Investment Pitches

Pitch Summary:
Often healthcare stocks face challenges during election years as the cost of medical care frequently becomes a political issue, however, UNH also had several discrete challenges that pressured it. In February, the company disclosed a massive data breach at its Change Healthcare unit impacting its electronic prescribing, payment and medical claims platforms. The company has been aggressively working to restore its systems and launched a Temporary Funding Assistance Program to ensure healthcare providers impacted by the hack could bridge their cash flow needs until systems were restored. While work continues, we believe this will prove to be a temporary impediment. In addition to the hack, media reports suggested UNH was the subject of a Department of Justice (DoJ) investigation over antitrust concerns. This is another area where we believe the risk is overblown as the DoJ has failed in the past to alter UNH's strategy. Although UNH runs the largest private health insurer in the US, has a sizable physician network, one of the largest pharmacy benefits managers and large billing and data businesses, we believe its integrated approach is instrumental in improving health outcomes and lower costs, benefiting both consumers and payors. Lastly, rising medical cost trends fueled by higher care utilization will generally pressure health insurers' profitability. We believe UNH has appropriately priced its policies to account for current trends and its broad product offering will help it mitigate any margin pressure in its health insurance business. One area we are paying close attention to is how competitors respond to the current backdrop. In the past, efforts to gain market share through aggressive pricing during a rising cost environment have not been good for industry valuations. We believe the industry has learned from past mistakes and recent competitor commentary suggest so, however, time will tell.

BSD Analysis:
Bristol Gate maintains conviction in UnitedHealth despite multiple near-term headwinds, viewing current challenges as temporary. The fund acknowledges the Change Healthcare data breach impact but emphasizes management's aggressive response including system restoration and provider funding assistance. On antitrust concerns, the manager notes the DOJ's historical failure to alter UNH's strategy and argues the integrated model actually benefits consumers through improved outcomes and lower costs. The fund believes UNH has appropriately priced policies for current medical cost trends and its diversified platform provides margin protection. Bristol Gate expresses confidence that industry competitors have learned from past pricing mistakes during cost inflation periods. The investment thesis rests on UNH's market-leading integrated platform and management's ability to navigate cyclical challenges.

Pitch Summary:
ZTS fell due to competitive concerns on key franchises like Simparica Trio in parasiticides, and Apoquel and Cytopoint in dermatology as new entrants entered or are expected to enter the markets. We believe the company has several strategies at its disposal to not only defend share but continue growing it, including chewables in Apoquel or longer lasting versions of Cytopoint. In the parasiticide market, less effective treatments like collars retain a large share of the market which we expect to provide continued conversion opportunities for Simparica Trio. Competitive entrants should help grow the segment through increased consumer awareness. In addition to the competition issues, ZTS was pressured by investor concerns regarding the safety of a new osteoarthritis (OA) drug launched in the US called Librela. We believe the safety concerns are overblown as the drug has been in markets outside the US for almost three years now with 11 million doses globally since the launch. Management has reported no unusual trends or signals with its US experience thus far.

BSD Analysis:
Bristol Gate maintains a bullish stance on Zoetis despite recent competitive pressures and safety concerns. The fund views the stock decline as an overreaction to manageable challenges. On competition, the manager highlights Zoetis's innovation pipeline including chewable Apoquel formulations and longer-lasting Cytopoint versions to defend market share. The parasiticide market opportunity remains significant with less effective collar treatments still holding large market share, providing conversion potential for Simparica Trio. The fund argues competitive entry may actually expand the overall market through increased awareness. Regarding Librela safety concerns, Bristol Gate emphasizes the drug's three-year international track record with 11 million doses administered without unusual safety signals, suggesting US concerns are overblown.

Pitch Summary:
CTVA had a significant rebound following better than expected commentary surrounding its crop protection business and extremely low expectations. While destocking amongst distributors is ongoing, underlying farmer demand remains stable. The company expects a normalization of the crop protection market into fiscal 2025. In the meantime, the company's seed segment continues to meet our expectations, with potential future upside from recent European Union policy change in favour of gene edited seeds. Gene edited crops had been bucketed along with genetically modified organisms and therefore effectively band throughout most of the EU, however the success of messenger RNA vaccines for COVID-19, the rising threat of climate change to food production, and the war in Ukraine have all worked to shift opinions on new breeding technologies.

BSD Analysis:
Bristol Gate's bullish view on Corteva reflects a turnaround story with multiple catalysts emerging. The fund emphasizes the significant rebound from extremely low expectations, suggesting the market had oversold the stock. While distributor destocking continues, stable underlying farmer demand provides a solid foundation. Management's expectation of crop protection market normalization by fiscal 2025 offers near-term visibility. The seed segment's consistent performance provides stability. The European Union's policy shift favoring gene-edited seeds represents a significant long-term catalyst, as these crops were previously banned alongside GMOs. The convergence of COVID vaccine success, climate change concerns, and Ukraine war impacts has shifted regulatory sentiment toward new breeding technologies.

Pitch Summary:
AVGO also benefited from AI. At a recent investor meeting, the company disclosed a third major customer for its custom AI chips, building upon existing relationships with Google and Meta. Management expects AI to account for ~$10 billion of revenue in fiscal 2024, accounting for 35% of its semiconductor segment revenue, compared to ~15% in fiscal 2023. The company's total semiconductor business has grown 13% annually, organically from $17 billion in fiscal 2019 to $28 billion in fiscal 2023. We expect AI to remain a substantial growth driver going forward as the company highlighted customer AI clusters have grown from 4,000 nodes in 2022 to 30,000 in 2024, with plans to go to one million+ nodes over time, driving demand for both AVGO's custom AI and networking silicon.

BSD Analysis:
Bristol Gate's bullish thesis on Broadcom centers on the company's dominant position in custom AI chip design and networking silicon. The addition of a third major customer beyond Google and Meta demonstrates expanding market penetration in the hyperscaler segment. AI revenue scaling from 15% to 35% of semiconductor revenue in one year illustrates explosive growth momentum. The $10 billion AI revenue target for fiscal 2024 represents significant scale. Historical semiconductor business growth of 13% annually provides a solid foundation. The dramatic expansion of customer AI clusters from 4,000 to 30,000 nodes, with plans for one million+ nodes, suggests sustained long-term demand for both custom AI chips and networking infrastructure.

Pitch Summary:
AMAT continues to benefit from ongoing investments by semiconductor manufacturers. A surge of interest in generative AI is leading to higher demand at the leading edge and COVID induced global supply chain challenges are resulting in localized manufacturing investments at the lagging edge. According to McKinsey, by 2030, generative AI alone will significantly increase semiconductor wafer demand, which will in turn translate into more demand for AMAT's semiconductor manufacturing equipment. When combined with more complex chip designs requiring new materials, innovative technologies, more steps in the chip manufacturing process, an increase in attached services and share gains we believe AMAT can grow revenue in the high single digits in a conservative outlook and mid teens in a more optimistic scenario over that period.

BSD Analysis:
Bristol Gate presents a compelling bull case for Applied Materials driven by the generative AI revolution and supply chain localization trends. The fund highlights two key demand drivers: leading-edge AI investments and lagging-edge manufacturing reshoring following COVID disruptions. McKinsey's projection of significant semiconductor wafer demand growth by 2030 supports the thesis. The manager emphasizes AMAT's positioning to benefit from increasing chip complexity, new materials requirements, and expanded manufacturing steps. Revenue growth projections of high single digits conservatively to mid-teens optimistically appear reasonable given the structural tailwinds. The investment thesis aligns with secular semiconductor equipment demand driven by AI infrastructure buildout.

Pitch Summary:
One business in EdgePoint Portfolios that's demonstrated an ability to reinvest its free cash flow at high returns, sustainably and primarily through acquisitions, is Berry Global, Inc., a leading global packaging company. Stable demand for consumer packaging, combined with high customer switching costs, has led to very consistent and predictable operating profits for Berry. Over its history, Berry has taken these operating profits (with the help of some additional debt or equity) and acquired over 45 different packaging companies. Berry can increase a packaging company's profitability margins by 5%, largely through its scale advantage. Berry's size allows it to procure resin cheaper than its competitors, making it the low-cost producer. The combination of buying companies at attractive valuations and further improving upon its business has led Berry to allocate capital at high rates of return. Today, it demonstrates attractive returns on capital, currently earning a ~14% pre-tax unlevered return on capital employed. In turn, with the benefit of some leverage, Berry has been able to grow its adjusted earnings per share by 20% since 2015. While the market believes Berry's growth will be significantly lower going forward, we see things differently. The packaging space remains highly fragmented, and we believe Berry's scale advantage should allow for the company to continue deploying its free cash flow into acquisitions for decades to come. This will not only give Berry an opportunity to sustain attractive returns on the capital currently employed, but more importantly, the potential to earn attractive returns on incremental capital and, in turn, drive free cash flow growth and business value.

BSD Analysis:
EdgePoint's investment thesis is built on Berry Global's proven acquisition-driven growth model and sustainable competitive advantages in the packaging industry. The company has successfully acquired over 45 packaging companies, consistently improving acquired businesses' profitability margins by 5% through scale advantages, particularly in resin procurement costs. Berry's position as a low-cost producer creates a durable competitive moat in an industry with stable demand and high customer switching costs. The company currently generates attractive 14% pre-tax unlevered returns on capital employed and has delivered 20% adjusted EPS growth since 2015. The highly fragmented packaging market provides a long runway for continued acquisitions, with EdgePoint believing Berry can deploy free cash flow into value-accretive deals for decades. While the market expects growth deceleration, EdgePoint sees sustained opportunities for attractive returns on incremental capital deployment. The combination of predictable cash flows, acquisition expertise, and scale advantages positions Berry to compound shareholder value through disciplined capital allocation in a consolidating industry.

Pitch Summary:
Take, for example, Norfolk Southern Corp., one of the two largest railroads in the eastern United States. Given limited cost-competitive alternatives to shipping large products such as bulk commodities, railroads have proven to be very good businesses with pricing power typically exceeding inflation. Most railroads in North America have undergone an operating model shift. Historically, a train would run only when it was fully utilized. The railroad operating model transitioned to one where trains run at scheduled times. By operating on a set schedule, a railroad can decrease its operating costs by allowing for greater predictability and less unproductive idling. Today, Norfolk Southern operates under a more legacy, hub-and-spoke system. That's expected to change as it adopts a scheduled system that looks more like its peers such as Canadian National, Canadian Pacific, CSX and, most recently, Union Pacific. We believe the opportunity to improve profitability for Norfolk Southern under a scheduled point-to-point system is far more immense than what the market is currently discounting.

BSD Analysis:
EdgePoint's thesis centers on Norfolk Southern's pending operational transformation from a legacy hub-and-spoke system to a scheduled point-to-point model that has already proven successful at peer railroads. The railroad industry benefits from limited cost-competitive alternatives for bulk commodity shipping, providing inherent pricing power that typically exceeds inflation. Norfolk Southern's current operating model creates inefficiencies through unpredictable scheduling and unproductive asset idling. The transition to scheduled operations, similar to Canadian National, Canadian Pacific, CSX, and Union Pacific, should dramatically reduce operating costs through improved asset utilization and predictability. This operational reconfiguration represents a fundamental lever for margin expansion rather than incremental cost reduction. The fund believes the market significantly underestimates the profitability improvement potential from this systems overhaul. Given Norfolk Southern's position as one of the two largest eastern US railroads, the scale of operational efficiency gains could be substantial and sustainable once implemented.

Pitch Summary:
Another example is Dollar Tree, Inc., a popular discount retail chain with strong brand affinity and high customer loyalty. Rather than growing volumes, our main insight is focused on "breaking the buck." Dollar Tree was known for selling products at a fixed $1 price point, but in 2021 it significantly shifted its pricing strategy by selling products at higher prices. This move marked a departure from the company's longstanding business model and allowed Dollar Tree to offer a broader, more diverse product range to customers. Moving beyond the $1 price point not only helps its revenue grow and better leverages fixed costs (e.g., labour and rents), but the Dollar Tree banner can attract a wider customer base and meet more of their shopping needs. We also believe with a broader (and potentially higher quality) selection of products, customer satisfaction may improve. Higher revenue and profits allow for greater reinvestment into the company. Funding store improvements and innovations can further strengthen the brand and drive even greater customer loyalty. The discount retail category is mature, but we still see Dollar Tree growing largely through a pricing opportunity. The market is currently discounting it because they believe Dollar Tree's price point will hover around $1.50. We see no reason the average item can't grow well beyond that level, especially as the current management team begins introducing products priced as high as $7 per item.

BSD Analysis:
EdgePoint's investment thesis revolves around Dollar Tree's strategic pivot away from its historic $1 fixed pricing model, which they term "breaking the buck." The 2021 pricing strategy shift enables the company to offer a broader, higher-quality product range while better leveraging fixed costs like labor and rent. This pricing flexibility allows Dollar Tree to attract a wider customer base and increase wallet share per customer visit. The fund believes the market is underestimating the pricing power, expecting average prices to stabilize around $1.50, while EdgePoint sees potential for significantly higher price points. Management's introduction of products priced up to $7 demonstrates the elasticity of their customer base and the opportunity for margin expansion. The reinvestment of higher profits into store improvements and innovations creates a virtuous cycle of enhanced customer satisfaction and loyalty. Despite operating in a mature discount retail category, EdgePoint views this pricing transformation as a sustainable competitive advantage that the market has yet to fully appreciate.

Pitch Summary:
An example of volume growth is Mattel, Inc. The idea is centred on being able to monetize a greater amount of its intellectual property, driving volume growth in toys, games, movies and music. Today, everyone only sees Mattel monetizing Barbie and Hot Wheels. While these are its two largest brands, Mattel literally has hundreds of others that are being underutilized. When current CEO Ynon Kreiz took over in 2018, he asked a team to produce a list of brands that they believed were currently being under-monetized. The team sent him a list 11 pages long! The market remains skeptical and seems only to be interested in hearing about how Barbie and Hot Wheels are growing. We believe toy brands should generate roughly $1 in non-toy sales for every $1 in toy sales. To that extent, we remain excited by Mattel's prospects. The next few years will include movies for Masters of the Universe, Polly Pocket, Barney, Major Matt Mason, Rock'em Sock'em Robots, Uno and several other properties.

BSD Analysis:
EdgePoint's thesis centers on Mattel's massive untapped intellectual property portfolio beyond its flagship Barbie and Hot Wheels brands. The fund believes the market is myopically focused on these two properties while ignoring hundreds of underutilized brands that could drive significant volume growth across toys, games, movies, and music. CEO Ynon Kreiz identified an 11-page list of under-monetized brands when he took over in 2018, suggesting enormous latent value. The investment thesis is predicated on expanding non-toy revenue streams, with EdgePoint targeting a 1:1 ratio of non-toy to toy sales for each brand. The upcoming movie slate including Masters of the Universe, Polly Pocket, Barney, and other properties represents concrete catalysts for monetization. This intellectual property leverage strategy could drive substantial revenue growth without proportional cost increases. The market's skepticism creates an opportunity for EdgePoint to capitalize on this underappreciated asset base.

Pitch Summary:
Over the past year we have built a position in our first Canadian listed company. Blackline Safety (TSX:BLN) is a provider of gas detection and safety monitoring systems to the energy, industrial, transportation, and consumer packaged goods verticals. Blackline is led by Founder/CEO Cody Slater, who entered the gas detection space in 1987 as an undergraduate at the University of Alberta when he invented the RigRat. The RigRat was the world's first wireless area gas detector. Mr. Slater then founded BW Technologies to further develop and market gas detection systems. BW Technologies was responsible for the world's first disposable portable gas detector and the first wearable multi-gas detector. BW also pioneered a fleet management system for automated detection report generation. BW Technologies was sold to First Technology in 2004 and subsequently acquired by Honeywell in 2006. The same year BW was acquired by First Technology, Mr. Slater founded Blackline Safety. The company released several GPS-enabled asset tracking products over the next decade (think Apple Air Tag) before pivoting to gas detection in 2015 with the release of the G7 connected gas detector. The G7 added capabilities like two-way radio, fall detection, facility-wide alerting, 24/7 remote monitoring, and automated compliance reporting to an internet-connected gas detector. Following the release of the G7, Blackline began taking share from competitors like Honeywell, Industrial Scientific (owned by Fortive), MSA, and Drager. Competing gas detectors are mostly unchanged from the 80s (market leader Honeywell still sells the original Rig Rat gas detector that Mr. Slater invented in 1987) and rely on alarms to notify workers of danger. These devices can fail if a worker is already incapacitated or working in loud/chaotic environments, with potentially fatal consequences. The G7/G6's connectivity allows for falls or alarms to automatically trigger emergency response and facility evacuations, while also saving time and costs through automatic compliance and safety reporting. We believe that Blackline's products are significantly safer than existing opportunities and that the company will continue to take share from legacy products. Competitors have been slow to respond with only MSA launching a competing product so far. MSA launched its first connected products late in 2023, some of which were pulled from the market after release due to quality control issues. Today, Blackline sells hardware, consumables (gas detection sensors/cartridges), and bundles a service contract with each hardware sale with an average length of 3-5 years. Its net expansion rate is over 130% (on average, a customer spends >30% more on Blackline hardware/service year-over-year), but only fraction of this increase is from price increases. Sales have grown from less than $10 million in 2018 to over $50 million in 2023 (>40% CAGR). We believe that Blackline offers 100% upside over the next 3 years through a combination of sustained revenue growth and margin expansion as revenue scales over a largely fixed cost base. As margins inflect, we expect the company's multiple expand as well, but this would be a bonus (leading IoT companies listed in the U.S. have sales multiples north of 10x sales which compares to Blackline at ~2x).

BSD Analysis:
Liberty Park has initiated their first Canadian position in Blackline Safety, a connected gas detection and safety monitoring company led by industry pioneer Cody Slater. The investment thesis centers on Blackline's technological superiority over legacy competitors, with their G7 connected detector offering two-way radio, fall detection, facility-wide alerting, and automated compliance reporting versus basic alarm-only devices from the 1980s. The company has demonstrated exceptional growth with sales expanding from under $10 million in 2018 to over $50 million in 2023, representing a 40%+ CAGR. Blackline's business model combines hardware, consumables, and 3-5 year service contracts, generating a net expansion rate exceeding 130% with minimal price increases. The fund expects 100% upside over three years driven by continued market share gains, revenue growth, and margin expansion as the business scales over fixed costs. At approximately 2x sales, Blackline trades at a significant discount to leading IoT companies that command 10x+ sales multiples, suggesting substantial multiple expansion potential as the company matures.

Pitch Summary:
Our funds underperformed in 1Q24 primarily due to a large drawdown in one of our core positions, Luna Innovations (LUNA). In March, the company announced that it had incorrectly recognized revenue in the second and third quarters of 2023. A lack of details and the subsequent "retirement" of the CEO combined to send the stock down over 50%. Obviously, we were disappointed by the update. We do not expect a dramatic restatement to financials and do not expect a meaningful impact to the company's business going forward (i.e., Luna is not a fraud). In our view, fiber optic sensing remains a game-changing, next-generation technology, and Luna owns most of the intellectual property around it. As such, we view the stock's collapse as an extreme overreaction. Once the company updates its financials and the Board/management is able to speak with investors, we likely will buy more shares and more assertively engage with the company; we will update you on our plans in coming months.

BSD Analysis:
Liberty Park views Luna Innovations' 50% decline as an extreme overreaction to accounting irregularities that resulted in revenue restatements for Q2 and Q3 2023. The fund manager emphasizes that Luna is not a fraud and expects minimal impact to the underlying business fundamentals. The investment thesis centers on Luna's dominant intellectual property position in fiber optic sensing technology, which the manager characterizes as game-changing and next-generation. Despite the accounting issues and CEO departure, the fund maintains conviction in the long-term value proposition. Liberty Park plans to potentially increase their position once financial updates are provided and management becomes accessible to investors. The fund's willingness to add shares and engage more assertively demonstrates strong conviction in the turnaround potential. This represents a classic value opportunity where temporary operational issues have created a significant discount to intrinsic value.

Pitch Summary:
Paywalled (Primerica’s highest producing agents are engaged in misleading, false, or deceptive conduct including i) the recorded ppt has fake numbers and suggested ongoing investigation; ii) deliberate obfuscation with PRI; iii) recruiting over serving customers is emphasized; iv) 'its normal to be a millionaire' saying). Update 4/18/24 - The company responded that the allegations are false.

BSD Analysis:
Primerica sells life insurance through an MLM-style distribution model. Critics argue the business depends on high-turnover agents selling to friends and family, with limited productivity beyond initial contacts. Regulatory scrutiny of MLM structures could impair the model, while persistency of policies sold to lower-income households remains a concern. Earnings growth has been steady but may mask underlying fragility of the distribution channel. Insurance;

Pitch Summary:
The first time we did a “Roadie” was back in early 2022 when Alex, Isaac, and I drove to visit Medpace just outside of Cincinnati, OH which was ~16 hours round trip. Medpace is a contract research organization (CRO) that operates as a service provider to the pharmaceutical/biotech industry. There are many services offered by CRO’s, and Medpace focuses on being a full-service clinical trial provider. Medpace helps to design and run the human-intensive Phase 1-4 clinical trials for small to mid-size biotech companies. One of Medpace’s competitive advantages is they have a large majority of their employees in one location, far away from their competitors and with many universities nearby. This provides a tremendous opportunity for recruiting and training employees to fit their model. It also helps the economics of the business to operate in a city that has a relatively lower cost of living. When we were in Cincinnati, we were able to see how much their main campus has grown (~30% over the last 24 months to 6,000 people) and better understand the future expansion potential that existed - think years and years of further headcount growth (which is what drives revenue!). In addition to being our first “Roadie”, it was also a first to see corporate swag in a vending machine in the parking garage…the hoodie I bought has become a staple in our ‘corporate swag Friday’ office dress policy. I think Isaac wishes he had grabbed one as well, though he did walk away with something more valuable. The investment he led, and that we made into Medpace, is the first to have doubled our clients’ money! We remain very supportive shareholders and think the future remains bright for their full-service approach.

BSD Analysis:
The Medpace pitch highlights a structurally advantaged, high-growth CRO with a differentiated single-campus model that supports culture, training, and operating leverage. By concentrating most employees in Cincinnati near a deep university talent pool and lower cost of living, Medpace can scale headcount efficiently while preserving quality and margin structure. Serving small and mid-size biotech clients across Phase I–IV gives it exposure to an innovation-rich segment of drug development, and recent ~30% campus growth underscores strong demand and revenue momentum. Historically, the company has delivered robust EPS and FCF growth, translating into meaningful share-price appreciation and a doubling of client capital, even as it continues to reinvest heavily in capacity. While the stock often commands a premium multiple versus CRO peers given its execution track record and reinvestment runway, the manager believes this is justified by sustainable high-teens or better earnings growth and disciplined capital allocation.

Pitch Summary:
Watches of Switzerland (WOSG) lowered its guidance for the 12-months ending April 2024 after a weak Christmas holiday period in the UK and some negative product mix in their Rolex deliveries (more stainless steel watches were produced than expected) which caused lower average selling prices. We did not fathom this business trading at or near invested capital when we made the investment and feel confident that no private owners of authorized Rolex agencies are willing to sell their businesses at the trading multiple of this company today. We have never invested assuming the ‘greater fool theory’ where we hope people pay a higher multiple for a dollar of earnings. A large portion of our time is spent on maintenance research, which includes meetings with industry stakeholders. In the case of WOSG, this has manifested as private meetings with participants in the luxury watch industry and an upcoming visit to the largest industry conference in Geneva. We think this business will grow in the mid-teens after 2024 and we are also comforted by the track record of 15%+ EPS growth since IPO despite this year appearing to be down 35% year-over-year. As we wrote last quarter, we will make mistakes; and so far, our holding period return would put WOSG in that camp for us. We believe bad news should travel as fast, if not faster, than good news, and so commit to always being accountable and transparent in sharing these updates.

BSD Analysis:
The manager acknowledges execution setbacks at Watches of Switzerland but sees current valuation near invested capital as overly punitive for a business with structurally attractive economics. WOSG controls scarce Rolex and other top-brand franchises, operates in a rational luxury watch ecosystem, and has historically grown EPS at mid-teens rates since IPO, indicating strong unit economics and brand leverage. Near-term headwinds—slower UK holiday demand and adverse Rolex mix—are framed as cyclical and mix-related rather than thesis-breaking, with management still expecting mid-teens growth beyond 2024. Industry channel checks and ongoing conference participation reinforce conviction that underlying demand and brand relationships remain intact. With the stock trading at a depressed multiple relative to its growth and return profile, the risk-reward is viewed as favorable if earnings normalize and the market reassesses the durability of its luxury positioning.

Pitch Summary:
Topicus, up ~40% in the quarter, is the first business spun out of Constellation Software and focuses on acquiring vertical market software across Europe. What we have discovered in the European market is that there is often a niche software solution that serves a specific country, tailored to unique language and regulatory requirements in that country. This leads to a much larger hunting ground and runway than North America alone would provide. We are excited by this capital deployment runway. So far this year, Topicus has outperformed expectations on both organic growth and capital deployed to acquire some of these European software businesses. They have also expanded their business development team across Europe in countries where they have fewer resources. We have found this to be a good leading indicator for regional capital deployment.

BSD Analysis:
The manager’s thesis on Topicus centers on its Constellation-style playbook of acquiring sticky vertical-market software franchises across a structurally fragmented European landscape. By targeting country- and regulation-specific niches, Topicus expands its addressable market far beyond what a North American footprint could offer, creating a very long reinvestment runway at attractive returns on capital. Strong recent results in both organic growth and M&A deployment support the idea that management can compound capital efficiently, while the build-out of business development teams across underpenetrated regions should seed future deal flow. Financially, Topicus exhibits the hallmarks of a high-quality VMS platform: high recurring revenue, strong margins, and modest capital intensity, supporting robust free-cash-flow generation and optionality for further acquisitions. With a long runway of bolt-on deals and disciplined capital allocation, the manager views the recent share-price strength as justified by fundamentals rather than mere multiple expansion.

Pitch Summary:
ATS Automation is a provider of automated supply chain technology. The business builds factory automation solutions for supply chains in the life science, food & beverage, energy, industrial, and consumer sectors. We reduced our position in ATS in mid-2023 for two reasons that we uncovered during our maintenance research on existing holdings period. First, the business was becoming increasingly reliant on EV battery programs from General Motors (over 40% of the business’s revenue backlog was concentrated with one economically sensitive customer) and second, some of ATS’s suppliers had seen slowdowns in their own orderbooks which we discovered by talking to European suppliers of the automation industry. Recently, ATS saw GM delay its EV battery program due to slower than expected demand for EVs, leading to negative growth revisions for ATS. We are pleased that the business is rebasing its backlog toward life sciences and food & beverage, which we view as higher quality end-markets. We retain conviction in the long-term potential of the business and had been waiting for the business to price in shorter-term headwinds, which we believe is beginning to be reflected more appropriately in the shares.

BSD Analysis:
The manager views ATS as a high-quality industrial automation compounder whose fundamentals remain attractive despite near-term earnings headwinds from EV-related program delays and customer concentration in General Motors. The thesis emphasizes that backlog is now tilting toward structurally better end markets such as life sciences and food & beverage, which should improve the business mix and reduce cyclicality over time. Balance-sheet and cash-flow strength, coupled with long customer relationships, support the view that the orderbook normalization is cyclical rather than structural. While the stock has de-rated on reduced growth expectations, that reset arguably lowers downside risk and offers upside optionality if execution in higher-quality verticals is strong. Overall, ATS is framed as a temporarily out-of-favor industrial with intact moat, making incremental weakness a potential opportunity rather than a reason to exit.

Pitch Summary:
The company is likely to fail to restart the fossil fuel complex it bought from Exxon; the auditors flagged the company's ability as a 'going concern'; immense regulatory hurdle to make the pipeline operational; Update 4/23/24 - The country determined the offshore application as 'incomplete' and making additional requirements;

BSD Analysis:
Sable Offshore develops offshore oil fields. The BSD short thesis stresses high-cost structures, exposure to volatile crude prices, and environmental/regulatory risks tied to offshore drilling. These projects require significant upfront capex with long paybacks, which are less competitive than shale in a lower-oil-price environment. ESG headwinds may further limit capital access.

Pitch Summary:
ACV Auctions has started to experience accelerating growth as the wholesale automotive market has finally returned to growth. They guided to revenue growth for 2024 of 25-30% while finally becoming adjusted EBITDA profitable. We believe the wholesale auto market now is in the first inning of a multiyear tailwind that will dramatically accelerate ACV's revenue and free cash flow generation.

BSD Analysis:
The manager presents a bullish thesis on ACV Auctions centered on the company's positioning to benefit from a recovering wholesale automotive market. After a challenging period, ACV is experiencing accelerating growth as the broader wholesale auto market returns to expansion. The fund highlights the company's strong 2024 guidance of 25-30% revenue growth while achieving adjusted EBITDA profitability for the first time, marking a significant operational milestone. The manager believes the wholesale automotive market is entering the early stages of a multi-year growth cycle that will provide sustained tailwinds for ACV's business model. As a digital marketplace connecting automotive dealers, ACV is well-positioned to capture increasing market share as the industry continues its digital transformation. The combination of market recovery, operational leverage, and the company's leading platform position supports the fund's conviction that ACV will experience dramatic acceleration in both revenue and free cash flow generation over the coming years.

Pitch Summary:
Uber continues to deliver strong bookings growth over ~20% while free cash flow is growing at over double that rate. At their investor day they stated they expect bookings to grow in the high teens while free cash flow will grow closer to 40% over the next 3 years. Given they now generate billions of free cash flow annually they also announced a $7B buyback authorization which was welcomed by investors.

BSD Analysis:
The manager maintains a bullish view on Uber based on the company's strong operational momentum and impressive cash generation capabilities. With bookings growth exceeding 20% and free cash flow growing at more than double that rate, Uber demonstrates significant operating leverage in its platform business model. The fund highlights management's confident three-year outlook projecting high-teens bookings growth while free cash flow accelerates to approximately 40% annual growth. This substantial cash generation has enabled Uber to announce a $7 billion share buyback authorization, signaling management's confidence in the business and commitment to returning capital to shareholders. The manager believes Uber has won the ride-share market, positioning it as the dominant player in a large and growing total addressable market. The combination of sustained growth, improving profitability, and shareholder-friendly capital allocation reinforces the fund's conviction in Uber's long-term value creation potential.

Pitch Summary:
Xponential Fitness is a founder-led boutique fitness market leader that has significant future growth opportunities trading at extremely depressed valuation. This was a new position in the quarter that we'll shed more light on later in the letter. Xponential Fitness is one of the largest franchisors in the boutique fitness sector worldwide, owning ten brands, each offering a unique fitness experience. Its largest brands are Club Pilates, Stretch Lab, and Pure Barre. The founder and CEO Anthony Geisler has been successfully navigating the boutique fitness industry since the early 2000s. Geisler's journey began with the acquisition of LA Boxing, which he transformed from a handful of locations into a network of nearly 100, culminating in its acquisition by UFC Gym for $25 million. Following a couple years with UFC Gym, Geisler's desire to scale another boutique fitness brand led him to purchase Club Pilates for $2 million, which at the time had less than 20 locations and generated around ~$500k of EBITDA. Over the next 3 years Geisler grew Club Pilates to ~100 locations and ~$6 million of EBITDA, after which he sold the company to the private equity firm TPG for $100 million. TPG's acquisition marked the genesis of Xponential Fitness, with Geisler spearheading a multi-brand entity poised to repeat the success of Club Pilates. Today, Geisler owns around 15% of Xponential Fitness, which today is valued at ~$100 million. We believe, and historical performance suggests, Anthony Geisler is an exceptional CEO. In the middle of 2023, an anonymous short report was released claiming that Anthony Geisler is an unethical, untrustworthy businessperson, and Xponential is an entity that oversells failing fitness concepts. Since this report was released the share price declined over 60% while the financial results continued to be robust. To address some of the concerns mentioned in the short report, the company hosted an investor day and dug into the health of the business and each individual boutique fitness brand. We believe the short report found a few disgruntled franchisee's, which every franchise system has, and claimed their complaints are shared by the entire franchisee base. From our research we don't believe this to be true. In aggregate the portfolio of brands is doing well, and franchisees are profitable and growing. Ultimately after investigating all the claims from the short report and speaking with management on multiple occasions, we believe Xponential fitness is a high-quality business trading at an extremely attractive price. Even if half the claims from the short report were true (which we don't believe to be the case) we believe the business would still be worth significantly more than the current market price. Xponential will generate around $100 million of free cash flow in 2024 and is currently a ~$850m market cap company. We believe Xponential can deliver on their 2026 adjusted EBITDA target of $200m (implying a 24% 3-year compounded annual growth rate) and their valuation will gradually return to ~20x adj. EBITDA (versus today's valuation of ~7x adj. EBITDA) which is where Xponential was valued before the short report was released. Put together, this implies a target price in the next 2 years of $56, or a 275% return from today price of ~$15. We think the risk/reward is attractive.

BSD Analysis:
The manager presents a compelling contrarian investment thesis on Xponential Fitness, viewing the company as a high-quality franchise business trading at a deeply discounted valuation following a damaging short report. The fund emphasizes CEO Anthony Geisler's exceptional track record, having successfully scaled multiple fitness brands including transforming Club Pilates from 20 locations generating $500k EBITDA to 100 locations with $6 million EBITDA before selling to TPG for $100 million. Despite a 60% stock decline following anonymous short seller allegations, the company's financial performance remained robust. The manager conducted thorough due diligence, speaking with management and investigating the short report claims, concluding that the concerns represent isolated franchisee complaints rather than systemic issues. With $100 million in projected 2024 free cash flow and an $850 million market cap, the company trades at approximately 7x adjusted EBITDA versus its historical 20x multiple. The fund targets a $56 price (275% upside) based on achieving the 2026 EBITDA target of $200 million and multiple re-rating.