Helen of Troy (HELE), Concentrix Corp (CNXC), and accelerated revenue Red Flags

Updated: Aug 10

Bedrock AI Red Flags - Dirty Laundry


Welcome to our weekly reports featuring impactful and unusual disclosures as extracted by Bedrock AI’s algorithms.


Filings from the week of October 4 - 8.

 

Accelerated revenue Red Flags


CHENIERE ENERGY INC (LNG) recorded accelerated revenues from LNG cargoes upon receiving notice from customers notified that they would not accept delivery.


MI HOMES INC (MHO) reports accelerated sales pace resulted in a decline in their number of active communities.


TECHTARGET INC (TTGT) reports that revenue growth was due, in part, to international events moving from face-to-face to online due to COVID-19 considerations.

 

HELEN OF TROY (HELE)


10-Q | Market cap: $5B

Costs to repackage Health & Home products due to non-compliance have been capitalized to inventory. This follows a stop shipment action on these products effective May 27. [1] In Q1 the company recognized a $13.1M impairment charge for packaging. Compliance costs in the current quarter (Q2) totaled $3M. [2]


The Health & Home segment net sales decreased by 33% in the quarter, and is the primary driver for the overall revenues decrease of 10%. [3]


We recently reported on $HELE’s - including their exposure to increased shipping costs from China and restructuring costs.

  1. “These charges are referred to throughout this Form 10-Q as “EPA compliance costs.” In addition, during the second quarter of fiscal 2022, we incurred and capitalized into inventory costs to repackage a portion of our existing inventory of the affected products and expect to continue to incur and capitalize such costs as we continue to repackage the remainder of the inventory during the third and fourth quarters of fiscal 2022.”

  2. “During the first quarter of fiscal 2022, we recorded a $13.1 million charge to cost of goods sold to write-off the obsolete packaging for the affected products in our inventory on-hand and in-transit as of the end of the first quarter of fiscal 2022.”

  3. “Consolidated net sales revenue decreased $55.6 million, or 10.5%, to $475.2 million, compared to $530.9 million. The decline was driven by a decrease from Organic business of $57.7 million, or 10.9%, primarily due to: a decrease in sales in our Health & Home segment as a result of the EPA packaging compliance matter and related stop shipment actions; and •a net sales revenue decline in Non-Core business primarily due to the sale of our North America Personal Care business during the second quarter of fiscal 2022.”

 

CONCENTRIX CORP (CNXC)


10-Q | Market cap: $920M

The company has revenue increased ~20% for the 3 and 6 months ended Aug 31. As substantially all of their revenues are recorded as services are performed (96%, per their 10-K), part of this growth is catch-up on previously undelivered services, and may not not be sustainable. [1]


The company attributed the prior year decrease in gross margin % to Covid-19 related costs. Despite a sales recovery, gross margin % has not recovered in the current year.

  1. “Our revenue increased 20.5% in the nine months ended August 31, 2021, compared to the nine months ended August 31, 2020, reflecting increased volumes across all verticals and certain increases over the prior year period due to “shelter-in-place restrictions” in response to COVID-19 and COVID-19 impacts on our employees’ ability to work productively despite client demand during the nine months ended August 31, 2020.”... “Revenue in our communications and media vertical increased in the first nine months of fiscal 2021 due to larger volumes over the prior year period, primarily as a result of prior year impacts from COVID-19 that did not recur in the current period, partially offset by our portfolio balancing efforts.”

 

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