With another quarterly report falling short of his expectations, Canaccord Genuity analyst Doug Taylor lowered MCI Onehealth Technologies Inc. to “hold” from “speculative buy,” warning balance sheet flexibility is “waning.”

“While there are positive items in the report, including the expectation that long-awaited data services revenue will pick up sharply in the quarters ahead, another quarter of heightened cash burn has limited the company’s balance sheet flexibility,” he said. “We’d prefer to see a positive and more consistent EBITDA performance in order to better discount the growth potential.”

After the bell on Monday, the Toronto-based company reported third-quarter revenue of $13.8-million, up 23 per cent year-over-year but below Mr. Taylor’s $15.1-million estimate. Adjusted EBITDA of a loss of $2.9-million also missed the analyst’s forecast (a loss of $1.2-million), which he attributed to a mix in lower margin revenues and higher expenses.

“MCI ended the quarter with $1.0-million in cash (vs. $3.4-million in Q1) and has $6-million in available liquidity including unused credit capacity, which was recently boosted by a shareholder loan facility,” he said. “While this loan suggests a willingness by principal shareholders to continue to backstop MCI’s progress, we believe that the outlook for other shareholders is becoming increasingly clouded by balance sheet and dilution concerns. Management re-stated the company’s goal of being EBITDA and FCF positive in the “back half of 2022″ (vs. the prior expectation of Q3/22), which suggests further cash burn in any scenario. This balance sheet risk weighs on our willingness to discount growth initiatives.”

After reductions to his financial forecast, Mr. Taylor trimmed his target for MCI shares to $1.50 from $2. The average is $2.15.