Think Research Corp. (THNK:CVE) is a Canadian company that designs and provides clinical software and services to international healthcare industries, and it ended Q422 with a 13% YoY profit while displaying a 20% reduction in operating expenses. The company ended last year with US$21.6 million in revenue, including US$10.1 million in gross profit and US$1.6 million in EBITDA.
In a May 2, 2023 research report, Rob Goff of H.C. Echelon Capital Markets gives Think a Speculative Buy rating due to promising growth over the past year but still cautions investors that the company will have upcoming debt obligations to settle in 2023 with BioPharma and MDBriefcase.
Since the company mainly works with government contracts and large health conglomerates, it is expected that these debts will be easily covered.
Review of Results
Goff presented the key points of Think's latest reports.
BioPharma, a subsidiary, is credited with the company's robust growth in Q422, bringing in record revenues of around US$11.5 million. Though it had previously faced issues with supply chain delays due to Covid-19, the company was able to pull resources from its extensive sales backlog. Think's Software and Data Services Solutions segment also managed to grow its revenue by roughly 18% as MDBriefcase, Think's largest education client continually grew its contract with the company via renewals and new acquisitions of big pharma clients throughout 2022.
Think did experience declines in its Clinical Services segment "quarter due to the departure of two prominent members of the Clinic 360 team (one plastic surgeon and one lead sales rep). Consequently, Clinic revenues were down ~24% y/y from the nearly $16M run rate established in Q421," reports Goff.
Finally, Think is pulling in significantly large SaaS contracts, like its five-year contract with Digital Front Door, for US$40 million. The company is optimistic that it can continue this growth pattern, as it is currently garnering around 80% of sales from these recurring contracts.
According to Goff, "Think currently licenses its offerings to ~14,200 facilities (up 9% y/y) with over 3 million patients and residents annually receiving care due to the data that the Company produces, manages and delivers." The company's physician outreach has grown 7% y/y, with its services currently reaching over 320,000 physicians.
Structure and Predictions
Think's stock price has declined 46% this year, which Goff notes Echelon "would characterize this sell-off as both irrational and an exceptional buying opportunity for a company executing toward scale and profitability. We believe the shares are significantly discounted and currently trading at 0.7x/1.5x/9.6x EV to 2023 revenues/gross profit/EBITDA on our forecasted 2023 EBITDA margin of ~8%, compared to its Canadian Digital Health (Exhibit 2) peers at medians of 1.7x/2.4x/7.4x on a forecasted EBITDA margin of 13%."
Goff's research report also shares recent rating and target price information as well as current market data on the company:
- Rating: Speculative Buy
- Price: US$0.35, with a 52-week high of US$1.07 and a 52-week low of US$0.28
- Price Target: US$1.10
- Market Cap: US$26.1 million
Think holds a net debt of US$40.1 million with an enterprise value of US$68.8 million. The company has 74.7M basic shares outstanding, with 81.8M fully diluted shares outstanding.
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Disclosures for Echelon Capital Markets, Think Research Corp., May 2, 2023
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ANALYST CERTIFICATION
Company: Think Research Corp. | THNK:TSXV
I, Rob Goff, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.
