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Think Research is still a Hold, says Desjardins

Health sector software solutions company Think Research Corp (Think Research Stock Quote, Charts, News, Analysts, Financials TSXV:THNK) delivered mixed results in its latest quarter, according to Desjardins Capital Markets analyst Jerome Dubreuil, who reviewed the quarter in an update to clients on Tuesday. Dubreuil stuck with a “Hold” rating on the stock, saying Think remains a wait-and-see proposition.

Think Research, which has healthcare technology to support the clinical decision-making process for clients in areas such as hospitals, health regions and government, announced on Monday its third quarter 2022 financials. The company reported $18.4 million in revenue, up 82 per cent year-over-year, with adjusted EBITDA at negative $0.7 million compared to negative $3.4 million a year earlier.

Management emphasized in its commentary new study wins secured for the fourth quarter by the company’s BioPharma subsidiary, with the additions helping increase visibility going forward, according to CEO Sachin Aggarwal. The company reiterated a full-year guidance of between $84 and $90 million in revenue and Q4 revenue of between $21 and $22.5 million. 

“Given our recent success winning increasingly larger deals combined with a more streamlined cost structure, the Company is well positioned to continue enhancing our revenue growth and advancing near and longer-term expectations for profitability, all of which we believe will translate into value creation for our shareholders,” Aggarwal said in a press release.


On the Q3 results, Dubreuil said the $18.4 million topline was under the consensus call of $19.2 million, while adjusted EBITDA at negative $0.7 million was a beat of the Street’s negative $0.9 million forecast. 

“The disappointing revenue was attributable in part to lower clinics revenue as the company continues to discourage non-affiliated doctors from renting its facilities to perform their own surgeries, which is a lower-margin business relative to THNK’s other business lines. Despite the top-line miss, management sounded bullish for 4Q and 2023 as THNK estimates it has never had a bigger pipeline in the RFP or negotiation stage,” Dubreuil wrote.

The analyst said there were no real surprises overall in the Q3 earnings, although he was pleased that the covenant on Think’s credit agreement with Scotiabank.

“While management sounded confident about 4Q (reiterated 4Q guidance) and 2023 on the conference call, we are maintaining our Hold rating and will wait for improved results and a more comfortable balance sheet situation before becoming more constructive on the name,” he said.

Dubreuil reworked his estimates and is now calling for full year 2022 revenue of $78 million (previously $79 million) and Adjusted EBITDA of negative $1.0 million (previously negative $1.6 million). With his “Hold” rating, Dubreuil maintained a 12-month target of $0.55 per share, which at press time represented a projected one-year return of 72 per cent.

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