1. Revenue gains are much better than what it looks like on the surface. There was some one-time revenue that they received in 2009 due to moving their collections in-house and collecting on old receivables. That improved both revenue and earnings in 2009. If you back out revenue related to service in prior periods for both 2010 and 2009, revenue for the first 9 months improved $4,056,454 or 28.2%.
Here is the related comment from the Q3'10 10-Q: "Revenue: We generated revenue of $18,711,908 for the nine months ended September 30, as compared to $16,702,850 for the nine months ended September 30, 2009. The increase in revenue for the nine months ended September 30, 2010 as compared to the same period in 2009 was $2,009,058, or 12%. The increase in revenue is due primarily to a 16% increase in cases performed by our surgical assistants during the first nine months of 2010 compared to the comparable period in 2009. Those new cases originated in part due to our provision of services at additional facilities in Georgia, Virginia, Tennessee, and Texas. Revenue during the nine months ended September 30, 2010 included $247,877 related to services performed in prior periods as compared to $2,295,273 included in the comparable period in 2009. Revenue during the nine months ended September 30, 2010, excluding revenue from services performed in prior periods increased by $4,056,454, or 22% as compared to the comparable period in 2009. Because our revenue recognition policy requires us to make certain estimates with respect to our revenue, we anticipate that our future will continue to be impacted by revenue from services performed in prior periods, which should be considered in comparing our results. Revenue from services performed in prior periods is likely to continue to decline in the future because we have moved our billing services in-house, which has resulted in more timely and efficient processing of services and claims."
2. This is at least the third sequential year that revenue has grown. I didn't bother to go back earlier than 2007. That shows that they have long term growth which I expect to continue.
3. I think that they have become more shareholder friendly. Management indicated in the current 10-Q that they aren't accepting a bonus. My hunch is that they will primarily use dividends going forward and rely less on bonuses.
4. Expenses also increased due to M&A activity. Most of this is one-time in nature. Here is the related comment from the Q3'10 10-Q regarding the nine month change: "Legal and professional fees and director fees increased by $928,694 and $591,462, respectively, as compared to the comparable period in 2009. The increase in legal and professional fees and director fees resulted from the creation of the Mergers and Acquisitions Committee of the Board of Directors in the third quarter of 2009 and the evaluation by such committee of potential transactions, which activity increased during 2010. In addition, legal and professional fees also increased as a result of the retention of law firm to assist the Mergers and Acquisitions Committee and to expand the review of all our SEC filings and other regulatory filings including state filings which were required as a result of the expansion of our business into additional states."
5. If you back out the one-time items in #1 and #4 above you will find that their net income is growing. Assuming they continue to use dividends instead of bonuses which I believe they will do, there is a good argument that earnings will grow nicely going forward.
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