{ "docId": "019dd923-622c-750b-8b98-c6f1577ed5e1", "docSlug": "97e66c73c118", "documentTitle": "Hill-Rom Holdings, Inc. (HRC)", "authorId": "54_Spruce_Point_Capital", "authorName": "Ben Axler", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2019-10-29 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 33, "pageCount": 80, "prevPage": 32, "nextPage": 34, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 0, "notes": "Uses a comparison of two earnings call transcripts to expose management's shifting methodology.", "elementsJson": [ "headline_text", "paragraph", "callout_box", "quote_block" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b98-c6f1577ed5e1/33", "deckHref": "/decks/019dd923-622c-750b-8b98-c6f1577ed5e1", "deckJsonHref": "/decks/019dd923-622c-750b-8b98-c6f1577ed5e1.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-c6f1577ed5e1#slide-33", "components": [ { "bbox": { "h": 0.15, "w": 0.3, "x": 0.05, "y": 0.685 }, "kind": "callout", "text": "Note that the contribution of acquisitions to core growth will now be greater than this due to the recent addition of Breathe Technologies (and any further acquisitions to be completed in the near future)", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e1846dce-2dec-486b-8322-2463e12c951a", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "callout", "text": "We find it highly suspicious that management now adjusts core growth for M&A only when doing so inflates core revenue growth.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-203c-716b-be77-3153346ca61f", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.22, "w": 0.9, "x": 0.05, "y": 0.17 }, "kind": "paragraph", "text": "Though we disagree with the philosophy behind and construction of management’s “core growth” figure, we appreciate that management has, until now, been honest enough to deduct revenue growth attributable to acquisitions out from core revenue. However, during its recent Q2 FY19 earnings call, management announced that it will no longer be adjusting core revenue for acquisition-driven sales growth: starting with Hill-Rom’s recent acquisition of Voalte, sales from acquisitions will be included in core revenue. If the purpose of management’s “core growth” figure is to distill Hill-Rom’s underlying growth rate from the effect of recent divestitures – which would otherwise depress sales growth – shouldn’t management also deduct the impact of recent acquisitions from core growth? What good is “core revenue growth” – supposedly a measure of Hill-Rom’s run-rate sales growth – if management doesn’t back out the impact of inorganic sales? We find it highly suspicious that management now adjusts core growth for M&A only when doing so inflates core revenue growth.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "359e59e6-63e3-42de-ad1e-69b6892b4454", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.05, "w": 0.9, "x": 0.05, "y": 0.91 }, "kind": "paragraph", "text": "How does an inconsistent treatment of M&A “simplify” core revenue? How can management justify this new approach to calculating core revenue growth when it adjusted core growth for acquisitions until just recently?", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "4f0ec0dc-3c7a-4fd5-86dd-24e433475570", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "\"As a reminder, core revenue excludes the impact of businesses that we divested or made divest in both the current and prior year. It also excludes revenue from Mortara.\" — Steven Strobel, CFO, Hill-Rom; \"Good morning. First question. I was just curious, philosophically this idea of core growth clearly, you -- as you mentioned you are excluding divestitures non-strategic assets and FX. But presumably, I'm just kind of curious the thought process as far as including Voalte. And obviously, it's helpful that you gave the color for the updated guidance excluding Voalte. But again, just curious on that core growth first question, is why did you exclude -- or why did you include rather Voalte in those numbers?\" — John Hsu, Raymond James; \"Thanks for the question. We give a lot of encouragement to keep things as simple as possible with core, non-core. We felt like for the Voalte contribution, which is pretty small for this year. I mean, we've talked about how it's modestly dilutive and from a top line standpoint, it'll deliver a -- some additional growth on the top line this year. But we're estimating by 50 basis points, not much more than that. We thought it was simpler to keep it in, given the small contribution, rather than introduce a new set of metrics that would be core, non-core, organic to core, organic, non-core however you would want to go for it. So we try to keep the message as simple as possible. And the -- like we said, the Voalte contribution is small enough that by giving you insight into the core revenue growth differences, we thought that was a good compromise.\" — Barbara Bodem, CFO, Hill-Rom; \"And John, it's Mary Kay. Non-core also is defined as things that we divested wound down on non-strategic and Voalte obviously is a strategic acquisition for us, so we didn't feel with that fit into a non-core definition.\" — Mary Kay Ladone, CVP of Corporate Development, Strategy, and IR, Hill-Rom.", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-203c-716b-be77-34f3d043efe2", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.45, "x": 0.52, "y": 0.41 }, "kind": "table", "text": "Hill-Rom: Q2 FY19 Earnings Call", "attrs": null, "subkind": "data", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "15fa16f6-0a26-4833-a434-10ce5c8f29b2", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.45, "x": 0.05, "y": 0.41 }, "kind": "table", "text": "Hill-Rom: Q2 FY17 Earnings Call", "attrs": null, "subkind": "data", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "cd6539de-a8cb-40c3-a36b-b77c8dd9e29e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.65, "x": 0.305, "y": 0.02 }, "kind": "title", "text": "Management Adjusts Core Growth For M&A Only When Convenient", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "3b4e074d-ce04-4a5e-b397-05613ab75289", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "ceo-quote-contradiction", "slug": null, "matchId": "0f44c18d-0ac7-4085-9509-044b2865a5bd", "evidence": "Contrasting CFO statements from 2017 and 2019 to highlight inconsistent financial reporting.", "confidence": 0.95 } ], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }