Corbin Advisors Q419 Earnings Primer

Q419 Earnings Primer Investor Sentiment Survey January 17, 2020 | IF IT’S CORBIN, IT’S ACTIONABLE |

Inside The Buy-side® Q419 Earnings Primer

ISSUE: 41 DATE: JANUARY 17, 2020 Market Performance

For over a decade, we have surveyed global investors quarterly on the equity markets, world economies and business climate. At the start of every earnings season, we publish our leading-edge research, Inside The Buy-side®, which captures real-time Voice of Investor™ sentiment and trends.

DJIA

1

BY REGION 60%

7% 15%

23% Industrials Technology Healthcare Materials

8%

NASDAQ

12.2%

35.2%

S&P 500

8.5%

28.9%

Russell 2000

9.5%

23.7%

FTSE 100

1.8%

12.1%

Stoxx 600

5.8%

23.2%

Hang Seng

8.0%

9.1%

Shanghai

5.0%

22.3%

As of 9’30’19

BY INVESTMENT STYLE Core Value

22%

Core Growth

22% 19%

GARP

5%

70%

4% 3%

22.3%

Asia

Survey Timeframe: Nov. 21, 2019 – Jan. 7, 2020

Multi1

6.0%

Europe

Survey Scope: 82 participants globally, comprising 71% buy side and 29% sell side; assets under management total ~$1.2 trillion

Generalist

2019

U.S.

Leveraging our deep understanding of capital markets, proprietary research, cutting-edge technology and best practice knowledge, our research demonstrates the value we add by remaining at the forefront of global market trends, investor sentiment and effective communication strategies.

BY TYPE

Q419

17%

VC/Private Equity

13%

Hedge Fund North America

Inc. Value/Yield

5%

EMEA Other

1

5%

APAC

Deep Value

2%

Multi includes Cons. Disc, Cons. Staples, Energy, Financials, REIT, Telecom, Utilities CORBIN ADVISORS

2

Word Cloud: Frequency of Occurrence We developed a word cloud to visually demonstrate the investment community’s focus areas, trends in frequency of word occurrence, as well as the underlying tone

Investor Feedback Indicates a Positive Change in Sentiment amid a Strong Consumer and Priced-in Slowing Growth

Q119

Q219

Top 2019 Mentions

Q319

Q419

Q119

Q219

Q319

Q419

Q/Q

Trade War

27

44

62

38

 24

U.S.

24

30

36

44



Growth

32

13

23

32

 11

Economy

8

15

22

22

➔ -

China

10

31

22

20

 2

Interest Rates

7

14

20

23

 3

Recession

7

8

12

15

 3

8

Key: Underlying Sentiment

⚫ ⚫ ⚫

Positive Neutral Negative

CORBIN ADVISORS

3

Survey Findings Reveal a Sea Change in Investor Sentiment – A Floor Has Been Reached as More Positive Views Abound and Expectations Rise #1

Following Q319 Results that Handily Beat Consensus, Most Expect Q4 to come In Line with Estimates and Nearly Three-Quarters Expect 2020 Outlooks to Be In Line or Better Than 2019

▪

~75% and 60% of S&P 500 companies reported positive Q319 EPS and revenue surprises, respectively

▪

For Q419, 41% expect In Line sequential EPS and 54% believe earnings will be consistent with consensus; only 24% predict Below consensus

▪

While most investors expect EPS and Organic Growth to be In Line with Q3 results, all key metrics – EPS, Organic Growth, Margins and FCF – registered increases in Better Than expectations and saw decreases in Worse Than views; notably, investors are expecting strong FCF and margin resiliency

▪

73% expect full-year 2020 guides to be In Line or Better Than 2019, compared to only 27% anticipating Worse Than outlooks

▪

36% anticipate capex levels will improve over the next six months, as negative views on most global economies ease across the board

#2

Investor Nervousness Recedes as the Strong Consumer, Low Unemployment, Low Interest Rate Environment and Strong Balance Sheets More than Offset Slowing Economic Growth and Geopolitical Uncertainty

▪

Investor sentiment is more optimistic; those whom are Bullish or Neutral to Bullish increased to 52% from 37% QoQ, while 43% describe executive tone as more upbeat, up from 31%

▪

2019 U.S. GDP expectations improve QoQ, with 60% expecting 2.5% growth, up from 54% last quarter; similar for 2020, only 15% anticipate a recession in the next 12 months, a marked improvement from 40% last quarter

▪

For the fourth consecutive quarter, trade war impact remains the most prominent investor concern, albeit at 44%, down from 55% QoQ

▪

Shrugging off U.S. political risk, 97% do not believe the impeachment hearings will lead to the removal of President Trump

#3

A Few “X Factors” Emerge as Investors are Decidedly Split on Outcomes

▪

While 45% believe a U.S./China tariff dispute resolution by the 2020 U.S. election is Likely, 55% are in the Not Going to Happen or only Somewhat Likely to Happen camp

▪

Investors are divided on interest rates; 51% expect the U.S. Fed to cut rates in 2020 while 49% foresee “no cut”, signaling confidence in the health of the economy

#4

Despite All-time Equity Market Highs, More Room to Run as Investors Jump Back In

▪

Only 55% of investors classify U.S. markets as Overvalued, while Europe and Asia markets are considered Under to Fairly Valued

▪

Only 22% report Increasing portfolio cash holdings this quarter, down from 35% last quarter, while 28% are Decreasing cash holdings

▪

31% of investors report they are Net Buyers, the highest level registered since December 2017 (32%)

▪

Technology and Healthcare claim top spot among bulls, while defensive plays – Consumer Staples, Utilities and REITs – were the only sectors to see higher levels of bearish sentiment, yet another sign that investors are more optimistic about economic prospects

CORBIN ADVISORS

4

Modest Economic Growth Baked into Expectations and Some Investors Calling 2019 “The Floor” 60% report Q3 earnings results were as expected – mixed to moderately weaker – and forecast Q4 will be In Line sequentially; nearly one-third anticipate sequential earnings growth, nearly double QoQ Q419 EARNINGS EXPECTATIONS VS. PRIOR QUARTER

34%

31%

Q419 EARNINGS EXPECTATIONS VS. CONSENSUS

41% 36% 41%

50%

41%

37%

28% 18% 20% 18%

16% 18% 17% Better Than

In Line Mar '19

Jun '19

Sep '19

54%

50%

47%

Worse Than

43% 32%

22%

Better Than

Dec '19

In Line Mar '19

Jun '19

Sep '19

43% 39%

Worse Than Dec '19

Better Than

In Line

Worse Than

“Improving productivity, better economic conditions.”

“Trade war has had an impact on many businesses. It seems China has borne the brunt of the damage but the U.S. was still affected.” Buy Side, Generalist, N. America

“Consensus is too high.” Buy Side, Generalist, Europe

Buy Side, Generalist, N. America

“Analysts try to lowball estimates.” Buy Side, Generalist, N. America

“Natural Language Processing (NLP) analysis.” Sell Side, Generalist, N. America

“Strong U.S. consumer.” Sell Side, Generalist, N. America “Seasonality, typically stronger Q4 vs Q3.” Sell Side, Healthcare, N. America

24%

“Macro headwinds, seasonality, GM strike and 737 Max.” Buy Side, Multi, N. America

“Low unemployment, high consumer sentiment and lowered expectations.” Buy Side, Generalist, N. America “Continued albeit modest economic growth coupled with sustained margins.” Buy Side, Generalist, N. America

“Uncertainty in U.S. leadership, trade war with China, increasing debt and geopolitical instability are contributing to negative sentiment and an expected slowdown in the global economy.” Buy Side, Multi, N. America

“Slowdown is built into the numbers and that is right for another quarter.” Buy Side, Generalist, N. America

“Weaker ISM and industrial production trend.” Buy Side,

“Slowing global economy but continued confidence in the U.S. consumer.” Buy Side, Generalist, N. America

“Worsening commodity prices.” Sell Side, Energy, N. America

Industrials, N. America

“Weak commodity prices.” Sell Side, Materials, N. America

“Low, steady global growth and low volatility in the stock markets.” Buy Side, Generalist, Europe “Management teams are not motivated to be optimistic but the market understands that.” Buy Side, Multi, N. America “Reasonable expectations.” Buy Side, Technology, N. America

“Phony accounting to justify government cash injections lifting the market.” Buy Side, Materials, N. America

CORBIN ADVISORS

5

Demand Improvement and Strong Consumer Drive More Upbeat 2020 Outlooks Nearly three-quarters expect 2020 guidance to be In Line or Better Than 2019 EXPECTATIONS FOR FULL-YEAR 2020 GUIDANCE OUTLOOKS RELATIVE TO 2019

LIKELIHOOD OF A FAVORABLE RESOLUTION TO THE U.S./CHINA TARIFF DISPUTE BY 2020 U.S. ELECTION

73%

38%

37%

35% 27%

25%

18%

15% 5% Stronger

In Line

Weaker

Will Happen

Very Likely

Likely

Somewhat Likely

Not Going to Happen

Stronger

In Line

Weaker

“Modestly stronger given a number of macro events (e.g., initial efforts to resolve trade conflicts, consumer sentiment coupled with expansion in wages). Apparent stability being evidenced in specific economic regions outside the U.S.”

“Although we may have a trade deal, we don’t understand what it is yet. The devil is in the details.” Buy Side, Generalist,

“High political, fiscal and monetary uncertainty will cause management to set a low bar.” Buy Side, Generalist, N. America

N. America

Buy Side, Generalist, N. America

“Growth deceleration has been well-documented throughout the year, resulting in an ‘easy comp’ situation for next year.”

“Anticipated improvements in economy and earnings.”

Buy Side, Generalist, N. America

“Slowing economy.” Buy Side, Generalist, N. America “Everyone guides below, so they can beat-and-raise through the year.” Buy Side, Generalist, N. America

Buy Side, Generalist, N. America

“Low beginning expectations.” Buy Side, Generalist, N. America

“Uncertainty will stay high (Brexit, U.S. election, trade war, China-Hong Kong).” Buy Side, Generalist, Europe

“Tariffs, slowing economy, political uncertainty.” Buy Side,

“Money is cheaper and the economy is still okay.” Buy Side,

“Too much uncertainty for guidance to be materially higher.”

Generalist, N. America

Buy Side, Multi, N. America

“Still strong U.S. consumer, recovery in business sentiment.”

“Economy to stabilize.” Buy Side, Healthcare, Europe

“Slowing global demand and consumer concerns about the election process and the possibility of higher taxes in a completely new Democratic-run government.” Buy Side,

Generalist, N. America

Generalist, N. America

Sell Side, Generalist, N. America

“Low interest wages.” Sell Side, Generalist, Europe “Growth in new products.” Sell Side, Healthcare, N. America “Improvement in demand and commodity prices.” Sell Side, Materials, N. America

“Current company projections / easy comps.” Sell Side,

“Trade war.” Buy Side, Generalist, Europe

Industrials, N. America

“Range bound commodity prices.” Sell Side, Energy, N. America

“Global slowdown.” Buy Side, Generalist, Europe “The trade war continues to dominate investor sentiment and affect CFO 2020 budgeting decisions amid a wide range of business environment outcomes.” Buy Side, Multi, N. America “Uncertainty in U.S. leadership, trade war with China, increasing debt and geopolitical instability are contributing to negative sentiment and an expected slowdown in the global economy.” Buy Side, Multi, N. America

CORBIN ADVISORS

6

Following Three Quarters of Deteriorating Investor Expectations, Views toward KPIs Improve Significantly On the heels of last quarter’s survey, which saw the most bearish sentiment on EPS and FCF in the past five years, all indicators are expected to Stay the Same, with notable upward moves in investors expecting improvement

ORGANIC GROWTH

FCF

51%53% 44%

38%34% 28%

28% 11%13% Improving

Staying the Same

Worsening

EPS

42%

46%44%42%

43% 33%

21% 13%

16%

Improving

Staying the Same

OPERATING MARGINS

Worsening Jun '19

35%

43% 43% 35%

49% 41%

16%16%

Sep '19

Staying the Same

53%

31% 22%

Improving

46%

Worsening

57% 46%

29%

18% 8% 12% Improving

Staying the Same

Worsening

Dec '19

Total Number of Mentions on Quarterly Earnings Calls by Companies Globally1 Tariffs

Cost Actions

2000

Headcount Reduction

4000

500 3420

1228 1500

3500

1000

3000

371

400 347 300

2959

200 2500

Change (∆)

1

0

Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 Mar '18 Jun '18 Dec '18 Mar '19 Jun '19 Sep '19 Dec '19

2000

Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 Mar '18 Jun '18 Dec '18 Mar '19 Jun '19 Sep '19 Dec '19

0

100

Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 Mar '18 Jun '18 Dec '18 Mar '19 Jun '19 Sep '19 Dec '19

500 261

QoQ

YoY

QoQ

YoY

QoQ

YoY

 25.2%

 15.0%

 5.5%

 13.6%

 15.9%

 62.0%

Source: Corbin Advisors research CORBIN ADVISORS

7

Topics of Interest for Upcoming Earnings Calls 2020 Outlooks, Growth Prospects and Margin Resiliency

1

2020 outlooks

2

Growth prospects

3

Margin sustainability

4

Capital deployment strategy, including reinvestment

5

New product development

6

Inventory

Views from N. America

Views from EMEA

Views from APAC

“How are inventories in the channel being worked through and where are we in that process? Reinvestment and positioning of balance sheet.” Buy Side, Generalist

“Order intake / order book.” Buy Side, Generalist

“Company thematic.” Buy Side, Generalist

“Business environment, outlook.” Buy Side, Healthcare

“Stagflation.” Sell Side, Consumer Discretionary

“Balance sheet structure, cash utilization, strategic outlook and expectations, competitive environment.” Buy Side, Generalist

“Outlook for 2020.” Sell Side, Generalist

“Impact of global macro environment.” Sell Side, Technology

“Portfolio changes (dispositions vs. acquisitions).” Sell Side,

“How they are going to grow revenue.” Sell Side, Generalist

“Global outlook.” Buy Side, Generalist

REIT

“Inventory/capex plans.” Sell Side, Generalist “Penetration within their markets, efficacy of execution, sustainability of margins.” Buy Side, Generalist “Business investment.” Buy Side, Generalist “Capex and revenue outlook. If they are spending, then I assume they like their prospects.” Buy Side, Generalist “Trade and capital investment.” Buy Side, Generalist “Organic growth.” Buy Side, Generalist

“What they see in the pipeline and why.” Buy Side, Generalist “Organic growth trends, price vs. cost inflation spread, new product/service launches, outlook for 2020.” Buy Side, Generalist

“2020 guidance.” Buy Side, Generalist “Use of cash.” Buy Side, Generalist “New product development, margin outlook and organic growth.” Buy Side, Multi

CORBIN ADVISORS

8

Investor Sentiment and Perceived Management Tone Register at the Most Bullish Levels Since Sep. 2018 With Q3 earnings results generally surprising to the upside, slowing growth priced in, a more optimistic executive tone and expectations for easier YoY comps, investor sentiment rebounds INVESTOR SENTIMENT 3%

11%

37%

MANAGEMENT TONE

16%

26%

Bullish

52% 36%

31%

28%

Neutral to Bullish

38%

33%

Bearish 38%

24% 27%

30%

23% 12% Sep '19

43%

Neutral Neutral to Bearish

24%

5%

17%

1%

6% Dec '19

Sep '19

2% Dec '19

Bullish

Neutral to Bullish

Neutral

Neutral to Bearish

Bearish

“Faith in the consumer and companies to invest to meet demand at least through Q120.”

“Most smart managers talk down earnings allowing them to beat. Plus with some reduction in tariffs, there might be room for global growth.”

“This is an aging bull market and it is becoming increasingly skittish and volatile. The geopolitical environment isn’t helping. We have very poor leadership worldwide.”

“Declining organic earnings.”

Buy Side, Generalist, N. America

Buy Side, Generalist, Europe

“Uncertainty in U.S. leadership, trade war with China, increasing debt and geopolitical instability are contributing to negative sentiment and an expected slowdown in the global economy.” Buy Side, Multi,

“Strong consumer, removal of some risks, while other strong risks remain.” Buy Side, Generalist,

“Overextended.” Sell Side, Generalist,

Buy Side, Generalist, N. America

Buy Side, Generalist, N. America

“Data and trade war improvement.”

Buy Side, Generalist, N. America

“Liquidity.” Buy Side, Generalist, N. America

“Recovery in investor confidence on 2020 global growth.” Sell Side,

“Similar to the prior quarter and throughout most of this year, management has been very deliberate in their presentations.

Guidance has been muted to afford some degree of surprise.” Buy Side,

Buy Side, Generalist, N. America

“Lower capex, rhetoric to protect margins, still not at the bottom.”

N. America

N. America

N. America

Generalist, N. America

Generalist, N. America

“Management will err on the side of caution given consequences of downward revisions.” Buy Side, Generalist, N. America

“U.S. consumer plus election.”

Buy Side, Generalist, N. America

“Global growth should improve in 2020 if there is a trade deal between U.S. and China by the end of 2019.”

Buy Side, Generalist, Europe

CORBIN ADVISORS

9

Top Concerns from around the Globe For the fourth consecutive quarter, investor focus remains on trade war impact but at a moderated level; fewer than 20% are concerned about the global economy

44%

35%

27%

24%

18%

16%

Trade wars

Geopolitics

U.S. elections

Low interest rates

Global economy

China-Hong Kong

Views from N. America

Views from EMEA

Views from APAC

“Perpetual trade war, Democrat sweep of presidency and Senate in 2020, the Fed didn’t pivot in time.” Buy Side,

“Commercial wars.” Buy Side, Generalist

“Macro environment trumping company fundamentals.”

Generalist

“Global trade war, U.S. election, China-Hong Kong dispute.”

Buy Side, Generalist Buy Side, Generalist

“Labor availability, political risks, interest rate policy.” Buy Side,

“Political developments, low interest rates, deleveraging.”

Buy Side, Generalist

Generalist

“Slowing U.S., trade war.” Buy Side, Generalist

“Economic growth, interest rates rising, regulation.” Buy Side,

Multi

Generalist

“Trade war, negative interest rates, equity valuations exbanking sector.” Buy Side, Generalist

“Trade, election uncertainty, Hong Kong.” Buy Side, Generalist

“Tariffs, policy.” Buy Side, Multi

Generalist

“Continuation of advancement in trade negotiations and resolution, U.S. political environment, geopolitical events within Asia (e.g., Hong Kong) and the Middle East; potential spillover or widening of events.” Buy Side, Generalist

“Political uncertainty, recession, Middle East.” Buy Side,

“Debt levels, inflation, trade.” Buy Side, Generalist

“Long-term interest rates, political changes, consumers purchase.” Sell Side, REIT

“U.S. election and political climate, deteriorating revenue and earnings growth, debt and deficits.” Buy Side, Generalist

Healthcare

“Economic slowdown, unemployment, high inflation.” Buy Side, “U.S./China trade, China economy, geopolitics.” Sell Side, “Trade tension, U.S. recession, war.” Sell Side, Consumer Discretionary

“U.S./China trade, valuations, negative rates.” Sell Side, Multi

“Trade wars being prolonged, interest rates.” Buy Side, Generalist

“The corrosive political environment and unfit leadership, U.S. debt and future obligations, low (and negative) interest rates.”

Buy Side, Generalist

“Trade policies, asset bubble due to artificially low interest rates, slowdown in productivity.” Buy Side, Generalist “The tariff situation with China, consumer resilience as the economy slows, a complete democratic sweep in Congress and the White House, especially the progressive wing of the party.” Buy Side, Generalist

CORBIN ADVISORS

10

With 2019 U.S. GDP Predictions at 2.5%, a U.S. Recession is Not in the Cards Near-term While Manufacturing ISM® worsened slightly in December, a record-low unemployment rate and robust consumer drive optimism

U.S. RECESSION PREDICTION

2019 U.S. GDP PREDICTION Q11

Q21

Q31

Q4 Est.2

2019 Est.2

3.1%

2.0%

2.1%

2.2%

2.3%

55%

37% 30% 20%

60% 54% 41%

2.0% or Below

40% 30% 23%

17% 14%

2.5%

8%10%

3.0% Jun '19

4% 4% 1%

0% 0% 0%

3.5%

4.0%+

Sep '19

Dec '19

4% 3%

9%

20% 12%

3% Within 6 Months

I Do Not Pay Attention to GDP

Within 12 Months

Within 24 Months

Sep '19

I Do Not Think We Will

Dec '19

®

Manufacturing ISM Report on Business3 Proprietary Research: According to our survey (n = 110), investors most focused on the following economic indicators 1

Manufacturing ISM®

51%

2

Consumer Confidence

43%

3

Unemployment

40%

4

Yield Curve

26%

5

Interest Rates

18%

57.5

60

58.8 54.3

56.6

54.2

55.3

55

52.8

52.1

51.7

51.2

49.1

50

47.8

48.3

48.1

47.2

45 Oct '18 Nov '18 Dec '18 Jan '19 Feb '19 Mar '19 Apr '19 May 19 Jun '19 Jul '19 Aug '19 Sep '19 Oct '19 Nov '19 Dec '19

Consumer Confidence2 150

6

GDP

14%

130

7

Capex level

8%

110

8

Inflation

7%

9

Stock Market

4%

10

Housing Starts

6%

137.9

136.4 126.6

131.4 124.2

121.7

129.2

131.3

135.8

134.2 126.3

124.3

126.1

126.8

126.5

Oct '18 Nov '18 Dec '18 Jan '19 Feb '19 Mar '19 Apr '19 May 19 Jun '19 Jul '19 Aug '19 Sep '19 Oct '19 Nov '19 Dec '19

U.S. Unemployment Rate4

4.0%

3.8%

3.7%

3.9%

4.0%

3.8%

3.8%

3.6%

3.6%

3.7%

3.7%

3.7%

3.5%

3.6%

3.5%

3.5%

1 Source:

U.S. Bureau of Economic Analysis 2 Source: The Conference Board 3 Source: Institute for Supply Management 4 Source: U.S. Bureau of Labor Statistics CORBIN ADVISORS

2.0% Oct '18 Nov '18 Dec '18 Jan '19 Feb '19 Mar '19 Apr '19 May 19 Jun '19 Jul '19 Aug '19 Sep '19 Oct '19 Nov '19 Dec '19 11

Investors Continue to Reduce Cash Holdings QoQ and Report Supporting Valuations Despite all-time highs and U.S. equities being considered Overvalued, investors remain committed to equities, focusing on companies with balance sheet strength; views are divided on the Fed, which is expected to be the “X Factor” in 2020 GLOBAL EQUITY VALUATION CLASSIFICATION

U.S. 4%

41%

QoQ PORTFOLIO CASH HOLDING

46%

55%

43% 40% 43%

35% 22% Europe

38%

37%

22%

28%

25% 7%

4% Asia

34%

45%

Under

Fairly

21%

Increase

Remain Steady

Over

Jun '19

QoQ INVESTMENT TRENDS

Decrease

Sep '19

3%

7%

Do Not Hold Cash

Dec '19

51%

Believe the Fed Will Lower Interest Rates in 2020, Compared to 49% Who Do Not

86%

Do Not Believe Impeachment Hearings Will have an Impact on the Stock Market

97%

Do Not Believe Impeachment Will Lead to Removal of U.S. President Trump

37% 32%

31%

31%

27%

26%

24% 25%

20%

17% 17% 11%

1% 1% 0% Net Buyer

Net Seller

Holding Jun '19

Sep '19

Rotating

Liquidating

Dec '19

Top Measures to Evaluate Downside Risk (n = 93)

CORBIN ADVISORS

1

Balance Sheet Strength

70%

2

Multiple Compression

39%

3

Sensitivity Analyses

23%

4

Recurring Revenue

22%

5

Cash Flow Generation

18%

12

Views on Capital Allocation Remain Consistent, with Reinvestment and Debt Reduction Favored Ideal debt levels remain at 2.0x or below, but debt sensitivity levels ease somewhat given strong company balance sheets and improving views on the global economy; buybacks remain muted given all-time market highs

PREFERRED USES OF CASH In Descending Order of Top Two Preferences

58% 61% 45%

52% 50% 54% 34%

27%

32%

26%

26%

26%

30% 18%

15%

Reinvestment

Debt Paydown

Dividend Growth

10%

M&A

Jun '19

Sep '19

19% 19%

Buybacks

Dry Powder

Dec '19

IDEAL NET DEBT-TO-EBITDA LEVELS

47% 36%

37%

38% 36% 38% 30%

29% 18%

12%

13%

10% 11% 11%

11% 4%

<2.0x

2.0x

2.5x 2018

CORBIN ADVISORS

Jun '19

Sep '19

3.0x

11% 3% 5%

0%

>3.0x

Dec '19

13

Global Concerns Ease as Most Economies Are No Longer Expected to Worsen Over the Next Six Months For the sixth consecutive quarter, China sees the most downbeat outlook of all regions, though outright bearishness has noticeably declined; Latin America expected to struggle

GLOBAL ECONOMY EXPECTATIONS OVER THE NEXT SIX MONTHS

EUROZONE U.S. Improve

Worsen

36%

18%

+15 pts

-19 pts

MEXICO Worsen

Improve

Worsen

34%

26%

15%

31%

-15 pts

Worsen

42%

22%

+27 pts

-29 pts

-4 pts

Improve

Worsen

Improve

Worsen

34%

38%

20%

18%

+15 pts

-24 pts

UNCH

-1 pt

INDIA Improve

Worsen

37%

17%

Improve

Worsen

+6 pts

+1 pt

58%

10%

+22 pts

-14 pts

+10 pts

BRAZIL Improve

Worsen

37%

20%

-12 pts

+8 pts

58%

SE Asia

Eurozone

India

SOUTHEAST ASIA

TOP 3 – WORSENING

TOP 3– IMPROVING

CORBIN ADVISORS

JAPAN

CHINA

LATIN AMERICA

Improve

+6 pts

Improve

42%

37%

38%

China

Latin America

Mexico

31%

26%

14

Key Indicator Expectations Over the Next Six Months Significant positive shifts in sentiment identified across all key measures, particularly Global Capex, Global PMI, and Non-Resi.

Construction GLOBAL CAPEX 17%

GLOBAL PMI 36%

26%

CONSUMER CONFIDENCE 12%

17%

39% 42%

39%

58%

38% 57% 26% Sep '19

Dec '19

43% 46%

44%

22%

18% Sep '19 Improving

“Staying the Same: Within the U.S., this may be adversely impacted given the uncertainty of the election and continuation (or termination, should the President not be re-elected) of deregulation.” Buy Side, Generalist, N. America

20%

Dec '19 Staying the Same

Sep '19

Dec '19

Worsening

“Improving: Easing moves are putting a floor in.” Buy Side,

“Improving: Strong labor market.” Buy Side, Generalist, Europe

Generalist, N. America

“Improving: Acceleration of global growth will lead to higher confidence.” Buy Side, Generalist, Europe

“Worsening: Weakening international economies and domestic uncertainty aren’t environments for increasing capex.”

“Staying the Same: The rise in consumer sentiment is anticipated to be sustained, barring any shocks to the economy or political landscape.” Buy Side, Generalist, N. America

“Staying the Same: The consumer is happy at this point.”

Buy Side, Generalist, N. America

Buy Side, Generalist, N. America

OIL & GAS MARKETS 29%

NON-RESI. CONSTRUCTION 10% 37%

RESI. CONSTRUCTION 27%

36%

50%

33%

23%

31%

Dec '19

Sep '19

39%

44% 49%

49% 46%

22%

14%

Sep '19

Dec '19

Sep '19 Improving

“Improving: Modest improvement.” Buy Side, Generalist, N. America

Staying the Same

43% 18%

Dec '19

Worsening

“Staying the Same: Unlikely to get better given economic uncertainty but also unlikely to be materially worse.” Buy Side,

“Improving: Demographic trends, affordability.” Buy Side, Generalist, N. America

Generalist, N. America

“Improving: Acceleration of global growth will lead to higher Oil & Gas consumption.” Buy Side, Generalist, Europe

“Improving: Low interest rates are positive for the housing markets.” Buy Side, Generalist, Europe “Staying the Same: Housing formation within the U.S. may be adversely impacted should interest rates rise.” Buy Side, Generalist, N. America

CORBIN ADVISORS

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With Sentiment Ticking Higher, All Sectors See Bears Recede QoQ Except Defensive Plays Stronger outlooks in general support Tech and Healthcare, which remain top sector bets for the sixth consecutive quarter; after seeing more optimism for six consecutive quarters, REIT bears emerge, while Cons. Staples sees the largest increase in negative sentiment

BULLS VS BEARS Bulls

Technology

Bears

100% 80% 60% 40% 20% 0%

+/- Represents Study-over-Study Delta

Technology Healthcare Financials

58%

-4 pts

16%

52%

+16 pts

15% 39%

+12 pts +11 pts

31%

Biotechnology

-4 pts

31%

Comm. Services

7%

Cons. Discretionary

+6 pts

19%

Cons. Staples

-1 pt

19%

Building Products

-1 pt

19%

UNCH

18%

-11 pts

-4 pts

23%

21%

-4 pts

Healthcare

-16 pts

36%

25%

+12 pts

-1 pt

23%

Energy

Industrials

-5 pts

100% 80% 60% 40% 20% 0%

-7 pts

16%

Materials

-9 pts

23%

-21 pts

36% 23%

+18 pts

100% 80% 60% 40% 20% 0%

-5 pts

REIT Utilities Materials

+7 pts

REIT

-7 pts

CORBIN ADVISORS

16% 13%

26% 23% 30%

+10 pts -14 pts

+12 pts

100% 80% 60% 40% 20% 0%

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If Itâ&#x20AC;&#x2122;s Actionable, Itâ&#x20AC;&#x2122;s Corbin Advisors Insights-driven Advice Resulting in Real Value Creation

Our proprietary approach combines stakeholder research, investor engagement and communication strategies to unlock embedded value.

Leveraging deep experience across sectors, market-caps and various company situations, we engage with public companies on both high-level strategy and tactical execution.

Our candid advice and actionable recommendations consistently result in value creation.

1

1

CORBIN VALUE CREATION MODEL

Event-driven Consulting includes: Restructuring; Earnings; Large-Platform M&A; Transformations CORBIN ADVISORS

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