November 12, 2019

Opportunity Equity Update for Week Ended 11/8/19

Quotient Gains on 3Q Beat While Medifast Falls on 3Q Disappointment

Last week, the Opportunity Equity strategy rose 0.76%, underperforming the S&P 500’s 0.93% gain (Exhibit 1). The strategy ended the week up 25.04% YTD, or 48 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 11/8/191

Time Period Opportunity Equity S&P 500
Last Week (11/1 – 11/8) 0.76% 0.93%
MTD 2.99% 1.91%
QTD 10.65% 4.12%
YTD 25.04% 25.52%
Inception (annualized since 6/26/00) 7.14% 6.03%

Source: Bloomberg, Miller Value Partners

Quotient Technology Inc. (QUOT) crossed above the 100 and 200-day moving average after reporting 3Q results which beat. The company reported revenue of $114.8M ahead of consensus of $110M and EBTIDA of $13.6M beating the Street at $11.7M. QUOT announced that the current CFO, Ron Fior, will retire in 4Q and names Pamela Strayer as the new CFO. The company announced the purchase of Ubimo (a data activation company) and expects the acquisition to be accretive to EBITDA and positive to margins. The company guided to 4Q revenue of $107.4-111.4M below consensus of $114M with full year revenue of $425-429M with the midpoint in line with the street. 4Q EBITDA was guided to $9.3-11.3M below consensus of $12.6M with full year of $43-45M with the midpoint roughly in-line with the street at $44M. The company repurchased 1.3m shares for $14.6M. Teva Pharmaceuticals (TEVA) climbed over the week as it reported 3Q results. The company reported revenue of $4.26B beating the Street at $4.24B with a slight miss on EPS of $0.58 vs. $0.59 expected. The company modestly narrowed its full year guidance for revenue ($17.2-17.4B from $17-17.4B), operating income ($4.0-4.2B from $3.8-4.2B), EBITDA ($4.5-4.8B from $4.4-4.8B), EPS ($2.30-2.50 from $2.20-2.50), and FCF ($1.7-2B from $1.6-2B). Discovery Inc. (DISCA) crossed above the 100 and 200-day moving average after reporting 3Q results. The company reported revenue of $2.68B in-line with consensus with adjusted OIBDA of $1.13B above consensus of $1.07B due to a larger decline in opex from content synergies leading to EPS of $0.87, beating the Street at $0.82. The company repurchased $300M of Series C common stock. Eventbrite (EB) crossed above the 200-day moving average after releasing 3Q results. The company reported revenue of $82.1m vs. $76.6m expected with adjusted EBITDA of ($6.5)m beating consensus of ($6.9)M. Revenue per ticket was $3.05 above consensus of $2.97. The company announced that the Ticketfly migration was nearly done in-line with its October 1st target. Management guided for 4Q revenue of $75-79m with adjusted EBITDA of $(4)-0M compared to consensus of $76.5M in revenue and ($0.7)M in EBITDA. For the full year, management expects revenue of $319-323M vs. $315M expected and adjusted EBITDA Of ($5)-($1)M versus ($1.6)m expected. Qualcomm Inc. (QCOM) gained released FY4Q results which beat expectations. The company reported revenue of $4.8B ahead of $4.7B expected with EPS of $0.78 beating consensus of $0.71. The company’s guidance for the December quarter came in slightly below expectations on revenue at the midpoint but beat on EPS guidance at the midpoint. The company sees revenue of $4.4-5.2B ($4.8B midpoint) vs. $4.9B expected and EPS of $0.80-0.90 ($0.85 midpoint) vs. $0.83 consensus. Management expects to see a mid-teens sequential uptick in QTC revenue in the March quarter and QTL revenue of ~$1.1m.

Exhibit 2: Significant Contributors to Performance, 11/1/19 – 11/8/19

Name Type Return
Quotient Technology Inc. Equity 20.2%
Teva Pharmaceuticals Equity 11.4%
Discovery, Inc. Equity 13.4%
Eventbrite, Inc. Equity 14.2%
Qualcomm, Inc. Equity 12.5%

Source: Miller Value Partners

Medifast Inc. (MED) fell below the 50 and 100-day moving average after reporting disappointing 3Q results and lowered guidance. The company reported sale of $190.1M below consensus of $194.7M with EPS of $1.32 below consensus of $1.33. The company repurchased 225k shares and announced a new 2m share authorization (17% of shares). The company cited three sources of disruption that negatively impacted 3Q results including fraudulent e-commerce credit card transactions, issues with the technology platform migration and supply chain problems. The company guided for 4Q sales of $157-167 vs consensus of $202.4M with EPS of $1.03-1.13 versus consensus of $2.04. The company also announced the delay of the implementation of their new ERP system until 2Q20. The company expects all three issues to be resolved by year-end. Endo International (ENDP) fell over the week after reporting solid 3Q results while announcing the retirement of CEO, Paul Campanelli who will ascend to the role of Chairman. The company reported revenue of $729M beating consensus of $709M with EBITDA of $321M vs $311m expected and EPS of $0.60 vs. $0.53 consensus. The company narrowed their 2019 guidance range to revenue of $2.86-2.89B ($2.76-2.96 previously), EBITDA of $1.26-1.30B ($1.24-1.34B previously), and EPS of $2.10-2.25 ($2.00-2.25 previously). Flexion Therapeutics (FLXN) announced 3Q results which beat expectations. The company reported revenues of $21.8M, 29% sequential growth, beating consensus of $19.8M with EPS -$1 slightly below consensus of -$0.95. The company narrowed full year guidance to revenue of $70-75M from $65-80M previously with a midpoint of $72.5M ahead of consensus of $70M. Management announced the form discontinuation of the hip study. There was minimal news on Stitch Fix Inc. (SFIX) and Lennar Corp. (LEN).

Exhibit 3: Significant Detractors from Performance, 11/1/19 – 11/8/19

Name Type Return
Medifast, Inc. Equity -32.0%
Endo International plc Equity -10.2%
Stitch Fix, Inc. Equity -7.0%
Flexion Therapeutics Equity -5.6%
Lennar Corp Equity -5.1%

Source: Miller Value Partners


1The performance figures reflect the results of a representative account net of management fee and certain other expenses. For important additional information about Opportunity Equity performance, please click on the Opportunity Equity Composite Performance Disclosure. The performance returns shown in this report are preliminary and are subject to revision. Past performance is no guarantee of future results.

Significant Contributors and Significant Detractors are the Strategy holdings that had the greatest effect on Strategy performance for the week. Holdings that have been in the Strategy since the end of the most recent calendar quarter are identified by name. For information on how Contributor/Detractor data were calculated and a list showing the contribution to the Strategy’s weekly performance of each investment held at such quarter end, contact us.

Any views expressed are subject to change at any time, and Miller Value Partners disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results, and there is no guarantee dividends will be paid or continued. Content may not be reprinted, republished or used in any manner without written consent from Miller Value Partners.

©2019 Miller Value Partners, LLC

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