Results Further Dissected Here's my opinion. The financials are not actually reflective of the doom and gloom scenario being portrayed here by many (cough cough choices). Believe me, when I say that I understand better than most, just how trying it has been to stay long on this stock. Yes, the "next quarter" mantra that's been preached here, over and over (myself included), it grows tired... however reason should prevail. Some of the hype and false expectation has partly been the fault of misplaced optimism, but then there's those who've been drinking the cool-aid (or wine) and making outlandish predictions that are baseless and not grounded in any measure of reason -- just pure fantasy.
Now I've been and remain an optimist, but I'm not shooting rainbows and unicorns out of my ahrse. So now that everybody's adrenaline dump is over, take a minute to look at the results objectively. Other than A/R and allowance for doubtful accounts, the results look quite expected. So let's explore these two things.
Going back to the A/R numbers posted in Q1 & Q2, it demonstrated to me that the "bleeding" was stopped. This was important to see. Health's plan was taking hold. Looking only at Q3's A/R increase might seem alarming, but we also have new centres coming online with new billing and new receivables. In this business -- it takes time to collect! You can expect a minimum of 30 days to 90 days out for accounts to be resolved. Because we're ramping up and increasing census, growing and expanding, of course there will be a temporary gap; however, it will be closed and the efficiencies of the model will become more apparent. The numbers will reflect this balance going forward.
What makes the numbers harder to interpret is the rate of change in growth, the timing of the expansion, and the opening of new centres which will skew the numbers, but I don't see anything to get too excited about. I would love to see more transparency in this regard however, including the pofitability of different centres. Regardless, what I see looking back is a measure of growing stability. Heath wasn't about to sit on his laurels however. Now looking forward (forward-looking) Q3's A/R increase is not reflective of a new problem, but is simply a consequence of the accounting measures inherent in this business.
As far as the doubtful accounts/bad debt this will likely continue to be an eyesore going forward for the next few quarters because the problem is only just now being fully addressed both in changes to industry practices and in accounting. Some of theses doubtful accounts held are likely 180-270+ days in the red, some likely even dating back to before Heath inherited this mess. The entire US mental healthcare industry known the pitfalls of the accompanying insurance fiasco. Health Net is still working its stink through the system.
Keep in mind also that the lab is not also generating to its full potential as it has not fully scaled to capitalize on revenue streams and there have been delays in obtaining facility accreditation which has been previously acknowledged. There will be many synergies throughout the model expansion and roll-out that are not yet accounted for in the bottom line.
Lots of positive news to come regarding new partners / facilities, expansion plans, marijuana treatment roll-out, lab update, etc. Chris' team is just starting to gel and things will start moving along more quickly. I see that Pablo Mendez had also put his stamp on Q3 financials as our new CFO, and with assumption of these duties, this will now free up Chris for greater involvement, oversight and applied focus where needed in the overall execution and implementation of his new model.
BLVD, having been kicked around for so long now, will simply ignite when the turn-around finally arrives! It's not going to be an "in your face" reversal that some here hope to see in the numbers, it will be a gradual improvement in the top and bottom line. If you wait for the numbers to "stand out" like that blushing bride I heard talk of, then you'll already be too late to the party, and you'll have missed the best part of this investment play. I know everybody here was hoping to see roses in the numbers this quarter... they're not there, but the makings of the turn-around are clearly showing. The picture is not as the bashers would have it seem. Heath hasn't even been at the helm for a year, and we can see an improvement in the trajectory of the financials compared to the directionality we saw before he took over.
Most here won't likely see this quarter as being reflective of "turning the corner", but to me I see that bottoming has clearly taken place. The upside will follow.. Since the smart money is forward looking, there will be patient and opportunistic investors & shareholders happy to load up on the shares that are shaken from the tree. I'll be one of them.
Anyway, if we were already churning butter, we'd be over a dollar. We're still at 0.11 because we haven't shown the model is a gravy train. Rome wasn't built in a day... or a year. Patience will reward. Sleeping happily with my shares.
Esther