Q4 2022 Definitive Healthcare Corp Earnings Call

February 23, 2023

Ladies and gentlemen, greetings and welcome to the definitive healthcare fourth quarter 2022 earnings conference call.

At this time all participant lines are in a listen only mode.

A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce you to your host Matt route them in General Counsel.

Please go ahead.

Good afternoon, and thank you for joining us today to review definitive healthcare's fourth quarter 2022 financial results.

Joining me on the call today are Robert Musselwhite, CEO , Jason Cramps, founder and executive Chairman and Rick Booth, our CFO .

During this call we will make forward looking statements, including but not limited to statements related to our market and future performance and 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 impacts of global macroeconomic conditions on our.

This results in clients and on the health care industry generally.

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 and elsewhere in our filings with the SEC actual results may differ materially from any forward looking statements.

Company undertakes no obligation to revise or update any forward looking statements to reflect events that may arise. After this conference call, except as required by law.

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

Additionally, we will discuss non-GAAP financial measures on this conference call. Please refer to the tables in our earnings release on the Investor Relations portions of our website for reconciliation of these measures to their most directly comparable GAAP financial measure with that I'd like to turn the call over to Robert.

Thanks, Matt I would like to thank all of you for joining US. This afternoon to discuss definitive healthcare's fourth quarter results on today's call I will review, our fourth quarter and full year results offer some perspective on what you're seeing in the market and highlight some of the key value drivers of definitive health Care's differentiated data and platform and then.

Jason will highlight some of our latest product innovations.

We are pleased to have delivered strong fourth quarter results on both the top and bottom line with revenue and adjusted EBITDA, both exceeding the high end of our guidance range.

Our total revenue was $66 million, which represents 31% year over year growth and our adjusted EBITDA was 17 point out $1 million, which translates into a 28% margin.

For the full year 2022, total revenue was $222 $7 million, which represents 34% year over year growth.

And our adjusted EBITDA was $63 $7 million, which translates into a 29% margin.

Together, we delivered a rule of 63 performance in 2022, which we believe highlights our powerful combination of growth and profitability.

Before diving into the fourth quarter in more detail I would like to take a moment to highlight some of our key accomplishments across 2022.

I am proud of our success in what became a difficult macroeconomic environment.

Our mission is to transform data analytics and expertise into health care commercial intelligence and we made significant progress against each element of that mission in 2022, which will position the business for sustainable growth over time, we started off 2022 by expanding our analytics capabilities with the acquisition of analytical Wizards and then we release.

Passport Express six months later.

I'm, particularly proud of the passport express release, because it integrated the analytics from analytical Wizards with definitive health care's industry, leading proprietary dataset.

The passport product line extends our reach into both treatment pathway analytics and commercial marketing optimization, while significantly increasing the value that we can provide to life science customers across their entire lifecycle from research and development to product launch and commercial optimization.

In the middle of the year, we released the next generation of our expert identification solution monocle expert inside to point out which added a number of significant capabilities to the platform and expanded our data set to include more than 13 million key opinion leaders.

Perhaps most importantly throughout the year, we continued to make significant investments in our data assets, increasing the breadth depth and uniqueness of our data, which we recently re package as the new Atlas dataset.

Jason will provide some more detail on the Atlas dataset and other fourth quarter innovations in a bit.

We accomplished all of this in the midst of an economic backdrop that got progressively more challenging during the year.

Conditions in the fourth quarter continued to exhibit what we saw in the third quarter with longer sales cycles, more stringent approval processes and a sizeable number of deferred purchasing decisions.

Also like in the third quarter, we saw this dynamic in both new logo and upsell activity and it remained more pronounced within the life sciences and provider markets.

As we've discussed in the past our commercial teams have been adapting to this new backdrop and those efforts are showing early signs of yielding benefits. We are particularly encouraged by the continued strength and demand generation. Our sales pipeline was at an all time high entering January and we've seen meaningful growth across all stages of the pipeline and in each vertical market.

The increasing interest in the definitive health care platform is a strong validation of how mission critical we are to the success of our customers' operations.

We also kicked off 2023 with a more vertically aligned go to market function, which will help us do a better job of understanding and responding to client needs I've.

I've been impressed with the team's early efforts to develop more in depth account plans in the sales or up sell process, ensuring we understand and in franchise all of the key decision makers, who can impact your decision to avoid delays late in the cycle.

These global account plans also enable us to pursue larger more strategic customer engagements and we are seeing early success with this strategy with one life Sciences customer now accounting for nearly $3 million of cumulative a are across all of our product lines.

All of these improvements will help us function more effectively against the more challenging backdrop.

Overall, we are pleased with what we achieved in 2022, we've continued to effectively grow and scale the business exceeding $200 million in revenue and generating $54 million in free cash flow. We have continued to manage the business with a clear focus on maximizing our long term success and value creation for customers and shareholders and we enter 2023, having made some.

Key improvements across data analytics expertise and with the commercial focus that will serve us well as we turn our attention forward to 2023 and beyond we expect to continue to have success in the market as the definitive health care platform is increasingly seen as a must have for any business looking to efficiently and effectively sell into the complex fragmented.

Four trillion dollar U S health care market. This is not easy to do in the best of times and it is even harder when the economy is weaker the good news is that our platform is purpose built to deliver this outcome to clients.

We enabled meaningful improvements in sales productivity by combining our proprietary affiliation data with claims data. So customers can develop more granular sales territories identify the right decision makers and developed sales pitches that are targeted and effective I.

I would note that this is becoming even more important as the life sciences and other companies increasingly leverage digital channels as part of their sales efforts.

We also help customers maximize their R&D investments by helping them accurately assess and size market opportunities as well as to identify the most important experts in the field to increase the likelihood of a successful product launch.

Part of what makes the definitive health care platform is so powerful is its ability to take the vast amount of data. We collect insured is accurate with our proprietary data science capabilities and make it easily accessible to business users.

In order to be truly useful to a customer data has to be actionable and we believe there's no other platform in the market that provides the breadth and depth of actionable intelligence that we do.

To show why customers are choosing definitive healthcare to tackle some of their most pressing business challenges I would like to highlight a few of our key wins from the fourth quarter one of the world's largest and most were now in cancer treatment and research institutions purchased a multi year enterprise subscription to inform their strategy for partnering with leading hospitals across the country. This client purchased subscriptions to <unk>.

Hospital view physician view physician group view and our Atlas all payer claims dataset.

A large biopharmaceutical company focused on the discovery development and commercialization of RNA interference therapeutics purchased a multi year enterprise subscription to our hospital view in Atlas all payer claims to design and execute a strategy for selling into integrated delivery networks, one of the world's largest cloud computing service providers purchase a subscription to.

Our hospital of your product as they recently decided to enter the health care market after seeing a rise in data breach and ransom attacks in hospitals.

As they look to build out a new sales and marketing team for health care. They chose to make definitive health care one of their first investments.

Turning to up sell deals the nation's oldest and largest association dedicated to fighting heart disease and stroke already use definitive healthcare referenced an affiliation data to support their commercial efforts with hospitals and other facilities.

In Q4, they added our Atlas all payer claims product to monitor a hospital heart failure heart attack and stroke encounters by the number of procedures at each facility.

Armed with this information the association can better educate these facilities on how to improve care for patients facing severe heart ailments.

We also had a significant upsell deal at one of the nation's largest health insurance and service companies.

We originally sold to the health care services business, which was using our physician view and physician group view products to map positions to provider organizations in.

In the fourth quarter, we expanded our contract to cover the entire organization and added multiple new products, including Hospital view surgery Center view imaging Center view and connected care of you.

The organization also purchased our integration services to import our data into their internal data environments.

At the world's largest private global pharmaceutical company, we had a six figure expansion of passport promotional analytics into two new therapy areas, where he previously did not have relationships and as a result, the combined definitive healthcare a are across all product lines that this company is now in excess of $1 million.

Finally, we more than doubled the size of our Monical experts suite contract and one of the world's largest multinational pharmaceutical and biotechnology companies.

This contract is now in excess of $1 million a R and our key opinion leader intelligence will be used by this company's entire global medical affairs team.

Now I'd like to look ahead at 2023 from.

From a macro perspective, we expect 2023 will be similar to what we saw in the second half of 2022.

Our financial outlook does not anticipate an improvement in the selling upselling or renewing environment and Rick will cover this financial outlook in more detail later.

That said, we are committed to focusing on the things we can control that will best position the company for the long term.

We will accelerate investment in our data and platform to increase the insights we can provide to customers over.

Over the past 12 years, we've created unique and highly differentiated datasets and combine them with incredibly sophisticated analytics and decades of health care industry expertise.

Part of the power of our platform is our ability to quickly apply AI and sophisticated data science to our growing dataset to create new solutions that solve more of our customers' business challenges. These investments are foundational to our long term growth strategy and generate strong returns for us.

We will build upon the success I mentioned earlier with our vertical as Asian, and global account team strategies.

As we continue to invest in the capabilities of the definitive healthcare platform the opportunities we have to deliver value to customers will only get bigger.

We are at the early stages of a $10 billion plus market opportunity and believe we can dramatically expand our wallet share with customers over time.

Investing to capitalize on this land and expand opportunity will continue to be our primary focus.

Finally, we will continue to prudently manage our cost structure to fund these growth initiatives, while maintaining our attractive margin profile.

We've built a highly scalable and efficient business model that is highly cash generative prior.

Prioritizing investments and rigorously measuring the returns we generate from a dollar spent is an important part of our success.

Our ability to invest in our long term priorities in a more challenging environment increases our competitive moat and long term growth opportunity.

Now I'd like to turn the call over to Jason to talk about recent product innovation highlights.

Thanks, Robert I'd like to start by sharing some exciting news about the Atlas dataset, which we announced to the market on February 2nd.

Composed of multiple datasets, including Atlas referenced and affiliations data.

Outlets all payer claims data.

Atlas prescription claims data and Atlas expert data the Atlas data set provides a longitudinal comprehensive and complete picture of the health care market.

Over the 12 years since I founded definitive healthcare, we've been recognized as a leader in referenced and affiliations data, providing a complete view of the U S health care ecosystem and have continued to build upon that foundation with our investment in new data types and data science, helping clients gain unique intelligence and health care entities.

And we're excited to now package up all of that data that our clients know and love into the Atlas dataset.

With the Atlas dataset, we're empowering customers to make strategic enterprise wide data driven decisions based on comprehensive up to date intelligence on the complex and broad health care ecosystem.

Combining multiple datasets are more than 15 million health care experts and professionals and 300000 health care organizations. The Atlas dataset has multiple components, including.

Atlas referenced and affiliations, which provides clients with unique visibility into the operations of and connections between healthcare providers and health care organizations.

This data set spans more than 30 referenced categories, including executive contact information physical locations care quality technology infrastructure and more.

Secondly outlets all payer claims previously known as our claims Amex product contains billions of <unk> patient level data points that enable longitudinal analysis of healthcare activity across all sites of care.

This data includes claims for facilities and physicians across all payers, including commercial Medicare Medicaid and other federal programs.

We recently expanded our Atlas all payer claims cover significantly including double digit increases in key areas, such as rare disease oncology and chronic conditions.

Thirdly Atlas prescription claims formerly known as our claims Rx product contains billions of all payer lifecycle pharmacy and direct prescription claims. So users can understand the volume of claims that are paid rejected and reversed.

When coupled with the broader Atlas dataset, our claims products provide definitive health care customers with industry, leading intelligence on provider behavior providers affiliation and referral patterns patient care and the activity is taking place within our facility.

As a result clients can more easily find under diagnosed patients gain deeper insight into longitudinal patient journeys leveraged more accurate data and AQR analytics and access more precise commercial targeting.

Finally, Atlas expert, which contains information on more than 13 million global key opinion leaders scientific researchers and health care providers.

The data set also includes millions of data points from publications clinical trials, social media activity and news outlets. So clients can get an accurate understanding of the scientific activity and key providers for virtually any therapy area or a disease state.

As part of the Atlas data set launch not only did we significantly expand our coverage, but we also refined the methodology that we use to master payer and patient data, while implementing additional layers of data science to delivered more detailed and granular reporting increased accuracy.

Our plan is to continually expand and improve the Atlas dataset by adding new data types as well as to continue to develop more sophisticated data science to help our customers instantly access the insight they need to drive the growth of their businesses.

For example, just last week, our executive profiles crossed the 1 million threshold.

Thanks to the hard work from our data collection teams.

Our in depth industry, leading executive profiles cover executives and administrators at all levels of health care organizations.

And when combined with our World class referenced and affiliations data allows our customers to not only find the right executive target, but to deliver a message that hits that Mark every time.

This is just one example of definitive health Care's innovation flywheel, which allows us to quickly and continuously build out new datasets, new analytics and new functionality to drive more value for our customers and continue to sell more use cases across our clients' organizations.

This results in a higher ROI and the ability for our customers to reach that ROI more quickly, which in this market environment is absolutely critical.

The impact that we're having on our customers as highlighted in the results of an independent marketing customer research study that we completed in the fourth quarter.

At a summary level the Atlas dataset ranked first or second in every single one of the top 10 use cases for health care reference an affiliation data.

This shows up more specifically as follows.

Within life Sciences definitive healthcare ranked first or second out of nine companies is the best option in multiple categories, including <unk>.

Comprehensive quality clinical and financial metrics total addressable market analysis, and identify new physicians or health care organizations.

In fact, biotech and medical device respondents ranked definitive healthcare as having the best intelligence to understand parent child relationships by two to one margin over the competition.

Even more importantly, definitive healthcare users, which includes current and previous customers ranked definitive healthcare as having the best intelligence to understand these relationships by a three to one margin over competing solutions.

Finally, more than 90% of life science respondents said that the completeness accuracy and ease of accessing referenced an affiliation data are the most important evaluation criteria of health care data and analytics providers.

Which of course plays right into our unique strengths.

Looking forward. The same survey showed that there is still plenty of opportunity for definitive health care to grow our business as nearly half of the respondents said their organizations are spending too much time, managing and matching data across datasets.

This is a problem we can help them with.

As you can tell I'm tremendously excited about what we learned in this survey is it shows the tremendous need for health care commercial intelligence.

And that definitive health care is perceived as a leader in that market, putting us in a perfect position to take advantage of the opportunity.

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

Thanks, Jason.

I'll start with a detailed review of our Q4 results before finishing with our guidance for Q1 and full year 2023.

I always you know in my remarks, I will be discussing our results on a non-GAAP basis, unless otherwise noted.

Our strong business model allowed us to deliver solid results in Q4.

Highlighted by strong revenue growth and profitability, despite the continuing economic conditions.

Highlights include 31% revenue growth compared to Q4 2021.

28% adjusted EBITDA margin.

And at 24% Unlevered free cash flow margin over the last 12 months and.

And revenue growth plus the trailing 12 month Unlevered free cash flow margin was 55%.

It's well above the rule of 40.

Turning to our results in more detail.

Revenue for the fourth quarter was $60 6 million.

31% from prior year, and 4% above the midpoint of our guidance.

This performance was driven by strong organic innovation and execution.

As in the fourth quarter, we demonstrated our deepening analytics capabilities by delivering some large projects for global pharmaceutical clients.

Pro forma organic revenue growth was 21% in the quarter.

27% for the full year.

We ended the quarter with 538 enterprise customers, which we define as customers with at least 100000 a R. R.

This was an increase of 121 enterprise customers or 29% year over year, and an increase of 34 enterprise customers from the previous quarter.

As a reminder, these customers represent the majority of our a R. R.

And are a key focus of our go to market programs.

Our total customer count, which includes smaller customers was 3047 at the end of Q4.

From 2865 in Q4 of 2021.

Overall economic conditions continued to be challenging in Q4.

Despite the continuing headwinds, we believe new business and expansion opportunities remains strong.

Even if realization is slightly delayed in this environment.

Gross profit was $53 4 million up 31% from Q4 2021.

And gross margin of 88, 2% increased 31 basis points from Q4 2021 as our prior year investments in prescription claims data scaled.

We invested in additional data sources earlier this year and we expect to see approximately 200 to 300 basis points of temporary gross margin compression for full year 2023, as these sources come online.

Because two large data sources came online in January the margin pressure is expected to be greatest in the first half of the year.

Sales and marketing expense was $21 1 million up 33% from Q4 2021.

As a percentage of revenue sales and marketing expense was 35% of revenue up 44 basis points from Q4 2021.

The year over year increase is a result of modest investment in our go to market organization.

Primarily focused on continued vertical <unk> of our sales and marketing teams.

Product development expense was $7 5 million up 50% year over year.

As a percentage of revenue product development expense.

It was 12% of revenue up from 11% in Q4 2021.

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

Robert and Jason touched on some examples of these earlier.

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

G&A expense was $8 1 million.

16% from Q4 2021.

As a percentage of revenue G&A expenses were 13% of revenue.

Down approximately 180 basis points from 15% in Q4 2021.

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

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

Operating income was $16 $3 million up 33% from Q4 of 2021.

As a percentage of revenue operating income was 27% of revenue.

Up approximately 50 basis points versus Q4 2021.

The year over year margin improvement was a result of favorable gross margin as noted as.

As well as an approximately 180 basis point decline in G&A costs.

These were partially offset by approximately 40 basis points of continued investment in sales and marketing and.

And approximately 160 basis points of innovation investments in product and development.

Adjusted EBITDA was $17 million or 30.

30% increase from Q4 2021.

As a percentage of revenue adjusted EBITDA was 28% of revenue.

<unk> the same as Q4 2021.

As we move through 2023, we will continue to look for areas in which we can reallocate investments to optimize growth.

While delivering adjusted EBITDA margins consistent with the Q4 run rate.

Despite the impact of gross margin pressures noted above.

Net income in Q4 was $10 $5 million or seven cents per diluted share.

Just on 154 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 $35 6 million on a trailing 12 month basis.

Up 41% from $25 $5 million in the comparable period a year ago.

Unlevered free cash flow was $54 $2 million on a trailing 12 month basis.

Down 2% from the comparable period a year ago.

Unlevered free cash flow was 24% of revenue on a TTM basis.

Effectively converting 85% of our adjusted EBITDA of $63 7 million for the same period into cash.

Like any SaaS company when bookings growth slows. So just deferred revenue, which is the biggest driver of Unlevered free cash flows.

As growth rates stabilize and recover so should unlevered free cash flow.

On the balance sheet, we ended the quarter with $332 million in cash and short term investments with only $266 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 $183 $5 million.

We're up 18% year over year.

And total revenue performance obligations were up 11% year over year.

Deferred revenue of $99 $9 million was up 19% year over year.

You will note that C. R. P L and deferred revenue grew more slowly than revenue and.

And you saw that show up in Unlevered free cash flow as I mentioned before.

Moving now to guidance for Q1, we believe it's prudent to assume that current conditions extend through the first quarter as well.

Assuming this is the case in Q1, we would expect.

Total revenues of 56.5 to $58 $5 million.

For a growth rate.

I mean, 13% and 17%.

Adjusted operating income of 13.5 to.

<unk> $14.5 million.

Adjusted EBITDA.

$15 million to $16 million.

Four of 27% adjusted EBITDA margin.

And adjusted net income of 6.5 to $7 $5 million.

We're three to five cents per diluted share on 154 5 million weighted average shares outstanding.

For the full year 2023, we expect revenue of $249 million to $255 million.

For a growth rate of 12% to 15%.

This assumes current conditions continue throughout 2003.

And this growth will be almost entirely organic as we owned analytical wizards for all but two months of the prior year, it will contribute less than 100 basis points to growth.

As we move through 2023, we will keep a careful eye on costs and operating efficiency to ensure we drive growth in the most efficient way as possible when.

When we see revenue website, we will try to reinvest it to deliver efficient growth. While also ensuring that we continue to deliver attractive margins.

Following this strategy adjusted operating profit is expected to be between 61, five and $65 $5 million.

Adjusted EBITDA is expected to be between 67 and $71 million for a full year margin of 27% to 28%.

And adjusted net income is expected to be between 30 and $34 million.

Providing earnings per share of.

Of 19 to 23 cents on 155.5 weighted average shares outstanding.

Within this guidance the key expected cost drivers are the gross margin impact of the new data sources coming online early in the first quarter.

The and utilization of expenses associated with people hired in 2022.

The impact of cost of living expenses on employee wages.

And selective investment in the very highest group's priorities.

We expect these costs will be partially offset by continued efficiencies in costs not directly associated with revenue growth.

So to summarize 2022 was a solid year for definitive healthcare, despite economic headwinds and uncertainty.

We are well positioned for the long term because we have developed a clear leadership position in large and attractive market that we believe will support high levels of predictable revenue growth.

<unk> ability and capital efficiency.

And with that I'll hand, it back to Robert for a few closing thoughts before we take questions.

Thanks, Rick before opening the call for questions I, just wanted to share how proud I am of our employees and the culture and community. They have created and continue to cultivate it is a testament to them that we continue to receive important honors and recognition, including having been awarded the 2023 Best places to work in Boston Award from built in the <unk>.

Gage 2023 top workplaces culture Excellence award the 2022 Stevie award for Great employers and for the sixth consecutive year. The 2022 top place to work by the Boston Globe.

Another area of Pride is our commitment to our community where the volunteer work and generosity of our employees earned us recognition as a top charitable contributor in Massachusetts by the Boston business Journal, and where last year, our employees had over 3400 volunteer hours and we donated nearly $500000 to charitable organizations.

And to further our mission and action towards sustainability and transparency. We are proud to have joined the United Nations Global compact the largest corporate sustainability initiative and the world.

As we look ahead to 2023 I expect our team to continue to do valuable work not only in their roles at definitive health care, but also in sustaining our strong culture and in making a difference outside the office in our communities with that we'll open the line for questions operator.

Thank you ladies and gentlemen at this time, we will be conducting a question and answer session.

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Ladies and gentlemen, we will wait for a moment, while we poll for questions.

Our first question comes from the line of David Grossman from Stifel. Please go ahead.

Thank you good afternoon.

I know it.

Lee.

Difficult environment to forecast anything right now, but as you.

Obviously, you had to come up with guidance for 2023. So as you think about the assumptions that youre, making that underlie that guidance.

Where do you think are there areas, where you could have the most variability whether it be kind of positively or negatively relative to the assumptions that you're using.

Well, we have an extremely we have an extremely predictable business model. So we're very we're very lucky.

That.

New bookings is the most variable component.

Actually a little bit derisked in the guidance that we've provided.

And we expect that we will see some uptick as we get into the second half of second half of the year as the economy improves.

That's why this variability that we have.

And I saw the deck that came out during the call. So it.

It looks like obviously revenue retention went down consistent with.

The backdrop of everything you've been saying so as we think about 2023 should we think about retention no improvement.

Retention levels would look similar to 2022 or.

Should we expect to see some improvement in the back half.

David I think.

David can you hear me this is Robert.

Hey, great from a math perspective.

Here's what we did we basically looked ahead, we now have another quarter of information on how things went last year and like Rick said it looks a lot like Q3 last year.

We don't have any any.

Reason to believe it's going to differ from the quarter. We just saw on the quarter before that so we've assumed that that environment is going to continue for the rest of this year.

To Rick's point, there are things that can change across the year, if the macro environment improves.

We would see better.

New sales and up sell.

It would have some effect this year, obviously, but it will primarily have an impact on 2024 revenues because like Rick said, our business model set up so the commercial performance of one year really does lock in commercial performance in the following year.

You asked about retention retention.

Retention kit impacting year, obviously, if it were to really change, but our retention rates have been reasonably consistent year over year.

Certainly, we see a little bit more especially.

Especially for small bio of late where we've seen most of the financial distress cases that have popped up and we try to work with them and try to keep them as much as we can obviously.

But.

Sometimes you just set up in a place where you can't get to an agreement on what that means and you lose the client and that's the bomber, but I don't think we would expect to see that number move markedly in such a way that it would impact drastically the projections, we put out now so long way of saying look there's a lot of variability and we do our best to predict it we made assumptions based on what we knew.

Looking back in what we feel going forward and.

Feel good about that.

All right got it thanks very much for that.

About the <unk> guidance.

Can you help us understand it looks like we're going to be down sequentially is there is there some anomaly there seasonally that's not typically the case. So is that just kind of consistent with everything we've been saying or is there. Some anomaly in there that's taken a look at their down sequentially.

There's a seasonality.

Particularly in the small amount of professional services that we do have in our model. We completed a number of significant analytics projects for large pharma companies in the fourth quarter.

And we don't expect that to recur in the first quarter, that's a pretty consistent year over year trend within the analytical Wizard business that we.

That we acquired last year.

Got it Okay, and then just one last thing Ric I didn't catch.

The <unk> number that you gave.

Even in the P&L.

Yes.

CRP number was nine.

Okay.

Yes.

<unk>.

183.5 up 18% year over year.

Got it alright.

Alright, great. Thanks again.

Thank you. Thank you.

Our next question comes from the line of Craig heading back from Morgan Stanley . Please go ahead.

Yes. Thanks. Thank.

Question for Robert you talked about some of the sales cycles have lengthened out.

Comment on deals arent closing in the quarter are you seeing them in the subsequent quarter and it is part of that you also mentioned sales is adapting to this environment anything in particular that you're finding successful in terms of their ability to manage through some of that macro.

Yes. Thanks for the question Craig on your first question.

I think.

Sorry, I forgot the first part of your question about the answer the second part.

Remind me the first part correct.

Yeah, just the deals that have taken longer.

Yes.

Pushed deals.

What salespeople always tell you what it pushes its coming in next quarter and I think experience would show that sometimes that doesn't happen.

So when things push.

We do get a lot of them back and we actually track a push deals.

List each month and each quarter that goes forward and then we projected month that it's supposed to close and we've done pretty well on those so what we've kind of seen as a lengthening of the sales cycle.

But still being able to pull some of those through when the decision really is a push I think what ends up happening sometimes as you kind of hear back from your team that its a push but a push is a nice way of a client, saying you know what I'm, saying no and so some of those don't come through.

But in general we have pipeline is bigger than they've ever been we do really look at those and apply consistent standards and take it out of the pipeline if it's not going to be something that closes and even with that pipeline cleansing. We still feel really good. So that's why we know we have the confidence that with a little bit of macro improvement I'd expect the cycles to shorten again and to really start.

Putting that stuff through at the pace, we had seen in the past.

Before some of those macro impact.

On the sales improvements these are tactics that as the environment change, we've really pushed our teams to adopt across the board and I'd highlight a couple of them.

One is deeper account planning and Thats been.

Really helpful and we've seen it yield a lot of benefits, where we've started to do a better job of take.

Take life Sciences, where we have a lot of different solutions for clients.

The team that works on selling commercial data working with the team that is talking to the client about analytics working with the team is talking to medical affairs about expert data.

Working much more closely together and coordinating on the opportunity to really expand those relationships.

The other way it has helped us to really create a better map of who are the influencers for any given decision and be sure that we're getting ahead of talking to those clients about are the ways, we can help them.

If down the line there.

Bucket mandate or a CFO that steps in with something we have a broader bench of support and potentially a broader venture support across the organization even in other therapeutic areas or other departments.

So that's something that I think in this environment is going to be really helpful to us.

The thing that we've done a lot of us continue to vertical wise and by that I mean really organizing our commercial efforts and our expertise that supports our commercial teams around each vertical.

And with that lets us do is speak more of the language of our client.

We've always done that really well diversified because thats kind of the history of the company, but as we've gotten bigger and provider and life Sciences. Those are two places where.

We've really gotten much better at.

Speaking about the use cases that we can generate and we have a lot of neat cases based on acquisitions and new products that we've built over the last couple of years, and so really getting the teams able to articulate the value and the ROI of our solutions and how that fits into our clients and can meaningfully inflect their business.

And that's going to help so in an environment like this people are now theyre going get ROI. They want to understand in the near term and I want to hear confidence from our team about the value, we're going to deliver and I think that all that will really help.

Sorry for the long answer, but at the end of the day.

When people start wanting to invest in growth and make the decision that they want to put dollars behind growing their business, we're still very favorably positioned.

We can accelerate that and deliver a lot of value. So again.

I'd Love a little help from the macro environment, we're not assuming it but when and if it comes it will certainly speed things back up on the cycle front.

Got it and then just my second question a year into analytical with their wood.

Like to hear how it's performing versus your initial expectations and I know Michael was the deal that performed very well. He thought there was any similarities or differences.

Between how those deals have kind of progressed.

Yes, I think both just a quick refresher both had been pretty similar types of acquisitions. They each brought a new capability monocle brought incredible key opinion leader and expert data that we can put into our broader Atlas data set and use across the business and our commercial teams could help accelerate the sale of <unk> products.

<unk>, it's really the same thing they brought us a rapid easily configurable analytic capability. That's data agnostic. So it doesn't have to require a client to buy at the inner data of course, we'd like them to but lets us serve clients that might not have our data yet.

And brought a really strong analytical capability, particularly in biopharma.

And thats something that our biopharma teams can take out and help accelerate adoption and their team can use definitive data. For example, we built passport express that was definitive data loaded onto analyst blizzards analytics and pre package to sell and that's an awesome way that we created synergy with them early in the process.

So I'm really pleased with how both have played out.

I think we believe life Sciences is a huge market for us. The Tam there is huge the opportunity is huge we're growing very well there even despite some of the macro trends in that market. If we look ahead 567 years, it's going to be a huge market for us and both of those acquisitions are really meaningful building blocks.

Two of the solutions that we will be able to bring to that space.

Got it thank you.

Thanks, Craig.

Thank you ladies and gentlemen.

It's a request to restrict it to one question and one follow up.

Our next question comes from the line of Kash Rangan from Goldman Sachs. Please go ahead.

Hi, guys. This is Jacob staff along for Kash Rangan.

Thank you for taking my question I wanted to touch on the conversations that have been had around the Atlas data, thus far namely.

We are in a time, where we are seeing.

Customers can be a lot more.

One more disciplined on our spending and so.

What's been the initial.

The initial reception notes only.

Then three weeks or so but any color we could get there would be really really appreciate it.

It's been great. It's very early obviously, it's something that we're super excited about it gives us a much more complete coverage of some really important areas and unifies our data on your.

The Atlas umbrella, which gives us a really exciting way too.

Present, all the strength of the data and the uniqueness and the distinctiveness of the data back to clients.

So that's been awesome. It just lets us refresh the conversations and.

I think it gives us a way to remind people just how unique and differentiated our referenced stipulations data is.

We mentioned on the study we're number one or two for every use case, we care about with that and I think widely recognizes if you want that those that kind of data and you need use cases that depend on it you have to go to a definitive.

I think in three weeks I'm not going to say all of a sudden we had millions of dollars of sales just from the Atlas dataset, but it's certainly been a conversation invigorate or and I think it will be something that's meaningful in terms of the value we deliver to clients across the year.

Awesome.

Thank you very much and a follow up from me thanks, guys.

Okay.

Thank you.

Our next question comes from the line of Ryan Macdonald from Needham. Please go ahead.

Hey, guys. This is Matt Shea on for Brian Thanks for taking the question.

Wanted to follow up on the deal cycle elongation and curious if you guys are starting to see any consistency in that elongation, meaning if you're able to quantify how much longer those deal cycles have become and then to the extent you are starting to see some consistency in the lengthening how that consistency or <unk>.

<unk> to predict the new normal increases your confidence or visibility into the 2023 outlook.

Yes, it's a really good question.

Traditionally we would have said you know kind of before the second half of last year deal cycles were three to six months with more complex deals being on the longer side of that and smaller.

Single product deals being on the shorter end of that.

It's hard to say what the actual cycle is on stuff that closes it's probably extended by two to three months.

But when you ask about consistency and looking forward what I would say is that our forecasting has gotten a lot better around the sort of new environment and how long deal to come in.

Feel like we have better visibility.

You're entering the year kind of assuming the market kind of taking the market as a given.

And incorporating that into our forecast so well, while we might have gone back to September and say, we were surprised by a lot of things were pushed off I'd say now we do know things are going to push off we're not surprised by it to at least that's progress.

What I would hope that over time that I mentioned earlier with a little bit of benefit from for the macro we have this large pipeline that you do have deals that are genuinely pushing.

Once people decide to spend it up at the budget, we can start getting those sales cycles back down to levels. We saw in the past and that would obviously accelerate AOR this year, if and when that happens.

Okay got it that is that is helpful. And then I wanted to touch on something that Jason mentioned, where you saw in your survey half of life science organizations think that theyre spending too much time matching data across datasets. That's something you can help with I'm curious relative to that demand what module that you have today that can meet that.

<unk> had on whether you would need to leverage some professional services to assist with that and then to the extent that there are some gaps in completing that data matching strategy for those life science companies, how that might guide some of your investments over the next year or two to capitalize on that demand.

Yes, Hi, this is Jason great question so.

First of all as you think about the Atlas data set which we just rolled out the whole point of that is to be able to provide an enterprise wide view.

It is really the source of truth for these clients by bringing together, our referenced and affiliations data with our claims and prescription drug and expert data.

It really solves a lot of problems for our clients versus them trying to mix and match from lots of different places. So that is super important and it also provides us the foundation to where we want to invest in the future. So as we continue to bring in new data sets through internal development.

To roll in for example, digital opinion leader data into the Atlas dataset. So we can really give our clients a sense of.

Who are the Influencers are online and how is that important as they think about going to market with new drugs and therapies in medical devices.

And then similarly, as we think about our M&A strategy, it's really about how do we continue to strengthen the Atlas dataset and bring in more unique data sets to it. But then also how do we leverage that in new and unique ways for our clients both through new capabilities like analytical Wizards as well as internal development, where we are.

Create and new use cases, and new ways to allow our clients to solve as many business problems. They can with our data.

So it's all related together.

The strategic in the way we are thinking about it.

Awesome. Thanks, guys.

Okay.

Thank you.

Our next question comes from the line of D. J Hynes from Canaccord Genuity. Please go ahead.

Hey, guys. This is Ryan Shannon.

Hey, congratulations on the quarter and the year.

So given these tighter sales environment.

Just I guess through Rfps or just word on the street I guess greater price competition between less specialized competitors in there that's affecting your win rates at all.

That's a great question excuse me and I'd say, we haven't really seen.

Any different pricing that we traditionally have seen.

Obviously, we have lots of all guest count to get a deal done that's typical business customers always push for the best price, but there hasn't really been a change in the pricing environment.

That pricing environment has always had a little bit more competition at the sort of lower end.

Where people would be looking at substitutes that would be like just lists of people or telephone directories. If they are not that focused on health care, sometimes that's good enough for them in general people are focused on health care and succeeding in health care and growing in health care. They have to buy definitive and so we don't end up getting getting price eroded for the type of clients.

So that we want to bring in.

So.

No that hasn't been a place that we've really seen we've really seen any any big change.

Okay, great. Thanks appreciate it.

Sure.

Thank you.

Our next question comes from the line of Glenn <unk> envelope from Jefferies. Please. Please go ahead.

Oh, yes, thanks for taking my questions Hey, Robert I just had two.

The first is on the enterprise client side I mean, we.

Grew almost 7% sequentially.

In the quarter from three Q and I was kind of curious if you can give us some color around the split between what what percentage of that growth came from new customers versus organic growth within your existing base, just sort of given all the incremental modules and offerings. You now have on the platform just trying to get a better sense for where the growth is coming from.

Okay.

I'm sorry.

Thanks for the question I'd say, we saw though I don't know I don't have the exact number on the split and I don't know if we normally disclose it but I guess the best answer to your question is we had some very large new business wins that came in in the quarter that went straight to enterprise and then up sell upsell came in as expected and that generally results in.

Kind of have the half the.

Size client growth through that as well, maybe a little bit more than half so.

I don't know the exact mix for you, but we had a healthy performance on both sides of that in terms of getting people up to enterprise.

Okay perfect. That's helpful color, maybe if I could just follow up sort of on the on the <unk> commentary you made you said sort of the conditions that you're seeing in the second half sort of continued maybe first at least into 2023 and last quarter. When we spoke I think the commentary seemed to suggest that sequentially.

Through the third quarter things kind of got maybe incrementally weaker I was wondering if you can give us.

Maybe sequential commentary on how <unk>.

And maybe so far we have two thirds of <unk> already done how things have been trending because I think what we're all trying to get a sense for is maybe.

Have things sort of stabilized in the current environment as we try to assess.

Either the conservatism more potential vulnerability in your 'twenty three revenue guidance, just kind of based on where we are now.

Yes, yes.

Yeah, again, I hate to give you a math answer, but basically Q4 looked a lot like Q3, just in terms of absolute performance and so I guess you could say that.

There was not a great quarter Q4 is not a great quarter, but it wasn't.

A much worse quarter than Q3, either just wasn't better quarter.

I'm not going to comment on what we've seen so far this year, but in general what we've modeled model that that Q4 Q3 Q4 performance continues through this year.

That's what drives the model and.

We don't have any reason right now to believe that that's not the environment. We're operating in we certainly hope that the operating.

Operating environment improves, but what it tells US is you now have another period of results and so our assumption.

As we've planned out this year is that it lasts longer than we might have thought before so it's going to go through this year and that's at least where we were.

Where we're looking at it right now.

Okay. Thank you.

Sure. Thank you.

Our next question comes from the line of Brian Peterson from Raymond James. Please go ahead.

Hey, gentlemen, thanks for taking the question.

Maybe another high level, one on the on the macro and budgets, but as we went through 2022, I guess I'd just love to understand how budget trends progressed, I mean based on our work it sounded like they've been down but maybe as we go into 2023.

Been set so I guess I'm curious if in your customer conversations I know maybe it wasn't the clothes that you guys want it in the back half of the year, but are we kind of through the worst of it and it maybe customers with budgets and everything are a little bit more ready to play offense. When they were playing defense in 2022. So I think that's the right line of questioning but any thoughts there. Thanks.

Yeah.

Sure. It's a really good line of questioning and we're hopeful that that would be the case.

And assume that coming into the year.

The experience, we have with budgets as they got very tight.

And in many cases did not open up the hope was that okay. Maybe this year budgets will get better we haven't assumed that budgets are going to radically open up from what we saw at the end of last year and I think that's a prudent assumption to make just because we haven't seen it.

For every client that we got a deal closed at the end of the year I saw another client that came in is literally ready to sign and some get some spending mandate.

Came in and said, we just can't do it now we're going to have to reposition us for some time next year.

The pace and the number of those that happened was just markedly different in the second half of the year and that was across the first half of the year are really in years before this one.

<unk>.

I don't believe it's an environment the last forever, but right now it feels like.

Coming into the year. It felt like we were still in the middle of it and remember we do serve some sectors that we've seen have a little more financial stress right now I mean, certainly small biopharma small life Sciences is not there are a lot of companies that are really struggling there. So they're going to scrutinize every dollar a lot of them are pulling back on growth investments.

<unk> seen a lot of a lot of segments of our provider vertical are having a tough go of it right now and you've seen you've seen the announcements they are cutting a lot of spend and so those are places that are just harder to get in or harder to upsell or.

Yeah, just just tend to be places, where we don't always control the <unk>.

This sort of budget environment that we're selling into it and you might have been talking to someone for three months and have a really good conversation and then the budget environment changes in the last hour or.

So again look I'm hopeful that things turn in the right direction and that we get a little relief on this but we have not assumed that in our in our planning for this year.

I appreciate the color. Thank you.

Thanks.

Thank you.

Our next question comes from the line of Anne Samuel from Jpmorgan. Please go ahead.

Hi, Thanks for my taking my question. This is maybe just a little bit of a follow up on what you were just talking about I was wondering if maybe you could talk about some of the differences between what youre seeing in the demand environment for life sciences versus provider.

You know where the headwinds are more pronounced and maybe which when you expect to recover first.

Well that's a good question I guess I'll start with the end of your question, which is we haven't assumed any recovery in the plan that we've put out so from and assuming in sort of looking forward. We've assumed that the environment. We're in is the environment. We're in and we're going to function as best we can against that.

In terms of just what we're seeing kind of life sciences versus provider certainly.

It's been more acute for us in the smaller life science and that's been a strong point for us over the years, we have a great value proposition in that market. There's just a lot of financial strain there.

Were either really just come in with an ability to continue.

Spend extra money or at least have a budget scrutiny and both of those impact our ability to.

To grow with those clients and providers a little different story.

Providers tend to be okay over the long term not necessarily super high margin, but usually not low margin either I think the end of last year was tough and there are a lot of things working against provider economics.

I'd expect that market over time to be a great market for us. So I just don't know when when things will open back up so.

Hopefully that gives you as much color as I can at this point I wish I could look forward and tell you that one is going to recover sooner than the other and that theyre, both going to recover really quickly.

But that's again not what we have in our outlook right now.

Very helpful. Thank you.

Sure.

Thank you.

Our next question comes from the line of Allen Lutz from Bank of America. Please go ahead.

Hi, Thanks for taking the questions I guess one for Rick.

If we look at sort of the Kpis here enterprise customers still growing total cost total customers still growing pretty nicely here, even though you've talked about how the macro is impacting the business I guess to ask this.

<unk> question. Another way is there any way to size the contribution in <unk> from professional services or what's not going to repeat in <unk> and then how should we think about growth of total customers, especially in the first quarter or first half of the year is that could that potentially dip just trying to kind of.

Brain.

What's driving the sequential change in revenue from <unk>.

Yes.

$100 million anticipated difference between Q4 professional services and Q1 professional services, which is normal and customary for the analytical Wizards.

Project work that they still do overall professional services are only about 2% of our revenue, but they do tend to be back end loaded.

And thank you by the way for for acknowledging the underlying strength of the business.

No problem and then one question for Jason we've been trying to figure out as I'm sure. You have just sort of life sciences wins spends going to inflect and theres a lot of different data points that suggest that maybe it had some are saying that it has and I guess can you talk when exactly did.

<unk> sciences start to pull back and is there any kind of a historical reference point that you can point to I know the business was founded sort of after that the last great recession, but is there anything historically that you can point to where you have seen something like this before and how long it took before things started to pick up.

Yeah.

Yes, it's a good question.

Jason.

Gil for Jayson, it's always hard to say when exactly things youre going to turn around I guess, what I would comment on as you think about the long term.

For this business overall all of the amazing tailwind that has really led to the extraordinary growth over the last 12 years still exist. If there is any.

Explosion of healthcare data, that's continuing that's a market that's incredibly complex to sell into and only getting more complicated over time, it's highly interconnected and it's so different than any other market and Theres continued rapid changes around for life Sciences about how drugs are being reimbursed and above.

Finding under diagnosed patients for extremely rare diseases. So all of those great tailwind still exist and long term those are going to drive.

Really great continued growth and great underpinnings for this company.

When that happens.

We'll wait and see but in the meantime, we are building this business and innovating in ways that are going to continue to drive long term sustainable growth.

So we're in a great position as we've talked about many times, we have growth and profitability and that allows that affords us the opportunity to continue to invest when others can't.

So it will strengthen our position during this time and when it turns around we'll take advantage of it.

Great. Thank you both.

Thank you.

Ladies and gentlemen, we have reached the end of the question and answer session.

And I would like to turn the conference silver to Robert <unk>, Chief Executive Officer for closing comments.

Yes. Thank you all for the time Tonight, we always appreciate it we look forward to circling back with all of you and with our shareholders over the next several months.

Look forward to that thank you again for your time Tonight and the questions. Okay.

Thank you.

Conference of definitive healthcare has now concluded. Thank you for your participation you may now disconnect your lines.

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Ladies and gentlemen, greetings and welcome to the definitive healthcare fourth quarter 2022 earnings Conference call.

At this time all participant lines are in a listen only mode.

A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce you to your host Matt Ruderman General Counsel.

Please go ahead.

Good afternoon. Thank you for joining us today to review definitive healthcare's fourth quarter 2022 financial results.

Joining me on the call today are Robert Musselwhite, CEO , Jason grants, founder and executive Chairman and Rick Booth CFO .

Our competitive position customer behaviors, our financial guidance, our planned investments and the anticipated impacts of global macroeconomic conditions on our business results and clients and on the health care industry generally.

Any forward looking statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 90 to 95.

We're looking statements involve a number of risks and uncertainties, including those discussed in the risk factors section and elsewhere in our filings with the SEC actual results may differ materially from any forward looking statements. The company undertakes no obligation to revise or update any forward looking statements to reflect events that may arise. After this conference call, except as required by law.

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

Additionally, we will discuss non-GAAP financial measures on this conference call. Please refer to the tables in our earnings release on the Investor Relations portions of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure with that I'd like to turn the call over to Robert.

Thanks, Matt.

I'd like to thank all of you for joining us this afternoon to discuss definitive healthcare's fourth quarter results.

On today's call I will review, our fourth quarter and full year results offer some perspective on what youre seeing in the market and highlight some of the key value drivers of definitive healthcare's differentiated data and platform and then Jason will highlight some of our latest product innovations we are pleased.

To have delivered strong fourth quarter results on both the top and bottom line with revenue and adjusted EBITDA, both exceeding the high end of our guidance range.

Our total revenue was $60 6 million, which represents 31% year over year growth and our adjusted EBITDA was $17 $8 million, which translates into a 28% margin.

For the full year 2022, total revenue was $222 7 million, which represents 34% year over year growth.

And our adjusted EBITDA was $63 7 million, which translates into a 29% margin.

Taken together, we delivered a rule of 63 performance in 2022, which we believe highlights our powerful combination of growth and profitability.

Before diving into the fourth quarter in more detail I would like to take a moment to highlight some of our key accomplishments across 2022.

I am proud of our success in what became a difficult macroeconomic environment.

Passport Express six months later.

I am, particularly proud of the passport express release, because it integrated the analytics from analytical Wizards with definitive health care's industry, leading proprietary dataset.

In the middle of the year, we released the next generation of our expert identification solution monocle expert insight to point out which added a number of significant capabilities to the platform and expanded our data set to include more than $13 million key opinion leaders.

Jason will provide some more detail on the Atlas datasets and other fourth quarter innovations in a bit.

We accomplished all of this in the midst of an economic backdrop that got progressively more challenging during the year.

Also like in the third quarter, we saw this dynamic in both new logo and upsell activity and it remained more pronounced within the life sciences and provider markets.

As we've discussed in the past our commercial teams have been adapting to this new backdrop and those efforts are showing early signs of yielding benefits were particularly.

Really encouraged by the continued strength and demand generation. Our sales pipeline was at an all time high entering January and we've seen meaningful growth across all stages of the pipeline and in each vertical market.

The increasing interest in the definitive health care platform is a strong validation of how mission critical we are to the success of our customers' operations.

We also kicked off 2023 with a more vertically aligned go to market function, which will help us do a better job of understanding and responding to client needs.

I've been impressed with the team's early efforts to develop more in depth account plans and the sales are up sell process, ensuring we understand and in franchise all of the key decision makers, who can impact of the decision to avoid delays late in the cycle.

All of these improvements will help us function more effectively against the more challenging backdrop.

Overall, we're pleased with what we achieved in 2022, we've continued to effectively grow and scale the business exceeding $200 million in revenue and generating $54 million in free cash flow. We have continued to manage the business with a clear focus on maximizing our long term success and value creation for customers and shareholders and we enter 2023, having made some.

Key improvements across data analytics expertise and with the commercial focus that will service well as we turn our attention forward to 2023 and beyond we expect to continue to have success in the market as the definitive health care platform is increasingly seen as a must have for any business looking to efficiently and effectively sell into the complex fragmented.

I would note that this is becoming even more important as a life sciences and other companies increasingly leverage digital channels as part of their sales efforts.

What makes the definitive healthcare platform is so powerful is its ability to take the vast amount of data. We collect insured is accurate with our proprietary data science capabilities and make it easily accessible to business users.

In order to be truly useful to a customer data has to be actionable and we believe there is no other platform in the market that provides the breadth and depth of actionable intelligence that we do to.

To show why customers are choosing definitive healthcare to tackle some of their most pressing business challenges I would like to highlight a few of our key wins from the fourth quarter.

One of the world's largest and most renowned cancer treatment and research institutions purchased a multi year enterprise subscription to inform their strategy for partnering with leading hospitals across the country. This client purchased subscriptions to hospital view physician view physician group view and our Atlas all payer claims dataset.

A large biopharmaceutical company focused on the discovery development and commercialization of RNA interference therapeutics purchased a multi year enterprise subscription to our hospital view in Atlas all payer claims to design and execute our strategy for selling into integrated delivery networks.

One of the world's largest cloud computing service providers purchase a subscription to our hospital of your product as they recently decided to enter the health care market after seeing a rise in data breach and ransom attacks in hospitals.

As they look to build out a new sales and marketing team for health care. They chose to make definitive healthcare one of their first investments.

Turning to up sell deals the nation's oldest and largest association dedicated to fighting heart disease and stroke already used definitive healthcare referenced an affiliation data to support their commercial efforts with hospitals and other facilities.

In Q4, they added our Atlas all payer claims product to monitor hospital heart failure heart attack and stroke encounters by the number of procedures at each facility.

Armed with this information the association can better educate these facilities on how to improve care for patients facing severe heart ailments.

We also had a significant upsell deal at one of the nation's largest health insurance and service companies.

We originally sold to the health care services business, which was using our physician view and physician group view products to map positions to provider organizations in.

The organization also purchased our integration services to import our data into their internal data environments.

At the world's largest private global pharmaceutical company, we had a six figure expansion of passport promotional analytics into two new therapy areas, where you previously did not have relationships and as a result, the combined definitive health care across all product lines that this company is now in excess of $1 million.

Finally, we more than doubled the size of our moniker expert suite contract and one of the world's largest multinational pharmaceutical and biotechnology companies.

This contract is now in excess of $1 million and our key opinion leader intelligence will be used by this company's entire global medical affairs team.

Now I'd like to look ahead at 2023 from.

From a macro perspective, we expect 2023 will be similar to what we saw in the second half of 2022.

Our financial outlook does not anticipate an improvement in the selling upselling or renewing environment and Rick will cover this financial outlook in more detail later.

That said, we are committed to focusing on the things we can control that will best position the company for the long term.

We will accelerate investment in our data and platform to increase the insights we can provide to customers over.

Over the past 12 years, we have created unique and highly differentiated datasets and combine them with incredibly sophisticated analytics and decades of health care industry expertise.

We will build upon the success I mentioned earlier with our vertical position in global account team strategies.

As we continue to invest in the capabilities of the definitive healthcare platform the opportunities we have to deliver value to customers will only get bigger.

We are at the early stages of a $10 billion plus market opportunity and believe we can dramatically expand our wallet share with customers over time.

Investing to capitalize on this land and expand opportunity will continue to be our primary focus.

Finally, we will continue to prudently manage our cost structure to fund these growth initiatives, while maintaining our attractive margin profile.

We have built a highly scalable and efficient business model that is highly cash generative prior.

Prioritizing investments and rigorously measuring the returns we generate from a dollar spent is an important part of our success.

Our ability to invest in our long term priorities in a more challenging environment increases our competitive moat and long term growth opportunity.

Now I'd like to turn the call over to Jason to talk about recent product innovation highlights.

Thanks, Robert I'd like to start by sharing some exciting news about the Atlas dataset, which we announced in the market on February 2nd.

Composed of multiple datasets, including Atlas referenced and affiliations data.

At least all payer claims data at.

This prescription claims data and Atlas expert data.

The Atlas data set provides a longitudinal comprehensive and complete picture of the health care market.

And we're excited to now package up all of that data that our clients know and love into the Atlas dataset.

Combining multiple datasets are more than 15 million health care experts and professionals and 300000 health care organizations. The Atlas dataset has multiple components, including.

Atlas referenced and affiliations, which provides clients with unique visibility into the operations of and connections between healthcare providers and health care organizations.

This data set spans more than 30 referenced categories, including executive contact information physical locations care quality technology infrastructure and more.

Secondly, Atlas all paired claims previously known as our claims Amex product contains billions of D identified patient level data points that enable longitudinal analysis of healthcare activity across all sites of care.

This data includes claims for facilities and physicians across all payers, including commercial Medicare Medicaid and other federal programs.

We recently expanded our Atlas all payer claims cover significantly including double digit increases in key areas, such as rare disease oncology and chronic conditions.

When coupled with the broader Atlas dataset, our claims products provide definitive healthcare customers with industry, leading intelligence provider behavior providers affiliation to referral patterns patient care and the activity is taking place within our facility.

As a result clients can more easily find under diagnosed patients gain deeper insight into longitudinal patient journeys leverage more accurate data and AQR analytics and access more precise commercial targeting.

Finally, Atlas expert, which contains information on more than 13 million global key opinion leaders scientific researchers and health care providers.

As part of the Atlas data set launch not only did we significantly expand our coverage, but we also refined the methodology that we use to master payer and patient data, while implementing additional layers of data science to deliver more detailed and granular reporting increased accuracy.

For example, just last week, our executive profiles crossed the 1 million threshold.

Thanks to the hard work from our data collection teams.

Our in depth industry, leading executive profiles cover executives and administrators at all levels of health care organizations.

And when combined with our World class referenced and affiliations data allows our customers to not only find the right executive target, but to deliver a message that hits that Mark every time.

This results in a higher ROI and the ability for our customers to reach that ROI more quickly, which in this market environment is absolutely critical.

The impact that we are having on our customers as highlighted in the results of an independent marketing customer research study that we completed in the fourth quarter.

At a summary level the Atlas dataset ranked first or second in every single one of the top 10 use cases for healthcare referenced an affiliation data.

This shows up more specifically as follows.

Within life Sciences definitive healthcare ranked first or second out of nine companies is the best option in multiple categories, including <unk>.

Comprehensive quality clinical and financial metrics total addressable market analysis, and identify new physicians or health care organizations.

In fact, biotech and medical device respondents ranked definitive healthcare as having the best intelligence to understand parent child relationships by two to one margin over the competition.

Which of course plays right into our unique strengths.

Looking forward. The same survey showed that there is still plenty of opportunity for definitive healthcare to grow our business as nearly half of the respondents said their organizations are spending too much time, managing and matching data across datasets. This is a problem we can help them with.

As you can tell I'm tremendously excited about what we learned in this survey is it shows the tremendous need for health care commercial intelligence.

And the definitive healthcare is perceived as a leader in that market, putting us in a perfect position to take advantage of the opportunity.

I'd now like to turn it over to our CFO , Rick Booth to walk through definitive health care, It's financial performance in more detail.

Thanks, Jason.

I'll start with a detailed review of our Q4 results before finishing with our guidance for Q1 and full year 2023.

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

Our strong business model allowed us to deliver solid results in Q4.

Highlighted by strong revenue growth and profitability, despite the continuing economic conditions.

Highlights include 31% revenue growth compared to Q4 2021.

28% adjusted EBITDA margin.

And at 24% Unlevered free cash flow margin over the last 12 months and.

And revenue growth plus the trailing 12 month Unlevered free cash flow margin was 55%.

Well above the rule of 40.

Turning to our results in more detail.

Revenue for the fourth quarter was $60 6 million.

Up 31% from prior year, and 4% above the midpoint of our guidance.

This performance was driven by strong organic innovation and execution.

As in the fourth quarter, we demonstrated our deepening analytics capabilities by delivering some large projects for global pharmaceutical clients.

Pro forma organic revenue growth was 21% in the quarter.

27% for the full year.

We ended the quarter with 538 enterprise customers, which we define as customers with at least 100008 IRR.

This was an increase of 121 enterprise customers were 29% year over year, and an increase of 34 enterprise customers from the previous quarter.

As a reminder, these 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 3047 at the end of Q4.

Up from 2865 in Q4 of 2021.

Overall economic conditions continued to be challenging in Q4.

Despite the continuing headwinds, we believe new business and expansion opportunities remained strong.

Even if realization is slightly delayed in this environment.

Gross profit was $53 4 million up 31% from Q4 2021.

And gross margin of 88, 2% increased 31 basis points from Q4 2021 as our prior year investments in prescription claims data scaled.

Because two large data sources came online in January the margin pressure is expected to be greatest in the first half of the year.

Sales and marketing expense was $21 1 million up 33% from Q4 2021.

As a percentage of revenue sales and marketing expense was 35% of revenue up 44 basis points from Q4 2021.

The year over year increase as a result of modest investment in our go to market organization.

Primarily focused on continued vertical position of our sales and marketing teams.

Product development expense was seven 5 million up 50% year over year.

As a percentage of revenue product development expense.

It was 12% of revenue up from 11% in Q4 2021.

We believe that investing in our platform and using our existing data sets to launch our enhanced 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 early years.

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

G&A expense was $8 $1 million up 16% from Q4 2021.

As a percentage of revenue G&A expenses were 13% of revenue.

Down approximately 180 basis points from 15% in Q4 2021.

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

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

Operating income was $16 3 million up 33% from Q4 of 2021.

As a percentage of revenue operating income was 27% of revenue.

Up approximately 50 basis points versus Q4 2021.

The year over year margin improvement was a result of favorable gross margin has noted as.

As well as an approximately 180 basis point decline in G&A costs.

These were partially offset by approximately 40 basis points of continued investment in sales and marketing.

And approximately 160 basis points of innovation investments in product and development.

Adjusted EBITDA was $17 million, a 30% increase from Q4 2021.

As a percentage of revenue adjusted EBITDA was 28% of revenue.

Approximately the same as Q4 2021.

As we move through 2023, we will continue to look for areas in which we can reallocate investments to optimize growth.

While delivering adjusted EBITDA margins consistent with the Q4 run rate.

Despite the impact of gross margin pressures noted above.

Net income in Q4 was $10 $5 million or seven cents per diluted share based on 154 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 $35 6 million on a trailing 12 month basis.

Up 41% from $25 $5 million in the comparable period a year ago.

Unlevered free cash flow was $54 $2 million on a trailing 12 month basis.

Down 2% from the comparable period a year ago.

Unlevered free cash flow was 24% of revenue on a TTM basis.

Effectively converting 85% of our adjusted EBITDA of $63 7 million for the same period into cash.

Like any SaaS company when bookings growth slows so does deferred revenue, which is the biggest driver of Unlevered free cash flows.

As growth rates stabilize and recover so should unlevered free cash flow.

Current revenue performance obligations of $183 $5 million.

We're up 18% year over year.

In total revenue performance obligations were up 11% year over year.

Deferred revenue of $99 $9 million was up 19% year over year.

You will note that CRP L and deferred revenue grew more slowly than revenue and.

And you saw that show up in Unlevered free cash flow as I mentioned before.

Moving now to guidance for Q1, we believe it's prudent to assume that current conditions extend through the first quarter as well.

Assuming this is the case in Q1, we would expect.

Total revenues of 56.5 to $58 $5 million.

For growth rate.

<unk>, 13% and 17%.

Adjusted operating income of $13 five to.

$14 $5 million.

Adjusted EBITDA of.

$15 million to $16 million.

We're at 27% adjusted EBITDA margin.

And adjusted net income of 6.5 to $7 $5 million.

We're three to five cents per diluted share on 154 5 million weighted average shares outstanding.

For the full year 2023, we expect revenue of $249 million to $255 million.

For a growth rate of 12% to 15%.

This assumes current conditions continue throughout 2003.

And this growth will be almost entirely organic as we owned analytical wizards for all but two months of the prior year, it will contribute less than 100 basis points to growth.

As we move through 2023, we will keep a careful eye on costs and operating efficiency to ensure we drive growth in the most efficient way as possible when.

When we see revenue website, we will try to reinvest it to deliver efficient growth. While also ensuring that we continue to deliver attractive margins.

Following this strategy adjusted operating profit is expected to be between 61, five and $65 $5 million.

Adjusted EBITDA is expected to be between 67 and $71 million for a full year margin of 27% to 28%.

And adjusted net income is expected to be between 30 and $34 million.

Providing earnings per share of.

Of 19 to 23 cents on 155.5 weighted average shares outstanding.

Within this guidance the key expected cost drivers are the gross margin impact of the new data sources coming online early in the first quarter.

The and utilization of expenses associated with people hired in 2022.

The impact of cost of living expenses on employee wages.

And selective investment in the very highest group's priorities.

We expect these costs will be partially offset by continued efficiencies in costs not directly associated with revenue growth.

So to summarize 2022 was a solid year for definitive healthcare, despite economic headwinds and uncertainty.

We are well positioned for the long term because we have developed a clear leadership position in large and attractive market that we believe will support high levels of predictable revenue growth.

Stability and capital efficiency.

And with that I'll hand, it back to Robert for a few closing thoughts before we take questions.

Thanks, Rick before opening the call for questions I, just wanted to share how proud I am of our employees and our culture and community. They have created and continue to cultivate it is a testament to them that we continue to receive important honors and recognition, including having been awarded the 2023 Best places to work in Boston Award from built in the <unk>.

<unk> 2023 top workplaces culture Excellence Award the 2022, Stevie Award for Great employers and for the sixth consecutive year. The 2022 top place to work by the Boston Globe.

As we look ahead to 2023 I expect our team will continue to do valuable work not only in their roles at definitive health care, but also in sustaining our strong culture and in making a difference outside the office in our communities with that we'll open the line for questions operator.

Thank you ladies and gentlemen at this time, we will be conducting a question and answer session.

If you would like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue.

You May press Star two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Ladies and gentlemen, we will wait for a moment, while we poll for questions.

Our first question comes from the line of David Grossman from Stifel. Please go ahead.

Alright. Thank you good afternoon.

I know it's really.

Difficult environment to forecast anything right now, but as you.

You, obviously had to come up with guidance for 2023. So if you think about the assumptions that youre, making that underlie that guidance.

Where do you think are there areas, where you could have the most variability whether it be kind of positively or negatively relative to the assumptions that youre using.

Well, we have an extremely we have an extremely predictable business model. So we're very we're very lucky.

In that.

The new bookings is the most variable component.

Actually a little bit derisked in the guidance that we've provided.

And we expect that we'll see some uptick as we get into the second half of second half of the year as the economy improves.

That's why this variability that we have.

And I saw that deck that came out during the call. So if it.

It looks like obviously revenue retention went down consistent with.

The backdrop of everything you've been saying so as we think about 2023 should we think about retention no improvement, meaning that the retention levels with look similar to 2022 or should.

Should we expect to see some improvement in the back half of the year.

David I think.

David can you hear me this is Robert Yeah, Okay, great from a math perspective.

Here's what we did we basically looked ahead, we now have another quarter of information.

On how things went last year and like Rick said it looked a lot like Q3 last year.

We don't have any any.

Reason to believe it's going to differ from the quarter. We just saw in the quarter before that so we've assumed that that environment is going to continue for the rest of this year to Rick's point, there are things that can change across the year, if the macro environment improves we.

We would see better.

New sales and up sell.

That would have some effect this year, obviously, but it will primarily have an impact on 2024 revenues because like Rick said, our business model is set up so the commercial performance of one year really does lock in commercial performance in the following year.

You asked about retention retention.

Pension kit impacting year, obviously, if it were to really change, but our retention rates have been reasonably consistent year over year.

Certainly, we see a little bit more.

Especially for small bio of late where we've seen most of the financial distress cases that have popped up and we try to work with them and try to keep them as much as we can obviously, but.

Sometimes you to set up in a place where you can't get to an agreement on what that means and you lose the client and that's the bomber, but I don't think we would expect to see that number move markedly in such a way that it would impact drastically the projections, we put out now so long way of saying look there's a lot of variability that we do our best predict it we've made assumptions based on what we knew.

Back in what we feel going forward and.

Feel good about that.

Alright got it thanks very much for that.

About the <unk> guidance.

All anomaly in there thats taken a rocketing down sequentially.

There is a seasonality effect.

Particularly in the small amount of professional services that we do have in our model. We completed a number of significant analytics projects for large pharma companies in the fourth quarter and.

And we don't expect that to recur in the first quarter, that's a pretty consistent year over year trend within the analytical Wizard business that we.

That we acquired last year.

Got it Okay, and then just one last thing Ric I didn't catch.

The <unk> number that you gave do you mind repeating that.

Yes.

CRP number was 9%.

Okay.

Yes.

<unk>.

183.5 up 18.

<unk> percent year over year.

Yes.

Alright, great. Thanks again.

Thank you.

You.

Our next question comes from the line of Craig heading back from Morgan Stanley . Please go ahead.

Yes. Thanks.

Question for Robert.

<unk> talked about some of the sales cycles have lengthened out.

Your comment on deals arent closing in the quarter are you seeing them in the subsequent quarter and it is part of that you also mentioned sales is adapting to this environment anything in particular that you're finding successful in terms of their ability to manage through some of that macro.

Yes. Thanks for the question Craig on your first question.

I think.

Sorry, I forgot the first part of your question about the answer the second part.

Remind me the first part correct.

Yeah, just the deals that have taken longer.

Yes.

Pushed deals.

What salespeople always tell you is when it pushes it is coming in next quarter and I think experience would show that sometimes that doesn't happen.

So when things push.

We do get a lot of them back and we actually track a push deals.

But still being able to pull some of those through when the decision really is a push I think what ends up happening sometimes as you kind of hear back from your team that its a push but a push is a nice way of a client, saying I'm, saying no and so some of those don't come through.

But in general we have pipeline is bigger than they've ever been we do really look at those and apply consistent standards and take it out of the pipeline if it's not going to be something that closes and even with that pipeline cleansing. We still feel really good. So that's why we know we have the confidence that with a little bit of macro improvement I would expect the cycles to shorten again and to really start.

Pulling that sell through at the pace, we've seen in the past.

Before some of those macro impact.

On the sales improvements these are tactics that as the environment change, we've really pushed our teams to adopt across the board and I'd highlight a couple of them.

One is just deeper account planning and Thats been.

Really helpful and we've seen a yield a lot of benefits, where we've started to do a better job.

Take life Sciences, where we have a lot of different solutions for clients.

The team that works on selling commercial data working with the team that is talking to decline about analytics working with the team is talking to medical affairs about expert data.

Working much more closely together and coordinating on the opportunity to really expand those relationships.

The other way, it's helped us to really create a better map of who are the influencers for any given decision and be sure that we're getting ahead of talking to those clients about are the ways, we can help them.

If down the line there is a budget mandate, our CFO that steps in with something we have a broader bench of support and potentially I bought a bunch of support across the organization even in other therapeutic areas or other departments.

So that's something that I think in this environment is going to be really helpful to us.

The thing that we've done a lot of us continue to vertical wise and by that I mean really organizing our commercial efforts and our expertise that supports our commercial teams around each vertical.

And with that lets us do is speak more of the language of our clients.

We've always done that really well diversified because thats kind of the history of the company, but as we've gotten bigger and provider and life Sciences. Those are two places where.

We've really gotten much better at.

Speaking about the use cases that we can generate and we have a lot of new use cases based on acquisitions and new products that we've built over the last couple of years and so really getting the teams able to articulate the value and the ROI of our solutions and how that fits into our clients and can meaningfully inflect their business.

And that's going to help so in an environment like this people are know theyre going to get ROI. They want to understand in the near term and I want to hear confidence from our team about the value we're going to deliver.

That will really help.

Sorry for the long answer, but at the end of the day.

When people start wanting to invest in growth and make the decision that they want to put dollars behind growing their business, we're still very favorably positioned.

Because we can accelerate that and deliver a lot of value. So again.

I'd Love a little help from the macro environment, we're not assuming it but when and if it comes it will certainly speed things back up on this cycle front.

Got it and then just my second question a year into analytical whether we'd like to hear how it's performing versus your initial expectations and I know Michael was the deal that performed very well he's out theres any similarities or differences.

Between how those deals have kind of progressed.

Yes, I think both just a quick refresher both had been there pretty similar types of acquisitions. They each brought a new capability Monaco brought incredible key opinion leader and expert data that we can put into our broader Atlas data set and use across the business and our commercial teams could help accelerate the sale of <unk> products.

And it looks like it's really the same thing they brought us a rapid easily configurable analytic capability. That's data agnostic. So it doesn't have to require a client to buy at the inter data of course, we would like them to but lets us serve clients that might not have our data yet.

And brought a really strong analytical capability, particularly in biopharma.

And thats something that our biopharma teams can take out and help accelerate adoption and their team can use definitive data. For example, we built passport express that was definitive data loaded onto Anil blizzards analytics and pre package to sell and that's an awesome way that we created synergy with them early in the process.

So I'm really pleased with how both have played out.

I think we believe life Sciences is a huge market for us the Tam there is huge the opportunities here, which are growing very well there even despite some of the macro trends in that market. If we look ahead 567 years, it's going to be a huge market for us and both of those acquisitions are really meaningful building blocks.

Two of the solutions that will be able to bring to that space.

Got it thank you.

Thanks, Craig.

Thank you ladies and gentlemen.

It's a request to restricted to one question, Bob Potter spin and one follow up.

Our next question comes from the line of Kash Rangan from Goldman Sachs. Please go ahead.

Hi, guys. This is Jacob staff along for Kash Rangan.

Thank you for taking my question I wanted to touch on the conversations that have been had around the Atlas datasets, thus far namely.

We are in a time, where we are seeing.

Customers will be a lot more.

While we are disciplined on our spending and so.

What's been the initial.

The initial reception notes only.

And then three weeks or so but any color we could get there would be really really appreciate it.

It's been great. It's very early obviously, it's something that we're super excited about it gives us a much more complete coverage of some really important areas and unify it's our data under.

The Atlas umbrella, which gives us a really exciting way too.

Present, all the strength of the data and the uniqueness and the distinctiveness of the data back to clients.

So that's been awesome. It just lets us refresh the conversations and.

I think it gives us a way to remind people just how unique and differentiated our referenced manipulations data is.

We mentioned on the study we're number one or two for every use case, we care about with that and I think widely recognizes if you want that those that kind of data would you need use cases that depend on it you have to go to a definitive.

I think in three weeks I'm not going to say all of a sudden we have millions of dollars of sales just from the Atlas dataset, but it's certainly been a conversation invigorate or and I think it will be something that's meaningful in terms of the value we deliver to clients across the year.

Awesome.

Thank you very much no follow up from me thanks, guys.

Okay.

Thank you.

Our next question comes from the line of Ryan Macdonald from Needham. Please go ahead.

Hey, guys. This is Matt Shea on for Brian Thanks for taking the question.

<unk> to predict the new normal increases your confidence or visibility into the 2023 outlook.

Yes, it's a really good question.

Traditionally we would have said you know kind of before the second half of last year deal cycles were three to six months with more complex deals being on the longer side of that and smaller.

Single product deals being on the shorter end of that.

It's hard to say what the actual cycle is on stuff that closes it's probably extended by two to three months.

But when you ask about consistency and looking forward what I would say is that our forecasting has gotten a lot better around the sort of new environment and how long deal to come in.

Feel like we have better visibility.

Youre entering the year kind of assuming the market kind of taking the market as a given.

And incorporating that into our forecast so while while we might have gone back to September and say, we were surprised by a lot of things were pushed off I'd say now we do know things are going to push off we're not surprised by it so at least that's progress.

What I would hope that over time that I mentioned earlier that with a little bit of benefit from for the macro that we have as large pipeline that you do have deals that are genuinely pushing.

Once people decided to spend it up at the budget, we can start getting those sales cycles back down to levels. We saw in the past and that would obviously accelerated this year, if and when that happens.

Okay got it that is that is helpful. And then I wanted to touch on something that Jason mentioned, where you saw in your survey that half of life Science organization thinks that theyre spending too much time matching data across datasets. That's something you can help with I'm curious relative to that demand what module that you have today that can meet that.

<unk> had on whether you would need to leverage some professional services to assist with that and then to the extent that there are some gaps in completing that data matching strategy for those life science companies and how that might guide some of your investments over the next year or two to capitalize on that demand.

Yes, Hi, it's Jason Great question so.

First of all as you think about the Atlas data set which we just rolled out the whole point of that is to be able to provide enterprise wide view.

That's really the source of truth for these clients by bringing together, our referenced and affiliations data with our claims and prescription drug and expert data that really solves a lot of problems for our clients versus them trying to mix and match from.

Lots of different places so that is super important and it also provides us the foundation to where we want to invest in the future. So as we continue to bring in new data sets through internal development.

To roll in for example, digital opinion leader data into the Atlas dataset. So we can really give our clients a sense of who are the influencers are online and how is that important as they think about going to market with new drugs and therapies in medical devices.

And then similarly, as we think about our M&A strategy, it's really about how do we continue to strengthen that Atlas dataset and bring in more unique data sets to it. But then also how do we leverage that in new and unique ways for our clients both through new capabilities like analytical Wizards as well as internal development, where we are.

Create and new use cases, and new ways to allow our clients to solve as many business problems. They can with our data.

So it's all related to gather and highly strategic in the way we're thinking about it.

Awesome. Thanks, guys.

Thank you.

Our next question comes from the line of D. J Hynes from Canaccord Genuity. Please go ahead.

Hey, guys. This is Ryan Shannon D J, congratulations on the quarter and the year.

So given these tighter sales environment.

I guess through Rfps or just word on the street I guess greater price competition between less specialized competitors in there that's affecting your win rates at all.

That's a great question excuse me and I'd say, we haven't really seen.

Any different pricing that we traditionally have seen.

Obviously, we have lots of all guest count to get a deal done Thats typical business customers always push for the best price, but there hasn't really been a change in the pricing environment.

That pricing environment has always had a little bit more competition at the sort of lower end.

Where people would be looking at substitutes that would be like just lists of people or telephone directories, if theyre not that focused on health care, sometimes that's good enough for them in general people are focused on health care and succeeding in health care and growing in health care. They have to buy definitive and so we don't end up getting getting price eroded for the type of <unk>.

So there we want to bring in.

So no that hasnt been a place that we've really seen we've really seen any big change.

Okay, great. Thanks appreciate it.

Sure.

Thank you our.

Next question comes from the line of Glenn Fat Antelope from Jefferies. Please. Please go ahead.

Yes, thanks for taking my questions Hey, Robert I just had two.

First is on the enterprise client side I mean, we grew almost 7% sequentially.

Okay.

Sorry.

Thanks for the question I'd say, we saw though I don't know I don't have the exact number on the split and I don't know if we normally disclose it but I guess divest answer to your question is we had some very large new business wins that came in in the quarter that went straight to enterprise and then up sell upsell came in as expected and that generally results in.

Kind of have the half the enterprise client growth through that as well, maybe a little bit more than half so.

I don't know the exact mix for you, but we had a healthy performance on both sides of that in terms of getting people up to enterprise.

Okay perfect. That's helpful color, maybe if I could just follow up sort of on the on the <unk> commentary you made you said sort of the conditions that you're seeing in the second half has sort of continued may be first at least into 2023 and last quarter. When we spoke I think the commentary seemed to suggest that sequentially.

Through the third quarter things kind of got maybe incrementally weaker I was wondering if you can give us.

Maybe sequential commentary on how <unk> and maybe so far.

Two thirds of <unk> already done how things have been trending because I think we're all trying to get a sense for is maybe.

Have things sort of stabilized in the current environment as we try to assess.

Either the conservatism more potential vulnerability in your 'twenty three revenue guidance, just kind of based on where we are now.

Yes, yes.

Yeah, again, I hate to give you a math answer, but basically Q4 looked a lot like Q3, just in terms of absolute performance and so I guess you could say that.

There was not a great quarter Q4 is not a great quarter, but it wasn't.

A much worse quarter than Q3, there just wasn't a better quarter.

I'm not going to comment on what we've seen so far this year, but in general what we've modeled model that that Q4 Q3 Q4 performance continues through this year.

That's what drives the model.

And we.

We don't have any reason right now to believe that that's not the environment. We're operating in we certainly hope that the.

Operating environment improves, but what it tells US is you now have another period of results and so our assumption.

As we've planned out this year is that it lasts longer than we might have thought before so it is going to go through this year and that's at least where we were.

Where we're looking at it right now.

Okay. Thank you.

Sure. Thank you.

Our next question comes from the line of Brian Peterson from Raymond James. Please go ahead.

Hey, gentlemen, thanks for taking the question.

Maybe another high level, one on the on the macro and budgets.

As the winter 2022, I guess I'd, just love to understand how budget trends progressed, I mean based on our work it sounded like they've been down but maybe as we go into 2023.

<unk> been set so I guess I'm curious if in your customer conversations I know maybe it wasn't the clothes that you guys want it in the back half of the year, what are we kind of through the worst of it and it maybe customers with budgets and everything are a little bit more ready to play offense. When they were playing defense in 2022 line of questioning.

Questioning, but any thoughts there thanks guys.

Sure. It's a really good line of questioning and we're hopeful that that would be the case, we haven't assumed that coming into the year.

The experience, we have with budgets as they got very tight.

For every client that we got a deal closed at the end of the year I saw another client that came in was literally.

Ready to sign some got some spending mandate.

He came in and said we just can't do it now we're going to have to reposition us for some time next year.

The pace and the number of those that happened was just markedly different in the second half of the year and that was across the first half of the year are really before this one.

<unk>.

I don't believe it's an environment the last forever, but right now it feels like.

Coming into the year felt like we're still in the middle of that and remember we do serve some sectors that we've seen have a little more financial stress right now I mean, certainly small biopharma small life sciences is not there.

There are a lot of companies that are really struggling there so they're going to scrutinize every dollar a lot of them are pulling back on growth investments providers a lot of a lot of segments of our provider vertical are having a tough go of it right now and you've seen you've seen the announcements they are cutting a lot of spend and so those are places that are just harder to get in or harder to upsell or.

Yeah, just just tend to be places, where we don't always control the <unk>.

Sort of budget environment that we're selling into it and you might have been talking to someone for three months and have a really good conversation and then the budget environment changes in the last hour or.

So again look I am hopeful that things turn in the right direction and that we get a little relief on this but we have not assumed that in our in our planning for this year.

I appreciate the color. Thank you.

Thanks.

Thank you.

Our next question comes from the line of Anne Samuel from Jpmorgan. Please go ahead.

Hi, Thanks for my taking my question on this is maybe just a little bit of a follow up on what you were just talking about I was wondering if maybe you could talk about some of the differences between what youre seeing in the demand environment for life sciences versus provider.

Where the headwinds are more pronounced and maybe which one you expect to recover first.

In terms of just what we're seeing kind of life sciences versus provider certainly.

It's been more acute for us in the smaller life science and Thats been a strong point for us over the years, we have a great value proposition in that market. There's just a lot of financial strain there.

Were either really just come in with an ability to continue.

Spend extra money or at least heavy budget scrutiny and both of those impact our ability to.

To grow with those clients and providers a little different story.

I'd expect that market over time to be a great market for us I, just don't know when when things will open back up so.

But that's again not what we have in our outlook right now.

Very helpful. Thank you.

Sure.

Thank you.

Our next question comes from the line of Alan <unk> from Bank of America. Please go ahead.

Hi, Thanks for taking the questions I guess one for Rick.

<unk>.

What's driving the sequential change in revenue from <unk>.

Yes.

$100 million anticipated difference between Q4 professional services and Q1 professional services, which is normal and customary for the analytical Wizards.

Project work that they still do overall professional services are only about 2% of our revenue, but they do tend to be backend loaded.

And thank you by the way for for acknowledging the underlying strength of the business.

No problem and then one question for Jason we've been trying to figure out as I'm sure. You have just sort of life sciences wins spends going to inflect and theres a lot of different data points that suggest that maybe it has some are saying that it has and I guess can you talk when exactly did.

Okay.

Yes, it's a good question Jason.

Gulfport Jayson, it's always hard to say when exactly things are going to turn around I guess, what I would comment on as you think about the long term.

For this business overall all of the amazing tailwind that has really led to the extraordinary growth over the last 12 years still exist and there is some <unk>.

<unk> of health care data, that's continuing that's a market that's incredibly complex to sell into and only getting more complicated over time, it's highly interconnected and it's so different than any other market and there is continued rapid changes around for life sciences about how drugs are being reimbursed and above.

Finding under diagnosed patients for extremely rare diseases. So all of those great tailwind still exist and long term those are going to drive.

Really great continued growth and great underpinnings for this company.

When that happens.

We'll wait and see but in the meantime, we are building this business and innovating in ways that are going to continue to drive long term sustainable growth.

So we're in a great position as we've talked about many times, we have growth and profitability and that allows that affords us the opportunity to continue to invest when others can't.

So we will strengthen our position during this time and when it turns around we'll take advantage of it.

Great. Thank you both.

Thank you.

Ladies and gentlemen, we have reached the end of the question and answer session.

And I would like to turn the conference silver to Robert <unk>, Chief Executive Officer for closing comments.

Yes. Thank you all for the time Tonight, we always appreciate it we look forward to circling back with all of you and with our shareholders over the next several months.

And look forward to that thank you again for your time Tonight and the questions. Okay.

Thank you.

Conference of definitive healthcare has now concluded. Thank you for your participation you may now disconnect your lines.

Q4 2022 Definitive Healthcare Corp Earnings Call

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