Q4 2021 Definitive Healthcare Corp Earnings Call

Greetings and welcome to the definitive health care fourth quarter and fiscal year 2021 earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this.

Conference is being recorded it is not my pleasure to introduce your host David Samuel General Counsel of definitive health care. Thank you David you may begin.

Good afternoon, and thank you for joining us today to review definitive healthcare's fourth quarter 2021 financial results.

Joining the call today are adjacent cramps definitive health Care's, founder and CEO , Rick Booth definitive healthcare CFO and Robert Musselwhite definitive health Care's precedent.

During this call we will make forward looking statements, including but not limited to statements related to our market and future growth opportunities and the benefits of our health care commercial intelligence solutions, our competitive position customer behaviors, our financial guidance our planned investments.

And the anticipated impact from the COVID-19 pandemic on our business and results of operation as well as on our clients the health care industry generally and the macroeconomic environment.

Any forward looking statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Forward looking statements involve a number of risks and uncertainties, including those discussed in the risk factors section of our filings with the SEC.

Actual results may differ materially from any forward looking statements. The company undertakes no obligation to revise or update any forward looking statements to reflect events that may arise. After this conference call, except as required by law.

For more information please refer to the cautionary statements included in the earnings release that we just posted to the Investor relations portion of our website.

Additionally, we will discuss non-GAAP financial performance measures on this conference call references on this call to profitability are on an adjusted EBITDA basis. Please refer to the tables in our earnings release on the Investor Relations portion of our website for a reconciliation of these measures to the most directly comparable GAAP financial measure.

With that I'd like to turn the call over to Jason.

Thanks, David Thank you everyone for joining us today for definitive healthcare's fourth quarter 2021 earnings call.

We entered a transformational year for the company with excellent fourth quarter results that reflect the significant momentum we have across all parts of our business.

Our performance demonstrates the significant market opportunity for health care commercial intelligence, which we are delivering through our comprehensive SaaS based platform, our industry, leading datasets and our proprietary data science based analytics.

We are at the very early stages of a $10 billion and growing market opportunity and we believe that we're in a great position to generate strong growth and significant profitability for years to come.

Let's start today by quickly reviewing our financial results for the fourth quarter and the full year, which reinforce our unique value proposition of high growth high profitability and visibility into the future.

Starting with the fourth quarter, our total revenue was $46 3 million, which represents 38% year over year growth in our adjusted EBITDA was $13 1 million, which translates into a 28% margin.

For the full year, our total revenue was $166 2 million, which represents 40% year over year growth.

Our adjusted EBITDA was 56.0 million, which translates into a 34% margin and our Unlevered free cash flow was $55 4 million a 33% margin.

We are extremely excited about our performance in the fourth quarter as we not only surpassed our growth target, but we continue to do so in a highly profitable manner, even with the additional burden of a full quarter of public company expenses and the significant investments that we continue to make in sales marketing and product innovation.

I'm now going to hand, it over to our President Robert Musselwhite to talk about some of the drivers of the success as well as to highlight some key customer wins during the quarter.

Thanks, Jason These fantastic results are driven by our unique ability to deliver the commercial intelligence that companies selling into the four trillion dollar U S health care ecosystem need to achieve better business results across a number of different use cases from product development to network expansion to sales.

Definitive healthcare offers comprehensive and proprietary intelligence across the U S health care ecosystem, including health care providers facilities claims and key opinion leaders. We've collected this proprietary set of intelligence from hundreds of thousands of sources for more than 10 years, and we've applied sophisticated data science and AI.

To cleanse and link all the data and ultimately deliver new intelligence to our customers via our easy to use SaaS platform.

Our proprietary definitive I D assigns a unique identifier to every player in the health care ecosystem from hospitals, and physicians to payers and G. P o's to map out relationships across the industry and informed commercialization strategies.

As a result, our clients can gain greater clarity and insight on the health care market that they then used to inform their most important high stakes strategical and tactical decisions.

The breadth and depth of the intelligence that our platform delivers can help customers across multiple critical areas of their business.

First we help our clients develop better sales and marketing strategies that enable highly targeted go to market campaigns that efficiently drive more revenue.

For example, during its first year using our sales intelligence one of our medical device customers expanded its market share in the urgent care market by adding more than 400, new customers worth more than $7 million in incremental revenue.

Second we help improve our client's clinical research and product development performance by connecting them with the right experts and the most effective clinical trial sites to make data driven decisions throughout the product lifecycle.

Bringing a new drug or medical device can cost billions of dollars and take anywhere from three to 12 years using commercial intelligence to help improve the success rate of our life science clients product development efforts is an immense opportunity for definitive health care.

For example in preparation for F. D. A approval of its drug a pre commercial Biopharma company used our monocle expert insight product to successfully engage 90% of its targeted key opinion leaders compared to a historical engagement rate of under 50% as.

As a result, this company received significantly more endorsements from the leading clinicians in its therapeutic area greatly improving its chances of FDA approval and subsequent commercial success.

Third we inform our customers' strategic priorities by providing detailed intelligence that can be used to identify and size market opportunities that represent the most attractive potential risk weighted returns.

For example, one orthopedic medical device customer used our commercial intelligence to determine that its total available market opportunity was 30% higher than previously estimated.

Which would in turn use to justify incremental sales and marketing investments.

Finally, we help our clients improve their talent acquisition efforts by identifying and recruiting the best candidates for jobs across the health care ecosystem.

This is critically important for customers today, given the unprecedented stress facing health care workers and the worker shortages facing the entire industry.

Recently, one of our customers and interim leadership and staffing company used our executive profiles and affiliation data to identify candidates, who could fill vacant leadership positions and hospital facilities, who needed those candidates.

As a result this customer grew its lead funnel by 100 times improved email open rates by five times increased email response rate by four times and ultimately generated millions of dollars in new revenue.

Looking at our fourth quarter performance, we continue to see very strong demand for our products across customer segments and use cases.

During the quarter, we continued to rapidly grow our enterprise client base, which are clients that generate more than $100000 in a R. I'd like to highlight a few of these wins to lead off in life Sciences, We signed an enterprise deal with one of the world's largest manufacturers of COVID-19 vaccines.

This company recently received U S F D. A approval for its COVID-19 vaccine, so needed master data to populate CRM and data warehouse as it builds out the field sales team that will sell its vaccine directly to hospitals physician groups and I D ends across the country.

Also in life Sciences, we signed a multi year multi product deal with one of the world's largest genetic testing in gene therapy treatment companies.

This company purchased our hospital data physician data and commercial claims data all of which will be used across multiple therapy areas in specialties.

This company plans to use definitive health care commercial intelligence to do segmentation customer profiling CRM cleanup sales force planning and territory alignment.

Additionally, we signed our largest ever monocle deal. This multi year enterprise deal enables the medical affairs team at a global Biopharma company to engage with all the right experts across all of its primary and secondary therapy areas. The.

The Monaco product delivers up to date accurate data about a clinical experts most recent publications and clinical trials and speaking engagements. So that our clients medical science liaisons can effectively engage the expert to obtain scientific guidance prior to regulatory approval.

In our provider segment, we signed a multi year enterprise deal with a multistate addiction treatment provider.

This company plans to use our claims data to identify the top physicians, who are diagnosing and treating patients with substance use disorder, and then identify the hospitals, where those patients are treated.

This company will also use our contact data to populate both at Salesforce and Mark Hadow instances to create a single source of truth for all go to market activities and it plans to use the affiliations intelligence created through our definitive I D to identify referral patterns and system leakage.

Finally, we also won significant deals in other parts of our business.

We brought on the world's largest manufacturer of HVAC equipment, which signed a multi year contract with us to identify hospitals and other health care facilities undergoing major renovations, which might need its equipment.

We signed the largest financial services deal in the company's history with a major consumer financial services company, which will use our intelligence to identify physician groups that are good candidates for small business commercial loans.

And finally, our specialty pharmacy companies subscribed to our unique combination of physician groups and claims data in order to understand prescribing patterns across all the doctors and extended network. So it can improve business development and outreach strategy.

We're excited about these wins across all parts of our business and look forward to working with these clients for many years to come.

I'll now turn it back to Jason to talk about our product strategy and our relentless focus on innovation.

Thanks Robert.

I'd like to shift gears, now and talk about our product strategy.

Our innovation flywheel continues to spin in fact as I have discussed before the more that we build out our proprietary data and data science capabilities. The more of this innovation accelerates and becomes more sophisticated.

In the fourth quarter, we launched latitude reporting a new product that allows users to build and real time custom patient cohorts targeting specific disease states.

With latitude reporting users can quickly perform iterative analysis on real world data to gain actionable intelligence that accelerates their go to market strategy.

Leaded to reporting is a critical proof point that demonstrates how we're delivering on our strategy to create disruptive industry, leading health care commercial intelligence.

True intelligence is the combination of data analytics and expertise and our launch of latitude reporting helps our clients use our extensive proprietary data to quickly get the answers they need to solve their most critical business problems.

In addition, during the quarter, we added multiple new features across our product suite and expanded our datasets.

Of particular note, we added Asia expert data to our Monaco expert insight product.

Given medical affairs professionals access to more than 11 million worldwide expert profiles in.

In addition to our internal innovation, we are constantly looking for companies that we can acquire that can provide us with a new dataset or a new capability that will accelerate this innovation companies, where we can strengthen our product platform and leverage our significant sales organization and exceptional client base to drive commercial synergies.

One of those companies is analytical Wizards, whom I am excited to announce today that we recently acquired.

Analytical Wizards and industry leader in delivering technology enabled advanced analytics to life Sciences companies. He used by six of the top 10 global pharmaceutical companies and four of the top seven global biotech companies.

Analytical Wizards brings several exciting capabilities to the definitive health care platform and is indicative of our disciplined approach to acquisitions.

First it deepens, our analytical capabilities for the life sciences market, not only allowing us to attract new customers more quickly, but importantly, it also broadens the solution set that we can sell to our customers new and existing in this strategically important vertical.

Second the acquisition provides us with a new data agnostic suite of solutions that expands our total addressable market.

With the analytical Wizards SaaS product line customers can combine data from multiple sources, including definitive health care and then rent detailed analytics on demand to gain new intelligence on product planning marketing promotion and product performance.

Third analytical wizards expands our reach across the entire life sciences commercialization cycle from discovery and development all the way through post launch sales and marketing <unk>.

Similar to how our acquisition of <unk> extended our capabilities into medical affairs analytical Wizards further extends our reach into both treatment pathway analytics and commercial marketing optimization.

The acquisition brings to definitive health care more than 100, new employees, most of whom are highly talented developers and data scientists with deep subject matter expertise.

Also with offices in the U S and Bangalore analytical Wizards gives us a presence in India to leverage the extraordinary technological and artificial intelligence talent in that great country annulled.

Analytical Wizards is a great example of the type of acquisition that we will pursue will bring our existing proprietary data to their analytics suite, which will immediately raised the value of their offering.

And we will bring analytical wizards proprietary analytics solution to our customers, which will accelerate their growth.

This acquisition also accelerates the timeline of our internal product roadmap and further feeds our flywheel of innovation, thus extending our market leadership and competitive moat even more.

We are excited to welcome the analytical Wizards team to definitive healthcare and build on the great success they've already achieved.

As we look ahead to 2022, we remain incredibly excited and believe we are at the very early stages of a multibillion dollar market opportunity that will enable us to delivers consistently strong growth and high profitability.

Our plan in 2022 is to continue executing on our core priorities that have driven our success to date.

First we will continue to make significant investments in our sales and marketing capabilities growing our team and expanding our marketing reach.

As a relatively young company in an emerging category. It is imperative that we increase awareness of the definitive health care brand and the unique value we deliver.

We've identified more than 100000 potential customers for our solutions and we have less than 3000 customers today, so the opportunity to expand our customer base and in particular, our enterprise customers is vast and.

In addition, we will continue to invest in and focus on our powerful land and expand selling model.

We believe theres, an opportunity to significantly grow our relationships with our existing customers by expanding usage of the current modules that you're using and selling additional modules.

Finally, we will accelerate our pace of innovation.

We have a passion for solving some of the most challenging business problems facing our customers.

With the definitive idea as a strong foundation of our proprietary data hub, we can innovate quickly and deliver new forms of commercial intelligence to our customers.

We will continue to invest in the very best data to strengthen our platform will continue to apply even more sophisticated data science and AI to that data and.

And we will build out new modules to help our clients leveraged as powerful intelligence in their workflow.

The investments we make this year are the critical building blocks for future growth.

I would like to wrap up by reiterating how pleased we are with our performance in the fourth quarter as well as the full year and our excitement for the future.

We believe we have built a differentiated and highly valuable platform that is becoming increasingly strategic to our customers. We are confident in our ability to continue delivering strong growth and profitability for years to come as we execute on our growth strategy.

With that let me turn the call over to Rick to review, our financial results in more detail Rick.

Thanks, Jason Q4 was a strong quarter highlighted by continued rapid revenue growth and strong profitability.

Since today is only our second earnings call as a public company.

I'll start with a quick overview of our business model from a financial perspective, then provide a detailed review of our fourth quarter and full year 2021 results.

And finally finish with our outlook for the first quarter and the full year 2022.

And all my remarks, I will be discussing our results on a non-GAAP basis, unless otherwise noted.

To me definitive demonstrates many of the best attributes of the vertical software business model.

We're a high growth subscription business selling into a 10 billion and growing total addressable market with low single digit market penetration.

We have excellent forward looking visibility through our predominantly multi year contracts and high net dollar retention rates.

We operate profitably due to high gross margins and a very efficient customer acquisition engine, we innovate efficiently and effectively due to our ability to build upon our proprietary data assets and data science platform.

And finally upfront billings and low capex requirements help us translate our profits efficiently into cash flows and shareholder value.

Our Q4 results illustrate how this business model plays out in practice.

Highlights include 38% revenue growth compared to Q4 2020.

28% adjusted EBITDA margin.

33% Unlevered free cash flow margin over the prior 12 months.

And our revenue growth plus trailing 12 month Unlevered free cash flow margin was 71%, putting us well above the rule of 40.

For the full year, we reported 40% revenue growth compared to full year 2020.

34% adjusted EBITA margin.

33% Unlevered free cash flow margin.

We believe definitive combination of high growth high visibility and attractive profitability positions us well in current conditions and for many years to come.

Turning to our results in more detail.

Revenue for the fourth quarter was $46.3 million.

Up 38% from prior year, and 4% above the midpoint of our guidance.

Revenue for the full year was $166 $2 million up 40% from 2020.

This performance is driven by strong organic innovation and execution.

As pro forma organic revenue growth was 37% in Q4 and 36% for the full year.

This pro forma calculation assumes we owned monocle in the same period during the prior year.

This methodology is a small refinement from how we discussed inorganic contribution from acquisitions in Q3, where we excluded monocle entirely from our organic growth calculations, we will use the new pro forma organic growth approach going forward in those periods in which we discussed the revenue contribution of acquisitions.

Our revenue growth continues to be driven by strong sales momentum, particularly among enterprise customers.

We ended the quarter with 417 enterprise customers, which we define as customers with at least $100000 of annual recurring revenue.

This was an increase of 123 customers were 42% year over year and up 40 enterprise customers from the preceding quarter.

As a reminder, enterprise customers represent the majority of our air are and they are a key focus of our go to market programs.

Our total customer count, which includes smaller customers was 2865 at the end of Q4 up from 2577 in Q4 2020.

We also had a strong quarter and year upselling into our existing customers, which is a core component of our growth strategy.

Our overall net dollar retention rate of 108%.

Was up 300 basis points from 105% in the prior year.

In our enterprise N D. Our rate for the full year was again above 120%, reflecting the success of our land and expand strategy.

We have best in class gross retention rates among enterprise customers.

And multiple avenues to increase their spending with us over time through the adoption of additional modules and expanding usage to additional users and new areas within their organizations.

Gross profit with $40 7 million up 34% from Q4, 2020, and our gross margin of 88% was down from 90% in Q4 2020 due to growth investments to add prescription claims data prescription.

Prescription claims data represents a significant opportunity to innovate and expand our upsell opportunity within life Sciences, and we expect to realize operating leverage from these investments over time as we did with medical claims information.

Sales and marketing expense was $15 9 million.

Up 50% from Q4 2020.

As a percentage of revenue sales and marketing expenses were 34% of revenue up from 31% in Q4 of 2020.

We're committed to investing for growth, specifically, expanding our digital marketing capabilities and building out our sales and customer success teams we.

We have a highly efficient and scalable go to market model with an LTV to CAC of more than 10 times.

And we'll continue to invest incremental resources into our growth initiatives to capture more and more of this $10 billion market for as long as we continue to generate strong returns on those investments.

Product development expense was $5 million up 46% from Q4 of 2020.

As a percentage of revenue product development expense was 11% of revenue up from 10% in Q4 of 2020.

Investing in our platform and using our existing datasets to launch or enhance multiple products is a highly effective and efficient way for us to increase the value we deliver to customers.

We will continue to invest in our product development efforts given the number of exciting opportunities we've identified on our long term product roadmap.

G&A expense was $7 million up 88% from Q4 2020, when we were a private company.

As a percentage of revenue G&A expenses were 15% of revenue up from 11% in Q4 of 2020.

The increase in G&A expense reflects the first full quarter of incremental public company expense and we expect the and utilization of these largely fixed costs will impact margins in the early part of 2022, but we will gain operating leverage throughout the upcoming year and beyond.

Operating income was $12 3 million down 1% from Q4 2020.

As a percentage of revenue operating income was 26% of revenue compared to 37% in Q4 2020.

The year over year change in margin is related to three key investments.

First 300 basis points of continued investment in sales and marketing.

Second.

300 basis points of innovation investments in prescription data and development.

And third.

400 bps of increased G&A costs required to operate as a public company.

As we face our first full quarter of these largely fixed costs, we will experience operating leverage in G&A going forward.

Adjusted EBITDA was $13 1 million up 2% from Q4 2020 as a percentage of revenue adjusted EBITDA was 28% of revenue compared to 38% in Q4 of 2020.

The change in EBITDA margin is due to the same investments, which I described impacting operating income.

Net income in Q4 was $6.5 million or four cents per diluted share based on 150.9 million weighted average shares outstanding.

It's important to note that net income was impacted by a 700000 dollar non-GAAP tax effect for transaction related expenses without that item and our secondary offering.

Net income would have been $6 9 million and earnings per share would have been five cents.

Both at the high end of our guidance range.

Turning to cash flow definitive high margins upfront billing and low capex requirements provide substantial free cash flow generation, we focus on trailing 12 month cash flow due to seasonality.

Historically, our cash flow has been strongest in Q4 and Q1 due to the timing of year end invoicing and we expect that trend to continue.

Operating cash flows were $25 2 million on a trailing 12 month basis.

From $23 2 million in the comparable period, a year ago and on a trailing 12 month basis Unlevered free cash flow was $55.4 million were 33% Unlevered free cash flow margin.

Converting essentially all of our full year, adjusted EBITDA $56 million into cash.

We ended the quarter with $387 5 million in cash.

Reflecting $243 million of net proceeds from our secondary offering in November and.

And with only $270.7 million of that and strong profitability, we're well position to fund both organic and inorganic growth initiatives.

Even after the acquisition of analytical Wizards, we have over $330 million of cash on the balance sheet.

We view, our strong balance sheet and our ongoing profitability as strategic assets in today's dynamic environment, which position us well, both today and for years to come.

As Jason mentioned, we were pleased to complete the acquisition of analytical Wizards on February 18th for a total of $100 million in cash $65 million of which was delivered after quarter end. They are a perfect fit for our tuck in M&A strategy, and we have a clear value creation thesis we.

We will bring our proprietary data to the air analytics platform and their proprietary analytics to our.

We'll leverage our best in class sales and marketing engine to accelerate their growth and we will accelerate product innovation across both platforms. The financial impact of a W is expected to be modest in the short term to contribute high single digit millions of dollars of revenue in 2022 with growth rates slightly accretive to.

Our own.

And their adjusted EBITDA is projected to be several million dollars negative in 2022, but will operate at attractive profitability in 2023 and beyond.

I'd like to wrap up by providing our guidance for the full year 2022, as well as the first quarter.

Guidance is based on a bottoms up operating models and excludes any new M&A other than analytical Wizards and excludes any changes in capital structure in general to the extent we over perform on revenue, we will often seek to reinvest upside in incremental growth opportunities rather than maximizing short term.

Profitability.

That will vary from quarter to quarter.

For the full year 2022, we expect total revenue of $219 million to $222 million for median growth rate of 33%.

And this includes a revenue contribution from analytical Wizards in the high single digit millions of dollars.

non-GAAP income from operations of $57 million to $63 million.

Adjusted EBITDA of $61 million to $67 million for full year median margin of 29%.

And non-GAAP net income of 35 to 41 million and earnings per share of 22 to 26 cents on a 155.5 million weighted average shares outstanding.

Our guidance for 2022 reflects approximately 450 bps of investment relative to full year 2021, which is composed of approximately 150 bps of incremental growth investments in our core business just over 200 Bips from the short term margin impact of analytical Wizards and just over one.

100 bps in the G&A costs required to operate as a public company.

Because we're making these investments late in 2021 and early in 2022, you will see a steady increase in the EBITDA run rate profitability as we move through the year with Q1 EBITDA margin of 26% building to over 30% by year end for an average of 29%.

For the year.

In Q1, we expect total revenue between 47 and $49 million for median growth rate of 29% non-GAAP income from operations of $10 million to $12 million adjusted EBITDA of $11 million to $13 million and non-GAAP net income of $4 million to $6 million.

We're two to four cents per diluted share on 155 million weighted average shares outstanding.

So to summarize 2021 was a great year for definitive health care, and we're well positioned to carry that strength into 2022.

We've developed a clear leadership position in a large and attractive market that we believe will support high levels of predictable revenue growth and profitability for the foreseeable future. We believe we built a unique business that can deliver strong growth at scale and do so in a capital efficient manner, we feel very good about the opportunity definitive health care has to be.

From a much larger more valuable business for our shareholders over time and with that we can open the call for questions.

Thank you we will now be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants and speaker equipment that may be necessary to pick up your handset before pressing the star.

Yes.

In the interest of time, we ask that participants limit themselves to one question and one follow up one moment. Please while we poll for question.

Thank you. Our first question comes from Sterling Auty with J P. Morgan. Please proceed with your question.

Hey, this is Doug on for Sterling. Thank you for taking my question can you talk about the penetration levels of the most popular modules within your customer base.

Sure. Thanks, Doug It's Jason grants.

So the way that we look at modules overall, we have 16 modules that we can sell to our existing clients. So our strategy as you know is really about land and expand.

We bring our clients and then over time we.

Player account executives and customer success team to increase your modules within there that module account has increased too since we last talked to you all and thats due to the launch of latitude discovery and latitude reporting.

So when we bring out a new client today, they bring on we bring them on typically with just over two modules that they purchased and then we continue to expand over the course of the life with those customers.

You'll see is if you look at different segments of our customer base, you see different levels of penetration.

So our life sciences companies over time should by every one of those modules. So as we continue to launch new modules and increase the amount of things that our clients can buy we should be able to sell all of those kind of life sciences clients, our health care providers, which is also a big opportunity market for us should buy the vast majority of those modules.

And then with the rest of our customers, our health care customers and our diversified customers it depends a little bit on the markets that theyre selling into but typically speaking they should be able to buy seven or eight of those modules over time.

Great. Thank you so much and then as a follow up to that can you discuss how much of the growth in this quarter came from upsell and cross sell versus new logos.

Sure roughly speaking our historical average is about 66% of our growth is from new logos and 33% of our growth is from Upsells.

So that's been pretty typical for the last several years.

And it's been pretty typical in the last year as well.

Course.

Jason's, referring to the growth in air or one of the great things about this business model is our exceptional forward looking visibility so in any given quarter.

Youll see virtually the entirety of the revenue growth coming from existing customers because of the beginning of the year, we have 90% visibility to.

To the full year results.

In times like these nice to have that long term visibility.

Great. Thanks, so much.

Thank you. Our next question comes from Craig heading back with Morgan Stanley . Please proceed with your question.

Yes. Thanks have a question on analytical Wizards and appreciate all the disclosure and discussion in the prepared remarks, you know, Jason you've talked about having a good pipeline for M&A and being disciplined can you just touch on why this is the right deal to do at this time and then also how you think about retention of key employees.

And then any potential new customers that they bring to <unk>.

Yeah. It's a great question I'm glad you asked analytic questions is incredibly excited and it really fits squarely into the acquisition strategy that we've laid out with all of you and we continue to pursue so when we acquire a company.

Looking for two things, we're looking for product synergies, where we can bring our data into their capability and immediately improve that capability.

And then secondly, we're looking for commercial synergies, where we're able to take the product and platform that they have and accelerate their growth by pushing it through our very large sales force and our.

Extensive client relationships.

Analytical Wizards Israeli really hits both of those perfectly so we're going to be able to expand our capabilities and immediately make that product better by pushing definitive health care data into it. It also expands our Tam because now we're able to bring in due to their data agnostic posture, we're able to bring in third party data as well as internal data and combine.

That was the definitive health care data to immediately make their solution extraordinarily powerful.

And they are a very small sales team so far so being able to push their product through our very large sales force is going to be a great way to accelerate their growth.

From a financial standpoint, while they're slightly negative from an EBITDA standpoint, as Rick mentioned, they are fantastic unit economics, and we expect over time that they can reach similar EBITDA levels is definitive.

It's really it ticks all the boxes that we're looking for.

In terms of making sure that we retain employees. Obviously, that's very important we look to significantly grow their employee base. We're very excited about the opportunity to have access to the extraordinary talent in Bangalore. So we're gonna be investing heavily in day have a great culture that fits really well with what we've done where we folk.

Just on creating a great environment, where people have the opportunity to develop and grow with the organization.

Just as an example, we promoted almost 100 people at the beginning of this year out of our 700 employees.

That's the type of environment that we're bringing people in and we're excited to bring the analytical wizards employees into that type of growth environment.

Got it and then just as my follow up when we when you talk about kind of the reinvested into sales and marketing and then making sure.

Customers are aware of all the capabilities you have.

The context.

Customer shy with just over two modules and understand why it's higher in life sciences, but they could be.

Complete said, Hey, you know what.

Some of the things from a sales perspective, how are you going to measure the sales force success in terms of their ability to upsell and any kind of traction that they're seeing to drive that higher.

Sure Hey, this is Robert and we're extremely metrics driven so we're looking at these types of things all the time and the good news for us in terms of thinking about continuing to invest in sales and marketing is that.

All of our markets are growing quickly we have a lot of opportunities to deploy.

Additional focus and so in a very strong sales efficiency with toric mentioned, which has an LTV.

To CAC ratio of 10 X.

We want to continue to deploy investment against the right places and sales and marketing I'd say a couple of places to your question, where we see really really strong opportunity and maybe outsized growth and providers and life Sciences.

And providers you know, it's a relatively nascent market for us we haven't put a lot of focus there historically, but we're seeing a lot of growth through sales efforts.

And so we're continuing to add resources there. The other one is obviously a critical life science market.

Really focusing especially on mid to large pharma, where we see tons of opportunity and now with amoco local wizards onboard and some of the modules that Jason talked about them a lot of opportunities to expand there. So.

And you mentioned number of modules per client, which of course, we look at but we also look at all the basics like conversion rates.

Average value per customer.

Growth by segment and growth by size within the segments or monitoring. These all the time to be sure we're deploying.

The investment appropriately to drive the maximum growth.

Thank you. Our next question comes from Kash Rangan with Goldman Sachs. Please proceed with your question.

Hi.

Thank you very much for taking my question.

Congrats on wrapping up the year with a spectacular Q4, Jason I'm curious to get your thoughts on the strategic evolution of the company, who made this amazing acquisition, which hasn't analytic layer on top of your core dataset. If you look at our friends across the other side of the country at zoom and phone they have definitely take that Dave.

Centric approach in both layers of engagement intent et cetera, and really evolving that business into two I shouldn't say, a CRM company, but a more customer centric engagement centric model. How do you see the evolution of definitive healthcare. If you believe that that's the way to go or do you have a different way in which.

Do you want to have all of the strategic direction of the company.

As regards to the way in which you.

We want to engage with your customers. Thank you so much.

Sure.

So I think it's really as we think about innovation, which is really what this is all about it's absolutely core to everything that we do innovation drives our double digit HIV growth for new logos every year.

This increase our retention and it increases our competitive mode. So as you think about the areas that we're innovating in how analytical wizards fits into that first and foremost we're innovating always in building out our proprietary data asset.

Foundation, what we built over the 11th last 11 years of having the.

The entire ecosystem of health care providers laid out and connected through our definitive idea is extraordinarily proprietary and creates a tremendous opportunity for us to continue to apply data science to create new insights and analytics for our clients and also to utilize this data in new and unique ways for our clients.

So there is a big investment, where we're constantly polling and new data to make that platform stronger and drive new insights for our clients are good example of that is our data science team today is working on what we call a physician prescribing influence scar and this data science allows us to go through our intelligence.

We built up over the last 11 years and utilize that to figure out which doctors actually influenced new prescriptions.

Versus the ones that are just involved from a from a maintenance and refill process. So once we have developed this data then it's all about how do we use. This so we're constantly building new analytical workflows internally to help our clients utilize this data in the most effective way possible.

Our front end workflows that meet their exact needs. These are integrations with CRM systems, like Salesforce, and Viva and of our Caddo and analytical Wizards is just another extension of that so how can we utilize this amazing and proprietary data platform that we've created to help our clients solve new problems and analytical Wizard.

Allows us to solve an increasing number of problems for mid to large sized pharmaceutical companies.

Wonderful and then one follow up for Rick as you take on acquisitions, I guess that the scale of the company allows it to absorb more of these tuck in acquisitions more and more efficiently at what point will we be able to do it.

No hit to the operating margin trajectory of the business, maybe that takes a few more price or maybe a few more years, but wondering how we should think about the ability of the company to absorb acquisitions that scale. Thank you so much.

It's a great question and it's really a trade off of <unk>.

Capital efficiency versus reported profitability in the very short term.

Our strategy is to go after the very best Tech and to go after it early that means that quite frequently we'll have a small amount of negative EBITDA in the short term, but accretive long term growth and a powerful ability to marry their tech with our salespeople.

And in the case of analytical Wizards, there their analytics with our proprietary data really.

Just as we saw with Monica this has the potential to be event Tastic acquisition.

I would like to clarify in case, there's any confusion.

Really right on track with our organic profitability and accelerating organic growth vis vis what we talked about in.

And the analyst day in the IPO and absorbing a small amount of dilution from analytical Wizards.

Wonderful thanks for the insights.

Thank you. Our next question comes from <unk> <unk> with Barclays. Please proceed with your question.

Okay, Great, Hey, Jason Hey, Eric Thanks for taking my questions here.

Yes.

Jason maybe just to start with you just the Super high level, but as you sort of look at the U S healthcare landscape here in 2022.

Are there are there any changes or anything that you see in the horizon.

That could be particularly impactful for demand and I'll leave that sort of intentionally open ended because I'm kind of curious how you think about just any industry changes vis vis demand for definitive.

Yes, there is a lot of changes that are taking place that are all great tailwind for definitive I think one of the biggest ones is the continued use of data and.

In terms of Digitization of health care overall, so there's a lot of challenges for people that are selling into health care, there's less access than they've ever had before to physicians and hospitals and that's a real advantage and a real tailwind for definitive healthcare it requires companies to be much more focused and know much more.

There are prospects before they go have a conversation to make sure that their message hits every single time.

Other thing it does is it the timing of all interactions with companies has become it with physicians and hospitals will become an increasingly important and we help our clients not only figure out when they segment their market who are the most important physicians to go after but what's the right timing of that so we look at things like historical affiliations in winter.

Affiliations changing over time, and how does that create opportunities for our clients. We're the only people that have mapped all that out with a definitive idea and we're the only people with that longitudinal data over time in order to answer those important questions for our clients. So we see that continued move towards data and leveraging that as a real tailwind.

For us going forward.

Got it got it that makes a lot of sense, Rick maybe for my follow up for you and great to see the net dollar retention.

Continue to continuing to increase can you just talk about that a little bit and maybe as part of that what modules you're may be particularly excited about.

And for continuing to drive that up does that make sense.

Absolutely after managed time in terms of the modules I, most excited about but what youre seeing.

And we've got this illustrated in the Investor in the Investor deck is a long term secular strat trend of <unk>.

MTR going up into it right.

So we believe that can continue to progress at least for the foreseeable future and it's it's driven in large part by World Class Enterprise MTR.

120% and in fiscal 2021, and so as that continues to expand as a percentage of the base that will be the greatest driver of long term MTR.

Very helpful. Thanks, guys.

Thank you. Our next question comes from Gilenya dressing with credit Suisse. Please proceed with your question.

Hi, This is Adam on for Joe lender today, Thanks for taking the question and congrats on the quarter end.

The acquisition that you guys.

That completed.

Maybe I'll start with you just had more of a high level one but.

Definitely appreciate the color on the new customer wins, both this quarter and last quarter.

I was wondering if you could just touch on the sales cycle for some of these significant wins.

Quickly they were able to be converted.

And then maybe how many other vendors if any were considered.

<unk> definitive.

Okay.

Sorry, I missed the very end of your question. There this is Robert.

Yes, I was just wondering if.

How many other vendors were included as part of the sales cycle.

New customer wins.

Sure. So our new sales are sales cycles tend to range and roughly 90 to 120 days, obviously, there can be some exceptions to that but in general that's how long it'll take.

And I'd say, what's really great about definitive is many of our clients will use other data vendors, but it's not a replacement it's an AD we have such distinctive.

Data and unique data that in many cases clients will choose to use us along with others.

So certainly Theres times, where we're competing against some one or the other but I think in many cases.

Even if there's someone else there the final choose to go along with definitive regardless of what they decide with the other vendors so.

That's been a really nice part of the sales strategy here, which is every single potential client out there as a sales opportunity regardless of who else they are using.

Got it and then as a follow up looking at the earnings presentation. It looks like slide number 11 shows around 33, and a half thousand active users on our platform slightly down compared to the 34000 users disclose as part of the <unk> 21 earnings I know, it's on a metric you guys guide to or anything like that.

I was just curious if you can help me bridge that metric.

Bridge that with the new customers and the revenue growth that you've been experiencing.

Yeah, I'll answer that one Jason so the.

The active users that indicated there is all about just people that are utilizing the online platform.

It doesn't measure because we lose visibility into it is all of the integrations that we're doing with internal systems, whether it be a sales force or a veeva RMR Caddo.

That's been a big focus of ours over the last couple of years.

We found that clients are far stickier.

Once they are integrated into their internal systems. So we put a lot of emphasis on that once clients come in to make sure that they get fully integrated and thats not picked up in that step.

Got it very helpful. Thank you so much.

Thank you. Our next question comes from Brian Peterson with Raymond James. Please proceed with your question.

Hi, Thanks for taking the question just just one for me So Jason you mentioned a couple of big wins.

And HVAC provider, one with financial services providers kind of outside of the traditional kind of health care landscape I'm curious where are you landing with these customers in their kind of digital or data driven go to market motion is that.

We are in that kind of go to market motion and I'd be curious what are the sizes of those deals kind of versus your expectations. Thank you.

Yes so.

We sell into foreign markets as you know we sell into life Sciences health care providers health care. It and then what we call diversified companies, which are companies that sell into many industries, including healthcare are.

Diversified is where those two would fall it it's been a fantastic market for us.

Well you have as you know people are realizing health care. It's one out of every $5 that is spent in the U S is four trillion dollars. So a lot of companies are looking for how to sell into this market and what they're finding is it's a very very complex market to sell into you really need to sell into the entire ecosystem and it's.

Very different than the motion they are used to in different industries.

And Thats, where we come in we help them map that out and we help them identify paths to success commercially.

So that's been a great growth market for us over the last few years and we expect that to continue in fact, we're adding significant sales team to that this year.

In terms of price point, if you look across those four segments. Our life Sciences has the largest average price followed by our providers, but our HCI and our car is continuing to grow significantly year over year. So they are slightly lower ACB for new logos, but we're seeing significant growth year over year.

As we find new ways to add value to those clients.

Good to hear thank you.

Thank you. Our next question comes from David Grossman with Stifel. Please proceed with your question.

Alright, thank you.

If I could go back to an earlier question about retention yes.

You described some pretty significant investments in sales and marketing and other areas and I think you mentioned, 120% plus.

Net retention on your larger customers can you maybe share with us how that compares to the 2020 number and and perhaps even some color on kind of how you thought about retention and providing your 'twenty two guidance.

Sure. This is Robert Thanks for the question.

It is down from the 2020 number slightly so I think it's 124 compared to $1 20.

Again that number we look at it as anywhere in the 100 Twenty's range is incredibly good and continues to grow our really important enterprise base and drives up our overall MBR as rich commented on earlier Rick commented on earlier.

That's a place where we focus a ton and if you look at that segment the enterprise segment.

Look at the growth in 2020 , one it's 42% customers added in that segment.

And they now comprise 57% of our IRR and so that segment's incredibly important as we look forward we would expect.

In that 120 range, perhaps grow growing slightly depending upon when bigger upsells tend to fall.

And again that will continue to drive up our overall MBR rates slightly and Thats, how we think about the business going forward and in the detail.

In the details.

There was also in Q4 2020, there is a few exceptionally large renewals and so in any given quarter any given snapshot of time youre going to see some some ups and downs as we get larger it's steady.

But we're very pleased with 120% on a go forward basis, and we feel we feel that we continue to maintain or even even improve that slowly over time.

Got it and thank you for that description by the way and then just.

One question on the margin it sounds like again, some pretty substantial investments.

Just around the IPO and afterwards and.

You talked about improving margins as we go through 2022, so with that in line is it fair to assume that margins at least for the forecastable future have kind of bottomed or will bottom in 2022, and we should think of that as the base to build upon in future years.

Absolutely and this is very consistent with if you recall the discussion.

In last quarter's earnings call and in the IPO, how in the short term youre dealing with the largely fixed cost of.

Public company costs, which are which are certainly a drag, especially in the beginning part of the year and given our operating metrics, we have high confidence that the.

Measured incremental investments that we're making in sales and marketing and product development.

We will drive growth for years to come and I think you see that starting to be reflected in the guidance in 2022.

Okay, great very good thank you.

Okay.

Thank you. Our next question comes from Glen Santangelo with Jefferies. Please proceed with your question.

Yes. Thanks I also just wanted to follow up with a quick question Rick on the margin.

Just to make you repeat yourself, but.

Think about that 25% margin in the first quarter, that's down over 300 basis points sequentially did I hear you say that that the analytical Wizards acquisition was a 200 basis point impact and the other 100 basis points were coming from an incremental investment in sales and marketing is there anything else that we should be thinking about or is that.

Yes, it's a follow up to that last question is <unk> the appropriate jump off point to think about the rest of the year at that level.

So the.

So the bridge that I provided in terms of the bps of bps of investment was for full year and.

There is there's more moving pieces in Q1, we accelerated our sales and marketing hiring so that we enter the year with tremendous.

With tremendous momentum I think the most important takeaway in terms of profitability is our fast and significant improvement in profitability as we go through the year. So exiting at the end of Q4 with a run rate over 30%.

Which combined with our revenue growth is really best and best in class unit economics.

So we're very focused on that.

Okay. Thanks, if I could just ask a question around the balance sheet I think I heard you say.

At the end of that acquisition. After you paid the cash for analytical Wizards, you're left with $330 million and so Jason I guess the question to you is.

Is that a level that you're sort of comfortable with because if I'm not mistaken I think the company has a lockup expiring next week and I'm. Just curious what you think about the current cash levels and mix.

The investment opportunities you see in the marketplace and I guess I'm, assuming there are no plans or intentions or signs down at this level.

Yeah.

Yes, so we.

We're excited about the fact that we have a nice cash balance.

I think we've driven growth over the last 10 years, primarily organically.

We will continue to have significant organic growth, we've got an amazing internal product pipeline.

Fantastic, but as you've seen with Monaco and now in a political wizards, they're spectacular opportunities out there for us to complement that organic growth with tuck in acquisitions, where we can increase capabilities and accelerate their growth.

So we will continue to be looking for great opportunities like analytical wisdom Monica to continue to accelerate that growth, but I will say it will be extremely disciplined on our acquisitions as we have in the past. So we only want companies, where we can meet our criteria, which is we can add data to their pre.

To make it more valuable and we can accelerate their growth by leveraging our commercial capabilities as well as our existing client base. So we'll be aggressive, but we'll be very disciplined in that approach.

Thank you there are no further questions at this time I would like to turn the floor back over to Jason cramps for any closing remarks.

Yes, so once again I just wanted to say thanks for the time, everyone and the support we're really excited about the quarter that we have and we're excited about the long term growth of the company.

As we've talked about for US. This is about building 10 years of long term sustainable profitable growth.

Based on the market that we have our competitive moat and the things that we're doing both internally as well as Inorganically. We see no reason that we won't capitalize on that so thanks again for the time and we look forward to hearing from all of you.

This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

Okay.

Yes.

Yeah.

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Yeah.

Sure.