IPO Update: Definitive Healthcare Aims For $350 Million IPO

seekingalpha2021-09-13

Summary Definitive Healthcare has filed proposed terms for a $350 million IPO. The firm provides data and insights on the U.S. healthcare delivery ecosystem. DH is growing quickly, and while the IPO ...

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Andrew210782
2021-09-13
Andrew210782
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ACCY
2021-09-13
ACCY
Nice! ?
pravind
2021-09-13
pravind
Yo
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href=https://seekingalpha.com/article/4454054-ipo-update-definitive-healthcare-aims-for-350-million-ipo><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nDefinitive Healthcare has filed proposed terms for a $350 million IPO.\nThe firm provides data and insights on the U.S. healthcare delivery ecosystem.\nDH is growing quickly, and while the IPO ...</p>\n\n<a href=\"https://seekingalpha.com/article/4454054-ipo-update-definitive-healthcare-aims-for-350-million-ipo\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"DH","symbol_name":"Definitive Healthcare Corp.","start_time":0,"source_url":"https://seekingalpha.com/article/4454054-ipo-update-definitive-healthcare-aims-for-350-million-ipo","article_id":"1164912986","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1164912986","pubTimestamp":1631503324,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Summary\n\nDefinitive Healthcare has filed proposed terms for a $350 million IPO.\nThe firm provides da","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"DH":"Definitive Healthcare Corp."},"translate_title":"IPO最新消息：Definitive Healthcare拟IPO 3.5亿美元","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"DH":0.9},"content_text":"Summary\n\nDefinitive Healthcare has filed proposed terms for a $350 million IPO.\nThe firm provides data and insights on the U.S. healthcare delivery ecosystem.\nDH is growing quickly, and while the IPO isn't cheap, the firm has strong prospects for growth ahead of it.\n\nQuick Take\nDefinitive Healthcare (DH) has filed to raise $350 million from the sale of its Class A common stock in an IPO, according to an amendedregistration statement.\nThe company provides commercial intelligence on the healthcare delivery ecosystem.\nI favor the space that DH is operating in and believe the firm has room for significant growth ahead of it.\nWhile the IPO isn’t cheap, the firm’s prospects outweigh its price and the IPO is worth a close look.\nCompany & Technology\nFramingham, Massachusetts-based Definitive was founded to develop a SaaS platform to deliver data and insights into all aspects of the healthcare delivery system.\nManagement is headed by founder, Chairman and CEO, Jason Krantz, who has been with the firm since inception and was previously CEO of Infinata, a SaaS provider of intelligence to the pharmaceutical industry.\nThe company’s primary offerings by client use case include:\n\nSales\nMarketing\nClinical research & product development\nStrategy\nTalent acquisition\nPhysician network management\n\nDefinitive has received at least $1.3 billion in equity investment from investors including Advent International, Spectrum Equity, DH Holdings, AIDH Management Holdings, and 22C Capital.\nCustomer Acquisition\nThe firm seeks customer relationships with:\n\nLife science companies\nHealthcare IT companies\nHealthcare providers\nStaffing firms\nReal estate firms\n\nThe company counts over 2,600 companies as customers as of June 30, 2021, with no single customer accounting for more than 2% of its revenue.\nSales and Marketing expenses as a percentage of total revenue have fluctuated as revenues have increased, as the figures below indicate:\n\nThe Sales and Marketing efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Sales and Marketing spend, fell slightly to 0.9x in the most recent reporting period, as shown in the table below:\nThe Rule of 40 is a software industry rule of thumb that says that as long as the combined revenue growth rate and EBITDA percentage rate equal or exceed 40%, the firm is on an acceptable growth/EBITDA trajectory.\nDH’s most recent calculation was 29% as of June 30, 2021, so the firm has some room for improvement in this regard, per the table below:\nThe firm’s dollar-based net revenue retention rate for the year ended June 30, 2021 was 111%, a good result.\nThe dollar-based net revenue retention rate metric measures how much additional revenue is generated over time from each cohort of customers, so that a figure over 100% means that the company is generating more revenue from the same customer cohort over time, indicating good product/market fit and efficient sales and marketing efforts.\nMarket & Competition\nAccording to a 2019 marketresearch reportby Grand View Research, the global market for healthcare analytics was an estimated $25.9 billion in 2019 and is expected to reach $46 billion by 2027.\nThis represents a forecast CAGR of 7.5% from 2020 to 2027.\nThe main drivers for this expected growth are continued digitization of healthcare data, technological advancements, and pressure to reduce healthcare spending through efficiencies.\nAlso, the COVID-19 pandemic has provided a boost to these trends and will likely pull forward demand from healthcare ecosystem companies for greater information and capabilities.\nMajor competitive or other industry participants include:\n\nClarivate(NYSE:CLVT)\nIQVIA(NYSE:IQV)\nSymphony Health\nKomodo Health\nH1 Healthcare\nMarketware\nTrella Health\nTrilliant Health\nSG2\nVeeva(NYSE:VEEV)\nOthers\n\nFinancial Performance\nDefinitive’s recent financial results can be summarized as follows:\n\nGrowing top line revenue\nIncreasing gross profit and high gross margin\nLowered operating losses and reduced negative operating margin\nIncreasing cash flow from operations\n\nBelow are relevant financial results derived from the firm’s registration statement:\nAs of June 30, 2021, Definitive had $38 million in cash and $555 million in total liabilities.\nFree cash flow during the twelve months ended June 30, 2021 was $25.7 million.\nIPO Details\nDH intends to sell 15.55 million shares of Class A at a proposed midpoint price of $22.50 per share for gross proceeds of approximately $350 million, not including the sale of customary underwriter options.\nBlackRock and Capital World have indicated a non-binding interest to purchase shares of up to an aggregate of $80 million at the IPO price.\nClass A and Class B common stockholders will each have one vote, but Class B stockholders will not have economic rights.\nThe S&P 500 Index no longer admits firms with multiple classes of stock into its index.\nAssuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO (ex-underwriter options) would approximate $4.8 billion.\nExcluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 7.48%. A figure under 10% is generally considered a ‘low float’ stock which can be subject to significant price volatility.\nPer the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:\n\n We intend to use a portion of the net proceeds from this offering to [i] purchase 14,222,222 newly issued LLC Units (or 14,222,222 LLC Units, if the underwriters exercise their over-allotment option to purchase additional shares of Class A common stock in full) from Definitive OpCo, [ii] acquire 425,229 LLC Units from Pre-IPO LLC Members, and [iii] repurchase 908,104 shares of Class A common stock received by the Blocker Company equityholders in connection with the Mergers. The foregoing purchases of LLC Units and Class A common stock, respectively, will be at a price per unit equal to the public offering price per share of Class A common stock in this offering, less the underwriting discount. We have agreed to reimburse approximately $1.05 million in aggregate expenses incurred by our Sponsors in connection with the Reorganization Transactions. See “Organizational Structure—The Reorganization Transactions.”\n\n\n We will cause Definitive OpCo to use the proceeds from the issuance of the LLC Units to Definitive Healthcare Corp. as follows: [i] to pay fees and expenses not already paid from our total estimate of approximately $10.1 million in connection with this offering and the Reorganization Transactions; [ii] to repay $195.4 million of the outstanding borrowings under our Senior Credit Facilities and [iii] for general corporate purposes. Definitive OpCo will not receive any proceeds from the purchase of LLC Units from certain Pre-IPO LLC Members by us or from the repurchase of shares of Class A common stock by us.\n\nManagement’s presentation of the company roadshow isavailable here.\nRegarding outstanding legal proceedings, no matters are judged by management to have the potential for a material impact on the firm's operations or financial condition.\nListed underwriters of the IPO are Goldman Sachs, J.P. Morgan, and several other investment banks.\nValuation Metrics\nBelow is a table of the firm’s relevant capitalization and valuation metrics at IPO, excluding the effects of underwriter options:\nAs a reference, a potential public comparable would be Veeva Systems, although Veeva is a much larger company; shown below is a comparison of their primary valuation metrics:\nCommentary\nDH seeks to go public to pay down debt and purchase underlying LLC interests.\nThe firm’s financials show strong top line revenue growth and gross profit results, continued operating losses but reduced negative operating margin, so the firm appears to be making progress in this regard.\nCash flow from operations is growing quickly and free cash flow for the twelve months ended June 30, 2021, was a solid $25.7 million.\nSales and Marketing expenses as a percentage of total revenue have fluctuated as revenue has increased; its Sales and Marketing efficiency rate dropped slightly in the most recent reporting period.\nThe company’s dollar-based net retention rate of 111% is a good performance metric that shows good product market fit and efficient sales & marketing efforts.\nThe market opportunity for providing healthcare delivery industry data to a wide variety of market participants is large and expected to grow at a moderate rate of growth over the coming years.\nGoldman Sachs is one of the lead underwriters and IPOs led by the firm over the last 12-month period have generated an average return of 45.1% since their IPO. This is a mid-tier performance for all major underwriters during the period.\nThe primary risk to the company’s outlook is the increasing competitiveness in the markets in which it operates which may produce downward pressure on the firm’s pricing power over time.\nAs for valuation, DH is within range of much larger competitor Veeva on revenue multiples, with a slight premium as DH is growing revenue at a faster rate of growth.\nHowever, on an EV/EBITDA or earnings basis, the DH IPO is far higher valued than Veeva’s current stock price.\nStill, I like the space that DH is operating in and believe the company has room for significant growth ahead of it.\nWhile the IPO isn’t cheap, the firm’s prospects outweigh its price and the IPO is worth consideration.\nExpected IPO Pricing Date: September 14, 2021.","kind":"news","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":888528604,"gmtCreate":1631509583408,"gmtModify":1676530561639,"author":{"id":"3583140590641923","authorId":"3583140590641923","name":"Andrew210782","avatar":"https://static.tigerbbs.com/0e065afa93f953171dd0eb9aaebbe93b","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"3583140590641923","authorIdStr":"3583140590641923"},"htmlText":"Like","listText":"Like","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/888528604","repostId":1164912986,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":888588861,"gmtCreate":1631507543753,"gmtModify":1676530561194,"author":{"id":"3579758808989513","authorId":"3579758808989513","name":"ACCY","avatar":"https://static.tigerbbs.com/a44626552831eb06aa01cf85dcaf7422","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"3579758808989513","authorIdStr":"3579758808989513"},"htmlText":"Nice!&nbsp;?&nbsp;","listText":"Nice!&nbsp;?&nbsp;","text":"Nice! 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