Definitive Healthcare (DH) - 2024 Q3 - Quarterly Results

Financial & Business Highlights Third Quarter 2024 Financial Highlights Definitive Healthcare's Q3 2024 revenue was $62.7 million, a 4% decrease year-over-year, with a $187.8 million net loss primarily due to a $228.2 million goodwill impairment Third Quarter 2024 Financial Performance | Financial Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $62.7 million | $65.3 million | -4% | | Net Loss | $(187.8) million | $(248.7) million | +24% | | Goodwill Impairment | $228.2 million | $287.4 million | - | | Adjusted Net Income | $15.4 million | $14.6 million | +5.5% | | Adjusted EBITDA | $20.6 million | $21.7 million | -5% | | Adjusted EBITDA Margin | 33% | 33% | 0% | | Cash Flow from Operations | $19.4 million | N/A | - | | Unlevered Free Cash Flow | $24.3 million | N/A | - | * CEO Kevin Coop reported financial performance exceeded guidance for revenue, adjusted net income, and adjusted EBITDA, noting improved expansion sales and the return of former customers as promising indicators[4] Recent Business and Operating Highlights The company's enterprise customer base (>$100k ARR) grew to 530 in Q3 2024, marked by the return of a leading Alzheimer's organization and new contracts with pharmaceutical and specialty food companies * The enterprise customer base (>$100k ARR) reached 530 by Q3 2024, an increase of 1 year-over-year[5] * Key customer wins in Q3 2024 include the return of a leading Alzheimer's organization, a pharmaceutical company utilizing the platform for market potential assessment, and a specialty food and beverage company leveraging 'View' and 'Populi' for targeted sales and marketing[5] Corporate Updates Share Repurchase The Board authorized a new $100.0 million stock repurchase program, commencing after the prior $20.0 million authorization and expiring December 31, 2025 * The Board authorized a new stock repurchase program of up to $100.0 million, effective upon completion of the prior $20.0 million program[6] * The new repurchase program expires on December 31, 2025, and will be executed via open market or negotiated transactions[6] Executive Transition Chief Financial Officer Richard Booth will depart on June 1, 2025, with a search for his successor underway to ensure a smooth transition * CFO Richard Booth will depart the company on June 1, 2025[7] * A search for a new CFO is underway, considering both internal and external candidates, to ensure a smooth transition before Mr. Booth's departure[7] Business Outlook Fourth Quarter 2024 Guidance Definitive Healthcare projects Q4 2024 revenue between $60.0 million and $61.0 million, with Adjusted EBITDA of $16.0 million to $17.0 million and Adjusted Net Income per diluted share of approximately $0.07 Fourth Quarter 2024 Financial Guidance | Metric | Q4 2024 Guidance | | :--- | :--- | | Revenue | $60.0 million – $61.0 million | | Adjusted Operating Income | $14.0 million – $15.0 million | | Adjusted EBITDA | $16.0 million – $17.0 million | | Adjusted EBITDA Margin | 26% – 28% | | Adjusted Net Income | $10.5 million – $11.5 million | | Adjusted Net Income Per Diluted Share | ~$0.07 | Full Year 2024 Guidance The company updated its full-year 2024 guidance, projecting revenue between $250.0 million and $251.0 million, Adjusted EBITDA of $77.5 million to $78.5 million, and Adjusted Net Income per diluted share of $0.34 to $0.35 Full Year 2024 Financial Guidance | Metric | Full Year 2024 Guidance | | :--- | :--- | | Revenue | $250.0 million – $251.0 million | | Adjusted Operating Income | $71.0 million – $72.0 million | | Adjusted EBITDA | $77.5 million – $78.5 million | | Adjusted EBITDA Margin | ~31% | | Adjusted Net Income | $53.0 million – $54.0 million | | Adjusted Net Income Per Diluted Share | $0.34 – $0.35 | Financial Statements Condensed Consolidated Balance Sheets As of September 30, 2024, total assets decreased to $1.18 billion (due to goodwill reduction), total liabilities to $486.1 million, and total equity to $695.6 million Condensed Consolidated Balance Sheets (in thousands) | Balance Sheet Item | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $137,609 | $130,976 | | Goodwill | $490,343 | $1,075,080 | | Total Assets | $1,181,653 | $1,825,901 | | Total current liabilities | $148,176 | $170,682 | | Term loan (current & long-term) | $246,418 | $256,317 | | Total Liabilities | $486,093 | $626,727 | | Total Equity | $695,560 | $1,199,174 | Condensed Consolidated Statements of Operations Q3 2024 revenue was $62.7 million (down 4%), with a $228.2 million goodwill impairment leading to a $187.8 million net loss and $(1.12) net loss per share Condensed Consolidated Statements of Operations (in thousands) | Income Statement | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $62,697 | $65,325 | $189,914 | $185,483 | | Gross Profit | $49,031 | $53,430 | $149,867 | $150,514 | | Goodwill Impairment | $228,153 | $287,400 | $591,794 | $287,400 | | Loss from Operations | $(225,367) | $(295,378) | $(611,257) | $(319,720) | | Net Loss | $(187,824) | $(248,688) | $(506,729) | $(276,265) | | Net Loss per Share | $(1.12) | $(1.50) | $(3.02) | $(1.72) | * Total equity-based compensation expense for Q3 2024 was $6.3 million, a decrease from $12.0 million in Q3 2023[31] Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, net cash from operations was $50.1 million, net cash used in investing was $0.1 million, and net cash used in financing increased to $43.4 million Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $50,061 | $36,481 | | Net cash provided by (used in) investing activities | $(139) | $(86,189) | | Net cash used in financing activities | $(43,381) | $(19,522) | | Net increase (decrease) in cash | $6,541 | $(69,230) | | Cash and cash equivalents, end of period | $137,609 | $77,460 | Non-GAAP Financial Measures & Reconciliations Reconciliation to Unlevered Free Cash Flow Unlevered Free Cash Flow for Q3 2024 was $24.3 million (up from $17.7 million), and $74.1 million for the nine-month period, derived from operating cash flow with adjustments Unlevered Free Cash Flow Reconciliation (in thousands) | Unlevered Free Cash Flow | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $19,432 | $9,487 | $50,061 | $36,481 | | Unlevered Free Cash Flow | $24,299 | $17,707 | $74,064 | $57,453 | Reconciliation to Adjusted Net Income Adjusted Net Income for Q3 2024 was $15.4 million (or $0.10 per diluted share), reconciled from a $187.8 million GAAP Net Loss by adding back goodwill impairment, amortization, and equity-based compensation Adjusted Net Income Reconciliation (in thousands) | Adjusted Net Income | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net loss | $(187,824) | $(248,688) | | Add: Goodwill impairment charge | $228,153 | $287,400 | | Add: Amortization of intangible assets | $11,485 | $11,666 | | Add: Equity-based compensation | $6,296 | $11,994 | | Adjusted Net Income | $15,393 | $14,576 | | Adjusted Net Income Per Share | $0.10 | $0.09 | Reconciliation to Adjusted EBITDA Adjusted EBITDA for Q3 2024 was $20.6 million with a 33% margin, primarily adjusted from GAAP Net Loss by adding back the $228.2 million goodwill impairment charge and other non-cash items Adjusted EBITDA Reconciliation (in thousands) | Adjusted EBITDA Reconciliation | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net loss and margin | $(187,824) (-300%) | $(248,688) (-381%) | | Add: D&A | $13,063 | $13,027 | | Add: Equity-based compensation | $6,296 | $11,994 | | Add: Goodwill impairment | $228,153 | $287,400 | | Adjusted EBITDA and margin | $20,615 (33%) | $21,744 (33%) | * The goodwill impairment charge resulted from sustained decreases in the company's stock price and market capitalization, triggering quantitative tests that showed the reporting unit's fair value was below its carrying value[39]