Callouts & quotes from 52+ activist slides

"Spruce Point observes that Mr. Chadha has also removed reference to his role as Leidos' Chief Accounting Officer from his public LinkedIn biography. We observe he served in various accounting and financial reporting roles at Computer Sciences Corp during a tumultuous period when its executives were charged with accounting fraud and assessed a $190m penalty. Curiously, the fraud involved inflating unbilled receivables – the same accounts ballooning at Leidos with inconsistent explanation."

"Spruce Point observes that multiple DV executives have 10b5-1 trading programs to dump stock. Most recently, the Chief Legal Officer enacted a program in mid March 2023. We also observe that an unusual reference was added to CEO Zagorski's Form 4 referencing vested shares being delivered "as soon as administratively feasible following his separation from service with the Issuer." Is this an indication that he is on his way out?"

"Spruce Point observes that insider stock sales began around the time the CFO and CRO departed. CEO Movchan also started selling stock at year end 2023 with two large blocks of 100K and 150K at $10.00 per share. In addition, the new 10-K reveals that CEO Movchan enacted a 10b5-1 program on March 14, 2024 to enable the sale of up to 400,000 shares through Dec 31, 2024."

"Spruce Point observes that BR updated its Code of Business Conduct and Ethics policy twice in February and August 2020, and yet again in August 2021. The word "Fraud" was added three times, and the 2021 updated policy specifically added eight points regarding accurate period reports and accounting."

"Spruce Point observes two conflicting stories around the departure of Mr. Glover from Blucora. The public press release says he resigned, which suggests his departure was voluntary. However, the proxy statement later described him as a terminated executive and having received a severance payment."

"Spruce Point observes a concerted effort by Avery over the years to provide less and less disclosure to investors. Notably, we see omission of six (6) key disclosures that directly affect revenue drivers. We believe this bolsters our concern that organic revenues may be overstated."

"Spruce Point observes that AMR has used a relatively small firm in Virginia as its “Qualified Expert”. The consent form is increasingly being signed by a principal lower down the chain of command. Furthermore, there are subtle language changes being made that raise our concern."

"Spruce Point observes that Saputo stopped promoting its @FrigoCheeseHead Twitter account on its website, and now has a @CheeseHeads_USA account. We find that the old Twitter handle reveals multiple product quality issues around uniform cheese sizes and hair contamination."

"Spruce Point observes that in addition to making a recent and subtle revision in the line-item from "Selling Costs" to "Other Selling Costs", it is by far the fastest growing operating expense with no discussion from management as to the drivers behind the increase."

"Spruce Point observes that Movers+Shaker's corporate branding is yellow. We also notice that a picture of co-founder Horowitz shows him donning a similar yellow sash. This is a potential indicator of Movers+Shakers continued sympathy for the NXIVM belief system."

"With many of Align's key CAD/CAM software patents having rolled off from 2018-20, Spruce Point observes that new, innovative companies are beginning to disrupt what has been one of the major barriers to widespread 3D printer adoption among orthodontists."

"Spruce Point observes that WSP’s backlog definition became even more vague in its recent Annual Report. Notice that it now omits language that contracts are to be completed and qualifies that backlog for public-sector funded clients has secured funding."

"Spruce Point observes that MSCI recently changed its goodwill testing discussion to first insert a qualitative test before a quantitative approach. It struck out language referencing that the fair value “substantially exceeded” the carrying values."

"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."

"Spruce Point observes that Nuvei just restated a key disclosure related to its concentration risk of receivables and didn't draw attention to the revision. Receivables are closely related to sales, which we pointed out are being revised."

"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 observes a very abrupt shift in language around the acquisition of Carolina Aseptic and Dairy (completed Aug 31, 2021, $148m) and the Reedsburg Facility of Wisconsin Specialty Protein (completed May 29, 2021, $37m)."

"We also observes there has been a recent increase in FDA inspection citations since 2020 after a hiatus between 2017-2019. A majority of Saputo’s financial challenges have also come from its US segment in the past few years."

"Spruce Point observes a troubling trend of what appears to be less Board engagement through fewer meetings. Despite 2023 being a challenging year, the Board met just five times, which was a large decrease from prior years."

"Spruce Point observes that IPX has issued multiple press releases about partnerships and non-binding MOUs, and in some cases they have lapsed or are no longer actively discussed. IPX also has still not reported revenues."

"Spruce Point observes that FND removed its Adjusted Net Income and EPS bridge following FY 2022 results. We view this as a potential indicator that the Company no longer wants investors to rely on historical results."

"Spruce Point observes that Forescout appears to have experienced higher-than-average employee departures of late, particularly among its sales staff – confirming employee anecdotes that we’ve heard elsewhere."

"Spruce Point observes that Philip Services Corp. also understated its Capex through the cash flow statement after completing its IPO in the U.S. and Canada. The stock eventually collapsed towards insolvency."

"Spruce Point observes that Sunnova has engaged in a highly aggressive business practice related to prepaid inventory purchases which we believe has provided an unsustainable benefit to recent results."

"Spruce Point observes that Sunnova has engaged in a highly aggressive business practice related to prepaid inventory purchases which we believe has provided an unsustainable benefit to recent results."

"Spruce Point observes that BOOT's last 10-K revised language around management's judgement in estimating future sales price and auditing adjustments (plural emphasis) to inventories for obsolescence."

"Spruce Point observes that Evoqua changed how it discussed gross margin post-IPO. At first, it gave a more detailed discussion about factors that drove costs, including the impact from acquisitions."

"MSCI first acquired 40% of Burgiss in Q1 2020. Spruce Point observes that MSCI avoids an explicit discussion of the true profitability of Burgiss, but rather focuses on its mid-teens EBITDA margin."

"Spruce Point observes that Remitly modified its definition of active customer in a manner that broadens its potential to inflate active customers by considering them over an undefined period."

"C3.ai promotes itself as a leading enterprise AI company, and it even has obtained “AI” as its ticker. However, Spruce Point observes that it is not a top 10 holding in any AI specialist ETF."

"Spruce Point observes that Saputo recently made a change of description in a key operating cost classification from "Selling Costs" to "Other Selling Costs" in the most recent Fiscal Year."

"Spruce Point observes canola oil prices are exploding, and DNMR is exposed. The CEO's comments about hedging its exposure are not supported by documented disclosures in the Company's 10-K."

"Spruce Point observes some sharply worded changes to BR's Code of Business Conduct and Ethics Policy in May 2022 that strongly suggest it is dealing with active audits and investigations."

"Spruce Point observes many signs of financial stress in Generac’s financial statements. Gross margins are declining, inventory turns are decreasing and earnings quality is deteriorating."

"Spruce Point also observes that Saputo made a subtle change in describing its competitive position from "market-leading" to "category-leading". Why would the Company make this revision?"

"Spruce Point observes that MSCI is capitalizing a greater amount of software development costs, which are conveniently added back to Adjusted EBITDA and passed-off as non-cash expenses."

"Spruce Point observes that Remitly now obscures the number of countries it can send and receive currencies from and also doesn't disclose the number of currencies."

"Spruce Point observes an alarming departure between revenue growth and inventory growth, which is often a harbinger of material margin compression in the future."

"Spruce Point observes a changing of leadership at key roles starting in 2017. In 2020, we observe an accelerating departure of long tenured professionals."

"Greenlight observes that a portion of Allied’s stated accounting policy in its 10-K appears to reflect SBA rather than SEC accounting principles."

"Spruce Point observes that after 2021, WSP's Executive Clawback Policy omits condition (c) which appears to weaken the conditions for recoupment."

"Spruce Point observes a degradation in the quality of the short-term incentive definitions applicable to management between 2021 to 2022."

"Spruce Point observes a shift of tone from the beginning of the year, notably around longer sales cycles in the Index and ESG business."

"Spruce Point observes that Stryker stopped presenting Adjusted Return on Invested Capital (ROIC) as a metric to investors after 2017."

"Spruce Point observes that Telaria's revenue and, especially its EBITDA, continued to disappoint up until the deal closed in Q1 2020."

"Spruce Point observes that REZI's leverage has materially increased while cash flow available for debt reduction has decreased."

"Spruce Point observes that Saputo has implemented a few financial strategies which we believe are designed to conserve cash."

"Spruce Point observes a sharp recent increase in fees spent by BR for audit-related services tied to internal controls."

"Spruce Point observes that long-term deferred revenue is in rapid decline and headed towards zero."

"Spruce Point observes substantial modifiers tied to the analytically flawed Free Cash Flow metric"

"Spruce Point observes significant challenges in WTRG's ability to close recent deals."

"Spruce Point observes recent promotional activities around the Frigo Cheese brand."