Investment Pitches

Pitch Summary:
Nufarm: The seed technologies segment within the Nufarm Group has grown EBITDA at a CAGR of 49% p.a. over the last three years to now comprise 20% of group earnings (refer Figure 11 on the next page). The company outlined the aspiration at its last investor day to grow EBITDA within this segment to ~$150m in FY26 and over ~$400m in FY30. A large part of this growth is driven by its proprietary Omega-3 seed technology which we believe provides a sustainable and scalable solution to support growth in Omega-3 demand from the fish farming industry.

BSD Analysis:
L1 Capital highlights Nufarm's transformation from traditional crop protection to high-growth seed technologies. The seed tech segment has delivered exceptional 49% EBITDA CAGR over three years, now representing 20% of group earnings. Management's ambitious targets call for segment EBITDA growth to $150m by FY26 and over $400m by FY30, representing substantial value creation potential. The proprietary Omega-3 seed technology addresses growing demand from the aquaculture industry, providing a sustainable alternative to traditional fish oil sources. This technology platform offers significant competitive advantages through intellectual property protection and first-mover positioning. The investment thesis centers on Nufarm's evolution into a higher-margin, technology-driven business model. The combination of proven growth trajectory and substantial market opportunity creates compelling long-term value creation potential.

Pitch Summary:
Westgold: We expect production to grow strongly from around 250koz to over 300koz ounces in the next few years (refer Figure 10). If we couple this production growth with a very attractive A$ Gold price which remains above A$3,000/koz we see the potential for exceptional free cash flow growth in the coming years. The new management team continues to execute well and has delivered an outstanding turnaround over the past year.

BSD Analysis:
L1 Capital's Westgold thesis centers on significant production growth and exceptional free cash flow generation potential. The company is positioned to increase production by 20% from 250koz to over 300koz, providing clear operational leverage. The attractive Australian dollar gold price above A$3,000/koz creates favorable economics for the Australian-based operations. The new management team has demonstrated strong execution capabilities, delivering a remarkable operational turnaround over the past year. This combination of production growth, favorable commodity pricing, and improved operational performance creates substantial free cash flow generation potential. The management transformation appears to have unlocked significant value through operational improvements and strategic focus. Westgold represents a compelling growth story in the Australian gold sector with multiple drivers supporting enhanced profitability.

Pitch Summary:
Newmont: Post the acquisition of Newcrest, Newmont is now the largest gold producer in the world by a sizeable margin with nearly double the annual production of the second placed company – Barrick Gold. The company has a portfolio of tier one, long-life mining assets with several development-ready growth assets that will support production and free cash flow growth over the next few years (refer Figure 9). In addition, the company has strong exposure to copper, with annual copper production of ~150kt.

BSD Analysis:
L1 Capital views Newmont as the dominant global gold producer following the transformative Newcrest acquisition. The company now produces nearly double the output of its nearest competitor, creating significant scale advantages and market leadership. The portfolio consists of tier-one, long-life assets that provide operational stability and predictable cash flows. Multiple development-ready growth projects offer clear visibility on production and free cash flow expansion over the coming years. The additional copper exposure (~150kt annually) provides valuable diversification and leverage to the energy transition theme. Newmont's scale, asset quality, and growth pipeline position it as the premier vehicle for gold exposure. The combination of market leadership, operational excellence, and growth optionality creates a compelling investment proposition in the precious metals space.

Pitch Summary:
Flutter: 2024 has several catalysts for the company with Flutter due to complete its U.S. Secondary listing at the end of January and with FanDuel's profitability set to accelerate meaningfully after several years of high investment. The U.S. market remains relatively nascent, with many years of growth ahead as additional states continue to legalise sports betting and iGaming (refer Figure 8 on the next page). We believe the business has an exciting growth path ahead for the rest of the decade with Flutter's outstanding management team well placed to maintain the company's leading position.

BSD Analysis:
L1 Capital's Flutter thesis centers on multiple near-term catalysts and long-term U.S. market expansion. The upcoming U.S. secondary listing provides enhanced liquidity and access to U.S. capital markets. FanDuel's profitability inflection represents a key catalyst after years of heavy investment in market share. The U.S. sports betting and iGaming market remains in early stages with significant runway as more states legalize these activities. Management's track record and market-leading position provide competitive advantages in capturing this growth. The combination of immediate catalysts (listing, profitability acceleration) and structural growth drivers (market expansion) creates a compelling investment case. Flutter's dominant market position and proven execution capabilities position it well to capitalize on the multi-year U.S. opportunity.

Pitch Summary:
CRH: As the largest construction materials business in North America, CRH holds the number one positions in several construction materials categories. At its recent investor day, the company outlined a pathway to double-digit annualised earnings growth over the medium term, as well as the potential to deliver ~$35b in financial capacity from operating cash flow generation and bolt-on acquisitions over the next 5 years – amounting to over 70% of its current market capitalisation. Despite this exceptional growth outlook, the company trades on only ~14x consensus FY24 earnings, a huge discount to U.S. Peers (refer Figure 7 on the next page).

BSD Analysis:
L1 Capital presents CRH as a dominant market leader trading at a significant valuation discount despite exceptional growth prospects. The company's #1 market positions across multiple construction materials categories provide competitive advantages and pricing power. Management's investor day outlined compelling medium-term targets including double-digit earnings growth and $35 billion in financial capacity over five years, representing over 70% of current market cap. The valuation disconnect is stark - CRH trades at only 14x FY24 earnings versus U.S. peers at ~23x despite superior growth outlook. The investment benefits from massive U.S. infrastructure spending tailwinds including the Infrastructure Investment and Jobs Act. This represents a classic quality growth company trading at value multiples with clear catalysts for re-rating.

Pitch Summary:
Cenovus: Continues to generate solid free cash flows at current oil price levels and trades on a free cash yield of 14% based on consensus FY24 estimates. Cenovus has seen some impacts from refinery outages, but operational performance has improved in recent periods which will support better downstream performance. We estimate the company can reach its net debt target in CY24, enabling a step-up in shareholder returns through on-market share buybacks. Cenovus has been very clear that as soon as it hits this target, it will return 100% of cash flow to shareholders.

BSD Analysis:
L1 Capital's Cenovus thesis centers on exceptional cash generation and imminent capital return acceleration. The manager highlights an attractive 14% free cash yield at current oil prices, demonstrating the company's robust cash generation capabilities. Despite temporary refinery headwinds, operational improvements are driving better downstream performance. The key catalyst is Cenovus reaching its net debt target in 2024, which will trigger a significant step-up in shareholder returns through buybacks. Management's commitment to return 100% of cash flow to shareholders once debt targets are met provides clear visibility on capital allocation. This represents a compelling value proposition with near-term catalysts for enhanced returns. The combination of strong free cash flow generation and disciplined capital allocation creates an attractive risk-adjusted return profile.

Pitch Summary:
Santos: Share price performance has lagged global peers significantly over the last three years with the company trading at a large discount to U.S. peers despite having a much stronger EBITDA growth profile (refer Figure 6). As outlined in our September 2023 Quarterly Report, we believe Santos' asset base has been materially undervalued by the market and that structural options (e.g. demerger, asset sales, etc.) should be explored to close the valuation gap. On the 7th of December 2023, Santos announced that it was engaged in preliminary discussions for a potential merger with Woodside, in addition to examining a range of alternative structural options for unlocking value. We welcome the willingness of the Santos Board to engage with Woodside, demonstrating the company is open to exploring options to unlock shareholder value.

BSD Analysis:
L1 Capital presents a compelling value thesis for Santos, highlighting significant undervaluation relative to global peers despite superior EBITDA growth prospects. The manager emphasizes Santos trades at a substantial discount to U.S. peers while delivering stronger fundamental growth metrics. The investment case centers on potential value unlocking through structural alternatives including demerger, asset sales, or the announced merger discussions with Woodside. L1 views management's willingness to explore strategic options as validation of their undervaluation thesis. The position appears to be a classic value play with multiple catalysts for value realization. The manager's confidence in the asset base quality and structural optionality suggests significant upside potential. This represents a strategic bet on corporate action driving share price convergence to intrinsic value.

Pitch Summary:
LNK announced that it had entered into a scheme implementation deed with Japanese company, Mitsubishi UFJ Financial Group (Mitsubishi), under which Mitsubishi will acquire LNK for total consideration of $2.26 per share. The scheme is unanimously recommended by LNK's board. There has been significant corporate interest in LNK over the past few years, however all that interest has amounted to nought. We expect the likelihood of the Mitsubishi scheme proceeding to be high, however also believe there is some chance that another bidder enters the fray for the company.

BSD Analysis:
Sandon Capital views the Mitsubishi UFJ Financial Group takeover offer for Link Administration as a positive outcome after years of corporate interest that failed to materialize. The $2.26 per share offer represents definitive value realization for shareholders and has unanimous board recommendation, suggesting fair valuation. The fund acknowledges Link's history of attracting corporate interest without successful completion, but expresses confidence in the Mitsubishi transaction's likelihood of success. Sandon also identifies potential for competing bids given the strategic value of Link's administration and technology platform. The Japanese acquirer's financial strength and strategic rationale provide credibility to the transaction structure. This represents a successful exit opportunity for the fund after holding through previous unsuccessful takeover attempts. The unanimous board recommendation and scheme structure suggest management confidence in deal completion and valuation fairness.

Pitch Summary:
MFG announced that strong underlying markets in November had resulted in a 2.6% increase in funds under management (FUM). This was only the second increase in FUM in the past 20 months and the first since January 2023. Also during the month, MFG announced a resolution to the liability related to options over closed class units in Magellan Global Fund (ASX: MGF). MFG will purchase up to 750 million MGF options on market at a price of 10 cents per option. This coincided with the responsible entity (RE) of MGF deciding to proceed with a conversion of the closed class units to open class units, thus permanently addressing the discount to net asset value (NAV) that MGF has persistently traded at. Whilst the resolution of MGF and its options will cost more than we expected, it will also bring an end to a saga that has tarnished the MFG brand for a number of years now. MFG Executive Chairman, Andrew Formica, has moved expeditiously to address a number of legacy issues. With these now largely in the rear-view mirror, we look forward to him turning his attention towards capital management in the first half of 2024.

BSD Analysis:
Sandon Capital views Magellan Financial Group as emerging from a challenging period with positive operational momentum and leadership changes. The 2.6% FUM increase represents the first growth since January 2023, suggesting potential stabilization after 20 months of outflows. Executive Chairman Andrew Formica is actively addressing legacy issues, including the complex MGF options situation that has damaged the brand. The resolution involves purchasing 750 million MGF options at 10 cents each and converting closed class units to open class units, permanently eliminating the persistent NAV discount. While the cost exceeds expectations, this decisive action removes a long-standing overhang on the business. The fund anticipates Formica will pivot to capital management initiatives in 1H2024 once legacy issues are resolved. Sandon appears positioned for a potential turnaround story as operational improvements and strategic clarity emerge under new leadership.

Pitch Summary:
CYG provided a 1HFY24 trading update, with the encouraging trends disclosed at the AGM in October accelerating into the end of the calendar year. 1HFY24 sales are expected to be $185.5 million, up ~5.5% on the prior corresponding period (pcp). More importantly, 1HFY24 EBITDA is expected to be $9.8 million, up ~18.0% on the pcp. The initiatives to grow EBITDA margin to 10% in the medium term that were implemented early in the financial year gained momentum in the December quarter with 2QFY24 EBITDA forecast to be up ~28.5% on the pcp. Demand continues to remain solid in the company's core end markets (mining and resources, infrastructure, commercial construction and industrial) and the Enterprise Resource Planning (ERP) upgrade continues to track to schedule and budget. CYG operates in large, fragmented markets and has very modest market shares. We expect the strong top line growth that has been demonstrated over the past 5-6 years to continue into the medium term, with operating leverage and margin expansion initiatives translating to significantly faster earnings growth.

BSD Analysis:
Sandon Capital highlights Coventry Group's accelerating operational momentum with strong margin expansion driving earnings growth. The company delivered 5.5% sales growth to $185.5 million in 1HFY24, but more importantly achieved 18% EBITDA growth to $9.8 million, demonstrating effective operational leverage. Management's margin expansion initiatives are gaining traction with 2QFY24 EBITDA forecast up 28.5%, supporting the medium-term target of 10% EBITDA margins. The fund emphasizes CYG's exposure to resilient end markets including mining, resources, infrastructure, and commercial construction where demand remains solid. The successful ERP system upgrade provides operational efficiency benefits while maintaining budget and timeline discipline. Sandon views CYG as operating in large, fragmented markets with modest market share, providing significant growth runway. The combination of consistent top-line growth over 5-6 years and accelerating margin expansion creates a compelling earnings growth trajectory through operational leverage.

Pitch Summary:
A2B had an extraordinarily busy month in December announcing the settlement of its remaining properties; Downing Street, Oakleigh for $8 million and O'Riordan Street, Alexandria for $78 million. Following the sale of these properties, the company announced a larger than expected fully franked dividend of 60 cents per share to be paid in late January. The positive surprises didn't end there. On 22 December 2023, A2B announced it had entered into a scheme of arrangement with Singapore's ComfortDelGro. If approved, shareholders will receive a total of $2.05, comprising $1.45 per share in scheme consideration and the aforementioned fully franked special dividend of $0.60 per share. When we first invested in A2B, its market capitalisation was approximately $110 million and the company was committed to a strategy that we believed was eroding the value of the business. Our campaign to change the Board, including the appointment of Mark Bayliss as Executive Chairman, has led to a significant change in fortunes for A2B and its shareholders. Mark and his team have executed one of the most successful corporate resurrections we have witnessed – non-core property assets have been sold, the core taxi despatch and payments businesses have been successfully turned around, and these efforts have been capped off with the announcements of the large special dividend and the scheme implementation agreement with ComfortDelGro. The company today has a market capitalisation of more than $260 million (prior to the payment of the special dividend). In less than three years, more than $150 million of shareholder value has been created.

BSD Analysis:
Sandon Capital presents A2B as a successful activist turnaround story, highlighting their role in driving strategic changes through board appointments. The fund's intervention led to the appointment of Mark Bayliss as Executive Chairman, who executed a comprehensive value creation strategy including property asset sales and operational improvements. The company's transformation culminated in a takeover offer from Singapore's ComfortDelGro at $2.05 per share, representing significant value creation from the original $110 million market cap. The manager emphasizes the successful turnaround of core taxi dispatch and payments businesses alongside strategic asset divestments. The special dividend of 60 cents per share demonstrates strong capital allocation following property sales. Market capitalization growth to over $260 million represents more than $150 million in shareholder value creation over three years. This case study exemplifies Sandon's activist investment approach and ability to drive operational improvements through governance changes.

Pitch Summary:
Another weak name in the strategy was Paylocity Holding Corp. (PCTY). The company provides software for payroll and human-resources management using the software-as-a-service business model. Facing an uncertain U.S. employment outlook in 2024 and difficult year-over-year comparisons, Paylocity issued forward guidance that failed to reassure nervous investors. Moreover, client funds held on Paylocity's balance sheet provide the company with substantial interest income—which would be expected to decline in an environment of falling interest rates. Our long-term thesis for owning the company has not changed, so we maintained our position.

BSD Analysis:
Despite near-term headwinds, Wasatch maintains conviction in Paylocity's long-term prospects, demonstrating their focus on fundamental business quality over short-term guidance concerns. The company's SaaS-based payroll and HR management platform serves a critical function for medium-sized businesses, creating sticky customer relationships and recurring revenue streams. While management's conservative 2024 guidance disappointed investors amid uncertain employment conditions and difficult year-over-year comparisons, Wasatch views this as temporary noise rather than a fundamental deterioration. The managers acknowledge that falling interest rates would pressure the substantial interest income Paylocity earns on client funds held on its balance sheet, but this appears to be viewed as a manageable headwind. The decision to maintain their position reflects confidence in the underlying business model and competitive positioning. Paylocity's software solutions address essential business functions that are unlikely to be eliminated even in challenging economic environments, supporting the long-term investment thesis.

Pitch Summary:
XPEL, Inc. (XPEL) was also a major detractor. The company develops and manufactures automotive products including window tints and cut-to-fit protective films for painted surfaces. The stock was down on news that Tesla, a prominent XPEL customer, started offering color and clear paint-protection film wraps in two California service centers without using XPEL's products. This news caused investors to question how much business XPEL might lose if Tesla's recent move is the start of a broader trend. Our initial reaction to the news isn't overly pessimistic because Tesla vehicles account for only about 5% of XPEL's revenues and because other automobile manufacturers have been increasing the use of XPEL's products. Nevertheless, our senses are heightened as we continue to evaluate our position in the stock.

BSD Analysis:
Wasatch takes a measured approach to the Tesla-related concerns surrounding XPEL, demonstrating their analytical discipline in evaluating customer concentration risks. While Tesla's decision to offer paint protection services without XPEL products created investor anxiety about potential customer defection, the managers correctly note that Tesla represents only 5% of revenues, limiting the immediate financial impact. The broader concern is whether Tesla's move signals a trend toward automotive OEMs bringing these services in-house, which could pressure XPEL's business model. However, Wasatch finds some comfort in the fact that other automobile manufacturers are actually increasing their use of XPEL's products, suggesting the company's value proposition remains strong across the broader market. The neutral stance reflects appropriate caution while acknowledging that the Tesla situation may be isolated rather than indicative of a broader industry shift. XPEL's diversified customer base provides some protection against single-customer risk.

Pitch Summary:
The fourth quarter's greatest detractor was Fox Factory Holding Corp. (FOXF). The company manufactures suspension products and other components for cycling and motorsports applications. Investors reacted negatively to news that Fox Factory had entered into an agreement to acquire Marucci Sports, a manufacturer of baseball and softball bats and other sports-related products. Although acquisitions are often met with skepticism, in this case it was especially unclear why Fox Factory had decided to venture outside its core business. The unusual nature of the deal requires us to engage in discussions with management and perform an ongoing evaluation of the purported growth opportunities and operational synergies.

BSD Analysis:
Wasatch expresses concern about Fox Factory's strategic direction following the announcement of the Marucci Sports acquisition, which represents a significant departure from the company's core suspension and motorsports component business. The managers view this diversification move with skepticism, noting that the rationale for entering the baseball and softball equipment market is unclear and doesn't align with Fox Factory's established expertise in cycling and motorsports applications. The negative market reaction reflects broader investor uncertainty about management's capital allocation strategy and focus. Wasatch's neutral stance indicates they are taking a wait-and-see approach, planning to engage directly with management to better understand the strategic rationale and potential synergies. The acquisition raises questions about whether Fox Factory is losing focus on its core competencies where it has built strong market positions. This situation highlights the importance of management execution and strategic clarity in Wasatch's investment process.

Pitch Summary:
Another strong position in the strategy was Pinnacle Financial Partners, Inc. (PNFP). Based in Nashville, Tennessee, Pinnacle is the bank holding company for Pinnacle Bank. Early in the year, the failures of three regional banks in the U.S. and the government-brokered sale of troubled Swiss firm Credit Suisse Group AG dragged down bank stocks generally. As the year progressed, investors remained worried that the Fed would continue to raise interest rates—and precipitate a recession and more credit defaults, which would clearly hurt most banks. Also, continually rising interest rates can be detrimental because banks then need to pay more to depositors, narrowing the spread between what's paid to depositors and what's received from borrowers. Even though Pinnacle announced strong earnings, the stock remained below its February high for most of the year. Then, in November, the stock began a dramatic rise based on dovish comments from the Fed, which eased worries about credit defaults and interest-rate spreads. We like Pinnacle, in particular, because it follows a responsible banking model with a diversified customer base, appropriate levels of loans and deposits, and a small securities portfolio. Moreover, we believe Pinnacle is well-managed and serves a geographical area with a healthy real-estate market, favorable demographics and above-average economic growth.

BSD Analysis:
Wasatch's investment in Pinnacle Financial Partners demonstrates their ability to identify quality regional banks trading at discounted valuations due to sector-wide concerns. Despite strong earnings throughout 2023, the stock was pressured by regional banking failures and Federal Reserve policy uncertainty that compressed net interest margins. The managers highlight Pinnacle's differentiated risk profile through its responsible banking model, featuring a diversified customer base, appropriate loan-to-deposit ratios, and minimal securities portfolio exposure. The geographic focus on Nashville and surrounding markets provides exposure to favorable demographics, healthy real estate fundamentals, and above-average economic growth. Management quality appears to be a key differentiator in Wasatch's thesis. The November rally following dovish Fed commentary validated their patience, as interest rate concerns that had weighed on the stock began to ease. Pinnacle's conservative approach positions it well to navigate credit cycles while benefiting from its attractive market footprint.

Pitch Summary:
Medpace Holdings, Inc. (MEDP) was also a significant contributor. The company is a contract research organization (CRO) supplying clinical development services to small biotechnology companies. Early in the year, the stock fell due to concerns that rising interest rates and tightening credit could make it harder for many of Medpace's customers to fund their research programs. Although short-term risk had increased back then, we believed the company's underlying fundamentals would support attractive long-term growth. Additionally, we liked that Medpace continued to generate significant free cash flows, which could be used to enhance shareholder value by repurchasing stock. Based on these views and our confidence in management, we added to our position in Medpace. During the fourth quarter, we were rewarded for our conviction and patience.

BSD Analysis:
Wasatch demonstrates strong conviction in Medpace despite early-year headwinds from rising interest rates that pressured biotech funding. The managers correctly identified that while short-term risks had increased due to tighter credit conditions affecting Medpace's small biotech customers, the company's underlying fundamentals remained strong for long-term growth. The investment thesis is anchored by Medpace's ability to generate significant free cash flows, providing financial flexibility and enabling shareholder-friendly capital allocation through stock repurchases. Management's decision to add to their position during the weakness reflects high confidence in both the company's fundamentals and leadership team. The fourth quarter performance validated their contrarian approach, rewarding their patience and fundamental analysis over macro concerns. As a CRO serving small biotechs, Medpace benefits from the ongoing innovation in drug development while maintaining a capital-efficient service model.

Pitch Summary:
The fourth quarter's top contributor was BellRing Brands, Inc. (BRBR), a relatively new holding for Wasatch. BellRing's offerings include nutritional shakes, powders, bars and other products primarily marketed under the Premier Protein and Dymatize brands. We like the company's asset-light operating model, which relies on outsourced production. Given the low cost of BellRing's products and perceived value among a loyal and growing group of health-conscious consumers, we believe the company has a durable, economically resilient business. Moreover, we think the intellectual property associated with BellRing's shelf-stable, good-tasting products is relatively difficult for competitors to replicate. Amid the fallout from the Covid-19 pandemic, the company's production capacity had been severely constrained, impacting revenues and earnings. In 2023, BellRing was able to add new outsourced production facilities—and even more will be added in 2024. Finally, the company and the stock benefited from the proliferation of GLP-1 agonists, such as Ozempic, being used for weight loss. Dieters often consume BellRing's products in an effort to ingest enough nutrients. That said, the GLP-1 trend wasn't part of our original investment thesis and isn't why we continue to own the stock.

BSD Analysis:
Wasatch presents a compelling bull case for BellRing Brands centered on its asset-light business model and strong competitive positioning in the nutrition market. The managers highlight the company's durable economic moat through difficult-to-replicate intellectual property in shelf-stable, good-tasting products that serve a loyal health-conscious consumer base. The investment thesis is strengthened by BellRing's recovery from COVID-related production constraints, with new outsourced facilities coming online in 2023 and additional capacity planned for 2024. While the company has benefited from the GLP-1 weight loss drug trend as dieters use their products for nutritional supplementation, management wisely notes this wasn't part of their original thesis. The combination of low-cost products, perceived consumer value, and expanding production capacity positions BellRing well for continued growth in the expanding nutrition market. The asset-light model provides operational leverage and capital efficiency advantages over traditional manufacturing competitors.

Pitch Summary:
Lastly, leading global dental manufacturing company, Envista Holdings Corp. (NVST), declined on disappointing earnings results. Challenges with sanctions in Russia and China due to volume-based procurement (VBP) reimbursement, as well as a weakening environment in North America for large dental equipment and implants resulted in management reducing its sales and profitability guidance for the year. While shares may be range bound for the next couple of quarters as NVST works through these headwinds and invests in future growth, we think NVST has multiple opportunities to drive upside over the long-term. We believe NVST will benefit from its rich research and development pipeline, several new products in high-growth dental segments, successful execution from recent M&A, facility consolidation and previous IT investments. We anticipate a re-rating of the stock and multiple expansion relative to peers.

BSD Analysis:
Despite near-term challenges, Ariel maintains a constructive long-term view on Envista Holdings based on the company's innovation pipeline and strategic positioning. The stock declined on disappointing earnings with management reducing guidance due to sanctions in Russia, VBP reimbursement issues in China, and weakness in North American dental equipment markets. While acknowledging shares may remain range-bound as the company navigates these headwinds, Ariel emphasizes multiple long-term value drivers. The rich R&D pipeline and new products in high-growth dental segments should drive future revenue growth and market share gains. Recent M&A execution, facility consolidation, and IT investments position the company for improved operational efficiency and margin expansion. The manager expects these fundamental improvements to drive stock re-rating and multiple expansion relative to dental industry peers. Ariel appears to view current weakness as a temporary cyclical downturn rather than structural deterioration.

Pitch Summary:
Toy manufacturer, Mattel, Inc. (MAT), also traded lower in the period. Despite delivering a significant earnings beat, management maintained full-year guidance signaling a lighter-than-expected holiday outlook to investors. Nonetheless, we continue to expect MAT will gain share, improve profitability and generate higher levels of cash flow in this weaker retail environment. In our view, MAT remains an undervalued company with resilient consumer demand for toys such as Barbie, Hot Wheels and Disney Princesses, as well as an attractive opportunity for future film and TV projects.

BSD Analysis:
Ariel maintains a bullish view on Mattel despite recent stock weakness and conservative management guidance. The company delivered a significant earnings beat, demonstrating operational execution even in a challenging retail environment. While management's maintained full-year guidance suggests caution around holiday sales, Ariel believes this conservative approach may create opportunity for upside surprises. The investment thesis centers on MAT's ability to gain market share and improve profitability during industry weakness, leveraging its strong brand portfolio. Iconic brands like Barbie, Hot Wheels, and Disney Princesses provide resilient consumer demand and pricing power. The entertainment expansion opportunity through film and TV projects represents a significant value creation catalyst, as demonstrated by the success of recent Barbie movie initiatives. Ariel views current valuation as attractive relative to the company's brand strength and cash generation potential.

Pitch Summary:
Alternatively, shares of oil services company, Core Laboratories, Inc. (CLB), declined in the period on mixed earnings results. Despite contract delays and lower-than-expected activity in the U.S., CLB maintained solid profitability, delivering operating margin expansion. Although the ongoing geopolitical conflict between Russia and Ukraine, as well as associated European and U.S. sanctions, continue to disrupt the business and create near-term uncertainty, CLB is seeing progress in both onshore and offshore activity across its global operations. We have conviction in the management team's long history of delivering strong operating results, robust free cash flow and returning capital to shareholders.

BSD Analysis:
Despite near-term headwinds, Ariel maintains conviction in Core Laboratories based on the company's operational resilience and management track record. While the stock declined on mixed earnings and faced contract delays in the U.S., CLB demonstrated strong profitability with operating margin expansion, indicating effective cost management. The geopolitical disruption from the Russia-Ukraine conflict and associated sanctions create temporary uncertainty, but the company is showing progress in both onshore and offshore operations globally. Ariel emphasizes confidence in management's proven ability to deliver strong operating results and generate robust free cash flow across cycles. The company's history of returning capital to shareholders through various market conditions supports the long-term investment thesis. The manager appears to view current challenges as cyclical rather than structural, maintaining faith in CLB's fundamental business quality.