Although Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) likes to tout it “sector leading expertise in consulting, software, outsourcing and brokering solutions,” what they really are – the root of the company – is an ambulance chasing law firm.
Quindell’s revenue generation issues
This fact was recently highlighted in a Financial Times piece that noted the “unusual” nature of the one-time country club and it speaks to the company’s revenue generation issues to a degree.
A big issue with Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) has been the quality of its cash flow. The company has been feverishly working on this, and it can be seen in the number of legal cases the firm is now processing.
A significant driver of Quindell’s revenue comes from personal injury lawsuits. While the company does not portray itself as such – personal injury law is much less appealing to investors that “software, outsourcing and brokering solutions” – the reality is that the company has an upside-down cash flow model as a result.
When the company receives a new personal injury claim it invests significant assets up front and receives payment – typically from insurance companies – after the claim has been settled.
Quindell burning cash through its growth phase
One of Quindell’s issues is that it has been burning cash through its growth phase, but this, importantly, appears to be trending down. The company said it should break even on an adjusted cash flow basis in the third quarter and – hold your breath – will generate positive cash flow in the fourth quarter.
There are two interesting angles here to consider.
Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) is becoming a leader at increasing the revenue volume per legal producer on its personal injury cases. Quindell says it has been able to raise the number of cases its legal staff are able to handle – increasing profitability in the segment. The company noted it was generating £500,000 per business day in legal services now, and this is expected to rise to £750,000 and then £1m per day in the third and fourth quarters, respectively. Legal work is the growing aspect of the business, but will this generate leadership in related businesses?
Quindel’s insurance claims business
The dot that might be appropriate to connect at this point is the company’s insurance claims business. While Quindell is proving to be expert at streamlining the processing of legal complaints, the other end of this equation is with the insurance company, which settles the claims.
Could Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) become a leader at streamlining insurance claims processing? To answer that question one might need to consider sometimes those who game a system are best at identifying its flaws. Could a personal injury law firm that deals with insurance claims processing every day be the best to reduce costs in this area.
Or is this giving the fox control over the hen house security?