{ "docId": "019dd923-622c-750b-8b98-c99fec0ed8aa", "docSlug": "1c836eeb374c", "documentTitle": "Monolithic Power Systems (MPWR)", "authorId": "54_Spruce_Point_Capital", "authorName": "Ben Axler", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2019-10-09 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 40, "pageCount": 95, "prevPage": 39, "nextPage": 41, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "balanced", "nDataPoints": 0, "notes": "The slide uses a yellow callout box to emphasize the specific text from the 10-Q that the activist is flagging as suspicious.", "elementsJson": [ "headline_text", "callout_box", "paragraph" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b98-c99fec0ed8aa/40", "deckHref": "/decks/019dd923-622c-750b-8b98-c99fec0ed8aa", "deckJsonHref": "/decks/019dd923-622c-750b-8b98-c99fec0ed8aa.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-c99fec0ed8aa#slide-40", "components": [ { "bbox": { "h": 0.06, "w": 0.9, "x": 0.05, "y": 0.18 }, "kind": "callout", "text": "New mention of consignment agreements in revenue recognition discussion is suspicious in context of increasingly bloated inventory, and write-downs that are occurring.", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b61bf45a-d1cc-47aa-ab0c-e2ad95f4db5a", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.55, "w": 0.76, "x": 0.12, "y": 0.3 }, "kind": "paragraph", "text": "Product sales consist of a single performance obligation that we satisfy at a point in time. We recognize product revenue from distributors and direct end customers when the following events have occurred: (a) we have transferred physical possession of the products, (b) we have a present right to payment, (c) the customer has legal title to the products, and (d) the customer bears significant risks and rewards of ownership of the products. In accordance with the shipping terms specified in the contracts, these criteria are generally met when the products are shipped from our facilities (such as the “Ex Works” shipping term) or delivered to the customers’ locations (such as the “Delivered Duty Paid” shipping term).\n\nUnder certain consignment agreements, revenue is not recognized when the products are shipped and delivered to be held at customers’ designated locations because we continue to control the products and retain ownership, and the customers do not have an unconditional obligation to pay. We recognize revenue when the customers pull the products from the locations or, in some cases, a 60-day period from the delivery date has passed, at which time control transfers to the customers and we invoice them for payment.\n\nWe account for price adjustment and stock rotation rights as variable consideration that reduces the transaction price, and recognize that reduction in the same period the associated revenue is recognized. Three U.S.-based distributors have price adjustment rights when they sell our products to their end customers at a price that is lower than the distribution price invoiced by us. When we receive claims from the distributors that products have been sold to the end customers at the lower price, we issue the distributors credit memos for the price adjustments. We estimate the price adjustments based on an analysis of historical claims, at both the distributor and product level, as well as an assessment of any known trends of product sales mix. Other U.S. distributors and non-U.S. distributors, which make up the majority of our total sales to distributors, do not have price adjustment rights.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "9533239c-ce20-4db9-9f8d-b07644e68757", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.2, "x": 0.12, "y": 0.91 }, "kind": "source-note", "text": "Source: First disclosed Q1 2019 10-Q", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "dbb74758-8c19-4199-a013-a63ca7490c4b", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.65, "x": 0.305, "y": 0.03 }, "kind": "title", "text": "Revenue Recognition Disclosure Language Change Gives New Insights", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "80fc29a9-8464-4a64-a767-269d57c44705", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "fraud-exposure", "slug": null, "matchId": "7193089d-b0f2-4efa-939f-8333452fd068", "evidence": "The slide explicitly links a change in accounting disclosure to suspicious inventory behavior.", "confidence": 0.9 } ], "arcBeats": [ { "to": 40, "from": 7, "beatId": "d8746476-9a97-4214-9f12-49d6bd9131a5", "arcName": "Problem-Agitate-Solution", "arcSlug": "problem-agitate-solution", "beatName": "Agitate (Make it worse)", "beatSlug": "problem-agitate-solution-agitate-make-it-worse", "evidence": "The document then agitates the problem, presenting numerous examples of accounting and disclosure red flags.", "position": 1, "confidence": 0.8, "parentBeatName": "Development", "parentBeatSlug": "development" } ], "loops": [ { "to": 40, "from": 30, "name": "Hypothesis Test", "slug": "42-hypothesis-test", "bestFor": "Strategy validation, due diligence, research presentations", "matchId": "34f0562e-ce69-44bc-a8d8-f1ebcc6b8b72", "evidence": "The document presents numerous examples of accounting and disclosure red flags, testing the hypothesis that MPWR's financials are suspect.", "position": 2, "objective": "To test the hypothesis that MPWR's financials are suspect", "structure": "The Hypothesis -> Test 1 (Supports/Refutes) -> Test 2 (Supports/Refutes) -> Conclusion (Validated/Pivoted)", "confidence": 0.6, "description": "State a hypothesis upfront, then systematically prove or disprove it with evidence" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }