SENVEST
ANNUAL REPORT
2023
S S
Financial Highlights
SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
(years ended December 31)
SUMMARY OF OPERATIONS
Total revenues and investment gains (loss)
Net income (loss) attributable to
common shareholders
Diluted earnings (loss) per share
FINANCIAL DATA
Total assets
Total equity
2023
$
2022
$
2021
$
2020
$
2019
$
432,303
(730,345)
2,482,176
739,405
426,150
83,608
33.78
(326,083)
(130.98)
732,988
289.32
211,717
80.66
104,794
39.16
5,132,462
1,638,626
5,653,153
1,593,771
6,563,902
1,815,653
4,065,992
1,146,114
2,884,999
942,655
COMMON STOCK INFORMATION
The company’s common shares are listed on the Toronto Stock Exchange under the symbol SEC.
FISCAL QUARTER
First
Second
Third
Fourth
2023
$
2022
$
High
344.10
319.67
327.51
310.00
Low
321.00
300.00
310.00
280.00
High
415.00
404.00
362.08
344.99
Low
361.00
340.00
306.25
279.00
Total Assets ($ Thousands)
Total Equity ($ Thousands)
Book Value per Share
6,563,902
5,653,153
5,132,462
1,815,653
1,593,771 1,638,626
721
636
656
4,065,992
2,884,999
1,146,114
942,655
423
347
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Management’s Discussion and Analysis
OVERALL PERFORMANCE
Senvest Capital (“Senvest” or the “Company”) recorded net income attributable to common shareholders of $83.6 million
or $33.78 per basic and diluted common share for the year ended December 31, 2023. This compares to a net loss
attributable to common shareholders of ($326.1) million or ($130.98) per basic and diluted common share for the year
ended December 31, 2022. For the current year, the US dollar weakened against the Canadian dollar and the result was a
currency translation loss of about $37.4 million. This amount is not reported in the Company’s statement of income rather
it’s reflected in its statement of comprehensive income. As a result, the comprehensive income attributable to common
shareholders was $46.7 million for the year.
The Company’s income from equity investments was the biggest contributor to the results. The net change in fair value of
equity investments and other holdings including securities sold short and derivative liabilities totaled $307.7 million in the
year versus ($810.0) million in 2022. Most of the Company’s equity investments are held by two funds, Senvest Master
Fund, L.P. and Senvest Technology Partners Master Fund, L.P., which are consolidated into the accounts of the
Company. A more detailed discussion on net change in fair value of equity investments can be found in the year end
investment letters for each of the two funds which are disclosed near the end of this letter.
On a consolidated basis across the different funds, the largest holdings as at December 31, 2023 were Paramount
Resources (POU), QuidelOrtho (QDEL), Tower semiconductors (TSEM), Boston Properties Inc (BXP), Kilroy Realty
Corp (KRC) and Marriot Vacations (VAC).
The Senvest Master Fund (Senvest Partners Fund) is focused primarily on small and mid-cap companies. The fund
recorded a return of 6.6% net of fees in the fourth quarter and 4.9% for the year. With most of the long portfolio invested
in small and mid-cap stocks, the fund underperformed its most relevant benchmark, the Russell 2000 for the fourth
quarter and for the year. The fund also underperformed the S&P 500 index both for the fourth quarter and for the year but
does not consider this index as a benchmark. The fund has issued an institutional share class which requires a minimum
investment of $75 million US, and includes a longer duration element, which further enhances the stability of its capital
base and its ability to make long-term investments to help generate returns for the benefit of all of our partners. Senvest’s
internal capital is subject to the same liquidity provisions of the institutional share class.
technology for 15 years,
The Senvest Technology Partners Fund was initiated in 2003 to focus on investing in Israel related companies. In 2019,
the Fund broadened its geographic investment mandate to focus on global technology investments. After investing in
technology universe. The
its holdings extended across
Israel-related
Technology Fund maintained the same investment philosophy and continued to leverage the existing diligence and
understanding of global technology and end markets. This fund recorded a return of 10.2% net of fees for the fourth
quarter and up 15.3% year (monthly results of the two funds can be found on the Company’s website). As stated above
both funds are consolidated into the accounts of the Company.
the global
The Company has a portfolio of real estate investments as at December 31, 2023. One part of this amount
trusts (REITs) and partnerships. These REITs
in different US real estate
represents investments
and partnerships are not publicly traded and there is no established market for them.
income
2SENVEST CAPITAL INC. December 31, 2023 The most likely scenario for a disposal of these holdings is an eventual sale of the underlying real estate properties of the
REITs and partnerships and the distribution to its holders. Also, there are minority interests in private entities whose main
assets are real estate properties. As described above for the REITs and partnerships, the most likely scenario for a disposal
of these holdings is an eventual sale of the underlying real estate properties.
The Company also has investment properties in lands and buildings, specifically self-storage units in Madrid,
Spain. Investment properties are initially measured at cost, including transaction costs. Subsequent to initial
recognition, investment properties are remeasured at fair value, using the fair value model. The fair value is based on
external valuations from third party valuators. Gains or losses arising from changes in fair value of investment properties
are included in the Company’s net income or loss. The Company has seven self-storage units in operation and another
four units are at various degrees of construction.
The Company consolidates the Senvest Management LLC (SML) entity that serves as the investment manager of Senvest
Partners and Senvest Technology Partners as well as the general partners of the funds. The portion of the expected
residual returns of structured entities that do not belong to the Company is reflected as a non-controlling interest on the
statement of financial position. This non-controlling interest is owned by an executive of the Corporation. This non-
controlling interest was $17.8 million as at December 31, 2023 from $17.5 million as at December 31, 2022.
At the end of December 31, 2023, Senvest had total consolidated assets of $5,132.5 million versus $5,653.2 million at the
end of 2022. Equity investments and other holdings totaled $4,586.0 million from $5,280.9 million in December 2022.
The Company purchased $3,456.5 million of investment holdings in the year and sold $4,360.3 million of such holdings.
The Company’s liabilities decreased to $3,493.8 million this year versus $4,059.4 million in 2022. The decrease was
mainly due to a decline in due to brokers and securities sold short and derivative liabilities. The proceeds of securities
sold short were $3,195.8 million and the amount of shorts covered was $3,573.7 million in the year. Overall, the trading
figures were less than the corresponding amounts for the prior year.
Functional currency
Items included in the financial statements of each of the Company’s entities are measured using the currency of the
primary economic environment in which the entity operates (the functional currency). The functional currency of the
Company is the US dollar.
Presentation currency
The Company has adopted the Canadian dollar as its presentation currency, which in the opinion of management is the
most appropriate presentation currency. Historically, the Company’s consolidated financial statements have been
presented in Canadian dollars, and since the Company’s shares are listed on a Canadian stock exchange, management
believes it would better serve the use of shareholders to continue issuing consolidated financial statements in Canadian
dollars. The US dollar consolidated financial statements described above are translated into the presentation currency
as follows: assets and liabilities – at the closing rate at the date of the consolidated statement of financial position; and
income and expenses – at the average rate for the period. All resulting changes are recognized in other comprehensive
income as currency translation differences. Equity items are translated using the historical rate.
3SENVEST CAPITAL INC. Management’s Discussion and Analysis December 31, 2023 Risks
Financial risk factors
The Company’s activities expose it to a variety of financial risks: market risk (including fair value interest rate risk, cash
flow interest rate risk, currency risk and equity price risk), credit risk and liquidity risk.
The Company’s overall risk management program seeks to maximize the returns derived for the level of risk to which the
Company is exposed and seeks to minimize potential adverse effects on the Company’s financial performance. Managing
these risks is carried out by management under policies approved by the Board of Directors.
The Company uses different methods to measure and manage the various types of risk to which it is exposed; these methods
are explained below.
Market risk
Fair value and cash flow interest rate risks
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of
changes in market interest rates.
The majority of the Company’s debt is based on floating rates which expose the Company to cash flow interest rate risk.
The Company does not have a long-term stream of cash flows that it can match against this type of fixed debt, so it prefers
to use short-term floating rate debt. The Company does not mitigate its exposure to interest rate fluctuation on floating rate
debt. If interest rates spike, then the Company could enter into interest rate swaps or more probably just reduce its debt
level. As at December 31, 2023, the Company has listed equity securities of $4,142.1 (2022 – $4,740.1). It can sell these
securities to reduce its floating rate debt. As at December 31, 2023, a 1% increase or decrease in interest rates, with all other
variables remaining constant, would impact interest expense by approximately $8.8 over the next 12 months (2022 – $10.6).
The Company holds held for trading financial assets in debt securities of $22.44 (2022 – $82.65).
Debt securities are usually highly sensitive to interest rate changes. Theoretically, when interest rates rise, it causes the value
of debt securities to decline. The opposite generally happens when interest rates fall, then debt securities usually rise in
value. A change of 100 basis points in the yield to maturity will affect the fair value of the debt securities held for trading.
Currency risks
Currency risk refers to the risk that values of monetary financial assets and liabilities denominated in foreign currencies will
vary as a result of changes in underlying foreign exchange rates.
The Company is exposed to currency risk due to potential variations in currencies other than the US dollar. The following
tables summarize the Company’s main monetary financial assets and financial liabilities whose fair value is predominantly
determined in currencies other than the US dollar, the Company’s functional currency, and the effect on pre-tax net income
of a 10% change in currency exchange rates:
4SENVEST CAPITAL INC. Management’s Discussion and Analysis December 31, 2023 Financial
assets
$
Financial
liabilities
$
Net
exposure
$
63,150
6,683
-
290
-
(4,507)
(64,911)
-
63,150
2,176
(64,911)
290
70,123
(69,418)
705
2023
Net effect of a
10% increase
or decrease
$
6,315
218
(6,491)
29
71
Canadian dollar
Euro
British Pound
Israeli shekel
Equity price risk
Equity price risk is the risk that the fair value of equity investments and other holdings and equities sold short and derivatives
will vary as a result of changes in the market prices of the holdings. The majority of the Company’s equity investments and
other holdings and all of the securities sold short and derivatives are based on quoted market prices as at the consolidated
statement of financial position date. Changes in the market price of quoted securities and derivatives may be related to a
change in the financial outlook of the investee entities or due to the market in general. Where non-monetary financial
instruments − for example, equity securities − are traded in currencies other than the US dollar, the price, initially expressed
in a foreign currency and then converted into US dollars, will also fluctuate because of changes in foreign exchange rates.
Securities sold short represent obligations of the Company to make future delivery of specific securities and create an
obligation to purchase the security at market prices prevailing at the later delivery date. This creates the risk that the
Company’s ultimate obligation to satisfy the delivery requirements will exceed the amount of the proceeds initially received
or the liability recorded in the consolidated financial statements. In addition, the Company has entered into derivative
financial instruments, which have a notional value greater than their fair value, which is recorded in the consolidated
financial statements. This creates a risk that the Company could settle these instruments at a value greater or less than the
amount that they have been recorded in the consolidated financial statements.
The Company’s equity investments and other holdings have a downside risk limited to their carrying value, while the risk
of equities sold short and derivatives is open ended. The Company is subject to commercial margin requirements which act
as a barrier to the open-ended risks of the securities sold short and derivatives. The Company closely monitors both its
equity investments and other holdings and its equities sold short and derivatives.
The impact of a 30% change in the market prices of the Company’s listed equity investments and other holdings and equities
sold short and derivatives would be as follows:
5SENVEST CAPITAL INC. Management’s Discussion and Analysis December 31, 2023 2023
Estimated
fair value
with a 30%
price increase
$
Estimated
fair value
with a 30%
price decrease
$
Fair
value
$
Equity investments and other holdings
Listed equity securities and derivatives
Equities sold short and derivative liabilities
4,263,539
(502,965)
5,542,601
(653,855)
2,984,477
(352,075)
Pre-tax impact on net loss
1,128,172
(1,128,172)
Liquidity risk
Liquidity risk is the risk the Company will encounter difficulties in meeting its financial obligations. The Company’s largest
assets are equity investments and other holdings. Most of these assets are made up of equities in listed companies which
can be liquidated in a relatively short time. Due to its large holding of liquid assets, the Company believes that it has
sufficient resources to meet its obligations as they come due. All financial liabilities other than equities sold short, derivative
liabilities, mortgages, lease liabilities and liability for redeemable units as at the consolidated statement of financial position
date mature or are expected to be repaid within one year (2022 – one year). The liquidity risk related to these liabilities is
managed by maintaining a portfolio of liquid investment assets.
Credit risk
Credit risk is the risk that a counterparty will fail to fulfill its obligations under a contract and will cause the Company to
suffer a loss.
The Company is exposed to credit risk from cash and cash equivalents, restricted short-term investments, due from broker
and debt investments. Credit risk arising from funds held at financial institutions are managed by only investing with
financial institutions with a minimum A rating. The Company manages its credit risk exposure from debt securities by
closely monitoring the debt issuer and the ratings issued by various bond rating agencies. All debt security investments
measured at fair value through profit or loss are traded over stock exchanges therefore exiting a position with increased risk
is relatively easy if the credit worthiness of an issuer falls below the Company’s threshold for credit risk exposure. All non-
trading convertible debt securities are convertible into equity of the issuer and are measured at fair value using independent
third-party appraisals. The Company closely monitors the debt issuer in order to identify when the credit risk falls below
the Company’s threshold at which point the Company may exercise its option to redeem its debt holdings or dispose of it in
the less liquid private markets.
Capital risk management
The Company’s objective when managing its capital is to maintain a solid capital structure appropriate for the nature of its
business. The Company considers its capital to be its equity. The Company manages its capital structure in light of changes
in economic conditions. To maintain or adjust its capital structure, the Company initiates normal course issuer bids or adjusts
the amount of dividends paid. The Company monitors capital on the basis of its net debt -to-capital ratio. Net liabilities used
6SENVEST CAPITAL INC. Management’s Discussion and Analysis December 31, 2023 in the net debt-to-capital ratio is calculated by subtracting the due from broker balances from total liabilities. The net debt-
to-capital ratio is as follows:
Total net liabilities
Total equity
Net liabilities to capital ratio
December 31, 2023
December 31, 2022
$3,147.5
$1,638.6
1.92
$3,895.8
$1,593.8
2.44
The Company’s objective is to maintain a debt-to-capital ratio below 3.0. The Company believes that limiting its debt-to-
capital ratio in this manner is the best way to monitor risk. The Company’s debt to capital ratio was at 1.92 as at December
31 2023 from 2.44 at the end of 2022. The Company does not have any externally imposed restrictive covenants or capital
requirements, other than those included in the credit facility.
Investment Risk
To the extent not discussed above, the Company is subject to additional risks with respect to the investments made.
The value of the Company’s portfolio may decrease as well as increase, due to a variety of factors, including general
economic conditions, and market factors. Additionally, investment decisions made by the Company may not always be
profitable or prove to have been correct. Investment strategies, at any given time, may incur significant losses. Losses can
occur for a number of reasons, including but not limited to, an overall decline in the underlying market, a lack of liquidity
in the underlying markets, excessive volatility in a particular market, government intervention or monetary and/or fiscal
policies of a specific region or country. The profitability of a significant portion of the Company’s investments also depends
to a great extent upon the Company’s ability to correctly assess the future course of the price movements of securities and
other investments. There can be no assurance that the Company will be able to accurately predict these price movements.
The Company’s investment strategy is speculative and involves risk. The Company trades in options and other derivatives,
as well as using short sales and utilizing leverage. The portfolio may not be diversified among a wide range of issuers or
industries. In addition, the Company may take concentrated positions in its high conviction ideas, invest in high yield
securities or invest in foreign markets outside the US and Canada. Accordingly, the investment portfolio may be subject to
more rapid change in value than would be the case if the Company were required to maintain a wide diversification in the
portfolios among industries, areas, types of securities and issuers.
The Company may make investments in the securities of high growth companies. More specifically, the Company may
have significant investments in smaller-to-medium sized companies with market capitalizations of less than $2 billion US.
While smaller companies may have potential for rapid growth, they often involve higher risks because they lack the
management experience, financial resources, product diversification, and competitive strengths of larger corporations.
These factors make smaller companies far more likely than their larger counterparts to experience significant operating and
financial setbacks that threaten their short-term and long-term viability. In addition, in many instances, the frequency and
volume of their trading is substantially less than is typical of larger companies. As a result, the securities of smaller
companies may be subject to wider price fluctuations and exiting investments in such securities at appropriate prices may
be difficult, or subject to substantial delay. Furthermore, some of the portfolio may be invested in technology, technology-
related markets and biotech. These types of companies may allocate greater than usual amounts to research and product
7SENVEST CAPITAL INC. Management’s Discussion and Analysis December 31, 2023
development. The securities of such companies may experience above-average price movements associated with the
perceived prospects of success of the research and development programs. Also, these companies could be adversely
affected by lack of commercial acceptance of a new product or products or by technological change and obsolescence.
Some of these companies may have limited operating histories. As a result, these companies may face undeveloped or
limited markets, have limited products, have no proven profit-making history, operate at a loss or with substantial variations
in operating results from period to period, have limited access to capital and/or be in the developmental stages of their
businesses.
The Company tries to manage the above risks by monitoring its leverage, actively following its investee companies and
trying to react to market conditions. At the same time the Company expects its portfolio to exhibit a higher degree of
volatility than portfolios that invest in larger more stable companies and that invest within more defined limits. As at
December 31, 2023, approximately 88% of the Company’s portfolio was invested in Level 1 securities. The Company
monitors its Level 1 securities as a percentage of its total investments; however, it does not have a fixed number that this
percentage cannot fall below.
Climate Change Risk
Climate change risk refers to the physical risks and transition-related risks related to the changes in climate patterns that
may have a significant impact on communities and the economy. While the direct exposure of the Corporation’s operations
to climate change risk is relatively low, as an investor in equities and other assets, the Corporation could indirectly be
impacted by this risk through its portfolio investments.
The Corporation’s portfolio investments face the potential direct impact of more frequent and more intense extreme weather
events, as well as the potential indirect impact of any related supply chain disruptions. The exposure of the Corporation’s
portfolio investments to climate change risk also arises from the movement toward a low-emission economy, which may
result in increased reputational, market, regulatory, policy, legal and technology-related risks. Existing portfolio investments
in carbon-intensive industries and in other markets which are dependent on such industries may be more exposed to such
transitional risks as a result of significant changes in customer perceptions and preferences, the increasing cost of carbon
emissions and competition from renewable energy.
Critical accounting estimates and judgments
Critical accounting estimates
The Company makes accounting estimates that are subject to measurement uncertainty because they require the use of
judgement and assumptions. The Company uses judgement and assumptions in designing and selecting measurement or
valuations techniques that are appropriate to the circumstances and applies inputs that correlate to the measurement or
valuation technique selected. Inputs selected also require the use of judgment and assumptions.
Consolidation of entities in which the Company holds less than 50% of the voting rights.
Management considers the Company to have de facto control of Senvest Management L.L.C. (RIMA), RIMA Senvest
Master Fund GP, L.L.C., and Senvest Technology Partners GP, L.L.C. three legal entities wholly owned by an executive of
the Company, because of the Company’s Board representation and the contractual terms of the investment advisory
8SENVEST CAPITAL INC. Management’s Discussion and Analysis December 31, 2023 agreement. RIMA is the investment adviser to the Funds, whereas RIMA Senvest Master Fund GP, L.L.C. is the General
Partner of Senvest Master fund LP and Senvest Technology Partners GP LLC is the General Partner of Senvest Technology
Partners Master Fund LP. As compensation for its sub-advisory services, the Company is entitled to receive 60% of the net
management fees through RIMA and incentive allocation earned through the General Partners each fiscal year.
Management considers that the Company has control of Senvest Master Fund LP, Senvest Technology Partners Master
Fund LP and Senvest Cyprus Recovery Investment Partners LP even though the Company has less than 50% of the voting
rights in each of the Funds. The Company assessed that the removal rights of non-affiliated unitholders are exercisable but
not strong enough given the Company’s decision-making authority over relevant activities, the remuneration to which it is
entitled and its exposure to returns. The Company, through its structured entities, is the majority unitholder of each of the
Funds and acts as a principal while there are no other unitholders forming a group to exercise their votes collectively.
Fair value estimates of investment properties
The Company has adopted the fair value model in measuring its investment properties. The fair value of the investment
properties is performed by external independent knowledgeable valuators located in the area of the properties. Inputs used
in the property valuation models are based on appropriate assumptions that reflect the type of property and location.
Management reviews the assumptions made and models used to ensure they correlate with their expectation and
understanding of the market. Changes in assumptions about these factors could affect the reported fair value of financial
instruments.
Fair value estimates of financial instruments
The fair value of financial instruments, including real estate investments, where no active market exists or where listed
prices are not otherwise available are determined by using valuation techniques. In these cases, the fair values are estimated
from observable data in respect of similar financial instruments or by using models. Where market observable inputs are
not available, they are estimated based on appropriate assumptions. To the extent practical, models use only observable
data; however, areas such as credit risk (both the Company’s own credit risk and counterparty credit risk), volatilities and
correlations require management to make estimates. Changes in assumptions about these factors could affect the reported
fair value of financial instruments.
Financial instruments in Level 1
The fair value of financial assets and financial liabilities traded in active markets are based on quoted market prices at the
close of trading on the year-end date . The quoted market price used for financial assets and financial liabilities held by the
Company is the close price. Investments classified in Level 1 include active listed equities and derivatives traded on an
exchange. The financial assets classified as Level 1 were approximately 88% of the total financial assets.
Financial instruments in Level 2
Financial instruments classified with Level 2 trade in markets that are not considered to be active but are valued based on
quoted market prices, broker quotations or valuation techniques, such as financial models, that use market data. These
valuation techniques maximize the use of observable market data where available and rely as little as possible on entity-
specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in
9SENVEST CAPITAL INC. Management’s Discussion and Analysis December 31, 2023 Level 2. These include corporate bonds, thinly traded listed equities and derivatives, over-the-counter derivatives and private
equities.
The Company uses a variety of methods and makes assumptions that are based on market conditions existing at each year-
end date. Valuation techniques used for non-standardized financial instruments such as options and other over-the-counter
derivatives include the use of comparable recent arm’s length transactions, reference to other instruments that are
substantially the same, discounted cash flow analyses, option pricing models and other valuation techniques commonly used
by market participants, making maximum use of market inputs and relying as little as possible on entity-specific inputs. The
financial assets classified as Level 2 were approximately 5.5% of the total financial assets.
Financial instruments in Level 3
Investments classified in Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 instruments
consist of unlisted equity investments, debt securities and real estate investments. As observable prices are not available for
these securities, the Company has used valuation techniques to derive the fair value. The financial assets classified as Level
3 were approximately 6.5% of the total fair value of financial assets.
Level 3 valuations are reviewed by the Company’s Chief Financial Officer (CFO), who reports directly to the Board on a
quarterly basis in line with the Company’s reporting dates. The Board considers the appropriateness of the valuation models
and inputs used. On an annual basis, close to the year-end date, the Company obtains independent, third party appraisals to
determine the fair value of the Company’s most significant Level 3 holdings.
The Company’s CFO reviews the results of the independent valuations. Emphasis is placed on the valuation model used to
determine its appropriateness, the assumptions made to determine whether it is consistent with the nature of the investment,
and market conditions and inputs such as cash flow and discount rates to determine reasonableness.
As at December 31, 2023, Level 3 instruments are in various entities and industries.
Real estate investments are made up of investments in private real estate companies, and in real estate income trusts and
partnerships. The real estate companies are involved with various types of buildings in different geographical locations. For
the main Level 3 instruments, the Company relied on appraisals carried out by independent third party valuators. There was
no established market for any of these investments, so the most likely scenario is a disposal of the underlying assets. For
the investments in real estate income trusts and partnerships, the Company relied mainly on audited financial statements,
valuing the assets at fair value. The most likely scenario is an eventual sale of the underlying properties and the subsequent
distribution to the holders.
Income taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the
consolidated provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether
additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially
recorded, such differences will impact the current and deferred income tax assets and liabilities in the year in which such
determination is made.
10SENVEST CAPITAL INC. Management’s Discussion and Analysis December 31, 2023 QUARTERLY RESULTS
(In thousands except for earnings (loss) per share information)
Total revenue and
investment gains (losses)
Net income (loss)-
common shareholders
Earnings (loss)
per share
281,084
(147,432)
120,082
178,571
467,665
(265,349)
(956,862)
24,201
85,665
(67,029)
21,222
43,750
153,795
(118,477)
(356,091)
(5,310)
34.61
(27.07)
8.58
17.66
61.58
(47.72)
(142.71)
(2.13)
Year
2023-4
2023-3
2023-2
2023-1
2022-4
2022-3
2022-2
2022-1
SELECTED ANNUAL INFORMATION
(In thousands except for earnings per share information)
Total revenue and investment
gains (losses)
Net income (loss) – common
shareholders
Earnings (loss) per share-
diluted
2023
2022
2021
432,303
(730,345)
2,482,176
83,608
(326,083)
732,988
33.78
(130.98)
289.32
Total assets
5,132,462
5,653,153
6,563,902
The Company has equity investment capital commitments of $12,857 and has real estate equity investment capital
commitments of $9,804.
Liability for redeemable units
Liability for redeemable units represents the units in Senvest Master Fund, L.P., Senvest Technology Partners Master Fund,
L.P. and Senvest Cyprus Recovery Investment Partners, L.P. Fund (collectively the Funds or individually a Fund) that are
not owned by the Company. Senvest Master Fund, L.P. and Senvest Technology Partners Master Fund, L.P. units may be
redeemed as of the end of any calendar quarter, however for a particular class (the institutional class) there is a maximum
quarterly redemption of 17% of the investor units and a maximum annual redemption of 34% of the investor units. The
parent company, Senvest Capital, who is an investor in these funds has agreed to be bound by the terms of the institutional
class. Redemptions made within the first 24 months will be subject to a redemption fee of 3% to 5% which is payable to
Senvest Master Fund, L.P. and Senvest Technology Partners Master Fund, L.P. In addition, there are notice periods of 60
days that must be given prior to any redemption. Senvest Cyprus Recovery Investment Partners, L.P. Fund has units that
11SENVEST CAPITAL INC. Management’s Discussion and Analysis December 31, 2023 can be redeemed semi-annually with a 120 day notice. These units are recognized initially at fair value, net of any transaction
costs incurred, and subsequently units are measured at the redemption amount.
Redeemable units are issued and redeemed at the holder’s option at prices based on each Fund’s net asset value per unit at
the time of subscription or redemption. Each Fund’s net asset value per unit is calculated by dividing the net assets
attributable to the holders of each class of redeemable units by the total number of outstanding redeemable units for each
respective class. In accordance with the provisions of the Funds’ offering documents, investment positions are valued at the
close price for the purpose of determining the net asset value per unit for subscriptions and redemptions.
The Company has had wide swings in profitability from quarter to quarter in the past two years, as seen above. The profit
has fluctuated a significant amount quarter to quarter. These wide swings are primarily due to the large quarterly mark to
market adjustments in the Company’s portfolio of public holdings. However, we expect the volatility and choppiness of the
markets to result in wide profit swings from year to year and from quarter to quarter. Reference is made to the section on
Investment risk above.
The Company maintains accounts with several major financial institutions in the U.S. who function as the Company’s main
prime brokers. The Company has assets with the prime brokers pledged as collateral for leverage. Although the prime
brokers are large financial institutions, there is no guarantee that any financial institution will not become insolvent. In
addition, there may be practical or time problems associated with enforcing the Company’s rights to its assets in the case of
such insolvency.
While both the U.S. Bankruptcy Code and the Securities Investor Protection Act seek to protect customer property in the
event of a failure, insolvency or liquidation of a broker dealer, there is no certainty that, in the event of a failure of a broker
dealer that has custody of the Company’s assets, the Company would not incur losses due to its assets being unavailable for
a period of time, ultimately less than full recovery of its assets, or both. As a significant majority of the Company’s assets
are in custody with three prime brokers, such losses could be significant.
On August 16, 2023, Senvest commenced a new normal course issuer bid to purchase a maximum of 100,000 of its own
common shares until August 15, 2024. There have been 6,500 shares repurchased for the year. The number of common
shares outstanding as at December 31, 2023 was 2,472,124 and as at March 28, 2024 was 2,468,824. There were no stock
options outstanding as at December 31, 2023 and none have been issued since 2005.
The Company has financing with a bank, composed of a credit facility and a guarantee facility. A first ranking movable
hypothec in the amount of $30 million on all of its assets has been granted as collateral for both of the facilities. According
to the terms of the facilities, the Company is required to comply with certain financial covenants. During the year, the
Company met the requirements of all the covenants. The Company also has margin facilities with brokers.
Related party transactions
The Company consolidates the Senvest Management LLC entity that serves as the investment manager of Senvest Partners
and Senvest Technology Partners as well as the general partners of the funds. The portion of the expected residual returns
of structured entities that do not belong to the Company is reflected as a non-controlling interest on the consolidated
statement of financial position. This non-controlling interest is owned by an executive of the Company and was $17.8
million as at December 31, 2023 from $17.5 million on December 31, 2022.
12SENVEST CAPITAL INC. Management’s Discussion and Analysis December 31, 2023 Significant Equity Investments
For information on a summary of financial information from certain significant investees please refer to the 2023 audited
consolidated financial statements. The accounts of Senvest Partners, Senvest Technology Partners and Senvest Cyprus
Recovery Investment Fund are consolidated with the Company’s accounts.
FORWARD LOOKING STATEMENTS
This MD&A contains “forward looking statements” which reflect the current expectations of management regarding our
future growth, results of operations, performance and business prospects and opportunities. Wherever possible, words such
as “may”, “would”, “could”, “will”, “anticipate”, “believe”, “plan”, “expect”, “intend”, “estimate”, “aim”, “endeavour”,
“likely”, “think” and similar expressions have been used to identify these forward looking statements. These statements
reflect our current beliefs with respect to future events and are based on information currently available to us. Forward
looking statements involve significant known and unknown risks, uncertainties and assumptions. Many factors could cause
our actual results, performance or achievements to be materially different from any future results, performance or
achievements that may be expressed or implied by such forward looking statements including, without limitation, those
Risk Factors listed in the Company's annual information form. Should one or more of these risks or uncertainties materialize,
or should assumptions underlying the forward looking statements prove incorrect, actual results, performance or
achievements could vary materially from those expressed or implied by the forward looking statements contained in this
MD&A. These forward looking statements are made as of March 28, 2024 and will not be updated or revised except as
required by applicable securities law.
OTHER FINANCIAL INFORMATION
There is additional financial information about the Company on Sedar at http://www.sedarplus.ca/ the Company’s website
at www.senvest.com, as well the Company’s or Senvest Management’s U.S. SEC section 13 and other filings on
www.sec.gov.
13SENVEST CAPITAL INC. Management’s Discussion and Analysis December 31, 2023 Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
Senvest Master Fund, LP
6.64%
Q4 20231
2023
4.94%
6096.86%
16.68%
Cumulative Since
Inception
Annualized Since
Inception
Russell 2000
14.02%
16.88%
750.09%
11.68%
26.26%
956.12%
5.51%
10.44%
606.59%
S&P 500
HFRI
Dear Partners:
Review of Q4 2023
8.33%
9.21%
7.58%
Senvest Partners ended the year with a monthly performance that was much like how we entered 2023 – with
a roughly mid-teens return that solidly beat the broader equity market indices. We view that sort of monthly
outperformance as representative of what can happen to the portfolio at major inflections in the underlying
macro, driven simply by interest rate expectations. That said, the Fund lagged behind the equity market indices
for the quarter and the year.
Below and on the following page we show the Fund’s sector attribution along with the average gross, net, long,
and short exposure for the last quarter.
1 Net performance
14SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
Sector Attribution2 and Average Exposures for Q4 2023
Sector
Communication Services
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Real Estate
Utilities
Index/ETF
Attribution Q4
Long
Short
-0.43% 0.00%
-1.31% -0.23%
-2.11% 0.01%
-3.29% 0.00%
3.88% -0.03%
1.18% 0.07%
0.89% -0.73%
7.05% -0.43%
-0.09% 0.00%
3.35% -0.03%
0.00% 0.00%
0.00% -0.24%
Total Gross Total Net
-0.45%
-1.60%
-2.18%
-3.42%
3.70%
1.20%
0.15%
6.37%
-0.09%
3.20%
0.00%
-0.25%
-0.43%
-1.54%
-2.10%
-3.29%
3.85%
1.25%
0.16%
6.62%
-0.09%
3.32%
0.00%
-0.24%
Average Exposure Q4
Long Short Gross Net
5%
14%
1%
17%
19%
18%
14%
39%
1%
17%
0%
0%
0%
-9%
0%
0%
0%
0%
-3%
-2%
0%
0%
0%
-2%
5%
23%
1%
17%
19%
18%
17%
41%
1%
17%
0%
2%
5%
5%
1%
17%
19%
18%
11%
37%
1%
17%
0%
-2%
Total
9.12% -1.61%
7.51%
6.63%
145% -16% 161% 129%
Below, we show the top 10 winning and losing investments (in rank order) for the Fund in Q4 20233:
Top 10 Contributors
Company
PENNYMAC FINANCIAL SERVICES
UIPATH
BOSTON PROPERTIES
KILROY REALTY REIT
TOWER SEMICONDUCTOR
AVIDXCHANGE HOLDINGS
BANK OF CYPRUS4
WIX.COM
RH
JANUS INTERNATIONAL GROUP
Ticker
PFSI
PATH
BXP
KRC
TSEM
AVDX
BOCH
WIX
RH
JBI
Long/Short
Long
Long
Long
Long
Long
Long
Long
Long
Long
Long
9/30/2023 Stock
Price
66.60
17.11
59.48
31.61
24.56
9.48
259.00
91.80
264.36
10.70
12/31/2023
Stock Price
88.37
24.84
70.17
39.84
30.52
12.39
304.00
123.02
291.48
13.05
% Price
Change
32.69%
45.18%
17.97%
26.04%
24.27%
30.70%
17.37%
34.01%
10.26%
21.96%
2 Net Attribution Figures have been prepared on a pro forma basis and provided above. Important considerations regarding
Senvest's calculation methodology for the Net Sector attributions should be reviewed under the Important Disclosures on
page 16—these figures are not properly understood without reference to these disclosures.
3 Short investments are labelled by GICS Sector and the price changes are rounded to the nearest tenth.
4 Based on the prices of LSE listed security, which is denominated in GBP. The P&L/performance also includes the Fund’s
investment in Senvest Cyprus Recovery Fund, L.P.
15SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
Top 10 Detractors
Company
PARAMOUNT RESOURCE
BEAUTY HEALTH COMPANY
MARRIOTT VACATIONS WORLDWIDE
INDUSTRIALS CO
CRITEO ADR
MARKFORGED HOLDING
EBAY
ARC RESOURCES
INFORMATION TECHNOLOGY CO
WM TECHNOLOGY
Ticker
POU
SKIN
VAC
N/A
CRTO
MKFG
EBAY
ARX
N/A
MAPS
Long/Short
Long
Long
Long
Short
Long
Long
Long
Long
Short
Long
9/30/2023 Stock
Price
32.25
6.02
100.63
N/A
29.20
1.45
44.09
21.68
N/A
1.32
12/31/2023
Stock Price
25.93
3.11
84.89
N/A
25.32
0.82
43.62
19.67
N/A
0.72
% Price
Change
-19.60%
-48.34%
-15.64%
30.00%
-13.29%
-43.45%
-1.07%
-9.27%
40.00%
-45.43%
Top Five Contributors and Detractors Commentary
PennyMac Financial Services (“PFSI”)
Residential mortgage originator and servicer PennyMac Financial Services (“PFSI”) stock rose +32.69% in the
quarter. PFSI reported Q3 GAAP earnings of $1.77 and core earnings ex-hedging losses of $2.11, ahead of
consensus of $1.69. PFSI generated an 11% ROE, up from 7% in Q2 and 4% in Q1, bolstering our confidence that
the cycle troughed in Q1 2023, and ROE expansion is likely as conditions improve. Note the company has
achieved these relatively solid returns in the face of the smallest mortgage origination market since the late
1990s.
Importantly, on December 4th PFSI announced the completion of the long-standing dispute between the
company and Black Knight.5 In November 2019, Black Knight filed suit against PFSI, alleging that the company
misappropriated trade secrets and breached their contracts to copy Black Knight’s mortgage servicing platform,
MSP, to create its own internal servicing platform. Black Knight had sought over $340M in damages and
ownership of PFSI’s IP related to its internal servicing platform. The arbitrator awarded Black Knight $155M in
damages but categorically rejected Black Knight’s claim of misappropriation of trade secrets and gave PFSI
unfettered ownership of its servicing platform and the ability to use its IP however it sees fit. While the
$2.85/share hit to book value is meaningful, the arbitration result was less than the potential for a greater than
$6.25/share hit and critically removed tail risk that had existed for four years.
PFSI shares had a terrific 2023, increasing by +55.97%. PFSI has been a core position for the Fund for over 10
years, and we still see the upside. PFSI has proven itself as a best-in-class operator with significant scale and a
5 PennyMac Financial Services – Investor Update. Investor Presentation (December 4, 2023)
16SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
long runway of future growth. We expect PFSI to continue generating double-digit ROEs in a constrained
mortgage market and greater than 20% ROEs when mortgage rates and spreads normalize over time. We think
the book value for PFSI could approach $100 by year-end of 2025, which should garner a meaningful premium
north of 1.0x book value, driving shares higher from current levels at just under $90/share.
UiPath (“PATH”)
UiPath (“PATH”), a leader in artificial intelligence-based workflow automation and process optimization
software, increased +45.18% during the fourth quarter as the company reported upside to revenue, annual
recurring revenue (“ARR”), profitability, and an acceleration in new bookings. During the quarter, PATH saw ARR
growth of 24% year-over-year and bookings growth of 31% year-over-year, resulting in a record number of $1
million ARR deals in the quarter. Profitability metrics, including an operating margin of 13.5% and FCF margin of
12.5%, also exceeded expectations. We attended the company’s user conference, “Forward,” in October, at
which the company expressed confidence in its execution of a new go-to-market strategy as well as new product
introductions that integrate Generative AI (“Artificial Intelligence”) into its automation platform. While the
overall demand environment remains uneven due to macroeconomic factors, PATH saw strong demand in key
verticals such as the Federal Government, Financial Services, and Healthcare.
UiPath is a relatively recent investment for the Fund which we identified as a broken IPO (April 2021), one of
our favorite new idea screens. We were attracted to the company’s leading technology in the software
automation market as well as a greater focus on driving operating leverage. PATH provides a platform for
customers to automate legacy and repetitive digital tasks using robotic process automation software. UiPath
pioneered the market for attended and unattended bots, which has since evolved into a full automation
platform that includes key capabilities such as process, task, and communication mining that infuse AI-based
technologies. In addition to market-leading technology, PATH was undergoing key changes in its go-to-market
sales approach led by new senior management. Although the stock has seen its multiple expand to 7x EV/Sales
from a trough of 4.5x in April 2023, we still believe the stock price can benefit from accelerating revenue and
profitability over the next several years as it addresses a market opportunity of over $60 billion and approaches
becoming “a rule of 40” company (revenue growth plus free cash flow margins). Rule of 40 SaaS companies
typically trade at 10-12x revenues or 45-55x EV/FCF.
Boston Properties (“BXP”)
Boston Properties’ (“BXP”) stock appreciated +17.97% in the quarter. BXP develops and operates premium Class
A office space across the US, boasting over 54 million square feet of space between Boston, New York, DC, San
Francisco, and other major metropolitan areas.
17SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
As discussed in a previous letter, the prevailing narrative is that the COVID-driven shift to work-from-home has
permanently impaired the demand for office space and, thus, the value of office properties around the US. On
top of work-from-home, the current higher interest rate environment has both valuation and fundamental
implications for office REITs. On the valuation side, higher long-term rates drive lower multiples. From a
fundamental perspective, REITs operate with leverage and as that comes due, real estate owners have to
refinance at higher rates.
These dynamics have combined into a perceived “perfect storm” for office REITs, demand destruction and
higher cost of capital, and have become common knowledge among both investors and laypersons alike. When
a theme becomes common knowledge in the investing community, it can be a sign that positioning has become
lopsided. For example, betting against publicly traded office REITs has become so popular that short interest in
companies like BXP has reached levels not seen since the financial crisis. Further, pre-COVID BXP has, on
average, traded at an around 1.4% spread to the 10-year treasury when measured on adjusted funds from
operations, or free cash flow (“AFFO”) yield, yet by September 2023, this spread had expanded to roughly 4.4%. 6
When positioning eventually reverses, it can drive violent moves in share prices. The volatility in share price of
BXP during Q4 2023 illustrates this dynamic perfectly.
Despite the Q4 rally in the shares, we still view the risk/reward as largely attractive. If BXP returns to the pre-
COVID average AFFO spread of around 1.4%, that would equate to a $95 stock today, even with the 10-year
treasury hovering around 4.09%.7 Every additional 25bp move lower in interest rates would equate to an
additional roughly $3 in share price. In the meantime, we also collect a roughly 6% dividend. Finally, sentiment
and positioning remain on our side, with short interest still over 6.5M shares, versus the pre-COVID average of
around 2M.
Kilroy Realty (“KRC”)
Commercial office REIT Kilroy Realty (“KRC”) appreciated +26.04% in the quarter. Similar to BXP, KRC develops
and operates premium Class A office space, except with a focus on the West Coast and Austin. KRC is especially
exposed to the San Francisco market, with over 50% of NOI from the Bay Area.
The prevailing narrative around office REITs noted above also applies to KRC just as it applies to BXP, absent one
wrinkle: San Francisco. As Boston is to Life Sciences, San Francisco is to the Tech industry, and the latter has
been the poster child for both work-from-home and, beginning in late 2022, layoffs. While Manhattan office
worker visits sit only -25% below the 2019 level, San Francisco remains -53% below the pre-COVID average.8
6 Senvest analysis and NTM Consensus AFFO divided by share price
7 Per Bloomberg 10-year Treasury and the BXP Forward AFFO estimates as of January 22, 2024
8 https://www.placer.ai/blog/placer-ai-office-index-august-2023-recap
18SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
Crime has also jumped in the city, with motor vehicle thefts up +53% and homicides up +44% since 2019.9 People
have responded by leaving the city outright, with net migration outflows reducing the San Francisco population
to 2010 levels. Some believe the city to be stuck in a negative feedback loop, with worsening business conditions
and crime driving people to leave, reducing tax receipts and the ability to control crime.
Similar to office REITs overall, the issues in San Francisco have become common knowledge, and can lead to
lopsided positioning or valuation. Currently, short interest in KRC sits at over 5M shares sold short, well above
the historical average. In terms of valuation, KRC historically traded at an AFFO yield of around 1.9% above the
10-year treasury pre-COVID. Heading into Q4 2023, this spread sat at over 5.4%, implying that investors
demanded 3x the risk premium to invest in San Francisco offices versus recent history.
Despite the issues surrounding both office REITs and San Fransisco, KRC is especially well-positioned to weather
the storm. First, premier office space historically outperforms the average as companies that downsize on space
typically upgrade on quality. Despite the overall office vacancy in San Francisco sitting around 21%, the KRC
vacancy in San Francisco is 9%. Second, 95% of KRC's debt is fixed-rate, and less than 10% comes due in 2024
and 2025. Third, only around 6% of in-place leases are up for renewal in each of the next two years, the 2nd
best lease maturity profile amongst peers.10
While the timing of the San Francisco office market recovery may be unknown, the question of whether it
happens is not. There are already green shoots for those paying attention. US tech layoffs have decreased from
over 60k in January 2023 to less than 10k in October 2023, and tech job postings in KRC markets have increased
by +70% from January to October 2023. On the Q3 2023 earnings call, KRC disclosed a very muted 117k square
feet of leases signed in October, equivalent to down -50% year-over-year. During a conference two weeks later,
KRC surprised the market by announcing 205k square feet of leases signed in the first half of November alone.
This momentum continued through the rest of the month, and the company finished November with 400k
square feet of newly signed space.11 Much of the leasing momentum can be traced to the boom in funding in AI
companies. In summary, with one month to spare in the fourth quarter, KRC had already leased space
equivalent to 1.6x the prior year's quarter, an impressive achievement. The recovery in the tech market appears
to be translating to increasing leasing activity for KRC already.
Despite the clear improvement in sentiment, future interest rate expectations, and fundamentals, we still view
the risk/reward as favorable. If KRC returns to the pre-COVID average AFFO spread of 1.9% versus the 10-year
9 https://www.sfexaminer.com/news/crime/how-san-francisco-crime-trends-compare-to-drops-across-us/article_a23f638e-
99de-11ee-a582-df313ac11b80.html
10 Kilroy Realty Investor Presentation November 2023
11 https://investors.kilroyrealty.com/investors/press-room/news-details/2023/Kilroy-Realty-Continues-Strong-Fourth-
Quarter-Leasing-Momentum/default.aspx
19SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
treasury, that could equate to a $56 stock today, even with the 10-year treasury sitting at 4.09%. Every
additional 25bp move lower in interest rates would equate to an additional roughly $2.50 in share price, before
considering the attractive roughly 6% dividend yield. We believe we are being well compensated to wait for the
recovery.
Tower Semiconductor (“TSEM”)
Tower Semiconductor (“TSEM”), a leading specialty analog foundry, increased +24.27% during the quarter. The
stock found its footing following the deal break from Intel in August, as the investor base has largely turned over
from merger arbitrage funds to more traditional fundamental investors. Like many semiconductor peers, Tower
faces temporary headwinds from an ongoing inventory correction in the semiconductor industry that the
company highlighted in its November earnings conference call. Tower provided a cautious outlook for the fourth
quarter, similar to peers and competitors throughout the industry. Although the company expects revenue to
decline sequentially, management sees green shoots with some parts of its business, particularly in areas such
as mobile and data centers, that should support revenue through the trough of the current cycle. Investors
looked through the near-term choppiness and appear more focused on new opportunities over the next several
years.
Looking out over the medium term, we are increasingly bullish on the opportunity set that should meaningfully
benefit Tower and provide growth tailwinds for the company over the coming years. Given its advanced analog
and mixed-signal foundry capabilities, TSEM benefits from the trend of ongoing supply chain rebalancing away
from China. Tower has leading technologies in emerging areas, such as Silicon Photonics and Image Sensing
that will enable new vectors of growth. Historically known as being capacity-constrained with limited room for
growth, Tower has announced new capacity corridors with ST Micro and Intel that have just started to ramp
modestly. We also see additional benefits emerging from the new Intel capacity deal as we believe Tower forged
new customer relationships that it would not have otherwise engaged with if it were not for the new Intel
partnership.
These new agreements should add an incremental $1.2 billion of revenue off of its Q3 annualized run-rate of
$1.4 billion while dropping an incremental of approximately $400 million of gross profit. On an aggregate basis,
at full utilization, we believe TSEM will have a revenue capability of $2.7 billion with EBITDA margins approaching
40% and net profit margins approaching 20%. This implies EBITDA greater than $1.0 billion and earnings per
share of $4.50, well ahead of prior company targets. With peers like GlobalFoundries (“GFS”) currently trading
at 4x EV/Revenue and 12x EV/EBITDA, we believe over time, TSEM has material upside to its stock, which could
exceed Intel’s deal price of $53/share.
20SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
Paramount Resources (“POU”)
Canadian oil and gas exploration company Paramount Resources (“POU”) declined -19.60% in the quarter.
In terms of macroeconomic data points, the backdrop was largely negative. Renewed tensions in the Middle
East and news around the US refilling the Strategic Petroleum Reserve were largely offset by negative data
points including record US oil production, speculation over weak 2024 demand growth, and doubts about
OPEC’s ability to control prices. West Texas Intermediate crude sold off sharply in the quarter, declining -21.08%,
and Henry Hub natural gas declined -9.83%.
On top of the unfavorable commodity price backdrop, POU reported positive Q3 2023 results in November but
made some negative adjustments to 2024 guidance. The company decreased 2024 production guidance by -3%
and, at the same time, increased 2024 capital expenditures guidance by +15%. These two factors combined
decreased 2024 free cash flow guidance to $350M from $445M.
While this revision to guidance may look poor on the surface, it is worth unpacking the drivers behind this
change. The largest driver behind the revision to production guidance is downtime at third-party infrastructure
at the Wapiti plant. POU was notified of a 21-day maintenance outage in Q2 2024 and given the poor historical
reliability, decided to layer in additional conservatism. Given this is entirely outside of management’s control, it
is hard to ding the company for the revision here.
With respect to the revised capex guidance, it is worth revisiting POU’s ownership structure. CEO Jim Riddell
and other insiders own nearly 50% of the company, meaning they are aligned with long-term shareholders.
During the quarter, management made the decision to pull forward capex for 2025 production into 2024 after
seeing better-than-expected well results. Said another way, 2024 will include the capex needed to grow without
the benefit to production numbers in the year. While this may have frustrated more short-term oriented
investors, we agree with management’s capex decision. The recent well results in POU’s Kaybob and Willesden
Green acreage have been outstanding, and investing to get this production on-stream sooner is the right move.
We continue to believe that POU is a best-in-class combination of production growth and shareholder returns
along with management’s ability to create value through opportunistic acquisition, asset sales and investment
activity.
Beauty Health Company (“SKIN”)
The Beauty Health Company (“SKIN”), a beauty aesthetic company, declined -48.34% in the quarter. On the
November earnings call, SKIN disclosed widespread quality issues with the Syndeo system, with the company
implementing a remediation program that offered repairs or replacements on all Syndeo systems that had been
21SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
shipped since launch. While we were aware of quality issues, management had claimed that they would be
largely resolved by the end of Q3 2023. Furthermore, we independently conducted channel checks with Syndeo
customers across a swath of geographies to evaluate the pervasiveness and magnitude of quality concerns with
the Syndeo instrument. These customers did not indicate anything unusual with the quality of the instrument,
deeming the emergent quality issues as an ordinary course for aesthetic device product launches. In fact,
customers expressed satisfaction with the company’s responsiveness in resolving any issues they had.
In reality, the scope of issues and cost of remediation was far worse than we were led to believe. Concurrently,
SKIN announced that the CEO was departing, creating significant uncertainty regarding the forward path of the
business. We have chosen to exit our investment in SKIN, as we believe that the risks associated with remedying
the faulty Syndeo systems, the potential for new problems to arise, and the absence of long-term leadership in
place outweighed the potential for share price appreciation.
Marriott Vacations Worldwide (“VAC”)
Vacation ownership company Marriott Vacations Worldwide (“VAC”), fell -15.64% in the quarter, capping a
difficult year in which shares declined -36.93%.
VAC has been a core holding for the Fund since 2018, during which the company has consistently delivered top-
and-bottom-line growth with robust free cash flow. However, 2023 presented a perfect storm of headwinds,
bringing company-specific and macro challenges that pressured results. As of Q3 earnings, FY guidance for
EBITDA and EPS was 23% and 32% lower than the company’s initial guidance for the year.
Our thesis over the last five years has remained consistent. We believe VAC owns the best brands in a sector
that offers attractive margins, cash flow, and growth. Importantly, we also see compelling value for consumers.
VAC’s points-based model allows owners to prepay their vacation for life and use those points each year to
vacation across over 100 resorts in the Marriott, Westin, Sheraton, and Hyatt systems. For families with kids,
the value proposition of larger bedrooms, a kitchen and a living space offers good value versus the alternative
of multiple hotel rooms and 100% of meals eaten at restaurants. Consumers definitively love the product, as
evidenced by two-thirds of VAC sales coming from existing owners buying more points. For VAC, bringing a new
owner into the system provides a reliable source of future upgrades, along with resort management fees,
ancillary fees, and potential financing income should the customer choose to use financing. Each year, the
company repurchases roughly $100M of inventory (at values far less than the physical replacement cost) from
owners who have aged out of the product and re-sells those points to new owners for $1B. We think the core
of this business remains intact and has a runway for growth ahead as the company adds more flags to the system
and gains traction selling its recently introduced “Abound by Marriott Vacations” product that unifies the
Marriott, Sheraton, and Westin brands under one roof.
22SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
We spent considerable time analyzing and re-underwriting every facet of the business and believe that most of
the problems in 2023 are either transitory or fixable. As the company regains its footing in 2024, we expect
there will be an opportunity for earnings growth and multiple expansion. Shares trade for less than 11x what
we believe to be trough earnings and sport a 15% free cash flow yield, which we deem too cheap for a company
of VAC’s quality, despite its recent challenges.
Industrial Short
A short position in a truck rental company rose approximately +30.00%. Shares rose as the interest rate relief
rally significantly lifted housing-related names.
Criteo (“CRTO”)
Criteo (“CRTO”), an ad tech company specializing in commerce media and retargeting for the open internet,
declined -13.29% in the quarter. CRTO has become a dominant player in the emerging and fast-growing market
for “retail media” – essentially online advertising by brands and agencies to promote products on retailers’ e-
commerce sites – and has created an exclusive, scaled network of over 200 global retailer customers including
60% of the top 25 US retailers and 50% of the top 20 EMEA retailers.
CRTO reported Q3 earnings in November and the stock traded down -11.97% on the print. While Q3 results
met expectations, the Q4 guide was worse than expected, and the company withdrew its primary 2025 financial
targets for several reasons. First, CRTO’s biggest retail media customer will switch to a new contract structure
in 2024 that will impact revenues and EBITDA. The company noted that almost all of its other existing clients
already operate with this type of contract, so we shouldn’t expect similar contractual issues going forward.
Other reasons for a potentially weak 2024 included macro headwinds and the apparent pull forward of Google’s
impending elimination of third-party cookies in the Chrome browser. While the deprecation of the cookie has
been a known event, CRTO management expressed caution around the impact on its retargeting business given
a hastier timeframe to respond to this major change.
Despite the issues highlighted during Q3 earnings, CRTO continued moving the ball down the field, as retail
media growth accelerated and CRTO signed up 10 new clients in Q3. We believe there is significant momentum
behind CRTO’s retail media business and once this “show me” story comes to fruition, the stock could have
outsized upside from its price and valuation today around $24.50 and 4.8x 2024 EBITDA.
23SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
Portfolio Activity
We added meaningfully to our TSEM investment during the quarter as it traded down to its lowest levels for the
year following the termination of its acquisition by INTC in August. We initiated a position in a wireless
communications semiconductor company and added to a position we have been building in a life sciences tools
company, among other additions in the quarter. We sold down two core holdings on strength to reduce position
sizes, which had grown due to stock price performance and reduced several core holdings to lower our gross
long and net long exposure in general. We closed out of our investments in EBAY (not delivering on expected
potential growth from its “tech-led reimagination”), New Relic (company agreed to be acquired), Doc Martens
(lack of confidence in execution), Alexandria Real Estate (reduction in commercial office exposure), and Axcelis
Technologies (valuation). We added to leisure and consumer-product related short positions while covering an
index ETF and other positions.
Review of 2023
Below we show the Fund’s sector attribution for 2023 along with average gross long and short exposure for the
year:
Sector Exposure and Average Exposures for 202312
Sector
Communication Services
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Real Estate
Utilities
Index/ETF
Total
Long
-0.36%
-4.26%
-3.55%
0.71%
7.23%
-3.20%
2.64%
8.64%
-1.10%
2.89%
0.00%
0.02%
9.66%
Attribution 2023
Short
Total Gross Total Net
-0.40%
-6.20%
-3.57%
0.73%
6.80%
-3.41%
1.43%
7.36%
-1.22%
3.20%
0.13%
-0.02%
4.83%
-0.36%
-5.62%
-3.24%
0.81%
7.59%
-3.09%
1.59%
8.21%
-1.10%
3.57%
0.14%
-0.02%
8.48%
0.00%
-1.36%
0.31%
0.10%
0.36%
0.11%
-1.05%
-0.43%
0.00%
0.68%
0.14%
-0.04%
-1.18%
2%
Net
Average Exposure 2023
Short Gross
4%
Long
4%
26%
2%
19%
17%
18%
12%
38%
2%
12%
0%
0%
0%
-9%
0%
0%
-1%
-1%
-4%
-1%
0%
-1%
0%
-2%
4%
35% 17%
2%
19% 19%
18% 16%
19% 17%
8%
16%
39% 37%
2%
13% 11%
0%
-2%
150% -19% 169% 131%
0%
2%
2%
Exposure 12/31/2023
Long
4%
11%
0%
14%
18%
18%
14%
46%
1%
18%
0%
0%
144%
Short
Gross
Net
0%
-11%
0%
0%
0%
0%
-3%
-1%
0%
0%
0%
0%
-15%
4%
22%
0%
14%
18%
18%
17%
47%
1%
18%
0%
0%
4%
0%
0%
14%
18%
18%
11%
45%
1%
18%
0%
0%
159% 129%
Included on the next page is a list of the top 10 winning and losing investments (in rank order) for the Fund in
2023.
12 Net Attribution Figures have been prepared on a pro forma basis and provided above. Important considerations regarding
Senvest's calculation methodology for the Net Sector attributions should be reviewed under the Important Disclosures on
page 16—these figures are not properly understood without reference to these disclosures.
24SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
Ticker
PFSI
ACLS
PATH
BOCH
MDA
N/A
AVDX
BXP
RH
WIX
Ticker
VAC
SKIN
QDEL
VRNT
CPRI
AMWL
GFP
N/A
RDWR
TSEM
Long/Short
Long
Long
Long
Long
Long
Long
Long
Long
Long
Long
Long/Short
Long
Long
Long
Long
Long
Long
Long
Short
Long
Long
12/31/2022
Stock Price
56.66
79.36
12.71
150.50
6.40
56.45
9.94
67.58
267.19
76.83
12/31/2022
Stock Price
134.59
9.10
85.67
36.28
57.32
2.83
1.53
N/A
19.75
43.20
12/31/2023
Stock Price
88.37
129.69
24.84
304.00
11.52
87.00
12.39
70.17
291.48
123.02
12/31/2023
Stock Price
84.89
3.11
73.70
27.03
50.24
1.49
0.95
N/A
16.68
30.52
% Price
Change
55.97%
63.42%
95.44%
101.99%
80.00%
54.12%
24.65%
3.83%
9.09%
60.12%
% Price
Change
-36.93%
-65.82%
-13.97%
-25.50%
-12.35%
-47.35%
-37.91%
40.00%
-15.54%
-29.35%
Top 10 Contributors in 2023
Company
PENNYMAC FINANCIAL SERVICES
AXCELIS TECHNOLOGIES
UIPATH
BANK OF CYPRUS13
MDA
NEW RELIC
AVIDXCHANGE HOLDINGS
BOSTON PROPERTIES
RH
WIX.COM
Top 10 Detractors in 2023
Company
MARRIOTT VACATIONS WORLDWIDE
BEAUTY HEALTH COMPANY
QUIDELORTHO
VERINT SYSTEMS
CAPRI HOLDINGS
AMERICAN WELL
GREENFIRST FOREST PR
CONSUMER DISCRETIONARY CO
RADWARE
TOWER SEMICONDUCTOR
Outlook and Positioning for 2024
Early last year, Bank of America chief investment strategist Michael Hartnett dubbed a group of tech stock
leaders the “Magnificent Seven” and launched the catchphrase into our cultural zeitgeist. And for good reason,
as these stocks rode the advent of Artificial Intelligence into our lives and dominated the returns of the S&P 500
in 2023, rising an average of 105% and representing almost two-thirds of the index’s returns. The other 493
stocks in the S&P 500 didn’t fare nearly as well, with data reported by Apollo Group that 72% of the S&P 500’s
stocks underperformed the index this year, a record.14 As the S&P 500 has hit record highs in early 2024, the
13 Based on the prices of LSE listed security, which is denominated in GBP. The P&L/performance also includes the Fund’s
investment in Senvest Cyprus Recovery Fund, L.P.
14 The New York Times (January 31, 2024). The S&P Through the Prism of a ‘Magnificent 7’.
25SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
Russell 2000 index, comprised of small-cap stocks and which we consider the Fund’s closest benchmark, remains
just out of bear market territory from its prior peak in 2021. In fact, Goldman Sachs research further notes that
for the first time in history, on January 19, the S&P 500 made a fresh all-time high while the Russell 2000 was in
a bear market.15 The Fund likewise sits about -17% off its February 2022 peak. We make these comparisons to
suggest that smaller market-cap stocks still have room to recover.
The relative underperformance of the Russell 2000 also highlights its relative attractive valuation. Alpine Macro
Research points out that “…it is clear that small caps are trading at their lowest levels relative to large caps since
2015.”16 Morgan Stanley research confirms this view and notes that “…the S&P Small Cap forward P/E multiple
trades at a 30% discount to large caps.”17 Bank of America research further notes that “…the last time relative
multiples for small vs. large were this low [was] during the Tech Bubble, following which we saw a great return
decade for small caps relative to large caps.” Value stocks also “…remains deeply underweight by active
managers.”18 We believe that the Fund has a value orientation based on factor analysis by our prime brokers
and fund administrator, and as also shown in the attached Appendix, which covers our top 15 holdings, which
represent approximately 93% of equity.
We have held the view that the rise in inflation stemmed largely from supply-side issues caused by the
pandemic-induced economic shutdowns and that the natural resolution of supply bottlenecks would help ease
inflationary pressures over time. The Fed’s rapid interest rate increases would further constrain financial
conditions and price increases. We believe this has been playing out and we think inflation will continue to drop
in 2024. In line with our thinking, Rosenberg Research made this important observation (January 29, 2024):
“The most important inflation metric to have come out in the past month was the market-based core PCE
deflator – devoid of the imputed guesswork that permeates the service sector components of all the various
price measures. This index came in at a meek +0.1% MoM for the second month running. The YoY trend has
been sliced form +4.8% a year ago to +3.0% today – and the six-month trend is down to the +2.0% target (at an
annual rate), less than half the pace of a year ago.” Rosenberg further notes “…both core and headline [market
based PCE] are running at +0.12% MoM, or a +1.5% annualized rate.”19
Further, we believe that the Fed significantly changed its posture toward the end of last year. In late November,
Fed governor Christopher Waller – “a hawkish and influential voice at the central bank” reports Reuters – stated
that “…we could start lowering the policy rate just because inflation is lower (emphasis added). It has nothing
15 Goldman Sachs Research (January 23, 2024). GS Global Equities Call.
16 Alpine Macro Research (January 8, 2024). Focus On The Big Picture.
17 Morgan Stanley Research (January 8, 2024). US Equity Strategy – Strategy Data Pack January 2024.
18 BofA Global Research (January 31, 2024). US Watch. January FOMC: March is no longer the base case.
19 Rosenberg Research (January 29, 2024). Breakfast with Dave
26SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
to do with trying to save the economy. It is consistent with every policy rule.”20 Chairman Powell confirmed
the Fed pivot in his December press conference with Bloomberg reporting “The Federal Reserve held interest
rates steady for a third meeting and gave its clearest signal yet that its aggressive hiking campaign is finished by
forecasting a series of cuts next year.”21 While Chairman Powell, at the January 31 FOMC meeting, confirmed
for the third time that rates had peaked, he threw cold water on the likelihood of a March cut. Thus, the debate
around the timing of cuts rages on. In the big picture, we don’t believe that whether rate cuts start in March or
May, or June will have much bearing on the year ahead.
A final piece to the puzzle comes from the record levels of cash held in money market funds at just under $6
trillion. Moreover, private equity funds are sitting on a record $2.59 trillion in cash reserves available for
buyouts and other investments, which of course can be further levered. When rates go lower, however, where
will this mountain of cash go? We see massive “coiled spring” buying power for stocks as eventually some of
this cash could rotate into equities.
Given the backdrop described above, coupled with the relative underperformance and attractive valuation of
the Fund’s investments, we have great optimism for the year ahead. December returns demonstrate the
potential torque in the portfolio.
In the attached Appendix, we show the Fund’s top 15 long positions and their market valuations. In general,
the bulk of the portfolio consists of relatively low P/E stocks of companies generating free cash flow, which they
often use to buy back stock at what we think are attractive valuations, thereby further enhancing shareholder
value.
We thank our partners for your support and continued confidence in Senvest by entrusting us with your capital.
As always, feel free to reach out to us with any questions.
Very truly yours,
Richard Mashaal
Brian Gonick
20 Reuters (November 28, 2023). With Fed Likely done hiking rates, Waller Flags pivot ahead.
https://www.reuters.com/markets/us/feds-waller-increasingly-confident-policy-is-right-spot-2023-11-28/
21 Bloomberg (December 13, 2023). Fed holds rates steady again and pivots towards cuts in 2024.
https://www.bloomberg.com/news/articles/2023-12-13/fed-holds-rates-steady-again-and-pivots-toward-cuts-in-
2024?sref=B4MQfMf3
27SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
Appendix A – Senvest Master Fund Top 15 Long Positions
Senvest Master Fund Top 15 Long Positions
Paramount Resources (POU CN)
Quidel (QDEL US)
Tower Semi (TSEM US)
Marriott Vacations (VAC US)
Boston Properties (BXP US)
Illumina (ILMN US)(5)
Bank of Cyprus (BOCH LN)
Radware (RDWR US)
Ciena (CIEN US)
UiPath (PATH US)
Kilroy (KRC US)
Kornit (KRNT US)
Verint (VRNT US)
PennyMac Financial Services (PFSI US)
MDA (MDA CN)
Median(6)
Russell 2000(7)
S&P 500(7)
% Change
Trailing(1)
Price
$24.79
$67.81
$28.55
$82.59
$62.65
$142.23
$2.98
$18.34
$54.77
$22.51
$34.42
$17.34
$29.62
$89.67
$11.39
52 Wk
High
(26%)
(28%)
(37%)
(50%)
(15%)
(39%)
(2%)
(21%)
–
(14%)
(20%)
(45%)
(26%)
(4%)
(9%)
2024
(4%)
(8%)
(6%)
(3%)
(11%)
2%
(2%)
10%
22%
(9%)
(14%)
(9%)
10%
1%
(1%)
EV / Rev
2.0x
2.2x
1.5x
1.3x
8.1x
5.2x
NA
1.6x
1.9x
9.0x
7.5x
1.2x
2.9x
NA
2.1x
EV /
EBITDA(3)
3.7x
8.8x
4.1x
7.9x
14.3x
NM
NA
18.3x
12.6x
NM
12.0x
NA
11.3x
NA
9.8x
P / Adj.
EPS(4)
3.5x
14.3x
4.0x
9.7x
8.6x
NM
3.2x
20.1x
20.1x
41.6x
7.5x
NM
12.3x
21.5x
31.3x
P / TBV
1.1x
0.9x
1.4x
1.5x
1.7x
3.8x
0.6x
2.7x
2.8x
6.5x
0.8x
1.0x
1.5x
1.3x
1.3x
LTM
(16%)
(24%)
(31%)
(48%)
(15%)
(32%)
63%
(16%)
11%
35%
(13%)
(36%)
(22%)
39%
68%
2024 Calendar(2)
EV /
EBITDA(3)
3.5x
8.5x
4.6x
8.0x
13.5x
NM
NA
16.7x
11.3x
42.2x
12.4x
NM
9.1x
NA
8.5x
P / Adj.
EPS(4) Market Cap
$3,823
3.1x
$4,531
13.4x
$3,176
9.6x
$3,576
10.5x
12.3x
$9,832
$22,586
NM
$1,329
3.2x
$775
14.6x
$7,932
18.3x
$12,742
37.0x
$4,112
8.0x
$849
73.4x
$1,912
10.5x
$4,713
9.1x
$1,389
19.0x
EV / Rev
1.8x
2.3x
1.6x
1.3x
8.1x
5.2x
NA
1.6x
1.8x
7.2x
7.4x
1.2x
2.7x
NA
1.7x
(21%)
(16%)
(3%)
2.1x
10.5x
12.3x
1.4x
1.8x
9.1x
11.4x
(6%)
(0%)
(1%)
20%
(4%)
4%
1.7x
3.0x
14.9x
15.3x
15.3x
23.8x
3.8x
13.0x
1.8x
2.9x
13.2x
13.5x
16.8x
20.5x
Note : NM = Not Meaningful. NA = Not Available. Senvest Top 15 ranking as of 2/5/24.
Prices, market cap and fundamentals as of 2/5/24. POU CN and MDA CN Price, Market Cap and EPS in CAD, BOCH LN Price,
Market Cap and EPS in GBP, all other positions in USD. BOCH LN position includes investment in Senvest Cyprus Recovery Investment Fund (SCRIF).
(1) Trailing multiples based on last twelve months reported data for all companies.
(2) Bloomberg Estimates for calendar year 2024; Adjustments exclude non-cash charges, including intangible amortization and stock-based compensation.
(3) Trailing and Forward EBITDA estimates for POU CN represent Debt Adjusted (Unlevered) Cash Flow.
(4) P / Adj. EPS based on cash adjusted stock prices for those companies with positive net cash per share (POU, TSEM, PATH, RDWR, and KRNT).
Earnings estimates for POU CN, BXP US, and KRC US based on FFO.
(5) ILMN historicals and projections assume consolidated financials for Core ILMN and GRAIL reportable segments.
(6) Median calculations also exclude members with negative earnings.
(7) P / EPS for Russell 2000 and S&P 500 represent current Price / Adj. EPS multiples from Bloomberg excluding members with negative earnings.
AUM ($ Million) - as of 12/31/2023
$2,226.8
Portfolio Exposure (% of AUM)
Gross Long
Gross Short
Total Gross
Net
Cash & Currency
Q3 2023 Q4 2023
144%
-15%
159%
129%
-29%
151%
-18%
169%
133%
-33%
Change
-7%
3%
-10%
-4%
4%
Concentration (% of Equity)
Top 10 Longs
Top 20 Longs
Largest Long Position Size
Top 10 Shorts
Top 20 Shorts
Q3 2023
76%
115%
15%
16%
18%
Q4 2023
71%
111%
11%
13%
15%
Change
-5%
-4%
-4%
-3%
-3%
28SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
IMPORTANT DISCLOSURES
This letter is an informational document and does not constitute an offer to sell or a solicitation to purchase any securities in any entity organized, controlled, or managed by Senvest
Management, LLC ("Senvest") or in (i) Senvest Partners LP, a Delaware limited partnership, (ii) Senvest Partners Ltd., a Cayman Islands exempted company (both Senvest Partners LP and
Senvest Partners Ltd. invest substantially all of their assets in Senvest Master Fund, L.P.), or any other partnership interests described herein (collectively, the "Funds"), and may not be relied
upon in connection with any offer or sale of securities. Any offer or solicitation may only be made pursuant to a Confidential Private Offering Memorandum (or similar document) which will
only be provided to qualified offerees and should be reviewed carefully by any such offerees prior to investing.
An investment in a Fund involves risk and volatility. Because this communication is only a high-level summary it does not contain all material terms pertinent to an investment decision,
including important disclosures of conflicts and risk factors associated with an investment in a Fund. This document in and of itself should not form the basis for any investment decision. An
investment in a Fund is speculative and entails substantial risks, including the fact that such an investment would be illiquid and be subject to significant restrictions on transferability. No
market is expected to develop for interests in any Fund. Financial instruments and investment opportunities discussed or referenced herein may not be suitable for all investors, and potential
investors must make an independent assessment of the appropriateness of any transaction in light of their own objectives and circumstances, including the possible risk and benefits of entering
into such a transaction.
An investor in a Fund could lose all or a substantial amount of his or her investment. Returns generated from an investment in a Fund may not adequately compensate investors for the business
and financial risks assumed. While the Funds are subject to market risks common to other types of investments, including market volatility, the Funds employ certain trading techniques such
as the use of leverage and other speculative investment practices that may increase the risk of investment loss. The products and strategies in which the Funds expect to invest may involve
above-average risk. Please see the Risk Factors section of the applicable Confidential Private Offering Memorandum (or similar document) for certain risks associated with an investment in a
Fund.
Certain information contained in this Presentation constitutes "forward-looking statements," which can be identified by the use of forward-looking terminology such as "may", "will", "should",
"expect", "anticipate", "target", "project", "estimate", "intend", "continue" or "believe" or the negatives thereof or other variations thereon or comparable terminology. Due to various risks
and uncertainties, actual events or results or the actual policies, procedures and processes of the Investment Manager and the performance of the Funds may differ materially from those
reflected or contemplated in such forward-looking statements and no undue reliance should be placed on these forward-looking statements, nor should the inclusion of these statements be
regarded as the Investment Manager's representation that the Funds will achieve any strategy, objectives or other plans.
This document should be read in conjunction with, and is qualified in its entirety by, information appearing in the Confidential Private Offering Memorandum (or similar document) for each
Fund and the organizational documents for such fund (e.g. limited partnership agreements, articles of association, etc.), which should be carefully reviewed prior to investing. Potential investors
should consult a professional adviser regarding the possible economic, tax, legal or other consequences of entering into any investments or transactions described herein. Investment
allocations and ownership percentages are subject to change without notice. The information contained herein is confidential and cannot be reproduced, shared or published in any manner
without the prior written consent of Senvest.
Unless otherwise indicated, the information contained in this document is current as of the date indicated on its cover. Such information is believed to be reliable and has been obtained from
sources believed to be reliable, but no representation or warranty is made, expressed or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of the
information and opinions. Additionally, there is no obligation to update, modify or amend this document or to otherwise notify a reader in the event that any matter stated herein, or any
opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
The Investment Manager is not acting and does not purport to act in any way as an advisor or in a fiduciary capacity vis-a-vis any investor in the Funds. Therefore, it is strongly suggested that
any prospective investor obtain independent advice in relation to any investment, financial, legal, tax, accounting or regulatory issues discussed herein. Analyses and opinions contained herein
may be based on assumptions that if altered can change the analyses or opinions expressed. Nothing contained herein shall constitute any representation or warranty as to future performance
of any financial instrument, credit, currency rate or other market or economic measure.
Certain performance information is provided for the Funds. Performance numbers are net of all fees and expenses unless noted otherwise. All returns are subject to revision until completion
of the annual audit. Past performance is not necessarily indicative of or a guarantee of future results. Short position percentage of price change is rounded to maintain the anonymity of the
security. Unless otherwise noted, all calculations in this report are made by Senvest. All profit and loss, or other performance information is unaudited and is net of fees and expenses based
on an investment made at inception. Total returns reflect compounded monthly returns. The distribution of this document in certain jurisdictions may be prohibited or restricted by law;
therefore, people in whose possession this document comes should inform themselves about and observe such restrictions. Any such distribution could result in a violation of the law of such
jurisdictions.
Gross and Net Attribution Figures: Attributions of sector-level performance are shown on a gross basis unless otherwise noted herein ("Gross Attributions"). Gross Attributions reflect the
return contribution by the aggregate investments in each Sector for the period indicated (calculated by dividing the gains/losses of the indicated Sector over the portfolio, as applicable), but
is calculated prior to the deduction of management fees, [expenses] and incentive compensation paid to Senvest, which will reduce performance.
Net sector attributions ("Net Attributions") reflect Gross Attributions, reduced by a percentage equal to the quotient of the the applicable Fund's net return divided by the applicable Fund's
gross returnin order to approximate a pro forma “net” return. This pro forma return should not be relied upon as a precise metric of the impact of fees and expenses on the performance of
each Sector, for the reasons detailed below.
Net Attributions are presented pro forma because, although such figures reflect actual performance, these calculations apply management fees, expenses and incentive compensation to each
Sector's Gross Attributions, even though each Fund's fees, expenses and incentive compensation are only calculated for the applicable Fund as a whole. Correspondingly, this approximation
does not precisely reflect the impact such fees and expenses actually had on the performance of positions included in each Sector. Net Attributions do not take into account the specific impact
of leverage and other costs on specific Sectors' performance, nor do they incorporate the differing impact that each investor’s [or Fund's] high water mark has on specific Sectors. For example,
if the Fund as a whole accrued incentive compensation for a given period, the Net Attributions methodology would result in the reduction of Gross Attributions,, on a percentage basis, of an
amount incorporating that accrued incentive compensation from each Sector's performance, even where a Sector experienced negative performance (and therefore, viewed in isolation, would
not have accrued incentive allocation). [In addition, expenses are not tracked on a Sector-by-Sector basis, and therefore the Net Attributions shown herein do not reflect an approximation of
the precise impact of expenses on specific Sectors' performance—many expenses are incurred on a fund-wide level and do not relate to any specific portion of the investment program. Pro
forma performance of this nature is subject to inherent limitations and should not form the basis for an investment decision. Additional information on the risks and limitations of pro forma
performance is available upon request.
Senvest Master Fund, L.P. performance returns presented in certain tables reflect those Funds' historical performance during the time periods indicated.
The S&P 500 Index, HFRI Equity Hedge Total Index, and Russell 2000 Index (collectively, the "Indices") are included for informational purposes only. All index returns include dividend
reinvestment. The Funds' portfolios will not replicate any of these indices and no guarantee is given that performance will match any of the indices; it is not possible to invest in any index.
There are significant differences between the Funds' investments and the Indices (for instance, the Funds will use short sales and leverage and may invest in securities that have a greater
degree of risk and volatility, as well as less liquidity, than those securities contained in the Indices). Moreover, the Indices are not subject to any of the fees or expenses that the Funds must
29SENVEST MANAGEMENT, LLC Senvest Master Fund, LP (“Senvest Partners”)
Review of Q4 2023 & 2024 Outlook: February 6, 2024
pay. It should not be assumed that the Funds will invest in any specific securities that comprise the Indices, nor should it be understood to mean that there is a correlation between the Funds'
returns and the Indices' performance. Additional information on each index follows:
The S&P 500 index is one of the most commonly used benchmarks for the overall U.S. stock market. This index is a broad based measurement of changes in stock market conditions based on
the average performance of 500 widely held stocks including industrial, transportation, financial, and utility stocks. The composition of the 500 stocks is flexible and the number of issues in
each sector varies over time.
The HFRX Equity Hedge Total Index is calculated by Hedge Fund Research, Inc. and is a benchmark of hedge fund industry performance that is engineered to achieve representative performance
of equity hedge fund managers that would typically maintain at least 50%, and may in some cases be substantially entirely invested, in equities, both long and short. In order to be considered
for inclusion in the HFRX Equity Hedge Index, a hedge fund must be currently open to new transparent investment, maintain a minimum asset size and meet the duration requirement
(generally, a 24 month track record). Because the HFR Indices are calculated based on information that is voluntarily provided, actual returns may be higher or lower than those reported.
The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which is made up of 3,000 of the largest U.S. stocks by market capitalization. The
Russell 2000 Index represents approximately 8% of the total market capitalization of the Russell 3000 I
30SENVEST MANAGEMENT, LLC Senvest Technology Partners Master Fund, LP (“Senvest Technology Partners”)
Q4 Investor Letter: March 4, 2024
Q422
Nov
Oct
Dec
Q41
2023
Annualized
Since
Inception
Cumulative
Since Inception
2023
Senvest Technology
Partners
-13.64%
15.41%
10.55%
10.18%
15.31%
16.92%
2,460.97%
Russell 2000
-6.82%
9.03%
12.23%
14.02%
16.88%
10.05%
629.13%
NASDAQ
-2.76%
10.84%
5.62%
13.84%
44.70%
13.55%
1,296.23%
Dear Partners,
Financial markets rallied into the end of 2023 as optimism increased around the U.S. Federal Reserve dialing
back its’ hawkishness on its ‘higher-for-longer’ interest rate policy amidst cooling core inflation data. The Fund
ended the fourth quarter up +10.18% net, trailing the NASDAQ and Russell 2000, which were up +13.84% and
+14.02% for the quarter, respectively. The Fund’s underperformance for the month of October was primarily
due to a temporary drop in Israeli stocks caused by the Hamas attack on Israel, as roughly 30% of the portfolio
is exposed to Israeli-related companies. The portfolio recovered in November as the conflict proved to be
contained to Gaza. Momentum continued into year-end as investors regained enthusiasm for small and mid
(“SMID”) cap stocks. During the quarter, we increased our investments in several core and new holdings,
specifically in companies that are showing signs of near-term fundamental improvements. As we begin 2024,
we are increasingly encouraged by the progress being charted by our portfolio companies to participate in
transformative secular growth opportunities enabled by Artificial Intelligence (“A.I.”). We expect that a gradual
easing of monetary policy will help reignite some of the more established secular growth trends beyond A.I., that
are currently seeing a slowdown due to high interest rates.
Technology Market Commentary:
The Magnificent Seven companies (Nvidia, Microsoft, Amazon, Alphabet, Apple, Meta, and Tesla) largely brought
A.I. to the mainstream in 2023, first through the introduction of Chat GPT 3 in November 2022, followed by an
enterprise version of Co-Pilot from Microsoft in November 2023. What started as a cloud computing intensive
technology is now beginning to permeate to the network edge (Edge A.I.) across enterprise, consumer, and
industrial markets. A.I. is still in its infancy and will continue to evolve (we are now on GPT 4), get more powerful,
and become increasingly more impactful on society. The breadth of technological innovation around A.I. is
resulting in a new emerging class of start-ups (Open A.I. and Anthropic, for example) as well as unprecedented
levels of investment by tech industry incumbents as companies fear being left behind in what is likely to be the
most important tech cycle of the next decade - the fear of becoming the next Blackberry or IBM is palpable. We
believe that A.I. will dramatically impact industries ranging from Automotive, Energy, Computers, to
22 Net Performance
31SENVEST MANAGEMENT, LLC Senvest Technology Partners Master Fund, LP (“Senvest Technology Partners”)
Q4 Investor Letter: March 4, 2024
Communications. We believe it will also accelerate improvements in technologies including Intelligent Process
Automation, Augmented Reality and Virtual Realty, to name a few.
The impact of A.I. is most acutely felt around the demand for Cloud Computing. Aggregate capital investments
approached $150 billion in 2023, between Microsoft, Google, Meta, and Amazon which have all integrated A.I.
into their cloud offerings. Most impactful has been Microsoft’s packaging of A.I. as part of its Microsoft Office
products with Co-Pilot. While still in its early iteration, Co-Pilot should meaningfully increase employee
productivity and accelerate enterprise digital transformation. Beyond having a profound impact on cloud
computing, the integration of A.I. into end devices, ranging from smartphones and PCs to sensors, security
cameras, and industrial equipment, should drive a refresh cycle across a host of consumer and enterprise
hardware applications.
As A.I. spreads to the edge of the network, the exponential growth of data will continue unabated and will
demand systems that can manage and transmit larger amounts of data at faster speeds. Data networks
continue to evolve as optical networking systems migrate from 100G just a few years ago to 800G and 1600G
over the next 2-3 years. There is also a revolution occurring in space-based communications. 2023 was a
breakthrough year for innovation in and around satellite technology and business plans that enable 5G cellular
connectivity from satellites and not just point-to-point satellite backhaul. What was unthinkable just a few years
ago is now possible with the advent of digital low earth orbit (“LEO”) satellites, made famous by Elon Musk’s
SpaceX; we expect to see Apple and other consumer technology companies launching connectivity services over
the next several years, as well as industrial and corporate use cases for machinery and vehicle monitoring.
While Apple was first to market with SOS text capabilities, we believe these 1st generation capabilities will be
superseded by an emerging ecosystem of cellular technology from the 10,000+ satellites expected to be
deployed over the upcoming decade. New digital beam forming technology will have the ability to bring mobile
broadband to wireless remote users.
Across our portfolio, we have several investments that are benefiting from the rapid adoption of A.I. including
companies that provide the infrastructure for the systems running A.I. to the software platforms that end-users
are directly interfacing with. On the infrastructure side, one of the Fund’s largest investments, Tower
Semiconductor, provides key semiconductor technology that underpins the data networking layer of A.I. clusters.
At the other end of the spectrum, UiPath is a software platform that enables enterprises automation using
proprietary and open A.I. models. We believe that there are multiple ways to invest in this emerging trend and
our research process enables us to discover less obvious beneficiaries who stand to benefit.
While we are excited about how A.I. is catalyzing growth across many industries, the after-effects of the COVID-
induced supply chain challenges and inflation remain headwinds for other industries. In particular, the
traditional technology supply chain wrestles with excess inventories and high-interest rates. Secular growth
sectors that we have previously highlighted, such as Electric Vehicles (“EV”s) and Solar, grew far below earlier
expectations in 2023 as high interest rates limited borrowing and sidelined demand from buyers. The slowdown
in demand in these industries subsequently led to an inventory overbuild which the industry is currently working
its way through. For example, in the fourth quarter, residential solar inverter companies estimated that sales
were reduced by as much as 50%, and their respective channels continued to work down excess inventories.
32SENVEST MANAGEMENT, LLC Senvest Technology Partners Master Fund, LP (“Senvest Technology Partners”)
Q4 Investor Letter: March 4, 2024
Long-term, we remain bullish on solar despite near-term challenges and are excited about the evolution
occurring in the EV market. Global EV demand remained resilient, growing 31% year over year in 2023 with
penetration approaching 12%. While elevated interest rates and higher prices for EVs will likely temper
consumer demand for EVs near-term, newer fast-charging battery and far more efficient Silicon Carbide based
motor technologies will become mainstream and help to improve performance and reduce costs over time. We
still expect demand to remain healthy and grow in 2024 and 2025. We look to take advantage of the cyclical
downturn in some of these more mature secular growth markets to buy out of favor, beaten-down companies
that will lead industry growth when the interest rate cycle turns more favorable.
OUTPERFORMERS:
The two largest contributors in the fourth quarters were UiPath [NASDAQ: PATH] and Tower Semiconductor
[NASDAQ: TSEM].
PATH
UiPath (“PATH”), a leader in artificial intelligence-based workflow automation and process optimization software,
increased +45.18% during the fourth quarter as the company reported upside to revenue, annual recurring
revenue (“ARR”), and profitability, and an acceleration in new bookings. During the quarter, PATH saw ARR
growth of 24% year-over-year and bookings growth of 31% year-over-year, resulting in a record number of $1
million ARR deals in the quarter. Profitability metrics, including an operating margin of 13.5% and FCF margin
of 12.5%, also exceeded expectations. We attended the company’s user conference, “Forward,” in October, at
which the company expressed confidence in its execution of a new go-to-market strategy and new product
introductions that integrate Generative A.I. into its automation platform. While the overall demand environment
remains uneven due to macroeconomic factors, PATH saw strong demand in key verticals such as the Federal
Government, Financial Services, and Healthcare.
PATH is a relatively recent investment for the Fund which we identified as a broken IPO (April 2021), one of our
favorite new idea screens. We were attracted to the company’s leading technology in the software automation
market as well as a greater focus on driving operating leverage. PATH provides a platform for customers to
automate legacy and repetitive digital tasks using robotic process automation software. PATH pioneered the
market for attended and unattended bots, which has since evolved into a full automation platform that includes
key capabilities such as process, task, and communication mining that infuse AI-based technologies. In addition
to market-leading technology, PATH was undergoing key changes in its go-to-market sales approach led by new
senior management. Although the stock has seen its multiple expand to 7x EV/Sales from a trough of 4.5x in
April 2023, we still believe the stock price can benefit from accelerating revenue and profitability over the next
several years as it addresses a market opportunity over $60 billion and approaches becoming “a rule of 40”
company (revenue growth plus free cash flow margins). Rule of 40 companies typically trade at 10-12x
revenues or 45-55x EV/FCF.
TSEM
Tower Semiconductor (“TSEM”), a leading specialty analog foundry, increased +24.27% during the fourth
quarter. The stock found its footing following the deal break from Intel in August, as the investor base has largely
turned over from merger arbitrage funds to more traditional fundamental investors. Like many semiconductor
33SENVEST MANAGEMENT, LLC Senvest Technology Partners Master Fund, LP (“Senvest Technology Partners”)
Q4 Investor Letter: March 4, 2024
peers, TSEM faces temporary headwinds from an ongoing inventory correction in the semiconductor industry
that the company highlighted in its November earnings conference call. TSEM provided a cautious outlook,
similar to peers and competitors throughout the industry. Although the company expects revenue to decline
sequentially into a seasonally weak Q1, management sees green shoots with some parts of its business,
particularly in areas such as mobile and data centers, that should support revenue through the trough of the
current cycle.
Looking past the near-term choppiness and out over the medium term, we are increasingly bullish on the
opportunity set that should meaningfully benefit TSEM and provide growth tailwinds for the company over the
coming years. Given its advanced analog and mixed-signal foundry capabilities, TSEM benefits from the trend
of ongoing supply chain rebalancing away from China. TSEM has leading technologies in emerging areas, such
as Silicon Photonics and Image Sensing, that will enable new vectors of growth. Historically viewed as capacity-
constrained, Tower has announced new capacity and technology corridors with ST Micro and Intel that have just
started to ramp modestly. We also see additional benefits emerging from the new Intel capacity deal as we
believe TSEM forged new customer relationships that it would not have otherwise engaged with if it were not
for the new Intel partnership.
These new agreements should add an incremental $1.2 billion of revenue off of its Q3 annualized run-rate of
$1.4 billion while dropping an incremental of approximately $400 million of gross profit. On an aggregate basis,
at full utilization, we believe TSEM will have a revenue capability of $2.7 billion with EBITDA margins approaching
40% and net profit margins approaching 20%. This implies EBITDA greater than $1.0 billion and earnings per
share of $4.50, well ahead of prior company targets. With peers like GlobalFoundries (“GFS”) currently trading
at 4x EV/Revenue and 12x EV/EBITDA, we believe over time TSEM has material upside to its stock, which could
exceed Intel’s deal price of $53/share.
UNDERPERFORMERS
The two largest detractors in the fourth quarter were MarkForged [NASDAQ: MKFG] and Criteo [NASDAQ: CRTO].
MKFG
Markforged (“MKFG”), a specialized additive manufacturing technology company, declined -43.45% in the
fourth quarter, as macro headwinds continued to result in elongated sales cycles for its products with the
company reporting a lower-than-expected outlook for 2023. Revenue declined 20% year-over-year due to
several large deals that did not close at the end of the quarter. The revenue decline was primarily driven by a
31% year-over-year decline in hardware and 7% decline in consumables. Consumables revenue was impacted
by lower system sales given customers typically purchase consumables with new system orders. At the end of
the third quarter, MKFG had $126 million in cash and no debt but was operating at an expected operating loss
of $60 million. While soft macroeconomic conditions are expected to continue into 2024, management was
confident that the company should deliver revenue growth in 2024, in part aided by anticipated demand for the
FX10 given the lower price point. In addition, management announced restructuring initiatives that are expected
to deliver $9 million to $12 million in annual cost savings in 2024, primarily from a 10% headcount reduction.
As a result, management expects margins to improve sequentially throughout 2024. MKFG is viewed as a leader
in industrial-grade 3D printing with systems that range from metal to composite printers that can make
34SENVEST MANAGEMENT, LLC Senvest Technology Partners Master Fund, LP (“Senvest Technology Partners”)
Q4 Investor Letter: March 4, 2024
extremely strong parts made from continuous strands of carbon fiber. While historically the 3D printing market
has been associated with parts made for prototyping, MKFG has introduced systems that can produce parts
used in production for industrial and aerospace applications. The company has introduced several new products
over the past two years including FX20, FX10, and PX100 that should help reinvigorate growth as the macro
stabilizes. Although fundamentals are soft near-term, we believe that at 0.8x EV-to-2024 consensus revenue,
MKFG shares trade at a meaningful discount to peers that trade between 1-3x EV-to-sales.
CRTO
Criteo (“CRTO”), an ad tech company specializing in commerce media and retargeting for the open internet,
declined -13.29% in the quarter. CRTO has become a dominant player in the emerging and fast-growing market
for “retail media” – essentially online advertising by brands and agencies to promote products on retailers’ e-
commerce sites – and has created an exclusive, scaled network of over 200 global retailer customers, including
60% of the top 25 US retailers and 50% of the top 20 EMEA retailers.
CRTO reported Q3 earnings in November, and the stock traded down -11.97% on the print. While Q3 results
met expectations, the Q4 guide was worse than expected, and the company withdrew its primary 2025 financial
targets for several reasons. First, CRTO’s biggest retail media customer will switch to a new contract structure
in 2024 that will impact revenues and EBITDA. The company noted that almost all of its other existing clients
already operate with this type of contract, so we shouldn’t expect similar contractual issues going forward. Other
reasons for a potentially weak 2024 included macro headwinds and the apparent pull forward of Google’s
impending elimination of third-party cookies in the Chrome browser. While this has been a known event, CRTO
management expressed caution around the impact on its retargeting business, given a hastier timeframe to
respond to this major change.
Despite the issues highlighted during Q3 earnings, CRTO continued moving the ball down the field, as retail
media growth accelerated and CRTO signed up 10 new clients in Q3. We believe there is significant momentum
behind CRTO’s retail media business. Once this “show me” story comes to fruition, the stock could have outsized
upside from its price and valuation today around $33/share and 5.6x 2024 EBITDA.
INDUSTRY ATTRIBUTION
On the page below, we show the Fund’s industry attribution. Given the strong performance from PATH in the
quarter, the Software sector contributed +5.51% to net performance. Similarly, strong performance from TSEM
drove attribution from the Semiconductor sector of +3.20% net, while the largest Q4 sector detractor was
Machinery -1.79% net from performance.
35SENVEST MANAGEMENT, LLC Senvest Technology Partners Master Fund, LP (“Senvest Technology Partners”)
Q4 Investor Letter: March 4, 2024
INDUSTRY
Aerospace & Defense
Banks
Broadline Retail
Comm. Equipment
Electronic Equip. & Components
Financial Services
Health Care Equip & Supplies/Tech
Machinery
Semiconductor & Equipment
Software
IT Hardware
IT Services
Index/ETF
Other
Totals
Long
Short
Totals
GROSS EXPOSURE
(AS OF 12/31)
GROSS
ATTRIBUTION23
(Q4 2023)
GROSS
ATTRIBUTION2
( 2023)
NET ATTRIBUTION
(Q4 2023)
NET ATTRIBUTION
( 2023)
15%
1%
0%
11%
7%
6%
5%
10%
23%
26%
1%
8%
0%
6%
119%
117%
--2%
119%
1.10%
4.52%
1.07%
4.17%
0.18%
-0.42%
-0.82%
0.44%
1.87%
0.13%
-1.71%
3.29%
5.66%
-0.39%
2.02%
-0.28%
-0.28%
0.46%
-0.73%
-2.40%
-0.14%
2.41%
-1.60%
-2.04%
6.94%
7.23%
-0.24%
2.37%
-0.14%
1.24%
0.18%
-0.43%
-0.84%
0.43%
1.82%
0.11%
-1.76%
3.20%
5.51%
-0.40%
1.97%
-0.29%
-0.29%
0.42%
-0.79%
-2.58%
-0.15%
2.23%
-1.72%
-2.20%
6.41%
6.68%
-0.26%
2.19%
-0.15%
1.15%
10.79%
17.88%
10.28%
15.40%
11.60%
18.49%
11.13%
16.09%
-0.81%
-0.61%
-0.84%
-0.69%
10.79%
17.88%
10.28%
15.40%
PORTFOLIO CHARACTERISTICS
During the fourth quarter, the Fund’s net exposure increased as we added to several holdings and initiated two
new positions. As a result, we ended the quarter with a net exposure of 115%, up modestly from 111% at the
end of the third quarter but well below 129% entering the year. Our gross exposure decreased modestly to
117%, down from 119% at the end of the third quarter, as we reduced our holdings in several positions. While
we remain cautiously optimistic for a soft-landing scenario for 2024, with interest rates beginning to ease later
in the year, we remain disciplined in the current risk environment.
PORTFOLIO VALUATION
As of December 31st, 2023, the Fund’s top ten investments represented 65% of gross exposure and 77% of
equity. The Fund’s top ten positions traded with a portfolio-weighted average valuation of 2.60x EV/sales. Of
our top investments, seven have a portfolio-weighted average net cash of 35.3% of their market capitalization,
and another three companies have net debt and trade at 9.7x EV/EBITDA (per Bloomberg). While these
23 Net Attribution Figures have been prepared on a pro forma basis and provided above. Important considerations regarding
Senvest's calculation methodology for the Net Sector attributions should be reviewed under the Important Disclosures on page
8—these figures are not properly understood without reference to these disclosures.
36SENVEST MANAGEMENT, LLC Senvest Technology Partners Master Fund, LP (“Senvest Technology Partners”)
Q4 Investor Letter: March 4, 2024
valuation levels are near historical lows for the Fund, the size, quality and diversity of the Fund’s underlying
investments and their market opportunities have greatly improved.
CONCLUSION / OUTLOOK FOR 2024
While the potential that technology adoption and A.I. brings for global growth is uncharted, the world still has
plenty of macro and geopolitical risks to navigate in 2024 from the impending US election to multiple regional
conflicts in Ukraine and the Middle East to rising tensions with China in the Straits of Taiwan. Although we are
gaining confidence in an economic soft landing, it is still not a fait accompli. While the timing may shift
somewhat, we believe that interest rates will gradually be reduced in 2024 and 2025, stimulating global
economic activity. We also see many ‘green shoots’ emerging for new products across multiple industries as
innovation accelerates and new A.I. enhanced business models drive renewed growth. We anticipate that, by
the second half of 2024, excess channel inventories will be drawn down to normalized levels and that end-user
demand will drive growth throughout the electronic manufacturing supply chain. We believe several secular
megatrends in technology, from A.I. and Digital Transformation to Electrification Economy and Industrial
Automation, will underpin growth and renewal in the global economy over the decade ahead.
As mentioned in our quarterly letters throughout 2023, a significant performance discrepancy exists between
the Magnificent 7 and SMID-cap stocks. This gap is one of the widest it has been in the past 30 years. In recent
months, we have observed a pattern where SMID-cap stocks have outperformed their larger peers as
expectations of falling interest rates increase, bringing growth into markets beyond core A.I. & Cloud Compute.
Smaller companies tend to be more sensitive to changes in interest rates and can experience greater changes
in profitability and, as a result, are primed for a greater re-rating as elevated interest rates begin to recede. We
believe there is a good chance that SMID-cap tech will catch up this year after trailing its Mega cap peers last
year.
We continue to see historically favorable risk-reward across the Fund, with many companies trading near
historical low valuations and flush with cash. Our investments are primed once interest rates moderate and
macro and geopolitical pressures start to abate. As always, please do not hesitate to reach out to us should you
have any questions or wish to discuss anything in further detail. We look forward to speaking with you and
reporting on our progress in future quarters.
Best regards,
Robert Katz
Richard Mashaal
IMPORTANT DISCLAIMER: This letter is an informational document and does not constitute an offer to sell or a solicitation to purchase any securities in any entity
organized, controlled, or managed by Senvest Management, LLC ("Senvest") or in (i) Senvest Technology Partners LP, a Delaware limited partnership, (ii) Senvest
37SENVEST MANAGEMENT, LLC Senvest Technology Partners Master Fund, LP (“Senvest Technology Partners”)
Q4 Investor Letter: March 4, 2024
Technology Partners Ltd., a Cayman Islands exempted company (both Senvest Technology Partners LP and Senvest Technology Partners Ltd. invest substantially
all of their assets in Senvest Technology Master Fund, L.P.), or any other partnership interests described herein (collectively, the "Funds"), and may not be relied
upon in connection with any offer or sale of securities. Any offer or solicitation may only be made pursuant to a Confidential Private Offering Memorandum (or similar
document) which will only be provided to qualified offerees and should be reviewed carefully by any such offerees prior to investing.
The Funds previously operated under the name of “Senvest Israel Partners Master Fund, LP”, and invested primarily in U.S. listed, Israeli-related and local Israel-
listed companies of all market capitalization sizes. Effective January 1, 2019, the Fund’s investment focus has been broadened to include global technology (and
technology-related), media and telecom investments, which may not include Israeli-related investments. Performance information of the Funds prior to January
1,2019 reflects the performance of the Fund’s prior investment strategy. While we believe that the investment strategy and process utilized prior to January 1,
2019 is similar to the current investment strategy and process, there is no historical performance available for the Fund’s current investment strategy. There can
be no assurance that the future performance of the Funds will be the same as the historical performance of the Funds.
An investment in a Fund involves risk and volatility. Because this communication is only a high-level summary it does not contain all material terms pertinent to an
investment decision, including important disclosures of conflicts and risk factors associated with an investment in a Fund. This document in and of itself should
not form the basis for any investment decision. An investment in a Fund is speculative and entails substantial risks, including the fact that such an investment
would be illiquid and be subject to significant restrictions on transferability. No market is expected to develop for interests in any Fund. Financial instruments and
investment opportunities discussed or referenced herein may not be suitable for all investors, and potential investors must make an independent assessment of
the appropriateness of any transaction in light of their own objectives and circumstances, including the possible risk and benefits of entering into such a transaction.
An investor in a Fund could lose all or a substantial amount of his or her investment. Returns generated from an investment in a Fund may not adequately
compensate investors for the business and financial risks assumed. While the Funds are subject to market risks common to other types of investments, including
market volatility, the Funds employ certain trading techniques such as the use of leverage and other speculative investment practices that may increase the risk of
investment loss. The products and strategies in which the Funds expect to invest may involve above-average risk. Please see the Risk Factors section of the
applicable Confidential Private Offering Memorandum (or similar document) for certain risks associated with an investment in a Fund.
Certain information contained in this Presentation constitutes "forward-looking statements," which can be identified by the use of forward-looking terminology such
as "may", "will", "should", "expect", "anticipate", "target", "project", "estimate", "intend", "continue" or "believe" or the negatives thereof or other variations thereon or
comparable terminology. Due to various risks and uncertainties, actual events or results or the actual policies, procedures and processes of the Investment Manager
and the performance of the Funds may differ materially from those reflected or contemplated in such forward-looking statements and no undue reliance should be
placed on these forward-looking statements, nor should the inclusion of these statements be regarded as the Investment Manager's representation that the Funds
will achieve any strategy, objectives or other plans. The stated gross returns are calculated before deducting incentive fees, management fees and other expenses
of the Fund, which would reduce returns. Net performance figures are not included for individual investments because individual investment level net performance
cannot be calculated without making arbitrary assumptions related to the allocation of fees and expenses. Please refer to Page 1 for the net performance results
of the Fund.”
This document should be read in conjunction with, and is qualified in its entirety by, information appearing in the Confidential Private Offering Memorandum (or
similar document) for each Fund and the organizational documents for such fund (e.g. limited partnership agreements, articles of association, etc.), which should
be carefully reviewed prior to investing. Potential investors should consult a professional adviser regarding the possible economic, tax, legal or other consequences
of entering into any investments or transactions described herein. Investment allocations and ownership percentages are subject to change without notice. The
information contained herein is confidential and cannot be reproduced, shared or published in any manner without the prior written consent of Senvest.
Unless otherwise indicated, the information contained in this document is current as of the date indicated on its cover. Such information is believed to be reliable
and has been obtained from sources believed to be reliable, but no representation or warranty is made, expressed or implied, with respect to the fairness,
correctness, accuracy, reasonableness or completeness of the information and opinions. Additionally, there is no obligation to update, modify or amend this
document or to otherwise notify a reader in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or
subsequently becomes inaccurate.
The Investment Manager is not acting and does not purport to act in any way as an advisor or in a fiduciary capacity vis-a-vis any investor in the Funds. Therefore,
it is strongly suggested that any prospective investor obtain independent advice in relation to any investment, financial, legal, tax, accounting or regulatory issues
discussed herein. Analyses and opinions contained herein may be based on assumptions that if altered can change the analyses or opinions expressed. Nothing
contained herein shall constitute any representation or warranty as to future performance of any financial instrument, credit, currency rate or other market or
economic measure.
Certain performance information is provided for the Funds. Performance numbers are net of all fees and expenses unless noted otherwise. All returns are subject
to revision until completion of the annual audit. Past performance is not necessarily indicative of or a guarantee of future results.
Gross and Net Attribution Figures: Attributions of sector-level performance are shown on a gross basis unless otherwise noted herein ("Gross Attributions"). Gross
Attributions reflect the return contribution by the aggregate investments in each Sector for the period indicated (calculated by dividing the gains/losses of the
indicated Sector over the portfolio, as applicable), but is calculated prior to the deduction of management fees, expenses and incentive compensation paid to
Senvest, which will reduce performance. Net sector attributions ("Net Attributions") reflect Gross Attributions, reduced by a percentage equal to the quotient of the
applicable Fund's net return divided by the applicable Fund's gross return in order to approximate a pro forma “net” return. This pro forma return should not be
relied upon as a precise metric of the impact of fees and expenses on the performance of each Sector, for the reasons detailed below. Net Attributions are presented
pro forma because, although such figures reflect actual performance, these calculations apply management fees, expenses and incentive compensation to each
Sector's Gross Attributions, even though each Fund's fees, expenses and incentive compensation are only calculated for the applicable Fund as a whole.
Correspondingly, this approximation does not precisely reflect the impact such fees and expenses actually had on the performance of positions included in each
Sector. Net Attributions do not take into account the specific impact of leverage and other costs on specific Sectors' performance, nor do they incorporate the
differing impact that each investor’s or Fund's high water mark has on specific Sectors. For example, if the Fund as a whole accrued incentive compensation for a
given period, the Net Attributions methodology would result in the reduction of Gross Attributions, on a percentage basis, of an amount incorporating that accrued
38SENVEST MANAGEMENT, LLC Senvest Technology Partners Master Fund, LP (“Senvest Technology Partners”)
Q4 Investor Letter: March 4, 2024
incentive compensation from each Sector's performance, even where a Sector experienced negative performance (and therefore, viewed in isolation, would not
have accrued incentive allocation). In addition, expenses are not tracked on a Sector-by-Sector basis, and therefore the Net Attributions shown herein do not reflect
an approximation of the precise impact of expenses on specific Sectors' performance—many expenses are incurred on a fund-wide level and do not relate to any
specific portion of the investment program. Pro forma performance of this nature is subject to inherent limitations and should not form the basis for an investment
decision. Additional information on the risks and limitations of pro forma performance is available upon request.
Unless otherwise noted, all calculations in this report are made by Senvest. All profit and loss, or other performance information is unaudited and is net of fees and
expenses based on an investment made at inception. Total returns reflect compounded monthly returns. The distribution of this document in certain jurisdictions
may be prohibited or restricted by law; therefore, people in whose possession this document comes should inform themselves about and observe such restrictions.
Any such distribution could result in a violation of the law of such jurisdictions.
The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which is made up of 3,000 of the largest U.S.
stocks by market capitalization. The Russell 2000 Index represents approximately 8% of the total market capitalization of the Russell 3000 Index. The Nasdaq
Composite Index is a market-capitalization-weighted index of all the stocks traded on the Nasdaq stock exchange. This index includes some companies that are not
based in the United States.
39SENVEST MANAGEMENT, LLC SENVEST CAPITAL INC.
December 31, 2023
INTERNAL CONTROLS
Disclosure controls and procedures
Our disclosure controls and procedures are designed to provide reasonable assurance that information required to
be disclosed by us in reports filed or submitted under Canadian securities laws is recorded, processed, summarized
and reported within the time periods specified under those laws, and include controls and procedures that are
designed to ensure that the information is accumulated and communicated to management, including Senvest’s
President and CEO and Vice-President and CFO, to allow timely decisions regarding required disclosure. As at
December 31, 2023, management evaluated, under the supervision of and with the participation of the CEO and
the CFO, the effectiveness of our disclosure controls and procedures, under National Instrument 52-109 –
Certification of Disclosure in Issuers’ Annual and Interim Filings. Based on that evaluation, the CEO and CFO
concluded that our disclosure controls and procedures were effective as at December 31, 2023.
Internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting
under National Instrument 52-109. Our internal control over financial reporting is a process designed under the
supervision of the CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with IFRS. However, because of
its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a
timely basis. Management evaluated, under the supervision of and with the participation of the CEO and the
CFO, the effectiveness of our internal control over financial reporting as at December 31, 2023, based on the
criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, the CEO and
CFO concluded that our internal control over financial reporting was effective as at December 31, 2023.
There have been no changes during the year ended December 31, 2023 in our internal control over
financial reporting that have materially affected, or are reasonably likely to materially affect, our internal
control over financial report.
Victor Mashaal
Chairman of the Board and President
March 28, 2024
(Management Discussion and Analysis (“MD&A”) provides a review of Senvest Capital Inc.’s operations, performance and financial condition for the year ended
December 31, 2023, and should be read in conjunction with the 2023 annual filings. Readers are also requested to visit the SEDAR+ website at www.sedarplus.ca
for additional information. This MD&A also contains certain forward-looking statements with respect to the Corporation. These forward-looking statements, by
their nature necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by these forward-
looking statements. We consider the assumptions on which these forward-looking statements are based to be reasonable, but caution the reader that these
assumptions regarding future events, many of which are beyond our control may ultimately prove to be incorrect.
40Management’s Discussion and Analysis SENVEST CAPITAL INC.
The Consolidated financial statements for the fiscal year ended December 31, 2023 and December 31,
2022, were prepared by the management of Senvest Capital Inc., reviewed by the Audit Committee and
approved by the Board of Directors. They were prepared in accordance with International Financial
Reporting Standards and are consistent with the Company’s business.
The Company and its subsidiaries maintain a high level of quality of internal controls, designed to provide
reasonable assurance that the financial information is accurate and reliable. The information included in
this Annual Report is consistent with the financial statements contained herein.
The financial statements have been audited by PricewaterhouseCoopers LLP, the company’s
auditors, whose report is provided herein.
Victor Mashaal
Chairman of the Board and President
Senvest Capital Inc.
March 28, 2024
41Management's ReportDecember 31, 2023 Independent auditor’s report
To the Shareholders of Senvest Capital Inc.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Senvest Capital Inc. and its subsidiaries (together, the Company) as at
December 31, 2023 and 2022, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS Accounting Standards).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated statements of financial position as at December 31, 2023 and 2022;
the consolidated statements of income (loss) for the years then ended;
the consolidated statements of comprehensive income (loss) for the years then ended;
the consolidated statements of changes in equity for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, comprising material accounting policy information
and other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
PricewaterhouseCoopers LLP
1250 René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec, Canada H3B 4Y1
T.: +1 514 205 5000, F.: +1 514 876 1502, Fax to mail: ca_montreal_main_fax@pwc.com
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
42 Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2023. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Valuation of level 3 debt and equity securities
Refer to note 2 – Material accounting policy
information, note 3 – Critical accounting estimates
and judgments and note 16 – Financial risks and
fair value to the consolidated financial statements.
As at December 31, 2023, the Company’s
investment portfolio included $4,585,964,000 of
equity investments and other holdings measured at
fair value through profit or loss, which included
$255,691,000 of level 3 debt and equity securities
(the Securities) for which quoted prices or
observables inputs were not available.
Management uses valuation techniques, including
the comparable company approach, comparable
bond methodologies, Black-Scholes option pricing
models, Backsolve option pricing models, index
performance method, and recent transactions to
determine the fair value of these Securities. In the
determination of the fair value of these Securities,
management applies significant judgment which
includes the selection of appropriate valuation
techniques and the use of significant unobservable
inputs in those techniques, such as:
a) earnings before interest, tax and amortization
(EBITA) multiples, revenue multiples, EBITA
estimates, revenue estimates, average change
in market capitalization and index weighting for
securities valued using the comparable
company approach;
b) discount rates and yield to maturity (YTM) rates
for Securities valued using comparable bond
methodologies;
Our approach to addressing the matter included the
following procedures, among others:
Tested how management determined the fair
value estimates for a sample of Securities,
which included the following:
Evaluated the appropriateness of the
valuation techniques used and tested the
mathematical accuracy thereof.
For Securities valued using the comparable
company approach, assessed the
reasonableness of EBITA and revenue
estimates of the underlying companies by
comparing them to past performance of the
underlying companies.
For Securities valued using the recent
transaction approach, assessed publicly
available information having a potential to
affect the fair value between the
transaction date and December 31, 2023
and, if applicable, the reasonableness of
the discount for lack of marketability
applied.
Professionals with specialized skills and
knowledge in the field of valuation were
used to further assist in evaluating the
reasonableness of management’s valuation
techniques and significant unobservable
inputs, by considering comparable
companies for the EBITA multiples,
revenue multiples, discount rates, YTM
rates, index weighting, average change in
market capitalization and expected
volatilities.
43 Key audit matter
How our audit addressed the key audit matter
c) expected volatilities for Securities valued using
the Black-Scholes option pricing models or
Backsolve option pricing models;
d)
index weighting for Securities valued using the
index performance method; and
e) discount for lack of marketability for Securities
valued using the recent transactions approach.
We considered this a key audit matter due to the
significant judgment applied by management in
determining the fair value estimates of the
Securities. This determination required the use of
appropriate valuation techniques which included
significant unobservable inputs. This in turn led to a
high degree of auditor subjectivity and judgment in
performing procedures relating to the valuation of
the Securities. The audit effort involved the use of
professionals with specialized skill and knowledge
in the field of valuation.
Valuation of investment properties
Refer to note 2 – Material accounting policy
information, note 3 – Critical accounting estimates
and judgments and note 9 – Investment properties
to the consolidated financial statements.
As at December 31, 2023, the Company held
investment properties amounting to $63,095,000,
which are measured at fair value. Management
uses valuation techniques, including the
comparable sales approach and recent
transactions, to determine the fair value of
investment properties. Management uses
significant unobservable inputs in estimating the
value of investment properties, such as value/m2
for investment properties valued using the
comparable sales approach.
Tested the underlying data used in the
valuation techniques.
Our approach to addressing the matter included the
following procedures, among others:
Tested how management determined the fair
value of a sample of investment properties,
which included the following:
Professionals with specialized skill and
knowledge in the field of real estate
valuation assisted us in evaluating the
appropriateness of the valuation
techniques, in testing the mathematical
accuracy thereof, assessing recent
transactions and evaluating the
reasonableness of the value/m2 used.
Tested the underlying data used in the
valuation techniques.
44 Key audit matter
How our audit addressed the key audit matter
We considered this a key audit matter due to the
significant judgments applied by management in
determining the fair value estimates of the
investment properties. This determination required
the use of appropriate valuation techniques which
included significant unobservable inputs. This in
turn led to a high degree of auditor subjectivity and
judgment in performing procedures relating to the
valuation of the investment properties. The audit
effort involved the use of professionals with
specialized skill and knowledge in the field of real
estate valuation.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information,
other than the consolidated financial statements and our auditor’s report thereon, included in the annual
report, which is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard. When we read the information, other
than the consolidated financial statements and our auditor’s report thereon, included in the annual report,
if we conclude that there is a material misstatement therein, we are required to communicate the matter to
those charged with governance.
45 Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS Accounting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
46 Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Linda Beauparlant.
Montréal, Quebec
March 28, 2024
1 CPA auditor, public accountancy permit No. A117693
/s/PricewaterhouseCoopers LLP147 (in thousands of Canadian dollars)
iiii
Assets
Cash and cash equivalents
Restricted short-term investments
Due from brokers
Equity investments and other holdings
Investments in associates
Real estate investments
Investment properties
Income taxes receivable
Other assets
Total assets
Liabilities
Bank advances
Trade and other payables
Due to brokers
Securities sold short and derivative liabilities
Redemptions payable
Subscriptions received in advance
Income taxes payable
Deferred income tax liabilities
Liability for redeemable units
Total liabilities
Equity
As at December 31, 2023 and 2022
Note
4
5(b)
6
7
8
9
12(b)
5(a)
11
5(b)
6
12(b)
10
2023
$
2022
$
33,011
477
346,315
4,585,964
20,383
44,172
63,095
19,928
19,117
42,531
477
163,579
5,280,915
29,563
47,763
56,318
14,871
17,136
5,132,462
5,653,153
349
22,359
878,750
502,965
72,332
-
386
89,492
1,927,203
532
29,694
1,058,328
858,733
34,006
703
4,797
90,606
1,981,983
3,493,836
4,059,382
Equity attributable to common shareholders
Share capital
Accumulated other comprehensive income
Retained earnings
13
20,605
197,312
1,402,922
20,657
234,254
1,321,347
Total equity attributable to common shareholders
1,620,839
1,576,258
Non-controlling interest
Total equity
Total liabilities and equity
17
17,787
17,513
1,638,626
1,593,771
5,132,462
5,653,153
Approved by the Board of Directors
________________________________
Victor Mashaal
Director
___________________________
Frank Daniel
Director
The accompanying notes are an integral part of these consolidated financial statements.
SENVEST CAPITAL INC.Consolidated Statements of Financial Position48
Note
2023
$
Revenue
Interest income
Dividend income
Other income
Investment gains (losses)
Net change in fair value of equity investments and other holdings
Dividend expense on securities sold short
Net change in fair value of real estate investments
Net change in fair value of investment properties
Share of loss of associates
Foreign exchange gain
7
Total revenue and net investment gains (losses)
Operating costs and other expenses
Employee benefit expense
Interest expense
Transaction costs
Other operating expenses
Change in redemption amount of redeemable units
Income (loss) before income tax
Income tax expense (recovery)
12(a)
Net income (loss) for the year
Net income (loss) attributable to:
Common shareholders
Non-controlling interest
Earnings (loss) per share
Basic and diluted
64,129
71,972
7,962
144,063
307,715
(11,235)
(3,965)
(919)
(9,450)
6,094
288,240
432,303
43,350
102,105
14,463
39,437
199,355
131,475
101,473
17,166
84,307
2022
$
28,232
42,292
6,583
77,107
(810,022)
(17,315)
10,587
4,511
(86)
4,873
(807,452)
(730,345)
40,953
51,780
18,097
29,085
139,915
(502,428)
(367,832)
(40,507)
(327,325)
83,608
699
(326,083)
(1,242)
14
33.78
(130.98)
The accompanying notes are an integral part of these consolidated financial statements.
SENVEST CAPITAL INC.Consolidated Statements of Income (Loss)For the years ended December 31, 2023 and 202249(in thousands of Canadian, except per share data)
Net income (loss) for the year
Other comprehensive income (loss)
Currency translation differences
Comprehensive income (loss) for the year
Comprehensive income (loss) attributable to:
Common shareholders
Non-controlling interest
2023
$
2022
$
84,307
(327,325)
(37,367)
107,279
46,940
(220,046)
46,666
274
(219,449)
(597)
Other comprehensive income (loss) includes currency translation differences arising from the Company’s interest in
foreign entities. Accumulated other comprehensive income arising from currency translation differences arising
from the Company’s interest in foreign entities will be reclassified to profit and loss upon the disposal of such
entities. Currency translation differences arising from the translation of the Company’s consolidated financial
statements’ translation to the presentation currency will not be subsequently reclassified to profit and loss.
The accompanying notes are an integral part of these consolidated financial statements.
SENVEST CAPITAL INC.Consolidated Statements of Comprehensive Income (Loss) For the years ended December 31, 2023 and 202250(in thousands of Canadian dollars) Equity attributable to owners of the parent
Note
Share
capital
$
Accumulated
other
comprehensive
income
$
Retained
earnings
$
Non-
controlling
interests
$
Total
$
Total
equity
$
Balance – December 31, 2021
20,853
127,620
1,656,171 1,804,644
11,009
1,815,653
Net loss for the year
Other comprehensive income
Comprehensive income (loss)
for the year
-
-
-
-
106,634
(326,083)
-
(326,083)
106,634
(1,242)
645
(327,325)
107,279
106,634
(326,083)
(219,449)
(597)
(220,046)
Repurchase of common shares
Contribution from non-controlling interest
13
(196)
-
-
-
(8,741)
-
(8,937)
-
-
7,101
(8,937)
7,101
Balance – December 31, 2022
20,657
234,254
1,321,347 1,576,258
17,513
1,593,771
Net income for the year
Other comprehensive loss
Comprehensive income (loss)
for the year
-
-
-
-
(36,942)
83,608
-
83,608
(36,942)
699
(425)
84,307
(37,367)
(36,942)
83,608
46,666
274
46,940
Repurchase of common shares
13
(52)
-
(2,033)
(2,085)
-
(2,085)
Balance – December 31, 2023
20,605
197,312
1,402,922 1,620,839
17,787
1,638,626
The accompanying notes are an integral part of these consolidated financial statements.
SENVEST CAPITAL INC.Consolidated Statements of Changes in EquityFor the years ended December 31, 2023 and 202251(in thousands of Canadian dollars)
Note
2023
$
2022
$
Cash flows provided by (used in)
Operating activities
Net income (loss) for the year
Adjustments for non-cash items
Purchase of equity investments and other holdings held for trading
Purchase of securities sold short and derivative liabilities
Proceeds on sale of equity investments and other holdings held for trading
Proceeds from securities sold short and derivative liabilities
Dividends and distributions received from real estate investments
Changes in non-cash working capital items
15(a)
15(b)
84,307
(159,802)
(3,456,530)
(3,573,672)
4,360,286
3,195,749
1,458
(367,381)
(327,325)
232,974
(5,472,576)
(6,663,804)
5,667,239
6,953,279
20,824
(153,303)
Net cash provided by operating activities
84,415
257,308
Investing activities
Transfers to restricted short-term investments
Purchase of real estate investments
Purchase of investment properties
Purchase of investment in associates
Purchase of equity investments and other holdings at
fair value through profit or loss
Proceeds on sale of equity investments and other holdings at
fair value through profit or loss
Proceeds from investments in associates
Proceeds from sale of investment properties
Net cash provided (used) in investing activities
Financing activities
Increase (decrease) in bank advances
Payment of lease liability
Contributions from non-controlling interest
Repurchase of common shares
Proceeds from issuance of redeemable units
Amounts paid on redemption of redeemable units
(11)
(2,904)
(7,341)
(618)
29
(4,019)
(2,639)
(448)
(21,915)
(20,668)
43,866
-
-
11,077
(185)
(1,283)
-
(2,085)
9,428
(110,091)
1,869
1,075
5,617
(19,184)
265
(1,236)
7,101
(8,937)
29,187
(276,760)
Net cash provided by (used in) financing activities
(104,216)
(250,380)
Decrease in cash and cash equivalents during the year
(8,724)
(12,256)
Effect of changes in foreign exchange rates on cash and
cash equivalents
Cash and cash equivalents – Beginning of year
Cash and cash equivalents – End of year
4
Amounts of cash flows classified in operating activities:
Cash paid for interest
Cash paid for dividends on securities sold short
Cash received on interest
Cash received on dividends
Cash paid for income taxes
(796)
42,531
33,011
104,210
13,312
65,819
69,838
25,657
2,598
52,189
42,531
47,951
15,937
24,414
41,879
12,067
The accompanying notes are an integral part of these consolidated financial statements.
SENVEST CAPITAL INC.Consolidated Statements of Cash FlowsFor the years ended December 31, 2023 and 202252(in thousands of Canadian dollars)
1 General information
Senvest Capital Inc. (the “Company”) was incorporated under Part I of the Canada Corporations Act on
November 20, 1968 under the name Sensormatic Electronics Canada Limited, and was continued under the
Canada Business Corporations Act under the same name effective July 23, 1979. On April 21, 1991, the
Company changed its name to Senvest Capital Inc. The Company and its subsidiaries hold investments in
equity and real estate holdings that are located predominantly in the United States. The Company’s head office
and principal place of business is located at 1000 Sherbrooke Street West, Suite 2400, Montréal, Quebec
H3A 3G4. The Company’s shares are traded on the Toronto Stock Exchange under the symbol “SEC”. Refer to
note 17 for the composition of the Company.
2 Material accounting policy information
Basis of preparation
The Company prepares its consolidated financial statements in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards)
The Board of Directors (Board) approved these consolidated financial statements for issue on March 28, 2024.
The preparation of consolidated financial statements in conformity with IFRS Accounting Standards, requires
the use of certain critical accounting estimates. It also requires management to exercise its judgment in the
process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or
complexity or areas where assumptions and estimates are significant to the consolidated financial statements
are disclosed in note 3.
Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except for
financial assets and financial liabilities at fair value through profit or loss (FVTPL), including derivative
instruments, and investment properties which have been measured at fair value.
Consolidation
Subsidiaries
The financial statements of the Company consolidate the accounts of the Company, its subsidiaries, and its
structured entities. All intercompany transactions, balances and unrealized gains and losses from
intercompany transactions are eliminated on consolidation. Where applicable, amounts reported by
subsidiaries, associates and structured entities have been adjusted to conform with the Company’s accounting
policies.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 53(in thousands of Canadian dollars unless otherwise stated) Investments in associates
Investments in associates held by the Company’s investment entities are included in the Company’s
consolidated financial statements as financial assets at FVTPL. The accounting policies applied to these
investments in associates are similar to those applied to the Company’s other financial assets at FVTPL and are
disclosed in the accounting policy notes discussing the classification and measurement of financial assets and
liabilities.
Investment in associates that are not held by the Company’s investment entities are included in the Company’s
consolidated financial statements using the equity method.
Equity method
Participations in associates are initially recorded at cost plus transaction costs. Subsequent to the acquisition
date, the Company’s share of profits or losses of associates is recognized in the consolidated statements of
income (loss). The cumulative post-acquisition movements are adjusted against the carrying amount of the
investment. When the Company’s share of losses in an associate equal or exceeds its interest in the associate,
including any other unsecured receivables, the Company does not recognize further losses, unless it has
incurred obligations or made payments on behalf of the associate.
Dilution gains and losses arising from changes in interests in investments in associates are recognized in the
consolidated statements of income (loss).
The Company assesses at each year-end whether there is any objective evidence that its interests in associates
are impaired. If impaired, the carrying value of the Company’s share of the underlying assets of associates is
written down to its estimated recoverable amount (being the higher of fair value less cost to sell and value in
use) and charged to the consolidated statement of income (loss). In accordance with IAS 36 Impairment of
Assets, impairment losses are reversed in subsequent years if the recoverable amount of the investment
subsequently increases, and the increase can be related objectively to an event occurring after the impairment
was recognized.
Liability for redeemable units
Liability for redeemable units represents the units in Senvest Master Fund, L.P., Senvest Technology Partners
Master Fund, L.P. and Senvest Cyprus Recovery Investment Partners, L.P. Fund (collectively the “Funds” or
individually a “Fund”) that are not owned by the Company. Senvest Master Fund, L.P. and Senvest Technology
Partners Master Fund, L.P. units may be redeemed as of the end of any calendar quarter subject to the
required notice of redemption period, maximum quarterly amounts and redemption fees. Senvest Cyprus
Recovery Investment Partners, L.P. Fund has units that can be redeemed semi-annually with a 120 day notice.
These units are recognized initially at fair value, net of any transaction costs incurred, and subsequently units
are measured at the redemption amount.
Redeemable units are issued and redeemed at the holder’s option at prices based on each Fund’s net asset
value per unit at the time of subscription or redemption. Each Fund’s net asset value per unit is calculated by
dividing the net assets attributable to the holders of each class of redeemable units by the total number of
outstanding redeemable units for each respective class. In accordance with the provisions of the Funds’
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 54(in thousands of Canadian dollars unless otherwise stated) offering documents, investment positions are valued at the close price for the purpose of determining the net
asset value per unit for subscriptions and redemptions.
Non-controlling interests
Non-controlling interests represent equity interests in the consolidated structured entities owned by outside
parties. The share of net assets of the structured entity attributable to non-controlling interests is presented as
a component of equity. Their share of net income (loss) and comprehensive income (loss) is recognized directly
in equity. Changes in the Company’s ownership interest in the structured entity that do not result in a loss of
control are accounted for as equity transactions.
Foreign currency translation
Functional currency
Items included in the financial statements of each of the Company’s entities are measured using the currency
of the primary economic environment in which the entity operates (the functional currency). The functional
currency of the Company is the US dollar.
Transactions and balances
Foreign currency transactions are translated into the relevant functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of
foreign currency transactions and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in currencies other than an entity’s functional currency are recognized in the
consolidated statement of income (loss).
Consolidation and foreign operations
The financial statements of a subsidiary or a structured entity that has a functional currency different from that
of the parent company are translated into US dollars as follows: assets and liabilities – at the closing rate at the
date of the consolidated statement of financial position; and income and expenses – at the average rate for the
period (as this is considered a reasonable approximation of actual rates). All resulting changes are recognized
in other comprehensive income (loss) as currency translation differences.
If the Company disposes its interest in a foreign operation or loses control or significant influence over a
foreign operation, the foreign exchange gains or losses accumulated in other comprehensive income related to
the foreign operation would be recognized in net income (loss). If the Company disposes of part of an interest
in a foreign operation which remains a subsidiary, a proportionate amount of foreign exchange gains or losses
accumulated in other comprehensive income (loss) related to the subsidiary would be reallocated between
controlling and non-controlling interests.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 55(in thousands of Canadian dollars unless otherwise stated) Presentation currency
The Company has adopted the Canadian dollar as its presentation currency, which in the opinion of
management is the most appropriate presentation currency. Historically, the Company’s consolidated financial
statements have been presented in Canadian dollars, and since the Company’s shares are listed on a Canadian
stock exchange, management believes it would better serve the use of shareholders to continue issuing
consolidated financial statements in Canadian dollars. The US dollar consolidated financial statements
described above are translated into the presentation currency as follows: assets and liabilities – at the closing
rate at the date of the consolidated statement of financial position; and income and expenses – at the average
rate for the period. All resulting changes are recognized in other comprehensive income as currency translation
differences. Equity items are translated using the historical rate.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits held with banks and other short-term highly liquid
investments with original maturities of three months or less.
Financial assets and liabilities
Recognition, derecognition and offsetting
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual
provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the
assets have expired or have been transferred and the Company has transferred substantially all risks and
rewards of ownership. Financial assets and financial liabilities are recognized on the trade date, the date on
which the Company commits to purchase or sell the investment.
Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement
of financial position when there is a legally enforceable and unconditional right to offset the recognized
amounts and when there is an intention to settle on a net basis or realize the asset and settle the liability
simultaneously.
Classification and measurement
The classification of financial assets is based on the Company’s business model and the financial asset’s
contractual cash flow characteristics. Business models are reassessed periodically, and contractual cash flows
characteristics are assessed to determine whether they are “Solely payments of principal and interest” (SPPI).
The Company assesses its business models individually at the level of the subsidiaries and the associated
companies. Information that is considered in determining the business models includes policies and objectives
for the financial instrument held in each entity, how risk and performance is measured at the entity level and
reported to management and expected future events for the financial instrument with respect to valuation,
holding period and selling. All of the group entities’ financial assets are managed on a fair value basis with the
exception of bank balances and short-term trade receivables. The Company does not hold any long-term
financial assets with the intent of solely collecting payments of principal and interest or collecting such
payments and selling the assets.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 56(in thousands of Canadian dollars unless otherwise stated) Financial assets, including hybrid contracts, are classified as either amortized cost or the residual classification
of FVTPL.
Financial assets with cash flows that are SPPI and are held within a business model where the objective is to
hold the financial assets in order to collect contractual cash flows (“Hold to collect” business model) are
measured at amortized cost.
Financial assets with cash flows that are SPPI but are not held within the “Hold to collect” business model are
measured at FVTPL.
Financial assets with cash flows that do not meet the SPPI conditions are measured at FVTPL.
Financial assets held for trading are classified as FVTPL.
Financial liabilities are measured at amortized cost unless they must be measured at FVTPL (such as
instruments held for trading or derivatives) or if the Company elects to measure them at FVTPL. The Company
has not made such elections.
Financial assets at FVTPL
i)
Financial assets and financial liabilities held for trading
A financial asset or financial liability is classified as held for trading if it is acquired or incurred
principally for the purpose of selling or repurchasing in the near term or if on initial recognition it is
part of a portfolio of identifiable financial instruments that are managed together and for which there
is evidence of a recent actual pattern of short-term profit taking.
The Company makes short sales in which a borrowed security is sold in anticipation of a decline in
the market value of that security, or it may use short sales for various arbitrage transactions.
From time to time, the Company enters into derivative financial instruments for speculative
purposes. Derivatives are also classified as held for trading. The Company does not classify any
derivatives as hedges in a hedging relationship.
ii)
Financial assets managed as fair value through profit or loss
Financial assets managed as fair value through profit or loss are financial instruments that are not
classified as held for trading but form part of a portfolio that is managed and whose performance is
evaluated on a fair value basis in accordance with the Company’s documented investment strategy.
The Company’s policy requires management to evaluate the information about these financial assets
and financial liabilities on a fair value basis together with other related financial information.
Recognition, derecognition and measurement
Financial assets and financial liabilities at FVTPL are initially recognized at fair value. Transaction costs are
expensed as incurred in the consolidated statement of income (loss).
Subsequent to initial recognition, all financial assets and financial liabilities at FVTPL are measured at fair value
which approximates the amount that would be received or paid if the derivative were to be transferred to a
market participant at the consolidated statement of financial position date.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 57(in thousands of Canadian dollars unless otherwise stated) Gains and losses arising from changes in the fair value of financial assets or financial liabilities at FVTPL are
presented in the consolidated statement of income (loss) in net change in fair value of equity investments and
other holdings or net change in fair value of real estate investments in the period in which they arise.
The fair value is included in equity investments and other holdings if in an asset position or equities sold short
and derivative liabilities if in a liability position.
Dividend income from financial assets at fair value through profit or loss is recognized in the consolidated
statement of income (loss) as dividend income when the Company’s right to receive payment is established.
Interest on debt securities at fair value through profit or loss is recognized in the consolidated statement of
income (loss) in interest income based on the contractual rate on an accrual basis. Dividend expense from
equities sold short is recognized in the consolidated statement of income (loss) as dividend expense on equities
sold short.
Financial assets at amortized cost
Classification
Financial assets at amortized cost are non-derivative financial assets with cash flows that are SPPI and that are
managed under a “hold to collect” business model.
The Company’s financial assets at amortized cost consist of cash and cash equivalents, due from brokers, as
well as loans to employees and restricted short-term investment, which are included in other assets.
Recognition and measurement
At initial recognition, the Company measures its financial assets at its fair value plus transactions costs
incurred. The amortized cost is the amount at which the financial asset is measured at initial recognition minus
the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any
difference between that initial amount and the maturity amount and adjusted for any loss allowance.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial
assets.
Impairment
Substantially all of the Company’s financial assets at amortized cost are short-term assets and due by
counterparties with low credit risk. The Company monitors its financial assets measured at amortized cost and
counterparty risk.
Financial liabilities at amortized cost
Classification
The Company’s financial liabilities at amortized cost are non-derivative liabilities that comprise bank advances,
trade and other payables, due to brokers, redemptions payable, subscriptions received in advance and liability
for redeemable units.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 58(in thousands of Canadian dollars unless otherwise stated) Recognition and measurement
Trade and other payables are initially recognized at fair value. Subsequently, trade and other payables are
measured at amortized cost using the effective interest method. Bank advances, due to brokers, redemptions
payable and subscriptions received in advance are recognized initially at fair value, net of any transaction costs
incurred, and subsequently at amortized cost using the effective interest method.
Due from and to brokers
Amounts due from and to brokers represent positive and negative cash balances or margin accounts, and
pending trades on the purchase or sale of securities.
Where terms in the prime brokerage agreements permit the prime broker to settle margin balances with cash
accounts or collateral, the due from brokers cash balances are offset against the due to brokers margin
balances at each prime broker.
Investment properties
Investment properties are properties held to earn rental income and/or for capital appreciation and are not
occupied by the Company. Investment properties are measured initially at cost, including transaction costs.
Subsequent to initial recognition, investment properties are measured at fair value. Changes in fair values are
recognized in the consolidated statement of income (loss) as part of net change in fair value of investment
properties in the period in which they arise.
Income tax
Income tax comprises current and deferred tax. Income tax is recognized in the consolidated statement of
income (loss) except to the extent that it relates to items recognized directly in equity, in which case the income
tax is recognized directly in equity.
Current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the
consolidated statement of financial position date in the countries where the Company and its subsidiaries
operate and generate taxable income. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However,
deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income
tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted
at the consolidated statement of financial position date and will apply when it is expected that the related
deferred income tax asset will be realized or the deferred income tax liability settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be used.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 59(in thousands of Canadian dollars unless otherwise stated) Deferred income tax is provided on temporary differences arising on investments in subsidiaries and
associates, except for deferred income tax liability where the timing of the reversal of the temporary difference
is controlled by the Company and it is probable that the temporary difference will not reverse in the
foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income
taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where
there is an intention to settle the balances on a net basis.
Share capital
Common shares are classified as equity. Incremental costs directly attributable to the issue of new common
shares or options are recorded in equity as a deduction, net of tax, from the proceeds.
Earnings per share
Basic earnings per share is calculated by dividing the net loss for the year attributable to equity owners of the
parent by the weighted average number of common shares outstanding during the year.
Diluted earnings per share are calculated by adjusting the weighted average number of common shares
outstanding to assume conversion of all potentially dilutive instruments. The Company currently does not have
any dilutive instruments.
Accounting standards and amendments issued but not yet adopted
The IASB has issued a new standard and various amendment to existing standards that are not mandatory for
the December 31, 2023, reporting period and which were not early adopted by the Company. Neither the new
standard nor the amendments are relevant to the Company’s current activities and transactions.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 60(in thousands of Canadian dollars unless otherwise stated) 3 Critical accounting estimates and judgments
Critical accounting estimates
The Company makes accounting estimates that are subject to measurement uncertainty because they require
the use of judgement and assumptions. The Company uses judgement and assumptions in designing and
selecting measurement or valuations techniques that are appropriate to the circumstances and applies inputs
that correlate to the measurement or valuation technique selected. Inputs selected also require the use of
judgment and assumptions.
Fair value of financial instruments
The fair value of financial instruments, including real estate investments, where no active market exists or
where listed prices are not otherwise available are determined by using valuation techniques. In these cases,
the fair values are estimated from observable data in respect of similar financial instruments or by using
models. Where market observable data inputs are not available, they are estimated based on appropriate
assumptions. To the extent practical, models use only observable data; however, areas such as credit risk (both
the Company’s own credit risk and counterparty risk), volatilities and correlations require management to
make estimates.
Changes in assumptions about these factors could affect the reported fair value of financial instruments.
Refer to note 16 for more information on fair value measurements and risk sensitivity for the Company’s
financial instruments.
Fair value of investment properties
The Company has adopted the fair value model in measuring its investment properties. The fair value of the
investment properties is performed by external independent knowledgeable valuators located in the area of the
properties. Inputs used in the property valuation models are based on appropriate assumptions that reflect the
type of property and location. Management reviews the assumptions made and models used to ensure they
correlate with their expectation and understanding of the market.
Changes in assumptions about these factors could affect the reported fair value of investment properties.
Refer to note 9 for more information on fair value measurements and risk sensitivity for the Company’s
investment properties.
Income taxes
The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in
determining the consolidated provision for income taxes. There are many transactions and calculations for
which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters
is different from the amounts that were initially recorded, such differences will impact the current and deferred
income tax assets and liabilities in the year in which such determination is made.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 61(in thousands of Canadian dollars unless otherwise stated) Critical accounting judgments
Consolidation of entities in which the Company holds less than 50% of the voting rights
Management considers the Company to have de facto control of Senvest Management L.L.C. (RIMA), RIMA
Senvest Master Fund GP, L.L.C., and Senvest Technology Partners GP, L.L.C. three legal entities wholly owned
by an executive of the Company, because of the Company’s Board representation and the contractual terms of
the investment advisory agreement. RIMA is the investment adviser to the Funds, whereas RIMA Senvest Master
Fund GP, L.L.C. is the General Partner of Senvest Master fund LP and Senvest Technology Partners GP LLC is
the General Partner of Senvest Technology Partners Master Fund LP. As compensation for its sub-advisory
services, the Company is entitled to receive 60% of the net management fees through RIMA and incentive
allocation earned through the General Partners each fiscal year.
Management considers the Company to have control of Senvest Master Fund, L.P., Senvest Technology Partners,
Master Fund L.P. and Senvest Cyprus Recovery Investment Fund, L.P. even though the Company has less than
50% of the voting rights in each of the Funds. The Company assessed that the removal rights of non-affiliated
unitholders are exercisable but not strong enough given the Company’s decision-making authority over relevant
activities, the remuneration to which it is entitled and its exposure to returns. The Company, through its
structured entities, is the majority unitholder of each of the Funds and acts as a principal while there are no
other unitholders forming a group to exercise their votes collectively.
4 Cash and cash equivalents
Cash on hand and on deposit
Short-term investments
5 Credit facility and due from and due to brokers
a)
Credit facility
Bank advances
2023
$
25,453
7,558
33,011
2022
$
42,309
222
42,531
The Company has a credit facility with a Canadian bank and has available a demand revolving loan (credit
facility) and a guarantee facility. The credit facility is in the amount of $3,000 and is payable on demand.
As at December 31, 2023, $349 was outstanding (2022 – $532). Under the credit facility, the Company
may, upon delivery of a required notice, opt to pay interest at the bank’s prime rate plus 0.25%. All of the
credit facility available is also available by way of term SOFR loans or banker’s acceptance at varying rates
depending on the length of term plus 1.75% per annum, or by US dollar advances.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 62(in thousands of Canadian dollars unless otherwise stated) A first-ranking movable hypothec in the amount of $30,000 on all of the Company’s assets has been
granted as collateral for the credit facility. According to the terms of the facility, the Company is required
to comply with certain financial covenants. As at December 31, 2023 and 2022, the Company had met the
requirements of all the covenants.
b) Due from and due to brokers
The Company has margin facilities with its prime brokers. As at December 31, 2023 and 2022, the
Company’s amounts due to brokers have no specific repayment terms, and they are governed by the
margin terms set forth in the prime brokerage agreements. As at December 31, 2023, listed equity
securities and due from brokers amounting to $4,504,888 have been pledged as collateral (2022 –
$4,488,173). The fair value of the collateral-listed equity securities is calculated daily and compared to the
Company’s margin limits. The prime brokers can at any time demand full or partial repayment of the
margin balances and any interest thereon or demand the delivery of additional assets as collateral.
Due from and due to brokers balances are presented on a net basis by broker in the consolidated
statement of financial position. Under the prime broker agreements, the broker may upon events of
default offset, net and/or regroup any amounts owed by the Company to the broker by amounts owed to
the Company by the broker. The following tables set out the offsetting of the Company’s various accounts
with prime brokers.
Due from brokers
Due to brokers
Gross
amounts due
from brokers
$
Gross
amounts due
to brokers
$
471,674
69,923
125,359
948,673
Gross
amounts due
from brokers
$
Gross
amounts due
to brokers
$
2023
Net
amount
$
346,315
(878,750)
2022
Net
amount
$
Due from brokers
Due to brokers
520,503
108,687
356,924
1,167,015
163,579
(1,058,328)
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 63(in thousands of Canadian dollars unless otherwise stated) 6 Equity investments and other holdings, securities sold short and derivative liabilities
Equity investments and other holdings
Assets
Financial assets at fair value through profit or loss
Held for trading
Equity securities
Debt securities
Derivative financial assets
Financial assets at fair value through profit or loss
Other
Equity securities
Debt securities
Derivative financial assets
Current portion
Non-current portion
Securities sold short and derivative liabilities
Liabilities
Financial liabilities
Held for trading
Securities sold short
Listed equity securities (proceeds of $450,737;
2022 – $914,461)
Derivative financial liabilities (proceeds of $1,080;
2022 – $3,084)
Note
2023
$
2022
$
4,097,801
22,445
165,738
6(a)
4,695,370
82,651
214,865
4,285,984
4,992,886
253,167
46,813
-
233,233
54,741
55
4,585,964
5,280,915
4,285,984
299,980
4,992,886
288,029
Note
2023
$
2022
$
445,658
6(a)
57,307
502,965
810,045
48,688
858,733
a)
From time to time, the Company enters into derivative financial instruments consisting primarily of
warrants and options to purchase or sell equity indices and currencies, equity swaps, foreign
currency forward contracts and foreign currency futures contracts. The following tables list the
notional amounts, fair values of derivative financial assets and financial liabilities and net change in
fair value by contract type, including swaps, options, warrants, rights, foreign currency futures
contracts, foreign currency forward contracts and swaps and options sold short included in equity
investments and other holdings or securities sold short and derivative liabilities:
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 64(in thousands of Canadian dollars unless otherwise stated) Fair value
of derivative
financial
assets
$
165,057
-
681
Notional
value
$
347,143
-
52,647
Notional
value
$
-
21,780
-
As at
December 31,
2023
Fair value
of derivative
financial
liabilities
$
(56,382)
(925)
-
For the
year ended
December 31,
2023
Net
change in
fair value
$
(46,602)
14,728
(12,235)
399,790
165,738
21,780
(57,307)
(44,109)
Fair value
of derivative
financial
assets
$
201,572
241
13,107
Notional
value
$
392,067
3,251
124,110
Notional
value
$
-
92,482
-
As at
December 31,
2022
Fair value
of derivative
financial
liabilities
$
(47,029)
(1,659)
-
For the
year ended
December 31,
2022
Net
change in
fair value
$
11,648
5,524
(29,338)
519,428
214,920
92,482
(48,688)
(12,166)
Equity swaps
Equity options
Warrants and rights
Equity swaps
Equity options
Warrants and rights
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 65(in thousands of Canadian dollars unless otherwise stated) 7
Investments in associates
The following have been included in the consolidated financial statements using the equity method.
Grant and Geary Partners LP(i)
Other associates
The Company’s share of:
Net income (loss) and comprehensive income (loss)
Grant and Geary Partners LP(i)
Other associates
2023
$
10,310
10,073
20,383
(2,578)
(6,872)
(9,450)
2022
$
13,144
16,419
29,563
(1,478)
1,392
(86)
i)
Grant & Geary Partners LP is a limited partnership in which the Company has an approximate 28.5%
economic interest in the underlying property, which is commercial real estate property held in the
United States. Grant & Geary Partners LP’s assets and liabilities are $43,252 (2022 – $56,310) and
$7,078 (2022 – $$10,190), respectively.
Commitments, contingent liabilities and borrowing arrangements of associates
There are no commitments, contingent liabilities or borrowing arrangements relating to the Company’s
interests in these associates.
8 Real estate investments
Real estate investments comprise the following:
Financial assets at fair value through profit or loss
Investments in private entities
Investments in real estate partnerships
and income trusts
Non-current portion
Note
8(a)
8(b)
2023
$
12,308
31,864
44,172
44,172
2022
$
12,759
35,004
47,763
47,763
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 66(in thousands of Canadian dollars unless otherwise stated) a)
These investments are minority interests in private entities whose main assets are real estate properties.
There is no established market for these investments. The most likely scenario for a disposal of these
investments is an eventual sale of the underlying real estate properties.
b) These real estate investments are in US real estate partnerships and income trusts (commonly referred to
as REITs). A REIT is an entity that owns and operates income-producing real estate and annually
distributes to its holders at least 90% of its taxable income. The Company’s investments are non-publicly-
traded REITs. There is no established market for these partnerships and REITs. The most likely scenario
for a disposal of these holdings is an eventual sale of the underlying real estate properties of the
partnerships and REITs and the distribution to their holders.
9
Investment properties
Opening balance as at January 1
Purchases
Proceeds from dispositions
Capitalized subsequent expenditure
Net gain from dispositions
Net gain (loss) from fair value adjustment
Currency translation adjustments
Closing balance as at December 31
Non-current portion
a) Amounts recognized in profit or loss for investment properties
Rental income
Direct operating expenses from property that generated rental
income
Direct operating expenses from property that does not generate
rental income
Net gain from dispositions
Net change in fair value of investment properties
b)
Investment properties are commercial properties situated in Spain.
c)
Contractual obligations
2023
$
56,318
635
-
6,706
-
(919)
355
63,095
63,095
2023
$
7,304
4,221
894
-
(919)
2022
$
54,349
2,200
(5,617)
439
2,068
2,443
436
56,318
56,318
2022
$
6,004
3,586
953
2,068
2,443
Refer to note 19 for disclosure of contractual obligations to purchase, construct or develop investment
property or for repairs, maintenance and enhancements.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 67(in thousands of Canadian dollars unless otherwise stated) d)
Leasing arrangements
e)
The investment properties are leased to tenants under short-term month-to-month operating leases with
rentals payable monthly.
f)
Fair value measurements
Investment properties are measured at fair value in these consolidated financial statements. Estimates are
made in determining the fair values of the investment properties. Based on the source of the inputs used
in determining the fair value, the Company has classified its investment properties in Level 3 of the fair
value hierarchy (a description of the levels is provided in note 16). There were no transfers between levels
for recurring fair value measurements of investment properties during the years ended December 31,
2023 and 2022.
i)
Valuation techniques used to determine Level 3 fair values
The Company obtains independent valuations for its investment properties annually. At the end of
each reporting period, management updates their assessment of the fair value of each property,
taking into account the most recent independent valuations. Management determines a property’s
value within a range of reasonable fair value estimates.
The best evidence of fair value is current prices in an active market for similar properties. Where
such information is not available the independent valuators consider information from a variety of
sources including:
current prices in active markets for similar properties in similar markets and in less active
market, adjusted to reflect those differences;
discounted cash flow projections based on reliable estimates of future cash flows; and
capitalized income projections based upon a property’s estimated net market income, and a
capitalization rate derived from an analysis of market evidence.
ii)
Fair value measurements using significant unobservable inputs (Level 3)
The following table summarizes the quantitative information about the significant unobservable
inputs used in recurring Level 3 fair value measurement. See (i) above for the valuation technique
adopted.
Description
Fair value
2023
$
Valuation
technique
Significant
unobservable
inputs
Weighted
average
input
Reasonably
possible
shifts +/−
Change
in value
$
Leased buildings and
land
–Storage facilities
45,633
Comparable
sales approach
17,462
Recent
Transaction
Value/m2
$1,175
10% +/-4,552
Value/m2
$728
-
-
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 68(in thousands of Canadian dollars unless otherwise stated) Description
Fair value
2022
$
Valuation
technique
Significant
unobservable
inputs
Weighted
average
input
$
Reasonably
possible
shifts +/−
Change
in value
$
Leased buildings and
land
–Storage facilities
46,569
Comparable
sales approach
9,749
Recent
Transaction
Value/m2
$1,182
10%
+/-4,642
Value/m2
$651
-
-
10 Financial instruments by category and related income, expenses and gains and
losses
Assets (liabilities)
at fair value through
profit or loss
Held for
trading
$
-
-
-
4,285,984
-
-
-
-
-
(502,965)
-
-
-
Other
$
-
-
-
299,980
44,172
-
-
-
-
-
-
-
-
Financial
Assets at
amortized
cost
$
Financial
liabilities at
amortized
cost
$
2023
Total
$
33,011
477
346,315
-
-
14,818
-
-
-
-
-
-
-
-
-
(349)
(22,359)
(878,750)
33,011
477
346,315
4,585,964
44,172
14,818
(349)
(22,359)
(878,750)
-
-
-
-
-
(72,332)
-
(1,927,203)
(502,965)
(72,332)
-
(1,927,203)
3,783,019
344,152
394,621
(2,900,993)
1,620,799
261,055
61,628
59,313
42,695
-
1,424
-
2,305
-
-
(101,900)
-
303,750
(37,967)
60,737
381,996
44,119
2,305
(101,900)
326,520
Assets (liabilities) as per consolidated
statement of financial position
Cash and cash equivalents
Restricted short-term investments
Due from brokers
Equity investments and other holdings
Real estate investments
Other assets*
Bank advances
Trade and other payables
Due to brokers
Securities sold short and derivative
liabilities
Redemptions payable
Subscriptions received in advance
Liability for redeemable units
Amounts recognized in consolidated
statement of income (loss)
Net change in fair value
Net interest income (expense)
Net dividend income
* Includes other financial receivables but excludes capital assets and other non-financial assets.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 69(in thousands of Canadian dollars unless otherwise stated) Assets (liabilities)
at fair value through
profit or loss
Held for
trading
$
-
-
-
4,992,886
-
-
-
-
-
(858,733)
-
-
-
Other
$
-
-
-
288,029
47,763
-
-
-
-
-
-
-
-
Financial
Assets at
amortized
cost
$
Financial
liabilities at
amortized
cost
$
2022
Total
$
42,531
477
163,579
-
-
11,392
-
-
-
-
-
-
-
-
-
(532)
(29,694)
(1,058,328)
42,531
477
163,579
5,280,915
47,763
11,392
(532)
(29,694)
(1,058,328)
-
-
-
-
-
(34,006)
703
(1,981,983)
(858,733)
(34,006)
703
(1,981,983)
4,134,153
335,792
217,979
(3,103,840)
1,584,084
(705,696)
24,859
22,067
(93,739)
2
2,910
(658,770)
(90,827)
-
244
-
244
-
(48,662)
-
(799,435)
(23,557)
24,977
(48,662)
(798,015)
Assets (liabilities) as per consolidated
statement of financial position
Cash and cash equivalents
Restricted short-term investments
Due from brokers
Equity investments and other holdings
Real estate investments
Other assets*
Bank advances
Trade and other payables
Due to brokers
Securities sold short and derivative
liabilities
Redemptions payable
Subscriptions received in advance
Liability for redeemable units
Amounts recognized in consolidated
statement of income (loss)
Net change in fair value
Net interest income (expense)
Net dividend income
* Includes other financial receivables but excludes capital assets and other non-financial assets.
`
11 Trade and other payables
Trade and interest payable
Employee benefits accrued
Mortgages
Lease Liability
Other
2023
$
3,326
7,349
5,759
1,528
4,397
2022
$
5,264
9,546
5,878
2,768
6,238
22,359
29,694
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 70(in thousands of Canadian dollars unless otherwise stated) 12 Income taxes
a)
Income tax expense (recovery)
Current tax
Current tax on income for the year
Adjustments in respect of prior years
Deferred tax
Origination and reversal of temporary differences
2023
$
21,279
(5,147)
16,132
1,034
1,034
17,166
2022
$
19,665
130
19,795
(60,302)
(60,302)
(40,507)
The tax on the Company’s income before income tax differs from the theoretical amount that would arise
using the federal and provincial statutory tax rate applicable to income of the consolidated entities. The
statutory tax rate for 2023 was 26.5% (2022 –26.5%). The difference between the Company’s income tax
and theoretical tax is as follows:
2023
$
2022
$
Income (loss) before income tax
101,473
(367,832)
Income tax expense (recover) based on statutory rate
of 26.5% (2022 – 26.5%)
Prior year adjustments
Difference in tax rate
Portion of income recoverable in hands
of non-controlling interests
Non-taxable dividends
Non-deductible (non-taxable) portion of capital loss (gain)
Non-taxable income
Foreign exchange
Other
Income tax expense (recovery)
26,890
(2,322)
14,002
(220)
(205)
(9,828)
(4,110)
(7,035)
(6)
17,166
(97,475)
130
5,556
(2,217)
(348)
34,693
(2,126)
22,381
(1,101)
(40,507)
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 71(in thousands of Canadian dollars unless otherwise stated) b) The analysis of deferred income tax assets and liabilities is as follows:
Deferred income tax assets
Deferred tax assets to be recovered
After more than 12 months
Within 12 months
Deferred income tax assets
Deferred income tax liabilities
Deferred tax liabilities to be settled
After more than 12 months
Within 12 months
Deferred income tax liabilities
2023
$
2022
$
-
-
-
89,492
-
89,492
-
-
-
90,606
-
90,606
The movement in deferred income tax assets and liabilities during the year, without taking into
consideration the offsetting of balances within the same tax jurisdiction, is as follows.
Deferred income tax assets
Equity
investments
and other
holdings
$
Investments
in
associates
$
Real estate
investments
$
Total
$
As at December 31, 2021
1,085
2,006
1,691
4,782
Credited (charged) to
consolidated statement
of income (loss)
Foreign exchange
differences
As at December 31, 2022
Credited (charged) to
consolidated statement
of income (loss)
Foreign exchange
differences
2,981
195
4,261
(780)
(85)
As at December 31, 2023
3,396
(627)
112
1,491
(1,377)
(7)
107
517
136
2,344
714
(69)
2,871
443
8,096
(1,443)
(161)
2,989
6,492
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 72(in thousands of Canadian dollars unless otherwise stated) Deferred income tax
liabilities
Equity
investments
and other
holdings
$
Investments
in
associates
$
Real estate
investments
$
Investment
properties
$
Other
$
Total
$
As at December 31, 2021
9,413
132,950
4,472
1,136
356
148,327
Charged (credited) to
consolidated statement
of income (loss)
Foreign exchange
differences
(4,239)
(52,242)
(2,127)
1,180
(3)
(57,431)
471
6,965
220
As at December 31, 2022
5,645
87,673
2,565
Charged (credited) to
consolidated statement
of income (loss)
Foreign exchange
differences
(1,082)
1,150
(819)
(111)
(2,079)
(44)
125
2,441
12
(63)
As at December 31, 2023
4,452
86,744
1,702
2,390
25
378
330
(12)
696
7,806
98,702
(409)
(2,309)
95,984
Deferred income tax liabilities have not been recognized on unremitted earnings totalling $70,267 as at
December 31, 2023 (2022 – $73,497) with respect to the investment in subsidiaries, branches and
associates and interest in joint arrangements because the Company controls whether the liability will be
incurred, and it is satisfied that it will not be incurred in the foreseeable future. During the year, the
Company did not distribute earnings from its subsidiaries (2022 - $nil).
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 73(in thousands of Canadian dollars unless otherwise stated) 13 Share capital
Authorized
Unlimited number of common shares, without par value
Movements in the Company’s share capital are as follows:
Balance – Beginning of year
Shares repurchased
Number
of shares
2,478,624
(6,500)
2023
Amount
$
20,657
(52)
Number
of shares
2,503,024
(24,400)
2022
Amount
$
20,853
(196)
Balance – End of year
2,472,124
20,605
2,478,624
20,657
In 2023, the Company began a normal course issuer bid to purchase a maximum of 100,000 of its own
common shares before August 15, 2024. In 2023, the Company purchased common shares 6,500; (2022 –
24,400) for a total cash consideration of $2,085; (2022 – $8,937). The excess of the consideration paid over
the stated capital was charged to retained earnings in the consolidated statement of changes in equity.
No dividends were declared in 2023 and 2022.
14 Earnings per share
a) Basic
Net income (loss) attributable to common shareholders
Weighted average number of outstanding common shares
$83,608
2,474,949
$(326,083)
2,489,652
Basic earnings (loss) per share
$33.78
$(130.98)
2023
2022
b) Diluted
For the years ended December 31, 2023 and 2022, there were no dilutive instruments.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 74(in thousands of Canadian dollars unless otherwise stated) 15 Supplementary information to consolidated statements of cash flows
a) Adjustments for non-cash items are as follows:
Note
2023
$
2022
$
Net change in fair value of equity investments and
other holdings
Net change in fair value of real estate investments
Net change in fair value of investment properties
Share of profit (loss) of associates, adjusted for
distributions received
Amortization and depreciation
Change in redemption amount of redeemable units
Deferred income tax
12(a)
b)
Changes in working capital items are as follows:
Decrease (increase) in
Due from brokers
Income taxes receivable
Other assets
Increase (decrease) in
Trade and other payables
Due to brokers
Income taxes payable
(307,715)
3,965
919
9,450
1,070
131,475
1,034
810,022
(10,587)
(4,511)
86
694
(502,428)
(60,302)
(159,802)
232,974
2023
$
(190,400)
(5,517)
(3,276)
(5,890)
(157,900)
(4,398)
2022
$
(86,027)
6,384
(1,151)
(69,157)
(7,958)
4,606
(367,381)
(153,303)
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 75(in thousands of Canadian dollars unless otherwise stated) 16 Financial risks and fair value
Financial risk factors
The Company’s activities expose it to a variety of financial risks: market risk (including fair value interest rate
risk, cash flow interest rate risk, currency risk and equity price risk), credit risk and liquidity risk.
The Company’s overall risk management program seeks to maximize the returns derived for the level of risk to
which the Company is exposed and seeks to minimize potential adverse effects on the Company’s financial
performance. Managing these risks is carried out by management under policies approved by the Board.
The Company uses different methods to measure and manage the various types of risk to which it is exposed;
these methods are explained below.
Market risk
Fair value and cash flow interest rate risks
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a
result of changes in market interest rates.
The majority of the Company’s debt is based on floating rates, which exposes the Company to cash flow
interest rate risk. The Company does not have a long-term stream of cash flows that it can match against this
type of fixed debt, so it prefers to use short-term floating rate debt. The Company does not mitigate its
exposure to interest rate fluctuation on floating rate debt. If interest rates spike, then the Company could enter
into interest rate swaps or more probably just reduce its debt level. As at December 31, 2023, the Company has
listed equity securities of $4,142,089 (2022 – $4,740,125). It can sell these securities to reduce its floating rate
debt. As at December 31, 2023, a 1% increase or decrease in interest rates, with all other variables remaining
constant, would impact interest expense by approximately $8,800 over the next 12 months (2022 – $10,600).
The Company’s exposure to interest rate risk is summarized as follows:
Cash and cash equivalents
Debt securities
Credit facilities
Canadian Bank advances
European Bank advances
Trade and other payables
Due to brokers
Mortgages
2023
2022
Between 0.00% and 5.64%
Between 1.94% and 10.95%
Between 0.00% and 2.58%
Between 0.25% and 12.5%
Prime rate plus 0.25%
2.75 %
Non-interest bearing
0.00% to 5.65%
0.95% to 4.73%
Prime rate plus 0.25%
Between 2.75% and 2.97%
Non-interest bearing
0.00% to 5.6%
0.76% to 2.24%
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 76(in thousands of Canadian dollars unless otherwise stated) The Company holds held for trading financial assets in debt securities of $22,445; (2022 – $82,651).
Debt securities are usually highly sensitive to interest rate changes. Theoretically, when interest rates rise, it
causes the value of debt securities to decline. The opposite generally happens when interest rates fall, then debt
securities usually rise in value. A change of 100 basis points in the yield to maturity will affect the fair value of
the debt securities held for trading as follows.
Estimated effect on the fair value of debt securities due to:
2023
2022
Financial assets
Held for trading
Debt securities
$
Financial assets
Held for trading
Debt securities
$
An increase of 100 basis points in the yield to maturity
A decrease of 100 basis points in the yield to maturity
(3,721)
2,429
(3,218)
3,655
Currency risk
Currency risk is the risk that the value of monetary financial assets and financial liabilities denominated in
foreign currencies will vary as a result of changes in underlying foreign exchange rates. The Company is
exposed to currency risk due to potential variations in currencies other than the US dollar. The following tables
summarize the Company’s main monetary financial assets and financial liabilities whose fair value is
predominantly determined in currencies other than the US dollar, the Company’s functional currency, and the
effect on pre-tax net income of a 10% change in currency exchange rates:
Canadian dollar
Euro
British Pound
Israeli shekel
Financial
assets
$
Financial
liabilities
$
Net
exposure
$
2023
Net effect of a
10% increase
or decrease
$
63,150
6,683
-
290
-
(4,507)
(64,911)
-
63,150
2,176
(64,911)
290
6,315
218
(6,491)
29
70,123
(69,418)
705
71
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 77(in thousands of Canadian dollars unless otherwise stated) Financial
assets
$
Financial
liabilities
$
Net
exposure
$
2022
Net effect of a
10% increase
or decrease
$
124,870
9,813
1,068
3,248
-
(17,231)
(22,402)
(2,916)
124,870
(7,418)
(21,334)
332
12,487
(742)
(2,133)
33
138,999
(42,549)
96,450
9,645
Canadian dollar
Euro
British Pound
Israeli shekel
Equity price risk
Equity price risk is the risk that the fair value of equity investments and other holdings and equities sold short
and derivatives will vary as a result of changes in the market prices of the holdings. The majority of the
Company’s equity investments and other holdings and all of the equities sold short and derivatives are based
on quoted market prices as at the consolidated statement of financial position date. Changes in the market
price of quoted securities and derivatives may be related to a change in the financial outlook of the investee
entities or due to the market in general. Where non-monetary financial instruments − for example, equity
securities − are traded in currencies other than the US dollar, the price, initially expressed in a foreign
currency and then converted into US dollars, will also fluctuate because of changes in foreign exchange rates.
Securities sold short represent obligations of the Company to make future delivery of specific securities and
create an obligation to purchase the security at market prices prevailing at the later delivery date. This creates
the risk that the Company’s ultimate obligation to satisfy the delivery requirements will exceed the amount of
the proceeds initially received or the liability recorded in the consolidated financial statements. In addition, the
Company has entered into derivative financial instruments which have a notional value greater than their fair
value which is recorded in the consolidated financial statements. This information is disclosed in note 6(a) to
these consolidated financial statements. This creates a risk that the Company could settle these instruments at
a value greater or less than the amount that they have been recorded in the consolidated financial statements.
The Company’s equity investments and other holdings have a downside risk limited to their carrying value,
while the risk of equities sold short and derivatives is open-ended. The Company is subject to commercial
margin requirements which act as a barrier to the open-ended risks of the equities sold short and derivatives.
The Company closely monitors both its equity investments and other holdings and its equities sold short and
derivatives.
The impact of a 30% change in the market prices of the Company’s listed equity investments and other
holdings and equities sold short and derivatives would be as follows:
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 78(in thousands of Canadian dollars unless otherwise stated) 2023
Estimated
fair value
with a 30%
price increase
$
Estimated
fair value
with a 30%
price decrease
$
Fair
value
$
Equity investments and other holdings
Listed equity securities and derivatives
Equities sold short and derivative liabilities
4,263,539
(502,965)
5,542,601
(653,855)
2,984,477
(352,075)
Pre-tax impact on net loss
1,128,172
(1,128,172)
2022
Estimated
fair value
with a 30%
price increase
$
Estimated
fair value
with a 30%
price decrease
$
Fair
value
$
Equity investments and other holdings
Listed equity securities and derivatives
Equities sold short and derivative liabilities
4,929,114
(858,733)
6,407,848
(1,116,353)
3,450,380
(601,113)
Pre-tax impact on net income
1,221,114
(1,221,114)
The above analysis assumes that listed equity securities, derivatives, equities sold short and derivative
liabilities would increase or decrease at the same rate. As these portfolios are not hedged together, a change in
market prices will affect each one differently.
Credit risk
Credit risk is the risk that a counterparty will fail to fulfill its obligations under a contract and will cause the
Company to suffer a loss.
The Company is exposed to credit risk from cash and cash equivalents, restricted short-term investments, due
from broker and debt investments. Credit risk arising from funds held at financial institutions are managed by
only investing with financial institutions with a minimum A rating. The Company manages its credit risk
exposure from debt securities by closely monitoring the debt issuer and the ratings issued by various bond
rating agencies. All debt security investments measured at fair value through profit or loss are traded over
stock exchanges therefore exiting a position with increased risk is relatively easy if the credit worthiness of an
issuer falls below the Company’s threshold for credit risk exposure. All non-trading convertible debt securities
are convertible into equity of the issuer and are measured at fair value using independent third party
appraisals. The Company closely monitors the debt issuer in order to identify when the credit risk falls below
the Company’s threshold at which point the Company may exercise its option to redeem its debt holdings or
dispose of it in the less liquid private markets.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 79(in thousands of Canadian dollars unless otherwise stated) Credit ratings are presented using Standard & Poor’s rating scale as follows:
Financial assets
Cash and cash equivalents
Due from brokers
Debt securities
Debt securities
Debt securities
Debt securities
Rating
A
A
A- to AAA
B- to BBB
CCC
Unrated
2023
$
33,011
346,315
87
19,466
1,721
47,984
2022
$
42,531
163,579
39
7,178
10,002
120,173
The company estimates that the unrated investments are below investment grade.
Liquidity risk
Liquidity risk is the risk the Company will encounter difficulties in meeting its financial obligations. The
Company’s largest assets are equity investments and other holdings. Most of these assets are made up of
equities in listed companies which can be liquidated in a relatively short time. Due to its large investments in
liquid assets, the Company believes that it has sufficient resources to meet its obligations as they come due.
All financial liabilities other than equities sold short, derivative liabilities, mortgages, lease liabilities and
liability for redeemable units as at the consolidated statement of financial position date mature or are expected
to be repaid within one year (2022 – one year). The liquidity risk related to these liabilities is managed by
maintaining a portfolio of liquid investment assets.
Capital risk management
The Company’s objective when managing its capital is to maintain a solid capital structure appropriate for the
nature of its business. The Company considers its capital to be its equity. The Company manages its capital
structure in light of changes in economic conditions. To maintain or adjust its capital structure, the Company
initiates normal course issuer bids. The Company monitors capital on the basis of its net debt-to-capital ratio.
Net liabilities used in the net debt-to-capital ratio is calculated by subtracting the due from broker balances
from total liabilities. The net debt-to-capital ratio is as follows:
Net total liabilities
Total equity
Debt-to-capital ratio
2023
2022
$3,147,521
$1,638,626
1.92
$3,895,803
$1,593,771
2.44
The Company’s objective is to maintain a debt-to-capital ratio below 3.0; (2022 – 3.0). The Company believes
that limiting its debt-to-capital ratio in this manner is the best way to monitor risk. The Company does not
have any externally imposed restrictive covenants or capital requirements, other than those included in the
credit facility (note 5).
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 80(in thousands of Canadian dollars unless otherwise stated) Fair value estimation
The tables below analyze financial instruments carried at fair value by the inputs used in the valuation method.
The different levels have been defined as follows:
Level 1 –
Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability
either directly (that is, as prices) or indirectly (that is, derived from prices); and
Level 3 –
Inputs that are not based on observable market data.
The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is
determined on the basis of the lowest level input that is significant to the fair value measurement in its
entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its
entirety. If a fair value measurement uses observable inputs that require significant adjustment based on
unobservable inputs, that measurement is a Level 3. Assessing the significance of a particular input to the fair
value measurement in its entirety requires judgment, considering factors specific to the asset or liability.
The determination of what constitutes “observable” requires significant judgment by the Company. The
Company considers observable data to be that market data that is readily available, regularly distributed or
updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively
involved in the relevant market.
The following tables analyze within the fair value hierarchy the Company’s financial assets and financial
liabilities measured at fair value as at December 31, 2023 and 2022:
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 81(in thousands of Canadian dollars unless otherwise stated) Assets
Financial assets at fair value through profit or
loss
Held for trading
Equity securities
Debt securities
Derivative financial assets
Other
Equity securities
Debt securities
Derivatives
Real estate investments
Liabilities
Financial liabilities
Held for trading
Equity holdings sold short
Derivative liabilities
Assets
Financial assets at fair value through profit or
loss
Held for trading
Equity securities
Debt securities
Derivative financial assets
Other
Equity securities
Debt securities
Derivatives
Real estate investments
Liabilities
Financial liabilities
Held for trading
Equity holdings sold short
Derivative liabilities
Level 1
$
Level 2
$
Level 3
$
2023
Total
$
4,071,844
-
-
4,447
-
-
-
25,957
22,445
165,738
39,841
-
-
-
-
-
-
4,097,801
22,445
165,738
208,878
46,813
-
44,172
253,167
46,813
44,172
4,076,291
253,981
299,863
4,630,136
(445,658)
-
-
(57,307)
(445,658)
(57,307)
-
-
-
(445,658)
(57,307)
(502,965)
Level 1
$
Level 2
$
Level 3
$
2022
Total
$
4,686,413
-
-
8,957
82,651
214,865
-
-
-
4,695,370
82,651
214,865
30,174
-
-
-
1,758
2,365
-
-
201,301
52,376
55
47,763
233,233
54,741
55
47,763
4,716,587
310,596
301,495
5,328,678
810,045
-
-
48,688
810,045
48,688
-
-
-
810,045
48,688
858,733
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 82(in thousands of Canadian dollars unless otherwise stated) Financial instruments in Level 1
The fair value of financial assets and financial liabilities traded in active markets are based on quoted market
prices at the close of trading on the year-end date. The quoted market price used for financial assets and
financial liabilities held by the Company is the close price. Investments classified in Level 1 include active listed
equities and derivatives traded on an exchange.
Financial instruments in Level 2
Financial instruments classified with Level 2 trade in markets that are not considered to be active but are
valued based on quoted market prices, broker quotations or valuation techniques such as financial models that
use market data. These valuation techniques maximize the use of observable market data where available and
rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument
are observable, the instrument is included in Level 2. These include corporate bonds, thinly traded listed
equities and derivatives, over-the-counter derivatives and private equities.
The Company uses a variety of methods and makes assumptions that are based on market conditions existing
at each year-end date. Valuation techniques used for non-standardized financial instruments such as options
and other over-the-counter derivatives include the use of comparable recent arm’s length transactions,
reference to other instruments that are substantially the same, discounted cash flow analyses, option-pricing
models and other valuation techniques commonly used by market participants, making maximum use of
market inputs and relying as little as possible on entity-specific inputs:
Description
Equity securities
Private equities
Debt securities
Derivatives
Valuation technique
Quoted market prices or broker quotes for similar instruments
Valuation techniques or net asset value
based on observable inputs
Quoted market prices or broker quotes for similar instruments
Quoted market prices or broker quotes for similar instruments
Financial instruments in Level 3
Investments classified in Level 3 have significant unobservable inputs, as they trade infrequently. Level 3
instruments consist of unlisted equity investments, debt securities and real estate investments. As observable
prices are not available for these securities, the Company has used valuation techniques to derive the fair value.
Level 3 valuations are reviewed by the Company’s chief financial officer (CFO), who reports directly to the
Board on a quarterly basis in line with the Company’s reporting dates. The Board considers the
appropriateness of the valuation models and inputs used. On an annual basis, close to the year-end date, the
Company obtains independent, third party appraisals to determine the fair value of the Company’s most
significant Level 3 holdings. The Company’s CFO reviews the results of the independent valuations. Emphasis
is placed on the valuation model used to determine its appropriateness, the assumptions made to determine
whether it is consistent with the nature of the investment, and market conditions and inputs such as cash flow
and discount rates to determine reasonableness.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 83(in thousands of Canadian dollars unless otherwise stated) As at December 31, 2023 and 2022, Level 3 instruments are held in various entities and industries.
Real estate investments are disclosed in more detail in note 8, comprising investments in private real estate
companies and in real estate income trusts and partnerships. The real estate companies are involved with
various types of buildings in different geographical locations. For the main Level 3 instruments, the Company
relied on appraisals carried out by independent third party valuators. There was no established market for any
of these investments, so the most likely scenario is a disposal of the underlying assets. For the investments in
partnerships and real estate income trusts, the Company relied mainly on audited financial statements, valuing
the assets at fair value. The most likely scenario is an eventual sale of the underlying properties and the
subsequent distribution to the holders.
The following tables present the changes in Level 3 instruments:
Real estate
investments
$
Unlisted
securities
$
2023
Total
$
As at December 31, 2022
47,763
253,732
301,495
Transfers out of level 3
Purchases (ii)
Distributions
Gains (losses) recognized in net income
On financial instruments disposed of during the year
On financial instruments held at end of year
Currency translation adjustments
-
2,904
(1,458)
-
(3,965)
(1,072)
(1,611)
17,212
(33,241)
20,798
4,922
(6,121)
(1,611)
20,116
(34,699)
20,798
957
(7,193)
As at December 31, 2023
44,172
255,691
299,863
Real estate
investments
$
Unlisted
securities
$
2022
Total
$
As at December 31, 2021
50,765
287,961
338,726
Purchases (ii)
Distributions
Gains (losses) recognized in net income
On financial instruments disposed of during the year
On financial instruments held at end of year
Currency translation adjustments
4,019
(20,824)
20,668
(3,620)
-
10,587
3,216
(6,785)
(68,850)
24,358
24,687
(24,444)
(6,785)
(58,263)
27,574
As at December 31, 2022
47,763
253,732
301,495
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 84(in thousands of Canadian dollars unless otherwise stated) i.
ii.
During the year the Company transferred private holdings in equity securities in the information
technology and pharmaceuticals industries out of level 3 pursuant to public offerings. The fair value of
these investments became available through quoted prices from the active markets however due to
restrictions on trading they have been classified as level 1.
During the years ended December 31, 2023 and 2022, the Company made investments in private
holdings in the information technology, healthcare, pharmaceutical, communication services and
financial industries totaling $17,212 (2022 – $18,103). There is no established market for these
holdings. The most likely disposal of these investments is through a disposition or a listing of these
holdings on a public stock exchange.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 85(in thousands of Canadian dollars unless otherwise stated) The table below presents the investments whose fair values are measured using valuation techniques classified as
Level 3 as at December 31, 2023.
Fair value
(rounded)
2023
$
Valuation
technique
Significant
unobservable
inputs
Weighted
average
input
Reasonably
possible
shifts +/−
Change
in value
$
Description
Unlisted private equity holdings
Industrials
-Convertible Prefs
Unlisted private equity holdings
Financial services
-Equity securities
Unlisted private equity holdings
Financial services
-Equity securities
Unlisted private equity holdings
Financial services
-Equity securities
Unlisted private equity holdings
Financial services
-Equity securities
Unlisted private equity holdings
Healthcare
-Convertible bonds
Unlisted private equity holdings
Healthcare
-Convertible bonds
Unlisted private equity holdings
Healthcare
Unlisted private equity holdings
Healthcare
-Corporate bonds
Unlisted private equity holdings
Healthcare
-Equity securities
Unlisted private equity holdings
Healthcare
-Equity securities
Unlisted private equity holdings
Healthcare
-Equity securities
Unlisted private equity holdings
Food and beverages
-Equity securities
Unlisted private equity holdings
Food and beverages
-Equity securities
44,000
23,000
44,500
4,000
16,900
1,200
24,000
Comparable
company
approach
Comparable
company
approach
Comparable
company
approach
Comparable
company
approach
Comparable
company
approach
Recent
transaction
Comparable
bond
methodology
Comparable
bond
methodology
14,000
Recoverability
analysis
Black-Scholes
Options Pricing
Model (OPM)
6,000
2,200
Black-Scholes
OPM
Recent
transaction
Comparable
company
approach
16,500
21,500
2,000
Average change in
market cap
22.50%
10%
+/-3,800
Revenue multiple
2.25
10%
+/-2,280
Revenue multiple
4
10%
+/-4,360
Revenue multiple
4.5
10%
+/-316
Average change in
market cap
8.49%
10%
+/-71
None
0%
0%
-
Discount rate
10.25%
10%
+/-276
Yield to maturity
(YTM)
18.22%
10%
+/-118
Revenue multiple
0.92
10%
+/-6,135
Expected volatility
33%
10%
+/-27
Expected volatility
85%
10%
+/-48
Discount for lack of
marketability
(DLOM)
50%
10%
+/-1,670
Revenue multiple
EBITA multiple
2.6
18.2
10%
10%
+/-1,500
+/-1,000
Comparable
company
approach
Average change in
market cap
DLOM
(38.10%)
15%
10%
+/-117
-Corporate bonds
4,000
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 86(in thousands of Canadian dollars unless otherwise stated)
Description
Unlisted private equity holdings
Pharmaceuticals
-Equity securities
Unlisted private equity holdings
Pharmaceuticals
-Equity securities
Unlisted private equity holdings
Information technology
-Equity securities
Unlisted private equity holdings
Information technology
-Equity securities
Unlisted private equity holdings
Information technology
-Equity securities
Unlisted private equity holdings
Information technology
-Equity securities
Unlisted private equity holdings
Information technology
-Equity securities
Unlisted private equity holdings
Communication services
-Equity securities
Unlisted private equity holdings
Other
-Equity securities
Unlisted private equity holdings
Other
-Equity securities
Unlisted private equity holdings
Other
-Equity securities
Unlisted private equity holdings
Other
-Equity securities
Unlisted private equity holdings
Other
-Convertible Bond
Fair value
(rounded)
2023
$
750
7,000
235
1,050
4,000
Valuation
technique
Recent
transaction
approach
Recent
transaction
Comparable
company
approach
Significant
unobservable
inputs
Weighted
average
input
Reasonably
possible
shifts +/−
Change
in value
$
DLOM
20%
10%
+/-18
Index weighting
3.8%
10%
+/-22
Revenue multiple
3.42
10%
+/-42
Comparable
company
approach
Lower quartiles
change of market
caps
(59.85%)
10%
+/-158
Backsolve
OPM/
Comparable
company
approach
Expected volatility/
Average change in
market cap
60%
18.93%
5.49%
10%
+/-170
835
Black-Scholes
OPM
1,050
Black-Scholes
OPM
Index
performance
method
Comparable
company
approach
Comparable
company
approach
Comparable
company
approach
Recent
transaction
Comparable
Bond
Methodologies
5,600
625
151
1,200
6,000
4,000
Expected volatility
70%
10%
+/-90
Expected volatility
60%
10%
+/-150
Index weighting
(3.13%)
10%
+/-17
Average change in
market cap
Average change in
market cap
2.85
10%
+/-11
(17.4%)
10%
+/-9
Revenue multiple
0.98
10%
+/-223
none
-
-
-
YTM
9.31%
10%
+/-55
REITs and partnerships
32,000
Discounted
cash flows
Discount rate 6.3%-12%
Cash flow term 5-10 years
Capitalization rate 4.8%-7.5%
The inputs disclosed cover the range
used for all the real estate holdings in
the REITs and partnerships
Real estate investments in
private entities
12,310
Capitalization
model
Rate of return
7.4%
1.0%
+1,200
-920
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 87(in thousands of Canadian dollars unless otherwise stated)
The table below presents the investments whose fair values are measured using valuation techniques classified as
Level 3 as at December 31, 2022.
Description
Unlisted private equity holdings
Industrials
-Convertible Prefs
Unlisted private equity holdings
Financial services
-Equity securities
Unlisted private equity holdings
Financial services
-Equity securities
Unlisted private equity holdings
Financial services
-Equity securities
Unlisted private equity holdings
Financial services
-Equity securities
Unlisted private equity holdings
Healthcare
-Convertible bonds
Unlisted private equity holdings
Healthcare
-Convertible bonds
Unlisted private equity holdings
Healthcare
-Equity securities
Unlisted private equity holdings
Healthcare
-Equity securities
Unlisted private equity holdings
Healthcare
-Equity securities
Unlisted private equity holdings
Food and beverages
-Equity securities
Unlisted private equity holdings
Food and beverages
-Equity securities
Unlisted private equity holdings
Pharmaceuticals
-Convertible bonds
Fair value
(rounded)
2022
$
Valuation
technique
Significant
unobservable
inputs
Weighted
average
input
Reasonably
possible
shifts +/−
Change
in value
$
Comparable
company
approach
Comparable
company
approach
Comparable
company
approach
Comparable
company
approach
Comparable
company
approach
Comparable
Bond
Methodologies
Comparable
Bond
Methodologies
46,000
28,000
25,000
6,600
5,500
21,500
17,000
Average change in
market cap
Price/Book Value
(P/BV) multiple
21.40%
10%
+/-1,200
12
10%
+/-2,700
Index Weighting
Revenue multiple
33.53%
8.48
10%
10%
+/-445
Average change in
market cap
16.03%
10%
+/-114
Revenue multiple
4.5
10%
+/-390
Discount rate
10.25%
10%
+/-244
YTM
8.91%
10%
+/-600
14,500
Recent
transaction
Discount for lack of
marketability
50%
10%
+/-1,460
6,000
Black-Scholes
OPM
2,500
Black-Scholes
OPM
Comparable
company
approach
Index
performance
method
Comparable
Bond
Methodologies
19,500
3,500
9,500
Expected volatility
33%
10%
+/-100
Expected volatility
88%
10%
+/-45
Revenue multiple
EBITA multiple
2.0
17.6
10%
10%
+/-2,300
Index weighting
9.39%
10%
+/-9
YTM
10.16%
10%
+/-1,000
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 88(in thousands of Canadian dollars unless otherwise stated)
Description
Unlisted private equity holdings
Pharmaceuticals
-Convertible prefs
Unlisted private equity holdings
Pharmaceuticals
-Convertible prefs
Unlisted private equity holdings
Information technology
-Equity securities
Unlisted private equity holdings
Information technology
-Equity securities
Unlisted private equity holdings
Information technology
-Equity securities
Unlisted private equity holdings
Communication services
-Equity securities
Unlisted private equity holdings
Other
--Equity securities
Unlisted private equity holdings
Other
-Equity securities
Unlisted private equity holdings
Other
-Corporate bonds
Fair value
(rounded)
2022
$
Valuation
technique
Significant
unobservable
inputs
Weighted
average
input
Reasonably
possible
shifts +/−
Change
in value
$
11,600
Black-Scholes
OPM
8,500
Recent
transaction
5,000
Black-Scholes
OPM
Expected volatility
90%
10%
+/-145
none
-
-
-
Expected volatility
60%
10%
+/-35
Black-Scholes
3,500
OPM Expected volatility
67%
10%
+/-25
Comparable
company
approach
Index
performance
method
Recent
transaction
Comparable
company
approach
Comparable
Bond
Methodologies
2,000
5,000
5,700
3,300
4,000
Average change in
market cap
50.8%
10%
+/-140
Index weighting
16.4%
10%
+/-92
none
-
-
-
Revenue multiple
EBITA multiple
1.50
0.83
10%
10%
+/-205
YTM
11.01%
10%
+/-100
REITs and partnerships
35,000
Discounted
cash flows
Discount rate 5.8%-10.5%
Cash flow term 5-10 years
Capitalization rate 3.8%-7.5%
The inputs disclosed cover the range
used for all the real estate holdings in
the REITs and partnerships
Real estate investments in
private entities
12,760
Capitalization
model
Rate of return
4.6%
1.0%
+3,000
-2,000
Financial assets and financial liabilities not carried at fair value but for which fair value is
disclosed.
The carrying amount of cash and cash equivalents, restricted short-term investments, due from brokers, bank
advances, credit facilities, trade and other payables, due to brokers, redemptions payable, and subscriptions
received in advance represent a reasonable approximation of their respective fair value due to their short-term
nature.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 89(in thousands of Canadian dollars unless otherwise stated) 17 Disclosure of the composition of the Company
Principal subsidiaries and structured entities
The consolidated financial statements include the accounts of the Company and all of its subsidiaries and
structured entities as at December 31, 2023 and 2022. The principal operating subsidiaries and structured
entities and their activities are as follows.
Name
Country of
incorporation
Senvest Global (KY) L.P.
Senvest Global L.P.
RIMA Senvest Master Fund GP, L.L.C.
Cayman Islands
United States
United States
Senvest Technology Partners GP,
United States
L.L.C.
Argentina Capital Inc.
Pennsylvania Properties Inc.
Senvest Blends Inc.
Senvest Management L.L.C.
Senvest Master Fund, L.P.
Senvest Technology Partners Master
Fund, L.P.
Senvest Cyprus Recovery
Investment Fund, L.P.
Coldstream SL
Canada
United States
United States
United States
Cayman Islands
Cayman Islands
Cayman Islands
Spain
% Interest held
2023
2022
100
100
100
100
-
-
100
100
100
-
41
49
75
100
-
-
100
100
-
-
39
49
75
100
Nature of
business
Investment company
Investment company
General partner of Senvest
Master Fund, L.P.
General partner of
Senvest Technology Partners
Master Fund L.P.
Real estate
Real estate
Investment company
Investment manager
of the Funds
Investment fund
Investment fund
Investment fund
Real estate
The total non-controlling interest in net income (loss) for the year is mostly attributed to Senvest Management
L.L.C. The change in redemption amount of liability for redeemable units for the year is attributable to the
Funds. No guarantees or collateral were provided to the subsidiaries and structured entities except for the lease
liabilities of Senvest Management L.L.C. The amounts in question have been included in trade and other
payables. The Company is not liable for any other contingent liabilities arising in its subsidiaries and structured
entities and will not settle any other liabilities on their behalf.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 90(in thousands of Canadian dollars unless otherwise stated) 18 Related party transactions
Key management compensation
Key management includes the Board, the president and chief executive officer, the vice-president, the
secretary-treasurer, and the CFO. The compensation paid or payable to key management for employee services
is as follows:
Salaries and other employee benefits
Management fees
2023
$
14,310
14,310
2022
$
19,619
19,619
Certain employees and related parties that have invested in the Funds do not pay management fees that are
charged to outside investors. The amount invested by these participants in 2023 totals $510,753 (2022 –
$518,346). The amount invested in the fund by these participants is included in liability for redeemable units.
19 Commitments
As of December 31, 2023, the Company’s future commitments relating to other equity investments and
other holdings totaled $12,857 and those relating to real estate totaled $9,804.
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 91(in thousands of Canadian dollars unless otherwise stated) 20 Segmented and geographical information
The Company operates in a single reportable segment, which is the management of its own investments and
those of the Funds.
The following tables summarize the Company’s revenues by geographical area for the years ended
December 31:
2023
United
States
$
56,167
43,090
-
Canada
$
European
Union
$
Other
$
Total
$
3,467
26,010
607
4,487
2,872
7,355
8
-
-
64,129
71,972
7,962
Revenue
Interest income
Dividend income
Other income
United
States
$
Canada
$
European
Union
$
Bermuda
$
Other
$
Total
$
Revenue
Interest income
Dividend income
Other income
22,267
22,977
109
940
18,754
454
4,683
35
6,020
-
289
-
342
237
-
28,232
42,292
6,583
2022
SENVEST CAPITAL INC.Notes to Consolidated Financial Statements December 31, 2023 and 2022 92(in thousands of Canadian dollars unless otherwise stated) SENVEST CAPITAL INC.
Board of Directors
Officers
Victor Mashaal
Chairman of the Board & President
Richard Mashaal
Vice-President
Frank Daniel
Secretary-Treasurer
George Malikotsis
Vice-President, Finance
Senvest Capital Inc.
1000 Sherbrooke street West
Suite 2400
Montréal (Québec) H3A 3G4
(514) 281-8082
Victor Mashaal
Chairman of the Board & President
Senvest Capital Inc.
Richard Mashaal
Vice-President
Senvest Capital Inc.
Frank Daniel
Secretary-Treasurer
Senvest Capital Inc.
David E. Basner*
Business Executive
Eileen Bermingham*
Business Executive
Jeffrey L. Jonas*
Partner, Brown Rudnick L.L.P.
*Member of the Audit Committee
Investor Information
AUDITORS
PricewaterhouseCoopers L.L.P.
Montréal (Canada)
LEGAL COUNSEL
Howard M. Levine
Blake, Cassels & Graydon L.L.P.
1 Place Ville-Marie
Suite 3000
Montréal (Québec) H3B 4N8
TRANSFER AGENT & REGISTRAR
Computershare Trust Company of Canada
1500 Robert-Bourassa Boulevard
7th Floor
Montréal (Québec) H3A 3S8
Computershare Trust Company of Canada
100 University Street
Toronto (Ontario) M5J 2Yl
Annual ReportDecember 31, 202393