Tenet Fintech Posts 2021 Results, Missing All Guidance Provided By Company

Tenet Fintech (CSE: PKK) is set to be one of the biggest movers and shakers today after posting its fourth quarter financial results. The company missed its 2021 guidance in every category it provided guidance for, despite providing revised guidance at the tail end of October.

Revenues for the year came in at $103.6 million, an improvement from $42.7 million on a year over year basis. However, revenues came in short of the $109 million that was guided to by the company two months prior to the end of the fiscal year.

Attempting to quell investor concerns on the failure to meet guidance, CEO Johnson Joseph commented, “While some may look at the 2021 financial results from a ‘glass half empty’ perspective and focus on the EBITDA and net income shortfalls, we, on the other hand, believe there are far greater reasons to look at the glass as being ‘half full’ than ‘half empty’.“

Joseph then went into what-if scenarios as a means of further justifying the miss by stating, “Also, if you take away the impairment hit that we took related to the Cubeler acquisition and the fact that almost all the insurance related revenue and profits expected in Q4 were delayed by about two quarters, then the total revenue, EBITDA and net income for the year would actually beat what we had forecasted for 2021.“

Cost of services meanwhile came in at $89.7 million for the full fiscal year, with the company electing to not separate this line item from other expenses to provide a gross profit figure. The firm also reported salaries and fringe benefit expenses of $4.9 million and professional fees of $2.4 million among other expenses.

Other expenses, which again are lumped together with all expenses on the firms income statement, include impairments of goodwill of $41.4 million, and impairments of intangibles of $12.0 million. Impairments recorded during the year were related to the firms acquisitions of Cubeler and Heartbeat.

Cubeler was notably acquired in October 2021, with the firms CEO, CFO, and three directors estimated to collectively own 39.98% of the entity based on SEDI filings related to shares received from the transaction. The asset was acquired for $107.7 million in both cash and shares.

Despite the price tag, the asset contributed exactly $0.00 to the firms revenue, while amounting to $41.17 million of the goodwill impairment and $11.98 million of the intangible asset impairment. The lack of revenue is said to be due to “forecasted revenues [shifting] by almost a year due to the delayed launched of the Company’s Canadian Business Hub.” The firm attempts to brighten the picture here for investors as well, saying that “impairment charges may be reversed in the future.”

Following the impairments just three months after acquiring the asset, Tenet Fintech posted a net loss of $48.6 million, $53.4 million of which is attributed to the Cubeler acquisition. The firm had previously guided to net income of $4.4 million. Adjusted EBITDA meanwhile came in at $2.5 million, versus EBITDA guidance of $11.3 million.

The company also reported a cash position of $18.8 million, along with total current assets of $94.4 million. Accounts payable meanwhile are sitting at $16.3 million, with total current liabilities of $20.3 million.

In terms of its 2022 outlook, the company has indicated that it “has not judged it necessary to revise its guidance for 2022 as it believes other revenue streams will compensate for the delays.” The delays referred to are that of the launch of its Canadian business hub. In October, the company guided 2022 revenues to be $345.0 million, while EBITDA is to come in at $81.8 million and net income at $51.4 million.

Tenet Fintech last traded at $3.48 on the CSE, down 28.5% on the day.

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Information for this briefing was found via Sedar and the companies mentioned. 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.