Spruce Point argued that Dun & Bradstreet's post-IPO organic growth relied on aggressive revenue recognition, capitalisation choices and acquisition accounting that flattered adjusted earnings well beyond underlying performance.
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Adjusted versus actual
The relisted D&B story rested on a return to organic growth and expanding adjusted margins. Spruce Point argued both were accounting artefacts.
Findings
- Deferred revenue and purchase accounting adjustments inflating reported organic growth
- Heavy capitalisation of internally developed software suppressing reported cost
- Adjusted EBITDA add-backs recurring year after year, contradicting their "one-time" label
The conclusion
A slow-growth data business marketed as a growth compounder, with leverage magnifying the gap.
subsequent events
- 2021-03-24Report published with a substantial downside price target
“Recurring add-backs are not one-time by any reasonable definition.”
- 2021-12-31Shares end the year materially below the report date price
Source — https://www.sprucepointcap.com/
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