RE:RE:No Software GrowthA few interesting points to take from the call, though again one has to take these comments with a grain of salt until results actually come through.
1. Software SAAS Segment: There are a number of potential large wins that THNK is close to winning (either they are in current negotiations OR they are in the RFP advanced stage). SA said it was the largest pipeline that this division has ever had and implied that 2023 is when this pipeline will start translating into revenue.THNK said investors should expect press releases regarding wins in the near/mid future. This segment is critical to getting grosss margins to move higher for the company overall
2. Gross Margins: Management being quite transparent here. One analyst asked if 47% was the right number and the CFO commented his internal model was a bit higher going forward so 48% to 49% is not out of the question for 2023. Given the backlog for Biopharma you can back out the math to get a sense as to how quickly Software could grow
3. Operating Expenses: Management commented that this quarters expenses are quite indicative of what investors should expect going forward. Backing out aquisition related depreciation and you get 11.5M in opex (which includes stock comp). A few times on the call management commented that they expect significant expense leverage going forward and they cited gross margins growing 78% while SG&A grew 26% as a fair run rate
4. No strange/exceptional items are driving the Q4 guidance, in fact SA said that Q4 would be the new baseline for the company from which to compare all future results. Seasonality could mean some quarters dip but Q1 and Q4 should typically be strong.
5. Cash raised to date should be sufficient to meet their working capital and other needs going forward, including contingent obligations. Hopefully this means those contingencies will be paid in cash rather than stock to limit further dilution (that's what seemed to be implied). Working capital seems to be needed for new Biopharma business given revenue is only recieved after studies are completed, which is the opposite of the software business from a cash flow perspective.
So net, net this company MUST deliver on Q4 and must build on that going forward in a material way. I think it's going to take a few major contract wins to get the stock moving again though. Time will tell.