March 16, 2020

Opportunity Equity Update for Week Ended 3/13/20

GTY Technology Warrants Gain on Solid Q4 While Stich-Fix Falls on Lower Guidance

Last week, the Opportunity Equity strategy lost -19.02%, underperforming the S&P 500’s -8.73% decline (Exhibit 1). The strategy ended the week down -33.99% YTD, or 1,826 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 3/13/201

Time Period Opportunity Equity S&P 500
Last Week (3/6 – 3/13) -19.02% -8.73%
MTD -23.46% -8.13%
QTD -33.99% -15.73%
YTD -33.99% -15.73%
Inception (annualized since 6/26/00) 5.16% 5.25%

Source: Bloomberg, Miller Value Partners

Warrants of GTY Technology Holdings (GTYHW) rose as the company reported strong results with Q4 revenue of $12.0M (+31% Y/Y), in-line with consensus and brining FY19 revenues to $40.5M (+36% Y/Y). EPS of $(0.10) came in wider-than-expected of $(0.08). For FY20, management sees revenue of $57M-$63M (+48% Y/Y), as well as an increase in operating leverage leading to EBITDA and FCF improvement.

Exhibit 2: Significant Contributors to Performance, 3/6/20 – 3/13/20

Name Type Return
GTY Govtech Inc. – Warrant Equity 29.4%

Source: Miller Value Partners

Stitch Fix (SFIX) reported revenue of $452M (+22% Y/Y), in-line with consensus while EBITDA of $14.3M topped estimates of $13.2M. Active clients of 3.465M represents 49K net additions with growth accelerating to 17.0% Y/Y (vs 16.6% in the prior quarter). For FY20, management lowered revenue growth to 15%-17% (from 20.5%-22.5%) and reduced EBITDA to flat to $10M (from $18M-$32M), driven by increased promotional activity and customer acquisition costs. Credit Suisse maintained their Neutral rating on Tivity Health (TVTY) with an $11 price target, 250% implied upside from current levels following management meetings. Further, insider buying continued as board member Dr. Paul Keckley added 10,925 shares totaling $99,750. Lennar (LEN) fell below closely watched technical levels as Bank of America cut to Neutral (from Buy) with a $66 price target, 80% implied upside, noting that while the setup for homebuilders is positive, the overall demand side lacks visibility given the COVID-19 outbreak. Farfetch (FTCH) fell below its 100-day moving average. Flexion (FLXN) reported Q4 revenue of $23.7M (+148% Y/Y), in-line with their pre-announcement. Management reiterated prior FY20 revenue guidance of $120M-$135M.

Exhibit 3: Significant Detractors from Performance, 3/6/19 – 3/13/20

Name Type Return
Stitch Fix Inc. Equity -41.4%
Tivity Health Inc. Equity -59.2%
Lennar Corp Equity -27.0%
Farfetch Ltd Equity -24.9%
Flexion Therapeutics Equity -32.7%

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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