Callouts & quotes from 984+ activist slides

"Without taking on any debt or implementing any additional operational improvements, Bristol-Myers will have the ability to use ~$37 billion of cumulative unlevered free cash flow over the next five years to execute a “String of Pearls” strategy (i.e. in-licenses, partnerships, small acquisitions)"

"Without taking on any debt or implementing any additional operational improvements, Bristol-Myers will have the ability to use ~$37 billion of cumulative unlevered free cash flow over the next five years to execute a “String of Pearls” strategy (i.e. in-licenses, partnerships, small acquisitions)"

"Without taking on any debt or implementing any additional operational improvements, Bristol-Myers will have the ability to use ~$37 billion of cumulative unlevered free cash flow over the next five years to execute a “String of Pearls” strategy (i.e. in-licenses, partnerships, small acquisitions)"

"Despite having created little to no value, in our opinion, as a public company (including missing financial targets and spending $110m on a revenue-less venture SecurityMatters with no clear evidence that it succeeded), Forescout insiders are in line for a hefty payday – cashing out nearly $100m."

"Given the Company’s tendency to ignore its hardware business activities and propensity for creative accounting, it should come as no surprise that CFO Phillips has suggested on several occasions that investors simply ignore the cash flow impacts of the Company’s hardware transactions altogether."

"With the same toxic combination of leverage and cash burn, we believe investors underestimate Nevro’s risk of becoming the next Nuvectra, especially if the FDA takes any action against its product, or if the OIG’s Nov 16th Special Fraud Alert on speakers programs is predictive of what’s coming."

"While there are multiple contributing factors to TI’s underperformance, we believe the most significant has been the dramatic increase in capital investment announced in 2022, which has led to a fundamental deviation from TI’s long-held commitment to driving growth in free cash flow per share."

"We believe Limbach significantly overstates its free cash flow, which in turn inflates its reported Adj. EBITDA-to-FCF conversion rate. While the Company claims an 80% conversion rate over the past six years, our Spruce Point-adjusted FCF analysis suggests the true figure may be less than 60%."

"WD-40’s share price defies logic and trades at an extreme valuation. Post the last financial crisis in 2018, management has directed ~62% of total free cash flow into repurchasing shares at increasingly inflated prices, while it methodically reduces its stake in the Company to almost nothing."

"Had Ginkgo included Synlogic’s foundry spend of $13.6MM, related party revenues as a percent of total would have jumped from 72% to 95% - that is, Ginkgo would have had to admit that its foundry is a flop and that it can’t get customers unless it gives them cash and round-trips the proceeds."

"With Sumner Redstone Absent for the Last Few Years, and With Dauman Effectively in Control of his Trust, it’s Been a Perfect Setup for Dauman and Dooley to Keep Paying Themselves Enormous Cash Compensation at the Expense of Shareholders With Weak Accountability in Terms of Their Performance"

"Altogether, we estimate the $25 million cash payment and tangible concessions linked to the valuable Meridian assets could over time represent a nine-figure cost in the coming years for Norfolk Southern - far exceeding the $84 million that CSX paid to hire industry legend Hunter Harrison."

"Doug Cole failed to disclose his involvement with Longwei. During Cole’s tenure, Longwei’s CFO “routinely” made misleading statements, ran a fraudulent scheme to induce the exercise of warrants to generate much-needed cash, and executed a sham purchase of LPIH stock to inflate its price."

"Given that Kangmei’s ex-Chairman was sentenced to 12 years in prison and the company allegedly overstated its cash balance by $4.3B “using false documents,” we were further stunned to see a 2017 press release from Twist stating that Kangmei Group was actually an investor in the company."

"The deterioration of Skechers' cash flow margins since 2018, coupled with a history of mismatch between its CFO and net income (before non-controlling interest) and thus highly suspect earnings quality, suggests that something is fundamentally wrong with the Company's financial model."

"We provide evidence that since 1999, the Company has generated a cash flow deficit of -$1.6bn after capital expenditures, business investment, and asset-shuffling and repositioning, while making +$4.7bn and +$3.9bn of dividends and share repurchases effectively through debt-financing."

"Dropbox does warn that its Free Cash Flow excludes payments for finance leases and that it may be calculated differently from other companies in the industry, limiting its usefulness. When asked about finance leases, the CFO avoids highlighting the effect on the financial statements."

"Spruce Point believes that PLUG cannot issue equity or raise debt fast enough to support its current restricted cash build - and, therefore, cannot continue to support customer leases through operating-type leasebacks, the source of the Company's recent "inflection" to profitability."

"It is evident that if investors include acquisition related expenses when calculating the company's free cash flow, the sum of free cash flow generated from 2013 to 2018 would be $205 million, as compared to $1.1 billion if those acquisition related expenses were excluded from capex."

"If it becomes necessary, we are confident Phillips 66 could follow a similar path by: Making appropriate management changes; Closing the current $2-$3 per barrel refining EBITDA gap between Phillips 66 and Valero; and Generating $15 billion to $20 billion of after-tax cash proceeds."

"We believe the Transaction presents the Company's stockholders with a compelling opportunity to realize a substantial cash premium to the trading price of their shares and/or to retain an ongoing equity interest in the next stage of the Company's evolution alongside Pershing Square."

"We immediately encountered articles discussing GF Securities involvement in a $12.7B fraud in China, centered on one of China’s largest publicly traded pharmaceutical firms, Kangmei Pharmaceutical, which allegedly overstated its cash balance by $4.3 billion “using false documents.”"

"If Val-gan can grow organically at a high single-digit rate as Valeant management projects, and management can invest the company’s free cash flow in new acquisition targets at historical rates of return, then we believe management can achieve its goal of 15%-20% annual EPS growth"

"Because of the substantially lower risk of predicting lots sales in mature MPCs (it is effectively inevitable, although subject to macro factors in the short term), we believe one should use very low discount rates to discount future cash flows from lot sales in HHC’s mature MPCs"

"Using the Company’s 2008 statement that half of “Distributor Facing” expenses are vacation packages, one-time cash bonuses, Herbalife pins and watches, and other similar promotions that can only be gained via recruiting, $291mm of Herbalife’s SG&A in 2011 were Recruiting Rewards"

"We strongly suspect that the vast majority of the $127.9 million cash and investments NQ reported having as of December 31, 2012 is not actually in the Company's accounts; rather, that some to all of NQ's IPO proceeds have been diverted in order to further the accounting fraud."

"Eurofins, whose BUs are often audited by firms unaffiliated with its consolidated financial auditor Deloitte, routinely has its subsidiaries report Cash & Equivalents balances in inconsistent manners, and often in ways that likely disguise that there is very little actual cash."

"MDA has consistently produced poor free cash flow. From 2012-2017 average free cash flow was C$33m (US$30m). Leading up to the DigitalGlobe deal, it even reported bank overdrafts of cash. YTD 2018 overdrafts have continued, and debt is rising through credit facility borrowing."

"Each has a similar structure: Ginkgo and its investors create and fund the entity, which then simply returns and round-trips back cash or “non-cash consideration” to Ginkgo under the guise of R&D “prepayments” or services, which it books as Foundry revenue or deferred revenue."

"An investor spoke with FTAI. FTAI confirmed that the new language indicates that the test to report Aerospace Products income on the Operating or Investing side of the Cash Flow Statement is determined by the amount of capitalized costs to the assets while held in Inventory."

"Moreover, we believe that there is a material risk that any insurance covering potential claw backs may be void if there is a determination of tax fraud, which could subject RUN and the tax equity investors to significant liabilities, and ABS holders to reduced cash flows."

"Xylem is trying to pass off $70 million of transaction costs in Q2 2023 as an addition to Adjusted Free Cash Flow. However, we take issue with this figure because it appears to be on a pre-tax basis when added to operating cash flow, which is an after-tax financial result."

"Our view is that most to all of the cash transfer never happened, and that by purporting to have somehow circumvented China's capital controls in order to transfer the money directly to the VIE, it makes it easier for NQ to carry out its fraud by forging its cash balances."

"ROAD initially touted its “Attractive Financial Profile with High Return on Capital” by showing Free Cash Flow (FCF) Conversion and Return on Capital Employed (ROCE). By 2023, ROAD’s FCF Conversion definition markedly changed, and it ceased to provide a chart showing ROCE."

"The sell side values VRNT on a P/E basis against Non-GAAP EPS. This approach fails to take into account Verint's poor organic growth, the widening disparity between GAAP EPS and (low-quality) Non-GAAP EPS, and the Company's failure to grow cash flow despite a flood of M&A."

"AOL has used the valuable cash flows generated by its declining Access and Search businesses to fund what we believe are massive losses of more than $500 million per year in its Display advertising business in pursuit of its goal of becoming a premium online media company."

"A close look at Nuvei's working capital and balance sheet reveals that payables are being increased at a faster rate than receivables. Working capital is turning more negative. We believe this is helping to generate cash flow in the near term which may not be sustainable."

"SMCI working capital stress is near all-time highs, some of which can be explained by the pandemic, supply chain challenges and having to carry more inventory. SMCI stopped highlighting its working capital measure (which includes cash and short-term debt) post pandemic."

"Now, betting on an electric future is a popular thing to do. While we don’t know the winners or the losers, the market loves all these stocks, which trade at multiples that seem ambitious to people like me, who try to tie a value to boring things like future cash flows."

"Even under management's wellness center ramp-up assumptions – which we consider overly-ambitious – PetIQ's new wellness centers would fail to generate positive cash flow until FY22, and would not generate a positive return on total investment until the following year."

"Warning: Although CHD runs its equity income through the income statement below the line as non-operating, and claims not to control it, but in 2005, started attributing more of its cash from operations as coming from these entities. So then why isn’t it consolidated?"

"IQE sells to CSC at purportedly arms-length / market valuations (e.g., PP&E transferred at 4.6x estimated carrying value), but IQE buys from CSC at non arms-length / market prices - at cash cost, with no profit margin or reimbursement for depreciation and amortization"

"Ströer's year-end cash flow statements wrongly show that Ströer had no borrowings during the year. In fact, Ströer draws down tens of millions euro on its credit facility each of the first three quarters of the year, which it then repays before the end of the quarter."

"Current FND investors should carefully evaluate the insider selling behavior. FND's two private equity sponsors, Freeman Spogli and Ares, completely cashed out before it even reached 160 stores or ~30% of the 500 stores that the Company currently claims it can reach."

"We observe that Axon just reported its worst Q1 cash burn in its public history. Management is claiming this is due to the Taser 7 ramp, and trade-in credit terms. However, we believe there are other factors at work that will cause cash flow to remain under pressure."

"Hence, a fraudster is trapped by double-entry bookkeeping and the interdependence between the income statement, balance sheet, and cash flow statement – they cannot overstate profits on the income statement without also overstating assets or understating liabilities."

"Though Herbalife’s SG&A disclosure is limited, we estimate a meaningful portion of Distributor Facing expenses are dedicated to vacation packages, one-time cash bonuses, Herbalife pins and watches, and other similar promotions that can only be gained via recruiting"

"BR’s balance sheet displays a worrisome trend of rapidly expanding deferred client conversion costs. The costs being added to the balance sheet are much higher than the cash spent on new client conversions being presented by its investor presentation (prior slide)."

"We refer to calculation with no credit for ongoing price increases as AFFO methodology (i.e., free cash flow will continue to grow by level of price increases), and calculation which adds back for price increases as bond methodology (i.e., true fixed income yield)."

"IRBT has historically reported positive operating cash flow (OCF) in its first quarter results. However, in Q1 2014, IRBT reported its first ever Q1 OCF burn in over 8 years (and the only time its GAAP Net Income has been positive, while its OCF has been negative!)"

"However, in our view, management failed to effectively communicate the financial rationale behind the strategic pivot, as the profitability guidance has not changed while the change in strategy put significant stress on Disney’s balance sheet and cash flow profile"

"In short, Vitek extracted cash loans and appears to have repaid with much less valuable interests in partially completed apartments and villas, conveying more in unfunded obligations than cash equity—and new CEO David Greenbaum sought to gloss over this behavior."

"FBHS currently trades ~9.7x LTM EBITDA and ~16.5x LTM cash earnings. If no recovery occurs, FBHS is trading at ~10x our estimate of cash earnings. If a recovery occurs, FBHS trades at ~4x to 7x our estimates of cash earnings, depending on the strength of recovery"

"In summary, the author believes IULs are complex instruments that contain features that are hard for the average consumer to understand; many of these features ultimately come with very high fees, which can threaten a policy's cash value during market downturns."

"Carvana not only trades at nosebleed levels relative to its closest peers, even on consensus revenue growth expectations we regard as too high, Carvana now trades at a premium to leading tech players, all of whom enjoy better margins and generate free cash flow."

"PBH reports “non-GAAP adjusted free cash flow.” Spruce Point believes this is particularly egregious and aggressive, as the Company adds back integration and transition costs, therefore ignoring the costs of M&A but wanting to show investors all the benefits."

"Because the JV transaction can generate such large cash proceeds, which significantly decreases Macy's current debt burden, the pro forma Macy's OpCo alone is worth more than Macy's current stock price, while Macy still owns 85% of the JV and its cash flows."

"Being forced to accept payments from end users over time, while at the same time being restricted from up-front cash payments from sale/leasebacks, represents a material deterioration of PLUG's economics that should NOT be adjusted out of Company financials."

"Based on our analysis, we find multiple data providers and sell-side analyst reports provide an inaccurate representation of Lightspeed's cash and shares outstanding, and do not account for the Company's two most recent acquisitions and equity capital raise."

"Spruce Point believes it is a major red flag when a company stops being able to provide Free Cash Flow (FCF) guidance. We observe this happened after the departure of CFO Young in mid 2020. In the year he left, BR missed FCF guidance by an astounding 15.3%."