Challenging Times For Definitive Healthcare: Analysts Highlight Sluggish Growth And Recovery Efforts In Q4 Analysis

Wednesday, Definitive Healthcare Corp DH reported fourth-quarter 2023 adjusted EPS of $0.07, missing the consensus of $0.08.

The healthcare commercial intelligence company reported sales of $65.93 million, up 9% Y/Y, missing the consensus of $66.02 million.

In the fourth quarter, Definitive Healthcare grew its enterprise client base by 28, or 5% Y/Y, ending the quarter with 565 enterprise customers, defined as those customers with more than $100,000 in annual recurring revenue. 

Guidance: Definitive Health expects first quarter fiscal year 2024 revenue of $63 million-$65 million compared to the consensus of $65.70 million.

The company sees adjusted EPS of $0.07-$0.08 compared to consensus of $0.07, with adjusted operating income of $18.0 million-$19.0 million and adjusted EBITDA of $19.5 million-$20.5 million. 

Definitive Healthcare sees fiscal year 2024 revenue of $263 million-$269 million versus the consensus of $269.63 million, with adjusted EPS of $0.37-$0.40 versus the consensus of $0.32

The company expects 2024 adjusted operating income of $78 million-$82.0 million, with an adjusted EBITDA of $84 million-$88.0 million. 

Canaccord Genuity notes that despite a disappointing guidance update, Definitive Healthcare has maintained its resilience, reflecting the inherent profitability in its model and investor confidence in the company’s potential to recover and achieve margins comparable to or better than its IPO levels. 

The positive aspect is that management is actively taking measures to steer the business back on track. However, the primary concern leading to a HOLD rating is the significant decline in growth, largely influenced by macroeconomic factors, with little improvement anticipated in 2024. 

William Blair writes that despite the persistently challenging macro environment, Definitive faces an extended sales cycle. 

Nonetheless, management expresses optimism about the value proposition of Definitive’s platform, leading to increased demand across all client segments.

A notable positive development highlighted is a favorable change in client retention towards the end of the quarter in 2023, continuing into the early months of 2024. The analyst maintains the Outperform rating.

Price Action: DH shares are up 4.8% at $9.65 on the last check Thursday.