Callouts & quotes from 575+ activist slides

"LONZA scientist (cont'd) slammed the instrument: doesn't shorten development timelines or eliminate the need for traditional workflows, both key to its value proposition and $2MM price tag; capabilities are lacking for both cell line development and antibody discovery, BLI's two key target markets; cost is "prohibitive" and a "major shortcoming": not enough potential usage for ROI – a telling sign for BLI's TAM given Lonza may be the world's largest contract drug developer and manufacturer."

"TASK's financial performance is not as robust as it appears on the surface. The company promotes its 57% top-line growth, 82% and 95% Adjusted EBITDA and Net Income growth, respectively. However, we point out that the COVID-19 adjustments are not industry standard, and should be removed. Furthermore, by adjusting LTM cash flows for one-time equity payments, we find that cash flow growth has lagged headline figures. Free cash flow growth was negative."

"Former employees we interviewed indicated a widespread awareness of and concern inside Ginkgo about its related-party/round-tripping business model: fear inside the company it may not be able to go public or could “be slammed by regulators”; indicated “confusion” at what Ginkgo counts as revenue and questioned if “money actually passed hands”; and suggested that concern around the circular flows was widespread internally."

"The Company reclassified prior year comparative figures in the condensed consolidated statement of cash flows to conform to the current year's presentation. In addition, the Company reclassified certain prior year comparative figures from interest expense to net sales to conform to the current year's presentation. This change in presentation did not have an impact on the Company's financial condition or operating results."

"After observing problematic restructuring accounting adjustments and financial presentation methods that we believe artificially boost Adjusted EPS and Free Cash Flow (two of the three key components of management Annual Incentive Plan), we observe that Avery Amended and Restated the Annual Incentive Plan on Jan 1, 2020 to greatly expand language around the clawback provision for fraud or intentional misconduct."

"This is simply not true. This cash would only be available to pay principal on debt and pursue further acquisitions in an imaginary world where this cash had not already been spent on severance, restructuring and other exit costs as well as transaction and integration costs, which left them with only $4.3 million of real free cash flow in 2018 – enough to pay down a whopping 0.13% of the principal on GTT’s debt."

"2U was founded in 2008. In over a decade since its founding, there is no evidence it has built a business of any value. Cumulative free cash flow since reporting in 2011 amounts to a loss of $225m. Over the same time periods, insiders have stashed in their piggy banks $148m from stock sales. Who is laughing to the bank? Now ask yourself, does 2U look like a vehicle to enrich insiders or investors?"

"With one of the major bottlenecks preventing more widespread in-house 3D printing demand now gone with the expiration of key Align patents and the development of new software, Spruce Point believes that the cost savings and workflow efficiency offered by in-house printing will trigger a new wave of demand for 3D printers among orthodontists, posing a significant threat to Align's case volumes."

"[T]he outsiders (who often had complicated balance sheets, active acquisition programs, and high debt levels) believed the key to long-term value creation was to optimize free cash flow, and this emphasis on cash informed all aspects of how they ran their companies – from the way they paid for acquisitions and managed their balance sheets to their accounting policies and compensation systems."

"Mr. Prittie’s alleged shortcomings were tied to his perceived failure to come to grips with Tyler and OneMove’s concerns over the Company’s financial status, share price performance, leadership, strategic vision and strategy, corporate governance, CEO compensation, excessive M&A activity, debt leverage to cash flow ratios and the lack of guardrails around senior management decision making."

"Another ex-manufacturing employee stated that Twist’s workflow is just “standard molecular biology” steps, and that the chip in fact creates time-consuming bottlenecks such as the need for amplification, as the chip can only product negligible amounts of DNA material, which has to then be scaled 1000x with lab personnel performing a dizzying array of repetitive manuals tasks over 16 hours."

"The Street believes that VRNT shares trade at a ~35% discount to SaaS peers. However, we estimate that VRNT trades just above the industry median, despite its chronically low organic growth, destructive acquisitions, and inability to generate cash flow growth despite frequent M&A – a stark contrast to the many fast-growing and highly-profitable true cloud businesses which occupy the space."

"Limbach trades at over 18x our estimate for its FY26E Adj. EBITDA, a large premium when compared to peers. We believe this premium is unwarranted considering the Company's decelerating organic revenue growth, non-existent free cash flow growth, and its aggressive accounting methods which we believe may overstate earnings quality and obscure the true underlying volatility of the business."

"Spruce Point believes that Dropbox overstates free cash flow with a simplistic presentation that is analytically flawed and ignores two material costs such as: 1) Costs required to repurchase shares related to employee compensation programs, which are operating in nature, and 2) Costs associated to pay for infrastructure, which are effectively deferred capital expenditure payments."

"We believe it will be difficult for Zillow to grow as long as its Premier Agent business is in decline. Our estimates for 2024 assume continued weakness in Premier Agent offset by strong gains in its Rentals business paired with a comparable operating expense structure to 2023. Based on these estimates, we believe Zillow could produce $200 to $260 million of free cash flow in 2024."

"Just as the Company reaches a size at which continued M&A-fueled growth would require even larger deals, management is communicating that it no longer has sufficient cash flow to consistently support M&A from FCF on top of its fairly consistent $450-550M return of cash to shareholders, and that any M&A would have to come out of buybacks / dividends (if not the balance sheet)."

"We see a major red flag that REZI has made four separate revisions to its capex nomenclature on the Consolidated Statement of Cash Flow. The revisions make it appear as if REZI is trying to obscure its technology spending which we view as enormously important given its recent disclosure of ERP challenges and the importance of technology in its product and service offerings."

"Amcor's CEO touted "flow forward" instead of "flow back" from a cross border deal. Flow back occurs when investors sell an acquiror's shares in a cross border deal, usually from technical considerations. Our analysis calls into question his statement, and shows that actual fundamental owners of Bemis have been selling, while index/ETF owners have only moderately added."

"AMR prominently promotes how valuable its 65% ownership in Dominion Terminal Associates (DTA) is to its export business, claiming export sales are primarily shipped through it. We will show how AMR gets all the benefits of owning and using the DTA, while avoiding any impact to its key performance metrics such as "cost of coal sales", EBITDA, and operating cash flow."

"Considering that Zillow's Adj. EBITDA is virtually all stock-based compensation, Spruce Point believes free cash flow is a much better figure to value the Company. Zillow trades at a much higher multiple of free cash flow then nearly all its peers. At over 6x sales and ~37x+ FCF, we believe that Zillow is one of the most richly valued stocks among its peer group."

"Spruce Point has identified many red flags as it relates to Aerojet’s meteoric share price appreciation since 2017. Its significant EBITDAP growth without corresponding cash flow growth should be evaluated relative to recent executive and director departures, along with heavy insider selling, a civil DOJ inquiry, and disclosure of federal and state tax audits."

"BR's CEO cited many records in FY 2022, but what he doesn't point out is that cash flow declined. By adjusting the results for the onerous UBS project investment and COVID-19 effects, as well as the inorganic acquisition contribution from Itiviti, we estimate that BR's core business experienced declining Cash From Operations by approximately -17.2%."

"Spruce Point believes part of what has driven Weis' share price is the belief that its operating cash flow grew 550% YoY in Q1'18. However, by pro forma adjusting results for its aggressive accounting change to accelerate accounts receivables as cash, and a one-time incentive payment (cash flow drag) from Q1'17, we estimate the growth rate was 74%."

"Spruce Point believes investors should be skeptical of the continued outperformance of PERI’s share price. PERI recently announced a CEO transition plan and then disclosed concerning revisions to accounting policies in its annual report. Insiders have been repeatedly liquidating shares and PERI reported its first cash flow decline in years."

"Free cash flow growth should be a strong driver of equity valuation and sell-side analyst price targets. What we find is that Stryker's 2022E Free Cash Flow estimates have been contracting. Yet, not a single analyst has downgraded the stock, and in fact some brazen analysts claim shrinking Free Cash Flow merits a price increase and a "Buy"."

"By following this plan, we believe Macy's has the opportunity to create significant value for shareholders and massively improve its share price to approximately $70 per share (before value creation from further improved operations and credit card earnings), while maintaining its cash flow and real estate flexibility and reducing risk."

"The Company subsequently determined, however, to pursue multiyear upfront contracts with enterprise customers to help meet its fiscal year 2023 free cash flow goal. Upfront billings of enterprise customers in fiscal year 2023 substantially exceeded historical levels, helping the Company to meet its lowered annual free cash flow target."

"Disney should consider issuing a long-term free cash flow growth target beyond FY 2024 to anchor investors on a clearer strategic vision, improve investor outlook, and provide shareholders with a tangible commitment that the Company will allocate capital in a disciplined way to continually maximize long-term shareholder value"

"Disney should consider issuing a long-term free cash flow growth target beyond FY 2024 to anchor investors on a clearer strategic vision, improve investor outlook, and provide shareholders with a tangible commitment that the Company will allocate capital in a disciplined way to continually maximize long-term shareholder value"

"Companies that consistently invested their cash flow and resources in a share repurchase program have generated material outperformance over the past 5, 10 and 15 year periods, leading to an average of more than 4% greater annualized returns versus the S&P 500 index and 4x the amount of investor gains over the 15-year period"

"The Loan Platform Business is not a capital-lite “tollbooth” generating fee income from connecting borrowers with third-party buyers. It appears to be a sophisticated financing arrangement called a “wet-funded forward flow agreement” that, in our opinion, SOFI is using to disguise borrowings against loans as sales of loans."

"TIP REIT will be required to fund land capex for the first two years after the spin-off. Thereafter, TIP REIT will be Target Corp’s land developer through its Preferred Vendor Agreement. As such, Target Corp will generate significant free cash flow and will likely deleverage to an A-/A3 ratings profile after two years"

"Spruce Point does not believe the Evoqua deal was an effective roll-up strategy worthy of the commanding valuation paid by Xylem. After deploying $490m for acquisitions, cash flow struggled ever since COVID-19, and its final acquisition of Mar Cor appears to have been a bust with the return of unpaid earnout money."

"Novartis cell and gene therapy (cont’d): Views the machine as a “failed purchase” and would have sent it back if they could; has no value proposition versus traditional flow cytometers that are a fraction of the price and have lower operating costs, can run more assays, and have higher throughput and better data."

"We estimate gross profit per system will continue to drop as the solar investment tax credit steps down over the next 2 years. Lower margins and a reduced benefit for tax equity investors look to pressure an industry which already has tight margins and relies on tax equity to support their negative cash flows."

"Spruce Point believes Kornit Digital (“the Company” or KRNT) saw 2018 revenues, and particularly cash flow, driven entirely by Amazon’s expansion of its Merch program, which are likely to taper based on a slow-down of program growth, and would leave a gaping hole in Kornit’s aggressive revenue growth strategy."

"Perion promotes its iHub, but how does the model work? In the most recent version, it not only made the pictograph significantly less elaborate, removed the millions and billions of data points, but also changed the flow of video monetization and social, a key part of the growth story, and also removed Bing."

"BR has experienced multiple expansion over the past few years, while the evidence shows its cash flow has deteriorated, it has a shrinking ecosystem and greater customer concentration, has failed to deliver on the UBS project in a timely manner, and may be under increasing regulatory scrutiny from the SEC."

"SMCI is currently trading at the highest revenue multiple in its sector, likely a reflection of investors perception that it is growing revenues the fastest. However, unlike its peers which have historically solid free cash flow generation, SMCI has not demonstrated any long-term free cash flow ability."

"Lasertec is an extreme, textbook accounting fraud that checks off every box: claiming to have the highest margins in the industry; but alarmingly little cash flow and the lowest cash conversion among its peers; accompanied by the highest inventory level of any semicap equipment supplier in the world."

"Given our discussions with former employees and forensic analysis of Stryker’s historical inability to deal with its SG&A and cost bloat, along with rising supply chain and inflation challenges, we view it unlikely that its free cash flow will increase 4.4% in 2022 and that earnings will grow 25.2%."

"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)"

"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."

"Our 2025E Low forecast assumes sustained weakness in North American new life sales, stronger than expected outflows from the UK-based adviser platform, and further challenges for the international business, which has been under pressure recently due to macro-related headwinds in China and Spain."

"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."

"Spruce Point has concerns about financial relationships and flows of payments between C3, its CEO's foundation, two directors and its sales partners. Spruce Point asks C3 to clarify the nature of the relationships and economic value proposition to C3 shareholders with enhanced disclosures."

"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."

"Amgen employee #1, a scientist and group leader has interfaced closely with BLI for 5+ years. Remains unenthusiastic about the instrument; machine is prone to major errors, creating distrust and hesitation among Amgen staff; still have to hack it get it to work for various workflows."

"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 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"

"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."

"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."