Definitive Healthcare Draws Contrasting Analyst Views After CEO Resigns: One Downgrades, Another Is Optimistic

Tuesday, Definitive Healthcare Corp DH announced that Robert Musslewhite has stepped down as Chief Executive Officer and board member. 

Jason Krantz, Founder and Executive Chairman of Definitive Healthcare, has been appointed interim Chief Executive Officer. 

The Board has engaged a leading global executive search firm to commence a process to identify a permanent CEO.

The company also reaffirmed its financial guidance for the fourth quarter of 2023. Revenue guidance hovers between $65.5 million and $66.5 million. That’s up 8-10% Y/Y versus the consensus of $66.00 million according to data from Benzinga Pro.

The company sees the fiscal year 2023 adjusted EPS of $0.06 – $0.08 versus the consensus of $0.08.

Definitive Healthcare expects the fiscal year 2024 revenue to increase 5-7% compared to the full year 2023 guidance. The company expects the full-year 2024 adjusted EBITDA margin to increase by approximately 200 basis points compared to the full-year 2023 guidance.

Needham notes that the demand conditions for Definitive’s solutions remain difficult. Recent industry assessments align with this perspective, revealing a prevalent “risk-averse” mindset among life sciences buyers. 

These buyers are opting to stay with existing vendors due to a constrained budgetary situation that has extended from 2023 into 2024. 

The prolonged sales cycles, anticipated throughout at least the initial half of FY24, coupled with an imminent CEO search, contributed to business uncertainty.

The analyst downgrades from Buy to Hold with a price target of NA compared to the earlier target of $15.

William Blair writes that Definitive has faced a tumultuous beginning to 2024. The unexpected change in leadership follows a previously announced reduction in headcount on Jan. 4.

Despite the added uncertainty from the leadership transition, the analyst emphasizes that the company’s valuation remains discounted compared to its close Health Care Information Technology peers. 

The analyst expresses confidence in Definitive’s robust long-term organic growth prospects, distinctive competitive position, substantial addressable market, and strong profit characteristics, hence keeping the Outperform rating.

Price Action: DH shares are down 9.14% at $8.35 on the last check Wednesday.

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