Q2 2022 Definitive Healthcare Corp Earnings Call

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Good day and welcome to the that's a definite of health care Conference call.

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I'd now like to turn the conference over to Mr. David Campbell.

Legal Chief legal officer.

Please go ahead.

Yes.

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Right.

Good morning, and thank you for joining us today to review definitive healthcare second quarter 2022 financial results.

Joining the call today are Robert Musselwhite definitive health Care's, CEO , Jason Cramps definitive healthcare's, founder and executive Chair.

And Rick Booth definitive healthcare's, Chief Financial Officer.

During the call, we will make forward looking statements, including but not limited to statements relating to our markets and future growth opportunities 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 operations 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 forward looking statements.

The company undertakes no obligations 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 was just posted to Investor relations portion of our website at.

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 measures.

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

Thanks, David I would like to thank all of you for joining US this afternoon to discuss definitive health Care's second quarter results.

Let me start by saying that I'm incredibly excited to lead this terrific company. We are at the early stages of delivering on our mission to transform data analytics and expertise into health care commercial intelligence and I believe we are in a great position to generate strong growth at scale for years to come.

Also thrilled to be able to continue to partner with Jason in his new role as executive Chairman.

I'm sure we will all continue to benefit from his passion for product development and delivering value to our customers.

On today's call I will review, our second quarter results provide some color on what we're seeing in the market and discuss several important recent wins before turning it over to Jason to discuss our latest product innovations.

We had a solid second quarter signing significant wins in each of our markets life Sciences providers health care, I T and diversified with both new and existing customers customer.

Customer interest in our health care commercial intelligence platform remains very high due to the value we can deliver across a variety of use cases from clinical trials and product development to sales force enablement to talent acquisition and many others cut.

Customers are looking for technology that can improve their top and bottom line performance and definitive health care is well positioned to deliver on both.

This backdrop powered our second quarter financial results, which exceeded the high end of our guidance on both the top and bottom line and demonstrated our ability to deliver strong revenue growth and high profitability.

Our total revenue was $54 $5 million, which represents a 37% year over year growth.

And our adjusted EBITDA was $16 $3 million, which translates into a 30% margin.

This was well ahead of our expectations for the quarter and reflected the timing of investments as well as the inherent scalability of our business model.

While our financial results in the quarter were strong we did begin to see some lengthening of deal cycles towards the end of the quarter.

Some prospects in each of our markets instituted additional approval processes or deferred making final decisions duty uncertainty in the broader economy.

This was largely concentrated among new prospects as upsell activity remained strong and importantly, the deals that have been delayed remain active sales opportunities.

In the near term, we think it is prudent to assume these dynamics we saw in the second quarter will persist across the second half of the year.

As I mentioned earlier, however demand generation across all channels remains very healthy and we feel very good about definitive health Care's continued strong growth prospects.

We will continue to benefit from the fact that the health care market is not only incredibly durable and all macroeconomic environment that has continued strong tailwind, including an aging population heavy focus on value based care and as an industry in the early stages of a digital transformation that plays right into our strength.

Plus we support companies and organizations growth in sales activities critical activities, where they are most in need of help and most likely to prioritize for external spend.

As a result, we remain on track to deliver revenue growth of approximately 34% for the year and to exit the year at or above a 30% adjusted EBITDA margin.

I would now like to spend a few minutes discussing how we believe our value proposition will resonate with customers and current market conditions and highlighting several wins from the quarter.

At its core the definitive health care platform is built to simplify the complexity of the health care ecosystem for any company selling into this four trillion dollar market, which is not only the largest segment of the economy, but also the most misunderstood and difficult to navigate.

The definitive healthcare platform can help any company looking to sell into the health care market make more informed decisions about their business. For example, we help all kinds of companies in various industries ranging from software to staffing to life sciences optimize their sales and marketing efforts across the entire spectrum of the health care ecosystem.

<unk> inefficient sales organization that targets the complicated health care marketplace requires a deep understanding of who are the most important decision makers and the relationships among all the relevant facilities physicians and health systems in order to create compelling messaging to drive effective sales and marketing campaigns that maximize precious investment dollars.

Our platform does all of this quickly and easily.

Provider organizations routinely select definitive health care to help them influence referral patterns reduce out of network leakage and ultimately grow market share.

Definitive health care provides intelligence around patient populations provider behavior, and payer behavior to help providers understand where and how to invest capital understand expansion opportunities and determine what types of service line changes might be necessary to optimize revenue in a value based world life.

Life Science companies. In addition to the sales and marketing needs outlined earlier must be able to accurately sized patient populations assess market opportunities and identify the right experts for a specific disease area before undertaking clinical trials that can take years and cost tens or hundreds of millions of dollars. Our platform helps them do all of that.

Solving these business needs for customers is especially important in more challenging economic times when investment decisions are more heavily scrutinized in the cost of a failed drug launch or sales campaign can be particularly costly.

The definitive health care platform is uniquely positioned to solve these and other business challenges for several reasons.

The first is our ability to provide a comprehensive view of the entire health care ecosystem.

Last quarter I discussed with you how we have amassed nearly 100% coverage of the health care market through our sophisticated data ingestion engine proprietary data research and extensive use of artificial intelligence.

Today I want to focus on why a comprehensive view is so important to your customer.

When companies are selling into the health care industry, they need more than a quantitative picture of their target market.

To identify the right physicians, who can be the best partners and key influencers organizations need to understand more than practice locations number of patients and prescribing history.

To be sure that's high value quantitative data that in many cases, only definitive healthcare has but to truly maximize sales force efficiency. These organizations need behavioral data about their provider population in their patient population, including a provider's willingness to try new therapies and whether the policies of their affiliated delivery network permit them to make that decision.

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A definitive health care algorithms generate these qualitative insights, which we then married to the quantitative data to generate real commercial intelligence.

The second is our SaaS based platform in rapidly changing markets speed and flexibility are paramount.

Customers need the right information at their fingertips and need to be able to find that information on their own. It is simply too costly and inefficient to have to wait weeks for an answer from a third party or services organization.

With a definitive health care platform customers are able to directly leverage our various datasets and customize their queries immediately as needed.

This is critically important at a time when market conditions are evolving quickly and customers need to ensure they are using the most relevant and up to date data when making business decisions.

Finally, the breadth and depth of our historical data allows us to respond to customer demand quickly with new insights.

Over the last 11 years, we've created a longitudinal view of the health care ecosystem that helps our clients understand how this dynamic industry is changing and how they need to adapt their business.

For example, we have historical affiliations data to ensure our clients understand how physician loyalty and referral patterns are changing overtime.

We understand the history of technology infrastructure and hospitals. So we can help our clients predict when a change is likely.

And we have details on where executives have been so that our clients can understand how to personalize their message to have the greatest impact. These mission critical questions can only be answered because we have the history to understand the past and therefore better predict the future.

And this history of highly proprietary data does not exist anywhere else, creating a competitive moat that continues to deepen overtime.

I'd now like to spend a few moments reviewing some of our key wins in the quarter.

Once again, we saw a good deal of momentum across each of our key customer segments for growing variety of different use cases.

First we continue to see significant traction across the life Sciences market.

We sold a multiyear enterprise deal at medical device company manufacturing compression pumps for lymphedema patients.

This was a very competitive deal, where we displaced the existing data and analytics provider with our latitude reporting product that we launched in Q4 of last year.

This customer will use definitive health care reference data lab data and account profiles to improve targeting account profiles and competitive analysis.

Our recent acquisition of analytical Wizards continues to perform in the second quarter as well.

We won a multiyear upsell deal for passport promotional mix and one of the world's largest independent biotechnology companies.

Customers, a longtime user of the analytical wizards product suite and they significantly increased their investment with us in the second quarter by adding seats and functionality to enable quarterly reporting and analysis of their marketing investments as opposed to the previous reporting set that was delivered annually.

Our <unk> product line also continued its track record of success, winning multiple deals within the quarter, including a large deal at a leading global biotech in the oncology space.

This company is launching a new key compound and it had an immediate need for key opinion leader data in the Asia Pacific region.

<unk> selected <unk> because of the depth of our expert data our medical liaison driven approach and the fact that we'll be able to offer them access to experts around the globe as they move beyond their initial APAC launch to other global regions.

In addition to our success in the life Sciences space, we had our usual wide spectrum of deals in a variety of industries.

Health care staffing and recruiting continues to be a strong market for us with both growth in new logos and expansion with existing clients.

We also saw multiple wins at both national and state level insurance companies to plan to use our physician and physician group data to strengthen their provider networks.

In the provider market, we had several significant wins, including a three year deal at a managed services organization that will utilize our platform to help build out its ambulatory network for outpatient cardiac surgeries.

In our diversified segment, we had wins ranging from the world's leader in electronic signatures and agreements to the largest specialty distributor of rehabilitation and sports medicine products in the United States to one of the world's largest coffee retailers, which once he used definitive health care to target hospitals for both its foodservice business and to put coffee shops in their lobbies.

These are great examples of the value, we're delivering to both new and existing customers today, and we will continue to do for years to come.

Now, let's turn the call over to Jason to review some of our recent product innovations and takeaways from our user conference definitive lives that we hosted during the quarter.

Thanks, Robert we had a busy second quarter in product development, including the introduction of medical expert insight to Plano and Monica expert go as well as continued innovation across our entire integrated platform. So let me start with our recent user conference definitive lives, which we held virtually on may 17th with almost.

1100 customers in attendance.

This is a great opportunity for us to showcase the full breadth and depth of the definitive health care platform.

Over the course of the day, we held more than 20 breakout sessions that highlighted some of the most innovative ways customers in each of our end markets are using our platform.

It was incredibly powerful to hear firsthand testimonials from numerous customers on how they're utilizing the data and context, our platform provides to drive significant tangible value to their businesses.

There are a number of these testimonials on the Investor Relations section of our website I encourage you to listen for yourselves.

One of the key takeaways for us is that the challenges and opportunities facing our customers continues to grow and.

And there's some desire to use our platform to solve even more of these challenges.

This underscores the opportunity for us to continue to innovate and as a result expand not only our total number of customers, but also to grow our relationships with existing customers through more data analytics and tools.

The most significant product announcement within the quarter was a simultaneous release of monocle expert insight to Plano and expert go.

Medical expert insight to point out is the next generation of our expert identification solution that significantly expands the capabilities of this product and provides customers access to nearly 13 million key opinion leaders.

In this latest version customers can use live filters that provide real time updates of scientific activity by expert or therapeutic area as well as more granular key opinion leader mapping all of these capabilities make Monica, even more effective at helping medical affairs teams find the right experts that can help develop better medical strategy.

<unk> and bring new drugs for medical devices to market quicker.

We've also made it even easier to access monical with release of our new mobile App expert go.

This is an important release as medical science liaisons are common users the Monaco and most of them spend the bulk of their time in the field visiting and experts in person with expert go they'll now be able to use monical no matter where they are.

We also worked hard during the quarter to continue to leverage the value of the technology platform, we acquired with analytical Wizards last week, we launched passport express the.

The first product that integrates to comprehensive analytics bill by analytical Wizards with the proprietary data from definitive healthcare.

We acquired analytical Wizards in February of this year and in less than six months, our combined product and engineering teams were able to design and shipped this new product.

A great proof point of the speed at which we look to integrate acquisitions any innovation. This can drive.

Available for more than 20 therapy areas passport express delivers fast and easy access to off the shelf health care commercial intelligence, enabling biopharma companies to better understand treatment pathways brand behavior and market share.

For a given therapy area, we've extracted mission critical data from our industry, leading commercial intelligence platform, including payer claims physician affiliation information and health care reference data.

These data are then pre populated with the analytical wizards environment, where customers can instantly query flexible dashboards and powerful visualization tools to quickly get answers to their questions.

The integrated data and analytics and passport express practically eliminates the research requirements and timelines traditionally required for commercial teams to search real world data normalize in Lincoln and then build analytical models on top with passport Express you get that right out of the proverbial box.

This is the first of many innovations to come that will combine the power of the highly proprietary definitive health care data with the best in class commercial analytics platform that analytical Wizards has developed.

These are great. Examples of how we were able to quickly innovate and iterate on existing solutions to provide additional value to customers.

A key part of our product development strategy and you should expect to see continued enhancement of our existing modules over time as well as the development of brand New solutions.

I'd like to now turn it over to Rick to walk through definitive healthcare's financial performance in more detail.

Thanks, Jason our Q2 results reflect another quarter of steady execution highlighted by ongoing revenue growth and very strong profitability.

I'll start with a quick overview of our business model from a financial perspective, then provide a detailed review of our quarterly results before finishing with our guidance for Q3 and full year 2022, and all my remarks I'll be discussing our results on a non-GAAP basis, unless otherwise noted.

I'll start by reminding everyone of some of the key attributes to make definitive health Care's business model, so compelling where 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 multi year contracts and higher net dollar retention rates, we operate profitably with high gross margins in a very efficient customer acquisition engine, we innovate.

Efficiently by building on our proprietary data asset data science platform.

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

Our Q2 results illustrate how this business model plays out in practice.

Highlights include 37% revenue growth compared to Q2 2021 30.

30% adjusted EBITDA margin ahead of schedule.

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

And revenue growth plus trailing 12 month Unlevered free cash flow margin was 70%, putting us well above the rule of 40.

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

Turning to our results in more detail revenue for the second quarter was $54.5 million up 37% from prior year and 2% above the midpoint of our guidance.

This performance was driven by strong organic innovation and execution is pro forma organic revenue growth was approximately 29%.

Our revenue growth continues to be driven by strong sales momentum.

We ended the quarter with 486 enterprise customers, which we define as customers with at least 100000 in a R. R.

This was an increase of 136 enterprise customers were 39% year over year growth.

And an increase of 38 customers from the previous quarter as a reminder, enterprise customers represent the majority of our era and are a key focus of our go to market programs.

Our total customer count, which includes smaller customers with 2993 at the end of Q2.

From 2000, and 714 in Q2 'twenty one.

We also continue to have success upselling into our existing customers, which is a core component of our growth strategy.

We have strong retention rates among enterprise customers and multiple avenues to increase their spending with us over time.

Both through the adoption of additional modules and expanding usage traditional users and new functions in therapeutic areas within their organizations.

Gross profit was $48 3 million up 38% from Q2 'twenty one.

Gross margin of 88.5% increased 60 basis points from Q2, 'twenty one as our prior year investments in prescription claims data scaled.

We continue to invest in additional data sources, and we expect to see some temporary gross margin compression in the second half from those investments and his analytical Wizards continues to grow sales and marketing expense was $18 5 million up 48% from Q2 'twenty one.

As a percentage of revenue sales and marketing expense was 34% of revenue up from 31% in Q2 'twenty one.

The year over year increase as a result of investments in our go to market organization, such as expanding our digital marketing capabilities and building out our sales and customer success teams as well as the addition of analytical Wizards.

Product development expense was $6 8 million up 63% from Q2 'twenty one.

As a percentage of revenue product development expenses were 13% of revenue up from 11% in Q2 'twenty one.

And vesting 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.

Robert and Jason touched on some examples of these earlier.

And we will continue to invest in the multiple opportunities we have identified on our long term product roadmap.

G&A expense was $7 million up 67% from Q2 'twenty one.

As a percentage of revenue G&A expenses were 13% of revenue up from 10% in Q2 'twenty one when we were still a private company.

The good news is that we're already seeing scale effects as G&A as a percentage of revenue has dropped 230 basis points from Q4.

We expect to see continued leverage from G&A, both because these costs are relatively fixed as.

As well as due to success and ongoing efforts to lower administrative costs.

Operating income was $15 3 million up 11% from Q2 'twenty one.

As a percentage of revenue operating income was 28% of revenue compared to 35% in Q2 'twenty one.

The year over year change in margin is related to three key investments first 250 Bips of continued investment in sales and marketing.

Second 200, Bips of innovation investments in product and development.

And third 230 bps of public company G&A costs.

A brief comment on hiring in the quarter.

We set very aggressive hiring goals both in terms of the skills, we need and the number of people.

In Q2 as in Q1, we fell slightly behind our planned rate of hiring, especially in some technology roles, which drove some short term favorability in margins.

With the ability to recruit talent in more markets via analytical Wizards and in virtual roles, we continue to target, making up the shortfall in the remainder of the year.

Adjusted EBITDA was $16 3 million, a 13% increase from Q2 'twenty one.

As a percentage of revenue adjusted EBITDA was 30% of revenue.

<unk> to 36% in Q2, 'twenty, one due to the investments outlined earlier.

Net income in Q2 was $8 9 million or six cents per diluted share based on $154 7 million weighted average shares outstanding.

Turning to cash flow definitive high margins upfront billing and low capex requirements provide substantial free cash flow generation.

We focus on toilet trailing 12 month cash flows due to seasonality.

Operating cash flows were 32.4 million on a trailing 12 month basis up 3% from 31 4 million in the comparable period a year ago.

Historically cash flow has been strongest in Q1 and Q2 due to the timing of year end invoicing and we expect that trend to continue.

Unlevered free cash flow was $63.4 million on a trailing 12 months basis up 10% from the comparable period a year ago.

Unlevered free cash flow was 33% of revenue on a TTM basis.

Effectively converting more than 100% of our TTM adjusted EBITDA into cash.

We expect this ratio to return closer to 100% on a TTM basis by the end of the year.

As we make payments on our additional data investments.

On the balance sheet, we ended the quarter with $346 million in cash and investments.

With only $268 million of debt.

And with our strong profitability, we are well positioned to fund both organic and inorganic growth initiatives.

Current revenue performance obligations of $163 million were up 32% year over year.

In total performance obligations were up 31% year over year.

Deferred revenue of $89 million was up 29% from $69 million in Q2 'twenty one.

Investors will know the C. R P O and deferred revenue grew more slowly than revenue.

At C. R. P O grown at the same rate as revenue it would be about $6 million higher as of the end of Q2.

About one half of that difference is normal seasonality due to the timing of renewals and the remainder is due to longer booking cycle that Robert mentioned as.

As well as because analytical wizards business model generates less C. R. P O per dollar of revenue.

Turning to analytical Wizards.

It's early days and there are small tuck in so I won't spend much time on them other to say that they are performing very well and we're pleased with the launch of passport Express, which brings very analytics to bear on definitive unique proprietary data.

As a smaller company. They are still just below breakeven adjusted EBITDA margins and so impacted our consolidated margins by about 160 basis points, but were confident they will eventually operated our customary profitability levels.

Moving now to guidance for Q3 and full year 2022, while demand remains strong we saw the lengthening of some deal cycles in Q2.

<unk> reflects what we experienced in the first half of 2022 and assumes a continuation of this pattern in the second half of the year.

In Q3, we expect total revenue of $56 million to $57 million for median growth rate of 31%.

non-GAAP income from operations of $15 million to $16 million adjust.

Adjusted EBITDA of $16 million to $17 million for 29% median EBITDA margin.

And non-GAAP net income of 7.5 to $8 5 million or four to five cents per diluted share on 155.4 million weighted average shares outstanding.

For the full year 2022, we're maintaining our full year revenue guidance of 220 to $224 5 million for a median growth rate of 34%.

We are tightening our ranges for adjusted operating profit and adjusted EBITDA.

Adjusted operating profit is now expected to be between 58.5 and $61 $5 million.

And adjusted EBITDA is now expected to be between 63 and $66 million for a full year median margin of 29%.

Moving below operations to adjusted net income we are lowering our guidance for adjusted net income to $29 million to $32 million and earnings per diluted share at 18 to 21 cents on 155 1 million weighted average shares outstanding.

This decrease is due primarily to higher interest rates and secondarily due to the non-GAAP tax effects of one time restructuring and M&A integration costs to.

To summarize Q2 was a solid quarter for definitive healthcare and despite current economics uncertainty, we are well positioned for the remainder of 2022 and beyond we've developed a clear leadership position in 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.

Feel good about the opportunity definitive healthcare has to become a much larger more valuable business for our shareholders over time and with that I'll hand, it back to Robert for a few closing thoughts before we take questions.

Thanks, Rick.

For I close out I want to take a moment to congratulate our customer success team who won three Stevie Awards in Q2 at the 20th annual American Business Awards, including customer service Department of the year and customer service executive of the year.

And I also want to quickly recognize the definitive health care was recognized by inner gauge in Q2 as a top workplace culture excellence winter in five categories, including innovation compensation and benefits and purpose and values.

A huge thanks to all of our employees for the dedication and hard work they put into building, our incredible culture, and making definitive health care, such a special place to be.

I'll finish by reiterating the strength of definitive health Care's performance in the first half and our confidence to generate strong growth at scale overtime.

We have clearly established health care commercial intelligence is a large growing and strategically important market in which we are tremendously well positioned.

Our solutions help customers drive profitable growth across all stages of the health care market in a way that nobody else can.

With that we will now open the line for your questions.

Thank you.

I'll now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

You are using a speaker phone please pick up your handset before pressing the key.

If at any time your question has been addressed and you'd like to withdraw. Your question. Please press Star then two.

At this time, well pause momentarily to assemble our roster.

Okay.

Your first question comes with Craig Hallum back heading back.

I'm sorry. Please go ahead.

Yes. Thank you just starting with a question on the macro and the lengthening of sales cycles are you seeing any impact in terms of the length of contracts that customers are looking for and then also just want to be clear on the distinction. It sounded like these are new customer engagements versus existing customers.

Where it might be more pronounced.

No, we're not going to hey, Craig.

Craig Thanks for the question.

Yeah with regarding to.

Sales cycles, it's primarily new customers as we said that most of the where we saw it in general and some of the larger more complex deals and no. We haven't seen changes in the terms of the deals they remain pretty consistent throughout the year.

Got it.

Just want to follow up.

<unk> is an important part of the strategy just to kind of touch on the pipeline and in particular are you seeing maybe in a compression of evaluations out there or any changes in terms of potential targets and their appetite to be acquired.

On the M&A side, we've seen continuing good activity, we're always out there talking to companies we have a really good formula for M&A as you know.

Finding a unique capability that bring something new to us that we can then take out broadly across our customer base in that kind of sweet spot of size range.

<unk> had good success with monoclonal <unk> Wizard that you've seen so we're always out looking for those and we have a strong balance sheet and we're hopeful that we'll continue to find those opportunities going forward, we will still expect to do 1% to two per year moving forward and.

Like I said still seeing some some good targets out there.

Got it thank you.

Thanks, Craig.

Your next question comes with.

George Hill with Deutsche Bank. Please go ahead.

Hi, Nexia on for George Thanks for taking the question.

So just want to follow up on the question.

<unk> process can you provide some more color on demand by sub segment and by region, which ones are seeing the most impact on economic uncertainties, and which ones are more resilient.

Yeah.

The only sort of categorization of those that I think is that we've seen is that it's more new business. It was kind of the same across each of our core end markets and of course, most of our businesses here in the U S. So there wasn't a real difference in geographical.

Impact there, but we saw it across each of our end customer segments are roughly similar trends.

Okay.

I know, it's early but on a very high level can you talk about how do you see the demand trending in 2023 and whether the growth rate will hold thank you.

Sure I mean, it's obviously too early to comment on 2023 in terms of demand but.

Top yet we're still seeing good demand I mean, the nice thing is.

While there is a little congestion and moving through the pipeline during these times of uncertainty.

Revenue generating solutions get prioritized and funded we're having great conversations.

We think it's just a matter of when not if on these deals then.

Particularly as we look at types of solutions that we offer and the type of end market that we play into which is healthcare people need our help and people need our kinds of solutions, if theyre going to sell into health care. So.

It's a massive end market, it's generally not as cyclical as the rest of the economy has really strong demographic tailwind and it's confusing so.

As it continues to move towards Digitization, we really feel good about what we're hearing out there about people needing our solutions in.

Feel good about demand continuing.

Well said Robert at the top of the funnel demand is strong.

On a short term basis, we are seeing a little bit of pipeline elongate shadows as I mentioned in my remarks, the year to date <unk> has about $3 billion below where we would normally expect it to be I think it's prudent and we considered in our guidance.

Second half of the year that look a lot like.

The second the second quarter.

So simple math would then translate that to around a 2% to 3% headwind if things don't change in 2023.

So not major but certainly something that we're aware of and we're paying attention to.

Thank you. Your next question comes with David.

Stifel Financial please go ahead.

Thank you.

I know you don't really disclose retention quarterly, but perhaps you can give some qualitative commentary about what you're seeing on the retention side, obviously, you've given us some good color on what youre seeing in customer activity, but just given your recurring revenue model.

Curious kind of what the retention trends and start looking like you know as you went through the second quarter.

Yes, Thanks, David retention has been good I mean, I think we continue to see the dynamic win.

Customers start using our solution they get very high return from it.

And they tend to you know a lot of cases.

And better information into their CRM or into the workings of their sales force our marketing team and so once they start using it.

It's something that they want to keep using because they recognize that value. So we continue to see consistent retention trends.

And feel like Thats.

That's exactly what I said because of the value that our solution provides.

And that we would expect that to continue.

Alright.

Go ahead.

I was just going to point out what we see is exactly what other people are talking about when you are talking about a new incremental invest strategy. So a new logo.

They're just going through more scrutiny and we like you heard I'll give you on that.

But ultimately the things that drive growth and things that have passed.

We're going to get.

Right.

And I'm sorry, Rick you had mentioned I think he gave us both the current and non current arpino numbers can you just repeat those I didn't get them. When you mentioned on the call.

Yes current RP O is 163 million and total RPM is actually very close to.

Two the CRP out, but let me.

He might be.

Okay.

I will hop back into the line and when the second with that.

Sure.

Sure just one other quick question if I could.

So the the margin I think headwind I think he said in your prepared remarks for.

AWP was about 160 basis points and I think when we talked before it was closer to 200 so.

Is it just the second quarter was lower at its 200 for the year or.

Is the margin headwind.

A bit less than you had thought it would be at the beginning of the year are at post acquisition.

We're making we're making really strong progress with immigration HW, we've already integrated their north American operations onto our ERP.

So we're very pleased with our progress there.

You've asked about.

<unk> in total RTL CRP O $163 3 million as total RPI of about 256.6.

Great Alright, thanks, very much guys.

Thank you.

Your next question comes with Jonathan Young with Credit Suisse.

Please go ahead.

Yes.

Thanks, I'll, just kind of jump on the sales cycle again.

Yeah.

What's what do you do you have a sense of how long the elongation is kind of taking us adding three months six months kind of is there any color that you have on that in terms of how long the sales cycle will take kind of on a go forward basis and then secondly, if this does persist throughout the second half is there anything that.

You can do on your side to try to loosen that up a bit.

Yes, Thanks, Jonathan Great questions I think on the first part we just started seeing it this past quarter and so.

Our sales cycles are typically kind of two to four months.

So.

I can't give you a quantitative answer on that only that it just feels like we're getting a little bit greater budget scrutiny, a little bit of additional approval steps driven by procurement, our cfo's or new executives getting inserted kind of late in the sales process.

So it's really more process steps then.

Sort of overall fundamental change in the sales cycle and like I said, we're working hard to continue to get those deals signed in all of our deals signed.

When you talk about like the what we can do.

First and foremost we really feel like this is a short term issue.

Like I've said, we remain confident that revenue generating solutions like ours will get prioritized and funded just might take the extra steps to do that.

Second we continue to drive innovation as we talked about today and you know innovation is great because it lets you accelerate sales conversations in many cases in.

Expert go passport express and all of the things we're doing give us some use cases to come in and accelerate some of those.

And then of course, we're doing a lot of work just enabling our sales team to match their messages to today's environment and that's things like training. The teams to focus really heavily early in the cycle on the process required to close deals. So understanding every required step every key decision maker mapping out that whole path being sure we're not surprised.

And in the sales cycle.

Things like frequent deal level process management so.

Sharing that the deals progress through all the required steps in that reps in franchise all key prospect individuals' early in the process.

Like that and finally things like retraining on ROI, obviously, we have great ROI on our products, we want to be sure that our clients recognize that so when our sales reps are out talking to prospects.

They have really good case examples really good proof points really good.

Product marketing materials to be able to articulate that value and a compelling in clear ways to the clients know, though they'll get the value really quickly and if you look on our website, we have more than 40 client testimonials stories. Those are great to use with prospects just to highlight the really high ROI. So we're doing a lot to be sure that.

In this environment sales reps or are matching their message to this environment.

Great and then just on the the up sell into our existing clients, presumably there doesn't seem to be much much elongation, there, but just one want to confirm that into.

Given the commentary about the higher ROI for.

For people that are already using your solutions is there and is.

Is there a greater upsell opportunity because of that given the current environment.

We've seen upsell continuing to perform well so we're still very bullish and thats really part of our land and expand strategy. So once we have clients and they start seeing the value exactly like you said, we want to be.

Bringing them, new solutions and Upselling into new use cases, and increasing our revenue with those customers because we're increasing the value we deliver to them. So that continues to be a big focus.

Thank you.

Thank you.

Again, if you have a question. Please press Star then one.

The next question comes with the kit Calia with Barclays. Please go ahead.

Okay, Hey, guys, Hey, Robert Hey, Rick Thanks for taking my questions here.

Sure.

Well, Hey, I joined late so apologies if these questions have been asked but Robert maybe just to start with you totally get it increased scrutiny from from new logos can you just talk about whether that was mainly focused in a in any particular sub vertical like life sciences or health care I T or was it more of a trend.

And kind of across the sub verticals that you serve.

We've seen similar trends across each of our core end markets. So it's been something we kind of have perceived across the board I don't think it was focused in any particular area.

The one thing we did say he missed the early part of the calls its been primarily with new business and particularly the larger deals and new business, where we have a little more complexity and already more process steps.

Got it got it thanks for that Rick maybe maybe for you again apologies. If this was mentioned, but how much did did analytical wizards add to billings and our Po. If you. If you have that handy just to sort of get a sense of the organic growth rate for billings and bookings.

Phil analytical Wizards performed strongly in the quarter.

So we're very pleased by its performance as I mentioned earlier.

And in terms of its profitability contributed almost $3 billion of revenue, we don't break out <unk>.

Bookings and billings by sub segment in AWS is less than 5% of our revenue I would say that their business model by its very nature generates less CRP O per dollar of revenue.

<unk>.

So that gives you gives you a sense, but at less than 5%, we don't break it out.

Understood Thanks very much.

Thank you.

The next question comes with Bryan Mcdonald with need him.

Please go ahead.

I appreciate the commentary that sort of all the end markets have remained resilient.

As we enter the back half of the Europe , you see some end markets start to slip can you factor that into your sales motion and dynamically adjust to changes in the market, meaning for example, like of health systems are struggling but pharma is resilient do you dial up efforts on pharma and maybe pullback on health systems.

It's a good question I mean, obviously, if we saw longer term secular trend, we would adjust where we make investments in our sales and marketing invest.

Investments to target more on areas of opportunity, which we've done that across the past couple of years as we've added teams to our provider verticals. We've started to focus more there and seeing really good growth there and added more to life sciences as we've seen.

Opportunity, there and have more products targeted there.

I think it would be a hard thing to do kind of mid quarter.

Given our sales cycles are typically two to four months and we're out there seeing really strong opportunity in all our end markets.

That's kind of where we're out pushing so the hope is that we continue to deliver strong growth in each of those verticals across the rest of this year, but if we get to the end of the year and felt like there was some change like that certainly we would take that into account and going into the commercial planning for 2023.

Yes, I think more broadly.

We measure equity because the big part of our culture.

At very strong returns on sales and marketing we manage this business over a multiyear perspective.

So theres nothing that indicates to us that there is anything longer term going on but we would of course adjust as appropriate if we saw a continuing trend in the chain.

Change in those investments.

Rest assured we pay attention to it.

I think you're indicating something long term.

Makes sense I appreciate that and then it seems like with some of the product innovations that the product strategy for pharma is moving earlier in the drug approval timeline. We've also heard with some of these earlier stage biotech or pharma company that budgets are constrained data vendors might be what ends up getting cut from the spending budget.

So have you seen that at all in your go to market motion and then maybe if you could just compare and contrast, the differences of selling to some of these earlier stage pharma companies versus some of the larger pharma clients you have today.

Yes.

The overall we.

As you think about where we innovated, where we focus within life Sciences. We are really a later stage with these organizations. So we don't tend to sell much into research level research stage life Sciences companies and those are the ones that have really gotten hit the hardest by the financing crash out within that market says come.

They start, bringing a drug to market and start thinking about commercialization.

That's really where our product is most impactful their ability to commercialize that in size markets and figure out where to find the best experts and invest our resources.

So we don't see an outsized impact within that market as a result.

Got it thanks guys.

Thanks, Brian .

The next question comes with Brian Peterson with Raymond James. Please go ahead.

Hi, gentlemen, little wall, Jonathan to carry on for Brian . Thanks for taking the question and when you see one from us.

So one of the themes that we're hearing in software is that there is of course to consolidate vendor relationships ECL dollars point solutions that can be a source of share gains for you. How do you think about that dynamic. Thanks.

Okay.

Hi, <unk>.

Hard to hear we hear your question, but I think I got it which is.

Yeah.

As people are trying to consolidate vendors their software vendors do we see impact of that and I think what what's great about our solution is we're unique and we have a distinctive set of data and a distinctive solution that no. One else has so if you kind of look at any of our end markets. We represent something that if people want the value of understanding how to sell into health care.

And how to navigate the complex healthcare ecosystem, they're going to need to work with definitive.

So for example, if youre someone is outside of health care and wants to focus on selling into health care.

You might have services, you use that look across the industry, but they're not going to be deep in health care and so if you really want to penetrate health care, you've got to work with definitive.

The only one that has the unique data that we have around navigating that ecosystem and all the affiliations all the reference data all the specific players in the market, we have nearly 100% of the market mapped.

If you're inside the industry like a life Science company you might have for example claims data from a couple of other sources that you work with but you don't have that claims data combined with our 11 year buildup of that map of the ecosystem and all the references and affiliations when you put those together creates much more powerful dataset. So.

If you're inside the industry, even though you might work with other vendors. If you want to get the information that's critical youre going to be working with definitive as well, we sit side by side with them. So.

We don't really have someone that we could be quote consolidated into in terms of that spend and that's because we've really created a lot of differentiation over time and building up over 11 years, our proprietary data and building that into our SaaS platform, which provides quick return on our clients' investments.

Thank you.

Yes.

This concludes our question and answer session.

Like now to turn the conference back over to Mr. Robert muscle White for any closing remarks. Please go ahead.

Thank you everybody for joining the call today and look forward to seeing and talking to many of you in the coming weeks, where several conferences coming up and.

Thank you very much.

This conference has now concluded you may now disconnect have a great day.

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Okay.

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Good day and welcome to the that's a definite of health care Conference call.

All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question you May press Star then one on your touch themselves.

Withdraw your question. Please press Star then two please.

Please note this event is being recorded.

I'd now like to turn the conference over to Mr. David Kendall.

Legal Chief legal officer.

Please go ahead.

Good morning, and thank you for joining us today to review definitive healthcare second quarter 2022 financial results.

Joining the call today are Robert Musselwhite definitive health Care's, CEO , Jason Kraft definitive healthcare is founder and executive Chair and Rick Booth definitive Healthcare's, Chief Financial Officer.

During the call, we will make forward looking statements, including but not limited to statements relating to our markets and future growth opportunities 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.

<unk> and results of operations 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 1095 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 forward looking statements.

Company undertakes no obligations 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 was just posted to 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 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 measures.

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

Thanks, David I would like to thank all of you for joining US this afternoon to discuss definitive healthcare second quarter results.

Let me start by saying that I'm incredibly excited to lead this terrific company.

We are at the early stages of delivering on our mission to transform data analytics and expertise in the health care commercial intelligence and I believe we're in a great position to generate strong growth at scale for years to come.

I'm also thrilled to be able to continue to partner with Jason in his new role as executive Chairman I am sure. We will all continue to benefit from his passion for product development and delivering value to our customers.

On today's call I will review, our second quarter results provide some color on what we're seeing in the market and discuss several important recent wins before turning it over to Jason to discuss our latest product innovations.

We had a solid second quarter, signing significant wins in each of our markets life Sciences providers health care, it and diversified with both new and existing customers.

Customer interest in our health care commercial intelligence platform remains very high due to the value we can deliver across a variety of use cases from clinical trials and product development to sales force enablement to talent acquisition and many others.

Customers are looking for technology that can improve their top and bottom line performance and definitive healthcare is well positioned to deliver on both.

This backdrop powered our second quarter financial results, which exceeded the high end of our guidance on both the top and bottom line and demonstrated our ability to deliver strong revenue growth and high profitability.

Our total revenue was $54 5 million, which represents a 37% year over year growth.

And our adjusted EBITDA was $16 $3 million, which translates into a 30% margin.

This was well ahead of our expectations for the quarter and reflected the timing of investments as well as the inherent scalability of our business model.

While our financial results in the quarter was strong we did begin to see some lengthening of deal cycles towards the end of the quarter.

Some prospects in each of our markets instituted additional approval processes or deferred making final decisions due to uncertainty in the broader economy.

This was largely concentrated among new prospects as upsell activity remained strong and importantly, the deals that have been delayed remain active sales opportunities.

In the near term, we think it is prudent to assume these dynamics we saw in the second quarter will persist across the second half of the year.

As I mentioned earlier, however demand generation across all channels remains very healthy and we feel very good about definitive healthcare's continued strong growth prospects.

We will continue to benefit from the fact that the health care market is not only incredibly durable and all macroeconomic environments, but has continued strong tailwind, including an aging population heavy focus on value based care and as an industry in the early stages of a digital transformation that plays right into our strength.

Plus we support companies and organizations growth in sales activities critical activities, where they are most in need of help and most likely to prioritize for external spend.

As a result, we remain on track to deliver revenue growth of approximately 34% for the year and to exit the year at or above a 30% adjusted EBITDA margin.

I would now like to spend a few minutes discussing how we believe our value proposition will resonate with customers and current market conditions and highlighting several wins from the quarter.

At its core the definitive healthcare platform is built to simplify the complexity of the health care ecosystem for any company selling into this four trillion dollar market, which is not only the largest segment of the economy, but also the most misunderstood and difficult to navigate.

The definitive healthcare platform can help any company looking to sell into the health care market make more informed decisions about their business. For example, we help all kinds of companies in various industries ranging from software to staffing to life sciences optimize their sales and marketing efforts across the entire spectrum of the health care ecosystem.

<unk> inefficient sales organization that targets the complicated health care marketplace requires a deep understanding of who are the most important decision makers and the relationships among all of the relevant facilities physicians and health systems in order to create compelling messaging to drive effective sales and marketing campaigns that maximize precious investment dollars.

Our platform does all of this quickly and easily.

Provider organizations routinely select definitive health care to help them influence referral patterns reduced out of network leakage and ultimately grow market share.

Definitive healthcare provides intelligence around patient populations provider behavior, and payer behavior to help providers understand where and how to invest capital understand expansion opportunities and determine what types of service line changes might be necessary to optimize revenue in a value based world.

Life Science companies. In addition to the sales and marketing needs outlined earlier must be able to accurately sized patient population assess market opportunities and identify the right experts for a specific disease area before undertaking clinical trials that can take years and cost tens or hundreds of millions of dollars.

Our platform helps them do all of that.

Solving these business needs for customers is especially important in more challenging economic times when investment decisions are more heavily scrutinized and the cost of a failed drug launch or sales campaign can be particularly costly.

The definitive health care platform is uniquely positioned to solve these and other business challenges for several reasons the.

The first is our ability to provide a comprehensive view of the entire health care ecosystem.

Last quarter I discussed with you how we have amassed nearly 100% coverage of the health care market through our sophisticated data ingestion engine proprietary data research and extensive use of artificial intelligence.

Today I want to focus on why a comprehensive view is so important to a customer.

When companies are selling into the health care industry, they need more than a quantitative picture of their target market.

To identify the right physicians, who can be the best partners and key influencers organizations need to understand more than practice locations number of patients and prescribing history.

To be sure that as high value quantitative data that in many cases, only definitive healthcare has but to truly maximize sales force efficiency. These organizations need behavioral data about their provider population in their patient population, including a provider's willingness to try new therapies and whether the policies of their affiliated delivery network permit them to make that decision.

<unk>.

A definitive healthcare our algorithms generate these qualitative insights, which we then married to the quantitative data to generate real commercial intelligence.

The second is our SaaS based platform and rapidly changing market speed and flexibility are paramount.

Customers need the right information at their fingertips and need to be able to find that information on their own. It is simply too costly and inefficient to have to wait weeks for an answer from a third party or services organization.

With a definitive health care platform customers are able to directly leverage our various datasets and customize their queries immediately as needed.

This is critically important at a time when market conditions are evolving quickly and customers need to ensure they are using the most relevant and up to date data when making business decisions.

Finally, the breadth and depth of our historical data allows us to respond to customer demand quickly with new insights.

Over the last 11 years, we've created a longitudinal view of the health care ecosystem that helps our clients to understand how this dynamic industry is changing and how they need to adapt their business.

For example, we have historical affiliations data to ensure our clients understand how physician loyalty and referral patterns are changing over time.

We understand the history of technology infrastructure at hospitals. So we can help our clients predict when a change is likely.

And we have details on where executives have been so that our clients can understand how to personalize their message to have the greatest impact. These mission critical questions can only be answered because we have the history to understand in the past and therefore better predict the future.

And this history of highly proprietary data does not exist anywhere else, creating a competitive moat that continues to deepen overtime.

I would now like to spend a few moments reviewing some of our key wins in the quarter.

Once again, we saw a good deal of momentum across each of our key customer segments for growing variety of different use cases.

First we continue to see significant traction across the life Sciences market.

We sold a multiyear enterprise deal at medical device company manufacturing compression pumps for lymphedema patients.

This was a very competitive deal, where we displaced the existing data and analytics provider with our latitude reporting product that we launched in Q4 of last year.

This customer will use definitive health care reference data lab data and account profiles to improve targeting account profiles and competitive analysis.

Our recent acquisition of analytical Wizards continues to perform in the second quarter as well.

We won a multiyear upsell deal for passport promotional mix and one of the world's largest independent biotechnology companies.

As customers a long time user of the analytical Wizards product suite and they significantly increased their investment with us in the second quarter by adding seats and functionality to enable quarterly reporting and analysis of their marketing investments as opposed to the previous reporting set that was delivered annually.

Our <unk> product line also continued its track record of success, winning multiple deals within the quarter, including a large deal at a leading global biotech in the oncology space.

This company is launching a new key compound and it had an immediate need for key opinion leader data in the Asia Pacific region.

They selected <unk> because of the depth of our expert data our medical liaison driven approach and the fact that we'll be able to offer them access to experts around the globe as they move beyond their initial APAC launch to other global regions.

In addition to our success in the life Sciences space, we had our usual wide spectrum of deals in a variety of industries.

Health care staffing and recruiting continues to be a strong market for us with both growth in new logos and expansion with existing clients.

We also saw multiple wins at both national and state level insurance companies.

Plan to use our physician and physician group data to strengthen their provider networks.

In the provider market, we had several significant wins, including a three year deal at a managed services organization that will utilize our platform to help build out its ambulatory network for outpatient cardiac surgeries.

In our diversified segment, we had wins ranging from the world's leader in electronic signatures and agreements to the largest specialty distributor of rehabilitation and sports medicine products in the United States to one of the world's largest coffee retailers, which wants to use definitive healthcare to target hospitals for both its foodservice business and to put coffee shops in their lobbies.

These are great examples of the value, we are delivering to both new and existing customers today, and we will continue to do for years to come.

Now like to turn the call over to Jason to review some of our recent product innovations and takeaways from our user conference definitive lives that we hosted during the quarter.

Thanks, Robert we had a busy second quarter in product development, including the introduction of <unk> expert insight to Plano and Monica expert go as well as continued innovation across our entire integrated platform. So let me start with our recent user conference definitive lives, which we held virtually on may 17th with <unk>.

1100 customers in attendance.

This is a great opportunity for us to showcase the full breadth and depth of the definitive healthcare platform.

Over the course of the day, we held more than 20 breakout sessions that highlighted some of the most innovative ways customers in each of our end markets are using our platform.

It was incredibly powerful to hear firsthand testimonials from numerous customers and how they're utilizing the data and context, our platform provides to drive significant tangible value to their businesses.

There are a number of these testimonials on the Investor Relations section of our website I encourage you to listen for yourselves.

One of the key takeaways for us is that the challenges and opportunities facing our customers continues to grow and.

And there's some desire to use our platform to solve even more of these challenges.

This underscores the opportunity for us to continue to innovate and as a result expand not only our total number of customers, but also to grow our relationships with existing customers through more data analytics and tools.

The most significant product announcement within the quarter was a simultaneous release, a monocle expert insight to point out an expert go.

Medical expert insight to point out is the next generation of our expert indemnification solution that significantly expands the capabilities of this product and provides customers access to nearly 13 million key opinion leaders.

In this latest version customers can use live filters that provide real time updates of scientific activity by expert or therapeutic area as well as more granular key opinion leader mapping all of these capabilities make Monica, even more effective at healthy and medical affairs teams find the right experts that can help develop better medical strat.

<unk> and bring new drugs for medical devices to market quicker.

We've also made it even easier to access Monaco with release of our new mobile App expert go.

This is an important release as medical science liaisons are common users the Monaco and most of them spend the bulk of their time in the field visiting and experts in person with expert go they will now be able to use Monica no matter where they are.

We also worked hard during the quarter to continue to leverage the value of the technology platform, we acquired with analytical Wizards.

Last week, we launched passport express.

First product that integrates the comprehensive analytics bill by analytical Wizards with the proprietary data from definitive healthcare.

We acquired analytical Wizards in February of this year and in less than six months, our combined product and engineering teams were able to design and shipped this new product.

A great proof point of the speed at which we look to integrate acquisitions and the innovation. This can drive.

Available for more than 20 therapy areas passport express delivers fast and easy access to off the shelf health care commercial intelligence.

Enabling biopharma companies to better understand treatment pathways brand behavior and market share.

For a given therapy area, we've extracted mission critical data from our industry, leading commercial intelligence platform, including payer claims physician affiliation information and health care reference data.

These data are then pre populated in the analytical wizards environment, where customers can instantly query flexible dashboards and powerful visualization tools to quickly get answers to their questions.

The integrated data and analytics and passport express practically eliminates the research requirements and timelines traditionally required for commercial teams to search real world data normalize in Lincoln and then build analytical models on top with passport Express you get that right out of the proverbial box.

This is the first of many innovations to come that will combine the power of the highly proprietary definitive health care data with the best in class commercial analytics platform that analytical Wizards has developed.

These are great. Examples of how we were able to quickly innovate and iterate on existing solutions to provide additional value to customers.

A key part of our product development strategy and you should expect to see continued enhancement of our existing modules over time as well as the development of brand New solutions.

I'd like to now turn it over to Rick to walk through definitive healthcare's financial performance in more detail.

Thanks, Jason our Q2 results reflect another quarter of steady execution highlighted by ongoing revenue growth and very strong profitability.

I'll start with a quick overview of our business model from a financial perspective.

And then provide a detailed review of our quarterly results before finishing with our guidance for Q3 and full year 2022, and all my remarks I'll be discussing our results on a non-GAAP basis, unless otherwise noted.

I'll start by reminding everyone of some of the key attributes to make definitive healthcare business model, so compelling where 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 multi year contracts and higher net dollar retention rates, we operate profitably with high gross margins in a very efficient customer acquisition engine.

We innovate efficiently by building on our proprietary data asset in data science platform.

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

Our Q2 results illustrate how this business model plays out in practice.

Highlights include 37% revenue growth compared to Q2 2021 30.

<unk>, 30% adjusted EBITDA margin ahead of schedule.

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

And revenue growth plus trailing 12 month Unlevered free cash flow margin was 70%, putting us well above the rule of 40.

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

Turning to our results in more detail revenue for the second quarter was $54 5 million up 37% from prior year and 2% above the midpoint of our guidance.

This performance was driven by strong organic innovation and execution is pro forma organic revenue growth was approximately 29%.

Our revenue growth continues to be driven by strong sales momentum.

We ended the quarter with 486 enterprise customers, which we define as customers with at least 100000 <unk>.

This was an increase of 136 enterprise customers were 39% year over year growth.

And an increase of 38 customers from the previous quarter as a reminder, enterprise customers represent the majority of our IRR and are a key focus of our go to market programs.

Our total customer count, which includes smaller customers was 2993 at the end of Q2.

From 2000, and 714 in Q2 'twenty one.

We also continue to have success upselling into our existing customers, which is a core component of our growth strategy.

We have strong retention rates among enterprise customers and multiple avenues to increase their spending with us over time.

Both through the adoption of additional modules and expanding usage to additional users and new functions in therapeutic areas within their organizations.

Gross profit was $48 3 million up 38% from Q2 'twenty one.

Gross margin of 88, 5% increased 60 basis points from Q2, 'twenty one as our prior year investments in prescription claims data scaled.

We continue to invest in additional data sources, and we expect to see some temporary gross margin compression in the second half from those investments and his analytical Wizards continues to grow sales and marketing expense was $18 5 million up 48% from Q2 'twenty one.

As a percentage of revenue sales and marketing expense was 34% of revenue up from 31% in Q2 'twenty one.

The year over year increase as a result of investments in our go to market organization, such as expanding our digital marketing capabilities and building out our sales and customer success teams as well as the addition of analytical Wizards.

Product development expense was $6 8 million up 63% from Q2 'twenty one.

As a percentage of revenue product development expenses were 13% of revenue up from 11% in Q2 'twenty one.

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

Robert and Jason touched on some examples of these earlier.

And we will continue to invest in the multiple opportunities we have identified on our long term product roadmap.

<unk> expense was $7 million up 67% from Q2 'twenty one.

As a percentage of revenue G&A expenses were 13% of revenue up from 10% in Q2 'twenty one when we were still a private company.

The good news is that we are already seeing scale effects as G&A as a percentage of revenue has dropped 230 basis points from Q4.

We expect to see continued leverage from G&A, both because these costs are relatively fixed as.

As well as due to success in ongoing efforts to lower administrative costs.

Operating income was $15 3 million up 11% from Q2 'twenty one.

As a percentage of revenue operating income was 28% of revenue compared to 35% in Q2 'twenty one.

The year over year change in margin is related to three key investments first 250 bps of continued investment in sales and marketing.

Second 200 bps of innovation investments in product and development and.

Third 230 bps of public company and G&A costs.

A brief comment on hiring in the quarter.

We set very aggressive hiring goals both in terms of the skills, we need and the number of people.

In Q2 as in Q1, we fell slightly behind our planned rate of hiring, especially in some technology roles.

Which drove some short term favorability in margins.

With the ability to recruit talent in more markets via analytical Wizards and in virtual roles, we continue to target, making up the shortfall in the remainder of the year.

Adjusted EBITDA was $16 3 million, a 13% increase from Q2 'twenty one.

As a percentage of revenue adjusted EBITDA was 30% of revenue compared to 36% in Q2, 'twenty one due to the investments outlined earlier.

Net income in Q2 was $8 9 million or <unk> <unk> per diluted share based on $154 7 million weighted average shares outstanding.

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 flows due to seasonality.

Operating cash flows were $32 4 million on a trailing 12 month basis up 3% from 31 $4 million in the comparable period a year ago.

Historically cash flow has been strongest in Q1 and Q2 due to the timing of year end invoicing and we expect that trend to continue.

Unlevered free cash flow was $63 $4 million on a trailing 12 month basis up 10% from the comparable period a year ago.

Unlevered free cash flow was 33% of revenue on a TTM basis.

Effectively converting more than 100% of our TTM adjusted EBITDA into cash.

We expect this ratio to return closer to 100% on a TTM basis by the end of the year.

As we make payments on our additional data investments.

On the balance sheet.

We ended the quarter with $346 million in cash and investments.

With only $268 million of debt.

And with our strong profitability.

Well positioned to fund, both organic and inorganic growth initiatives.

Current revenue performance obligations of $163 million were up 32% year over year.

In total performance obligations were up 31% year over year.

Deferred revenue of $89 million was up 29% from $69 million in Q2 'twenty one.

Investors will note that.

<unk> and deferred revenue grew more slowly than revenue.

At <unk> growing at the same rate as revenue it would be about $6 million higher as at the end of Q2.

One half of that difference is normal seasonality due to the timing of renewals and the remainder is due to the longer booking cycle that Robert mentioned.

As well as because analytical wizards business model generates less CRP O per dollar of revenue.

Turning to analytical Wizards.

It's early days and there are small tuck in so I won't spend much time on them other than to say that they are performing very well and we're pleased with the launch of passport Express, which brings very analytics to bear on definitive unique proprietary data.

As a smaller company. They are still just below breakeven adjusted EBITDA margins and so impacted our consolidated margins by about 160 basis points, but were confident that they will eventually operated our customary profitability levels.

Moving now to guidance for Q3 and full year 2022, while demand remains strong we saw the lengthening of some deal cycles in Q2.

<unk> reflects what we experienced in the first half of 2022 and assumes the continuation of this pattern in the second half of the year.

In Q3, we expect total revenue of $56 million to $57 million for median growth rate of 31%.

non-GAAP income from operations of $15 million to $16 million adjust.

Adjusted EBITDA of $16 million to $17 million for 29% median EBITDA margin.

And non-GAAP net income of seven five to $8 5 million.

We're four to five cents per diluted share on 155 4 million weighted average shares outstanding.

For the full year 2022, we're maintaining our full year revenue guidance of 220 to $224 5 million for a median growth rate of 34%.

We are tightening our ranges for adjusted operating profit and adjusted EBITDA.

Adjusted operating profit is now expected to be between 58, 5% and $61 5 million.

And adjusted EBITDA is now expected to be between 63 and $66 million for a full year media margin of 29%.

Moving below operations to adjusted net income we are lowering our guidance for adjusted net income to $29 million to $32 million and earnings per diluted share at the 18 to 21 cents.

On $155 1 million weighted average shares outstanding.

This decrease is due primarily to higher interest rates and secondarily due to the non-GAAP tax effects of one time restructuring and M&A integration costs.

To summarize Q2 was a solid quarter for definitive healthcare and despite current economic uncertainty we are well positioned for the remainder of 2022 and beyond we have developed a clear leadership position in 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.

Feel good about the opportunity definitive healthcare has to become a much larger more valuable business for our shareholders over time and with that I'll hand, it back to Robert for a few closing thoughts before we take questions.

Thanks, Rick.

Before I close out I want to take a moment to congratulate our customer success team who won three Stevie Awards in Q2 at the 20th annual American Business Awards, including customer service Department of the year and customer service executive of the year.

And I also want to quickly recognize the definitive healthcare was recognized by inner gauge in Q2 as a top workplace culture excellence winter in five categories, including innovation compensation and benefits and purpose and values.

A huge thanks to all of our employees for their dedication and hard work they put into building, our incredible culture, and making definitive healthcare such a special place to be.

I'll finish by reiterating the strength of definitive health Care's performance in the first half and our confidence to generate strong growth at scale over time.

We have clearly established health care commercial intelligence is a large growing and strategically important market in which we are tremendously well positioned.

Our solutions help customers drive profitable growth across all stages of the health care market in a way that nobody else can.

With that we will now open the line for your questions.

Thank you.

We'll now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

If you are using a speaker phone please pick up the handset before pressing the keys.

If at any time your question has been addressed and you'd like to withdraw. Your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Your first question comes with Craig Hallum back heading back I'm sorry. Please go ahead.

Yes. Thank you just starting with a question on the macro.

Lengthening of sales cycles.

Seeing any impact in terms of the length of contracts that customers are looking for and then also just wanted to be clear on the distinction. It sounded like these are new customer engagements versus existing customers in terms of where it might be more pronounced.

Hey, Craig.

Great. Thanks for the question.

With regarding to.

Sales cycles. It is primarily in new customers as we said, that's mostly where we thought and general and some of the larger more complex deals and no. We haven't seen changes in the terms of the deals they remain pretty consistent throughout the year.

Got it and then I guess.

Wanted to follow up you know M&A is an important part of the strategy just to kind of touch on the pipeline and in particular are you seeing maybe any compression evaluations out there or any changes in terms of potential targets.

Their appetite to be acquired.

On the M&A side, we've seen continuing good activity, we're always out there talking to companies we have a really good formula for M&A as you know.

Finding a.

Unique capability that brings something new to us that we can then take out broadly across our customer base in that kind of sweet spot of size range.

And have had good success with monoclonal analytical wizard that you've seen so we're always out looking for those and we have a strong balance sheet and we're hopeful that we'll continue to find those opportunities going forward, we will still expect to do 1% to two per year moving forward and.

Like I said still seeing some some good targets out there.

Got it thank you.

Thanks, Craig.

Your next question comes with.

George Hill with Deutsche Bank. Please go ahead.

Hi.

So George Thanks for taking the question.

So just wanted to follow up on the question.

So youll process can you provide some more color on demand by segments and by region, which ones Youre seeing the most impact some economic uncertainties and which ones are more resilient.

Yes.

The only sort of categorization of those that I think is that we've seen is that it's more new business. It was kind of the same across each of our core end markets and of course, most of our businesses here in the U S. So there wasn't a real difference in geographical.

Impacts there, but we saw it across each of our end customer segments roughly similar trends.

Okay.

Yes, early but on a very high level can you talk about how do you view that trending in 2023 and whether the growth rate will hold thank you.

Sure I mean, obviously.

Early to comment on 2023 in terms of demand but.

We're still seeing good demand I mean, the nice thing is.

While there is a little congestion and moving through the pipeline during these times of uncertainty.

Revenue generating solutions get prioritized and funded we're having great conversations.

We think it's just a matter of when not if on these deals.

Particularly as we look at the types of solutions that we offer and the type of end market that we play into which is healthcare people need our help and people need our kinds of solutions, if theyre going to sell into health care. So.

It's a massive end market, it's generally not as cyclical as the rest of the economy has really strong demographic tailwind and it's confusing so.

As it continues to move towards Digitization, we really feel good about what we're hearing out there about people needing our solutions.

Feel good about demand continuing.

Well, Robert I think top of the funnel demand is strong.

On a short term basis, we are seeing a little bit of pipeline elongation.

As I mentioned in my remarks, the year to date <unk> was about $3 million below where we would normally expect it to be I think it's prudent and we considered in our guidance.

Second half of the year that look a lot like.

The second.

Second quarter.

So simple math would then translate that to about a 2% to 3% headwind.

Change in 2023.

So not major but certainly something that we.

Then we are paying attention.

Thank you. Your next question comes with David Graff.

Stifel financial.

Please go ahead.

Thank you.

I know you don't really disclose retention quarterly, but perhaps you can give us some qualitative commentary.

Are you seeing on the retention side, obviously, you've given us some good color on what youre seeing in <unk>.

Customer activity, but just given your recurring revenue model, just curious kind of what the retention trends are looking like.

Went through the second quarter.

Yes, Thanks, David retention has been good I mean, I think we continue to see the dynamic when.

Customers start using our solution they get very high returns from it and they tend to a lot of cases.

<unk> information into their CRM or into the workings of their sales force, our marketing team and so once they start using it.

It's something that they want to keep using because they recognize that value. So we've continued to see consistent retention trends.

And feel like Thats that.

Exactly what I said.

The the value that our solution provides.

And we would expect that to continue.

Alright.

Go ahead.

I was just going to point out what we see.

Exactly what other people are talking about when you are talking about a new incremental investment so a new logo.

Things are just going through more scrutiny and we like everyone else are doing that.

Ultimately the things that drive growth.

Pass are what are going to get.

Right and.

I'm sorry, Rick you had mentioned I think he gave us both the current and non current RPI numbers can you just repeat those I didn't get them. When you mentioned on the call.

Yes current RPI.

<unk> hundred $63 million and total RPM is actually very close to.

Two the CRP.

Okay.

Sure.

I will hop back in line and when the second with that.

Sure.

Sure just one other quick question if I could.

The margin.

Think headwind I think you said in your prepared remarks for.

AWS is about 160 basis points and I think when we talked before it was closer to 200. So is it just the.

Second quarter was lower than its 200 for the year or.

Is the margin headwind a little bit less than you had thought it would be at the beginning of the year. Our post acquisition I should say, we're making we're making really strong progress with integration of HW, we've already integrated their north American operations onto our ERP.

So we're very pleased with our progress there.

No doubt.

<unk> in total RTL CRP.

$163 3 million.

Total RPI of about 276.6.

Great Alright, thanks, very much guys.

Thank you.

Your next question comes with Jonathan Young with Credit Suisse.

Please go ahead.

Thanks, I'll, just kind of jump on the sales cycle again.

Yes.

What's what do you have a sense of how long the elongation is kind of taking us adding three months six months kind of is there any color that you have on that in terms of how long the sales cycle will take kind of on a go forward basis, and then secondly.

If this does persist throughout the second half is there anything that you can do on your side to try to loosen that up a bit.

Yes, Thanks, Jonathan Great questions I think on the first part we just started seeing it this past quarter and so.

Our sales cycles are typically kind of two to four months.

So.

I can't give you a quantitative answer on that only that it just feels like we're getting a little bit greater budget scrutiny, a little bit of additional approval steps driven by procurement, our cfo's or new executives getting inserted kind of late in the sales process.

So it's really more process steps then.

Overall fundamental change in the sales cycle and like I said, we're working hard to continue to get those deals signed in all of our deals signed.

When you talk about like the what we can do.

First and foremost we really feel like this is a short term issue.

As I've said, we remain confident that revenue generating solutions like ours will get prioritized and funded.

This might take a few extra steps to do that.

Second we continue to drive innovation as we've talked about today and innovation is great because it lets you accelerate sales conversations in many cases.

Expert go passport express and all of the things we're doing give us some use cases to come in and accelerate some of those.

And then of course, we're doing a lot of work just enabling our sales team to match their messages to today's environment and Thats things like training. The teams to focus really heavily early in the cycle on the process required to close deals. So understanding every required step every key decision maker and mapping out that full path.

Being sure we're not surprised in any sales cycle.

Things like frequent deal level process management so.

During that the deal has progressed through all the required steps in that reps in franchise all key prospect individuals' early in the process.

Things like that.

And finally things like retraining on ROI, obviously, we have great ROI on our products, we wanted to be sure that our clients recognize that so when our sales reps are out talking to prospects.

They have really good case examples really good proof points really good.

Product marketing materials to be able to articulate that value and a compelling and clear way. So that clients know they will get the value really quickly.

If you look on our website, we have more than 40 client testimonials stories those are great to use with prospects just to highlight the really high ROI. So we're doing a lot to be sure that in this environment sales reps are matching their message to this environment.

Great and then just on the upsell into our existing clients, presumably there doesn't seem to be much much elongation, there, but just want to confirm that into.

Given the commentary about the <unk>.

Higher ROI for.

For people that are already using your solutions is there and is.

Is there a greater upsell opportunity because of that given the current environment.

We've seen upsell continuing to perform well so we're still very bullish and thats really part of our land and expand strategy. So once we have clients and they start seeing the value exactly like you said, we want to be.

Bringing them, new solutions and Upselling into new use cases, and increasing our revenue with those customers because we're increasing the value we deliver to them. So that continues to be a big focus.

Thank you.

Thank you.

Hey, Ken if you have a question. Please press Star then one.

The next question comes with the kit caveat with Barclays. Please go ahead.

Okay.

I think Robert Hey, Rick Thanks for taking my questions here.

Sure.

Well, Hey, I joined late so apologies if these questions have been asked but Robert maybe just to start with you totally get it increased scrutiny from from new logos can you just talk about whether that was maybe focus in AR.

And any particular sub vertical like life Sciences, our health care it.

Or was it more of a trend kind of across the sub verticals that you serve.

We've seen similar trends across each of our core end markets. So it's been something we kind of have perceived across the board I don't think it was focused in any particular area.

The one thing we did say if you missed the early part of the call is it's been primarily with new business and particularly the larger deals and new business, where you have a little more complexity.

And already more process steps.

Got it got it thanks for that Rick maybe maybe for you again apologies. If this was mentioned, but how much did analytical wizards add to billings and our Po. If you have that handy just to sort of get a sense of the organic growth rate for billings and bookings.

Phil analytical Wizards performed strongly in the quarter.

So we're very pleased by this performance as I mentioned earlier.

Running ahead in terms of its profitability.

You did almost $3 million of revenue, we don't break out the CRP.

Yes.

Billings by segment in AWS.

5% of our revenue.

Saying that their business model by its very nature generates less CRP O per dollar of revenue.

So thank you again.

Less than 5%, we don't break it out.

Understood Thanks very much.

Thank you.

The next question comes with Bryan Mcdonald with need.

Please go ahead.

I appreciate the commentary that sort of all the end markets have remained resilient.

As we enter the back half of the year. If you see some end markets start to slip can you factor that into your sales motion and dynamically adjust the changes in the market, meaning for example, like of health systems are struggling with pharma is resilient do you dial up efforts on pharma and maybe pull back on health systems.

It's a good question I mean, obviously, if we saw longer term secular trend, we would adjust where we make investments in our sales and marketing invest.

Investments to target more in areas of opportunity, which we've done that across the past couple of years as we've added teams to our provider verticals. We've started to focus more there and seeing really good growth there and added more to life sciences as we've seen.

Opportunity, there and have more products targeted there.

I think it would be a hard thing to do kind of mid quarter, given our sales cycles are typically two to four months and we're out there seeing really strong opportunity in all our end markets.

That's kind of where we're out pushing so the hope is that we continue to deliver strong growth in each of those verticals across the rest of this year, but if we got to the end of the year and felt like there was some change like that certainly we would take that into account and going into the commercial planning for 2023.

Yes, I think more broadly.

We measure everything it's a big part of our culture.

Very strong returns on sales and marketing we manage this business over a multiyear perspective.

So there is nothing that indicates to us that there is anything going on but we would of course it just as appropriate if we saw a continuing trend change.

Change in those investments.

Rest assured we pay attention to it.

I think you're indicating something long term.

Makes sense I appreciate that.

And then it seems like with some of the product innovations that the product strategy for pharma is moving earlier in the drug approval timeline. We've also heard with some of these earlier stage biotech or pharma companies that budgets are constrained data vendors might be what ends up getting cut from the spending budget. So have you seen that at all in your go to market motion and then maybe if.

You could just compare and contrast, the differences of selling to some of these earlier stage pharma companies versus some of the larger pharma clients you have today.

Yes.

Overall, we.

As you think about where we innovated, where we focus within life Sciences. We are really a later stage with these organizations. So we don't tend to sell much into research level research stage life Sciences companies and those are the ones that have really gotten hit the hardest by the financing crash out within that market. So it has come.

Then you start, bringing a drug to market and start thinking about commercialization, that's really where our product is most impactful their ability to commercialize that in size markets.

Figure out where to find the best experts and invest our resources. So we don't see.

Outsized impact within that market as a result.

Got it thanks guys.

Thanks, Brian .

The next question comes with Brian Peterson with Raymond James. Please go ahead.

Hi, gentlemen, this is jonathan to carry on for Brian . Thanks for taking the question just one from us so.

So one of those themes that we're hearing in software, but theres offers to consolidate vendor relationships do you feel those point solutions that can be a source of share gains for you. How do you think about that dynamic.

Hi.

Hard to hear your question, but I think I got it which is.

As people are trying to consolidate vendors their software vendors do we see impact of that and I think what what's great about our solution is we're unique and we have a distinctive set of data and a distinctive solution that no one else has.

So if you kind of look at any of our end markets will represent something that if people want the value of understanding how to sell into healthcare and how to navigate the complex healthcare ecosystem, they're going to need to work with definitive.

So for example, if youre someone who is outside of health care and wants to focus on selling into health care.

You might have services, you use that look across the industry, but they're not going to be deep in health care and so if you really want to penetrate health care, you've got to work with definitive we're the only one that has the unique data that we have around navigating that ecosystem and all of the affiliations all the reference data all the specific players in the market, we have nearly 100% of the market mapped.

If you're inside the industry like a life Science company you might have for example claims data from a couple of other sources that you work with but you don't have that claims data combined with our 11 year buildup of that map of the ecosystem and all of the references and affiliations. When you put those together creates much more powerful data set so.

If you're inside the industry, even though you might work with other vendors. If you want to get the information that's critical youre going to be working with definitive as well, we'd sit side by side with them. So.

We don't really have someone that we could be quote consolidated into in terms of that spend and that's because we've really created a lot of differentiation over time and building up over 11 years, our proprietary data and building that into our SaaS platform, which provides quick return on our clients' investments.

Thank you.

This concludes our question and answer session I would like now to turn the conference back over to Mr. Robert muscle White for any closing remarks. Please go ahead.

Thank you everybody for joining the call today and look forward to seeing and talking to many of you in the coming weeks, we're at several conferences coming up.

<unk>.

Thank you very much.

This conference has now concluded you may now disconnect have a great day.