Q4 2023 Definitive Healthcare Corp Earnings Call

Unknown Executive: Transcription by ESO. Translation by — Welcome to Definitive Healthcare's Q4 2023 earnings call. Our host for today's call is Jason Krantz. At this time, all participants are in a listen-only mode.

Welcome to definitive health Care's, Q4, 2023 earnings call.

Our host for today's call is Jason credits.

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.

Unknown Executive: Later, we will conduct a question and answer session. I would now like to turn the call over to your host, Mr. Krantz. You may begin. Good afternoon, and thank you for joining us today to review Definitive Health Care's financial results. Joining me on the call today are Jason Krantz, our founder, executive chairman, and interim CEO, 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 healthcare commercial intelligence solutions, our competitive position, customer behaviors and use of our solutions, our financial guidance, our planned investments, generating value for our customers and shareholders, and the anticipated impacts of global macroeconomic conditions on our business, results, and clients, and on the healthcare industry generally. Any forward-looking statements made pursu 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. The actual results may differ materially from those projected.

I would now like to turn the call over to your host Mr. Chris You may begin.

Good afternoon, and thank you for joining us today to review definitive Healthcare's financial results. Joining me on the call today are Jason Grant founder Executive Chairman and interim CEO 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.

Benefits of our health care commercial intelligence solutions, our competitive position customer behaviors and the use of our solutions, our financial guidance, our planned investments generating value for our customers and shareholders 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 1095 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. 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.

Jason Ronald Krantz: 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, including the earnings release that we have just posted in the investor relations portion 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 portion 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 Jason. Thanks, Matt.

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

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 portion 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 Jason.

Thanks, Matt and thanks to all of you for joining US. This afternoon to review definitive healthcare's fourth quarter and full year 2023 financial results let.

Jason Ronald Krantz: And thanks to all of you for joining us this afternoon to review Definitive Healthcare's fourth quarter and full year 2023 financial results. Let me begin by saying that I'm excited to be back as Definitive Healthcare's CEO on an interim basis. Definitive Healthcare plays a unique and differentiated role in the healthcare ecosystem, providing thousands of companies with the data and analytics to help them more effectively commercialize in the large and complex healthcare market. I am energized to once again help Definitive capitalize upon this significant opportunity. On today's call, I will provide an overview of our fourth quarter results, review our performance for 2023 overall, and discuss the future as we position Definitive Healthcare for our next stage of growth. For the fourth quarter, our total revenue was $65.9 million, representing 9% year-over-year growth, and Adjusted EBITDA was $19.8 million, a 30% margin. For the full year, total revenue was $251.4 million, representing 13% year-over-year growth, and adjusted EBITDA was $74.5 million, a 30% margin.

Let me begin by saying that I'm excited to be back as definitive healthcare CEO and interim basis definitive.

Definitive healthcare plays a unique and differentiated role in the health care ecosystem, providing thousands of companies with the data and analytics to help them more effectively commercialize in a large and complex healthcare market I am energized to once again help definitive capitalize upon the significant opportunity.

On today's call I will provide an overview of our fourth quarter results review our performance for 2023 overall and discuss the future as we position definitive health care for our next stage of growth.

For the fourth quarter, our total revenue was $65 $9 million, representing 9% year over year growth in.

And adjusted EBITDA was $19 8, million% to 30% margin.

For the full year total revenue was $251 4 million, representing 13% year over year growth and adjusted EBITDA was $74 5, million% to 30% margin.

Jason Ronald Krantz: We are pleased with our performance during the quarter. We continued to show growth in a difficult macro environment, and we delivered upon the 30% full-year adjusted EBITDA margin that we guided to at the beginning of the year. Our clients continue to view definitive health care as critical to solving their most important commercialization problems.

We are pleased with our performance during the quarter, we continued to show growth in a difficult macro environment and we delivered upon the 30% full year adjusted EBITDA margin that we guided to at the beginning of the year.

Our clients continue to view a definitive health care is critical to solving their most important commercialization problems.

Jason Ronald Krantz: They use our products and data to analyze what markets to invest in, who the most important prospects are in those markets, and how to deliver targeted messaging to the right decision makers. This showed up in our fourth quarter leading results, which exhibited strong top-of-the-funnel demand for our product. But consistent with the trends of 2023, we continue to experience longer sales cycles, as uncertainty remained in some of the key markets that we serve.

They use our products and data to analyze what markets to investing through.

Who are the most important prospects are in those markets and how to deliver targeted messages to the right decision makers.

This showed up in our fourth quarter leasing results, which exhibited strong top of the funnel demand for our products.

But consistent with the trends of 2023, we continue to experience longer sales cycles as uncertainty remained and some of the key markets that we serve.

Jason Ronald Krantz: Late in the quarter, we began to see the benefits of the product and delivery investments we made during 2023, with a meaningful increase in customer retention across our business, a trend we expect to continue into 2024. Additionally, our success in adding 12 new enterprise clients during the quarter demonstrates that our data and products are must-haves for these essential customers.

Positively late in the quarter, we began to see the benefits of the product and delivery investments. We made during 2023 with a meaningful increase in customer retention across our business a.

A trend we expect to continue into 2024.

Additionally, our success in adding 12, new enterprise clients during the quarter demonstrates that our data and products are must haves for these essential customers.

Jason Ronald Krantz: Importantly, our enterprise clients, which renew at a higher rate and have the most opportunity for expansion, now account for 65% of our total ARR, up from 61% a year ago. I will discuss later how we are allocating even more resources and attention to this segment going forward. From an end market perspective, Life Sciences, which makes up almost half of our ARR, remained under pressure during the year.

Importantly, our enterprise clients, which renew at a higher rate and have the most opportunity for expansion now account for 65% of our total <unk> up from 61% a year ago.

I will discuss later, how we were allocating even more resources and attention to this segment going forward.

From an end market perspective life Sciences, which makes up almost half of our <unk> remained under pressure during the year the impact of a challenging financing environment impacted the lower end of the market and customer churn remains elevated across the entire industry. As these organizations continued to adjust to changing market dynamics.

Jason Ronald Krantz: The impact of a challenging financing environment impacted the lower end of the market, and customer churn remained elevated across the entire industry as these organizations continued to adjust to changing market dynamics. Despite this, we had a number of exciting customer wins and expansions in life sciences during the quarter, including a New Jersey-based biopharma company focused on oncology therapies for patients with limited treatment options that selected our Monaco platform to help its marketing and medical affairs teams grow their key opinion leader network in support of the launch of a new combination therapy to treat patients with liver cancer. Additionally, in MedTech, we signed on a Swiss robotics company that is focused on minimally invasive surgery. This company plans to utilize our platform across their sales and marketing organization to create a game plan for entering the U.S. market by identifying and targeting the most valuable opportunities for their products within the surgery center, hospital, and individual physician market.

Despite this we had a number of exciting customer wins and expansions in life sciences during the quarter, including a new Jersey based Biopharma company focused on oncology therapies for patients with limited treatment options.

Selected our Monaco platform to help their marketing and medical affairs teams ROE their key opinion leader network in support of the launch of a new combination therapy to treat patients with liver cancer.

Additionally, in Med Tech, we signed on a Swiss robotics company, which is focused on minimally invasive surgery.

This company plans to utilize our platform across your sales and marketing organization to create a game plan for entering the U S market by identifying and targeting the most valuable opportunities for their products within the surgery Center hospital and individual physician market.

Jason Ronald Krantz: Within our provider market, which now accounts for more than 10% of our ARR, we saw improved conditions as this market has started to recover from the challenges created by COVID and staffing shortages. The acquisition of Populi has had an immediate impact on our ability to meet the complex needs of this large and dynamic market, resulting in greater deal velocity with both new and existing customers, as well as a significant reduction in customer churn. Based on this success, we plan to expand the popularized solution to our other end markets in 2024, which we believe will have a similar impact across our entire business. I will talk more about this later.

Within our provider market, which now accounts for more than 10% of our era. We saw improved conditions. As this market has started to recover from the challenges created by Covid staffing shortages.

The acquisition of popular this had an immediate impact on our ability to meet the complex needs of this large and dynamic market resulted in greater deal velocity with both new and existing customers as well as the significant reduction in customer churn.

Based on this success, we plan to expand the popular solution to our other end markets in 2024, which we believe will have a similar impact across our entire business I will talk more about this later.

A key win in this segment included one of the largest not for profit integrated health care systems in Massachusetts that selected our new popular platform help them build their physician network by analyzing diagnosis and procedure volumes in their markets physician referral patterns and service line utilization.

Jason Ronald Krantz: A key win in this segment included one of the largest not-for-profit integrated health care systems in Massachusetts that selected our new Populite platform to help them build their physician network by analyzing diagnosis and procedure volumes in their markets, physician referral patterns, and service line utilization. Finally, our diversified customers, which account for about 40% of our ARR, performed well in 2023. This market is comprised of customers across a variety of industries that leverage Definitive Healthcare as a must-have in order to effectively sell their goods and services into the complex multi-trillion dollar healthcare market. An example of a great win during this quarter was a global leader in commercial real estate that selected Definitive Healthcare to help them map out their clients' market opportunities. Additionally, they're integrating our data into their Snowflake instance, which is an integration partnership that we launched last year that reinforces our goal of becoming heavily integrated into our client's workflow.

Finally, our diversified customers, which account for about 40% of our air are performed well in 2023.

This market is comprised of customers across a variety of industries that leveraged definitive health care as a must have in order to effectively sell their goods and services into the complex multi trillion dollar health care market.

An example of a great win during this quarter was a global leader in commercial real estate.

Selected definitive health care to help them map out their clients market opportunities.

Additionally, they are integrating our data into their Snowflake instance, which is the integration partnership that we launched last year that reinforces our goal of becoming heavily integrated into our clients' workflow.

We were also pleased with our ability to increase adjusted EBITDA margins during the quarter.

During 2023 and into the beginning of 2024, we took proactive actions to manage expenses and increase efficiency.

These actions allowed us to deliver on our full year adjusted EBITDA margin goal of 30% and the benefits of these efforts will help drive an expected 200 basis point increase in adjusted EBITDA margin in 2024.

Jason Ronald Krantz: We were also pleased with our ability to increase adjusted EBITDA margins during the quarter. During 2023 and into the beginning of 2024, we took proactive actions to manage expenses and increase efficiency. These actions allowed us to deliver on our full-year adjusted EBITDA margin goal of 30%, and the benefits of these efforts will help drive an expected 200 basis point increase in adjusted EBITDA margin in 2024. Importantly, however, our cost reduction efforts are intended to also give us room to invest throughout the year in the most attractive growth opportunities for our business. As part of the restructuring announcement we made in January, we made several organizational changes, all of which we believe set us up for long-term profitability and growth. First, we streamlined our go to market team by reducing overlays and allocating more resources to our most important enterprise clients.

Importantly, however, our cost reduction efforts are intended to also give us room to invest throughout the year and the most attractive growth opportunities for our business.

As part of the restructuring announcement, we made in January we made several organizational changes all of which we believe set us up for long term profitability and growth.

First we streamlined our go to market team are reducing overlays and allocating more resources to our most important enterprise clients.

These changes will allow us to increase go to market productivity by creating more direct accountability amongst our sales team.

Additionally, our shift in resource allocation to enterprise clients will allow us to build deeper relationships ensure these organizations fully benefit from the entirety of our offering and provide more direct feedback to our product development efforts.

Second we reallocated resources within our product organization to areas. We believe can have the most immediate impact on our business. This.

Jason Ronald Krantz: These changes will allow us to increase go-to-market productivity by creating more direct accountability amongst our sales team. Additionally, our shift in resource allocation to enterprise clients will allow us to build deeper relationships, ensure these organizations fully benefit from the entirety of our offering, and provide more direct feedback to our product development efforts. Second, we reallocated resources within our product organization to areas we believe can have the most immediate impact on our business.

This includes an investment in our claims analytics platform and more resources dedicated to artificial intelligence and data science.

Finally, we have increased our investment in our Bangalore office to leveraged tremendous talent and expertise in that region, particularly in Biopharma data science and engineering.

We expect this investment will not only result in cost savings over time, but will also impact the speed at which we are able to innovate.

While the decision to restructure is always difficult. We believe the changes that we've made create a more sustainable long term cost structure and free us up to allocate investment dollars to the highest opportunity areas.

Jason Ronald Krantz: This includes an investment in our claims analytics platform and more resources dedicated to artificial intelligence and data science. Finally, we have increased our investment in our Bangalore office to leverage tremendous talent and expertise in that region, particularly in biopharma, data science, and engineering. We expect this investment will not only result in cost savings over time but will also impact the speed at which we are able to innovate. While the decision to restructure is always difficult, we believe the changes that we have made create a more sustainable long-term cost structure and free us up to allocate investment dollars to the highest opportunity areas.

As we turn to the future 2020 for his year that will be focused on growth and innovation by digging deep into how we can further help our customers achieve the commercialization success for which they have been turning to us for the last 13 years.

Our product work in 2024 will build on our solid foundation of proprietary and differentiated data powerful and flexible analytical products and deep subject matter expertise.

All of which feed our flywheel of innovation that enables our offerings to evolve at a rapid pace to meet the changing and complex needs of our customers.

In 2024, we are focused on the following four areas.

First we will continue to invest heavily in our core and proprietary data asset.

Jason Ronald Krantz: As we turn to the future, 2024 is a year that will be focused on growth and innovation by digging deep into how we can further help our customers achieve the commercialization success for which they have been turning to us for the last 13 years. Our product work in 2024 will build on our solid foundation of proprietary and differentiated data, powerful and flexible analytical products, and deep subject matter expertise. All of which feed our flywheel of innovation that enables our offerings to evolve at a rapid pace to meet the changing and complex needs of our customers. In 2024, we are focused on the following four areas.

We will continue to focus on improving data quality as well as expanding the breadth and depth of our data.

Some specific examples include investment in nonstandard affiliations, such as management service organizations and independent provider associations, as well as new data and analytics on cancer and infusion centers.

Second we are expanding the use of our popular claims analytics and visualization platform to serve all of our end markets.

Since acquiring this platform in July of 2023, we have seen lower attrition and more rapid expansion and our provider business.

With this new platform, we have been able to deliver solutions that get into our clients' workflow as they look to expand their markets reduced leakage and strengthen their physician networks we.

Jason Ronald Krantz: First, we will continue to invest heavily in our core and proprietary data assets. We'll continue to focus on improving data quality, as well as expanding the breadth and depth of our data. Some specific examples include investing in non-standard affiliations, such as management service organizations and independent provider associations, as well as new data and analytics on cancer and infusion centers.

We see tremendous opportunity here to build on this success by leveraging this technology with our valuable life Sciences and diversified customers.

This enhanced solution will launch early in the second half of 2024, and we believe will have a measurable impact on our expansion and churn metrics.

Third we will continue to invest in AI and data science to drive more insights for our clients.

Our work here, which is a continuation of the deep data science that we have been focused on since we were founded is concentrated in three key areas.

Jason Ronald Krantz: Second, we are expanding the use of our Populite Claims Analytics and Visualization platform to serve all of our end markets. Since acquiring this platform in July of 2023, we have seen lower attrition and more rapid expansion in our provider business. With this new platform, we have been able to deliver solutions that get into our clients' workflow as they look to expand their markets, reduce leakage, and strengthen their physician network. We see tremendous opportunity here to build on this success by leveraging this technology with our valuable life sciences and diversified customers. This enhanced solution will launch early in the second half of 2024, and we believe it will have a measurable impact on our expansion and sharing metrics. Third, we'll continue to invest in AI and data science to drive more insights for our clients. Our work here, which is a continuation of the deep data science that we have been focused on since we were founded, is concentrated in three key areas.

First we are using AI and data science to become more efficient across our organization by automating our work.

Second we continue to derive new data and insights using AI.

Our proprietary data on the entire health care ecosystem gives us the unique ability to layer on AI to create new intelligence that cannot be found elsewhere.

A few newer examples of this include a geographic proxy to help providers understand where their patients come from in a new influence scar the measures the impact of science scientific activity, such as event presentations and scientific publications.

Thirdly, we are collaborating with our customers to explore ways in which we can overlay this technology into our front end sales.

Our users leverage our data and intelligence more quickly.

Finally, just after year end, we completed another acquisition purchasing the <unk> product line from each one.

<unk> is a software platform utilized with sales and marketing teams in med tech to identify the physicians and facilities that can benefit most from their medical technology or device.

Jason Ronald Krantz: First, we are using AI and data science to become more efficient across our organization by automating our work. Second, we continue to derive new data and insights using AI. Our proprietary data on the entire healthcare ecosystem gives us the unique ability to layer on AI to create new intelligence that cannot be found elsewhere. A few newer examples of this include a geographic proxy to help providers understand where their patients come from, and a new influence score that measures the impact of scientific activity such as event presentations and scientific publications.

While this acquisition is small from a revenue standpoint, we are excited that provides our clients in the valuable Med Tech segment with a workflow solution that can leverage our Atlas dataset to drive more meaningful interactions with physicians and hospital executives.

This product is already being sold by our commercial team and is quickly being integrated into our overall platform.

Early client response has been positive and illustrates the value of combining our best in class data assets with software that is purpose built for the needs of our end markets.

Jason Ronald Krantz: Thirdly, we are collaborating with our customers to explore ways in which we can integrate this technology into our front end to help our users leverage our data and intelligence more quickly. Finally, just after year end, we completed another acquisition, purchasing the Karaboyans product line from H1. Care Avoidance is a software platform utilized by sales and marketing teams in MedTech to identify the physicians and facilities that can benefit most from their medical technology or device.

Additionally, in 2024, we will remain keenly focused on customer retention.

As discussed we believe the product initiatives, we are putting in place such as enhancing our core data asset and expanding the use of our popular claims analytics platform will result in reduced churn.

However, we will also continue the work we started last year of improving our service and delivery efforts that began to positively impact our churn metrics as the year came to a close.

Jason Ronald Krantz: While this acquisition is small from a revenue standpoint, we are excited that it provides our clients in the valuable medtech segment with a workflow solution that can leverage our Atlas data set to drive more meaningful interactions with physicians and hospital executives. This product is already being sold by our commercial team, and it's quickly being integrated into our overall platform. Early client response has been positive and illustrates the value of combining our best-in-class data assets with software that is purpose-built for the needs of our end markets. Additionally, in 2024, we will remain keenly focused on customer retention. As discussed, we believe the product initiatives we are putting in place, such as enhancing our core data asset and expanding the use of our popular claims analytics platform, will result in reduced churn.

The future definitive health Care's bright we compete in a complex and dynamic market with a tam that is more than $10 billion and growing we.

We have a combination of unique and proprietary data assets along with powerful products that solve mission critical client problems and we have an extraordinarily talented workforce that innovates and constantly redefined a data and analytics can be leveraged in health care.

With that let me turn the call over to Rick to walk through the numbers Rick.

Thanks, Jason.

Start with a detailed review of our Q4 results before finishing with our guidance for Q1 and full year 2024.

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

We delivered solid results for the quarter, both revenue and adjusted EBITDA were within our guided range. We remained focused on what we can control. Despite the challenging economic conditions and continued to advance our efforts to operate more efficiently while delivering innovation for clients both of which we expect to position us well.

Jason Ronald Krantz: However, we will also continue the work we started last year of improving our service and delivery efforts, which began to positively impact our churn metrics as the year came to a close. The future of definitive healthcare is bright. We compete in a complex and dynamic market with a TAM that is more than $10 billion and growing. We have a combination of unique and proprietary data assets, along with powerful products that solve mission-critical client problems. And we have an extraordinarily talented workforce that innovates and constantly redefines how data and analytics can be leveraged in health care. With that, I'll turn the call over to Rick to walk through the numbers. Rick?

Well as the market recovers.

Highlights include 9% revenue growth compared to Q4, 2022, and 13% revenue growth for the year.

30% adjusted EBITDA margins for the quarter, Ken for the full year.

And our 2023 revenue growth plus the adjusted EBITDA margin was 43%.

Richard Douglas Booth: I'll start with a detailed review of our Q4 results before finishing with our guidance for Q1 and full year 2024. In all my remarks, I will be discussing our results on a non-GAAP basis, unless otherwise noted. We delivered solid results for the quarter. Both revenue and adjusted EBITDA were within our guided range.

And for the full year 2023, we generated $68 6 million of Unlevered free cash flow.

Which is up 20% versus 2022.

Turning to our results in more detail.

Revenue for the fourth quarter were $65 $9 million up 9% from the prior year and in line with our guidance.

Richard Douglas Booth: We remained focused on what we can control, despite the challenging economic conditions, and continue to advance our efforts to operate more efficiently while delivering innovation for clients, both of which we expect to position as well as the market recovers. Highlights include 9% revenue growth compared to Q4 2022 and 13% revenue growth for the year. 30% adjusted EBITDA margins for the quarter and for the full year. And our 2023 revenue growth plus the adjusted EBITDA margin was 43%. And for the full year 2023, we generated 68.6 million of unlevered free cash flow, which is up 20% versus 2022. Turning to our results in more detail, revenue for the fourth quarter was $65.9 million, up 9% from the prior year and in line with our guidance.

This amount includes $3 $2 million of professional services as large clients engage this work on some of their most challenging issues in the fourth quarter as in prior year.

Pro forma organic revenue growth was 7% in the quarter and 11% for the full year.

We ended the quarter with 566 enterprise customers, which we define as customers with at least 100000 in error.

This was an increase of nearly 30 enterprise customers or 5% year over year.

As a reminder, these customers represent the majority of our error and are a key focus of our go to market programs.

Our total customer count, which includes smaller customers with just over 2900 at the end of Q4.

Down about 150 from Q4 2022.

Smaller customers have been disproportionately impacted by current conditions.

Net dollar retention for 2023 was 96% for enterprise customers and 91% overall.

Richard Douglas Booth: This amount includes $3.2 million of professional services, as large clients engage this work on some of their most challenging issues in the fourth quarter, as in prior years. Reforma Organic Revenue Growth was 7% in the quarter and 11% for the full year. We ended the quarter with 566 enterprise customers, which we define as customers with at least $100,000 in ARR.

Although these are declined from year end 2022, many of our actions in 2023 were specifically targeted to customer suggestions for enhanced data.

Analytics.

And service and we began to see the payoff from these adjustments we expect at least 100 to 200 basis points of improvement in overall 2024 MBR by year end.

Richard Douglas Booth: This was an increase of nearly 30 enterprise customers, or 5% year over year. As a reminder, these customers represent the majority of our ARR and are a key focus of our go-to-market program. Our total customer count, which includes smaller customers, was just over 2,900 at the end of Q4.

Gross profit was $55 $8 million up 4% from Q4 2022.

Gross margin, maybe 4.7% decreased 350 basis points from the fourth quarter of 2022 due to the impact of both the incremental data sources, we introduced earlier in 2023.

Richard Douglas Booth: Down about 150 from Q4 2022, but smaller customers have been disproportionately impacted by current conditions. Net dollar retention for 2023 was 96% for enterprise customers and 91% overall. Although these are declines from year-end 2022, many of our actions in 2023 were specifically targeted at customer suggestions for enhanced data, analytics, and Service, and we've begun to see the payoff from these adjustments. We expect at least 100 to 200 basis points of improvement in overall 2024 NDR by year-end. Gross profit was $55.8 million, up 4% from Q4 2022. Gross margin, 84.7%, decreased 350 basis points from the fourth quarter of 2022 due to the impact of both the incremental data sources we introduced earlier in 2023, as well as the impact of Populi when we acquired it late in Q3 of 2023. We expect full year 2024 gross margin to be fairly consistent with the fourth quarter of this year. Sales and Marketing Expense was $20.4 million, down 3% from Q4 2022.

As well as the impact of popular required late in Q3 of 2023.

We expect full year 2020 for gross margin to be fairly consistent with the fourth quarter of this year.

Sales and marketing expense was $20.4 million.

Down 3% from Q4 2022.

And as a percentage of revenue sales and marketing expense was 31% of revenue down.

Down over 350 basis points from the fourth quarter of 2022.

The year over year decrease reflects the changes we have made to drive efficiencies in sales and marketing focus.

Focusing on the markets and activities with the highest return on investment.

We expect this continue to see operating leverage from sales and marketing in 2024 of two to 300 basis points relative to the fourth quarter of 2023.

And for that improvement in sales efficiency to build throughout the year.

Product development expense was $8 million up 7% from the fourth quarter of 2022.

As a percentage of revenue product development expenses were 12% of revenue consistent with the fourth quarter of 2022.

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

Richard Douglas Booth: And as a percentage of revenue, sales and marketing expense was 31% of revenue, down over 350 basis points from the fourth quarter of 2022. The year-over-year decrease reflects the changes we have made to drive efficiencies in sales and marketing, focusing on the markets and activities with the highest return on investment. We expect to continue to see operating leverage from sales and marketing in 2024 of 200 to 300 basis points relative to the fourth quarter of 2023, and for that improvement in sales efficiency to build throughout the year. Product development expense was $8 million, up 7% from the fourth quarter of 2022.

Jason touched on some examples of these are <unk> and we will continue to invest in the multiple opportunities we have identified on our long term product roadmap.

We expect full year 2020 for product development as a percentage of revenue to be fairly consistent with full year 2023.

Which implies up to 100 basis points of operating leverage relative to Q4 of 2023 building throughout the year.

G&A expense was $8 $5 million up 6% from the fourth quarter of 2022.

Richard Douglas Booth: As a percentage of revenue, product development expenses were 12% of revenue, consistent with the fourth quarter of 2022. We believe investing in our platform and using our existing data sets to launch or enhance multiple products is a highly effective and efficient way for us to increase the value we deliver to customers. Jason touched on some examples of these earlier, and we will continue to invest in the multiple opportunities we have identified on our long-term product roadmap. We expect full year 2024 product development as a percentage of revenue to be fairly consistent with full year 2023, which implies up to 100 basis points of operating leverage relative to Q4 2023 building throughout the year. G&A expense was $8.5 million, up 6% from the fourth quarter of 2022.

As a percentage of revenue G&A expenses were 13% of revenue, which is about flat to last year.

We expect operating leverage of one to 200 basis points in G&A as a percentage of revenue in 2024.

And for that improvement and efficiency to build throughout the year as well.

Adjusted operating income was $18 $3 million of 12% from the fourth quarter of 2022.

As a percentage of revenue operating income was 28% of revenue up 80 bps versus the fourth quarter of 2020 to be year over year margin increase was primarily due to efficiencies in sales and marketing as.

As I discussed previously.

Adjusted EBITDA was $19 $8 million, 16% increase from Q4 2022.

Richard Douglas Booth: As a percentage of revenue, G&A expenses were 13% of revenue, which is about flat to last year. We expect operating leverage of 1 to 200 basis points in G&A as a percentage of revenue in 2024 and for that improvement in efficiency to build throughout the year as well. Adjusted operating income was $18.3 million, up 12% from the fourth quarter of 2022. As a percentage of revenue, operating income was 28% of revenue, up 80 pips versus the fourth quarter of 2022. The year-over-year margin increase was primarily due to efficiencies in sales and marketing, as I discussed previously.

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

Up nearly 200 basis points from Q4 of 2022.

As we move through 2024, we expect to continue to see year over year improvement in our adjusted EBITDA margin.

We expect to reinvest some of the yield on the efficiency actions that we've taken and we continue to look for areas in which we can reallocate investments to optimize growth.

Taking into account the timing effects discussed above we would expect EBITDA margins to build throughout the year.

Adjusted net income in Q4 was $10 $6 million or seven cents per diluted share based on $155 6 million weighted average shares outstanding.

Richard Douglas Booth: Adjusted EBITDA was $19.8 million, a 16% increase from Q4 2022. As a percentage of revenue, adjusted EBITDA was 30% of revenue, up nearly 200 basis points from Q4 2022. As we move through 2024, we expect to continue to see year-over-year improvements in our adjusted EBITDA margin. We expect to reinvest some of the yield on the efficiency actions that we've taken, and we continue to look for areas in which we can reallocate investments to optimize growth. Taking into account the timing effects discussed above, we would expect EBITDA margins to build throughout the year. Adjusted Net Income in Q4 was $10.6 million, or $0.07 per diluted share, based on 155.6 million weighted average shares outstanding.

Turning to cash flow definitive healthcare's 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 $41 $2 million on a trailing 12 month basis up 16% from $35 6 million in the comparable period a year ago.

Unlevered free cash flow was $68 $6 million on a trailing 12 month basis up 20% from the comparable period a year ago.

Unlevered free cash flow was 27% of revenue on a TTM basis.

Actively converting 92% of our TTM adjusted EBITA of $74 $5 million.

Richard Douglas Booth: Care is 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 $41.2 million on a trailing 12-month basis, up 16% from $35.6 million in the comparable period a year ago. Unlevered free cash flow was $68.6 million on a trailing 12-month basis, up 20% from the comparable period a year ago.

Into cash.

On the balance sheet, we ended the quarter with $308 million in cash and short term investments.

With strong adjusted EBITDA profitability, and only $256 million of debt we.

We believe that we are well positioned to fund both organic and inorganic growth initiatives.

Current revenue performance obligations of $187 million were up 2% year over year and total revenue performance obligations were flat year over year.

Richard Douglas Booth: Unleveraged free cash flow is 27% of revenue on a TTM basis, effectively converting 92% of our TTM adjusted EBITDA of $74.5 million into cash. On the balance sheet, we ended the quarter with $308 million in cash and short-term investments, with strong adjusted EBITDA profitability and only $256 million of debt.

Deferred revenue of $97.4 million was down 3% year over year.

You'll note that as expected C. R. P O and deferred revenue grew more slowly than revenue and I'll have more to say about that in guidance.

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

Richard Douglas Booth: We believe that we are well positioned to fund both organic and inorganic growth initiatives. Current Revenue Performance Obligations of $187 million were up 2% year-over-year, and Total Revenue Performance Obligations were flat year-over-year. Deferred revenue of $97.4 million was down 3% year over year. You'll note that, as expected, CRPO and deferred revenue grew more slowly than revenue, and I'll have more to say about that in guidance. Moving now to guidance for Q1, we believe it's prudent to assume that current macroeconomic conditions continue to extend through the first quarter as well.

Assuming this is the case in Q1, we would expect total revenue in the range of $63 million to $65 million for our revenue growth rate of 6% to 10%.

Adjusted operating income in the range of $18 million to $19 million.

Adjusted EBITDA in the range of $19.5 million to $25 million.

Four of 30% to 32% adjusted EBITDA margin.

And finally, adjusted net income in the range of 12 million to $13 million or seven to eight cents per diluted share to be reported on a 157.4 million weighted average shares outstanding.

Richard Douglas Booth: Assuming this is the case, in Q1, we would expect total revenue in the range of $63-$65 million for a revenue growth rate of 6-10%, and Adjusted Operating Income in the range of $18 to $19 million. Adjusted EBITDA in the range of $19.5 to $20.5 million for a 30 to 32% adjusted EBITDA margin. And finally, adjusted net income in the range of $12 million to $13 million, or $0.07 to $0.08 per diluted share, to be reported on 157.4 million weighted average shares outstanding.

For the full year 2024.

We expect revenue of.

$263 million to $269 million for 5% to 7% growth rate.

It's worth noting that we do expect our revenue growth rate to continue to moderate as we move through the first few quarters of the year given current economic conditions, along with the anniversary of the popular acquisition in the second half.

Richard Douglas Booth: For the full year 2024, we expect revenue of $263 to $269 million for a 5 to 7% growth rate. It's worth noting that we do expect our revenue growth rate to continue to moderate as we move through the first few quarters of the year given current economic conditions, along with the anniversary of the Populi acquisition in the second half. I'd like to pause here to comment on our expected revenue growth versus the growth in CRPO of 2% mentioned earlier. We believe CRPO growth of 2% understates expected revenue growth for three reasons. First,

I'd like to pause here to comment on our expected revenue growth.

<unk> is the growths in CRP O of 2% mentioned earlier.

We believe <unk> growth of 2% understates expected revenue growth for three reasons.

First some customers have discretionary opt out clauses in their contracts, which means that they do not show up in CRP O.

Without these contracts C. R. P O would have been up 4% year over year.

Second we.

We saw improved renewal and retention late in the fourth quarter and in January and we expect that to continue through 2024.

Richard Douglas Booth: Some customers have discretionary opt-out clauses in their contracts, which means that they do not show up in CRPO. Without these contracts, CRPO would have been up 4% year over year.

And third we expect to grow in our transactional services work, which is not fully included in CRM.

Richard Douglas Booth: We saw improved renewal and retention late in the fourth quarter and in January, and we expect that to continue through 2024. And third, we expect to grow in our transactional and services work, which is not fully included in CRPO. Overall, these three changes bridge the gap from CRPO growth to our expected revenue growth of 5 to 7 percent. As in 2023, we'll keep a careful eye on costs and operating efficiency to ensure we drive growth in the most efficient ways possible. When we see revenue upside, we will try to reinvest it to deliver efficient growth while also ensuring we continue to deliver attractive margins. Based on this strategy, adjusted operating income is expected to be between $78 and $82 million. Jess DeVita's net worth is expected to be between $84 and $88 million.

Overall these three changes bridge the gap from CRP, Oh gross for expected revenue growth of 5% to 7%.

As in 2023, we'll keep a careful eye on costs and operating efficiency to ensure we drive growth in the most efficient ways possible.

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

Following this strategy adjusted operating income is expected to be between 78 and $82 million.

Adjusted EBITDA is expected to be between 84 and $88 million.

For a full year margin of 32% to 33%.

Adjusted net income is expected to be between 59 and $63 million.

Richard Douglas Booth: For a full year margin of 32% to 33%, Adjusted Net Income is expected to be between $59 and $63 million. Earnings per diluted share are expected to be 37 to 40 cents on 159.3 million weighted average shares outstanding.

Earnings per diluted share are expected to be 37 to 40 cents on 159.3 million weighted average shares outstanding.

Our guidance for 2024 reflects our balanced view of the year.

Richard Douglas Booth: Our guidance for 2024 reflects our balanced view of the year, demonstrated our ability to adapt to a tougher macro backup, focused on driving efficiency and investing to meet clients needs today and for the future. So to summarize, 2023 was another solid year for Definitive Health. We took several actions to improve our margin profile and added meaningful capabilities to our platform through organic innovation and strategic acquisition. We believe that we are well positioned for the long term because we have developed a clear leadership position in a large and attractive market that we believe will support high levels of predictable revenue growth, profitability, and capital efficiency for the long term. And with that, I'll hand it back to Jason for a few closing thoughts before we take questions.

<unk> strengthened our ability to adapt to a tougher macro backdrop.

<unk> on driving efficiency and investing to meet clients' needs today and for the future.

So to summarize 2023 was another solid year for definitive healthcare, we took several actions to improve our margin profile and added meaningful capabilities to our platform through organic innovation and strategic acquisitions.

We believe that 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 profitability and capital efficiency for the long term.

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

Jason Ronald Krantz: Before I open it up to questions, I want to thank all of our customers and employees for their commitment and support of Definitive Healthcare. The work that we are doing together is incredibly important as we look to help our customers transform the healthcare system by driving down costs, increasing quality, and helping our customers bring new devices and life-saving therapies to patients worldwide. I'm proud of the impact our platform and our teams continue to have on the marketplace. And we have been externally recognized for the second year in a row by the Boston Business Journal as one of their middle market leaders. We also continue to receive recognition for our strong workplace culture. In Q4, we were recognized as the best place to work in our India office and also received the Silver Stevia Award in the category of Employer of the Year in Health Products and Services for the second year in a row. With that said, I would like to open it up for questions. Thank you. If you would like to ask a question, please press star 1 on your telephone keypad now. You will be placed in the queue in the order received.

Before I open it up to questions I want to thank all of our customers and employees for their commitment and support of definitive healthcare.

The work that we're doing together incredibly important as we look to help our customers transform the health care system by driving down costs increasing quality.

And helping our customers bring new devices and lifesaving therapies to patients worldwide.

I'm proud of the impact our platform and our teams continue to have in the marketplace.

And we have been externally recognized for the second year in a row by the Boston business Journal as one of their middle market leaders.

We also continue to receive recognition for our strong workplace culture. In Q4, we are recognized as a best place to work in our India Office and also received the Silver Stevie Award in the category of employer of the year and health products and services for the second year in a row.

With that I would like to open it up for questions. Thank you.

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

You'll be placed into the queue in the order received.

Please be prepared to ask your question when prompted and please keep to one question and one follow up question.

Stephanie Davis: Please be prepared to ask your question when prompted, and please keep to one question and one follow-up question. Once again, if you have a question, please press star 1 on your phone now. Our first question today comes from Stephanie Davis with Barclays. Hey guys, thank you for taking my question. Jason, you mentioned a ton of new products this year, both inorganic, Can you walk us through which you're viewing as more near-true?

Once again, if you have a question. Please press star one on your phone now.

And our first question today comes from Stephanie Davis with Barclays.

Thank you for taking my question.

Jason you mentioned.

New products this year both in organic.

Can you walk us through with your viewing.

Thank you for waiting.

Jason Ronald Krantz: Where you've seen the greatest level of initial client interest. And a follow-up to that, you mentioned how it could improve. Do you have any color on the number, Science, and your brand new client book compared to some of the attrition? Yeah, so thanks for that question, Stephanie. I appreciate it.

Integrated sample.

Yes.

And a follow up to that you mentioned, how it could improve the churn.

Do you have any color on the number of solutions.

Can you bring new end client book compared to some of the attrition.

Yeah. So thanks for the question Stephen I appreciate it.

Jason Ronald Krantz: In terms of the products that we're going to be launching that are going to have a near-term impact this year, the one that we're most excited about in the shortest term is our claims analytics platform. So this is the platform that we bought as part of the popular acquisition that allows us to create visualizations and very specific analytics that allow our clients to solve specific problems that they're looking to solve. These are things like how to identify positions to grow their network or how to size markets as you're thinking about how to invest your resources from a clinical trial standpoint or from a geographic expansion standpoint.

As you think about products that were going to be launching that are going to have near term impact this year.

The one that we're most excited about.

Short ish term is our claims analytics platform.

So this is a platform that we bought as part of the popular acquisition that allows us to create visualizations and very specific.

Analytics that allow our clients to solve specific problems that they're looking to solve these are things like how to identify physicians to grow their network or how to size markets as youre thinking about how to invest your resources.

Clinical trial standpoint, or from a geographic expansion standpoint.

Jason Ronald Krantz: So we saw, when we rolled this out to providers after the acquisition, we saw an almost immediate impact in our ability to inflect expansion sales, as well as to reduce churn, as we were able to meet their needs more specifically in a better way than we were before. So we are gonna be expanding that to the rest of our clients, probably at the very beginning of H2. So that'll be expanded to our life sciences clients and our diversified clients, and we expect to have a similar impact in our ability to again meet those needs more quickly and deliver value more quickly for our clients. Following up on the analytical side of things.

So we saw when we rolled this out to providers. After the acquisition, we saw an almost immediate impact in our ability to inflect expansion sales as well as to reduce churn as we're able to meet their needs.

More specific in a better way than we were before.

So that we are going to be expanding that to the rest of our clients.

The big very beginning.

H two.

So that will be expenditure and life sciences clients in our diversified clients and we expect to have a similar impact in our ability to to again meet.

Meet those needs more quickly and deliver value more quickly for our clients.

Following up on that.

Analytic side of Fone.

Jason Ronald Krantz: The recent change outages probably put an opportunity for some competitive bids out there for healthcare data and analytics solutions. Are you seeing any opportunities in the recent outages as you go to market? I think it's too early to say what the impact is going to be from all the things that are happening to change right now. You know, what we're focused on is the things that we can control.

The recent same challenges probably placement opportunity and competitive.

Bids out there for health care data and analytics solutions are.

You see any opportunities.

If you go to market.

I think it's too early to say, what what is going to impact what the impact is going to be from.

Things that are happening no change right now what we're focused on is the things that we can control. So we're continuing to make sure that we put our investment dollars and the products that are most important and that we see quicker time to value for our customers and then making sure that we havent go to market team Thats able to articulate our vision.

Jason Ronald Krantz: So we're continuing to make sure that we put our investment dollars in the products that are most important and that we see the quickest time to value for our customers. And then making sure that we have a go-to-market team that's able to articulate our vision and deliver the type of value that our customers are looking for in Helpful. Thank you. Our next question comes from Craig Hettenbach with Morgan. Yes, thank you.

And deliver the type of value that our customers are looking for.

Okay.

Okay.

And our next question comes from Craig hitting Buck with Morgan Stanley.

Yes. Thank you on the comments of improved retention late in the quarter and into January is there anything else you can share in terms of color by end market or customers and then also what gives you the confidence that that's kind of back on the right trend as you move through the year.

Craig Matthew Hettenbach: On the comments of improved retention late in the quarter into January, is there anything else you can share in terms of color by end market or customers? and also what gives you the confidence that that's kind of back on the right trend as you move through the year. Craig Hettenbach.

Alright, great.

Jason Ronald Krantz: Thank you, Craig. The impact that we saw, as we mentioned, was later in the quarter, and it was really across the entire customer base for the most part. We believe that there were two key things driving that. The first was that we spent a lot of effort in the second half of the year really focused on how we improve the deliverability for our clients of all of our products, specifically our claims analytics. So that was a big focus of ours, and how could we improve that deliverability and drive additional service for those clients? So that had an immediate impact.

Go ahead, the impact that we saw.

Mentioned was later in the quarter and it was really across the entire customer base.

For the most part.

We believe that there was two key things driving that.

First was we spent a lot of effort in the second half of the year really focused on how do we improve the deliverability for our clients of all of our products specifically our claims analytics. So that was a big focus of ours and how can we improve that deliverability and drive additional service for those clients so that had immediate impact.

Jason Ronald Krantz: The second, which was expressed more in our provider market, was the impact, which I talked about, of how we've productized the popular platform with new claims analytics and new visualizations to help the provider market more specifically. So as we think about how this all translates into 2024, you know, the investments that we made in high-quality data, high service, and high touch will all continue into 2024. Our clients are seeing the benefit of that. And then, as we roll out and expand the product offering that I just mentioned, we're going to be able to do that in 2022. Stephanie's question that should also impact sharing in the second, at it.

The second which was expressed Florida provider market was the impact, which I talked about of how we've product.

The popular platform with new claims analytics, and new Visualizations to help with provider market more specifically so.

So as we think about how this all translates into 2024.

The investments that we've made in high quality data high service high touch that will all continue into 2020 for our clients are seeing the benefit of that and then it will roll out and expand the product offering that I just mentioned to Stephanie's question that should also impact churn in the second half of the year.

Got it and then just as a follow up Jason with the recent change in CEO and you comment that can ruin basis. You mentioned this is a year of growth can you just touch on just the.

Jason Ronald Krantz: And then just as a follow-up, Jason, with the recent change in CEO and you coming back on an interim basis, you mentioned this is a year of growth. Can you just touch on just, you know, the strategy here and what you're maybe tweaking at the margin? Yeah, I think it's, you know, as you start about it, it's just a change in mindset is the beginning of it.

The strategy here and what you may be tweaking at the margin.

Yeah, I think it's.

And he started about it's just a change in mindset.

Beginning of it so as you think about 2023.

Jason Ronald Krantz: So as you think about 2023, it was just a year where we had to do things like work on our cost structure and figure out how to set ourselves up, create that foundation for long term growth and profitability, which has always been so important. So the mindset this year is just much more about growth. It's we're, you know, we're on our front row, we're thinking about what are the different product investments that we need to make to go drive the type of impact that we're going to have with our clients. And we talked a little bit about the restructuring that we did in our sales force, that restructuring is really designed to put more resources and more impact on our largest, our enterprise clients that we think have the most opportunity for expansion, also have the lower return rate.

It was just a year, where we had to do things like work on our cost structure and figure out how to set ourselves up create that foundation for long term growth and profitability, which has always been so important to us.

The mindset this year, it's just much more of a growth.

We're on our front, we're thinking about what are the different product investments that we need to make to go drive that.

Type of impact that we're going to have with our clients.

And we talked a little bit about the restructuring.

The restructuring that we did on our sales force that that restructuring is really designed to put more resources and more impact on our largest.

Our enterprise clients that we think have the most opportunity for expansion also has the lower churn rate. So that will be in order to serve those clients. It's all about product innovation and what can we bring to the market to solve a vast number of problems across all their therapeutic areas for all the different functions of the organization. So that's really where we're focused right now.

Jason Ronald Krantz: So that will be, you know, in order to serve those clients, it's all about product innovation. And what can we bring to the market to solve a vast number of problems across all their therapeutic areas for all the different functions at the organization. So that's really where we're focused right now is how do we innovate? How do we meet clients' needs? How do we expand the use cases that we solve?

How do we innovate how do we meet clients' needs how do we get.

Spanned the use cases that we sold to them.

Craig Jones: Thank you. We'll move next to Craig Jones with, Hey, thanks for sharing my question here. I'm just thinking about their attention, you know, did you say that it's going to improve 100, 200 basis points by the end of the year? And then I was wondering if there's any way to give a breakdown kind of how you're thinking about by client size, you know, sort of those metrics you give. Yeah, we, we report NDR on an annual basis. And we would expect at our next fourth-quarter call, but we would see roughly one to 200 basis points improved. Okay, so year over year, not just like, say, a December to December or something like that, but you're saying that it wouldn't get better? Right, it's an annual, it's an annual disclosure. So it is effectively from December to December.

Thank you.

And we'll move next to Craig Jones with Stifel.

Hey, Thanks for St.

For taking my question here so on the.

We're thinking a lot about the attention you know did you say that's going to improve 100 200 basis points by the end of the year.

And then I was wondering if there's any way to give a breakdown of kind of how youre thinking about by client size.

So are those metrics you get.

Thanks.

Yes, we are we report MBR on an annual basis, and we would expect at.

And our next fourth quarter call, but we would see roughly one to 200 basis point improvement.

Okay. So year over year, not general like say, a December to December or something like that.

Youre, saying well it would affect it would've Nigel will get better.

Right.

Daniel It's an annual disclosure.

So it effectively is December to December and we don't we don't break that out more finely between the industry groups. We do comment if we see something that is different from the trend as we go through the year.

Unknown Executive: And we don't we don't break that out more finely between industry groups; we do comment if we see something that is different from the trend as we go through the year. But it's an annual disclosure. Okay, got it.

But it's an annual disclosure.

Okay got it and then on the acquisition how much revenue do you expect from that and then how much from a popular as well.

Ryan McDonald: And then on the acquisition, how much revenue do you expect from that? And then how much from a popularity? Both very, very small Tuckian acquisitions and are fully considered in our guidance material, whaling. Next question will come from Ryan McDonald with Needham. Hey, thanks for taking the question. This is Matt Shea on for Ryan.

Both very very small tuck in acquisitions.

And our fully considered in our guidance prepared materials.

Okay, great. Thank you.

And our next question will come from Ryan Macdonald with Needham <unk> Company.

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

Matthew Dineen Shea: So it seems like the diversified segment has been an area of outperformance, with the 40% ARR number being up from historical levels that were closer to say 20 or 30%. So is it fair to say that this end market has been more insulated from the macro? Or why do you think it has been so durable?

So it seems like the diversified segment has been an area of outperformance with the 40% number being up from historical levels that were closer to say 20 or 30%. So is it fair to say that this end market has been more insulated from the macro or why do you think it has been so durable and then how meaningful do you expect the contribution from this segment to be.

Jason Ronald Krantz: And then how meaningful do you expect the contributions from this segment to be to the 2024 growth outlook? Oh, let me just clarify. I think you're comparing again to the disclosures we made at our IPO, where we broke customer verticals into four groupings, one of which was diversified, and one of which was software and IT. Adding those together, that's roughly 40% in the way that we're talking about it now, which is three verticals.

To the 2024 growth outlook.

Well, let me just.

Clarify think youre comparing against.

The disclosures, we made at our IPO, where we broke customer verticals into four groupings, one of which was diversified and one of which was <unk>.

Software and IP.

Adding those together thats roughly the 40%.

The way that we're talking about it now which is three verticals to emphasize the biggest markets.

Richard Douglas Booth: To emphasize the biggest markets, you know, our single largest TAM is in life sciences, and our next largest is in provider, and we're lumping the rest into what we're calling diversified, which is roughly 40%. Now, within that, it has been a good performing segment for us, but I didn't want to confuse you with the 20 versus 40. Okay, that's a helpful clarification.

Our single largest Tam is in life Sciences, and our next largest Susan provider and we're lumping, Nebraska into what we're calling diversified.

Just roughly to 40 per ton now within that.

It has been it has been a good performing segment for us, but I didnt want I confused here with 20 versus 40.

Okay.

That's a helpful clarification.

Matthew Dineen Shea: I guess it'll be nice to see the improvement in retention late in Q4 in January. And that should help mitigate the churn. But for those who have, you talked about last quarter's strategies to recapture churn customers. Just curious if you can provide an update on how those efforts are going and then what kind of win-back expectations you're incorporating into the year, if any, or that just pure upside. Thanks, guys. Yeah, we have always won back customers. So I don't think that there's anything new that I would think of sort of outside for this year.

I guess pivoting nice to see the improvement in our retention late in Q4 in January.

And that should help mitigate the churn but for those who have you know you talked about last quarter. Our strategy is to recapture churned customers. Just curious if you could provide an update on like how those efforts are going and then what kind of wind back expectations, you're incorporating into the year, if any or is that just pure upside. Thanks guys.

Yes.

We have always won back customers. So I don't think that there is anything new that I would think of as sort of outsized for this year, we have a.

Jason Ronald Krantz: We have a heavy effort on making sure that any customer that turns, we go back. Specialist Budget due to all the problems that people are having in 2023, we go back, and we have a conversation with them. Many of these get a tremendous amount of value out of definitive, so they are likely to sign up. We've factored some of that into our guidance. We believe, you know, it's a little hard to predict how much of that is going to happen in 2024 versus 2025 and beyond, but it's an effort that we will continue to work on. Salad outside for us.

Heavy effort on making sure that any cash for the insurance, we go back and especially those budget due to all the other.

The problems that people are having within 2023 that we go back and we have a conversation with them and many of these get a tremendous amount of value added definitive so are likely to sign up in the future.

We factor some of that into our guidance.

We believe it's a little hard to predict how much of that is going to happen in 2024 versus 2025 and beyond.

But it's an effort that we will continue to work on and we believe will be some solid upside for us in years to come.

Allen Charles Lutz: We'll move next to Allen Lutz with Bank of America. Good afternoon and thanks for taking the question. Rick, I'm trying to back into why revenue growth should exceed CRPO growth. If we look back to 2023, CRPO growth was a little bit less than 7%, and it's, you know, effectively where you're guiding revenue 5 to 7% for 2024. I guess, as we think about the things that you called out, opt-out clauses, improved renewals, transaction services not included, how much of that is any of that different than how you were reporting CRPOs in 2023?

And we'll move next to Allen Lutz with Bank of America.

Good afternoon, and thanks for taking the questions Rick I'm trying to back into why revenue growth.

Should exceed <unk> growth, if we look back to 2023, <unk> growth was a little bit less than 7% and that's effectively where youre guiding revenue of 5% to 7% for 2020 for I guess as we think about the things that you called out opt out pauses improved renewals transaction as if it is not included.

How much of that is any of that different than.

How you were reporting <unk> in 2023.

Richard Douglas Booth: And just trying to look at this, should we assume that if CRPO growth remains at 2%, that that should point to 5 to 7% revenue growth from here? We've got a couple of things that are going on. So when you look further back, particularly early in 2023 or at the end of 2022, we had fewer opt-out clauses. Those have come in disproportionately through acquisition, so inherited contracts.

And just trying to.

To look at it should we assume that <unk> growth remains at 2%.

That should point to 5% to 7% revenue growth from here. Thanks.

No. We've got a couple of a couple of things that are going on so when you look.

Further further back, particularly early in 2023 or at the end of 2022, we had fewer opt out clauses.

Does it come in disproportionately.

Through acquisition, so it inherited contracts we also.

We are.

Richard Douglas Booth: We're now realizing some revenue from a product called Activations, which helps people complete that last mile of actually delivering marketing to the target person. We have that in provider right now. That's new; that came in through Populi. And then the final is...

We are now realizing some revenue from a product.

All the Activations, which helps.

Which helps people complete that last mile of actually delivering delivering.

Delivering marketing to the target person, we have that in provider right. Now that's that's new that came in through popular and then the final is.

Jason Ronald Krantz: The acquisition of Care Buoyance came in early 2024, and that is contemplated in our, Okay, great. And then I wanted to touch quickly on M&A. Has there been any change in valuations as you look at some of these assets? You mentioned a company you acquired in early 2024. Just trying to get a sense of what you're seeing out there versus maybe three or six months ago. Thanks. Yeah, I think we commented on this at the last one, Blaster, and his call as well.

The acquisition of Kerr brands came at a yen.

In early 2024 and that is contemplated in our in our guidance.

Okay, Great and then I wanted to touch quickly on M&A.

Has there been any change in valuations as you look at some of these assets you mentioned.

You acquired in early 2024, just trying to get a sense of what youre seeing out there versus maybe three or six months ago.

Yes, I think we commented on this at the last.

At the last earnings call as well the prices definitely seem like they're coming back to a more reasonable level.

Jason Ronald Krantz: The prices definitely seem like they're coming back to a more reasonable level. Although it does vary in the market, the A-plus assets are still, you know, at a very, very high price. But I think there's going to be more and more opportunities over the coming year. We're going to continue to focus a tremendous amount of attention on finding more tuck-in assets where we can either bring new data into our ecosystem, or we can leverage data into other software and use cases by buying those types of innovations. So it will continue to be a focus of ours. We believe prices are going in the right direction, but it's probably not quite where we'd like it to be. Great, thank you.

Although it does vary in the market the a.

Plus assets are still at a very very high price, but.

I think theres going to be more and more opportunities over the coming year.

We're going to continue to focus a tremendous amount of attention on finding more tuck in assets, where we can either bring new data into our ecosystem.

Or we can leverage data into other software and use cases.

Bye bye and those types of innovations. So it will continue to be a focus of ours. We believe prices are going in the right direction.

But it's probably not quite where we'd like it to be so.

Great. Thank you.

Unknown Executive: Just a reminder, if you would like to ask, please signal by pressing star 1 at the... We will take our next question from Jared Haase with William Blair. Thank you. Maybe just taking a step back a little bit, looking beyond 2024, we'd just be curious to hear how you sort of frame what the right way to think about margin expansion is over the longer term. Obviously, you've got north of 200 basis points implied in 2024, but there are a lot of kind of one-off dynamics impacting the comparison here this year. So it would just be great to hear some context as to how you would frame kind of the multi-year margin. Thanks for pointing that out and asking the question.

As a reminder, if you would like to ask a question. Please signal by pressing star one at this time.

And we will take our next question from Jared <unk> with William Blair.

Okay.

Thanks for taking the questions, maybe just taking a step back a little bit looking beyond 2024 would just be curious to hear how you sort of frame what the right way to think about margin expansion is longer term, obviously, you've got north of 200 basis points implied in 2024, but a lot of kind of one off dynamics impact.

The comparison here this year. So it would just be great to hear some context as to how you would frame kind of the multiyear margin expansion story.

Thanks for.

Thanks for pointing that out and asking the question.

Richard Douglas Booth: We value both growth and profitability. We take both seriously, and we will continue to reinvest where we see appropriate in order to drive shareholder value. Over time, I would expect our margins to continue to expand. We're not ready to quantify that in the form of a long-term model, just given the current dynamism, but it's something we take very seriously. And then, maybe, Jason for you, as well as the other two experts you mentioned. I'm seeing strong sort of top of the funnel demand for the products and services that you offer. Any way to impact that a little bit further, maybe just any additional data points you're able to share, sort of compare, and contrast, you know, kind of what that looks like going into 2020. Yeah, we had strong demand in 2023 as well. So I think it's a continuation of strong top of the funnel. You know, I think that the reality is that customers need to have our products in order to grow. And 2023 was just a year of people worrying much more about costs than growth.

We value both growth and profitability.

So we take both seriously and we will continue to reinvest where we where we see appropriate in order to drive shareholder value.

Overtime I would expect our margins to continue to expand.

Not ready to quantify that in the form of a long term model just given the current dynamism.

But it's something we take very seriously.

Okay.

And then maybe Jason for you I think in the prepared remarks, you mentioned.

There is seeing strong sort of top of the funnel demand for the products and services that you offer.

The way to unpack that a little bit further maybe just any additional data points, you're able to share and maybe if you're able to sort of compare and contrast kind of what that looks like going into 2023.

Yes, we had strong demand in 2023 as well so I think it's a continuation of strong top of the funnel demand.

I think the reality is customers need to have our products in order to grow.

And 2023, just was a year of people worrying much more about cost and growth and as a result, as we talked about sales cycles get elongated and decisions are stalled, but at the top of the demand.

Jason Ronald Krantz: And as a result, as we talked about, sales cycles get elongated, and decisions are stalled. But the top of the demand funnel, the top of the funnel of demand for what we offer, is still extraordinarily high. So, you know, we're excited about what we're able to do once the market, conditions continue to improve in terms of driving both new logo growth as well as expansion of their existing logos. Your next question will come from Brian Peterson with Raymond. This is Jonathan McCary on for Brian. Thanks for taking the question. Um, so we've seen some competitors call it slightly lower study starts. And I know that's only one of many variables that would impact the addressable market for definitive, but just kind of curious; we could frame what potential impact you're seeing from that right now in the demand environment. Sorry, what was the competitor?

The funnel demand for what we offer is still extraordinarily high so we're excited.

Pitted about what we're able to do what the market conditions continue to improve.

In terms of driving both new logo growth as well as expansion with existing clients.

And our next question will come from Brian Peterson with Raymond James.

Jonathan the carry on for Brian Thanks for taking the question.

So we've seen some competitors called slightly lower study starts and I know that's only one of many variables that would impact the addressable market for definitive but just kind of curious if you could frame what potential impact you're seeing from that right now and the demand environment.

Sorry, what was the.

The competitor Youre, saying.

Johnathan M. McCary: Oh, so we've just seen some competitors, whether that be like IQVR or some or some other some other names out there discussing lower study starts. I'm just just curious what impact that that may be having on your demand environment. That should have no short-term, short-to-medium-term impact on what we do.

Oh, well, so we've just seen some component or whether that would be like I keep you all or some or some other some other names out there discussing lower study starts just just curious what impact that that may be having an impact in your domain.

That should have no short term short to medium term impact what we do so we tend to really start to sell the clients wants their phase two and forward, we do a little bit in that earlier stage and we've talked about the impact of that with the small biotechs really struggling in this year that is.

Jason Ronald Krantz: So we tend to really start to sell to clients once they're in phase two and forward. We do a little bit in that earlier stage, and we've talked about the impact of that with the small biotechs really struggling this year. That's been, you know, that did have an impact on us from a churn perspective, in particular within the biotech market and the farm market globally. But overall, you know, this is not the core part of our business, and it makes up a small part of what we do, so we're not. Very. Gotcha, that makes sense.

Ben.

That did have an impact on us from a churn perspective in particular within the biotech market and the pharma market globally.

But overall, we don't this is not.

The core part of our business and it makes up a small part of what we do so we're not.

Very concerned about it.

Got it that makes sense and then could you give us an update on customer conversations you're having around the sales force and Snowflake integrations, you announced a couple of quarters ago.

Jason Ronald Krantz: And then, could you give us an update on customer conversations you're having around the Salesforce and Snowflake integrations you announced a couple quarters ago? That was an exciting development. Just hoping we could hear a little bit more about that. Thanks.

It's an exciting development, just hoping we could hear a little bit more about that thanks.

Jason Ronald Krantz: Yeah, sure. And I talked about it a little bit in my prepared remarks about the client that did the Snowflake acquisition as they looked to enter the real estate company. So we are, this is very exciting for our clients. Overall, integrations with our client workflow is a big part of our strategy. We wanna be able to deliver our data where and when clients need it so that they can use it throughout their organization. So we do. We have an integration with Databricks, we have integration with Snowflake, and we have integration with Salesforce.

Yeah sure.

I talked about it a little bit in my prepared remarks of the declines that did the snowflake acquisition as they look to enter the real estate.

Company. So we are this is very exciting for our clients overall integrations with our client workflow is a big part of our strategy, we want to be able to deliver our data where and when clients need it.

So that they can use it throughout the organization. So we do we have an integration with data rigs we have integration with snowflake, we have integration with salesforce.

Jason Ronald Krantz: So all of those types of things are highly used by our clients. Overall, over 50% of our clients have some sort of integration. We are also investing more in connectors to make these integrations even more seamless for our clients. So we'll be able to connect to things like Power BI and Tableau very seamlessly through all those Snowflake and Databricks-type platforms. Exciting stuff overall. Our clients are very bullish on their ability to leverage our data inside of their platforms. And if you would like to ask a question, you may signal by pressing star 1. Our next question will come from George Hill with... Yeah, good afternoon, guys. I'm glad I made it into the queue. The technology was messing with me a little bit.

So all of those types of things.

They are highly used by our clients overall over 50% of our clients have some sort of integration.

We are also investing more in connectors to make these integrations, even more seamless for our clients.

We will be able to connect into things like power bi and tableau very seamlessly.

Through all of those snowflake and data rich type of platform. So exciting stuff overall, our clients are very bullish on their ability to leverage our data inside of their platforms.

Once again, if you would like to ask a question you may signal by pressing star one at this time.

And our next question will come from George Hill with Deutsche Bank.

Yeah. Good afternoon, guys glad I made it into the queue. The technology was missing was being a little bit. So I guess, Jason one of the first question for you and it's because we're starting to see the biotech and life Sciences Fundraisings like all start to come back I know that you said you saw an uptick in retention in Q4 and into January but I'd be interested in what the pipeline looks like in the life Sciences space.

George Robert Hill: So I guess, Jason, one of the first questions for you I'd ask is we're starting to see the biotech and life sciences fundraising cycles start to come back. I know that you said you saw an uptick in retention in Q4 and into January, but I'd be interested in what the pipeline looks like in the life sciences space, given the return of the capital markets. And I have a follow up for, Yeah, the pipeline, the top of the funnel demand across all of our markets is, We think they've signed, that's our biggest TAM overall. So in some of our restructuring efforts, we have put more resources on our enterprise clients, as I mentioned. A lot of those are within our life sciences group, although they do cover all of the different markets that we cover. We have enterprise clients and diversified provider, of course, as well.

Just given the return of the capital markets and I have a follow up correct.

Yes, the pipeline at the top of the funnel demand across all of our markets is strong.

Life Sciences.

The biggest Tam overall.

So in some of our restructuring efforts, we have put more resources on our enterprise clients as I mentioned a lot of those are within our life Sciences group, although they do cover all of the different markets that we cover we have enterprise clients in diversified provider of course as well.

Jason Ronald Krantz: And then, as we've talked about, a lot of the product investments that we're making will be heavily weighted towards life sciences, and that should benefit us over the short to medium term. So our new claims analytics platform will be pushed into life sciences, as well as some of the data science and AI that I talked about around how we're using AI to actually measure the clinical impact of scientific events and publications. That's the type of thing that is extremely important to Life Sciences Companies, both the commercial organization as well as medical affairs. So all of that is driving a lot of excitement in the life sciences area. But that's helpful,

And then as we've talked about a lot of the product investments that we're making will be heavily weighted towards life sciences and that should benefit over the short to medium term.

New claims analytics platform being pushed into life sciences as well as some of the data science and AI that I talked about around how we're using AI to actually.

To measure the clinical impact of scientific publications.

Publications.

Type of thing that is extremely interesting to life sciences companies, but the commercial organization as well as medical affairs.

So all of that is driving a lot of excitement in the life Sciences area for us.

That's helpful and I guess, Rick My follow up is I guess can you help me square square the retention commentary with kind of slide 13 in the site slide deck, which kind of shows the continued erosion of the.

Richard Douglas Booth: And I guess, Rick, my follow-up question is, can you help me square the retention commentary with kind of slide 13 in the slide deck, which kind of shows a continued erosion of the net dollar retention across the customer base? I guess, kind of what we're seeing is that we're like, the clients are staying on board, but they kind of continue to mix down from an average dollars per client perspective, and kind of trying to square those data. Oh, So, remember that the NDRs that we're presenting are annual, and we talked about increasing churn in the early part of the year. Late in Q4, we saw a strong rebound. So that's too late in 2023 to offset the declines that you note, but given that that was tied to operating changes that we've spent a lot of time making and that we've seen it continue into the first month of the year, that gives us confidence that we will be able to continue to drive that as we move through the rest of the year. Okay, so when we're looking at this slide this time next year, we should probably expect to see those numbers go up.

Net dollar retention across the customer base, I guess kind of as what we're seeing is that where the clients are staying home more but they kind of continue to mix down from an average dollars per client perspective, and just kind of trying to square those data points.

It's a great question, so remember that the.

The <unk> that we're presenting barrick and newmont and we talked about increasing churn in the early part of the year, leaving Q4.

We saw a strong rebound.

So that's too late in 2023.

To offset the.

The declines that you note, but given given that that was tied to operating changes that we've spent a lot of time, making and we've seen it continue into the first month of the year that gives us confidence that we will be able to continue to drive that as we move through the rest of the year.

Okay. So so when we're looking at this slide this time next year, we should probably expect to see those numbers go up.

Richard Douglas Booth: Exactly. Yeah. Okay, helpful. Thank you. Yeah.

Exactly yes, okay. Thank you very much.

Jason Ronald Krantz: Again, if you would like to ask a question, you may signal by pressing star one on your. It appears we have no further questions at this time. I'd like to turn the conference back to our moderators for any additional or closing remarks. I just want to thank everyone once again for taking the time to listen to us and ask really thoughtful questions. As I mentioned earlier, we're incredibly excited about the opportunity ahead of us. We believe we have the data, products, and an extraordinarily talented workforce to take advantage of a huge and growing market.

Once again, if you would like to ask a question you may signal by pressing star one on your Touchtone phone.

Yeah.

It appears we have no further questions at this time I'd like to turn the conference back to our moderators for any additional or closing remarks.

Thank you.

I just wanted to thank everyone. Once again for taking the time to listen to us and ask a really thoughtful questions. Today. We appreciate it as I mentioned earlier, we're incredibly excited about the opportunity ahead of US. We believe we have the data products and an extraordinarily talented workforce to take advantage of a huge and growing market. So thank you once again.

Unknown Executive: So thank you once again. Have a great night, everyone. This concludes today's conference call. Thank you for attending. The host has ended this call. Goodbye.

Have a great night, everyone. We appreciate it.

This concludes today's conference call. Thank you for attending.

The host has ended this call goodbye.