Earnings were actually pretty goodI have to hand it to managment, overall earnings reported today were fairly strong and I would argue better than many expected, including myself, expected. Even analysts on the call congratulated management for a good quarter. Although sales were modestly lower than expected profitability was significantly higher with EBITDA beating consensus estimates by $300K. Guidance was unchanged but one gets the feeling that THNK is going to come in at the low end of its $90mm to $100mm 2022 guidance because of COVID shutdowns in January. We'll find out in a few weeks how much that challenged Q1 but it doesn't change the momentum of the business especially considering additional synergies are expected vs. prior guidance. We'll have to keep a close eye on cash in Q1 but my read through is that the recent $10mm drawdown on the Beedie line is to fund one-time costs associated with restructuring the business to benefit from enhanced synergies. In Q3 that cost the company $4mm+ (in fact without that EPS would have been -$0.06 per share, much improved and heading in the right direction. At the current share price I would be shocked to see an accretive deal, other than some very tiny tuck in acquisition, present itself as a compelling opportunity. Also management indicated that they have more than sufficient cash to fund themselves until the company realizes positive free cash flow so it seems the Beedie line is more of a back stop in case the environment turns south again (i.e. more COVID lockdowns). Otherwise Think is looking surprisingly strong and on track.
So if Q4 was better than expected, guidance intact, and the business beyond 2022 seems to be shaping up quite strongly why the heck are share only trading at 80 cents? It's easy to point a finger at peers like DOC or other small cap niche players like LSPK and blame market forces as being responsible for a disconnect. When I look at trading I see a lot fo retail broker accounts initiating stop losses on a fairly illuqid stock and others putting in "slightly above current price" sell orders in a panic. In other words yes the selling really seems to be all retail fear driven rather than large instutional shareholders dumping. Current management share sell programs don't help, and now is the time for insiders to step up and buy shares in the open market in size, though they may need to wait until Q1 has been reported to be able to do so. In the meantime the retail selling appears to becoming a vicious cycle, and there may be fears that the low share price is going to translate into significant dilution if additional capital needs to be raised and/or stock pledges need to be honoured. However at some point sentiment should change and a snap back rebound could occur quickly but timing is difficult to predict. It'll be interesting to read the analysts reports on the quarter once they are published.