Callouts & quotes from 1,047+ activist slides

"We believe that DOX has engineered superficial top and bottom-line growth alongside unusually stable margins through opaque M&A, aggressive percentage-of-completion accounting, software cost capitalization, and repeated one-off net tax benefits."

"In contrast to management's claims that plant-based foods will be a success with healthy margins for Saputo, based on our interview of a former Saputo executive familiar with its cheese business, the plant-based sales team is struggling to sell."

"The SEC's order finds that MagnaChip Semiconductor Corp. overstated revenues for nearly two years in response to immense pressure placed on employees each quarter to meet revenue and gross margin targets that had been communicated to the public."

"CLEAR talked about high incremental margin potential with TSA PreCheck. Yet, even as CLEAR increased its price from $189 to $199 per year, the discounted bundled cost of its service with the TSA partnership actually fell from $122.00 to $121.05."

"Manufacturers of clean energy solutions don't necessarily carry higher valuation multiples. Excluding Enphase, which has margins that Generac will likely never achieve, peers are trading around 2.7x and 2.0x 2022E and 2023E sales, respectively."

"In an effort to avoid admitting a large miss, management has recently started stating that "to get to its mid-cycle EBITDA PSX needs adjusted gross margin of $14.50/bbl," a level that even VLO (best-in-class operator) is not expected to achieve"

"In an effort to avoid admitting a large miss, management has recently started stating that "to get to its mid-cycle EBITDA PSX needs adjusted gross margin of $14.50/bbl," a level that even VLO (best-in-class operator) is not expected to achieve"

"Spruce Point views MSCI change of practices from providing margin targets to focusing on Adj. EPS as a major red flag. We later illustrate why we believe MSCI's margins are highly susceptible to potential manipulation through cost allocations."

"BR promoted Itiviti as a 30%+ operating margin business when announcing the acquisition in late March 2021. However, when its audited and pro forma financials were later filed with the SEC, we see that its operating margins were closer to 20%."

"To avoid admitting a large miss, management has recently started saying that "to get to its mid-cycle EBITDA Phillips 66 needs adjusted gross margin of $14.50/bbl," a level that even Valero (best-in-class operator) is not expected to achieve"

"Management confused the research community when it revised long-term margin targets and simultaneously added back pension/OPEB expenses. During this process, management brought down long-term targets but never made that clear to stockholders"

"Abbott management is aware that, given current G-Series prices and its own production cost advantages, offering the Libre at a lower price point allows it to take overwhelming incremental market share while still earning attractive margins."

"Ambry Genetics was acquired at a notable discount relative to other advanced genetic and molecular diagnostic testing companies, despite the entire peer group, including Ambry, showing double-digit sales growth and EBITDA margins above 10%."

"We believe GE can reach 18% operating margins through (i) a recovery in equipment profit margins to historical levels, (ii) stable improvement in the services portfolio over the next few years and (iii) a modest reduction in corporate costs"

"Kratos is trading at peak valuation on the inflated belief that “this time is different” and that its aspirations in the heavily promoted unmanned systems (aka: Drones) will drive nearly $800m of revenues and near record 10% EBITDA margins."

"To avoid admitting a large miss, management has recently started saying that “to get to its mid-cycle EBITDA Phillips 66 needs adjusted gross margin of 14.50/bbl,” a level that even Valero (best-in-class operator) is not expected to achieve"

"Spruce Point observes unusual and unexplained changes to REZI's property disclosures between 2023 and 2024. Our suspicion is that REZI used its discretion to allocate greater overhead costs to the P&S segment to flatter ADI segment margins."

"Avery Dennison faces significant long and short-term headwinds across its offerings' end-markets. We believe these headwinds will continue to intensify as competition increases, resulting in declining sales and further pressure on margins."

"Rollins has been increasing its discussion of auto accidents and insurance as a headwind to margins, and recently modified its Critical Audit Matter discussion on the topic. We believe this will continue to weigh on margins going forward."

"This stark and recent case study brings up several questions: How can a $2bn revenue segment of ADP have margins which are >80% below optimal levels? What does this say about ADP's corporate operating efficiency, culture, and governance?"

"Spruce Point believes that frequent segment shuffling is a classic red flag and we find that Zebra has made multiple shuffles. When we evaluate the revisions, we see that it has twice moved product lines that exhibited declining margins."

"In 2019 Vireo has come short of its dispensary rollout plan and gross margins have been significantly below expectations (16% in Q3/2019 vs 35% consensus and down 19% sequentially) Buildout in a number of locations have been put on hold."

"Although Tessera’s IP segment is currently profitable, its financial performance has deteriorated substantially over the past few years and its profit margins are far below the margins of other intellectual property licensing companies."

"We compare Rollins’ valuation with a broad set of residential and commercial service companies. We expect Rollins’ margins to contract and its top-line growth to normalize. As a result, we believe its excessive multiple should contract."

"If management becomes more bearish about a recovery, it can reduce capacity further and shrink the cost base. We believe that if the business were right-sized to the current sales base of ~$3.3bn, EBIT margins could be approximately 10%"

"CEO Dominik Richter's private company borrowed massively against his HelloFresh’s shares to fund highly leveraged real estate investments by his brother Benedikt Richter, apparently triggering margin calls amid a steep share price drop."

"10/28/15: Q3'15 earnings miss on SSS, EPS headwinds due to higher D&A & margin dilution from franchisee acquisitions (labor, low sales, training). Guided to "single digit" net earnings growth in FY'15 and 20% in FY'16. Shares fell ~17%"

"How does Mettler attract and retain the most talented employees when its stock compensation expense per employee is the lowest in its industry by a significant margin, and it appears to avoid granting equity to rank and file employees?"

"Following the spin-off of beverages and creation of a pure-play confectionary business in 2007, Cadbury increased its 2010 operating profit margin to a level 400 bps above what Wall Street analysts had forecast prior to the separation."

"As we’ve demonstrated, Nuvei’s revenue is low quality (already being restated) and growth has come from inorganic acquisitions and higher risk (and margin) business which will we believe will revert towards lower margin in the future."

"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."

"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"