Negative Cash Flow
Last quarter, TAVA reported earnings of $301K, but their cash flow (excluding financing) was a whopping negative $3,405,000! Wow! How can this be?
Accounts Receivable
A/R increased $1,410,000 to $11,180,000 . This represents 87 days outstanding, even though revenue only increased $700K from the second quarter. And buried in the A/R numbers is the "Allowance for Doubtful Accounts". Doubtful Accounts (i.e. uncollectable) increased almost 1 Million Dollars in just this quarter (actual increase is $977,000). Unbelievable.
Accounts Payable
TAVA used $1,044,000 in cash to pay down their A/P. A/P now stands at $5,618,000, representing 79 days of payables. Horrible. This is a business in trouble!
Software Capitalization
Software Capitalization was $306,000 for the quarter. Conservative accounting would argue that this should have been expensed, not capitalized!
Estimated Earnings in Excess of Billings
TAVA estimated earnings of $218,000 in excess of billings for the quarter. TAVA books revenue on a percent completion basis and bills the customer later. Percent completion is a standard method of recognizing revenue from consulting contracts, BUT it is highly unusual to NOT bill for the consulting work.
Other Items
Equipment purchases increased $190K, inventories increased $111K and prepaid expenses increased $102K.
Bottom Line
For small companies, cash is king. And TAVA is rapidly burning cash! This indicates that the quality of their earnings is very poor.
Regards, Bill |
