Callouts & quotes from 1,434+ activist slides

"Adopt an improved equity compensation and incentive scheme based on clear and transparent KPIs that are disclosed to investors (e.g. ROE, ROIC, operating profit, operating profit margin, debt to EBITDA and/or total shareholder return)"

"Warning: Oatly’s Gross Margin is overstated because it fails to include outbound shipping and handling costs. After a review of many public companies in the dairy, frozen and packaged foods space, we find this to be industry standard."

"This target represents the level of margin expansion we would expect any company to strive to achieve in the normal course of business, not the result of a publicly announced Operating Review that took almost eight months to complete."

"Oasis interactions with Kao’s IR team and competitors suggest the doubling of SKUs across the Group over the past decade and poor focus on inventory velocity probably drove around 200-300bps of consolidated gross margin erosion alone."

"Unique to China, however, Herbalife does not deduct its “[c]ompensation to China sales employees and service fees to China licensed business providers” to derive China Contribution Margin (and, instead, includes that expense in SG&A)."

"We do not believe that Saputo deserves a multiple commensurate with the larger branded players in the industry such as Danone or Kraft Heinz given its weaker margin profile, declining transparency, high leverage and fragile dividend."

"The first obvious issue is: who would pay a premium price for an identical product, given the choice (especially an IKEA product)? The answer is “no one”. Consumers will obviously opt for the low margin, extremely cheap IKEA product."

"Note that the company was guiding for AISC in the $748 to $786/Oz range in these slides above. However, the company missed its AISC by a wide margin and attained $893/Oz in AISC Q4 2016, but has since increased to $956/Oz in Q1 2017."

"Even after crediting INGN with a 10% increase in market share and ignoring the cannibalization of higher-margin DTC sales by increasing B2B sales, which management have admitted is going to occur, INGN is close to revenue saturation."

"Spruce Point believes LSPD purposefully avoids talking about quantifying payments margins. Even when asked directly by analysts, management gives long-winded answers and indirect responses suggesting things are fine and will improve."

"We believe the Street has failed to capture accounting gimmicks to boost CHD’s 2018 EBITDA. Analysts simply take CHD’s recent annual results at face value, and use it as a base-line for future year EBITDA growth and margin expansion."

"Spruce Point observes that Stryker has recorded in its income statement $419 million of inventory sold that was stepped-up to fair value since 2017. Stryker passes this through as a "non-cash" cost add-back to improve gross margins."

"Spruce Point believes that Stryker's inability to raise prices to offset inflation speaks volumes about the quality of its business vs. peers. Most are sticking to margin improvements despite inflationary and supply chain headwinds."

"Although we were able to offset increased material costs through our pricing initiatives during fiscal 2022, inflationary pressures have limited, and may continue to limit, our ability to achieve margin expansion. — Evoqua 2022 10-K"

"We believe companies should generate significant operating leverage on revenue growth, evidenced by incremental margins that are substantially higher than consolidated margins – especially software companies with high gross margins"

"We believe companies should generate significant operating leverage on revenue growth, evidenced by incremental margins that are substantially higher than consolidated margins – especially software companies with high gross margins"

"Gross margins materially compressed from the 40% - 50% range to 23% in 2019. The compression was from cost of good sold rising much faster than revenues. This could suggest L3Harris pushed high priced product to its distributor."

"The loss of the PPB will undoubtedly hit margins. While the sell-side optimistically projects a gross margin rebound and a reversal in R&D and SG&A as a percentage of revenue, the changes to tax policy make this scenario absurd."

"Spruce Point interviewed a former senior executive who formerly had insights into executive management and the Board and heard an opinion that a majority of Xylem’s businesses were commodities without a lot of margin potential."

"We observe significant red flags in Mettler's SEC reported Chinese Operations segment. Our biggest concerns: two unexplained restatements boosting segment margins, and total asset growth since 2015 of 144% vs. 30% sales growth."

"Now that we've established that Stryker has failed at unifying over 40 technology systems, let's take a closer look at its inventory reporting. Inventory reporting is a critical link toward reporting gross margin profitability."

"Further, we are concerned that Mellanox has set the bar far too low. For example, even if the 2018 targets are achieved, Mellanox would still be expected to come in dead last among the peer group in terms of operating margins."

"Spruce Point believes BR is retroactively reducing segment margins, notably in its Global Technology and Operations segment by approximately 80 - 90 basis points, with a reclassification involving foreign exchange allocation."

"Logically, if in 2020 the lower margin cohorts from 2018 and 2020 grew to become the majority of the TPV, we would expect the average take rates to fall; however, the opposite occurred, and average take rates spiked by 17.5%."

"Bisher haben wir berechnet, dass 77 % der HelloFresh-Bestände von Dominik Richter über DSR Ventures verpfändet sind. Dies bedeutet, dass ein weiterer Rückgang des Aktienkurses um 23% einen weiteren Margin Call auslösen würde."

"We find Procept’s historical pattern of inventory reclassifications and COGS definition changes, accompanied by extra mid-year auditor work, troubling. As a result, we lack confidence in the Company’s reported gross margins."

"In contrast to the significant opportunity touted by the Company, we learned that the margins in this region are typically dilutive because a majority of the market is low-cost driven and not seeking premium priced products."

"Margins are already “industry leading” and yet Rollins is now talking about SG&A initiatives. With such strong cash flow, why is Rollins only now making these investments with the Rollins family and management selling stock?"

"Margins are already "industry leading" and yet Rollins is now talking about SG&A initiatives. With such strong cash flow, why is Rollins only now making these investments with the Rollins family and management selling stock?"

"In the context of wildly increasing margins being reported by Smart2Pay following the close, we investigated its revenue post closing. Our analysis suggests that Smart2Pay’s revenues declined by approximately 6% in Q1 2021."

"We estimate the structural potential margin of ADP's various sub-segments by analyzing the segments' underlying economic characteristics (scale, market position) and performance relative to direct and/or related competitors"

"Die Immobilienstruktur von Richter scheint stark liquiditätsbeschränkt zu sein. Das Halten illiquider Vermögenswerte bei gleichzeitiger Liquiditätsnachfrage während eines Margin Calls führt zu einer gefährlichen Diskrepanz."

"And if we were a business today that we're separated from our TiO2, we would be going into 2016 saying...2016 will be a record EBITDA margin year in the history of this company. — Peter Huntsman, President & CEO, March 2016"

"Even if we look at Segment EBITDA margins which adds back disclosed depreciation and amortization costs, we find that segment margins have fallen from 2020 and did not improve much with the contribution of Itiviti in 2022."

"We fail to understand why any investors would ascribe IDEXX’s multiple to “core” Heska given its precarious competitive position, inferior innovation, dramatically lower margin profile, and vastly inferior management team."

"Spruce Point has difficulty believing Generac's reasons for why Domestic EBITDA margins keep falling. First off, it keeps citing commodity input costs, yet this same factor is never mentioned in the International segment."

"They are maintaining their margins. So being off 10% when you plan to be off 10% and you keep your margin is a significantly different situation than being off 15% when it wasn't your plan and your margins were decimated."

"We cannot find any record of Saputo providing EBITDA figures for Argentina. However, we can now estimate Argentina's margins with the insights from Saputo's obscured Australian financial filings through a numbered entity."

"TWC's programming costs continue to rise, especially for sports programming. TWC has been relatively successful at passing these costs onto consumers, however, margins are predicted to compress as costs rise even further."

"Despite ~50% increase in revenue, ~800bps of margin expansion and improved free cash flow over the last two years, NFLX’s share price is down more than 40% from recent highs and has nearly returned to pre-pandemic levels"

"Spruce Point’s warns that Evoqua’s final 10-K Annual Report made multiple alarming revisions to its “Growth Opportunities” around margin expansion, cash flow improvements, and capabilities servicing complex contaminants."

"We estimate that Twist sells to Ginkgo at 1.5 cents per base pair, and experts indicate that the cost to manufacture is “probably 9-10 cents at this point,” which by our math comes out to a gross margin of negative 533%."

"Upon closer inspection, we see that Stryker’s foreign earnings before income taxes (“EBT”) has been falling as a percentage of total EBT, and its foreign margins are falling, yet it is claiming greater U.S. tax benefits."

"As PBH has grown through larger acquisitions, the Company has been paying higher multiples for businesses with lower margins. PBH currently trades at a premium to the average EBITDA multiple of its acquisition targets."

"There is no question, on ETF and index products our margins are huge. It’s the highest margin business for us, or it’s one of the highest margin businesses for us — Larry Fink, BlackRock 4th Quarter 2010 earnings call"

"Tenon EBITDA running at low cycle of USD8m vs peak of USD20m. Margin improvement potential from restructuring, new products launch, new geographies and housing market recovery could drive an EBITDA pick-up to USD23m."

"Over a longer term period, with a best-in-class management team and perfect information, we believe the opportunity exists to reach peer average margins of 48% and potentially further close the margin gap with Amgen."

"This could help FTAI transfer leasing equipment to Inventory at arbitrarily low costs. Recall, a lower carrying value for Inventory results in lower COGS and consequently a higher gross margin for Aerospace Products."

"The hour-long interview note started on a bullish note for Soleno as he has submitted 15 start forms, and then quickly collapsed as he confessed that he thinks the drug has minimal benefit and the data is “marginal”."

"Recent buyers bucket Avery as a "value" investment, despite the fact we illustrate it trades at the richest multiple in its sector (with below average margins and sales growth) and at a premium to broker fair value."

"Compared to its DTC peers, FIGS allocates nearly all fulfillment and distribution expenses to the operating expense line items, instead of COGS. This results in FIGS gross margins being overstated relative to peers."

"Wall Street analysts are projecting 2023 revenue growth of $283 million and improving margins. We believe these expectations are overly optimistic based on the breadth of revenue and profit headwinds we see in 2023."

"We believe sports prediction exchanges have structurally better odds. Prediction exchanges do not set the odds, users do. We believe Kalshi only charges ~1.5% on average to users per trade vs. the 8–10% DKNG margin."

"Henan Ruili cannot be dismissed as a single anomalous operation. We strongly suspect there are other controlled suppliers that, combined with the controlled distributors, materially improve ANTA's reported margins."

"At Trian’s consumer investments where Nelson Peltz has served on the board, margin improvement coincided with sales growth, often due to reduced bureaucracy, greater accountability, and a faster moving organization"

"Genius currently trades at a premium to peers on a sales and EBITDA multiple basis while generating significantly lower margins than peers and below average projected revenue growth to online gaming and B2B peers."

"To grow margin, we have to incorporate innovation, which is a really difficult hill to climb. We can do it in pieces and parts, but there are not a lot of super large opportunities to expand margins in that space."

"PEN trades in line with more advanced and R&D-intensive medical device companies despite its weak IP, relatively low gross margins (even by the standard of 510(k) companies) and increasingly competitive landscape."

"While auditor rotations can be viewed positively, we believe three auditors in six years is excessive in light of the accounting anomalies we have identified related to sales, gross margins, inventories and capex."

"Based on our view of appropriate revenue growth and operating profit margins, we believe that P&G should be earning closer to $6/share by FY June 2016 – a level more indicative of the company’s true earnings power"