TechnologySpecialistsof Equity Research: September 6, 2016 KBCM Topics: PPG PCS Topics: ELLI, T, S, TMUS, VZ, WWE, FOXA, AMCX, CBS, CMCSA, DISCA, LGF, MSGN, NFLX, SNI, STRZA, TWX, VIAB, WWE Initiation of Coverage Ticker Company Rating Price Target 2016 2017 2018 2018 Analyst ELLI Ellie Mae, Inc. Overweight $124.00 $2.07 $2.67E -- -- Bracelin Price Target Changes Ticker Company Old Price Target New Price Target Analyst WWE World Wrestling Entertainment, Inc. $22.00 $24.00 Wingren Important disclosures for the companies mentioned in this report can be found at https://key2.bluematrix.com/sellside/disclosures.action. Please refer to the analysts' recently published reports for company-specific valuation and risks. KeyBanc Capital Markets Inc. Member NYSE/FINRA/SIPC
Industrial: Milwaukee Industrial Field Trip Takeaways (AOS, ATU, FAST, GNRC, OSK, RBC, RXN, RRTS) Hammond 4 Industrials: We highlight key takeaways from our Milwaukee Industrial Field Trip, which included meetings with AOS, ATU, FAST, GNRC, OSK, RBC, RXN, and RRTS. Overall, our meetings point to a cautious environment, with sustained end market weakness across most verticals, while Companies proactively positioning themselves for the next recovery and those with well-protected growth drivers should continue to see favorable multiple expansion. We reiterate our Overweight rating on AOS and raise our PT (from $101 to $103) as we came away increasingly comfortable with the Company s long-term organic growth outlook and ability to maintain/expand operating margins. We reiterate our Overweight rating on GNRC ($42PT). We came away incrementally confident in the Company s ability to capitalize on any meaningful storm outages and encouraged with the Company s advertising and warranty initiatives. We reiterate our Overweight rating on OSK ($59PT). While the nearterm AWP outlook remains challenged, Defense should provide a positive offset. Lastly, we reiterate our Overweight rating on RXN and raise our PT (from $23 to $24). We are encouraged as cost savings and Cambridge integration are tracking well and continue to believe RXN is well positioned for earnings acceleration in FY18. Additionally, we are reiterating our Sector Weight ratings on ATU, FAST, RBC, and RRTS. Industrial: PPG: Looking for Organic Growth Improvements to Drive Shares Higher Marcuse, CFA 5 PPG Industries, Inc. (PPG, Overweight, $125PT): 16E $6.20 (FS $6.19); 17E $6.60 (FS $6.81). We reiterate our Overweight rating on PPG following recent due diligence and view current levels as attractive, with the stock trading at a discount to peers. We believe a primary reason for this has been disappointing organic growth trends. However, we expect organic growth will improve in 2H16 and into 2017, driven by favorable comps and underlying fundamentals/trends in the North American architectural paint, automotive refinish/oem, and packaging markets. Importantly, we sense that trends in PPG s paint stores (we estimate ~50% of NA paint sales) are improving after overhauling the impaired architectural business acquired from AkzoNobel in 2013. Lastly, we highlight PPG s solid FCF profile, which should bolster growth as we expect PPG to continue to spend its cash in a shareholder-friendly manner (i.e., share repurchases and bolt-on acquisitions). Valuation: 11.1x EV/EBITDA on our 17E vs. the Co. s 3-yr. avg. low to high EV/EBITDA multiple range of 10.8-15.2x. PT=~12x. Ratings: 18/3/0. Short Interest (8/15): 2.4d, 1.2%. Technology: Vertical SaaS Play Automating a $1.7 Trillion Mortgage Industry; Initiating at Overweight Bracelin 6 Ellie Mae, Inc. (ELLI, Initiating Overweight, PT $124): Vertical SaaS Play Automating a $1.7 Trillion Mortgage Industry; Initiating at Overweight: ELLI has emerged with one of the most profitable SaaS models, balancing high growth and high margins to become the leading cloud software platform in the mortgage industry, and has just ~5% penetration of a $6.25 billion TAM. We see a favorable risk/reward profile based on our forecast that revenue and profits should double over three years. Initiating at Overweight with a $124 target. Leader in digital automation software for mortgage origination. Best-in-class growth and margin model. Revenue and profits should double over the next three years. Initiating at Overweight with a $124 target. Technology: Mid-3Q16 Wireless Carrier Survey Bowen 7 Communications Services: Our mid-3q16 wireless carrier survey indicates that trends at T-Mobile should remain robust. The survey shows uncertainty in near-term subscriber trends at Sprint, but gradual improvements could be expected going forward. AT&T and Verizon are struggling to compete in a price-sensitive environment, but have announced new pricing plans aimed at regaining share. We believe it will be difficult to continue to drive increased monetization per subscriber. Our favorite idea is TMUS (Overweight, $53PT). Page 2
Technology: Early Checks from Brand Extension Appear Positive Wingren, CFA 8 World Wrestling Entertainment, Inc. (WWE, Overweight, PT $24 from $22): Early Checks from Brand Extension Appear Positive: We continue to recommend owning WWE and are raising our price target to $24. We believe it is well positioned to grow monetization of content across multiple platforms. It is also one of the most likely takeout candidates in the space, in our view. Early results from brand extension imply positive lift to linear viewership. Search volume for SummerSlam declined y/y, but we aren't overly concerned. Raising target to $24. Technology: Media: Q2 Viewership and Earnings Review Hargreaves, CFA 9 Media: Q2 Viewership & Earnings Review: Exiting Q2 earnings, broad trends continue to indicate growth for networks, but at a decelerating pace overall. We continue to believe that the relative value of sports in the bundle is growing at the expense of general entertainment and continue to like the less competitive nature of regional sports as a business. Within general entertainment, we believe most networks are being affected similarly; therefore, we favor names that trade at relative discounts, particularly if there are identifiable catalysts. Based on this, our favorite network stocks exiting Q2 are AMCX and FOXA. Among content-focused names, we recommend owning WWE and LGF. NFLX remains our favorite overall pick. Ad market continues relative strength, but viewership declines drive deceleration. Content sales drove a rebound in distribution dollar growth in Q2, but the longer-term trend continues to be slower growth. Cord-cutting is accelerating slightly, but relative pace of change continues to be modest. Valuations for the group appear reasonable. Our favorite idea remains NFLX. Among TV networks, we see outsized value in FOXA and AMCX. Among content-focused names, we like WWE and LGF. We view the risk/reward on SNI and MSGN favorably. Disclosure Appendix 10 Page 3
Milwaukee Industrial Field Trip Takeaways (AOS, ATU, FAST, GNRC, OSK, RBC, RXN, RRTS) Industrial Insights COLLABORATIVE RESEARCH Jeffrey D. Hammond / (216) 689-0236 / jhammond@key.com Ryan Cieslak / (216) 689-0298 / rcieslak@key.com Steve Barger / (216) 689-0210 / sbarger@key.com Todd C. Fowler / (216) 689-0219 / tfowler@key.com James Picariello, CFA / (216) 689-0447 / james.picariello@key.com We recently hosted investors at an Industrial Field Trip to Milwaukee, WI, meeting with management teams from A.O. Smith Corporation (NYSE: AOS), Actuant Corporation (NYSE: ATU), Fastenal Company (NASDAQ: FAST), Generac Holdings Inc. (NYSE: GNRC), Oshkosh Corporation (NYSE: OSK), Regal-Beloit Corporation (NYSE: RBC), Rexnord Corporation (NYSE: RXN) and Roadrunner Transportation Systems, Inc. (NYSE: RRTS). Key takeaways from our conversations point to sustained end market weakness across most verticals, with select areas of positive growth attributable in part to company-specific catalysts and/or favorable positioning. Key Investment Points Our sense is that currently challenged markets appear to show no sign of inflection beyond just easier 2H compares, while markets that continue to deliver solid growth are now receiving greater investor attention over potential peak concerns. All told, the demand environment warrants a scrupulous lens. Companies proactively positioning themselves for the next recovery and those with well-protected growth drivers should continue to see favorable multiple expansion as a result. We are reiterating our Overweight ratings on AOS, OSK, GNRC and RXN, raising our PTs on AOS and RXN and increasing estimates for AOS. Page 4
PPG Industries, Inc. PPG: Looking for Organic Growth Improvements to Drive Shares Higher We remains buyers of PPG shares based on the following points: 1) organic growth trends should start to improve beginning in 3Q16; 2) returns remain stable to up; 3) an industry consolidator; 4) the cash deployment strategy through buybacks and dividends remains active and may even rise above historical levels as its FCF increases over the coming years; and 5) we see valuation relative to the peer group as attractive. Key Investment Points Organic Growth Should Improve in 3Q16: We expect YOY volume growth to improve in 3Q16 vs. the last couple of quarters due in part to some favorable comparisons, but also near-term growth in underlying fundamentals, driven by architectural paint in North America, automotive refinish, packaging and auto OEM. Architectural Paint Market Remains Solid: Volumes in the architectural paint business should grow in 3Q16 as end-market demand remains healthy in addition to favorable YOY comparisons. While its NA paint business has underperformed its peers the last several quarters, as PPG needed to fix the impaired Akzo business it acquired in 2013, we believe that trends in its stores are starting to improve and becoming less of a drag on its sales and may become a contributor to growth in 2017. Higher Production Should Support Growth in Auto OEM Coatings: IHS expects global light vehicle production to increase ~3% in 2016. We expect sales in PPG s auto OEM business to be positive YOY in 2H16 and in line with the market, driven by higher build rates and market share gains. Above market growth for PPG may start to return in 2017 driven by market share gains due to its industry leading technologies combined with unfavorable market headwinds in certain regions abating. Better Organic Growth Should Lessen the Discount: PPG shares are currently trading at a discount to the group despite the Company s solid profitability, cash flow generation and active M&A strategy. Some cyclicality in PPG s businesses may explain the discount, but we believe the gap will close if organic growth starts to improve in 2H16. Ivan M. Marcuse, CFA / (216) 689-0258 imarcuse@key.com Eugene Fedotoff / (216) 689-4326 eugene_fedotoff@key.com NYSE: PPG Rating: Overweight Price Target: $125.00 Price: $107.04 6 5 4 3 2 1 0 Nov-15 Vol (mil) Jan-16 Mar-16 May-16 Jul-16 Markets Inc. Company Data 130 120 110 100 90 80 Sep-16 PPG 52-week range $83 - $117 Market Cap. (M) $29,403.9 Shares Out. (M) 274.70 Enterprise Value (M) $32,997.9 Avg. Daily Volume (30D) 1,378,980.0 Annual Dividend $1.60 Dividend Yield 1.5% SI as % of Float 1.2% SI % Chg. from Last Per. (0.1)% Book Value/Share $20.70 Cash (M) $1,605.0 Markets Inc. Estimates FY ends 12/31 F2015A 1Q16A 2Q16A 3Q16E 4Q16E F2016E F2017E EPS (Net) $5.69 $1.31 $1.85 $1.72 $1.32 $6.20 $6.60 Cons. EPS $5.69 $1.31 $1.85 $1.71 $1.32 $6.19 $6.81 EBITDA (M) $2,261.0 -- -- -- -- $2,839.0 $2,962.0 Cons. EBITDA $2,666.4 $602.9 $811.7 $757.0 $619.5 $2,808.5 $2,945.2 Valuation P/E 18.8x -- -- -- -- 17.3x 16.2x EV/EBITDA 14.6x -- -- -- -- 11.6x 11.1x Markets Inc. Page 5
Ellie Mae, Inc. Vertical SaaS Play Automating a $1.7 Trillion Mortgage Industry; Initiating at Overweight ELLI has emerged with one of the most profitable SaaS models, balancing high growth and high margins to become the leading cloud software platform in the mortgage industry, and has just ~5% penetration of a $6.25 billion TAM. We see a favorable risk/reward profile based on our forecast that revenue and profits should double over three years. Initiating at Overweight with a $124 target. Key Investment Points Leader in digital automation software for mortgage origination. Ellie Mae is on pace to generate more than $340 million in revenue this year, a 6x increase from 2011 driven by share gains within an increasingly complex and compliance-driven mortgage industry, which is transitioning from on-premise, manually intensive systems to more automated, cloud software tools. Ellie Mae has created three ways to monetize the shift to cloud and digital automation: (1) recurring subscription revenue sold on a per-user basis, (2) a transactional revenue component tied to loan volumes, and (3) network platform fees for more than 150,000 active mortgage professionals on the Ellie Mae network. Best-in-class growth and margin model. After analyzing revenue and margin metrics across the SaaS 20, we believe Ellie Mae stands out not only as one of the fastest growers, but also as one of the most profitable. Operating margin was 29% last quarter on 36.6% growth. Revenue and profits should double over the next three years. With just ~5% penetration of a large $6.25 billion TAM, continued share gains across all three monetization pathways within the mortgage-origination market position Ellie Mae to double revenue and profits in three years, by our estimates. Initiating at Overweight with a $124 target. Our Overweight rating is based on the assumption that Ellie Mae can maintain 25% to 30% growth in revenue and profits through automation share gains, even if mortgage volumes decline by 5% to 10% annually. EV/ EBITDA of 28x our 2017 estimates drives our $124 target, a slight premium to the fourand-a-half-year average FTM EV/EBITDA of 23.9x, but warranted, in our view, given bestin-class SaaS margins and growth. Brent Bracelin / 503.821.3893 bbracelin@pacific-crest.com Alyssa Johnson / 503.821.3894 alyssa.johnson@pacific-crest.com Trevor Upton, CFA / 503.821.3908 tupton@pacific-crest.com NYSE: ELLI Rating: Overweight Price Target: $124.00 Price: $98.80 $160 $140 $120 $100 $80 $60 $40 ELLI $98.80 (+33% Y/Y) Bull Case $146 (+48%) Target $124 (+26%) Bear Case $78 (-21%) 10/15 11/15 12/15 01/16 02/16 03/16 04/16 Nasdaq (+9% Y/Y) Markets Inc.. Company Data 52-week range $58 - $103 Market Cap. (M) $3,377.0 Shares Out. (M) 34.18 Enterprise Value (M) $2,951.3 Avg. Daily Volume (30D) 558,118.0 SI as % of Float 7.0% SI % Chg. from Last Per. (0.1)% Net cash/market cap 12.6% Markets Inc. 05/16 06/16 07/16 08/16 09/16 Estimates FY ends 12/31 F2015A 1Q16A 2Q16A 3Q16E 4Q16E F2016E F2017E EPS (Net) $1.69 $0.34 $0.64 $0.60 $0.49 $2.07 $2.67 Cons. EPS -- -- -- 0.60 0.47 2.05 2.64 Revenue (M) $253.9 $73.6 $90.1 $92.1 $85.8 $341.6 $424.9 Cons. Revenue -- -- -- $92.3 $85.6 $341.6 $422.8 Valuation EV/Sales 11.6x -- -- -- -- 8.6x 6.9x EV/EBITDA 36.9x -- -- -- -- 27.8x 22.0x Markets Inc. Page 6
Mid-3Q16 Wireless Carrier Survey Our mid-3q16 carrier survey indicates that trends at T-Mobile should remain robust. The survey shows uncertainty in near-term subscriber trends at Sprint, but gradual improvements could be expected going forward. AT&T and Verizon are struggling to compete in a pricesensitive environment, but have announced new pricing plans aimed at regaining share. We believe it will be difficult to continue to drive increased monetization per subscriber. Our favorite idea is TMUS. Communications Services Michael Bowen 917.368.2362 mbowen@pacific-crest.com Brandon Nispel, CFA 503.821.3871 bnispel@pacific-crest.com Switching Activity T-Mobile. Switching activity continues to show positive net additions for T-Mobile in the past three months and the company improved between sequential survey periods, which helps back up its statement that porting ratios have improved across all carriers. While survey responses in the next 12 months are lower than historical survey periods, they improved from the previous survey, which we believe indicates that directionally strong subscriber momentum continues. Sprint. Switching activity in the past three months was the lowest of all four carriers, and the company showed a deceleration in planned net additions between sequential survey periods. However, in the next three and 12 months, Sprint showed improvement, which shows somewhat mixed results overall. However, we believe gradual improvement in subscriber trends should be expected as switching activity in the next 12 months continues to move higher. AT&T. Switching activity in the past three months was a net positive, but relatively lower sequentially between survey periods. In the next three and 12 months, our survey found that AT&T would have net subscriber losses, which we believe is due to the expected 2G network shutdown set to take place by the end of 2016. Verizon. Switching activity in the past three months was little changed for Verizon, but the company did show some improvement in the next three and 12 months. This leads to our belief that Verizon should report improving trends throughout the remainder of the year, especially since it recently cut prices. Data Usage In Verizon's most recent quarter, it stated that network usage increased 44% y/y. However, we believe that tiered-pricing structures will be difficult to monetize, as we recently saw AT&T and Verizon cut the price of data, on a per GB basis, by between 30% and 40%. In addition, T-Mobile's fixed-pricing structure effectively blocks future price increases by the carriers as highly coveted high-data users will find value in T- Mobile's unlimited data plan. In addition, we expect Sprint to cease to offer its 50%- off promotion, as these price cuts on a per-gb basis are negative for the carrier; they require it to provide more data to consumers at a lower price per GB. Sprint likely finds it difficult to come up with promotions that compete on merit other than price. Stock Implications Positive, Negative, Neutral Company Stock Rating Target Price Mkt Cap. AT&T Inc. T SW NA $40.95 $252,154.5M Sprint Corporation S SW NA $6.42 $25,567.7M T-Mobile US, Inc. TMUS OW $53.00 $47.29 $39,769.9M Verizon Communications Inc. VZ SW NA $52.88 $216,150.2M Page 7
World Wrestling Entertainment, Inc. Early Checks from Brand Extension Appear Positive We continue to recommend owning WWE and are raising our price target to $24. We believe it is well positioned to grow monetization of content across multiple platforms. It is also one of the most likely takeout candidates in the space, in our view. Key Investment Points Early results from brand extension imply positive lift to linear viewership. Following the split of WWE Superstars and Divas among the Raw and SmackDown brands, average audience (L+3) for the first six episodes has increased 30% over the prior six episodes, according to comscore. The lift is also likely partially seasonal with the timing of SummerSlam, but we view early increases in viewership of SmackDown post-brand extension as a net positive so far. If SmackDown can hold an audience (primarily live viewership) at current levels, it would likely provide incremental leverage to negotiate higher rights fees when WWE's contract with NBCUniversal expires at the end of 2018. Search volume for SummerSlam declined y/y, but we aren't overly concerned. Search interest in SummerSlam, one of WWE's big four PPV events, declined modestly y/y, according to Google Trends. We believe the decline in search volume is likely due to more casual fans being focused on the Olympic games. We do not foresee any dramatic miss in subscriber results because of this decline. If the Olympics did impact Q3 results, we would likely view it as a one-time issue rather than a fundamental decline in brand affinity. Raising target to $24. Regardless of how the media landscape changes, WWE should be able to take its content and monetize it across all platforms for the highest value, while it should also remain relatively unexposed to the secular risks of cord cutting and declining viewership. Recent M&A suggests content that has passionate followings and is monetizable across a variety of channels will continue to command premium multiples. We believe WWE falls in this camp. We are raising our price target to $24 from $22, which is supported by our discounted cash flow (DCF) analysis and also ~17.0x 2017 EV/EBITDA, which remains 2.0x below our defined peer-group average of ~19.0x. Evan Wingren, CFA / 503.821.3872 ewingren@pacific-crest.com Andy Hargreaves, CFA / 503.821.3899 ahargreaves@pacific-crest.com NYSE: WWE Rating: Price Target: Overweight $24.00( from $22.00) Price: $21.19 $30 $28 $26 $24 $22 $20 $18 $16 $14 WWE $21.19 (+8% Y/Y) Bull Case $29 (+37%) Target $24 (+13%) Bear Case $17 (-20%) 10/15 11/15 12/15 01/16 02/16 03/16 04/16 Nasdaq (+9% Y/Y) Markets Inc.. Company Data 52-week range $14 - $21 Market Cap. (M) $1,640.1 Shares Out. (M) 77.40 Enterprise Value (M) $1,591.2 Avg. Daily Volume (30D) 357,305.0 Annual Dividend $0.48 Dividend Yield 2.3% SI as % of Float 23.2% SI % Chg. from Last Per. (0.1)% 05/16 06/16 07/16 08/16 09/16 Net cash/market cap 3.0% Markets Inc. Estimates FY ends 12/31 F2015A 1Q16A 2Q16A 3Q16E 4Q16E F2016E F2017E Revenue (M) $658.8 $171.1 $199.0 $180.8 $179.8 $730.7 $763.8 Cons. Revenue -- -- -- $177.4 $178.8 $726.2 $769.6 EBITDA (M) $68.7 $27.6 $7.5 $28.3 $17.7 $81.1 $103.1 Cons. EBITDA -- -- -- $26.4 $19.7 $82.6 $103.9 Valuation EV/EBITDA 23.2x -- -- -- -- 19.6x 15.4x Markets Inc. Page 8
Media: Q2 Viewership and Earnings Review Exiting Q2 earnings, broad trends continue to indicate growth for networks, but at a decelerating pace overall. We continue to believe that the relative value of sports in the bundle is growing at the expense of general entertainment and continue to like the less competitive nature of regional sports as a business. Within general entertainment, we believe most networks are being affected similarly; therefore, we favor names that trade at relative discounts, particularly if there are identifiable catalysts. Based on this, our favorite network stocks exiting Q2 are AMCX and FOXA. Among content-focused names, we recommend owning WWE and LGF. NFLX remains our favorite overall pick. Digital Media Andy Hargreaves, CFA 503.821.3899 ahargreaves@pacific-crest.com Evan Wingren, CFA 503.821.3872 ewingren@pacific-crest.com Stock Implications Positive, Negative, Neutral Company Stock Rating Target Price Mkt Cap. 21st Century Fox FOXA OW $35.00 $24.54 $47,116.8M AMC Networks Inc. AMCX OW $72.00 $54.34 $4,016.1M CBS Corporation CBS SW NA $51.03 $24,024.0M Comcast Corporation CMCSA OW $74.00 $65.26 $160,604.4M Discovery Communications, Inc. DISCA SW NA $25.51 $16,256.2M Lions Gate Entertainment Corp. LGF OW $24.00 $20.96 $3,222.6M MSG Networks Inc. MSGN SW NA $17.48 $1,405.4M Netflix, Inc. NFLX OW $125.00 $97.45 $42,036.1M Scripps Networks Interactive, Inc. SNI SW NA $63.37 $8,387.5M Starz STRZA SW NA $31.19 $3,158.0M Time Warner Inc. TWX SW NA $78.41 $64,188.8M Viacom, Inc. VIAB SW NA $40.34 $16,596.6M World Wrestling Entertainment, Inc. WWE OW $22.00 $20.77 $1,644.8M Page 9
Disclosure Appendix Important disclosures for the companies mentioned in this report can be found at https://key2.bluematrix.com/sellside/ Disclosures.action. Please refer to the analysts' recently published reports for company-specific valuation and risks. Reg A/C Certification The research analyst(s) responsible for the preparation of this research report certifies that:(1) all the views expressed in this research report accurately reflect the research analyst's personal views about any and all of the subject securities or issuers; and (2) no part of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this research report. Rating Disclosures Distribution of Ratings/IB Services KeyBanc Capital Markets IB Serv./Past 12 Mos. Rating Count Percent Count Percent Overweight [OW] 320 41.78 66 20.62 Sector Weight [SW] 434 56.66 55 12.67 Underweight [UW] 12 1.57 0 0.00 Rating System Overweight - We expect the stock to outperform the analyst's coverage sector over the coming 6-12 months. Sector Weight - We expect the stock to perform in line with the analyst's coverage sector over the coming 6-12 months. Underweight - We expect the stock to underperform the analyst's coverage sector over the coming 6-12 months. Note: KeyBanc Capital Markets changed its rating system after market close on February 27, 2015. The previous ratings were Buy, Hold and Underweight. Additionally, Pacific Crest Securities changed its rating system to match KeyBanc Capital Markets rating system after market close on April 10, 2015, in conjunction with the merger of the broker dealers. The previous ratings were Outperform, Sector Perform and Underperform. Page 10
Other Disclosures KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc., Member NYSE/FINRA/SIPC ( KBCMI ), and KeyBank National Association ( KeyBank N.A. ), are marketed. Pacific Crest Securities is a division of KeyBanc Capital Markets Inc. KeyBanc Capital Markets Inc. ( KBCMI ) does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. This report has been prepared by KBCMI. The material contained herein is based on data from sources considered to be reliable; however, KBCMI does not guarantee or warrant the accuracy or completeness of the information. It is published for informational purposes only and should not be used as the primary basis of investment decisions. Neither the information nor any opinion expressed constitutes an offer, or the solicitation of an offer, to buy or sell any security. The opinions and estimates expressed reflect the current judgment of KBCMI and are subject to change without notice. This report may contain forward-looking statements, which involve risk and uncertainty. Actual results may differ significantly from the forward-looking statements. This report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the specific needs of any person or entity. No portion of an analyst s compensation is based on a specific banking transaction; however, part of his/her compensation may be based upon overall firm revenue and profitability, of which investment banking is a component. Individuals associated with KBCMI (other than the research analyst(s) listed on page 1 of this research report) may have a position (long or short) in the securities covered in this research report and may make purchases and/or sales of those securities in the open market or otherwise without notice. As required by FINRA Rule 2241(C)(4)(A), financial interest, if any, by any research analysts listed on page 1 of this report will be disclosed in Important Disclosures, Company-specific regulatory disclosures located above in the Disclosure Appendix. KBCMI itself may have a position (long or short) in the securities covered in this research report and may make purchases and/or sales of those securities in the open market or otherwise without notice. As required by FINRA Rule 2241(C)(4)(F), if KBCMI, or its affiliates, beneficially own 1% or more of any class of common equity securities in the subject company(ies) in this research report, it will be disclosed in Important Disclosures, Company-specific regulatory disclosures located above in the Disclosures Appendix. This communication is intended solely for use by KBCMI clients. The recipient agrees not to forward or copy the information to any other person without the express written consent of KBCMI. Page 11