Definitive Healthcare Corp T.DH.R

CIBC Preview

[retiredcf]

DH Corp.

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Q4 Preview: The Known Unknowns

What's The Event

Our view: DH continues to have a number of known unknowns (outcome of the strategic process, 2017 outlook). For Q4, we believe that consensus may be somewhat conservative in what is typically a seasonally strong quarter, with expectations at the bottom end of management's implied guidance. We maintain our Neutral rating on DH and our $24 price target.

DH will report Q4 results on Tuesday, March 7, after market close and management will host a conference call on Wednesday, March 8 at 8:30 a.m. ET (dial-in 1-888-231-8191).

We expect revenue of $437 mln (consensus $419 mln) and adjusted EPS of $0.61 (consensus $0.56). Our estimates are ~9% above consensus on adjusted EPS and down 22% Y/Y. We note a wide variation in estimates, ranging from $0.48 to $0.63. Key topics for the quarter:

1. Strategic Process: We believe the strategic process remains ongoing, with news reports suggesting interest from several PE firms. DH noted it will not be discussing the process unless there is a definitive agreement to announce. We expect that potential bidders may be waiting to see investor reaction to Q4 results before submitting final bids.

2. Competitive Environment: In Q3, management guided down 2016 EBITDA growth expectations to a decline of 3%-7% versus the company's target of 5%-7% growth. Q4 is a seasonally strong quarter in the software space and other fintech players have either met or exceeded EPS expectations. As a result, we believe that consensus could be slightly conservative, although we hesitate to call a quarter given DH-specific issues (risk costs, product development, etc).

3. 2017 Outlook: DH's Q4 conference call announcement stated that a 2017 outlook would not be provided in light of the ongoing strategic review process. We believe that consensus EBITDA may be high for 2017, with an average expected growth of 9% Y/Y