Underlying demand for ClearStar’s tech-rich background & medical (MIS) screening services remains buoyant, as evidenced by its record orderbook and healthy pipeline – augmented by November’s ebullient US jobs report, where unemployment fell to a 50- year low of 3.5%
However as with many ‘industry disruptors’, there are occasional bumps along the road, with the Board saying today that Q4’19 “financial institution screening volumes [eg to multi-national banks] have been lower than previously anticipated”. Due to “political uncertainty in the US & abroad”, along with industry “realignments” pushing work into 2020.
That said, new business is still coming through the door at a fair rate of knots, and there is little sign of any ‘brake tapping’ elsewhere. Accordingly we view this as a temporary breather in activity levels - and understand the professional services client in question (ie who are serving the finance vertical) has indicated that they intend to purchase more screens next year than in 2019.
Nonetheless, we have pared back our revenue and adjusted EBITDA (pre SBPs) estimates to $23.0m (+14% vs $23.75m B4) and $300k ($700k) respectively - with the softer volumes only partially offset by strong growth in the lower margin MIS (+23%) division. Moreover this adverse mix shift feeds through into 2020, where our numbers have likewise been trimmed to $26.0m (vs $26.6m B4) and $1,234k ($1,885k).