RE:Organic growth?jdsd0517 wrote: I don't really follow junior stocks, but I like the HR space. When I found out about this one I checked it out and a colleague pointed me to Stockhouse for discussions, but given the paucity of comments, I think she may be wrong. In any case:
On their last press release they made two points that are seemingly contradictory.
- Organic Growth of 7% for this quarter more than double the growth rate achieved by industry peers (1.8%)
- Record revenue of $5.5 million was 89.1% higher than $2.9 million in Q1-2020 with $3.1 million contributed from acquisitions made in 2020.
If the revenue for the quarter has $3.1 million from acquisitions, then that means non-acquired revenue was $2.4 million, which is a marked decline from the prior year of $2.9 million.
The acquisitions only started rolling after Q1, so there was no "acquired" revenue in the prior year.
So if their "non-acquired" revenue (ie. organic) was lower, how can they have organic growth?
The only that that assertion works is to look at the numbers on a pro-forma basis where the prior year "as-acquired" comps are presented. But they aren't!
At best, this is misleading. At worst, it is wrong.
Anyone know what is happening here?
good DD. Good for you for doing research instead of just reading highlights and eating what you're fed.
They announced a "best efforts" basis convertible debenture May 12? with an anticipated closing date of June 1, 2021. It is July 14th today. I have yet to see an announcement that it closed and I checked SEDAR again today. Does that show "overwhelming' investor demand? (HIRE's comment not mine). I looked for news that announced the financing was completed but, I do not see it. I also do not see news of another attempt at a financing or cancellation of the announced.
Without enough cash, how do they execute their business model of acquisitions? They only had about 303K cash on the balance sheet as of Q1 results...how do they acquire like that?. And to note, many companies through history have hit a cash crunch even if they have sales (revenue recognition does not necessarily =cash in the bank) because it depends on cash flow/ receivable timing. It's like a household's finances, maybe the paycheque is coming next week but bills are due today. I am not saying that is occurring here but it is always something to watch for especially when they have a reference to note 2b relating to a going concern.....
"2b) Basis of measurement and going concern These condensed consolidated interim financial statements have been prepared on a going concern basis under the historical cost convention, except for certain financial instruments, which are recorded at fair value. The going concern basis assumes that the Company will continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. For the three months ended March 31, 2021, the Company incurred negative cash flows from operations of $973,492 and has an accumulated deficit of $17,947,568. The Company’s ability to continue as a going concern is dependent on the achievement of a profitable level of operations and may require the Company to raise additional funds. Although the Company has previously been successful in obtaining financing, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms acceptable to the Company. Furthermore, during the year the outbreak of the novel strain of coronavirus specifically identified as COVID-19 was declared a pandemic by the World Health Organization. This situation is dynamic and the ultimate duration and magnitude of the impact on the economy and on the Company’s ability to achieve revenue growth organically, or through the completion of acquisitions as has been done previously, is unknown. These conditions result in material uncertainties that may cast significant doubt about the Company’s ability to continue as a going concern. These condensed consolidated interim financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. Such adjustments would be material." Have they been able to complete additional financings? :)
I also do not like the whopping $8,731,239.00 on the balance sheet for goodwill and intangible assets (notes 5&6). Drop those off the asset side and that leaves $5,141,171.00 in assets and 10,304,586.00 in liabilities. They also had just over 4MM in current assets and ~7.6MM in current liabilities. I could go on but my fingers are sore. haha
In addition, they most likely missed the boat since the labor market is fairly hot (but in turn should help revenues somewhat...enough though? not sure but next financials will be interesting to see) so would you sell and be required to have skin in the game with HIRE after this performance? If it was me, I would laugh them out the door. But that's just me.
Far too many negatives here. Unless I missed the closing of the financing which, as mentioned, I do not see on SEDAR as of this writing, the difficulty in doing a financing is a major red flag in my humble opinion. But then I am a simpleton and not very bright and I should just follow the bold print that a company shoves at me.
I always ponder this question though, why do companies (or anyone that wants your money for that matter) call selected data "highlights"? and why, then, are there footnotes on financial statements (and corporate presentations) in smaller print that you need a magnifying glass to read? ;)
Anyways, in all seriousness, good on you for being a skeptic and asking yourself questions and seeking answers.