Backlog & Buybacks vs. Big Promises

An 8-name Software & IT services basket built to exploit quality-valuation gaps

Ridire Research

Aug 08, 2025

Structure, Sizing and Basket Chart

Long leg: OTEX CN (0.25%), KD (0.25%), DOX (0.25%), CGY CN (0.25%) = +1.00% gross
Short leg: SNOW (-0.25%), CNDT (-0.25%), CVO CN (-0.25%), IAS (-0.25%) = -1.00% gross

Why We’re Long

OTEX: Cloud bookings +32%, EBITDA margin 34.5%, record $683M capital return. Dividend +5%, buybacks active, durable ARR and TSR support.
KD: EBITDA up 16% YoY, $725M annualized savings from automation, shifting to higher-margin scopes. Cheap EV/EBITDA with active buyback.
DOX: $4.15B 12-month backlog (+3% cc), double-digit TSR target, deep Tier-1 telco integration.
CGY: $1.5B+ backlog, 61% recurring revenue, ~80% FCF conversion. Guidance withdrawal sets up re-rate if execution holds.

Why We’re Short

SNOW: FY26 product revenue guide $4.325B, NRR now 124% vs prior highs. EV/S ~17x, priced for perfection.
CNDT: Revenue –9% YoY, EBITDA margin 5%, –$30M FCF. Structural ceiling on margins.
CVO: FY25 revenue +6%, partner-dependent growth; strong GM (79–82%) but modest scale.
IAS: 35% margin with raised guidance, but tied to ad-spend cycles.

The Trade Setup

Longs: High-quality cash flow, backlog/ARR visibility, capital return, single-digit to low-teens EV/EBITDA.
Shorts: Cyclical or valuation-stretched, thin margins, or platform dependence.
Catalysts: KD margin expansion, OTEX cloud ramp, DOX backlog conversion vs. SNOW multiple risk, CNDT cash burn, and CVO/IAS cyclicality.

Conclusion

This is a spread trade on quality and valuation, long defensive compounders that can grind higher on earnings and buybacks, short names where expectations are stretched or structural issues limit upside. The valuation gap is wide and fundamentals are diverging.

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