EQUITY RESEARCH REPORT | 07/01/19

NETFLIX, INC. Recommendation: HOLD (Ticker: NFLX) Rating: 5

POTENTIAL FOR RETURN RISK RATING

LIMITED SIGNIFICANT LOW HIGH 1 7

Industry: Entertainment Sector: Over-the-Top Media Stock Price: $367.32 (7/1/19) Jarvis Rank: 151

(Data as of 07/01/19 unless specified)

Enterprise Value: $168.4B Market Cap: $160.6B Sales: $15.8B Fwd (TTM) 8.67x Fwd (TTM) 7.90x Fwd EV/EBITDA: 13.3x EV/Sales: (11.10x) Price/Sales: (7.65x) 46.2% 4.7% Fwd (TTM) ROE: Fwd (TTM) ROA: RSI: 57.8 (27.4%) (5.4%) Insider Transactions: In the last 12months, insiders have sold a net of 1,076.3k shares

 WHY WE RATE NETFLIX A HOLD 1. Revenue increased from $11.7bn in FY 2017 to $15.8bn in FY 2018 (YoY growth: 35.0%) 2. The Company’s main source of revenue is its paid memberships, and there has been an increase in net additions in paid members from 21mn LB INSIGHT in FY 2017 to 28mn in FY 2018 3. Netflix is currently the biggest player in the Over-the-Top market An investment in Netflix is a play globally with a presence in 190 countries having nearly 90,000 minutes on the evolving entertainment industry, which is moving away of original content1 from linear media. Netflix leads in 4. The Company’s net income increased by ~$652.3mn from $568.9mn in the online streaming services;, FY 2017 to $1,211.2mn in FY 2018 however, the industry is a. EPS increased to $2.68 in FY 2018 from $1.25 in FY 2017 witnessing increased competition. Quality of the original content 5. Operates in a rapidly growing market that is projected to reach $332.5bn will act as a catalyst for future by 2025 growth. 6. However, competition in the OTT (Over-the-Top) media services industry is heating up as new competitors with deep pockets, like Apple TV+ and Disney+ are entering the market 7. Many popular Disney titles are set to leave the platform and will be available exclusively on Disney+ 8. Free cash flows have been declining for the last five years from -$127mn in FY 2014 to over -$3bn in FY 2018 as the company shifts its focus to more original content than licensed content 9. Licensing costs have shot up for popular shows like Friends and The Office and their contracts are going to elapse at the end of 2019 and 2020, respectively

1 https://qz.com/1505030/keeping-up-with-netflix-originals-is-basically-a-part-time-job-now/

“Seeking Stocks that can 1 Double in 2-3 Years” 0.94 EQUITY RESEARCH REPORT | 07/01/19

 SUMMARY OF THE BUSINESS AND THE INDUSTRY  Business2 The Company operates as an online media streaming company that primarily focuses on delivering movies and TV shows to viewers over the internet, while continuing its DVD-by-mail service in the US. The Company operates on a subscription-based model wherein the subscribers are given unlimited access to content available on the platform, inclusive of the original content from Netflix. The company has also partnered with manufacturers of various consumer electronic products, which include video game consoles, Blu-ray disc players, smart TVs, and smartphones to enable the streaming of its content on their devices. The company has expanded rapidly, and as a result, its content is available for online viewing in more than 190 countries across the globe currently.

The company derives its revenues from the following segments:

• Domestic Streaming o Operates the largest SVOD (subscription video-on-demand) service in the US, with over 60mn subscribers o The Subscriber growth rate is slowing down due to saturation in the domestic market o In Q1 2019 the company added a total of 9.6mn subscribers, of which only 1.7mn were from the US compared to 2.2mn in Q1 2018 • International Streaming3 o The international markets are the growth catalyst for Netflix currently, as is evident from the rapidly growing subscriber count. The company added a total of 7.8mn subscribers during the latest quarter o The company followed a phased globalization strategy, and in 2010 it entered the similar Canadian market, which was also geographically close, thereafter expanding to a vast number of geographies o Currently, the focus is on expansion in the Asian market, particularly India where the company aims to add close to 100mn subscribers in the coming few years • Domestic DVD4 o The company continues to operate its DVD-by- mail business, which has seen a downward trend since 2007 when the company launched its online video service o The subscriber count stands at nearly 2.6mn as of Q1 2019, and the segment is still profitable

LB•INSIGHT Netflix has huge potential for growth, the majority of it coming from international markets. The company can benefit immensely from the growing internet penetration in markets like India, where it plans to grow the subscriber base over 100mn in the next few years.

2 https://www.vox.com/2019/4/16/18410996/netflix-growth-international-earnings 3 https://www.cnbc.com/2018/11/08/netflix-to-expand-audience-across-asia-focus-on-india-not-china.html 4 https://www.fool.com/investing/2019/02/02/netflix-still-has-2700-stubborn-dvd-subscribers.aspx

“Seeking Stocks that can 2 Double in 2-3 Years”

0.94 EQUITY RESEARCH REPORT | 07/01/19

 Outlook/Estimates5 Q1 2019A Q1 2019E Q2 2019E Revenue $4,521.0mn $4,494.0mn $4,928.0mn Operating Income $459.0mn $400.0mn $616.0mn Income Per Share (Diluted) $0.76 $0.56 $0.55

 Industry/Competition The company operates in a growing market, which was valued at $97.4bn as of 2017 and is projected to reach $332.5bn by 2025 at a CAGR of 16.7%.6

Netflix competes with several other players operating in the global OTT (over-the-top) media services industry

• Amazon Video7,8 o Amazon Prime Video is the second largest service provider in the OTT media services industry, with a subscriber base that is estimated to be in the range of 26-30mn o The company has made the streaming service available in over 190 nations and territories o The company has never disclosed the exact number of users subscribed to Prime Video, but it reported in 2018 that there are more than 100mn people who use its umbrella subscription Prime, that bundles a range of services including fast delivery of goods o According to Forbes, Amazon Prime Video subscribers are expected to reach 56mn in the US alone and 122mn in total by 2022 o The Prime service has been the primary growth catalyst for Amazon to gain new subscribers in Japan, Germany, and the UK o The primary focus for Amazon has not been volume, rather for them it is more about quality over quantity

• Hulu o Hulu is an American SVOD service majority owned by Walt Disney Direct-to-Consumer & International o The platform has greatly expanded its content library, which helped it break the 25mn subscriber mark in January 2019, a ~50.0% YoY increase o Disney expects Hulu to reach as many as 60mn subscribers by 2024 o The current focus of the company is on securing more exclusive licensing rights and developing more original programming content to boost the viewership and drive growth in the subscriber base o Disney has plans to position Hulu as a platform for adult-oriented series and classic television shows, while the original Disney series will be streamed exclusively on Disney’s streaming service, Disney+, which is set to launch towards the end of 2019

5 https://s2.q4cdn.com/967921702/files/doc_financials/2019/Q4/Investor-Relations-(4Q19).pdf 6 https://www.alliedmarketresearch.com/over-the-top-services-market 7 https://venturebeat.com/2019/03/30/global-video-streaming-market-is-largely-controlled-by-the-usual-suspects/ 8https://www.forbes.com/sites/louiscolumbus/2018/03/04/10-charts-that-will-change-your-perspective-of-amazon-primes- growth/#17600ab3feea

“Seeking Stocks that can 3 Double in 2-3 Years”

0.94 EQUITY RESEARCH REPORT | 07/01/19

• Apple TV+9 o Apple announced its upcoming over-the-top ad-free SVOD web television service during their Apple Special Event on March 25th o The content will be available on Apple's TV app, which is scheduled to become accessible to numerous consumer electronics devices o The application will be available to iPhone, iPad, and Apple TV customers in over 100 countries o The platform will be aggregating content from more than 150 streaming apps including Amazon Prime and Hulu o Apple had allocated a budget of at least $1bn in 2018 and another $2bn in 2019 for buying and production of original video content o Apple’s video team is led by two ex-Sony Pictures execs, Jamie Erlicht and Zack Van Amburg, who both have shown such as Breaking Bad and Better Call Saul under their belt and worked at Sony for 20 and 15 years, respectively

• HBO Now10 o HBO Now is an American SVOD service operated by American premium cable and satellite television network HBO o The service allows subscribers on-demand access to HBO's library of original programs, films and other content on personal computers, smartphones, tablet devices, and digital media players o It is only available to customers in the US, and certain US territories. Due to regional rights restrictions, HBO cannot offer the service outside of the country o It has 5mn paying subscribers, and its library offers 75+ original TV series o WarnerMedia is set to launch a new streaming service in 2020, which focuses primarily on HBO library content. The company is also considering providing access to the new WarnerMedia SVOD for free or as a tuck-in for new HBO subscriptions o Prices for HBO could be lowered both as a standalone service and as a premium channel add-on for pay TV providers

• Disney+11 o The Walt Disney Company announced its upcoming American over-the-top SVOD service Disney+, which is owned and operated by its Walt Disney Direct-to-Consumer & International division th o The platform is set to launch on November 12 , 2019 o The company had its movies streaming on Netflix, but they will now be taken to the much-anticipated Disney+ platform and withdrawn from Netflix o It has already announced it will not be renewing its contract with Netflix that started in 2016. The deal elapsing will lead to massive Disney and Marvel titles leaving Netflix o As per Walt Disney CEO Bob Iger, the Direct-to-Consumer business (which includes its majority ownership of Hulu, ESPN+ and the upcoming Disney+) is their number one priority as of now o In addition to the Star Wars and Marvel content bundled with all the Pixar movies, the company also plans to leverage National Geographic to differentiate the content for Disney+ from its competitors

9 https://www.macworld.co.uk/news/apple/streaming-service-3610603/ 10 https://www.fiercevideo.com/video/warnermedia-s-price-options-for-new-hbo-heavy-svod-look-like-revenue-eaters 11 https://finance.yahoo.com/news/disney-ott-streaming-is-now-number-one-priority-espn-plus-142004998.html

“Seeking Stocks that can 4 Double in 2-3 Years”

0.94 EQUITY RESEARCH REPORT | 07/01/19

o Disney has a cost advantage in the millions of customers in its core business, and this might result in significantly lower customer acquisition costs for Disney+ compared to Netflix, which has significantly higher marketing spend o Disney+ could also benefit from the emotional connection to the material created during the childhood of most of its current customer base o As per Ampere Analysis’s estimates, Disney+ will include 7,500 episodes of current and past TV shows and 500 movies in the first year of launch. That represents just 16% of Netflix’s US catalog of 47,000 TV episodes and 12.5% of the Netflix’s movie library of 4,000 titles o While its content lineup is less than that of Netflix, it has higher rated titles by critics o The Company’s long-term strategy focuses on its internally sourced programs but plans to launch this year with shows licensed from other media houses. The company has already licensed a CBS show o Disney+ will be priced at $7.0/month, half the price of HBO Now and a big discount compared with Netflix o The service is expected to support streaming to phones, tablets, computers, connected TVs and streaming media boxes, Roku TVs and the PlayStation 4 o Disney+ is going to be the only place one can stream all of Disney's theatrically released movies and TV Shows starting with Captain Marvel at launch and the rest of its 2019 slate

Competitive Landscape12 The OTT market is witnessing a lot of growth primarily due to the gradual shift from linear entertainment. Netflix is currently placed at the top primarily due to the first mover advantage it enjoyed in the US. The market is set to grow much larger with the competition getting intense and big names like Amazon, Disney, and Apple eyeing the market.

• Pricing the offering now becomes much more critical, with the competitors trying to snatch market share from Netflix. The company had its latest price hike in January 2019 o Netflix currently offers three subscription tiers priced between $9.0/month to $16.0/month while placing limits on the number of devices, and the company also charges extra for 4K HDR content o Amazon Prime bundles include a set of extra perks like faster shipping, discounted prices on selected items while also providing 4K content with HDR at no extra cost, all this at a price point of $13.0/month or $119.0/annum o Hulu offers the ad-based and ad-free services priced at $6.0/month and $12.0/month, respectively. It is also the only service that offers a Live TV feature priced at $45.0/month. The platform does not currently support 4K on any of the devices o As of September 2018, Netflix had a total of 245 original TV shows, while Amazon Prime and Hulu had 80 and 34 originals, respectively13 • Netflix offers an unmatched content library compared to its competitors. However, Amazon Prime, after having closed a content deal with Viacom, which controls Comedy Central, MTV, and Nickelodeon, offers a much larger and better section of comedy and children’s programming as compared to the other major players14 • ‘Ease of use’ is another front on which these players compete; Netflix offers the most intuitive interface, which is consistent across the wide range of devices the service is available on. Hulu has made significant improvements in its user interface with content classified into several categories that make the navigation simple. Amazon Prime doesn’t offer a standardized interface across the devices, some of which are more intuitive than others.

12 https://www.digitaltrends.com/home-theater/best-on-demand-streaming-services/ 13 https://www.vox.com/2018/9/28/17906772/netflix-hulu-amazon-original-content-streaming-new-shows-facebook-apple 14 https://www.tomsguide.com/us/best-streaming-video-services,review-2625.html

“Seeking Stocks that can 5 Double in 2-3 Years”

0.94 EQUITY RESEARCH REPORT | 07/01/19

Some of the most popular shows like Friends and The Office on Netflix are actually licensed, and the fact that new competitors like Disney and NBCUniversal are launching their own streaming services could be a matter of concern for Netflix as the previous licensing agreements approach expiration. The Office for instance was the most streamed show on Netflix in 2018 with viewers consuming a total of 52mn minutes of the show in the entire year. The current contract will expire at the end of 2020, and Netflix would have to pay a hefty sum if it wants to retain the show on its platform. The company faced a similar situation when it paid $100.0mn to keep Friends on the platform until the end of 2019.15

LB•INSIGHT The video streaming market is on the rise, and with multiple players set to enter the market soon, it is bound to be highly competitive. The company doesn’t believe that any of the new entrants will materially impact its growth trajectory primarily because the shift from linear to on-demand entertainment presents a vast market to be catered to.16 But as the competition increases and the content offerings begin overlapping, viewers will have many choices and ultimately will need to make a call on which service provider(s) to opt for.  Total Addressable Market (TAM) The company operates in the OTT market, which was valued at $97.4bn as of 2017 and is projected to reach $332.5bn by 2025 at a CAGR of 16.7% during the forecast period. Netflix is currently the leader in the streaming services with the last reported annual revenue of ~$15.8bn for FY18. The growing markets around the globe present Netflix with an opportunity to expand significantly.  Quality of Product/Service Netflix was the pioneer in the online streaming space when it launched the platform in 2007. Building upon the first mover advantage, the platform has only grown with time and maintained its position as the industry leader. The company made a gradual shift from the DVD rental business model to subscription-based online streaming of TV shows and movies while retaining its key distinction at that time; viewer engagement through tailored recommendations from within its vast catalog, based on the user behavior.

Netflix currently offers an unmatched catalog, which includes the Netflix Originals, and the company has been working on various aspects to better the user experience on the platform to not only retain but also grow its global subscriber base.

• The platform offers 4K HDR video for selected titles and movies to deliver better contrast and greater brightness levels • Roll-out of Dolby Atmos support on Netflix to deliver an immersive audio experience • Global recommendation system that leverages a global audience with shared tastes and preferences for delivering tailored recommendations • Smart Download feature that automatically downloads the next episode of the series that the customer is viewing

15 https://www.usatoday.com/story/money/2019/06/27/why-office-leaving-netflix-and-why-nbc-had-pay-so-much/1587151001/ 16 https://s22.q4cdn.com/959853165/files/doc_financials/quarterly_reports/2019/q1/FINAL-Q1-19-Shareholder-Letter.pdf

“Seeking Stocks that can 6 Double in 2-3 Years”

0.94 EQUITY RESEARCH REPORT | 07/01/19

 COMPANY MANAGEMENT  Founder/History Founded in 1997, headquartered in Los Gatos, California, Netflix is a provider of entertainment service over the internet and with a subscriber base of 148mn+ across 190+ countries worldwide.

Co-founded by Reed Hastings and Marc Randolph, the company offered online movie rentals in the beginning and gradually moved to streaming to allow members to watch content on their computers instantly. It is currently the market leader in the OTT media services industry and is exhibiting solid growth on the back of content quality and original programming.

Before founding Netflix, Hastings founded Pure Software in 1991, which he sold in 1997 for a substantial profit.

As per an old discredited story, Hastings got the idea to start Netflix after Blockbuster charged him $40.0 as a late fee for the delayed return of Apollo 13 videotape.  Current Management Mr. Reed Hastings – Founder & CEO 17,18

• Mr. Hastings, 58, is the Co-founder and CEO of Netflix • He is married to Patricia Ann Quillin and has two children • The couple signed the Giving Pledge in 2012, promising half of their family’s wealth to charity • He places emphasis on work life balance and firmly believes that taking breaks make him better at work • Awards and Achievements o Recipient of the Hen Crown Leadership Award in 2014 for achievements reflecting high standards of honor, integrity and philanthropy o Recipient of the John Wooden Global Leadership Award in 2018 recognizing him as a visionary for leading a revolution in entertainment o Recipient of David Packard Award in 2017 for exhibiting civic entrepreneurship exemplified by David Packard • Netflix is the 2nd company founded by Mr. Hastings o Founded Pure Software in 1991, which he sold in 1997 for a substantial profit o Prior to this, he served in the US Marine Corps o He served in the Peace Corps for two years, most of the time teaching math in Swaziland o Also served on the board of Microsoft from 2007 to 2012 • BA from Bowdoin College (1983) and MSc in Artificial Intelligence from Stanford University (1988) • Currently also serves as: o Member of the Board of Directors at Facebook o Member of the Board of several educational organizations including The City Fund, KIPP, and Pahara Institute • Hastings always had an entrepreneurial mindset and says that his time with the Peace Corps helped him hone his entrepreneurial skills and risk-taking abilities

17 https://www.entrepreneur.com/article/276403 18 https://www.thefamouspeople.com/profiles/reed-hastings-6436.php

“Seeking Stocks that can 7 Double in 2-3 Years”

0.94 EQUITY RESEARCH REPORT | 07/01/19

• He is an active philanthropist and served on the California State Board of Education from 2000 to 2004. Currently, he also runs the Hastings Fund, which raised a total of $100.0mn for public education • He is credited for employing strategies for innovative management and aggressive expansion during the early days at Netflix  Capital Allocation (M&A, buybacks, expansion) As of March 31st, 2019, the company has a net debt of $7.8bn. It has a revolving credit facility of $750.0mn, which is currently undrawn.

The company has made a total of three acquisitions in its history:

• Netflix made its first ever acquisition in 2017 when it acquired Millarworld, a comic book publisher, to work more closely with creators and filmmakers • Acquired ABQ Studios, which offers nine stages across 170,000 sq. ft. and allows Netflix greater flexibility with its original content production • Acquired StoryBots in May 2019, a children’s media company, for an undisclosed price. This comes ahead of the launch of a much-anticipated rival Disney+  Insider Transactions19,20 • In the last 12 months, insiders have sold a net of 1,076,320 shares • Reed Hastings executed the most recent trade when he traded 51,898 units of NFLX stock • The most active insider traders include Reed Hastings, Jay C Hoag, and A George Battle • On average, NFLX executives and independent directors trade stock every 5 days with the average trade being worth of $7.0mn

19 https://www.nasdaq.com/symbol/nflx/insider-trades/buys 20 https://wallmine.com/nasdaq/nflx/insider-trading

“Seeking Stocks that can 8 Double in 2-3 Years”

0.94 EQUITY RESEARCH REPORT | 07/01/19

 TREND ANALYSIS  Income Statement $ in millions 2014 2015 2016 2017 2018 Revenue 5,504.6 6,779.5 8,830.6 11,692.7 15,794.3 EBIT 402.6 305.8 379.7 838.6 1,605.2 EPS ($) 0.62 0.28 0.43 1.25 2.68

 Balance Sheet $ in millions 2014 2015 2016 2017 2018 Cash 1,608.4 2,310.7 1,733.7 2,822.7 3,794.4 Total Assets 7,042.5 10,202.8 13,586.6 19,012.7 25,974.4 Total Liabilities 5,184.7 7,979.4 10,906.8 15,430.7 20,735.6  Cash Flow $ in millions 2014 2015 2016 2017 2018

CFO 16.4 (749.4) (1,473.9) (1,785.9) (2,680.4) CFI (42.8) (179.1) 49.7 34.3 (339.1)

CFF 541.7 1,640.3 1,091.6 3,076.9 4,048.5

Free Cash Flow (126.6) (920.5) (1,659.7) (2,019.6) (3,019.5)

“Seeking Stocks that can 9 Double in 2-3 Years”

0.94 EQUITY RESEARCH REPORT | 07/01/19

EV/LTM Sales 15.00x

13.50x

12.00x 10.36x 10.50x 10.10x 9.00x

7.50x Average 6.00x

25.0x EV/LTM EBITDA

22.5x

20.0x 17.8x 17.5x

15.0x 16.8x

12.5x Average 10.0x

80.0x EV/NTM EBITDA 75.0x Average 70.0x 65.0x 60.0x 55.0x 55.0x 50.0x 45.9x 45.0x 40.0x 35.0x

“Seeking Stocks that can 10 Double in 2-3 Years”

0.94 EQUITY RESEARCH REPORT | 07/01/19

 FINANCIAL STATUS (QUANTITATIVE METRICS)  Recent Price Action The stock price has remained quite volatile over the last year and declined by 8.5% during the same period. During the recent correction, the share price declined by more than 40.0% and reached $233.88 and then bounced back above $350.00 within six months.

$450.00 Share Price Movement

$400.00 $365.53 $350.00 $342.18 $300.00

$250.00 200 days MAVG

$200.00

 QUALITATIVE INFORMATION  Special/Unique Characteristics of the Company • Netflix has implemented a tracking system on its platform to track subscribers’ preference and habits. This will also include the tracing of how quickly one watches each episode and their tendency to binge watch • The company altered its recommendation software and algorithms behind it from region-based recommendations to a more customized global recommendation system that is currently thought to be the best in the industry  Catalysts The company has witnessed significant revenue and subscriber growth over the years. Revenues for FY 2018 increased by ~35.0% yoy. The market has responded favorably to the additions in the subscriber base, and the same has been evident from the upward movement in the share price. If the company continues to grow in international markets, the share price appreciation is bound to follow.

“Seeking Stocks that can 11 Double in 2-3 Years”

0.94 EQUITY RESEARCH REPORT | 07/01/19

 RISKS TO THE BUSINESS • The streaming service market is witnessing a lot of new entrants, and that could be a matter of concern for Netflix, especially because some of the new players are those who currently have their content licensed to Netflix21 • Another pain point for Netflix could be the rising content cost, which is evident from the $100.0mn price it paid to renew its annual licensing of Friends until the end of 2019, compared with the $30.0mn it paid previously for the same show to keep it running throughout 2018 • Significant content marketing costs to ensure viewership to expand globally could hit the stock price in the coming future if the subscriber growth rate declines materially22 • With Apple, Disney, and Amazon now setting foot in the same market as Netflix, the company also faces risk regarding net addition to its platform given that the competitors also have significant cash to burn to drive viewers to their respective platforms

 VISUAL REPRESENTATION OF CAPITAL STRUCTURE23 Percentage of Enterprise Value

$750.0mn Revolving Credit 0.4% Facility

Senior Unsecured Notes

$2.4bn (Maturing 2021-2025)

6.1% $8.0bn (Maturing 2025-2029)

$5.5bn Market Value of Equity 95.4% $162.2bn Market Value of Equity

21 https://www.theverge.com/2019/5/14/18623082/att-streaming-warnermedia-netflix-hulu-friends-er-disney-comcast-nbc-universal 22 https://www.thestreet.com/technology/challenges-facing-netflix-nflx-in-2019-14810758 23 https://www.sec.gov/Archives/edgar/data/1065280/000106528019000157/form10q_q119.htm

“Seeking Stocks that can 12 Double in 2-3 Years”

0.94 EQUITY RESEARCH REPORT | 07/01/19

 GLOSSARY EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of a company’s operating performance, which allows the investor to analyze the earning power of an enterprise without having to consider financing or accounting decisions or tax environments.

EV/EBITDA: A valuation metric intended to describe the total amount an acquirer would have to pay to purchase a company (incorporating the cost of assumed debt) per dollar of EBITDA.

Fwd: Shorthand for Forward. Generally means “Next Twelve Months”.

Market Cap: Market Capitalization. Calculated by multiplying stock price by number of outstanding shares.

ROA: Return on Assets. A measure of financial performance that shows the percentage of profit that a company earns in relation to all of its available resources (both debt and equity). Calculated by dividing Net Income by Average Total Assets.

ROE: Return on Equity. A measure of financial performance that shows the percentage of profit that a company earns for each dollar of shareholder equity. Calculated by dividing Net Income by Average Shareholder Equity.

ROIC: Return on Invested Capital. A measure of financial performance intended to evaluate a company’s growth and measure how efficiently a company is using investor funds to generate income. An ROIC of 2% or more in excess of a company’s cost of capital defines a value creator. Calculated by dividing after-tax Operating Income by the book value of all Invested Capital

TTM: Shorthand for “Trailing Twelve Months”.

YTM: Shorthand for “Yield to Maturity”. YTM is the total return expected if an investor holds a bond to maturity, with the assumption that all coupon and interest payments are made on schedule.

“Seeking Stocks that can 13 Double in 2-3 Years”

0.94 EQUITY RESEARCH REPORT | 07/01/19

DISCLAIMER: This Report is provided for informational purposes only and is prepared without regard to the investment objectives, financial situation, or needs of any investor. The Report is not intended, and should not be relied upon, as a source of any investment recommendation, makes no implied or express recommendation to hold, sell, purchase or take any other action with regard to a security, and is not an offer or solicitation for the purchase or sale of the security that is the subject of the Report. Investors must exercise their own independent judgment as to the suitability of a security.

Past performance is not indicative of future performance. The price of securities can and will fluctuate, and any individual security may become worthless. A high or favorable rating, rating outlook, gauge, or similar opinion is not indicative of future performance, and no user should rely on any such rating, rating outlook, gauge, or similar opinion to predict performance or potential for return. Future performance may not equal projected or forecasted performance or potential for return. All ratings and related analysis, as well as data, statistics, analysis and opinions contained herein are solely statements of opinion, and are not statements of fact or recommendations to purchase, hold, or sell any security or make any other investment decisions.

THE REPORT IS PROVIDED ON AN "AS IS" AND "AS AVAILABLE" BASIS WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND. LEFT BRAIN INVESTMENT RESEARCH LLC DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES WITH RESPECT TO THE REPORT, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.

The Report is current only as of the date set forth herein. Left Brain Investment Research LLC (LBIR) has no obligation to update the Report or any material or content set forth herein.

LBIR is an affiliate of Left Brain Wealth Management LLC, an investment advisor registered with the Securities and Exchange Commission. LBIR is an affiliate of Left Brain Capital Appreciation Fund, L.P., Left Brain Capital Appreciation Offshore Ltd, and Left Brain Capital Appreciation Master Fund, Ltd., all of which are hedge funds managed by Left Brain Capital Management, LLC. The general partner of these hedge funds, Left Brain Capital Management, LLC, is an affiliate of LBIR.

© 2019, Left Brain Investment Research LLC. All rights reserved. Reproduction in any form is prohibited.

“Seeking Stocks that can 14 Double in 2-3 Years”