Leede still bullish on Theratechnologies following “soft” quarter

After what he calls a “soft” first quarter, Leede Jones Gable analyst Doug Loe has maintained his “Speculative Buy” rating on Theratechnologies (Theratechnologies Stock Quote, Chart, News, Analysts, Financials TSX:TH).

On April 10, TH reported its first quarter, 2024 results. The company posted an Adjusted EBITDA loss of $247,000 on revenue of $16.2-million, down 18.4% from the same period last year.

“I am pleased to wrap up the quarter by reaffirming our full year 2024 guidance of revenues between $87 and $90 million and an Adjusted EBITDA in the range of $13-15 million. Our new cost structure together with our strategic focus on commercial capabilities puts Theratechnologies on the brink of producing stronger cash flow and value for shareholders,” CEO Paul Levesque said. “EGRIFTA SV (TM) continues to be our engine of growth and according to key performance metrics such as enrollments and unique patients, we are on track to achieve and even surpass our long-term objectives. As anticipated during our recent fourth quarter call, we are experiencing some variability in revenue growth reporting based on the buildup and subsequent drawdown of inventories in the early part of fiscal 2023. Despite lower revenues this quarter, we expect a reverse trend in the second quarter and an evening out of revenues in the second half of 2024. We continue to demonstrate strength on the bottom line, with an improved net loss of $4.4 million versus a net loss of $10.4 million in Q1 2023. This quarter also marks our third consecutive quarter of near-flat-to-positive Adjusted EBITDA, up more than $3.6 million2 from Q1 2023.”

The analyst, in a research update to clients April 20, pinpointed the reason for the lackluster quarter

“EBITDA softness flows directly from Egrifta/Trogarzo sales softness, but sequential revenue strength if generated should lift EBITDA back into positive territory as soon as next quarter,” he wrote. “As indicated above, Thera had generated two solid EBITDA-positive quarters in FH223 of US$2.2M (in FQ323) and US$5.0M (in FQ423) respectively, and with Egrifta sales performance clearly driving profitability in both periods. Unsurprisingly, Egrifta revenue softness in FQ124 was a major contributor to EBITDA softness in FQ124, though with FQ124 EBITDA softness far less dramatic than in virtually all financial periods in the FQ220-to-FQ223 era.”

Loe thinks TH will post EBITDA of $14.9-million on revenue of $87.2-million in fiscal 2024. He expects those numbers will improve to EBITDA of $20.6-million on a topline of $92.1-million the following year.

“We are maintaining our Speculative Buy rating and one-year PT of $8.00 on TH, with our valuation still based on F2026 EBITDA/fd EPS forecasts, and with our previous F2024 revenue/EBITDA forecasts still falling with the firm’s guidance range (at the low end of revenue, but at the high end of EBITDA guidance provided) and we are not inclined to revise our forecasts even after considering FQ124 softness,” the analyst added.