Post by
dt_core on Nov 28, 2023 9:51am
What the Analysts are Saying
I've seen the reports from all three analysts this morning (Desjardins, Canaccord, Echelon). Very similar underlying tone - No Confidence in Management.
Some notables in the Analyst reports (I've included some of their comments in italics):
1. Collectively they slashed 2024 forecasts to an average of $91.4M in revenue and $6.7M in Adj. EBIDTA. They also slashed Q4 2023 to $20.6M revenue and just $700K in Adj. EBITDA.
2. Revised estimates imply a cash shortfall and thus furth imply additional funding needs of at least $5M between now and the end of 2024 and possibly as high as $7M. So we know that the company has already pre negotiated an additional $3M from Beedie, this will almost certainly be drawn and then management needs another $2M to $4M! - "These heightened balance sheet concerns lead us to reduce our target multiple on lower estimates"
3. I would highlight that once the next $3M is drawn THNK will be paying just under $6M in total annual debt servicing costs, which doesn't include the quarterly $500K principle paydown required by Scotia Bank.
4. THNK needs about $11M in Adj. EBITDA to be break even cash flow wise, which is in large part due to the company's high debt servicing costs.
5. The non SaaS segments are a distraction, not a benefit for the company. Direct quote from DT at Canaccord "Further software growth remains the key driver of upside. The performance of other units continues to distract"
6. All analysts saw that their forecasts and price targets reflect conservitism due to lost confidence rather than due to any substantive issue. A "wait and see" approach - "Our model changes reflect more conservatism in the near term while we await a rebound in Clinical Research." and from another research note "The Company is navigating pressure from multiple angles where investors are likely to await evidence of improved revenue momentum and a return to EBITDA positive operations."
7. There is some light at the end of the tunnel if the pipeline can materialize as promissed and Biopharma can return to the stronger numbers it was posting before - "We’re optimistic Think can continue generating momentum by closing SaaS contracts within its sales pipeline over the next several months to help relieve existing pressures." and "We maintain a SPECULATIVE BUY rating as we do believe Think’s technology is undervalued, but the risk profile remains elevated"
I remain convinced that it's time for new leadership and a rationalization/strategic review of its assets to i) significantly improve the balance sheet, ii) reduce or prevent further shareholder dilution related to Beedie debt conversion + need for additional cash, and iii) focus on the high growth and high margin SaaS business which in isolation commands a mich high valuation and multiple that isn't being reflected in the business. This Board has been rather lazy IMO + we know of at least one activist THNK shareholder that given current state of the business could garner significant shareholder support outside of Beedie. Pre-conversion Beedie owns 2.9 million shares whereas post conversion of all their convertible debt into shares they would own 35 million (not including the pending additional $3M conv. loan advance). So now is the time to take action on changes that could help reduce that Beedie debt / dilution burden by selling assets and paying off those converts!
Comment by
Possibleidiot01 on Dec 01, 2023 2:19pm
Here's a quote that caught my eye by Doug Taylor of Canaccord. "......the Clinical Research unit surprised to the downside, attributed to the cancellation of customer programs for which Think management claims no control." Now that to me is an analyst who is angry about being shown up and let down by management. Mangement credibility ?