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Filings from the week of May 5 - May 11.
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Mirion Technologies Inc ($MIR) lost $67 million in expected revenue (>10% of annual revenues) due to a lost multi-year contract with a Russian entity. Uber Technologies ($UBER) recorded a $182 million impairment charge in one of its investments due to the Ukraine-Russia conflict. Fastly Inc. ($FSLY) suffered recurring control issues, c-suite dismissals and blamed the “Great Resignation” for its woes.
Top Red Flags
MODERNA INC ($MRNA) & DENTSPLY SIRONA INC ($XRAY) | 8-K & NT 10-Q - MRNA CFO is departing effective immediately due to a newly disclosed investigation into what may have been channel stuffing at his former employer, XRAY. Read more here.
UBER TECHNOLOGIES INC ($UBER) | 10-Q | $46B - UBER recorded an impairment charge of $182 million related to its investment MLU B.V. due to unfavorable projections caused by Russia's invasion of Ukraine.
FARADAY FUTURE INTELLIGENT ELECTRIC INC ($FFIE) | 8-K | $589M - FFIE has failed to file its Form 10-K for the year ended December 31, 2022. FFIE has until May 16, 2022 to file its annual report with the SEC. If not, it will be delisted from Nasdaq. The 10-K is delayed because executive members failed to disclose related party relationships in connection with the business combination.
NATIONAL ENERGY SERVICES REUNITED CORP ($NESR) | NT 20-F | $635M - NESR filed a notification of late filing for its 2021 20-F because it requires additional time to complete a previously announced restatement for its financial statements for fiscal years ended December 31, 2018, 2019, and 2020.
TYSON FOODS INC ($TSN) | 10-Q | $33.3B - TSN reported, “we recently received a subpoena dated April 21, 2022 from the New York Attorney General’s Bureau of Consumer Frauds & Protection seeking information regarding our sales, prices and production costs of beef, pork and chicken products.”
MIRION TECHNOLOGIES INC ($MIR)
10-Q | Market Cap: $1.3B
Mirion Technologies Inc. ($MIR), a radiation measurement and detection device company, lost approximately $67 million dollars of expected revenue due to the termination of one of its customers’ multi-year contracts, representing over 10% of the company’s annual revenues. [1] [4] On May 2, 2022, one of MIR’s customers terminated a contract with a Russian state-owned entity to build a nuclear power plant in Finland. The expected $67 million of revenue from this contract was scheduled to be recognized over the next five years. [1] Furthermore, MIR’s Q1 2022 revenues decreased by $3 million compared to Q1 2021 revenues primarily due to project execution delays caused by the Ukraine-Russia conflict. [2] Although there had been a loss of expected revenues and a trend downwards in MIR’s recent performance due to current affairs, the company had not yet recorded any impairments to its assets, including goodwill. [3]
“On May 2, 2022, one of our customers announced that it had terminated a contract with a Russian state-owned entity to build a nuclear power plant in Finland. The contract represents a remaining performance obligation in our backlog of approximately $67 million, of which approximately 80% was scheduled to be recognized as revenue over the next five years. As of March 31, 2022, the contract's deferred contract revenue liability within our Industrial segment was $6.4 million. The Company will continue to monitor the social, political, regulatory and economic environment in Ukraine and Russia, and will consider actions as appropriate.”
“Revenues were $163.2 million for the three months ended March 31, 2022 and $166.2 million for the three months ended March 31, 2021. The decrease of $3.0 million from the three months ended March 31, 2021 was primarily driven by timing of project execution, delays caused by the Russia and Ukraine conflict, and supply chain-caused delays, offset by 2021 acquisitions and organic growth in the Medical segment.”
“Goodwill is assigned to reporting units at the date the goodwill is initially recorded and is reallocated as necessary based on the composition of reporting units over time. No goodwill impairment was recognized for the three months ended March 31, 2022 and 2021, respectively.”
According to MIR’s 2021 Form 10-K, the company’s total revenues for the twelve months ended June 30, 2021 was approximately $612 million.
FASTLY INC ($FSLY)
10-Q | Market Cap: $1.3B
Fastly Inc ($FSLY), a cloud computing services provider, blames the “Great Resignation” for multiple 10-Q red flags. [1]
The company stated that its internal controls were ineffective for the three months ended March 31, 2022. [2] FSLY had reported ineffective controls for the years ended December 31, 2021, 2020, 2019, and 2018. [3] That’s a lot of years of consecutive control weaknesses.
One of the reasons for ineffective controls was lack of sufficient qualified finance and accounting staff. [4] Another reason for ineffective controls was the company’s failure to prevent its employees from selling restricted stock that had not yet been vested! [5] This control issue was exacerbated by the increase in employee resignations at FSLY.
Not only have FSLY employees resigned, but also multiple major C-suite resignations had occurred during Q1 2022. On April 15, 2022, the company’s Chief Legal and Trust Officer, Paul Luongo, announced his resignation. On May 4, 2022, FSLY’s CEO Joshua Bixby announced his decision to resign. [6]
According to FSLY’s Q1 Form 10-Q, the company stated that “the failure to attract and retain qualified personnel could prevent [it] from executing [its] business strategy.” Furthermore, FSLY stated that “The market for such talented personnel is competitive. This competitive situation has become exacerbated by the increase in employee resignations currently taking place throughout the United States, in part as a result of the COVID-19 pandemic, which is commonly referred to as the “great resignation.” We have experienced significant unwanted employee attrition which we believe has been due to such competition, and we may continue to experience unwanted employee attrition in the future.”
“Based on the evaluation of the Company's disclosure controls and procedures as of March 31, 2022, its principal executive officer and principal financial officer concluded that, as of such date, due to the material weaknesses described below, the Company's disclosure controls and procedures were not effective.”
“We and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting for the years ended December 31, 2021, 2020, 2019 and 2018, some of which were newly identified in the year ended December 31, 2021 and one was originally identified in prior years and remains partially unremediated for the year ended December 31, 2021.”
“There is a lack of sufficient qualified finance and accounting resources commensurate with the complexity of the Company's operations and financial reporting requirements.”
“Certain of the Company’s systems controls were not designed to prevent the sale of unvested shares, which allowed certain holders of restricted stock to sell shares that had not yet vested.”
“On April 15, 2022, we announced that Paul Luongo resigned as our Chief Legal and Trust Officer and will continue to serve in this role until May 16, 2022. On May 4, 2022, we announced that Joshua Bixby notified our board of directors of his decision to resign as our Chief Executive Officer and a member of our board of directors, effective when a replacement Chief Executive Officer is appointed.”
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