3 Sixty Risk Solutions – Is There a Path to Profitability?

3 Sixty Risk Solutions Ltd (CSE: SAFE) reported their second quarter earnings this morning, posting revenues of $7.54 million, an increase of 119.16% from the previous quarter. In its associated news release, 3 Sixty stated that the current quarter is expected to see further growth as well, albeit at a slower pace.

While providing significant growth on a quarterly basis, questions still remain about the path to profitability for the issuer. Despite the doubling of revenues, there appears to be no path to profitability for the firm. While the firm doesn’t recognize cost of goods sold, total operating expense came in at $11.12 million for the quarter, resulting in a net loss of $3.57 million.

While the figures would be acceptable if the firm was largely mired by non-cash items, the most significant portion of the operating expense was wages at $6.44 million, and consultants at $1.14 million, which puts the firm behind the profitability line before non-cash items are even considered. To require these expenses routinely signifies that 3 Sixty is quite literally selling its services below the cost of being able to provide them.

Other expenses for the quarter include:

  • Office and Admin, $0.33 million
  • Vehicles, $0.41 million
  • Travel, $0.21 million
  • Advertising, $0.35 million,
  • Insurance, $0.37 million,
  • Freight and Storage, $0.58 million

All of the above listed expenses, which are cash-based items, are required for 3 Sixty to conduct its operations, and are a function of the services in which they provide. This isn’t an instance of ‘scale’ being required, like can be stated for many cultivation issuers that are awaiting licensing on a facility – the firm is focused on consultancy in the security field – meaning that at the end of the day, its simply selling services below cost.

Looking towards the balance sheet of the 3 Sixty, the firm had $3.47 million in the bank as of June 30, a decrease of $8.75 million from the prior period. Current receivables sit at $6.26 million, an increase from last quarters $3.88 million, suggesting that certain clients infrequently pay on a timely basis. Receivables will need to be focused on by the company however, as its accounts payables are piling up, and at $5.00 million outstanding, the firm doesn’t currently have the cash to cover its bills. Additional current liabilities outstanding include $1.28 million worth of current long term debt.

3 Sixty Risk Solutions is currently trading at $0.20, down 11.36% on the day.

Information for this briefing was found via Sedar and 3 Sixty Risk Solutions. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.