RE:RE:It's Time for New ManagementLooking at the numbers from this quarter and the year it appears that the SaaS business has hit EBITDA breakeven (possibly even modest positive EBITDA). If/when THNK's SaaS pipeline materializes then that should be material EBITDA for that segment. Management has made it clear that SaaS is the focus and basically told investors not to focus on the rest of the business (how convenient!). So, the obvious questio is why does THNK need the CRO and CS segments? They don't need to own them to get insightful data that informs the SaaS side of the business. They are volatile businesses and upside potential is limited. I realize that valuations are suppressed at the moment, and certainly THNK overpaid for biopharma amongst other aquisitions but the option must be put on the table by the Board. The current management team is too married to those investments + has not done a good job of extracting value from them. Sure you can talk all you want about synergies but if the top line fails to materialize then those synergies are not a value driver of the aquisition.
So its time to get a new management team to focus on SaaS and put the CRO/CS business up for sale. In the current environment with suppressed multiples/revenue the combined businesses would likely fetch net proceeds of between $20 million to $25 million. THNK could use those proceeds to pay down $8M to $10M in Scotia Debt + potentially much of the Beedie convertible debt (could pay down $6-8M of it which would just leave the $10M tranche at 97 cent conversion) + pay down the Beedie subordinated debt of $3.3M. Do that and suddenly the company saves about $2M in annual interest expense and reduces potential convertible dilution leaving fully diluted and converted shares at 98 million vs the current 128 million shares THNK is on pace for (once they draw the second $3 million from the latest Beedie negotiation at 35 cent conversion).
Post sale what's left is a pure play SaaS business that is EBITDA flat to modestly positve with high margins and rapid growth given the pipeline. A business like that will command a far superior valuation than THNK does today with the CRO and CS businesses being a valuation drag and not expected to contribute much in the way of incremental growth going forward.