Investment Pitches

Pitch Summary:
The management team has a record of losing 6 out of 6 capital raising; the processing plants were built by an inexperienced team; the six-week power outage resulting in millions in loss was not disclosed; the factory launch has been delayed as usual; investors are misled; Update 11/15 - Follow-up report: Accepted the production shortfalls and multi-million dollar repair during earnings call; missed operational milestones; Update 12/20 - The follow-up report: Factory shut down and announced a 90-day cure period.

BSD Analysis:
PureCycle is commercializing a solvent-based recycling process for polypropylene. The short case stresses execution risk, technology scale-up challenges, and capital intensity. While the technology promises high-quality recycled resin, first commercial plants have been delayed and over budget. Customer offtake agreements exist, but they are contingent on successful scale-up. PureCycle continues to rely heavily on equity raises and incentives to fund capex. Competition from incumbents with integrated waste streams adds pressure. If commercialization hurdles persist, equity could compress as liquidity dwindles.

Pitch Summary:
Paywalled (The site mentioned: The Bear Cave believes the MOVEit hack is a national scandal hidden in plain sight affecting the privacy of tens of millions of Americans and compromising some of our most important government agencies.)

BSD Analysis:
Progress is a roll-up of infrastructure and developer tools (OpenEdge, Chef, MoveIt, etc.) with modest organic growth and steady cash generation. The investment case hinges on M&A discipline and integration: buy durable, slower-growth assets at reasonable multiples, strip costs, and maintain high maintenance/recurring revenue. The bear case: (1) low single-digit organic growth in core products leaves the model dependent on constant deal flow; (2) debt-funded acquisitions push up leverage just as the cost of capital rose; (3) security liabilities from MOVEit (2023 breach) introduce tail legal/settlement risk and potential pricing/renewal pressure; (4) portfolio complexity raises integration and focus risk—sales overlap is limited, and engineering resources are spread across many codebases. KPIs to watch: net retention, maintenance renewal rates, adjusted FCF after interest, and any uptick in cyber-related costs or litigation accruals.

Pitch Summary:
During the quarter, the Fund initiated an opportunistic position in Enzo Biochem (ENZ). I first began researching ENZ in March 2023, when the company announced that it had reached an agreement to sell its clinical lab business to LabCorp for nearly $150 million in cash, or approximately $3 per share. Just three weeks after announcing the pending sale, ENZ disclosed a cyber security breach, which forced the company to direct its customers to competitors until it was able to resecure its IT systems. ENZ shareholders rightfully got nervous that a potential material adverse change would jeopardize the deal. In July, ENZ announced that it agreed to accept a reduced price of $113 million for its clinical lab business and completed the sale, at which point I began accumulating a position for the Fund. Following the sale, the company is left with its life sciences business, which develops, manufactures, and sells a diverse portfolio of products used for drug development, clinical research, and diagnostics. The company has 475 patents focused on genomics, small molecules, antibody production, and tissue analysis. It makes 10k+ products in house at its Long Island facility and has access to an additional 200k products in the portfolio, where it manipulates or relabels them for resale. This life sciences business generates $15-20 million of annual gross profit which should translate into EBITDA of $5-10 million if run for cashflow. I believe the ultimate value of this business to an acquiror would be $50-150 million, or $1-3 per share. Besides the life sciences business, ENZ has nearly $1.50 per share of net cash and some outstanding liabilities including a class action suit related to the data breach and several disputes with its founder. There are three activists involved in ENZ, each owning just under 10% of the company, and each with a cost basis double the Fund's cost basis and current share price. One of them is on the board. I believe that they all want to clean up the outstanding liabilities and sell the company in 2024. Recently, ENZ appointed a new chairman with a long and impressive background, including the winding down and selling of subscale public companies. He seems well qualified to create a favorable outcome relative to the current share price, and I look forward to seeing how this investment plays out in the year ahead. While opportunistic investments don't normally make their way into the top five positions of the Fund, I believe that the large cash balance and activist involvement provide a large margin of safety, making the risk reward here especially compelling.

BSD Analysis:
The manager presents an opportunistic value play in Enzo Biochem following the divestiture of its clinical lab business for $113 million in cash. The remaining life sciences business represents a hidden gem with 475 patents across genomics, small molecules, and antibody production, generating $15-20 million in annual gross profit. The company's manufacturing capabilities include 10,000+ in-house products and access to 200,000 additional products, suggesting significant operational scale. With EBITDA potential of $5-10 million if optimized for cash flow, the manager estimates acquisition value of $50-150 million or $1-3 per share. The investment thesis is strengthened by $1.50 per share in net cash and three activist investors each owning just under 10% with cost bases double the current price. The recent appointment of a new chairman with experience in winding down and selling subscale public companies signals potential near-term catalysts. The combination of activist pressure, new leadership, and substantial cash provides compelling downside protection while offering meaningful upside through asset optimization or sale.

Pitch Summary:
SP Plus is the largest operator of parking lots and garages in the country. The company has, over time, transitioned largely to management contracts where it generates, on average, approximately $50k per location annually, to operate parking lots for its clients. While historically the company's location count was relatively flat, it recently experienced a significant acceleration in new business wins for two reasons. First, struggling real estate owners are increasingly looking for additional ways to monetize properties that were previously unmonetized. More importantly, SP has built a technological lead with its Sphere offering that allows garage owners to dynamically price their lots, reduce labor, allow for easier mobile payments, and monitor their location in real time. Thus, smaller competitors without such a technology offering have been bleeding share to SP at an accelerating rate. The Fund initiated its position in SP in the second quarter at a low-double-digit free cash flow multiple. During the third quarter, I significantly increased our investment in the company as I gained confidence that this acceleration in location wins was sustainable. In my conversations and in-person meetings with management, the company suggested it should keep taking share until the end of the decade, as smaller competitors are unable to keep up with the Sphere offering. Early on in Q4, SP announced that it had agreed to be acquired for a large premium. Given the regulatory risk associated with the completion of acquisition, the Fund exited its investment in the company.

BSD Analysis:
The manager presents a compelling bull case for SP Plus based on its dominant market position and technological differentiation. The company's transition to higher-margin management contracts generating $50k per location annually demonstrates a stable, asset-light business model. The key investment thesis centers on SP's proprietary Sphere technology platform, which enables dynamic pricing, labor reduction, and real-time monitoring capabilities that smaller competitors cannot match. This technological moat is driving accelerated market share gains as struggling real estate owners seek to monetize previously unmonetized properties. Management's confidence in sustained share gains through the end of the decade suggests a multi-year growth runway. The manager's decision to significantly increase the position during Q3 reflects growing conviction in the sustainability of this competitive advantage. The subsequent acquisition announcement at a large premium validates the investment thesis, though the manager prudently exited due to regulatory completion risk.

Pitch Summary:
Kneat.com Inc (KSI.TO) – Kneat is a company I have yet to publicly write about. The business is based out of Ireland, and led by the three founders, with Eddie Ryan serving as CEO, Brian Ahearne serving as CIO and Kevin Fitzgerald serving as CPO. At just around $225 million market cap, the company flies below the attention level for most institutional investors. Kneat is solving an interesting and costly problem, automating electronic validation workflow and document management for highly regulated industries. When a healthcare company manufactures a product, extensive testing is required to ensure an internal quality threshold is maintained. This testing is done across all processes on every machine and manufacturing line, throughout all systems of the company. The testing is routine and results must be captured, documented, and made available for regulatory audits. Most companies have to keep records for 20+ years and manage this process through carbon copies in physical form (and you thought your filing cabinet was a mess!). The stakes are high for these companies as a mishap of any form in the captured data, inadequate documentation, or ability to recall the captured results, pushes the company out of compliance. Kneat is the first end-to-end complete electronic solution that solves this problem and can be viewed across the entire company. Customers of Kneat can generate highly detailed, compliant reports in real time, with a complete audit trail for regulatory bodies such as the FDA. What makes Kneat specifically interesting is the system is built for data quality within the document and not just the document itself. Most validation systems rely on intake and upload into the system. Kneat validation is the system which not only reduces redundancy but maintains a higher level of data integrity. In addition, the functionalities being built within Kneat allow for data analytics that can incorporate insight from a company's legacy system (ie paper) as well as the new documentation going forward. Since landing its first customer (Biogen) in 2016, Kneat has gone on to corner the top 20 Global Pharmaceutical companies, now calling the majority their customers. The company has a first-mover advantage, with each additional customer providing further user proof of the product, and gateways into segmented suppliers and customers of the value chain. Kneat's beachfront into the market was Pharma, but the company is already being sought after by other life science companies, consumer packaged goods, and contract manufacturing organizations.

BSD Analysis:
The manager presents a compelling bull case for Kneat.com, a $225 million market cap software company addressing critical validation and compliance challenges in regulated industries. The company's end-to-end electronic validation platform solves a costly problem for healthcare manufacturers who must maintain extensive testing documentation for 20+ years to satisfy regulatory requirements. Kneat's differentiated approach focuses on data quality within documents rather than just document management, creating superior data integrity compared to traditional upload-based systems. The platform enables real-time compliant reporting with complete audit trails for regulatory bodies like the FDA. Since acquiring Biogen as their first customer in 2017, Kneat has successfully penetrated the majority of the top 20 global pharmaceutical companies, demonstrating strong product-market fit and creating network effects. The company benefits from first-mover advantage in a mission-critical application where switching costs are high. Market expansion beyond pharmaceuticals into life sciences, consumer packaged goods, and contract manufacturing organizations provides significant growth runway for this founder-led business operating below institutional investor radar.

Pitch Summary:
Judges Scientific PLC (JDG.L) - Across the pond, our U.K. company, Judges Scientific continues to execute well. As a reminder, Judges Scientific is a serial acquirer of high-quality scientific instruments. The company benefits from two strong tailwinds, the first being the growing global student population base, and the second being the worlds never-ending quest to optimize. The marketplace for scientific instruments is interesting. Intuitively you would expect a cyclical pattern as most institutions delay or forgo capital expenditures (ie sales for Judges Scientific equipment) during tough economic times. However, with scientific instruments, not having the latest and greatest instruments can quickly make a lab obsolete. If your equipment can only measure to 100 nanometers, but your competitor can measure to 1,000 nanometers, business often flows to the higher precision player. This dynamic creates an arms race of sorts where eventually delayed sales are recouped from prior budget cutbacks. The key as a manufacturer (or owner of multiple manufacturers) is staying relevant with new technology and equipment innovations, ready to fill orders when they come in. Last year David Cicurel and team pulled the trigger on the largest acquisition in the company's 21-year history, purchasing Geotek Ltd for £80 million. Geotek has been around for over 30 years and specializes in high-resolution, non-destructive analysis of geological cores. The company is a leader in its field with interesting applications and end markets such as nuclear waste depositories. This year, Judges Scientific continues to add to its moat of scientific instrument businesses with two purchases, Henniker and Bossa Nova Vision (BNV). Paying 4x EBIT, Henniker was purchased for £1.8 million and is a manufacturer of plasma deposition instruments. BNV was also purchased at 4x EBIT, but for $1.6 million. BNV manufactures imaging measurement instruments for the cosmetic industry and is complementary to Judges Scientific portfolio company Dia-Stron (which was purchased in 2016). Altogether, Judges Scientific now has 22 independent companies. Organic growth is ticking along at 16.2% year over year, once again proving the value in Mr. Cicurel strategy of patiently waiting to allocate capital to purchase higher quality businesses when available at reasonable prices.

BSD Analysis:
The manager maintains a bullish outlook on Judges Scientific, emphasizing the company's successful serial acquisition strategy in the scientific instruments sector. The investment benefits from two structural tailwinds: growing global student populations and the perpetual drive for optimization across industries. The scientific instruments market exhibits unique characteristics where technological obsolescence creates an "arms race" dynamic, making equipment upgrades essential rather than discretionary, which provides resilience during economic downturns. CEO David Cicurel's disciplined capital allocation approach is evidenced by the £80 million Geotek acquisition (the largest in company history) and recent bolt-on acquisitions of Henniker and Bossa Nova Vision at attractive 4x EBIT multiples. The portfolio now encompasses 22 independent companies with strong 16.2% organic growth, demonstrating both acquisition integration capabilities and underlying business momentum. The strategy of acquiring specialized, high-quality businesses at reasonable valuations while maintaining technological relevance positions Judges Scientific well for continued value creation in the fragmented scientific instruments market.

Pitch Summary:
Redishred Capital Corp (KUT.V) - Redishred continues to execute its business model while shares of the company take a pummeling from the market. What's driving the sentiment in share price? It's not the record quarter the business reported in August. The culprit seems to be the price of recycled sorted office paper, which is down a little over 50% compared to this time last year. The business model of Redishred allows for proceeds from recycled paper to drop to the bottom line. When prices for paper are high, Redishred benefits. When prices for paper are low, the company is more dependent on the core service offerings of shredding to generate profits. This characteristic isn't limited to just Redishred, it's present for most operators in the paper shredding industry. However, what is unique to Redishred that you won't find in other operators, is the company's active acquisition strategy. During the trough cycle of paper prices, independent operators feel equal pain of depressed cash flows originating from the lack thereof pricing for recycled paper. This allows Redishred to accelerate its consolidation of route territories as valuations normalize and sellers are more realistic about what prices they'll sell their business. In a way, Redishred has a counterbalance to the cyclical exposure of recycled paper exposure. The operations benefit when paper prices are high, and capital allocation benefits when paper prices are low. Higher paper prices equal higher profit margins. Lower paper prices equal faster growth of territory consolidation. The company has already made acquisitions in both New Jersey and Baltimore this year, and it would be surprising if at least one more acquisition wasn't completed by year-end. If we like the business of Redishred, there's another reason we should welcome the sell-off in share price. Back in May of this year, management announced a share repurchase plan of up to 10% of the total company. This gives management another lever in the capital allocation toolbox. There are some technicalities, because Redishred trades on the TSX Venture Exchange, the company is limited to purchasing 25% of the average daily trading volume. As of the current market price, the company trades well below a takeout value that similar businesses in the paper shredding vertical have fetched over the years. We'll hope private equity buyers aren't paying attention, as Redishred is much more appealing for us to own as a way to compound capital over the long run versus benefiting from a one-and-done special situation takeout.

BSD Analysis:
The manager presents a contrarian bullish view on Redishred despite recent share price weakness driven by a 50% decline in recycled paper prices. The investment thesis centers on the company's unique countercyclical capital allocation strategy that creates value during both high and low paper price environments. When paper prices are elevated, Redishred benefits from higher profit margins as recycling proceeds flow to the bottom line. Conversely, during paper price troughs, the company accelerates territory consolidation as independent operators face cash flow pressures and become more willing sellers at normalized valuations. Recent acquisitions in New Jersey and Baltimore demonstrate this strategy in action, with additional deals expected by year-end. Management's 10% share repurchase authorization provides another capital allocation tool, though execution is limited by TSX Venture Exchange trading volume restrictions. The manager views current valuation levels as attractive relative to historical takeout multiples in the paper shredding industry, preferring long-term ownership over potential private equity acquisition scenarios.

Pitch Summary:
Constellation Software Inc (CSU.TO) - Outside of Copart, our shares of Constellation Software have been the best performers of the year. However, it's the progress of Constellation Software's acquisition machine that we should be excited about. Constellation Software continues to defy the gravitational rules of modern-day capital allocation. As of September, CSU has deployed over $2 billion on acquisitions this year, exceeding the $1.7 billion total last year. The company is showing agility, completing deals as large as a quarter of a billion dollars and as small as one million. If you look closely at your account you'll notice a funny little ticker that goes by "CSU.WTS." These are rights issued to CSU shareholders for a CSU debt instrument. Mark Leonard has always championed priority for the CSU shareholder base to have first participation in capital raises offered by the company, which is why we were given these rights. The debt that these rights entitle one to are hybrid instruments that offer 6.5% plus the overall change in inflation. To our applauds as equity owners, the debt requires no asset pledges, no covenants, and should it be needed, CSU can stop paying interest on the debentures. You may be asking why would someone would want to hold these debt instruments. For debt investors CSU offers an attractive diversified cashflow stream along with the same tenants we're fond of as equity investors of the company. As to the value for us, these rights trade about at the cost of what it would take for us to liquidate them. Considering we only deal with equity at this moment, we'll let our rights expire and take pleasure in knowing the debt raise is likely indicative of confidence the Constellation team has in continuing to deploy capital in the acquisition machine, and at such high rates of return.

BSD Analysis:
The manager maintains a bullish stance on Constellation Software, highlighting the company's exceptional capital allocation prowess. CSU has deployed over $2 billion in acquisitions in 2023, surpassing the previous year's $1.7 billion total, demonstrating remarkable scalability in their acquisition strategy. The company's ability to execute deals ranging from $1 million to $250 million showcases operational flexibility and market opportunity depth. The issuance of shareholder rights for debt instruments reflects management's shareholder-friendly approach and confidence in future capital deployment opportunities. The hybrid debt structure (6.5% plus inflation adjustment) with no asset pledges or covenants provides financial flexibility while maintaining attractive returns for debt investors. The manager views the debt raise as a positive signal of management's confidence in sustaining high-return capital deployment through their proven acquisition machine. This reinforces the investment thesis around CSU's unique ability to compound capital at superior rates through disciplined vertical market software acquisitions.

Pitch Summary:
BCI Minerals Ltd (BCI) announced that credit approvals for the $981 million of project finance required for the Mardie salt project have been received from all key debt providers. All facilities remain conditional on formal documentation, securing required tenure and approvals for the optimised feasibility study area, equity funding, offtake arrangements, and satisfying other customary conditions associated with the loans. We expect an update from BCI on the required equity funding before year end. As reported in the company's September quarter production report, the construction of the Mardi project and its associated infrastructure continues to progress, with first salt shipments in 2026 coinciding with an expected shortage in the global salt market.

BSD Analysis:
Sandon Capital presents BCI Minerals as a compelling development story positioned to capitalize on anticipated global salt market tightness. The company has secured critical project financing approvals for $981 million, representing a major de-risking milestone for the Mardie salt project. While several conditions remain including formal documentation, tenure approvals, and equity funding, the debt approval demonstrates lender confidence in the project economics. Construction progress continues on schedule with first salt shipments targeted for 2026, strategically timed to coincide with expected global salt supply shortages. The timing alignment between project completion and market fundamentals suggests strong pricing power potential at project startup. Equity funding requirements remain the key near-term catalyst, with management expected to provide updates before year-end. The project represents significant scale with substantial capital requirements, indicating meaningful production capacity upon completion. BCI appears well-positioned to benefit from favorable salt market dynamics while executing a large-scale development project.

Pitch Summary:
COG provided a strong 1Q trading update with unaudited 1Q FY24 NPATA increasing 19% on the pcp. The encouraging results were driven by the Novated Leasing segment which is experiencing continued organic growth and also benefiting from the recent acquisition of Paywise. The Funds Management & Lending segment has seen temporary margin squeeze on historical originations, however margins are expected to recover over time. Towards the end of the month, the press reported that COG had made a non-binding indicative offer (NBIO) to acquire Diverger Ltd (DVR), a provider of services to financial advisers and accountants, including back-office support to AFSL licensees and dealer groups. DVR had previously entered into a Scheme Implementation Deed with Count Ltd (CUP) and it remains to be seen if COG's NBIO will be sufficient to entice DVR into the arms of an alternative suitor.

BSD Analysis:
Sandon Capital views COG Financial Services as a well-positioned growth story in the Australian financial services sector. The company delivered strong Q1 FY24 results with 19% NPATA growth, driven primarily by the expanding Novated Leasing segment benefiting from both organic growth and the Paywise acquisition. While the Funds Management & Lending segment faces temporary margin pressure on historical originations, management expects margin recovery over time as the portfolio reprices. The potential acquisition of Diverger represents strategic expansion into financial advisory services, though execution remains uncertain given competing bids from Count Ltd. COG's diversified revenue streams across novated leasing and funds management provide defensive characteristics while maintaining growth optionality. The Novated Leasing business appears particularly well-positioned given favorable tax treatment and growing corporate adoption. Strong operational momentum combined with strategic acquisition opportunities suggests continued earnings growth potential. The company's established market position and recurring revenue characteristics support the positive investment thesis.

Pitch Summary:
CYG reported that 1Q24 earnings continued the growth trajectory seen over the past 6 years, with revenue up ~6% and EBITDA up ~11%, each on the prior corresponding period (pcp). Encouragingly, the company is starting to display positive operating leverage, with earnings now growing faster than revenues. This has been a long time coming and is a function of two things: (i) the improved service proposition allowing the company to raise prices (sell side), and (ii) the increased size of the company allowing it to extract better prices and working capital terms from its suppliers (buy side). The earnings growth looks set to accelerate, with EBITDA in the month of September up ~27% on the pcp and the company pointing to an improving run-rate from the buy side and sell side initiatives in the December quarter. CYG's EBITDA margins have remained relatively stagnant at ~4.6 - 4.8% over the past 3 years. We expect this margin to accelerate towards the company's 10% target over the next 3 years, assuming end markets remain accommodative.

BSD Analysis:
Sandon Capital highlights Coventry Group's inflection toward meaningful operating leverage after years of scale building. The company demonstrates accelerating earnings growth with Q1 FY24 EBITDA up 11% versus 6% revenue growth, indicating improved operational efficiency. September EBITDA growth of 27% year-over-year suggests momentum is building through dual-sided margin expansion initiatives. The improved service proposition enables pricing power on the sell-side, while increased scale drives better supplier terms and working capital optimization on the buy-side. Current EBITDA margins of 4.6-4.8% remain well below the company's 10% target, providing substantial expansion runway over the next three years. This represents a classic scale story reaching operational maturity, where incremental revenues flow through at higher margins. The six-year growth trajectory appears to be entering an acceleration phase driven by operational leverage. Assuming stable end markets, significant margin expansion potential creates compelling value creation opportunity.

Pitch Summary:
MFG continues to demonstrate the need for a change in strategy. Its shares declined ~30% for the month after reporting a larger than expected decline in funds under management (FUM) in September 2023. Later, the company announced that David George, MD & CEO, would be stepping down from his role immediately. Andrew Formica has become Executive Chairman while the company undertakes a search for a new CEO. This change in management is an opportune time for the Board to undertake a strategic review, particularly given the improved funds management skill-set of the "new" Board. The outcomes of such a review should then inform the Board of exactly the type of CEO that is needed at MFG. A first strike on the Remuneration Report at the upcoming AGM would also send a clear message that shareholders will not tolerate misaligned and excessive CEO remuneration in future. The continued outflows in FUM are disappointing. Despite the continued decline, the value of the company's non-operating assets – cash, fund investments and associate investments – has remained stable. We estimate these assets currently comprise ~$5.60 per share of value, or >80% of the current share price. This implies a value for the funds management business of approximately $250 million. This situation is clearly not tenable. The market is sending a message of no-confidence to the Board. We maintain that a strategy that prioritises the existing business and its clients combined with aggressive capital management is the best way to balance the interests of MFG clients and shareholders. We consider such an approach would regain the trust of MFG's clients and shareholders, both of whom are crucial to restoring value. For now, our campaign will continue to push the company to return the bulk of these non-operating assets to shareholders, rather than seeing them directed towards acquisitions, which are likely to fail to deliver on expectations.

BSD Analysis:
Sandon Capital presents a classic activist value play in Magellan, targeting a deeply discounted asset manager trading below net asset value. With non-operating assets worth approximately $5.60 per share representing over 80% of the current share price, the core funds management business is valued at only $250 million despite continued operations. The recent CEO departure creates a strategic inflection point for the new board to implement necessary changes. Sandon advocates for aggressive capital management, prioritizing existing client relationships over value-destructive acquisitions. The activist campaign focuses on returning excess capital to shareholders while rebuilding operational credibility. Despite ongoing FUM outflows reflecting operational challenges, the substantial asset backing provides significant downside protection. The manager views current market pricing as unsustainable, creating an asymmetric risk-reward opportunity. This situation exemplifies classic activist investing where governance improvements and capital allocation changes can unlock substantial shareholder value.

Pitch Summary:
FWD held its AGM in late October with the trading and outlook commentary pointing to continued improvement in the business. The turnaround in Building Solutions continues to gain traction with the order book growing ~12% since 30 June 2023, adding to the ~50% growth from 31 December 2022. With the business now focused on standardised, repeatable work and the benefits from the national procurement strategy starting to flow, we are expecting a significantly improved result from the Building Solutions segment in FY24. Community Solutions is benefiting from a strong demand environment and rising room rates which should translate to further improvement in segment earnings in FY24, after the 23% growth seen in FY23. Demand for products in RV Solutions is expected to moderate, however price increases implemented to recover last year's rising costs are expected to lead to improved margins and earnings for this segment in FY24.

BSD Analysis:
Sandon Capital presents a compelling turnaround thesis for Fleetwood, highlighting significant operational improvements across all business segments. The Building Solutions division shows strong momentum with order book growth of 12% since June 2023, building on 50% growth from December 2022, driven by standardization and procurement efficiencies. Community Solutions benefits from favorable market dynamics with rising room rates and strong demand, following 23% earnings growth in FY23. While RV Solutions faces moderating demand, implemented price increases should drive margin expansion and offset volume declines. The manager expects significantly improved FY24 results across all segments, supported by operational restructuring and favorable market conditions. This multi-segment recovery story appears well-positioned for continued earnings growth. The AGM commentary reinforces management's confidence in the turnaround trajectory.

Pitch Summary:
Creative Realities is a digital signage installer and digital signage software operating system. Creative Realities has completed two major acquisitions since 2019 (Reflect Systems in 2022 and Allure in 2019) to build a digital signage software offering that includes a robust suite of software for managing digital signage. Creative Realities offers software solutions, including ReflectView for digital signage management, Clarity for digital menu board management, and Reflect AdLogic for managing advertising on digital signage. Creative Realities has historically only sold their software on screens that they install, but that is beginning to change. Due to the breadth and quality of their software offering, they are beginning to ramp up a channel sales program to allow other digital signage installers to offer their software. This will likely begin as a very small opportunity for Creative Realities, but the gross margins on their software sales (likely ~70–80 margins) are much higher than their core hardware sales (~40%), so from a business model perspective, it could be transformative. The current SaaS business is operating at an annual recurring revenue (ARR) of $15.2 million as per the Q2 earnings report, which has been steadily growing over the past few quarters. As they install new sites, their software ARR will continue to grow, with around 5% of the spend from installation converting into increasing software ARR. If they can deliver $120 million of backlog installations over the next two years, their ARR should be over $20 million per year at the end of the period. Outside of the normal ARR from software operating licenses, they have several areas in which they can expand their ARPU per installed display, including content design, ad delivery, and interactive functionality. Creative Realities operates in two segments: hardware sales and services and software. Hardware sales include all of the display sales and installation costs associated with installing new digital displays. Services and software sales include engineering, design, content, ad exchange fees, and software licenses via a SaaS model. The hardware business is largely a commodity business, as they are simply resellers and installers of the OEM's hardware. The services and software business is the higher margin portion of the business, which is where the company is planning to gain leverage in their business model. The entire services and software business operates at a 60% gross margin, but we estimate that the SaaS portion of this business operates at a very high gross margin of 70–80%. The space for digital signage is a highly competitive business, but within each category, the competition differs. For example, in digital menu signage, Creative Realities competes largely with smaller local or regional digital signage installers, but in retail or entertainment signage, they compete with larger competitors like Stratacache and MagicInfo. Creative Realities is a top 10 digital signage installer (7th by licenses) based on industry research the company provides from the Invidis 2023 Yearbook. The company's offering has all the elements of a complete offering, including installation, design, operating software, and an advertising platform. Their complete solution has contributed to significant customer wins in the last 24 months. In 2022 and 2023, the company won three major customers: Panera Bread, Starlight Media, and Strike Ten Bowling/Bowling Proprietors Association of America (BPAA). These deals are a significant win for the company and highlight their total offering strength. In terms of the number of digital displays for each win, Panera is forecast at 2,000 sites, Starlight Media is forecast at up to 6,000 media assets, and the Bowling deal will evolve over time, but expectations are at least 250–500 sites. These three larger deals will be delivered over the course of the next few years, with the bowling delivery just starting in October of this year after a significant delay due to third-party equipment delays. The current backlog of the company is $120 million, which they believe they can deliver on over the next two years. Creative Realities is a unique situation in which the company has built a solid platform for their industry vertical and sold that offering to major customers. All that is waiting for the company now is to execute on those sales, which are largely based on them getting access to sites and availability of third-party equipment. The stock is extremely cheap at this level, trading at 4.4x EV/NTM EBITDA estimates. The company has a sizable portion of their EV in debt, providing the equity significant upside if they can deliver. We currently believe the business is worth $5.6 per share or a 201% upside to the current market price of $1.85 per share, which rests purely on them delivering on already sold projects and considers no new major sales wins or the potential to expand their software business through channel partnerships.

BSD Analysis:
Deep Sail Capital presents a compelling turnaround thesis for Creative Realities, a digital signage company transitioning from a hardware-focused model to a higher-margin SaaS business. The manager highlights the company's strategic acquisitions of Reflect Systems and Allure, which have created a comprehensive software suite including ReflectView, Clarity, and Reflect AdLogic. The investment thesis centers on the transformation potential as Creative Realities expands beyond captive software sales to channel partnerships, dramatically improving margins from 40% on hardware to 70-80% on software. With $15.2 million in current ARR and major customer wins including Panera Bread (2,000 sites), Starlight Media (6,000 assets), and bowling partnerships, the company has secured a $120 million backlog for delivery over two years. The manager sees significant value at 4.4x EV/NTM EBITDA, projecting a $5.6 target price representing 201% upside. The pitch emphasizes execution risk as the primary concern, with success dependent on delivering existing contracts rather than securing new business. Recent corporate governance issues with largest shareholder Pegasus Capital and equity dilution represent near-term headwinds, but the manager views current levels as an attractive entry point for a business model transformation story.

Pitch Summary:
The Fund's largest position is First Citizens Bancshares ("First Citizens" or "FCNCA"). We acquired our stake over the past three years. Initially, we owned and traded around a small position in CIT Group Inc. ("CIT") during the summer of 2020. We felt CIT was undervalued and management was making progress in reducing risk during the Covid-19 pandemic. In late 2020, CIT agreed to be acquired by First Citizens. We added to our CIT stake the morning of the acquisition announcement because we thought the acquisition was so financially attractive that First Citizens' shares would rally and pull CIT's shares higher. Our CIT shares were exchanged for First Citizens shares when the merger completed. We held onto our First Citizens shares because we admired the management team, we felt the bank was undervalued, and we projected the bank would benefit from higher interest rates. Then, earlier this year, First Citizens was the winning bidder in the FDIC's auction of the failed Silicon Valley Bank ("SVB"). We added significantly to the Fund's First Citizens position on the following Monday morning because the deal was unbelievably favorable for First Citizens. First Citizens's stock price rose more than 50% that day and has risen another 40% in the months since the SVB acquisition. We have not sold any shares. We believe the stock still has the potential to double over the next three years. Despite this attractive upside, we think the downside is minimal. Our downside scenario is an unchanged stock price in three years. Here is our detailed investment thesis for First Citizens: FCNCA trades at a discount to other large regional banks on a Price-to-Tangible Book value ("P/TBV") basis. It also trades at a slight discount on a Price-to-Earnings ("P/E") basis looking at sell-side 2024 earnings estimates. Usually when a bank trades at a discount to peers on a P/TBV basis, it is because it has lower returns than peers. At first glance this appears to be the case with First Citizens. It is projected to earn a 14% Return on Equity ("ROE") in 2024 where its peers are projected to earn higher ROEs. However, when we adjust for the excess capital that First Citizens is holding, we believe it has a ROE similar to its peers and does not deserve to trade at a discount. We believe there are other possible reasons why First Citizens trades at a discount to its peers. The main reason is it is not a member of the S&P 500 Index, so it does not have the demand from passive index investors. Other minor reasons for First Citizens' valuation discount are a lack of familiarity within the investment community due to limited but growing sell-side coverage, not hosting quarterly earnings conferences calls until recently, not attending brokerage investment conferences, high nominal stock price and limited trading volume, and a low dividend compared to peers. One additional unusual reason for the valuation discount is the dual-class share structure of First Citizens Bank. The Holding family controls the Class B voting shares. This dual-class structure may discourage some investors from owning the stock. We disagree with this thinking. First, the Holding family has demonstrated an extraordinary commitment to shareholder returns. First Citizens is the best performing stock of its peer group over the last 30 years. We view the Holding family as owner-operators. We note that many of the best performing stocks have had owner-operators: Berkshire, Microsoft, Amazon, etc. There is data that proves companies with owner-operators outperform because management is able to focus on long-term value creation. We think this applies to the Holding family controlling First Citizens. Another criticism of the dual-class share structure is the difficulty in applying outside pressure to gain voting control and/or board seats. I believe this is a non-issue for banks. The difficulty of a hostile takeover in banking is high. There hasn't been a successful hostile takeover of a bank since Bank of New York acquired Irving Trust in 1988. Plus, the regulators limit ownership levels of banks before an investor has to register as a Financial Holding Company. Overall, we see the First Citizens dual-class share structure as a non-issue. First Citizens' stock outperformance in 2023 may be distracting some investors from the potential returns still offered by the stock. First Citizens' stock has returned 78% this year. Its peers have had negative returns between 20% and 35% this year. We know it is natural for investors to say, "We missed it," when a stock has performed like First Citizens' stock has. The last thing these investors want is to buy First Citizens after the run and have it underperform once they buy it. In other words, they don't want to be wrong twice on the stock. As we will discuss below, we believe there is significant downside protection in First Citizens because of the defensive nature of its balance sheet. First Citizens has a very liquid balance sheet, which is perfect for the current environment. For example, First Citizens has 17.6% of its assets in cash compared to Truist at 5.6%. This liquid balance sheet gives First Citizens plenty of opportunity to take advantage of the wider loan spreads available in the current environment. The extra liquidity also reduces pressure to pay up for deposits. The high cash balance is the best indication that shareholders have a measure of protection from First Citizens' balance sheet. First Citizens' balance sheet is defensive and well-positioned for growth. The bank has almost no borrowings beyond the $35 billion FDIC note that has a five year term. First Citizens' management did not invest in long-dated fixed rate securities, so unlike many other banks, it is not carrying a portfolio of underwater bonds. Also, First Citizens loan book is balanced between floating-rate and fixed-rate loans. This balance was created through the strategic acquisitions of CIT and SVB. The CIT franchise produced excess loans and the legacy SVB franchise produced excess deposits. We believe First Citizens is positioned well for the current consensus outlook for rates of "Higher for Longer". Investors are not assuming any growth at First Citizens based on its stock price trading just above tangible book value. Based on sell-side models, expectations are for minimal growth in First Citizens's legacy banking operations and that SVB will shrink going forward. We think this is wrong because we think prospects for the former SVB operations are strong. Certainly, the SVB franchise is diminished as several business development personnel have been poached by competitors. We think multiple competitors are targeting the venture capital community. The current environment in the venture capital community is not ideal, but SVB was a powerful growth franchise. To offset these concerns, we note that the current deposit balances at SVB are already down close to 80% from year-end levels. So, we believe customers who want to leave SVB have already left. Also, we believe there is substantial goodwill within the venture capital community for SVB. SVB is intertwined with the venture community and continues to have strong relationships with the community. Lastly, we believe venture capital as an industry will grow faster than the overall economy. We think there is a good chance that SVB will continue to grow under First Citizens ownership. At the current valuation, we view this growth potential as a free option. Regional banks as a group may re-rate higher. In addition to First Citizens trading at a discount to peer large regional banks, we believe regional banks trade at the low end of their historical valuations. Large regional banks trade for about 7.4x 2024 EPS estimates, we believe the normal valuation for this group is between 10x and 14x. We understand that at this point in the cycle banks should trade cheap, but time marches on and cycles can change quickly. We expect the group multiple to re-rate higher as the industry works through higher interest rates and the credit cycle peaks. We think First Citizens is still an attractive holding despite its outperformance to date in 2023. We estimate First Citizens' tangible book value will be $1,800 at the end of 2026. We think FCNCA can trade at 1.5x tangible book value at the end of 2026 or $2,700, which is double the current share price.

BSD Analysis:
Gator Capital presents a compelling bull case for First Citizens Bancshares, built on the transformative Silicon Valley Bank acquisition and strong fundamental positioning. The manager's thesis centers on FCNCA trading at a discount to regional bank peers (1.04x P/TBV vs 1.39x median) despite having similar adjusted ROE when accounting for excess capital. The SVB acquisition provides significant upside optionality, with the manager viewing the venture capital franchise's growth potential as a "free option" at current valuations. The bank's defensive balance sheet characteristics are particularly attractive, including 17.6% cash-to-assets ratio, minimal borrowings beyond the favorable FDIC note, and balanced floating/fixed-rate loan exposure. Management's owner-operator structure under the Holding family provides long-term value creation focus, evidenced by 30-year outperformance versus peers. The manager projects tangible book value reaching $1,800 by 2026, supporting a $2,700 price target (double current levels) at 1.5x P/TBV multiple. Key risks include potential aggressive Fed rate cuts given asset sensitivity, regulatory capital requirement increases, and SVB integration challenges amid competitive pressures in the venture capital banking space.

Pitch Summary:
MarineMax (HZO) operates a vertically integrated boat and yacht company with manufacturing, retail sales, financing, insurance, all the way down to maintenance and storage operations. The company has a strong portfolio of marinas and is in a great position to be able to roll up additional retailers, marinas, and storage facilities. I do wish the company would provide more information on its capital allocation strategy and how it thinks about the decisions to target retailers, real estate/marinas, or share repurchases. This would provide foresight for investors and keep management accountable for decisions. RCI Hospitality has a capital allocation strategy slide mentioned earlier in this letter, that is the type of thing I would love to see from MarineMax. I will attempt to bring this up to management. Until I can gather more information about the capital allocation strategy this will remain my lowest conviction holding but trading at just 3x cash with a strong position in the high margin/high cost segments of the boating industry I like the entry point.

BSD Analysis:
The manager presents a cautiously optimistic view of MarineMax, highlighting its comprehensive vertical integration across the marine industry value chain from manufacturing to aftermarket services. The investment appeal centers on the company's strong marina portfolio and consolidation opportunities in a fragmented market of boat retailers, marinas, and storage facilities. However, the manager expresses significant concern about management's lack of transparency regarding capital allocation priorities, specifically how they evaluate opportunities between acquisitions, real estate investments, and share repurchases. This uncertainty has resulted in HZO being the manager's lowest conviction holding despite attractive valuation metrics. Trading at just 3x cash with exposure to high-margin, premium segments of the boating industry provides a compelling entry point. The manager plans direct engagement with management to address capital allocation transparency, suggesting active ownership approach. The neutral stance reflects the tension between attractive valuation and operational positioning versus management communication concerns.

Pitch Summary:
Drive Shack (DSHK) is a unique and innovative leisure and entertainment company that offers guests an immersive experience through its state-of-the-art driving ranges, golf courses, and now, its latest offering – The Puttery mini-golf venues. The company has gone through major disruption and changes in the last year, with its delisting and the appointment of a new CEO and CFO. The last quarter it was able to report its first profit as predicted with the addition of a couple recent Puttery venues. I will be watching closely as the next few quarters should either serve as a foundation for lift off or present the pitfalls to bankruptcy. I believe the upside is extremely high from this point and the likelihood of the company stabilizing presents a great asymmetric risk/reward opportunity moving forward.

BSD Analysis:
The manager presents Drive Shack as a high-risk, high-reward turnaround opportunity in the leisure entertainment space. The investment thesis is built around the company's innovative concept combining state-of-the-art driving ranges, golf courses, and The Puttery mini-golf venues to create immersive guest experiences. Recent operational progress is evidenced by the company achieving its first quarterly profit, driven by new Puttery venue additions. However, the manager acknowledges significant execution risk, noting the company's recent delisting and management changes, with new CEO and CFO appointments. The binary nature of the investment is explicitly recognized, with the next few quarters being critical in determining whether the company can build on its recent profitability or face potential bankruptcy. The manager's conviction stems from the asymmetric risk/reward profile, where successful stabilization could generate substantial returns from current depressed levels. The entertainment golf concept differentiates DSHK in the competitive leisure market, though operational execution remains the key investment variable.

Pitch Summary:
The fund's top position is RCI Hospitality (RICK). RICK is the only publicly traded owner of adult nightclubs in the US. Currently they own 56 clubs across 13 states and an additional 13 sports-bar restaurants with the "Bombshells" concept that has recently begun franchising. With few municipalities issuing new adult entertainment licenses these businesses function as local monopolies with excellent unit economics. The Bombshells segment works well as an alternative investment if no attractive acquisitions are available, and the share price is trading higher than the repurchase target range. The stock has seen a large drawdown of 40% from its highs in the 90s earlier this year. The company has estimated its FCF for FY24 to be in the $68M-$78M range and provided the slide below in its Q2 earnings presentation. With the stock trading at $52 at the time of writing, it is well under the lowest presented buyback target price in the range of $72-83. This represents greater than a 10% conservative cashflow yield since the company targets a min 10% FCF yield for repurchases, and the stock is substantially under this target. The market seems to have reacted negatively to the recent same-store sales comparisons and economic outlook. The same-store sales comparisons are negative when compared to the post Covid bounce period. With all segments profitable and a clear capital allocation strategy, RICK continues to be my top pick for the next 5-10 years.

BSD Analysis:
The manager presents a compelling bull case for RCI Hospitality based on its unique market position as the only publicly traded adult nightclub operator in the US. The investment thesis centers on the company's local monopoly characteristics, driven by restrictive municipal licensing that creates significant barriers to entry. With 56 clubs across 13 states plus 13 Bombshells sports-bar restaurants, RICK has built a diversified portfolio with strong unit economics. The manager highlights an attractive valuation opportunity, with shares trading at $52 versus management's buyback target range of $72-83, implying over 10% free cash flow yield. Despite recent same-store sales headwinds and a 40% drawdown from highs, the manager maintains conviction based on profitability across all segments and management's disciplined capital allocation framework. The 5-10 year investment horizon suggests confidence in the business model's durability and cash generation capabilities. The Bombshells concept provides additional growth optionality through franchising while serving as a capital deployment alternative when acquisition opportunities are scarce.

Pitch Summary:
Esperion, an old holding for the Jacob Fund family, has fallen on tough times trying to market its FDA-approved cholesterol reduction drugs over the past several years. However, if anything, the science behind the importance of reducing one's LDL cholesterol has only gotten more solid, as evidenced in part by the terrific long-term outcomes study the company performed for its lead drug, marketed commercially as Nexletol. That CLEAR study, which showed Nexletol can reduce the risk of heart attacks and other serious cardiovascular events by 20%, has led to more momentum for the product, solidifying its place in the treatment armamentarium for cardiologists. Using data from that study, Esperion is seeking a broader, more expansive label for its product, both here in the US and in the EU, which would likely lead to even more product momentum. Meanwhile, Esperion and its EU partner Daiichi Sankyo are tied up in a legal battle for more than $200m in potential milestones. A legal victory (or more likely settlement) would solidify the company's balance sheet as it moves toward profitability. Recently, we have been adding to names of extremely beaten-down biotech companies with approved, solid assets that we think will either increase sales momentum for them to reach standalone profitability, or more likely, be acquired by larger pharmaceutical companies, and Esperion fits that bill very nicely.

BSD Analysis:
Jacob Asset Management presents a turnaround thesis for Esperion Therapeutics, viewing the company as an undervalued biotech with validated science and approved assets. The investment case hinges on the strong clinical data from the CLEAR outcomes study, which demonstrated Nexletol's ability to reduce cardiovascular events by 20%, providing compelling evidence for cardiologist adoption. The manager expects label expansion in both US and EU markets to drive increased product momentum and commercial success. A significant catalyst exists in the form of a $200+ million legal dispute with EU partner Daiichi Sankyo, where a favorable resolution could substantially strengthen the balance sheet. Jacob's strategy focuses on acquiring beaten-down biotech names with approved drugs that face binary outcomes: either achieving standalone profitability through improved sales execution or becoming acquisition targets for larger pharmaceutical companies. The firm's familiarity with Esperion as a previous holding suggests confidence in the underlying asset quality despite recent commercial struggles.

Pitch Summary:
Over the last several years, SoFi Technologies has evolved from a primarily student lending platform to a financial services one-stop shop and tech platform allowing for a broad range of financial products. With now over 6 million customers, SoFi has focused on younger consumers that are early in their financial lives and just beginning to utilize different products and services to meet their financial needs. With highly sophisticated methods to price risk, SoFi has been able to offer very competitive rates on both loans and deposits, with the goal of developing a broad long-term relationship with their customers. With the 3-year-plus moratorium on student loan payments ending soon, Sofi has an excellent opportunity to assist with the expected refinancing activity that is likely to begin. It is estimated that roughly $200 billion of the $1.5 trillion student loans outstanding are at rates higher than are currently available. Additionally, as the interest rate yield curve continues to normalize, SoFi should benefit from expanding net interest margins going forward. Even though SoFi's growth over the last few years has already been impressive, they have indicated that they will continue their aggressive marketing as margins expand to help achieve their goal of becoming a top 10 financial institution.

BSD Analysis:
Jacob Asset Management presents a compelling bull case for SoFi Technologies based on the company's successful transformation from a student lending platform to a comprehensive financial services ecosystem. The manager highlights SoFi's strategic positioning to capitalize on the end of the student loan payment moratorium, with an estimated $200 billion refinancing opportunity from loans currently priced above market rates. The thesis centers on SoFi's sophisticated risk pricing capabilities enabling competitive loan and deposit rates while building long-term customer relationships with younger demographics. The fund views the normalizing yield curve as a catalyst for expanding net interest margins, providing fuel for continued aggressive marketing investments. Management's ambitious goal of becoming a top 10 financial institution underscores the company's growth trajectory and market opportunity. The 6+ million customer base provides a solid foundation for cross-selling additional financial products. Jacob's conviction appears strong given the position's addition across multiple fund strategies simultaneously.