GlobalData PLC

Moat: 3/5

Understandability: 3/5

Balance Sheet Health: 4/5

GlobalData PLC is a data and analytics company providing proprietary intelligence across various industries through subscription-based platforms and custom research services.

Investor Relations Previous Earnings Calls

The moat, understandability, and balance sheet health scores reflect a conservative evaluation to ensure a margin of safety in any assessment.

Business Overview

GlobalData provides data, analytics, and insights on various industries including energy, healthcare, technology, and consumer goods. The company operates primarily through a subscription-based model, where clients gain access to its proprietary platforms and data. Additional revenue streams are custom research services, advisory and consulting, and events and conferences.

Their revenue can be broken down into:

  • Subscription-based platforms: This is the core of GlobalData’s revenue, providing clients with access to databases, analytics, and reports through its online platform across different industries.
  • Custom research services: When clients have special requirements, such as a custom dataset or research on a particular topic, GlobalData provides its analysts to create bespoke and often complex research reports.
  • Advisory and Consulting Services: These services use GlobalData research and analysts to provide actionable insights and guidance. These may include specific advice on market entry strategies or acquisitions.
  • Events and Conferences: GlobalData produces and hosts events and conferences that allow clients to network and learn about the most recent trends in the respective industries.

GlobalData’s revenue growth is primarily driven by new subscription contracts, renewals and the upsell of existing customers to more expensive products.

Key Industry Trends:

  • Increasing data needs: In an increasingly competitive market environment, companies need actionable insights and data to make better decisions.
  • Growing importance of analytics: As information becomes more abundant, the use of data-driven analysis to create strategic advantages is growing as well.
  • Demand for accurate and reliable insights: Companies need trustworthy data providers, that can present insights that are verified, instead of anecdotal opinions.
  • Growth in digital services: The rise of digital platforms for access to information has led to a growing demand for digital information services.
  • Globalization: As companies continue to seek new markets across the globe, they need access to information that will help them penetrate markets overseas, creating a demand for a global data provider.

Competitive Landscape GlobalData faces a fragmented and competitive market with various players:

  • Large data providers: There are major players like Bloomberg and Refinitiv that dominate certain markets, mainly through large financial data sets.
  • Industry-specific research firms: Various niche firms provide in-depth research in a specific sector, which can include local companies that are very familiar with the local business environment.
  • Internal resources and technology: Internal resources and development of analytics tools also provide competition for GlobalData, as companies seek to produce similar findings themselves.

What Makes GlobalData Different?

  • Proprietary Data: GlobalData generates its data and insights with its analysts instead of relying on information compiled from other sources, providing a competitive advantage due to the proprietary nature of its product.
  • Global Coverage: The company offers broad global coverage across many sectors, which is useful for companies who need a world-wide perspective on their industry.
  • Integrated platform: By including data, analytics, reports and events into one platform, GlobalData offers a unique value proposition.
  • Domain Expertise: GlobalData analysts have developed expertise over many years, and are more knowledgeable about their respective sectors than the average investor.

Financials Overview

The financial performance of GlobalData over the past several years shows a clear pattern of growth in sales and a strong profit generation.

Revenues:

GlobalData shows a consistent revenue growth over the past few years, particularly with subscription revenue. Subscription revenues in 2022 and 2023 show a YoY growth of 12% and 15.5%, respectively, while custom research saw a small decrease of 4% in 2022, before a strong increase in 2023 of over 20%. Events revenue also increased dramatically by 85.3% in 2022 and 25.5% in 2023, because of the resumption of in-person events after the Covid crisis. It’s important to note, that subscription revenue makes 84.4% of total revenue in 2023, with the rest coming from custom research services (9.3%) and Events (6.3%). In its most recent earning report, GlobalData announced the “strong start to 2024”, with Q1 recurring revenue and underlying operating profit up by 10% and 11% respectively.

Profitability: GlobalData maintains a healthy profitability, which shows the strength of its subscription-based model.

Gross profit margins consistently are around 60-70%, while the operating margin comes around 16-19% for most years. The net margin in 2023 was 12.5% including a $45 million impairment of goodwill from its previous acquisitions, which implies that it’s capable of an above 20% net margin in a normal year.

Debt: GlobalData is levered but still healthy. In 2023, total debt amounted to $375 million, and a net debt of $343 million, and a long-term debt of $366 million. A part of this debt was used to finance the acquisition of a competing data provider, which created an additional debt burden on the balance sheet.

Cash Flow: Cash flow from operations continues to grow every year, as revenues increase and operational costs are kept under control. However, a sizable portion of this cash flow is used to pay for acquisitions.

GlobalData management is strongly focused on increasing free cash flow generation, as they have stated on many occasions, and they expect this to become a major factor in their valuation in the coming years.

Recent News:

  • In its Q1 2024 trading update, GlobalData announced that their recurring revenues and underlying operating profit are both up by 10% and 11% respectively.
  • GlobalData completed its acquisition of a business intelligence firm in July 2023, for which they used $233 million in cash and incurred additional debt.
  • The CEO expressed that the demand for data and insights is high, and they expect that trend to continue in 2024.
  • Despite facing some uncertainty, GlobalData is confident about growth opportunities ahead.

Moat Rating: 3 / 5 GlobalData possesses a moat which can be classified as “narrow” because it is based on switching costs and proprietary data, but is neither unbreachable nor indefinite:

  • Switching costs: Clients often become dependent on GlobalData’s platform for day-to-day operations and research needs. The more a client depends on GlobalData and the more data they upload and integrate into the system, the greater the cost for them to switch to a competitor’s platform. However, this switching cost is neither too big nor too small and clients can sometimes opt out of the subscription.
  • Proprietary Data and Insights: GlobalData generates its own data, instead of relying on outside sources. This gives them a defensible advantage, because a competitor would find it difficult to find the same level of insights elsewhere. Additionally, GlobalData’s analysts are experts in the fields and their knowledge is hard to replicate. But those data sets are neither an unreplicable nor indefinite moat. They might be overtaken by a competitor with better research.

Risks to the Moat and Business Resilience

  • Competition: Increased competition from larger data providers or niche players, may reduce the company’s pricing power, and profitability.
  • Technological Disruption: Rapid technological changes or the emergence of disruptive technologies that make the current offering obsolete, could diminish their advantage.
  • Data Quality: If GlobalData cannot keep up with the collection of information or there are flaws in data gathering, their moat may diminish, as clients lose trust.
  • Client Dependency: GlobalData needs to retain clients, as a big majority of its revenues come from recurring subscriptions. A drop in retention rates could severely affect its bottom line and create a negative effect of its future growth prospects.
  • Acquisition Challenges: GlobalData must manage its recent acquisition effectively to ensure a smooth integration and retain the value created.
  • Economic Downturn: A recession or significant economic downturn could lead to reduction in client spending, which will affect the bottom line.

It is crucial for the investor to continuously monitor the evolution of the industry and competitive landscape to see how those factors might create or erode competitive advantages.

Understandability Rating: 3 / 5 The business model is not overly complicated to understand because it is subscription-based and there are no physical elements. However, the complexities in their data sourcing and collection techniques and the different parts of the business (i.e., research services, events, etc) require some analysis and may create minor confusion. Also, the way some accounting numbers are generated, will be complicated for a non-accountant investor.

Balance Sheet Health Rating: 4 / 5 GlobalData carries a substantial level of debt from its previous acquisition, but remains in a healthy financial state. The consistent cash flows from the subscription service will allow it to rapidly reduce leverage and deleverage in the future. With the rising profits and consistent cash flows, GlobalData should be able to manage the debt obligations without financial distress. A robust profitability combined with rising revenue are another two positive elements of its financial situation, making it a healthy company in general.