Corporate Insights

Fall 2022

Portfolio Optimization:
linking performance
to value
Introduction

“Wide diversification is only required when investors don’t under-

stand what they are doing”.1 Legendary investor Warren Buffet
refers to the fact that, if an investor has conviction in a company’s
business model and its ability to create value, then wide diversifi-
cation of that investor’s portfolio is no longer necessary. Conven-
tionally, investors should not want companies to diversify their own
businesses; a company that is a pure play2 should be a more at-
tractive asset for an investor to consider. Therefore “pure plays”
should – in theory – trade at a premium in the market relative to
more diversified portfolio companies. After all, pure plays give the
investor the best opportunity to diversify his or her own portfolio
and get closer to the efficient frontier of capital deployment. This
logic lies at the heart of the often-discussed “conglomerate dis-
count”.3 Diversification of investment should be the responsibility
of shareholders, not of management teams.

In this paper, the latest in our ongoing series of Credit conglomerate discount? To figure this out, in this
Suisse Corporate Insights, we explore whether the paper we evaluate companies that are collections of
discount investors apply to large collections of business businesses or segments (which – for simplicity – we
segments is as pervasive as we are led to believe. Is every will call “portfolio companies”4). We evaluate them by
form of diversification bad for investors, or might there be measuring returns on capital5, growth and industry risk
such a thing as good diversification too? Will investors and compare those results to current market
perhaps even pay a premium for a certain combination of valuations. We find that the composition and
businesses that offer them efficiencies the investors characteristics of the constituents of a business
cannot achieve in the market? Nobel Laureate Ronald matter, particularly when it comes to their profitability
Coase pointed out in his seminal paper “The Nature of the (return on capital). With these tools, we can help
Firm” that markets can impose transaction costs which management teams analyze the composition and
firms can avoid by acquiring diverse sets of businesses, characteristics of their portfolio and make the best
whether adjacencies or vertically-aligned. capital allocation choices to maximize market value –
even for a portfolio company. This paper provides
All companies consist of an assortment of business lines guidance for managing – and allocating capital to – the
or projects. Some will be great, some good, some may be right mix of business segments in order to maximize
operationally challenged. But are there insights or metrics the market value of each company overall. Our work
that can shed light on when and how the market might suggests that collections of business segments will
pay a conglomerate premium, as opposed to a not inevitably be subject to a discount. Let’s see how.

2
Credit Suisse Corporate Insights 3
Laying out the
portfolio landscape

This paper looks at the optimization of business information – perhaps on a geographic basis or
segments – understanding which kinds of only revenue numbers (but not enough for us to
businesses succumb to portfolio company discern a segment’s profitability) – are excluded
discounts and which seem to overcome that from this study. This leaves us with a sample of
notion and trade at or even above the intrinsic over 3,000 observations7 (based on 200 - 400
value of the sum of their parts. In order to do so, companies over each of the last ten years) which
we focused our analysis on what we consider is a sample size sufficiently large enough to draw
“portfolio companies”. These portfolio companies conclusions about market sentiment.
are the universe of public companies that disclose
financial information about their distinct business Portfolio companies can be found across all
segments – at least revenue, operating income, industries, but there are some interesting
D&A and assets. We can compare that data – differences across industrial sectors8 (Exhibit 1).
which reveals the composition and characteristics Industrials and Materials are the two sectors with
of their business segments – with the value the the highest number of portfolio companies. Of all
market ascribes to the business overall. the sectors we looked at, Consumer Staples
companies tend to have the most complexity,
These portfolio companies constitute about 20% with more than 40% of Consumer Staples
of total public companies in the US and Europe6. companies running four or more segments.
Companies which report less segment

Exhibit 1: Number of segments per company by sector | 2012–2021

Number of company observations

1,126 639 464 367 339 286 184 137

24% 19%
27% 27% 26% 28%
34%
43%

28%
23%
34% 33% 28%
36%
35%

40%

52% 53%
39% 41% 44%
37%
31%
17%

Industrials Materials Consumer Health Care Consumer Energy Information Communication

Discretionary Staples Technology Services

2 segments 3 segments 4+ segments

4
How are portfolio companies
valued?

Does a company that owns multiple businesses The market rewards excellence in risk-adjusted
perform operationally better or worse relative to returns9 and growth with higher multiples,10 as
their industry and what are the consequences for observed from the difference in valuation
that company’s valuation? Let’s compare the multiples between the “Laggards” and
returns, growth and risk profiles of our portfolio “Champions” in Exhibit 2.
companies’ business segments to the market.

Exhibit 2: Growth & profitability metrics of US companies with a market capitalization of over $1bn
(1,681 companies)
50.0%

Market Market
median: median:
40.0% 13.1x 16.7x

Early
Champions
Growers
30.0%
Sales growth – FY3/FY1 CAGR

20.0%
Growth

+5.4x
10.0%

0.0%

(10.0%)
Cash
Laggards
Generators

(20.0%)
Market Market
median: +2.8x median:
7.7x 10.5x
(30.0%)
(10.0%) (5.0%) 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Profitability
Return on capital spread – NTM

Credit Suisse Corporate Insights 5

 Exhibit 3: The breakdown of portfolio companies by
number of business segments, operating assets12 and
economic profits13 | 2012–2021

Number of business segments

19% 26%
We can apply this quadrant concept11 to the
underlying operating segments of our
portfolio companies by replicating the
comparison of risk-adjusted returns on capital
vs. growth on an industry basis. This allows
us to place our approximately 11,000
segment observations into one of these 29%
buckets – Laggards, Early Growers, Cash
26%
Generators or Champions.

There is a stark difference between where

capital has been invested and where Operating assets (capital invested)
economic profit has been generated. While
only 20% of total capital was invested in 20%
segments that are considered Champions, 24%
these segments generated more than half of
total cumulative economic profit. Laggards,
by contrast, represent the largest amount of
capital invested (35%) while in aggregate
they do not even earn positive economic
profit. In aggregate, the economic profit for 21%
portfolio companies is earned almost
exclusively by segments that have above 35%
industry average returns on capital –
Champions and Cash Generators.
Economic profit

(0%) (4%)

51%

53%

Champions Cash Generators Laggards Early Growers

6
Solving the valuation puzzle

Now we get to the heart of the question, which is this multiples-based approach suffers since it is
valuation. Doing a sum-of-the-parts (SOTP) often very difficult to find relevant public
valuation is notoriously difficult for any outside comparables and this approach pre-supposes
investor or sell-side research analyst with access that the market fully understands the investment
to only public information. Ideally, we approach story of every segment and – therefore – that
that problem using a discounted cash flow (DCF) every segment is “fairly valued”.
methodology with perfect information around the
correct forecasts to use and discount those at a So, for us to arrive at an intrinsic valuation for
business line-specific cost of capital to arrive at each of our portfolio companies, we deployed an
an intrinsic value for the consolidated firm. approach that derives a valuation multiple (EV to
However, management teams themselves often invested capital)14 through a multivariate
struggle with estimating these inputs accurately. regression that uses each segment’s own return
on capital (CFROI), growth and a discount rate
Another approach – commonly used by sell-side that is unique to each segment’s relevant industry
research analysts is a multiples-based calculation, cohort. This discount rate is based on the
where each segment gets awarded a valuation forward-looking discount rate that is necessary to
multiple based on the average of a group of arrive at a fair value for each industry using Credit
companies similar in nature and in operating Suisse’s proprietary HOLT framework. Using this
characteristics in order to arrive at an approximate approach, our model produces an 87%
intrinsic value for the consolidated company. But correlation for the market as a whole.

Exhibit 4: Market regression based on NTM CFROI, discount rate and FY3/FY1 sales CAGR15
Universe includes all companies in North America and Europe excluding Financials, Real Estate and Utilities (by GICS classification) with market
capitalization over $1bn (2,333 companies)

32.0x
R² = 87%

16.0x
Actual EV / invested capital

8.0x

4.0x

2.0x

1.0x
1.0x 2.0x 4.0x 8.0x 16.0x 32.0x

Predicted EV / invested capital (based on NTM, CFROI, discount rate and forward sales growth)

Credit Suisse Corporate Insights 7

 Deriving Cash Flow Return On Investment, or segment’s asset base. The sum of the segment
“CFROI”, and growth trends of the segments of Enterprise Values results in an intrinsic Enterprise
each portfolio company in our analysis, we can plot Value of the portfolio company. When we compare
them on a regression such as Exhibit 4 and derive this value to the observable market value of each
each segment’s intrinsic EV / invested capital parent portfolio company, we now have a robust
multiple. That gives us an intrinsic Enterprise Value view of whether the portfolio company trades at a
for each segment by finding the implied multiple premium16 or discount to our derived intrinsic value
based on the regression, relative to each of the sum of its parts (Exhibit 5).

Exhibit 5: Warranted premium / (discount) to market value for portfolio companies | 2012–2021
Number of observations

500
Median discount: (2.4%)
Average discount: (3.7%)
450

400

350

300
54% of observations 46% of observations

250

200

150

100

50

0
(90%)

(80%)

(70%)

(60%)

(50%)

(40%)

(30%)

(20%)

(10%)

(0%)

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Across our universe of 400 portfolio companies think that in efficient markets this result does not
over the last ten years, we see a relatively normal come as a surprise. Systematic mis-pricing is
distribution where the median portfolio company unlikely as investors should recognize and reward
over the last ten years has a modest discount to well-operated, well-managed businesses. In fact,
intrinsic value of 2.4%. This is probably a much a notably large cohort of portfolio companies –
smaller discount than the material “conglomerate 46% – trade at an apparent premium to their
discount” many people believe exists, but we intrinsic value.

8
The fundamentals of
underlying segments drive
the consolidated value

So, what is driving the difference in our intrinsic Let’s test our data set of portfolio companies to
valuation estimates and the observed market see if we can tease out some intuitive themes
values? These differences don’t necessarily about our conclusions.
mean that these companies are over- or
undervalued. It could also be that our regression- We will start by looking at portfolio companies that
based valuation model – which focuses on contain at least one segment that doesn’t earn
profitability, growth and risk – doesn’t capture an ROIC above its cost of capital – a value
additional factor specific to portfolio companies, destructive business (Exhibit 6). To check on the
that investors are willing to pay up for or apply a market sentiment of companies that own such
discount to. Synergies across operating “bad” segments, we split our universe of portfolio
segments are often quoted as a source of value. companies into two buckets; companies where all
To the extent that these aren’t fully fleshed out in segments generate returns in excess of the cost
the underlying financials, any unquantified of capital… and those companies that operate at
synergies could also be a source of mis-pricing. least one “negative spread” business segment.

Exhibit 6: Impact of below cost of capital segments on warranted premium / (discount) to market value
(Discount) / premium to current share price

6.7% 6.6%
5.1% 5.6%
4.5%

1.7% 2.1% 1.7%

0.9%

(3.3%)

(5.6%)
(6.5%) (7.1%)
(7.8%)
(9.1%)
(9.8%)
(10.4%)
(12.5%)

(15.1%)
(16.3%)

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

At least one segment below cost of capital Zero segments below cost of capital

Credit Suisse Corporate Insights 9

 The results are clear; companies that own Applying our quadrant approach to potential
value-destructive assets trade at a consistent permutations of business segments produces
and material discount to their intrinsic value, 15 possible combinations (e.g. Laggards plus
whereas companies that don’t own value- Champions, Cash Generators plus Early
destructive assets often trade at a premium. Growers, etc.) To explain this logic, there is only
one possible combination of a portfolio company
We can take this analysis a step further by applying that has at least one segment in each of the
the quadrant concept we brought up earlier – quadrants but there are four possible
Laggards, Early Growers, Cash Generators or combinations where each of a portfolio
Champions. What can we learn from the interaction company’s segments fall in the same quadrant,
between underlying business segments and these with eight different other possible combinations.
operating profiles? Is there a secret sauce of The results are shown in Exhibit 7.
segment composition within a portfolio company
that investors might either favor or shy away from?

Exhibit 7: Warranted premium / (discount) by underlying fundamental profile

Number of observations
229 453 272 147 89 101 251 368 212 26 69 98 370 309 303

11.4% 11.8%
8.2%
6.3%
3.7%

(4.1%) (3.5%) (3.2%) (2.6%)

(5.4%)
(9.1%)
(10.6%)
(12.1%)
(14.5%)
(16.4%)
Early Growers

Laggards

CG+EG

CH+EG

CH+CG+EG

CH+CG

Champions

Cash Generators
EG+LA

CG+EG+LA

CH+EG+LA

CG+LA

CH+LA

CH+CG+EG+LA

CH+CG+LA

Portfolio companies with only best-in-class of uncertainty better since a bigger portion of
businesses trade at the biggest premium… their value is derived from near-term cash flows
and those with only Early Growers trade at the as opposed to Early Growers, whose implied
largest discount. value is derived from cash flows much further out
in the future.
Champions and Cash Generators
Our analysis reveals that investors are willing to pay
Our key insight here is that if we know that a premium for companies that have multiple
profitability matters for all public companies in businesses generating high returns on capital, an
the market today, it matters even more for indication that they have large moats or other
portfolio companies. Since profitability tends competitive advantages18. This is good
to be stickier than growth17, having Champions diversification. It’s not surprising to see that same
and/or Cash Generators businesses as the positive effect for companies that operate multiple
majority of the portfolio tends to be rewarded by Champion segments. This is a cohort of best-in-
investors and command premium valuations. class businesses that can provide investors with
These types of portfolio companies tend to be exposure to very high levels of profitable growth.
able to weather economic downturns and periods Investors appear to be willing to pay up for that.

10
Early Growers and Laggards

The most surprising result was the valuation businesses and will make the company look worse
discount we observe for Early Growers. These are compared to its key peers. In that case, it is
often early life cycle companies that can also be difficult for investors to see the exact impact of
described as high-risk and high-reward. Early life the Early Grower segment on the consolidated
cycle companies have been the darlings of company. Second, it can be difficult for investors
investors willing to pay high multiples for promises to understand the story of an Early Grower. Some
of future profitable market share capture during investors may understand it and appreciate its full
the almost ten years run up in the global equity worth, but others may not. In that case, we may
markets that we experienced pre-Covid. For a never see the valuation uplift until the fate of the
hypothetical, mono-line Early Grower company, Early Grower becomes clearer. Finally, having
investors may be willing to apply a revenue multiple Early Growers in a portfolio may also
multiple or price a company off of cash flows not present its own challenges. Early Growers are
expected to be generated for several more years. risky – cash flows are expected to be generated in
The archetype of a startup business is “burning” the future, while often requiring significant capital
cash to capture market share before driving shifts to support growth. Having one of the Early
toward profitability and a move into the Cash Grower segments underperform can create a
Generators quadrant as their growth moderates strain on the capital available to fund the future
and they achieve scale. Alternatively, they could growth of the other Early Grower segments and
turn into Champions if they manage to continue may make it difficult to secure further financing at
maintaining high growth and deliver strong an attractive cost.
profitability simultaneously. When those
companies have a single focus, or a single It’s too simple to say that investors don’t like
business segment, investors have an easier time diversification. Our analysis reveals that it may be
understanding their value proposition and can the type of diversification that matters.
make a focused decision about its probability of Combining highly profitable businesses with
success. each other seems to be a formula that
investors are willing to pay a premium for.
Yet portfolio companies that contain an Early But including an underperforming business can
Grower segment do not seem to receive the same drag the portfolio company’s valuation down below
credit as our hypothetical single-line Early Grower intrinsic value. This scenario raises the related
above. We can think of several reasons why. First, question of how big an underperformer has to be
the often-negative cash flow profile of these in order to represent a discernable drag on
segments presents a drag on the company’s (or valuation. Likewise, how relatively big does a
portfolio company’s) other more well-established Champion have to be to see a valuation premium?

Credit Suisse Corporate Insights 11

Inflection points for
portfolio optimization

To answer this question, we looked at how much valuation impact as a result of the share of
exposure a portfolio company has to each of our exposure to each of these categories (Exhibit 8).
four categories. Then we determined the

Exhibit 8: Median (discount) / premium by % of total capital invested in Early Growers, Champions, Laggards
and Cash Generators
(Discount) / Premium to current share price

Early Growers Champions

9.3%

3.3% 3.4%
0.1%

(0.2%)

(6.1%) (6.8%)
(8.5%)
(10.7%)

(15.6%)
0%–20% 20%–40% 40%–60% 60%–80% 80%–100% 0%–20% 20%–40% 40%–60% 60%–80% 80%–100%

Laggards Cash Generators

9.8%

2.7% 3.5%
0.0%

(0.7%) (1.1%)
(4.9%)
(6.2%)
(7.6%)

(14.6%)
0%–20% 20%–40% 40%–60% 60%–80% 80%–100% 0%–20% 20%–40% 40%–60% 60%–80% 80%–100%

12
 These graphs represent the share (or proportion) rises, the discount gradually gets bigger and
each company has invested in one of our four ends up at a rather steep discount in the
operational quadrants. We see a distinct and mid-teens for both.
intuitive pattern.
All of this discussion of operationally driven
For companies with Champion segments, those profiles and how they relate to the corporate life
segments need to represent more than 40% of cycle should be considered through a lens of
capital invested in order to begin to generate a movement or transition from one profile to
portfolio premium. That premium stays around another. An Early Grower can become a
3.5% until the total capital invested exceeds Champion, for example. Or a Champion can
more than 80%, where we observe a much remain so. The corporate life cycle embeds the
larger premium of about 10%. Keep in mind, fundamental assumption that, over time,
however, that the median of all companies is a businesses cannot earn high returns, nor can
2.4% discount and that should be the baseline they grow indefinitely. Thus, businesses should
of which to compare these premiums to. not remain in one bucket or another forever.
How often do business segments transition over
For companies with investment in Laggards and this 10-year period and should managers expect
Early Growers alike, there is not a discernable that their businesses will change their stripes?
discount for companies that have less than 20% Exhibit 9 shows just that.
of their assets exposed. Once that exposure

Exhibit 9: Persistence of fundamental profile – 1 year transition matrix

End state (1 year later)

Champions Cash Generators Early Growers Laggards

Champions 46.6% 39.3% 4.8% 9.3%

Beginning state

Cash Generators 32.2% 51.5% 4.5% 11.8%

Early Growers 11.4% 6.5% 38.6% 43.5%

Laggards 7.9% 8.8% 28.8% 54.5%

From one year to the next, profiles are relatively the benefit of it turning a profit, which may help
sticky. For Champions, Cash Generators, and explain why companies that own segments with
Laggards, the most likely result was that the Early Grower exposure trade at the steepest
following year they remained as such. discounts to intrinsic value. While there are
Interestingly, for Early Growers, it was more likely relatively high levels of stickiness, plentiful
that they transitioned to the Laggards profile one opportunities exist for managers to transition
year later. That means there is significant risk of businesses and improve portfolio composition.
rapidly growing an unprofitable business without

Credit Suisse Corporate Insights 13

Conclusions
In this paper, we have looked at how the composition of a
company’s portfolio can impact firm value. We also
question whether any systemic “conglomerate” discount
exists and we’ve shown that – if such a discount does
exist – it is not very large.

So it seems that the path to value creation does premium for a business portfolio. Therefore, we
not necessarily go via a mono-line business. believe it is vital for corporate managers to
Companies that grow through consolidation or continually diagnose, evaluate and monitor the
acquisition of other segments can be just as performance — both relative and absolute — of
successful, and perhaps more so, as those that the segments in their portfolio. Such a diagnosis
don’t. It is the type of combination of businesses will empower management to make better
– the Champions, the Cash Generators, etc. decisions about both capital allocation and buying
– that can drive a firm’s valuation. In fact, our and selling components of their portfolio. This
analysis shows that the right combination of information is the key to managing a portfolio of
high-performing assets can drive a valuation businesses to maximize value in the markets.

14
Authors and
Acknowledgements

Authors from Credit Suisse Investment Bank

Rick Faery – Managing Director, Global Head of Corporate Insights Group

Eli Muis – Director, Corporate Insights Group
Austin Rutherford – Vice President, Corporate Insights Group
Irek Akberov – Associate, Corporate Insights Group
Kailin Zhou – Associate, Corporate Insights Group

With thanks for their contributions and insights:

Steve Hellman – Managing Director, Industrials LA

Juan P Hernandez – Managing Director, LatAm NY
Tom Hillman – Managing Director, HOLT US
Diron Jebejian – Managing Director, Financial Sponsors NY
Jeffrey Ponko – Managing Director, Retail & Consumer Chicago
Richard Curry – Director, HOLT Portfolio & Quant Strategy
Kevin Reher – Director, HOLT Data Products
David Rones – Director, HOLT Portfolio & Quant Strategy

Credit Suisse Corporate Insights 15

End notes

1 Steven D. Price. “The Quotable Billionaire: Advice and Reflections From and for the Real, Former, Almost, and Wanna-Be Super-Rich and Others,”
Page 164. Skyhorse Publishing Inc., 2009.
2 Defined as a company that focuses solely on one type of product or service, or has one business segment.
3 Refers to the tendency of markets to value a consolidated company with a diversified group of business segments at less than the sum of its parts.
4 In this paper, a portfolio company is defined as a public company with at least two or more business segments with sufficient disclosure of business
segment’s balance sheet and income statement information.
5 Return on capital defined as HOLT CFROI.
6 The universe includes companies in the U.S. and Europe with a market capitalization over $1 billion, across all sectors, with the exception of Finan-
cials, Utilities, and Real Estate (based on GICS classification).
7 We analyzed ~400 companies across a 10-year period (2012-2021). Universe includes companies within the U.S. and Europe that exist in the
Credit Suisse HOLT database; all GICS sectors were included with the exception of Financials, Utilities, and Real Estate.
8 Sector defined per GICS classification.
9 Defined as HOLT CFROI less cost of capital. Cost of capital is defined as HOLT discount rate.
10 See Credit Suisse Corporate Insights – Managing the multiple: Weighing growth against profitability.
11 Each quadrant represents an aggregation of companies based on their respective growth rates and levels of return on capital. In any given year,
quadrant multiples represent EV/FY2 EBITDA multiples and are calculated as median multiple of all companies in the top-right quadrant and bot-
tom-left quadrant. The top-right quadrant contains all companies with above-median NTM CFROI spread and above-median FY3/FY1 sales CAGR.
The bottom-left quadrant contains all companies with below-median NTM CFROI spread and below-median FY3/FY1 sales CAGR.
12 Defined as Inflation-adjusted gross investment, which includes working capital, inflation-adjusted gross plant, capitalized R&D, and capitalized oper-
ating leases.
13 Defined as gross cash flow less capital charge.
14 Defined as ((market value of equity + debt) / (inflation adjusted net assets, including capitalized operating leases and R&D)).
15 FY3/FY1 sales CAGR is based on FactSet consensus median estimates.
16 Defined as ((observed value less intrinsic value) / intrinsic value). Observed value is defined as the observable market value of each parent consoli-
dated company. Intrinsic value is defined as the sum of the enterprise values of business segments derived from relevant industry regression implied
valuation analysis.
17 See Credit Suisse Corporate Insights – Managing the multiple: Weighing growth against profitability. “Two thirds of the high return companies are
able to deliver high returns on capital in the next period. Only less than one third of the high growth companies grew at similarly high rates in the
following period.”
18 See Credit Suisse Corporate Insights – Fighting the fade: Strategies for sustaining competitive advantage.

16
About

Credit Suisse
Investment Bank

Credit Suisse Investment Bank is a division of Credit Suisse, one

of the world’s leading financial services providers. We offer a broad
range of investment banking services to corporations, financial
institutions, financial sponsors and ultra-high-net-worth individuals
and sovereign clients. Our range of products and services includes
advisory services related to mergers and acquisitions, divestitures,
takeover defense mandates, business restructurings and spin-offs.
The division also engages in debt and equity underwriting of public
securities offerings and private placements.

Credit Suisse Corporate Insights

The Credit Suisse Corporate Insights series provides our
perspective on the key and critical corporate decision points many
of our clients face, regarding corporate strategy, market valuation,
debt and equity financing, capital deployment and M&A.

Credit Suisse Corporate Insights 17

This material has been prepared by personnel of Credit Suisse Securities (USA) LLC and its affiliates (“CSSU”) and not by
the CSSU research department. It is not investment research or a research recommendation, as it does not constitute
substantive research or analysis. This document is not directed to, or intended for distribution to or use by, any person or
entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution,
publication, availability or use would be contrary to law or regulation or which would subject CSSU to any registration or
licensing requirement within such jurisdiction. It is provided for informational purposes only, is intended for your use only,
does not constitute an invitation or offer to subscribe for or purchase any of the products or services, and must not be
forwarded or shared except as agreed with CSSU. The information provided is not intended to provide a sufficient basis on
which to make an investment decision. It is intended only to provide observations and views of certain personnel, which
may be different from, or inconsistent with, the observations and views of CSSU research department analysts, other
CSSU personnel, or the proprietary positions of CSSU. Observations and views expressed herein may be changed by the
personnel at any time without notice. This material may have previously been communicated to other CSSU clients.

The information provided, including any tools, services, strategies, methodologies and opinions, is expressed as of the date
hereof and is subject to change. CSSU assumes no obligation to update or otherwise revise these materials. The
information presented in this document has been obtained from or based upon sources believed to be reliable, but CSSU
does not represent or warrant its accuracy or completeness and is not responsible for losses or damages arising out of
errors, omissions or changes or from the use of information presented in this document. This material does not purport to
contain all of the information that an interested party may desire and, in fact, provides only a limited view. Any headings are
for convenience of reference only and shall not be deemed to modify or influence the interpretation of the information
contained.

Backtested, hypothetical or simulated performance results have inherent limitations. Simulated results are achieved by the
retroactive application of a backtested model itself designed with the benefit of hindsight. The backtesting of performance
differs from the actual account performance because the investment strategy may be adjusted at any time, for any reason
and can continue to be changed until desired or better performance results are achieved. Alternative modeling techniques
or assumptions might produce significantly different results and prove to be more appropriate. Past hypothetical backtest
results are neither an indicator nor a guarantee of future returns. Actual results will vary from the analysis. Past
performance should not be taken as an indication or guarantee of future performance, and no representation or warranty,
expressed or implied is made regarding future performance.

CSSU may, from time to time, participate or invest in transactions with issuers of securities that participate in the markets
referred to herein, perform services for or solicit business from such issuers, and/or have a position or effect transactions
in the securities or derivatives thereof. To obtain a copy of the most recent CSSU research on any company mentioned
please contact your sales representative or go to research-and-analytics.csfb.com. FOR IMPORTANT DISCLOSURES on
companies covered in Credit Suisse Investment Banking Division research reports, please see www.credit-suisse.com/
research disclosures.

Nothing in this document constitutes investment, legal, accounting or tax advice or a representation that any investment
strategy or service is suitable or appropriate to your individual circumstances. This document is not to be relied upon in
substitution for the exercise of independent judgment. This document is not to be reproduced, in whole or part, without the
written consent of CSSU.
The HOLT methodology does not assign ratings or a target price to a security. It is an analytical tool that involves use of a
set of proprietary quantitative algorithms and warranted value calculations, collectively called the HOLT valuation model,
that are consistently applied to all the companies included in its database. Third-party data (including consensus earnings
estimates) are systematically translated into a number of default variables and incorporated into the algorithms available in
the HOLT valuation model. The source financial statement, pricing, and earnings data provided by outside data vendors are
subject to quality control and may also be adjusted to more closely measure the underlying economics of firm performance.
These adjustments provide consistency when analyzing a single company across time, or analyzing multiple companies
across industries or national borders. The default scenario that is produced by the HOLT valuation model establishes a
warranted price for a security, and as the third-party data are updated, the warranted price may also change. The default
variables may also be adjusted to produce alternative warranted prices, any of which could occur. The warranted price is an
algorithmic output applied systematically across all companies based on historical levels and volatility of returns. Additional
information bout the HOLT methodology is available on request.

CSSU does not provide any tax advice. Any tax statement herein regarding any US federal tax is not intended or written to
be used, and cannot be used, by any taxpayer for the purpose of avoiding any penalties. Any such statement herein was
written to support the marketing or promotion of the transaction(s) or matter(s) to which the statement relates. Each
taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

This document does not constitute an offer to sell, or a solicitation of an offer to purchase, any business or securities.

This communication does not constitute an invitation to consider entering into a derivatives transaction under U.S. CFTC
Regulations §§ 1.71 and 23.605 or a binding offer to buy/sell any financial instrument.
CREDIT SUISSE SECURITIES (USA) LLC
Corporate Insights Group
Eleven Madison Avenue
New York, NY 10010

credit-suisse.com

© 2022, CREDIT SUISSE SECURITIES (USA) LLC