The markets remained unimpressed with Think Research’s third-quarter earnings, despite the company reporting an 82 percent growth in revenues to $18.4 million compared to the same period in 2021.
The acquisitive healthcare software company’s stock price at presstime sat at 35 cents, not far off its 52-week low of 30 cents, and down from its 52-week high of $1.58.
While the company’s revenue picture appears rosier, so does its appetite for debt. Think Research reported that in the second quarter of 2022 it borrowed $10 million from Beedie Investments Ltd. as a convertible note loan.
Think Research reported an 82 percent YoY growth in revenues to $18.4 million.
That money translated into $8.9 million after transaction costs. During the first nine months of 2022, cash allocations included payments of $2.4 million on lease liabilities, $2.3 million for finance costs, and investments of $2.9 million in intangible assets.
As well, $400,000 went towards property and equipment, and a $400,000 cash consideration was paid related to a 2021 acquisition.
While Think Research didn’t identify it as such, the $10 million appears to be part of the overall credit agreement it entered into with Beedie Investments in April. That agreement gave Think Research access to up to $25 million in a non-revolving term convertible loan facility. Think Research took $10 million as an initial advance, with the remaining $15 million available for subsequent advances in minimum tranches of $3 million.
In its earnings report, the company noted that its credit facility with Scotiabank matures in September 2023, with Think Research in active discussions to renegotiate the terms, anticipating “it will be extended beyond its September 2023 maturity date.”
Think Research replaced its existing credit arrangement in 2021 with the National Bank of Canada (NBC), moving to the Bank of Nova Scotia. With the move, Think Research was able to get more credit availability with lower interest rates. The company acquired up to $22 million in its revolving credit facility, a $6 million revolving acquisition facility, and a $10 million uncommitted accordion that can be allocated to either facility at Think Research’s discretion. The company’s debt-to-equity ratio sits at 2.73 as of September 30.
Think Research’s CEO Sachin Aggarwal praised the company for its forward momentum with significant revenue increases despite what he called summer’s seasonal impact, which impacts the company’s clinical and educational operations.
“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.
Think Research’s adjusted EBITDA for the quarter was a $700,000 loss compared to a loss of $3.4 million in the third quarter of 2021, and a loss of $1.6 million in the second quarter of 2022. The company said the quarter-over-quarter improvement directly reflects the impact of reduced operating expenses.
Think Research also reported a decrease in its net loss, $4.4 million in the third quarter, compared to the same period in 2021. The company attributed the decrease to its focus on reduced cash operating expenses through “realized cost synergies,” which it pegged at an annual value of $5.8 million in fiscal year 2021 and an additional $5.7 million in the first nine months of fiscal year 2022.
The company declared that following an active year of acquisitions in 2021, it has completed nearly a full year of integrating its assets and businesses, and believes a foundation has been set to establish revenue generation and sustainable profitability.
“Based on initiatives undertaken to date, along with enhanced sales and marketing programs, Think has greater visibility into improving revenue with reduced costs, supported by its core focus on increasing profitability and financial flexibility in order to drive shareholder value,” the company asserted.