It's Time for New ManagementToday's conference call highlighted a number of points that support the need for THNK to change it's management team.
1. Suprise miss on CRO business: When THNK provided their Q2 update late August, they would have known at that time that the CRO business was on track to dissapoint in Q3. But rather than disclose that fact to investors and sell side research analysts (Canaccord, Echelon, Desjardins) they merely said that we should expect lumpiness in EBITDA quater to quarter. Now that the truth is out regarding the reason for the lumpiness every investor is now questioning whether management comments can be trusted going forward. Also, every analyst on the call today said they were not expecting this Q3 miss, and DT from Canaccord was especially pissed in his tone of voice (and rightfully so) given management knew it was coming and wasn't transparant about it.
2. Management blamming the CRO business on factors "outside of their control": Remind me again, how did this segment end up as part of THNK? Aquisition is the answer, and that is something the management team does control. So far it has failed to live up to it's promise and in fact if management is surprised by events in Q3 it tells me that they didn't understand what they were buying because they should expect periodic delays/cancellations as normal business.
3. Balance sheet: Looks like the Nov 10th $2M draw from Beedie was the first of a potential $5M which was designed to shore up the balance sheet given negative cash flow, including the payment of interest. The next $3M would also have a 35 cent conversion price as implied by the original press release and comments today. So more dilution is coming - not in shareholders best interest.
4. All segments other than SAAS are underperforming and suggest that management's aquisition strategy has been poorly executed.
Going forward all eyes are on the need to raise additional cash and dilution. They may need a few fire sales to make it happen, but as of now the Board should announce a strategic review of the business and seek new leadership. The SaaS BD team is doing well so the core of THNK is intact, but the strategic choices are what is killing them. The current management team has lost credibility.