drove the stock down over 90% from peak levels. Alta Fox's activist intervention resulted in board replacement, CEO resignation, and strategic focus on the profitable core business. The fund successfully helped liquidate the problematic PCSIL subsidiary and implement cost-cutting measures. Alta Fox achieved over 100% returns by exiting at $0.95 AUD versus their entry at $0.40 AUD. The turnaround demonstrates Alta Fox's operational expertise in distressed situations and ability to unlock value through governance improvements and strategic refocusing.