{ "docId": "019dd923-622c-750b-8b98-898f7b790f90", "docSlug": "ecb6f6c63e11", "documentTitle": "Dollarama Inc. (DOL)", "authorId": "54_Spruce_Point_Capital", "authorName": "Ben Axler", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2018-10-31 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 33, "pageCount": 53, "prevPage": 32, "nextPage": 34, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 12, "notes": "The slide uses a combination of historical debt analysis and peer benchmarking to highlight financial mismanagement.", "elementsJson": [ "headline_text", "paragraph", "bar_chart_grouped", "line_chart", "callout_box", "quote_block" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b98-898f7b790f90/33", "deckHref": "/decks/019dd923-622c-750b-8b98-898f7b790f90", "deckJsonHref": "/decks/019dd923-622c-750b-8b98-898f7b790f90.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-898f7b790f90#slide-33", "components": [ { "bbox": { "h": 0.15, "w": 0.31, "x": 0.67, "y": 0.34 }, "kind": "callout", "text": "What happened? Should Dollarama's struggles become more pronounced – or should the economic cycle turn for the worse – this debt overhang could loom large over the business", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "35dec499-436b-4bcf-b75d-cc468cf47ac7", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.12, "x": 0.02, "y": 0.73 }, "kind": "callout", "text": "Dollarama consistently spends more on capex (as a percentage of sales) than industry peers", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "870caa1e-f878-4e5b-91ec-771d501d7cd0", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.12, "x": 0.87, "y": 0.73 }, "kind": "callout", "text": "Dollarama D&A consistently <50% of capex, and a lower percentage of capex than industry peers", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "dce271f2-8719-440f-83e9-b05e4db1b966", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "callout", "text": "Should Dollarama’s struggles become more pronounced – or should the economic cycle turn for the worse – this debt overhang could loom large over the business", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-5376-7749-9ede-fd4ed81ecda6", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.22, "w": 0.31, "x": 0.03, "y": 0.31 }, "kind": "chart", "text": "Net Debt vs Net Debt/EBITDA (2012-2018)", "attrs": null, "subkind": "bar-vertical", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "a542a9ba-6ca9-4250-ab86-9ff46247c96f", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.28, "w": 0.35, "x": 0.14, "y": 0.68 }, "kind": "chart", "text": "Capex and Intangibles as a % of Sales, Annual", "attrs": null, "subkind": "line", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "44c2c7a6-91f7-424a-9fe8-4e5c0ce11b23", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.28, "w": 0.35, "x": 0.51, "y": 0.68 }, "kind": "chart", "text": "D&A as a % of Capex and Intangibles, Annual", "attrs": null, "subkind": "line", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "82814855-df8b-4d1e-bc9f-2d02d581609b", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "Net Debt/EBITDA: 3x", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd953-5376-7749-9edf-072256f22d9c", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.11, "w": 0.96, "x": 0.02, "y": 0.17 }, "kind": "paragraph", "text": "Management claimed in 2011 that the business was sufficiently cash-generative to support growth and dividends/share buybacks, and that it would be able to pay down debt while pursuing both. However, debt has ballooned since then, with net debt rising 8x (and close to 3x versus EBITDA growth). Management is effectively levering up the balance sheet to support dividends and share buybacks, with CFO Michael Ross stating that he will continue to repurchase shares as long as the earnings yield remains above the after-tax cost of debt.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "1702121b-56f4-4ac4-bbed-b8372e0aff87", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.96, "x": 0.02, "y": 0.59 }, "kind": "paragraph", "text": "Dollarama also consistently spends more on capex (as a percentage of sales) than its peers in the discount retail industry, and shows abnormally high capex versus depreciation and amortization. We understand that Dollarama is a growing business, which could explain both patterns in part, but it is not the only discount retailer which is investing in store growth.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b41181b3-5e65-4f53-9845-6709e9f3bab9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.18, "w": 0.31, "x": 0.34, "y": 0.32 }, "kind": "quote", "text": "For the past few years our cash flow has enabled us to continue to pursue our growth plans and continue to pay down debt. Our free cash flow is now sufficient to fund both those priorities while enhancing new to shareholders through a quarterly dividend payment. We are able to generate the free cash flow to do all of this because we employ a simple growth oriented business model at Dollarama", "attrs": null, "subkind": "pull-quote", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "c9c8b945-63cf-49fb-9d43-f05eefe4d8d1", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "For the past few years our cash flow has enabled us to continue to pursue our growth plans and continue to pay down debt. Our free cash flow is now sufficient to fund both those priorities while enhancing new to shareholders through a quarterly dividend payment. We are able to generate the free cash flow to do all of this because we employ a simple growth oriented business model at Dollarama — June 2011 Conference Call", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-5376-7749-9edf-03f60fe7f1c1", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.68, "x": 0.28, "y": 0.02 }, "kind": "title", "text": "Capital Spending And Distribution Of Cash To Shareholders Are Overextending The Business", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "70e81155-5791-4651-b6c1-731c9adb04c5", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "ceo-quote-contradiction", "slug": null, "matchId": "4c8d5123-7984-4fb4-b0ce-1009df824d1e", "evidence": "Contrasting 2011 CEO quote with current financial data", "confidence": 1 } ], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }