Investment Pitches

Pitch Summary:
CyberArk Software Ltd., an identity security platform focused primarily on privileged access management (protecting credentials for high-level technology administrators), rose after the company delivered strong quarterly results. CyberArk grew annual recurring revenue by 36% year-over-year and generated 20% free-cash-flow margins. New customer deal sizes and existing customer expansions at renewal were strong, boosted by high demand for CyberArk's newer product categories like access management (credential management and multi-factor authentication for all employees) and secrets management (credentials for machine identities). The increasing frequency and severity of cyberattacks, new SEC regulatory requirements for cyberattack disclosures, and greater emphasis from the federal government on privilege controls for its agencies and suppliers are driving healthy demand for CyberArk's products. Management issued consensus-beating full-year guidance across all metrics. We remain optimistic about CyberArk's long-term revenue and free-cash-flow growth prospects.

BSD Analysis:
Baron Discovery Fund maintains an optimistic outlook on CyberArk based on strong financial performance and favorable secular trends in cybersecurity. The company delivered impressive results with 36% annual recurring revenue growth and 20% free cash flow margins, demonstrating both top-line momentum and operational efficiency. CyberArk is benefiting from robust demand across its product portfolio, particularly in newer categories like access management and secrets management, with strong deal sizes and customer expansion rates. The fund highlights multiple tailwinds driving demand, including increasing cyberattack frequency, new SEC disclosure requirements, and heightened federal government focus on privileged access controls. Management's consensus-beating guidance across all metrics reinforces Baron's confidence in the company's long-term revenue and free cash flow growth trajectory.

Pitch Summary:
Shares of DraftKings Inc., a leading online sportsbook in the U.S., rose during the quarter following an earnings release that showed strong market share gains and an improved outlook for future profitability. Market share capture has been driven by investment in innovative product offerings that are resulting in strong customer retention. The company also announced the acquisition of JackPocket, a digital lottery courier service. We believe the acquisition will help DraftKings achieve a first-mover advantage in many states that offer the JackPocket service but have not yet legalized online sports betting and casino gaming. DraftKings is well positioned to expand margins and generate positive free cash flow as it grows revenues alongside the rapidly expanding U.S. sports betting market, in our view.

BSD Analysis:
Baron Discovery Fund expresses strong confidence in DraftKings' market position and growth trajectory in the expanding U.S. sports betting market. The company demonstrated strong operational momentum with significant market share gains driven by innovative product development and superior customer retention rates. The strategic acquisition of JackPocket provides DraftKings with a first-mover advantage in states offering digital lottery services but not yet online sports betting, creating a pathway for future expansion. Baron believes DraftKings is well-positioned to achieve margin expansion and positive free cash flow generation as the company scales alongside the rapidly growing U.S. sports betting market. The fund views the combination of market leadership, product innovation, and strategic positioning as key drivers for continued outperformance.

Pitch Summary:
Specialty insurer Kinsale Capital Group, Inc. reported financial results that exceeded Street forecasts. After a slowdown in the prior quarter, gross written premiums grew 34% and EPS grew 49% with a record-high underwriting margin. Market conditions remain favorable with rising premium rates and more business shifting from the standard market to the excess and surplus lines market where Kinsale operates. In addition, insurance stocks broadly rebounded from last quarter's pullback as interest rates stabilized. We remain bullish on the stock because we believe Kinsale is well managed and has a long runway for growth in an attractive segment of the insurance market.

BSD Analysis:
Baron Discovery Fund maintains a bullish stance on Kinsale Capital Group based on strong operational performance and favorable market dynamics. The company delivered impressive Q1 results with 34% growth in gross written premiums and 49% EPS growth, accompanied by record-high underwriting margins. The fund managers highlight the structural tailwinds benefiting Kinsale, including rising premium rates and continued migration of business from the standard market to the excess and surplus lines segment where Kinsale operates. The stabilization of interest rates has also provided a boost to insurance stocks broadly. Baron views Kinsale as well-managed with significant growth potential in an attractive insurance market niche, positioning the company for continued outperformance.

Pitch Summary:
We bought TTD stock exactly 4 years ago at an average cost of $17.40 (split-adjusted). Since our purchase we have made 5x on our original investment, translating to ~50% annualized return. But it's our journey to the 5-bagger return that is most interesting here. About 1.5 years following our purchase, the stock had skyrocketed to the highs of $107 in November 2021 as NASDAQ peaked. At the time we knew very well that the stock was overvalued and had gotten ahead of itself. After all, this was a 6-bagger in just 1.5 years, so the conventional wisdom would suggest to bag your profits. However, we decided to keep the stock, knowing that it will likely experience a correction sometime in the near future. And here is our rational… First of all, we had gotten to know Trade Desk and its management team relatively well during our 1.5 years of ownership. We were convinced that we had stumbled upon a great business with excellent long-term growth prospects. We were fortunate to establish a position at an attractive price as this stock has always been very expensive. If we were to bag our profits at the time, no one would criticize a 6x return over the course of 1.5 years. But… what would we do with the cash proceeds? First, our investors would be faced with a capital gain tax bill at the end of the year. Would we sit there in hopes that we can buy it back at a lower price? And if it dropped, would we have bought it back? Our experience has taught us that it sounds nice in theory but very unlikely in practice! Could we have avoided a setback? Yes, but who could be sure we would return to the stock in time before an important rally (close to impossible and not what we are good at). So 5x in 1.5 years is very nice, but 5x in 4 years as of now is still an amazing return. And… we still own a great business that will likely do well over time and we didn't take all that capital and plow it into something we don't know very well or is likely a mistake. There are not a lot of TTDs around! Truly exceptional companies are rare and our job is to buy right and to hold on!

BSD Analysis:
The managers present The Trade Desk as a prime example of their evolved investment philosophy of holding winners through volatility. They purchased TTD at $17.40 (split-adjusted) four years ago and have achieved a 5x return (~50% annualized). The key insight centers on their decision to hold through the 2021 peak when the stock reached $107, representing a 6x gain in just 1.5 years. Despite recognizing the stock was overvalued at the time, they chose to maintain their position based on their conviction in the business quality and management team. The managers emphasize the practical challenges of timing re-entry after taking profits, including tax implications and the difficulty of buying back into exceptional companies. They view TTD as a rare, high-quality business with excellent long-term growth prospects in the digital advertising space. The pitch reinforces their philosophy that truly exceptional companies are scarce and should be held through market cycles rather than traded tactically.

Pitch Summary:
The best investment ideas are simple. We have previously written about Chipotle (CMG). It turned out that this was our best investment idea since starting the fund. The stock is up 10x since we first invested at the end of 2017 (~47% annualized). Sounds absolutely incredible, except that your managers sold CMG back in 2018 (thinking that the stock had gotten ahead of itself), and proudly booked an 85% profit in 6 months, patting ourselves in the back. Interestingly, when we wrote about this in our 2019 letter, describing our big mistake to sell, the stock still went up +270% since that letter, delivering an impressive 30% annual return. This is an incredibly important point! You do not get many Chipotles in your investing career. Companies like these are super rare and the opportunity to buy them at an attractive price (which we got in 2017) is even rarer. Booking a quick profit, paying the capital gains tax and thinking that you will find another CMG to invest your proceeds into is usually delusional.

BSD Analysis:
The managers identify Chipotle as their best investment idea since inception, generating a 10x return (~47% annualized) from their late 2017 entry point. They acknowledge a critical mistake of selling the position in 2018 after an 85% gain in six months, missing out on substantial additional returns. The pitch emphasizes the rarity of finding exceptional companies like Chipotle at attractive valuations. The managers highlight that even after writing about their selling mistake in 2019, the stock continued to deliver 30% annual returns, demonstrating the power of holding onto truly exceptional businesses. This case study serves as a cautionary tale about the dangers of taking profits too early on high-quality growth companies. The analysis reinforces their evolved investment philosophy of letting winners run rather than cutting flowers. The managers view Chipotle as a prime example of why investors should hold onto rare, exceptional businesses once identified.

Pitch Summary:
The Boston Beer Company, Inc. (SAM), a leading provider of alcohol beverages, was one of the top detractors in the SMID Cap strategy in the first quarter. The company reported a modest revenue decline (on a comparable basis) for 2023, with strong growth in the Twisted Tea brand offset by declines in the Truly brand. Margins expanded during the year, including in the fourth quarter, as the company benefited from operational margin improvement initiatives, as well as deflation in freight costs. The company expects slight sales growth at the midpoint of its guidance and continued margin expansion in 2024. Concurrent with its fourth quarter earnings announcement, the company announced the retirement of CEO Dave Burwick and his replacement with former Nike executive and current SAM board member Michael Spillane. We expect no change in the company's strategy or its capital allocation from this leadership change. In the near term, we believe the company will remain focused on sustaining Twisted Tea's growth, turning Truly volume trends, improving operations to enhance gross margins, and thus providing more funds to invest in its core assets as a company – its brands and its sales force. Overall, we remain confident management's efforts and investments are likely to produce profitable growth that will reward investors over time.

BSD Analysis:
SouthernSun maintains a constructive view on Boston Beer despite near-term headwinds and leadership transition. The manager sees the margin expansion story as intact, driven by operational improvements and freight cost deflation, with continued margin gains expected in 2024. While Truly brand volumes declined, the strong growth in Twisted Tea demonstrates the company's ability to build successful brands in evolving beverage categories. The appointment of former Nike executive Michael Spillane as CEO is viewed as continuity rather than strategic disruption. SouthernSun emphasizes the company's focus on core competencies: brand building and sales force effectiveness. The margin improvement provides increased financial flexibility to reinvest in brand development and market expansion. This appears to be a turnaround story where operational efficiency gains and selective brand focus can drive profitable growth despite challenging category dynamics in hard seltzers.

Pitch Summary:
MGP Ingredients Inc. (MGPI), a leading provider of distilled spirits, branded spirits and food ingredient solutions, was the top detractor in the SMID Cap composite in the first quarter. During the quarter, MGPI reported strong fourth quarter results including gross margin expansion in all three of its business segments, and sales of brown goods were up 26% in 2023. Management noted that 2023 new distillate sales outpaced aged distillate sales for the first time since 2020, and they expect this trend to continue. New distillate carries a lower gross margin profile than aged, but customers contract for new distillate volumes for several years as opposed to aged distillate, which is primarily sold in the spot market. Management believes the shift to more new distillate sales will provide greater visibility into cash flows and lower the risk profile of the distilling solutions segment. However, the market seemed to react negatively to this news based on the slightly lower gross margin expectations. We recently visited with Brandon Gall, CFO, and Chief Commercial Officer, Amel Pasagic, at the company's Lux Row Distillery in Bardstown, KY, to discuss MGPI's path to continued margin expansion for the overall business. We believe the company has ample opportunity to grow both the top line and margins, as the team continues to build out the portfolio of premium, super premium and ultra premium products in its branded spirits segment. Additionally, while the ingredient solutions segment is a smaller piece of the overall business, we believe the company is poised to grow sales of specialty wheat proteins and starches as it ramps up production at its recently completed texturized protein production facility in Atchison, KS. We expect 2024 to be another year of investment as the company builds new warehouses to support growth in both the distilling solutions and branded spirits segments. These investments are supported by strong cash generated by the business, and we believe they will produce even stronger cash flow in 2025 and beyond.

BSD Analysis:
Despite being a top detractor in Q1, SouthernSun maintains conviction in MGP Ingredients based on strong fundamental progress across all business segments. The manager views the shift toward contracted new distillate sales as a positive strategic move that enhances cash flow visibility and reduces business risk, even if it temporarily pressures gross margins. The 26% growth in brown goods sales and margin expansion across all three segments demonstrate operational momentum. SouthernSun's recent management visit to the Lux Row Distillery reinforces their confidence in the premium spirits portfolio buildout strategy. The company's investment in warehouse capacity and the new texturized protein facility in Atchison represents growth capex supported by strong cash generation. The manager sees significant runway for margin expansion in the branded spirits segment through premium product mix enhancement. This appears to be a temporary market misunderstanding of a strategic shift toward more predictable, contracted revenue streams in the distilling business.

Pitch Summary:
Boot Barn Holdings, Inc. (BOOT) is the largest retailer of western and work-related footwear, apparel, and accessories in the United States with more than 380 stores in 44 states, and an e-commerce channel consisting of bootbarn.com, sheplers.com and countryoutfitter.com. BOOT was one of the top contributors in the SMID Cap composite in the first quarter. We believe management has a sensible and achievable plan to expand their store count to approximately 900 stores over the next several years and believe they can do this without adding leverage to the balance sheet. Gross margin was up 180 bps in the most recent quarter, as they increased the mix of higher-margin proprietary brands. We continue to like the long-term growth and profitability prospects for BOOT and believe that the management team is well qualified to execute their strategy.

BSD Analysis:
SouthernSun's investment in Boot Barn represents a growth story centered on aggressive but disciplined retail expansion and margin enhancement. The manager sees significant runway for store count growth from 380 to approximately 900 locations, representing more than doubling the footprint without requiring additional leverage. The 180 basis point gross margin expansion demonstrates management's ability to drive profitability through proprietary brand mix optimization. As the dominant player in western and work-related apparel, Boot Barn benefits from a defensible niche market position with both physical and digital distribution channels. The company's multi-channel approach through bootbarn.com, sheplers.com, and countryoutfitter.com provides omnichannel capabilities in a specialized retail category. SouthernSun's confidence in management execution suggests this is a well-managed retail concept with clear growth visibility. The combination of unit growth and margin expansion creates a compelling dual-driver growth model in the specialty retail space.

Pitch Summary:
Dycom Industries, Inc. (DY), a leading provider of engineering and construction services to the telecommunications and utility industries, was the top contributor in the SMID Cap composite in the first quarter. Although results were slightly below management expectations due to severe winter weather, two large customers (AT&T and Frontier) returned to sequential growth, and management expects this trend to continue in 2024. More broadly, the demand for fiber construction over the next few years continues to look bright as both private and public capital enters the industry. Private equity continues to make investment in fiber assets via various channels, and the open access business model has emerged as a viable alternative to carrier owned networks. Some large carriers have even indicated they are willing to partner to build fiber networks, e.g., AT&T's joint venture with Blackrock in 2022, and recent rumors of a T-Mobile joint venture with Lumos Networks. Beyond private investment, there is significant public funding committed to fiber through the ARPA, RDOF, and BEAD programs. Although the $40 billion BEAD program has progressed slower than initially expected, management now expects deployments to begin in 2025. We expect this program to be a multi-year tailwind to the industry. Profitability at DY has increased over the last few quarters, and we believe there is further room for margin expansion by leveraging SG&A expenses as revenue grows. Management continues to operate the company well and allocate capital effectively while maintaining financial flexibility (Net Debt/Adj. EBITDA of 1.4x, the lowest level in over 10 years). As we have stated in past commentary, with only ~43% of the homes in the U.S. passed with fiber, we continue to believe there is a long runway for fiber penetration, and DY is well-positioned to engineer, construct and maintain these fiber networks.

BSD Analysis:
SouthernSun presents a compelling bull case for Dycom Industries based on the accelerating fiber infrastructure buildout across the United States. The manager highlights strong secular tailwinds from both private equity investment and substantial government funding programs totaling $40 billion through BEAD initiatives. Despite near-term weather-related headwinds, the return to sequential growth by major customers AT&T and Frontier signals improving demand momentum. The company's improving profitability metrics and conservative leverage ratio of 1.4x Net Debt/EBITDA provide financial flexibility to capitalize on the multi-year fiber deployment cycle. With only 43% of U.S. homes currently passed by fiber infrastructure, DY appears well-positioned to benefit from this massive infrastructure upgrade cycle. The manager's confidence in management's capital allocation and operational execution further supports the investment thesis. This appears to be a classic infrastructure play benefiting from both private and public investment in critical telecommunications infrastructure.

BSD Analysis:
The London Company initiated a position in Toro Company, viewing it as a dominant player in outdoor equipment with strong competitive positioning through professional-grade product focus. The company operates through Professional and Residential segments representing 80% and 20% of revenues respectively, with the professional segment providing more stable, non-discretionary demand. TTC's expansive dealer network creates natural entry barriers through exclusivities and scale advantages, supporting pricing power and market share leadership. The business model benefits from a large installed base with predictable replacement cycles of 2-5 years, providing visibility into future demand. Rentals and repairs constitute over 25% of revenues, adding recurring revenue streams and customer stickiness. The fund is attracted to TTC's resilient free cash flow generation, high return on invested capital, strong balance sheet, and disciplined capital allocation approach that has consistently increased shareholder value over time.

BSD Analysis:
The London Company acknowledges the challenging operating environment for Cable One while maintaining conviction in the company's long-term competitive positioning. The fund recognizes headwinds from increased competition via fixed wireless and fiber-to-the-home, along with reduced move activity affecting subscriber growth. Recent subscriber gains driven by new pricing schemes and promotions have negatively impacted ARPU, creating near-term margin pressure. However, management's disciplined pricing strategy prioritizes durable free cash flow growth over short-term metrics, demonstrating strategic focus on long-term value creation. CABO's advantaged position as a high-speed internet provider in rural markets provides defensive characteristics and pricing power. The company's relatively low penetration rates, superior service quality, and proven M&A capabilities support the long-term earnings growth thesis despite current market perception challenges.

BSD Analysis:
The London Company maintains confidence in Churchill Downs' operational performance despite quarterly underperformance, noting strong execution across most business segments. The fund highlights solid performance in key areas including on-trend Kentucky Derby ticket sales, strong historical racing machine business, and solid TwinSpires online betting platform results. Management's exemplary capital allocation track record continues to support the investment thesis. However, elevated leverage following a meaningful 2022 acquisition remains a concern, though the fund views the strategic rationale as sound. The expectation for leverage reduction next year through robust cash generation and EBITDA growth provides a clear path to improved financial metrics. Despite some softness in parts of the casino business, CHDN's diversified gaming and racing portfolio, combined with strong cash flow generation capabilities, supports the long-term investment case.

BSD Analysis:
The London Company expresses significant concern about Endava's strategic direction following disappointing Q4 earnings and reduced guidance. The fund attributes the guidance reduction to client spending delays, particularly concentrated in the payments and financial services verticals where clients are exercising heightened caution on new project commitments. However, the more troubling development is management's announced acquisition of GalaxE, an offshore Indian outsourcer, which represents a fundamental departure from DAVA's existing strategy and company identity. This strategic pivot raises questions about management's commitment to the company's differentiated positioning in the IT services market. The concentration risk in specific verticals, combined with the strategic uncertainty created by the GalaxE acquisition, suggests potential challenges ahead for the company's growth trajectory and competitive positioning.

BSD Analysis:
The London Company views Lancaster Colony's strong start to 2024 as validation of the company's operational improvements following a challenging prior year. The fund highlights significant margin expansion in Q4, driven by commodity deflation in key ingredients, demonstrating the company's ability to benefit from favorable input cost trends. Importantly, LANC has successfully completed both its ERP implementation and capacity expansion projects, removing operational headwinds and positioning the company for improved efficiency. The doubling of trailing twelve-month free cash flow from 2022 to 2023 illustrates the company's enhanced cash generation capabilities. The pristine balance sheet with net cash and zero debt provides substantial downside protection and financial flexibility. With operational improvements behind them and an attractive runway for cash flow expansion, LANC appears well-positioned for sustained performance improvement in the packaged foods industry.

BSD Analysis:
The London Company expresses strong conviction in Armstrong World Industries following its 27% quarterly gain and solid guidance delivery. The fund highlights AWI's effective execution on key growth initiatives and demonstrates confidence in management's ability to leverage pricing power in the building products sector. The annuity-like nature of the remodel business, representing approximately 70% of revenue, provides predictable cash flow generation and earnings stability. This recurring revenue model reduces cyclical volatility typically associated with construction-related businesses. Management's excellent capital allocation track record further enhances the investment appeal, suggesting disciplined use of cash flow for shareholder value creation. The company's demonstrated earnings resiliency and pricing power indicate strong competitive positioning within the ceiling systems market. AWI's ability to maintain margins while growing the business reflects operational excellence and market leadership in specialized building products.

Pitch Summary:
DECK continued to produce strong performance in 1Q. DECK thoughtfully manages top brands in the footwear industry, which has allowed them to outperform other retailers in the current environment. UGG and HOKA are benefitting from brand heat, and management remains focused on acquiring and retaining customers. DECK continues to diversify revenue through the growth of HOKA (non-seasonal), and the expansion of UGG into new categories. The cash balance sheet with no debt provides an additional element of downside protection.

BSD Analysis:
The London Company maintains a bullish stance on Deckers Outdoor, highlighting the company's exceptional brand management capabilities in a challenging retail environment. The fund emphasizes DECK's strategic diversification through HOKA's non-seasonal growth and UGG's category expansion, which reduces seasonal dependency and broadens market reach. Management's focus on customer acquisition and retention demonstrates operational excellence in brand building. The company's pristine balance sheet with net cash and zero debt provides significant downside protection in the current high interest rate environment. This financial strength, combined with strong brand momentum across both UGG and HOKA, positions DECK well for continued outperformance. The fund's decision to trim the position after 67% gains in 2023 suggests disciplined portfolio management while maintaining conviction in the long-term thesis. DECK's ability to generate strong cash flows while maintaining pricing power across its premium footwear portfolio makes it an attractive quality growth investment.

Pitch Summary:
Another new Alluvial holding is Scandic Hotels. Scandic operates a network of 280 hotels with more than 58,000 rooms, mostly in Scandinavia, naturally. These hotels are solid mid-market properties located mainly in city business or cultural districts, meant to attract the casual traveler and business traveler, not the luxury-seeker. Scandic's operating model is different than most. A typical hotel company builds or buys its properties, financing the transactions with property-level mortgages or portfolio-level bank debt. The financial obligations associated with these debts are predictable, but unforgiving. Principal and interest must be paid no matter how the hotels are performing. The result is significant operating leverage. Instead, Scandic opts to lease its hotels. Nearly all these leases are variable, with some portion of the lease payment based on hotel revenue. The result is increased lease obligations in good years and decreased in bad. Operating leverage is reduced, and the company's effective financial leverage is far lower than the balance sheet would suggest. Scandic also has a robust loyalty program, which generates meaningful pre-paid revenue and lowers working capital intensity. Like nearly all hotel companies, COVID was cataclysmic for Scandic. Scandic managed the crisis by issuing equity and a convertible bond. A few years on, Scandic's revenues and profits have reached record highs. The company has extinguished most of its non-lease debt and is now less leveraged than at any point in its history as a public company. But unlike other hotel companies, Scandic's share continue to trade well below pre-COVID highs and offer a double-digit free cash flow yield. Part of the discount may be explained by Scandic's convertible bond, which comes due in October 2024 and converts into common shares at SEK 43.36. Scandic repurchased one-third of the convertible issue in November 2023 and has ample financial capacity to tender for the rest of the issue prior to maturity if it chooses. Once this share overhang is addressed, I believe that Scandic's valuation will converge toward that of other European hotel operators. Scandic's 2024 results should be similar to those of 2023. Assuming full conversion of the convertible bond, Scandic's market capitalization is SEK 12.9 billion. Enterprise value excluding leases is SEK 13.4 billion. If we treat lease obligations as rent expense (a framework that I greatly prefer to use) then 2024 EBITDA should come in at around SEK 2.5 billion, leaving Scandic trading at around 5.4x EBITDA. Scandic will enter 2025 with a simplified balance sheet, little corporate debt, and a robust pipeline of hotel properties to add to its network.

BSD Analysis:
The manager highlights Scandic's unique variable lease structure that reduces operating leverage compared to traditional hotel operators who own their properties. This asset-light model provides downside protection during economic downturns while maintaining upside participation. The company has successfully navigated COVID-19 and now trades at attractive valuations despite record financial performance. At 5.4x EBITDA with a double-digit free cash flow yield, Scandic appears undervalued relative to peers. The convertible bond overhang presents a near-term catalyst, as addressing this issue should allow for valuation convergence with other European hotel operators. The combination of a deleveraged balance sheet, variable cost structure, and growth pipeline positions Scandic well for continued expansion in the recovering travel market.

Pitch Summary:
The first of Alluvial Fund's new holdings is McBride plc. Just when I thought I could not find a business more boring than our vegetable canner, Seneca Foods, along came McBride, a major European producer of private label laundry detergents and dishwashing liquids. For years, McBride was a profitable if unspectacular little company, regularly recording mid-single digit operating margins on a flattish revenue trajectory. Then, COVID and the inflationary aftermath walloped the firm, causing input prices to soar. Bad news for a company that did significant sales on long-term fixed price contracts with major supermarket chains and discount retailers. McBride survived by cutting operating costs and renegotiating sales agreements to re-price in tandem with changes in input costs. Now, economic trends are moving strongly in McBride's favor. Persistently high European inflation has led consumers to make the switch from branded cleaning products to private label products like those McBride supplies. Unit volume is up just as gross margins are rebounding. The company is using its reinvigorated cash flow to reduce debt and plans to reinstitute its dividend later this year. McBride shares have responded positively to the improved results and outlook, but not nearly enough. McBride still trades at just 4.4x my estimate of fiscal 2024 EBITDA and 5.9x fiscal 2024 normalized earnings. Both ratios will come down as net debt declines. Longer term, McBride expects to generate modest revenue growth and to increase its EBITDA margin to 10%. Today's enterprise value of £320 million could be ~3x EBITDA in just a few years. Alluvial Fund made its initial purchases of McBride shares between GBp 97 and GBp 99, believing the shares are worth GBp 200 today.

BSD Analysis:
The manager presents a compelling turnaround thesis for McBride, a European private label cleaning products manufacturer. The investment capitalizes on a post-COVID recovery story where the company has successfully renegotiated contracts to pass through input cost inflation and is now benefiting from consumer trading down to private label products. At 4.4x 2024E EBITDA and 5.9x normalized earnings, the valuation appears attractive for a company expecting to reach 10% EBITDA margins and modest revenue growth. The deleveraging story adds another layer of value creation as net debt reduction will improve valuation multiples. The manager's target of 200 GBp represents roughly 100% upside from purchase levels, suggesting confidence in the operational turnaround and margin expansion potential.

Pitch Summary:
CERT is the global leader in biosimulation technology, providing software and science-based services to big pharma, biotechs, and regulatory bodies. CERT runs an attractive software and services model that generates high-margin recurring revenues. Over 50% of revenues come from blue-chip customers, including 39 of the top 40 biopharma companies in the world. CERT's flagship platform, Simcyp, is the gold standard in the industry, and disruption risk is low. CERT is poised to benefit from the mid-teens% growth projected for the biosimulation market. CERT boasts a strong balance sheet and impressive cash flow generation.

BSD Analysis:
The London Company initiated a position in Certara, viewing it as the global leader in biosimulation technology with a compelling software and services business model. The manager highlights CERT's attractive recurring revenue profile with high margins, supported by a blue-chip customer base that includes 39 of the top 40 global biopharma companies, representing over 50% of revenues. The investment thesis centers on CERT's flagship Simcyp platform being the industry gold standard with low disruption risk, providing sustainable competitive advantages. The company is positioned to capitalize on projected mid-teens growth in the biosimulation market, while maintaining strong financial fundamentals including a robust balance sheet and impressive cash flow generation. This combination of market leadership, recurring revenues, and growth exposure makes CERT an attractive addition to the portfolio.

Pitch Summary:
The underperformance by QLYS this quarter was largely the result of timing – it was trading near an all-time high at year-end 2023. However, due to a challenging macro environment for cybersecurity spend, the stock traded down in 1Q. Our conviction on QLYS is based on their strong product strategy, competitive moat, and potential to improve their go-to-market execution, all of which are intact despite the macro issues.

BSD Analysis:
The London Company maintains strong conviction in Qualys despite first quarter underperformance, attributing the decline to timing factors and challenging cybersecurity spending environment rather than fundamental deterioration. The manager emphasizes that QLYS was trading near all-time highs at year-end 2023, making the stock vulnerable to macro-driven selling pressure. The investment thesis remains anchored on three core strengths: strong product strategy, sustainable competitive moat, and potential for improved go-to-market execution. The manager views the current macro headwinds as temporary, with the company's fundamental competitive advantages remaining intact. This suggests confidence that QLYS will benefit when cybersecurity spending normalizes and the company's execution improvements gain traction.