Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) released its third quarter financial results today, and despite the statement’s upbeat tone Quindell’s stock price fell 8% before it started to rebound and it is still down more than 4% in intraday trading (currently at 147.00p).

Adjusted cash increases, but cash holdings is still down from 1H14

Short sellers like Gotham City Research are still claiming that the stock is a zero, but today’s drop probably has more to do with some troubling fundamentals than short seller accusations of fraud. First off, Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) lowered its guidance for 2014FY revenue from a £800 million to £900 million range at the end of 1H14 to £750 million to £800 million in the statement released today. Cutting back revenue guidance alone should pull the stock price down a bit, even if CEO Rob Terry is still talking about high growth.

Quindell Plc QPP
Quindell Plc QPP

It is clear that in due course, the opportunity to deliver a business with over a billion pounds of revenue, generating significant profits with associated positive cash flows, is within our grasp,” said Terry.

Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) also tried to answer investors scared off by its dwindling cash holdings (cash fell from £199.6 million at the end of last year to £85.0 million at the half), but the news is a bit mixed. Adjusted operating cash flow was up to £9.4 million, but it would be nice to know what exceptional costs are excluded from that figure. As of September 30, the company had £78.9 million in cash and paid down £6.5 million worth of debt, that’s down from the previous quarter but not exceptionally so. Stabilizing cash flow is enough to give longs a reason to stay invested, and it quiets the argument that Quindell is in danger of simply running out of cash, but the company still needs to improve cash flow in future quarters.

Quindell commits to improving corporate governance

One comment that should make longs happy is that Quindell PLC (LON:QPP) (OTCMKTS:QUPPF) says it’s going to get better at corporate governance with additional announcement to be announced this quarter. One of the reasons Quindell has been an easy target for short sellers is that it has a weird corporate history, doesn’t explain its business model particularly well, and has opaque finances. Add in the huge difference between revenues and cash flow and Quindell has a lot of work to do both on governance and on IR to rebuild trust with investors.