Research Summary May 04, 2020 Today's Topics: LTC, RCM, SWVL, INTC Focus Research Key Revisions LTC - ALERT: 1Q20 Largely in Line; Initial COVID-19 Impact Better than Feared Jordan Sadler - (917) 368-2280 - [email protected] LTC’s 1Q20 report was largely steady, with FFO falling in line with consensus and a handful of transaction activity that had been previously announced, including: a $13.5M SNF acquisition; the $72M sale of the remaining Preferred Care assets; and the repurchase of ~615k/shs under LTC’s repurchase program before the program was terminated. The Company also disclosed the initial impact from COVID-19 on its portfolio, as LTC collected 94%+ of its contractual April rent. LTC did not disclose the operational impact on its portfolio from the pandemic and also did not disclose the prevalence of COVID-19 in its facilities; however, we think the percent of April rent collected could temper fear surrounding SNFs (57% of revenues) and we suspect the stock could outperform its healthcare peers in today’s trading. Full report RCM - ALERT: RCM Fills the CFO Role Donald Hooker, CFA - (917) 368-2378 - [email protected] R1 RCM announced a new CFO, Rachel Wilson, the previous CFO of the Data Centers business unit of Iron Mountain (IRM). She has no specific “healthcare experience;” however, it appears she was selected for her diversified experience across multiple larger organizations as well as her fit with culture and vision of RCM. RCM will report its 1Q20 results tomorrow (May 5) at 8 a.m. ET. The dial-in is: 833-968-2190 (code: 3155137). Full report For analyst certification and important disclosures, please refer to the Disclosure Appendix. KeyBanc Capital Markets Inc. | Member FINRA/SIPC Research Summary Other Research Basic Materials P&P - ALERT: Tyson Expects Volume Declines in its F2H (April-September) Adam Josephson, CFA - (917) 368-2289 - [email protected] In an update that's relevant to Sealed Air and our covered containerboard producers, Tyson Foods (the largest U.S. meat producer) said it expects volume declines in its F2H20 (April-September), compared to up 3.7% in F1H20. Historically, 45% of Tyson's sales were to retail and 40% were to foodservice (with the remaining 15% international); during early F3Q, its retail sales accounted for ~2/3 of its total sales. However, the increases in retail sales haven't been sufficient to offset the steep declines in foodservice. Tyson also noted two meaningful operational problems (which have adversely affected its and others' meat production): employee shortages or choices the Company made to ensure employees' health, and plant closures related to COVID-19 infections. When asked about the operating/utilization rate of its plants, Tyson said the situation is "very dynamic". In other words, it's unclear when its plants will come back up. As we've noted earlier, Sealed Air's N.A. food packaging business accounted for 35% of total sales last year, and that business is the Company's most profitable. And for the N.A. containerboard producers, protein accounts for ~10% of box demand, and protein is just one of several box end markets whose near-term prospects are questionable at best (along with durable goods, foodservice, and printing papers). Full report Consumer Firearms - ALERT: April Adjusted NICS Checks Increase +69.1% Brett Andress, CFA - (216) 689-0360 - [email protected] April adjusted NICS checks (a proxy for retail firearm demand) increased +69.1%, with the two-year stack remaining strong at +62.2% (vs. +67.9% in March). Handguns were +83.5% and long guns were +52.1%. State-level data shows broad-based strength, with growth in 47 states (most dealers in NY and MA were closed). While we had expected strong growth, we believe April cleared an already high bar, with April's growth coming in better than expected, particularly considering the significant +80.3% growth seen last month (which came in only second behind the +94.4% seen in January 2013). We view this strength as indicative of continued fear-based purchases amid social unrest caused by COVID-19. We expect continued positive growth numbers in the coming months as COVID-19 uncertainty lingers, combined with pre-election/politically-driven demand over the MT. Full report Industrial 5 More Days to Register for KBCM's Industrials & Basic Materials Virtual Conference KBCM Equity Research - - [email protected] Steve Barger - (216) 689-0210 - [email protected] Sean Eastman - (917) 368-2346 - [email protected] Todd Fowler - (216) 689-0219 - [email protected] Philip Gibbs - (216) 689-0312 - [email protected] Jeffrey Hammond - (216) 689-0236 - [email protected] Adam Josephson, CFA - (917) 368-2289 - [email protected] James Picariello, CFA - (216) 689-0447 - [email protected] Aleksey Yefremov - (917) 368-2341 - [email protected] Kenneth Zener - (415) 486-3420 - [email protected] We are excited to inform you that the Industrials & Basic Materials Conference will be moving forward as a virtual experience beginning Tuesday, May 26 – Friday, May 29, 2020. The event will continue to bring together the industry’s most influential executives and investors to participate in small and medium group meetings, fireside chats and larger company presentations. Full report May 4, 2020 Pg.2 KBCM Equity Research / [email protected] Research Summary Trucking - ALERT: On the Spot: KeyBanc Capital Markets Inc. Truckload Spot Rate Index, Wk 18 Todd Fowler - (216) 689-0219 - [email protected] Our proprietary spot rate index improved sequentially last week, potentially signaling an interim bottom in rates as economic activity gradually resumes, combined with some seasonal improvement in freight demand. That said, rates remain well below prior-year and contract levels. Looking ahead, we expect continued sequential improvement as some non-essential business closures are lifted and shelter-in-place orders are relaxed, along with seasonal food and beverage shipments and continuing capacity constraints. Assuming normal seasonal variations and factoring in prior-year comparisons from recent levels, we forecast dry-van spot rates will be down low to mid-single digits in 2020 following a 20% decrease in spot rates in 2019 (Exhibit 1b). Full report Technology Software Valuation Charts Ending May 1, 2020 KBCM Research Software Team - - [email protected] Josh Beck - 503.821.3878 - [email protected] Alex Kurtz - 503.821.3898 - [email protected] Jason Celino, CFA - 503.821.3945 - [email protected] Steve Enders, CFA - 415.486.3413 - [email protected] Updated software valuation charts for the period ending May 1, 2020. Please find the attached deck for the complete set of charts. Full report INTC - ALERT: Strategic Acquisition of Moovit Complements Mobileye Division Weston Twigg - 503.821.3875 - [email protected] Intel announced this morning that it has acquired Moovit, a mobility-as-a-service (MaaS) solutions company, for ~$900M ($840M net of Intel Capital equity gain). Moovit, an app that provides public transport and navigation data to simplify urban mobility, will continue to operate as a standalone app and be part of INTC's Mobileye business. INTC was already a strategic investor in Moovit, and had created a partnership to leverage Moovit's data with Mobileye's ADAS (advanced-driver-assistance-systems), so the decision to bring Moovit in-house reinforces INTC's commitment to becoming a full-stack mobility provider. Our model is unchanged as we view the acquisition as more strategic in nature. Full report KeyBanc Capital Markets Upcoming Events Date Event 5/4 - 5/5 Entegris, Inc. (ENTG) Virtual Company Meeting with Bertrand Loy, President and CEO; Greg Graves, EVP and CFO; and Bill Seymour, VP, IR 5/5 Luxfer Holdings PLC (LXFR) Virtual Company Meeting with Alok Maskara, CEO, and Heather Harding, CFO 5/6 - 5/7 ACCO Brands Corporation (ACCO) Virtual Company Meeting with Boris Elisman, President & CEO, and Neal Fenwick, CFO & Exec VP 5/7 Conference Call: Scott Stevens (President of Dimension Fabricators) 5/15 Sunnova Energy International Inc. (NOVA) Virtual Company Meeting with John Berger, CEO, and Rodney McMahan, VP, IR 5/15 Bill.com Holdings, Inc. (BILL) Virtual Company Meeting with Rene Lacerte, CEO, and John Rettig, CFO Earnings Releases Date Company Symbol Revenue (M) EPS Time 5/4/2020 CBL Properties CBL AMC May 4, 2020 Pg.3 KBCM Equity Research / [email protected] Research Summary 5/4/2020 Cirrus Logic, Inc. CRUS $271.74 $0.60 AMC 5/4/2020 ACCO Brands Corporation ACCO $393.90 $0.09 AMC 5/4/2020 LTC Properties, Inc. LTC BMO 5/4/2020 Parsley Energy, Inc. PE $0.18 AMC 5/4/2020 Public Service Enterprise Group PEG $3101.68 $1.03 BMO Incorporated 5/4/2020 Regal Beloit Corporation RBC $759.50 $1.24 AMC 5/4/2020 Viper Energy Partners LP VNOM $0.03 AMC 5/4/2020 Westinghouse Air Brake Technologies WAB $2077.40 $0.96 BMO Corporation 5/4/2020 Sempra Energy SRE $3162.08 $2.59 BMO 5/4/2020 Kennametal Inc. KMT $515.50 $0.32 AMC 5/4/2020 Skyworks Solutions, Inc. SWKS $765.98 $1.35 AMC 5/4/2020 Despegar.com, Corp. DESP $78.30 BMO 5/4/2020 Five9, Inc. FIVN $89.59 $0.16 AMC 5/4/2020 Helios Technologies HLIO $130.20 AMC 5/4/2020 Sterling Construction Company, Inc. STRL $282.70 $0.28 AMC 5/4/2020 Texas Roadhouse, Inc. TXRH $668.60 $0.19 AMC 5/4/2020 Westlake Chemical Corporation WLK $0.60 BMO 5/4/2020 AppFolio Inc. APPF $72.78 $0.11 AMC 5/4/2020 Black Stone Minerals, L.P. BSM $0.18 AMC 5/4/2020 WEC Energy Group, Inc. WEC $2358.11 $1.31 BMO 5/4/2020 WideOpenWest, Inc.