Q2 2024 Definitive Healthcare Corp Earnings Call

Speaker Change: Welcome to Definitive Health Care's Q2 2024 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

Operator: At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I would now like to turn the call over to Matt. Please do so.

Speaker Change: I would now like to turn the call over to Matt. Please go ahead.

Matt Ruderman: Good afternoon, and thank you for joining us today to review Definitive Healthcare's financial results. Joining me on the call today are Kevin Coop, Chief Executive Officer, and Rick Booth, Chief Financial Officer.

Matt: Good afternoon and thank you for joining us today to review Definitive Health Care's financial results.

Speaker Change: Joining me on the call today are Kevin Koop, Chief Executive Officer, and Rick Booth, Chief Financial Officer.

Matt Ruderman: 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 customers, and on the healthcare industry generally. Any forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Speaker Change: 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.

Speaker Change: The Benefits of Our Healthcare Commercial Intelligence Solutions.

Speaker Change: 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 Customers and on the Healthcare Industry Generally.

Speaker Change: Any forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Matt Ruderman: Forward-looking statements involve a number of risks and uncertainties, including those discussed in the risk factor sections and elsewhere in our filings with the SEC. The actual results may differ materially from those projected. The company undertakes no obligation to revise or update any forward-looking statements to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the cautionary statement included in the earnings release that we have just posted to the investor relations portion of our website.

Speaker Change: Forward-looking statements involve a number of risks and uncertainties, including those discussed in the risk factor sections and elsewhere in our filings with the SEC.

Speaker Change: Actual results may differ materially from any forward-looking statements.

Speaker Change: 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.

Speaker Change: For more information, please refer to the cautionary statement included in the earnings release that we have just posted to the investor relations portion of our website.

Matt Ruderman: Additionally, we will discuss non-GAAP financial measures on this conference call. Please refer to the tables in our earnings release and investor presentation 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 Kevin.

Speaker Change: Additionally, we will discuss non-GAAP financial measures on this conference call. Please refer to the tables in our earnings release and investor presentation 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 Kevin.

Kevin Coop: Thanks, Matt. And thanks to all of you for joining us this afternoon to review Definitive Health Care's second quarter 2024 financial results. Let me begin by saying I'm very excited and energized to be the new CEO of Definitive Health Care, and I look forward to meeting with many of you in the days and weeks ahead. As you will hear on today's call, our performance was mixed in the second quarter. Our total revenue was $63.7 million, up 5% year-over-year, and exceeded our guided. Adjusted EBITDA was $20.9 million, up 21% year-over-year, and exceeded our guidance rate.

Kevin Koop: Thanks, Matt. And thanks to all of you for joining us this afternoon to review Definitive Healthcare's second quarter 2024 financial results.

Kevin Coop: Adjusted EBITDA margin was 33%, up 450 basis points year-over-year, also exceeding our guidance. In addition, we continue to drive improved renewal rates versus prior year. However, although these results highlight Definitive Healthcare's business model and commitment to profitability, we underperformed on our internal logo and upsell expectation, largely due to continued macro headwinds and sales execution challenges. The sales challenges have caused us to revise our guidance for the remainder of the year, which is disappointing.

Kevin Koop: Let me begin by saying I'm very excited and energized to be the new CEO of Definitive Health Care, and I look forward to meeting with many of you in the days and weeks ahead.

Kevin Koop: As you will hear on today's call, our performance was mixed in the second quarter.

Kevin Koop: Our total revenue was $63.7 million, up 5% year-over-year and exceeding our guidance range.

Kevin Koop: Adjusted EBITDA was $20.9 million, up 21% year-over-year and exceeding our guidance range.

Kevin Koop: Adjusted EBITDA margin was 33%, up 450 basis points year-over-year, also exceeding our guidance range.

Kevin Koop: In addition, we continue to drive improved renewal rates versus prior year.

Speaker Change: Although these results highlight Definitive Healthcare's business model and commitment to profitability, we underperformed on our internal logo and upsell expectations, largely due to continued macro headwinds and sales execution challenges.

Speaker Change: The sales challenges caused us to revise our guidance for the remainder of the year, which is disappointing. But as I will address in my remarks, I believe that many of the operational fixes we need to make across the business can be done fairly quickly.

Kevin Coop: But, as I will address in my remarks, I believe that many of the operational fixes we need to make across the business can be done fairly quickly. Before we dive into the details of last quarter's results, I will give some background on myself and what attracted me to Definitive Health. I will provide my initial thoughts on what I've learned in my first 30 days in the job, and outline at a high level the action plans we're putting into place to drive towards improving our operational and financial performance. And I will highlight some of our key wins from the second.

Speaker Change: Before we dive into the details of last quarter results, I will give some background on myself and what attracted me to Defendant of Health Care.

Speaker Change: Provide my initial thoughts on what I've learned in my first 30 days in the job. Outline at a high level the action plans we're putting into place to drive towards improving our operational and financial performance. And I will highlight some of our key wins from the second quarter.

Kevin Coop: I'd like to start by explaining why I decided to join Definitive. With 30 years of experience driving business transformation at all levels of scale across many verticals, I was attracted to definitive health care and the combination of skill sets that this role requires, which also align with my own capabilities in it. One constant has always been a product-centered focus, always with the foundation and data and a relentless adherence to commercially driven. As part of the leadership team that took Dun & Bradstreet private, I was responsible for the global commercial transformation that returned the company to growth, while also realizing substantial cost synergies, and ultimately was the P&L leader for North America as its president.

Speaker Change: I'd like to start by framing initially, though, why I decided to join Definitive Health Care.

Speaker Change: With 30 years of experience in driving business transformation at all levels of scale across many verticals, I was attracted to definitive health care and the combination of skill sets that this role requires, which also align with my own capabilities and interests.

Speaker Change: One constant has always been a product-centered focus, always with the foundation and data, and a relentless adherence to commercially-driven results.

Speaker Change: As part of the leadership team that took Dun & Bradstreet private, I was responsible for the global commercial transformation that returned the company to growth, while also realizing substantial cost energies, and ultimately was the P&L leader for North America as its president.

Kevin Coop: At Black Knight, now part of ICE, the Intercontinental Exchange, I led the data and analytics businesses that returned that division to double-digit growth and profit and also allowed us to accelerate our return to the public markets with a very successful IPO. Prior to that, I led the data and solutions businesses for Veris. In this role, I led the businesses to sustained profit and growth, which drove double-digit annual increases and expanding margins for a decade, ultimately supporting its very successful IP.

Speaker Change: At Black Knight, now part of ICE, the Intercontinental Exchange, I led the data and analytics businesses that returned that division to double-digit growth and profit, and also allowed us to accelerate our return to the public markets with a very successful IPO.

Speaker Change: Prior to that, I led the data and solutions businesses for Verisk. In this role, I led the businesses to sustain profit and growth, which drove double-digit annual increases and expanding margins for a decade, ultimately supporting its very successful IPO.

Kevin Coop: Most recently, as CEO of DailyPay, a market-leading fintech in the work tech space, I led the team to accelerated growth, achieving profit goals ahead of schedule. And in all of these roles, I developed a deep understanding of the power of data, the ability to identify root cause issues and translate those into action. And perhaps most importantly, how do you build a high performing, accountable, and efficient go-to-market?

Speaker Change: Most recently, as CEO of DailyPay, a market-leading fintech in the WorkTech space, I led the team to accelerated growth, achieving profit goals ahead of schedule,

Speaker Change: And in all of these roles, I developed a deep understanding of the power of data, the ability to identify root cause issues, translate those and identified needs into action, and perhaps most importantly, how do you build a high-performing, accountable, and efficient go-to-market engine?

Kevin Coop: At the core, I'm a growth-oriented executive, a trait that I have nurtured and developed through years of commercial leadership. I am very proud to have had a direct impact on improving the growth and profitability performance of every business that I've been entrusted to lead. As I assessed the opportunity at Definitive Health Care, I had several specific things that I was looking for. First, a great team with deep domain expertise and a passion for serving customers.

Speaker Change: At the core, I'm a growth-oriented executive, a trait that I have nurtured and developed through years of commercial leadership. I am very proud to have had a direct impact on improving the growth and profitability performance of every business that I've been entrusted to lead.

Kevin Coop: Secondly, a growing and vibrant market that would provide ample opportunity for long-term, sustainable growth. Third, a differentiated and compelling set of data and technology assets that can deliver great value to customers and benefit from a sustained competitive moat. And finally, a business that would benefit from a commercially focused leader. My extensive due diligence made it clear that Definitive Health Care checked each of these boxes.

Speaker Change: As I assessed the opportunity at Definitive Health Care, I had several specific things that I was looking for. First, a great team with deep domain expertise and a passion for serving customers.

Speaker Change: Secondly, a growing and vibrant market that would provide ample opportunity for long-term sustainable growth.

Speaker Change: Third, a differentiated and compelling set of data and technology assets that can deliver great value to customers and benefit from a sustained competitive moat. And finally, a business that would benefit from a commercially focused leader.

Speaker Change: My extensive due diligence made it clear that Definitive Health Care checked each of these boxes, and after being here for a month, I'm happy to say that I'm even more confident that this is a business with strong fundamentals, particularly its people and data assets. A few observations from my first month here.

Kevin Coop: And after being here for a month, I'm happy to say that I'm even more confident that this is a business with strong fundamentals, particularly its people and data assets. Here are a few observations from my first month. We believe our reference and affiliation data is a true differentiator. We have a robust and growing data set, and we are seeing good early traction with our enhanced data visualization tool among healthcare providers. We have a great customer base that counts on Definitive Healthcare to improve their operational performance day in and day out.

Speaker Change: We believe our reference and affiliation data is a true differentiator. We have a robust and growing data set and we are seeing good early traction with our enhanced data visualization tool in health care providers.

Speaker Change: Care. We have a great customer base that counts on Definitive Health Care to improve their operational performance day in and day out. My initial customer conversations give me great confidence that we can add even more value, and I'm excited to meet directly with more of our customers, prospects, and key partners over the coming weeks.

Kevin Coop: My initial customer conversations give me great confidence that we can add even more value, and I'm excited to meet directly with more of our customers, prospects, and key partners over the coming weeks. Our product and data science teams have deep domain expertise and are already positioned on a simplified roadmap and strategy that we believe is focused on the right problems with our best people and best talent. Overall, our bench of talent exceeded my expectations, with a good mix of long-tenured domain experts who deeply understand our customers and products and Season Managers who are experienced in scaling organizations.

Speaker Change: Our product and data science teams have deep domain expertise and are already positioned on a simplified roadmap and strategy that we believe is focused on the right problems with our best people and best talents.

Speaker Change: Overall, our bench of talent exceeded my expectations, with a good mix of long-tenured domain experts who deeply understand our customers and products, and seasoned managers who are experienced in scaling organizations.

Kevin Coop: Our core assets provide a tremendous foundation for improved growth and profitability for Definitive Health Care going forward, and to build upon these strengths, we have spent the last month undergoing a process of ruthless self-reflection to identify the things we are doing well and the things that we need to improve. As part of that process, we needed to acknowledge that the business is not executing as well as it can. However, positively, we believe there are things we can fix quickly that should enable us to deliver meaningful growth better over time.

Speaker Change: Our core assets provide a tremendous foundation for improved growth and profitability for definitive healthcare going forward. And to build upon these strengths, we have spent the last month undergoing a process of ruthless self-reflection to identify the things we are doing well and the things that we need to improve.

Speaker Change: A part of that process, we needed to acknowledge that the business is not executing as well as it can. Positively, we believe there are things we can fix quickly that should enable us to deliver meaningful growth better over time.

Kevin Coop: When demoing and talking to customers about our products and solutions, I'm incredibly impressed with the breadth and depth of our data assets and technology. In Q2, we launched Carevoyance, our new platform for the medtech industry, along with a new mobile app for our flagship View platform. In addition, we continue to expand our data sets, recently adding Management Services Organizations and Independent Practice Associations to our PhysicianView data set. We were also selected as the 2024 Databricks Healthcare and Life Sciences Partner of the Year, which is a testament to our focus on delivering innovative data and AI solutions to the healthcare and life sciences industry.

Speaker Change: When demoing and talking to customers about our products and solutions, I am incredibly impressed with the breadth and depth of our data assets and technology.

Speaker Change: In Q2, we launched Carevoiance, our new platform for the medtech industry, along with a new mobile app for our flagship VUE platform.

Speaker Change: In addition, we continue to expand our datasets, recently adding management services organizations and independent practice associations to our PhysicianView dataset.

Speaker Change: We were also selected as the 2024 Databricks Healthcare and Life Sciences Partner of the Year, which is a testament to our focus on delivering innovative data and AI solutions to the healthcare and life sciences industries.

Kevin Coop: So we have great data, and we are making great strides in delivering even more great products for our customers. What we are now focused on is simplifying and prioritizing our product roadmap. Our end-to-end solutions for life sciences, provider, and diversified industries reflect the company's internal innovation and robust acquisition strategy of the last several years that can be made more efficient and more customer-focused. To streamline our development teams and to further our product innovation, the team is now focused on bringing these point solutions together into a more unified platform that is easier to use for our customers and solves a broader range of their most important business problems.

Speaker Change: So we have great data and we are making great strides in delivering even more great products for our customers. What we are now focused on is simplifying and prioritizing our product roadmap.

Speaker Change: Our end-to-end solutions for life sciences, provider, and diversified industries reflect the company's internal innovation and robust acquisition strategy of the last several years that can be made more efficient and more customer-focused.

Speaker Change: To streamline our development teams and to further our product innovation, the team is now focused on bringing these point solutions together into a more unified platform that is easier to use for our customers and solves a broader range of their most important business problems.

Kevin Coop: In addition, we've put together a new product roadmap framework that will streamline decision-making for more targeted and efficient future product development decisions. This process will also ensure that we stay focused on the parts of the market where we believe we will be able to compete as a top-tier solution. So, what are the things that we need to improve? At a high level, I would summarize it as simplification, both in go-to-market and product development.

Speaker Change: In addition, we've put together a new product roadmap framework that will streamline decision-making for more targeted and efficient future product development decisions.

Speaker Change: This process will also ensure that we stay focused on the parts of the market where we believe we will be able to compete as a top-tier solution.

Speaker Change: So, what are the things that we need to improve? At a high level, I would summarize it as simplification, both in go-to-market and product development. We have been doing too many things at the same time, and execution has suffered as a result.

Kevin Coop: We've been doing too many things at the same time, and execution has suffered as a result. This has led to inefficiencies and made it harder for us to deliver on our objectives than it needs to be. Let me give you a couple of examples.

Speaker Change: This has led to inefficiencies and made it harder for us to deliver on our objectives than it needs to be. Let me give you a couple of examples.

Kevin Coop: From a go-to-market standpoint, there's been a tremendous amount of change over the past six to nine months, and we have to simply acknowledge that it's been a mixed bag. I believe the high-level approach outlined by the team last quarter, which includes devoting more resources to our most important enterprise customers while creating a separate sales motion for small and medium-sized customers, is the right framework. However, I firmly believe that we can do this more efficiently and effectively with some very straightforward changes. As we announced last week, Carrie Lazarczak has resigned her position as CRO to pursue other opportunities.

Speaker Change: From a go-to-market standpoint, there's been a tremendous amount of change over the past six to nine months, and we have to simply acknowledge that it's been a mixed bag.

Speaker Change: I believe the high-level approach outlined by the team last quarter, which includes devoting more resources to our most important enterprise customers, while creating a separate sales motion for small and medium-sized customers, is the right framework.

Speaker Change: However, I firmly believe that we can do this more efficiently and effectively with some very straightforward changes.

Speaker Change: As we announced last week, Carrie Lazarchak has resigned her position as CRO to pursue other opportunities.

Kevin Coop: Given my extensive background leading commercial sales organizations and the current growth profile of the business, I will be directly overseeing the sales organization, with its senior leaders reporting directly to me. This will allow me to quickly and effectively enact required changes. For example, one of the key learnings we've identified so far is that our enterprise go-to-market efforts have become too complex. Given how the business has evolved, we often find ourselves selling point solutions rather than a unified platform. This has made our pricing and packaging more complicated than it needs to be, and it's made our demand generation and sales efforts less efficient and effective than they could have been.

Speaker Change: Given my extensive background leading commercial sales organizations and the current growth profile of the business, I will be directly overseeing the sales organization with its senior leaders reporting directly to me.

Speaker Change: This will allow me to quickly and effectively enact required changes. For example, one of the key learnings we've identified so far is that our enterprise go-to-market efforts have become too complex.

Speaker Change: Given how the business has evolved, we often find ourselves selling point solutions rather than a unified platform.

Speaker Change: This has made our pricing and packaging more complicated than it needs to be, and it's made our demand generation and sales efforts less efficient and effective than they could be.

Kevin Coop: Said another way, our go-to-market team is having success selling point solutions, but I believe we have an even greater opportunity to evolve towards more of a platform sale. Much of this can be addressed through a more simplified selling motion, which will be driven in part by our unified product. We also believe a simplified enterprise go-to-market motion will enable us to continue to improve churn by better serving our customers. By presenting a more unified platform and solution through a streamlined effort, we will be able to help our customers grow into solutions that meet more of their needs and fully unlock the entirety of our office.

Speaker Change: Set another way, our go-to-market team is having success selling point solutions, but I believe we have an even greater opportunity to evolve towards a more of a platform sale. Much of this can be addressed through a more simplified selling motion, which will be driven in part by our unified product vision.

Speaker Change: We also believe a simplified enterprise go-to-market motion will enable us to continue to improve churn by better serving our customers.

Speaker Change: By presenting a more unified platform and solution through a streamlined effort, we will be able to help our customers grow into solutions that meet more of their needs and fully unlock the entirety of our offering.

Kevin Coop: In the S&B market, we will focus on strengthening our self-serve capabilities and developing a product-led growth motion to expand our reach in this part of the market. The good news is that many of these operational fixes that we need to make across the business can be done fairly quickly.

Speaker Change: In the S&B market, we will focus on strengthening our self-serve capabilities and developing a product-led growth motion to expand our reach in this part of the market.

Speaker Change: The good news is that many of these operational fixes that we need to make across the business can be done fairly quickly. We have already begun to operationalize many of them and continue to identify other areas for improvement.

Kevin Coop: We have already begun to operationalize many of them and continue to identify other areas for improvement. Obviously, we're at the early stages of finalizing and executing on the near-term changes we will be making across the business, but I can tell you that there is a tremendous sense of excitement and urgency amongst everybody at Definitive to operationalize these changes and drive improvements as quickly as possible. So while we believe the future is very bright for Definitive Health Care, we did have a very challenging quarter in Q2.

Speaker Change: Obviously, we're at the early stages of finalizing and executing on the near-term challenges we will be making across the business, but I can tell you that there is a tremendous sense of excitement and urgency amongst everybody at Definitive to operationalize these changes and drive improvements as quickly as possible.

Speaker Change: So while we believe the future is very bright for Definitive Health Care, we did have a very challenging quarter in Q2.

Kevin Coop: Elongated sales cycles and a heightened sense of scrutiny on spending remain prevalent for many customers and prospects, particularly in the life sciences. Challenging marketing conditions are what they are, but we are dedicated to ensuring that they will not prevent us from delivering better operational results going forward.

Speaker Change: Elongated sales cycles, a heightened sense of scrutiny on spending remains prevalent for many customers and prospects, particularly in the life sciences market.

Speaker Change: Challenging marketing conditions are what they are, but we are dedicated to ensuring that they will not prevent us from delivering better operational results going forward. We are confident that as we execute the strategy I laid out above and bring stability to our go-to-market team, we can return this company to consistent growth.

Kevin Coop: We are confident that as we execute the strategy I laid out above and bring stability to our go-to-market team, we can return this company to consistency. I'd now like to highlight a few key customer wins from Q2 that demonstrate the growth opportunity we have. An AI software provider of personalized screening and early detection of breast cancer needed to understand a complex network relationship.

Speaker Change: I'd now like to highlight a few key customer wins from Q2 that demonstrate the growth opportunity we have.

Speaker Change: An AI software provider of personalized screening and early detection breast cancer needed to understand a complex network relationship, clinical volume by provider and place of service, and executive contact hierarchies.

Kevin Coop: Clinical Volume by Provider and Place of Service and Executive Contact Hierarchy. Through integration of our claims data and proprietary reference and affiliation data, Definitive Health Care will serve as the foundation for their market intelligence and commercial strategy planning function. Next up, one of the largest U.S. providers of electronic medical records systems recently expanded their relationship with Definitive Health. Since 2017, their sales organization has relied on Definitive Healthcare's VIEW suite of products for competitive intelligence, hospital technology installation analysis, and white space identification.

Speaker Change: Next up, one of the largest U.S. providers of electronic medical records systems recently expanded their relationship with Definitive Health Care.

Speaker Change: Since 2017, their sales organization has relied on Definitive Healthcare's VUE suite of products for competitive intelligence, hospital technology install analysis, and white space identification.

Kevin Coop: After they were acquired by a larger multinational software company, the newly formed go-to-market organization expanded their use of our data for their marketing programs in addition to sales. Their marketing team selected Definitive Healthcare for our in-depth affiliation data, account data granularity, and ease of use of our online portal. Another win for us in the medtech space is the cardiovascular division of one of the largest providers of diagnostics, medical devices, and pharmaceuticals.

Speaker Change: After they were acquired by a larger multinational software company, the newly formed go-to-market organization has expanded their use of our data for their marketing programs in addition to sales.

Speaker Change: Their marketing team selected Definitive Health Care for our in-depth affiliation data, account data granularity, and ease of use of our online portal.

Speaker Change: Another win for us in the medtech space is the cardiovascular division of one of the largest providers of diagnostics, medical devices, and pharmaceuticals.

Kevin Coop: They recently selected our CareVoyance platform for their marketing and field sales teams to understand patient movement for cardiovascular procedures within specific territories and to support their competitive displacement initiatives focused on the beginning stages of the physician referral funnel. A large health system on the West Coast selected Definitive Health Care to provide insights into their market opportunity at the service line level, including neurology, cardiology, oncology, orthopedic, and maternal child health. This analysis will allow them to allocate resources more efficiently, increase referrals, and reduce out-migration.

Speaker Change: They recently selected our CareVoyance platform for their marketing and field sales teams to understand patient movement for cardiovascular procedures within specific territories and to support their competitive displacement initiatives focused on the beginning stages of the physician referral funnel.

Speaker Change: A large health system on the West Coast selected Definitive Health Care to provide insights into their market opportunity at the service line level, including neurology, cardiology, oncology, orthopedic, and maternal child health.

Speaker Change: This analysis will allow them to allocate resources more efficiently, increase referrals, and reduce out-migration.

Kevin Coop: Finally, the Healthcare and Life Sciences field sales teams of one of the world's largest software companies will be leveraging our HospitalView and ImagingView data to target hospitals, health systems, and imaging centers that utilize Epic Systems and EHR platforms. After the initial rollout to their field teams, they plan to expand their use case to additional facilities. Before I turn the call over to Rick, let me wrap up by saying I couldn't be more excited about Definitive's future.

Speaker Change: Finally, the Healthcare and Life Sciences field sales teams of one of the world's largest software companies will be leveraging our HospitalView and ImagingView data to target hospitals, health systems, imaging centers that utilize Epic Systems and EHR platforms.

Speaker Change: After the initial rollout to their field teams, they plan to expand their use case into additional facilities types.

Speaker Change: Before I turn the call over to Rick, let me wrap up by saying I couldn't be more excited about Definitive's future.

Kevin Coop: The first 30 days only served to confirm my enthusiasm before joining; the team has built a great business and a truly differentiated technology that can solve some of our customers' most important operational needs. I believe we're in a great position to build upon that foundation to deliver even more value for our customers and return to the financial performance our shareholders expect. At that, let me turn the call over to Rick to walk you through the numbers.

Rick Booth: The first 30 days only served to confirm my enthusiasm before joining, the team has built a great business, and a truly differentiated technology that can solve some of our customers' most important operational needs.

Rick Booth: I believe we're in a great position to build upon that foundation to deliver even more value for our customers and return to the financial performance our shareholders expect. With that, let me turn the call over to Rick to walk you through the numbers. Rick?

Rick Booth: I'll start by reviewing our Q2 results in detail, then finish with our guidance for Q3 and for the full year 2024. In all my remarks, I will be discussing our results on a non-GAAP basis, unless otherwise noted.

Rick Booth: Thanks, Kevin.

Rick Booth: I'll start by reviewing our Q2 results in detail, then finish with our guidance for Q3 and for the full year 2024.

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

Rick Booth: As Kevin mentioned, we're pleased with the second quarter revenue and profit results, but we faced sales execution issues late in the quarter, leaving us well short of our internal bookings expectations. While the booking shortfall did not impact Q2 results, it did impact our view of Q3 and the full year, which I'll discuss at the end of my remarks. In Q2, we are pleased to deliver revenue and adjusted EBITDA above the high end of our guided range.

Rick Booth: As Kevin mentioned, we're pleased with the second quarter revenue and profit results, but face sales execution issues late in the quarter, leaving us well short of our internal bookings expectations.

Rick Booth: While the booking shortfall did not impact on Q2 results, it did impact our view of Q3 and the full year, which I'll discuss at the end of my remarks.

Speaker Change: In Q2, we are pleased to deliver revenue and adjusted EBITDA above the high end of our guided range.

Rick Booth: We remain focused on what we can control and continue to advance our efforts to operate more efficiently while delivering innovation for clients. Both these efforts are expected to position us well as the market recovers and growth improves.

Speaker Change: We remain focused on what we can control and continue to advance our efforts to operate more efficiently while delivering innovation for clients.

Speaker Change: Both these efforts are expected to position us well as the market recovers and growth improves.

Rick Booth: Financial highlights of the second quarter include revenue growth of 5% compared to Q2 2023, and we grew adjusted EBITDA, adjusted net income, and non-GAAP earnings per share by 21%, 14%, and 13%, respectively over the same period. We delivered a 33% adjusted EBITDA margin for the quarter, up over 450 basis points year over year.

Speaker Change: Financial highlights of the second quarter include revenue growth of 5% compared to Q2 2023.

Speaker Change: And we grew adjusted EBITDA, adjusted net income, and non-GAAP earnings per share by 21%, 14%, and 13% respectively over the same period.

Speaker Change: We delivered a 33% adjusted EBITDA margin for the quarter, up over 450 basis points year-over-year.

Rick Booth: As a result, our Q2 revenue growth plus the trailing 12-month adjusted EBITDA margin was 36%, and we generated $21.5 million of unlevered free cash flow in the quarter and $78.6 million on a trailing 12-month basis, which is up 50% versus the 12 months prior. Now, let's look at our results in more detail.

Speaker Change: As a result, our Q2 revenue growth plus the trailing 12-month adjusted EBITDA margin was 36%.

Speaker Change: And we generated $21.5 million of unlevered free cash flow in the quarter and $78.6 million on a trailing 12-month basis, which is up 50% versus the 12 months prior.

Rick Booth: Revenue for the second quarter was $63.7 million, up 5% from the prior year and above the high end of our guided range. This includes $1.7 million of professional services revenue as large clients engage us to work on some of their most challenging issues. In a small note, as part of the strategy to allocate more of our sales resources to enterprise customers, as we described in our last call, during the second quarter, we completed a project to refresh our customer hierarchies to reflect industry consolidation. At the same time, we normalized prior periods to reflect the same changes.

Speaker Change: Turning to our results in more detail.

Speaker Change: Revenue for the second quarter was $63.7 million, up 5% from the prior year and above the high end of our guided range.

Speaker Change: This includes $1.7 million of professional services revenue as large clients engage us to work on some of their most challenging issues.

Rick Booth: In some cases, this moved existing customer entities under larger parent accounts and therefore reduced our total client count while ARR was unaffected, to provide investors with transparency to the impact. The adjusted counts for 2023 and 2024 are disclosed in the 10-Q file today, and on this call, we will reference these adjusted counts normalized for the updated mapping when discussing the following quarter-over-quarter and year-over-year changes. We ended the quarter with 537 enterprise customers, which we define as customers with more than $100,000 per year in ARR.

Speaker Change: In a small note, as part of the strategy to allocate more of our sales resources to enterprise customers, as we described in our last call, during the second quarter, we completed a project to refresh our customer hierarchies to reflect industry consolidation.

Speaker Change: At the same time, we normalize prior periods to reflect the same changes.

Speaker Change: In some cases, this moved existing customer entities under larger parent accounts and therefore reduced our total client count while ARR was unaffected.

Speaker Change: To provide investors with transparency to the impacts.

Speaker Change: The adjusted counts for 2023 and 2024 are disclosed in the 10-Q file today, and on this call we will reference these adjusted counts normalized for the updated mapping in discussing the following quarter-over-quarter and year-over-year changes.

Speaker Change: We ended the quarter with 537 enterprise customers, which we define as customers with more than $100,000 per year in ARR.

Rick Booth: This was an increase of 32 enterprise customers, or 6% year over year. And the decrease of four customers, quarter over quarter, has been adjusted. As a reminder, these customers represent roughly two-thirds of our ARR and are a key focus of our go-to-market program.

Speaker Change: This was an increase of 32 enterprise customers or 6% year-over-year.

Speaker Change: And the decrease of four customers, quarter over quarter, has adjusted.

Speaker Change: As a reminder, these customers represent roughly two-thirds of our ARR and are a key focus of our go-to-market programs.

Rick Booth: Our total customer account, which includes smaller customers, was approximately 2,600 at the end of Q2, down about 200 from Q2 2023 and down 100 from the previous quarter as current conditions have disproportionately impacted smaller customers. The Adjusted Gross Profit Margin of $53.1 million was up 1% from Q2 of 2023, and as a percentage of revenue, the Adjusted Gross Profit Margin of 83.4% decreased approximately 260 basis points from Q2 2023 due to the impact of Populi, which was acquired in Q3 2023.

Speaker Change: Our total customer account, which includes smaller customers, was approximately 2,600 at the end of Q2, down about 200 from Q2 2023.

Speaker Change: and down 100 from the previous quarter as current conditions have disproportionately impacted smaller customers.

Speaker Change: and many more.

Speaker Change: Adjusted gross profit margin of $53.1 million was up 1% from Q2 of 2023.

Speaker Change: And as a percentage of revenue, the adjusted gross profit margin of 83.4% decreased approximately 260 basis points from Q2 2023 due to the impact of Populi, which was acquired in Q3 2023.

Rick Booth: Note that while Populi reduces gross margin in the short term, we expect it to benefit from operating leverage as a scale, and we believe it will operate at comparable gross margins to definitive in the long term. Sales and marketing expense of $19.8 million was down 9% from Q2 of 2023. As a percentage of revenue, sales and marketing expense was 31.1% of revenue, an improvement of nearly 450 basis points from Q2 2023. The year-over-year improvement reflects the changes we've made to drive efficiencies in sales and marketing by focusing on the markets and activities with the highest return on investment.

Speaker Change: Note that while Populi reduces gross margin in the short term, we expect it to benefit from operating leverage as it scales, and we believe it will operate at comparable gross margins to Definitive in the long term.

Speaker Change: Sales and marketing expense of $19.8 million was down 9% from Q2 of 2023.

Speaker Change: As a percentage of revenue, sales and marketing expense was 31.1% of revenue, an improvement of nearly 450 basis points from Q2 2023.

Speaker Change: The year-over-year improvement reflects the changes we've made to drive efficiencies in sales and marketing by focusing on the markets and activities with the highest return on investment.

Rick Booth: Based on our current full-year revenue outlook, which I'll get to in a few minutes, we now expect to see operating leverage from sales and marketing in 2024 of approximately 200 basis points relative to 2023. Product Development Expense was $6.9 million, down 1% from Q2 2023. As a percentage of revenue, product development was 10.8% of revenue, consistent with Q2 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.

Speaker Change: Based on our current full-year revenue outlook, which I'll get to in a few minutes, we now expect to see operating leverage from sales and marketing in 2024 of approximately 200 basis points relative to 2023.

Speaker Change: Product Development Expense was $6.9 million, down 1% from Q2 2023.

Speaker Change: As a percentage of revenue, product development was 10.8% of revenue, consistent with Q2 2023.

Speaker Change: 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.

Rick Booth: Kevin touched on some examples of these earlier, and we'll continue to invest in the highest ROI opportunities we have identified on our long-term product roadmap. We continue to expect full year 2024 product development expense as a percentage of revenue to be fairly consistent with full year 2020. G&A expense was $6.5 million, down 11% from Q2 2023. As a percentage of revenue, G&A expenses were 10.3% of revenue, which is an improvement of over 150 basis points compared to Q2 2023.

Speaker Change: Kevin touched on some examples of these earlier, and we'll continue to invest in the highest ROI opportunities we have identified on our long-term product roadmap.

Speaker Change: We continue to expect full year 2024 product development expense as a percentage of revenue to be fairly consistent with the full year 2023.

Speaker Change: G&A expense was $6.5 million, down 11% from Q2 2023. As a percentage of revenue, G&A expenses were 10.3% of revenue, which is an improvement of over 150 basis points compared to Q2 2023.

Rick Booth: We expect G&A expense as a percentage of revenue in 2024 to improve 50 to 100 basis points year over year. Adjusted Operating Income of $19.3 million was up 21% from Q2 2023. And as a percentage of revenue, operating income was 30% of revenue, up over 400 basis points from Q2 2023. The year-over-year margin increase was primarily due to spending efficiencies in sales and markets. Justin Debita's net worth was $20.9 million.

Speaker Change: We expect G&A expense as a percentage of revenue in 2024 to improve 50 to 100 basis points year over year.

Speaker Change: Adjusted Operating Income of $19.3 million was up 21% from Q2 2023.

Speaker Change: And as a percentage of revenue, operating income was 30% of revenue, up over 400 basis points from Q2 2023.

Speaker Change: The year-over-year margin increase was primarily due to spending efficiencies in sales and marketing.

Rick Booth: A 21% increase from Q2 2023. As a percentage of revenue, Adjusted EBITDA was 33% of revenue, up over 450 basis points from Q2 2023. For the full year 2024, we continue to expect to see year over year improvement in our adjusted EBITDA margin. We'll continue to make investments in the areas that are most important to us and our clients and maintain a balanced financial profile that drives profit margin expansion. Adjusted net income was $14.2 million, or $0.09 per diluted share based on 156.9 million weighted average shares outstanding.

Justin DeVita: Justice DeVita was $20.9 million, a 21% increase from Q2 2023.

Justin DeVita: As a percentage of revenue, Adjusted EBITDA was 33% of revenue, up over 450 basis points from Q2 2023.

Justin DeVita: For the full year 2024, we continue to expect to see a year-over-year improvement in our adjusted EBITDA margin. We'll continue to make investments in the areas that are most important to us and our clients and maintain a balanced financial profile that drives profit margin expansion.

Justin DeVita: Adjusted net income was $14.2 million, or $0.09 per diluted share, based on 156.9 million weighted average shares outstanding.

Rick Booth: 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 $44.8 million on a trailing 12-month basis, up 34% from $33.5 million in the comparable period a year ago. Unlevered free cash flow was $21.5 million in the quarter.

Justin DeVita: Turning to cash flow, Definitive Health Care's high margins, upfront billing, and low CAPEX requirements provide substantial free cash flow generation.

Justin DeVita: We focus on trailing 12-month cash flows due to seasonality.

Justin DeVita: Operating cash flows were $44.8 million on a trailing 12-month basis, up 34% from $33.5 million in the comparable period a year ago.

Justin DeVita: Unlevered free cash flow was $21.5 million in the quarter. On a trailing 12-month basis, unlevered free cash flow was $78.6 million.

Rick Booth: On a trailing 12-month basis, unlevered free cash flow was $78.6 million, up 50% from the comparable period a year ago. Unleveraged free cash flow was 30% of revenue on a TTM basis, equivalent to 95% of our TTM adjusted EBITDA of $82.5 million. As announced on the last earnings call, on May 1st, the board authorized the repurchase of up to $20 million of our stock. We expect the repurchase program to continue through the end of 2024.

Justin DeVita: Up 50% from a comparable period a year ago.

Justin DeVita: Unleveraged free cash flow was 30% of revenue on a TTM basis, equivalent to 95% of our TTM-adjusted EBITDA of $82.5 million.

Justin DeVita: As announced on the last earnings call, on May 1st, the board authorized the repurchase of up to $20 million of our stock. We expect the repurchase program to continue through the end of 2024.

Rick Booth: Within the second quarter, we repurchased approximately 1.3 million shares at an average price per share of $5.54 for a total of $7 million. The buyback authorization and our implementation of it reflect our strong cash flow generation, our confidence in the business' long-term prospects, and our commitment to enhancing shareholder value. At this time, we expect to continue to be active in the market in the third and fourth quarters of 2024. But, as always, any repurchase program is subject to other ongoing relevant considerations, including market conditions.

Justin DeVita: Within the second quarter, we've repurchased approximately 1.3 million shares at an average price per share of $5.54 for a total of $7 million.

Justin DeVita: The buyback authorization and our implementation of it reflect our strong cash flow generation, our confidence in the business' long-term prospects, and our commitment to enhancing shareholder value.

Justin DeVita: At this time, we expect to continue to be active in the market in the third and fourth quarter of 2024.

Justin DeVita: But as always, any repurchase program is subject to other ongoing relevant considerations, including market conditions.

Rick Booth: On the balance sheet, we ended the quarter with over $296 million of cash in short-term investments. With strong adjusted EBITDA profitability and only $251 million of debt, we believe we are well positioned to fund both organic and inorganic growth initiatives. Current Revenue Performance Obligations of $171 million were down 3% year-over-year as reported, but flat year-over-year when adjusting for contracts that are excluded from CRPO due to opt-out clauses. Total revenue performance obligations were down 2% year over year, and Deferred Revenue of $97.1 million was down 0.6% year over year.

Justin DeVita: On the balance sheet, we ended the quarter with over $296 million of cash in short-term investments.

Justin DeVita: With strong adjusted EBITDA profitability and only $251 million of debt, we believe we are well positioned to fund both organic and inorganic growth initiatives.

Justin DeVita: Current revenue performance obligations of $171 million were down 3% year-over-year as reported, but flat year-over-year when adjusting for contracts that are excluded from CRPO due to opt-out clauses.

Justin DeVita: Total Revenue Performance Obligations were down 2% year over year.

Justin DeVita: and Deferred Revenue of $97.1 million was down 0.6% year-over-year.

Rick Booth: After quarter end, we undertook an assessment of our equities book value versus our stocks' market value, and that review identified a $363.6 million goodwill impairment as of June 30. That write-down also generated approximately $40 million of gain on the remeasurement of the TRA liability and a $22 million deferred income tax benefit. As a reminder, these are non-cash accounting charges; they have no impact on our debt covenants, and all impacts are excluded from our adjusted earnings.

Justin DeVita: After quarter end, we undertook an assessment of our equities book value versus our stocks market value, and that review identified a $363.6 million goodwill impairment as of June 30th.

Justin DeVita: That write-down also generated approximately $40 million of gain on the remeasurement of the TRA liability and a $22 million deferred income tax benefit.

Justin DeVita: As a reminder, these are non-cash accounting charges. They have no impact on our debt covenants, and all impacts are excluded from our adjusted earnings.

Rick Booth: As Kevin discussed, we continue to experience macro headwinds and sales execution challenges, and we're adjusting our guidance accordingly. We believe this revised guidance fully contemplates year-to-date performance. Current conditions and potential short-term disruption from the recent organizational change. For Q3, we now expect total revenue of $61 to $62.5 million, resulting in a revenue decline of 4 to 7% year-over-year when compared to Q3 2023. This reflects both the wrap on the popular acquisition and our first half bookings performance. Within total revenue, we expect subscription revenue to be down low single digits with a more significant year-over-year decline in professional services revenue.

Justin DeVita: As Kevin discussed, we continue to experience macro headwinds and sales execution challenges, and we're adjusting our guidance accordingly.

Kevin Koop: We believe this revised guidance fully contemplates year-to-date performance, current conditions, and potential short-term disruption from the recent organizational change.

Speaker Change: For Q3, we now expect total revenue of $61 to $62.5 million, resulting in a revenue decline of 4 to 7% year-over-year when compared to Q3 2023.

Speaker Change: This reflects both the wrap on the popular acquisition and our first half bookings performance.

Speaker Change: Within total revenue, we expect subscription revenue to be down low single digits, with a more significant year-over-year decline in professional services revenue.

Rick Booth: From a profitability perspective, we expect adjusted operating income of $16 to $17.5 million, adjusted EBITDA of $17.5 to $19 million, for a 28 to 31% adjusted EBITDA margin in Q3, and adjusted net income of $12 to $13 million, or $0.07 to $0.08 per diluted share on 156.5 million weighted average shares outstanding. Rolling forward to the full year 2024, we now expect revenue of $247 to $251 million, ranging from a 2% decline to approximately flat year over year.

Speaker Change: From a profitability perspective, we expect adjusted operating income of $16 to $17.5 million.

Speaker Change: Adjusted EBITDA of $17.5 to $19 million.

Speaker Change: for a 28 to 31% adjusted EBITDA margin in Q3.

Speaker Change: And adjusted net income of $12 to $13 million, or $0.07 to $0.08 per diluted share, on 156.5 million weighted average shares outstanding.

Speaker Change: Rolling forward to the full year 2024, we now expect revenue of $247 to $251 million, ranging from 2% decline to approximately flat year-over-year.

Rick Booth: From a profitability perspective, we're tightly managing operating efficiency and the associated costs to protect margin expansion for the year. Accordingly, we now expect Adjusted Operating Income of $67 to $71 million. Adjusted EBITDA of $74 to $77 million for a full year margin of 30 to 31%. I'd like to reiterate, despite the top line pressures, we remain committed to profitability and expect 50 to 100 basis points of margin expansion from full year 2023 results.

Speaker Change: From a profitability perspective, we're tightly managing operating efficiency and the associated costs to protect margin expansion for the year.

Speaker Change: Accordingly, we now expect Adjusted Operating Income of $67 to $71 million.

Speaker Change: Adjusted EBITDA of $74 to $77 million for a full year margin of 30 to 31 percent.

Speaker Change: I'd like to reiterate, despite the top line pressures, we remain committed to profitability and expect 50 to 100 basis points of margin expansion from full year 2023 results.

Rick Booth: Adjusted net income is expected to be between $50 and $53 million, and earnings per share are expected to be $0.32 to $0.34 on 156.8 million weighted average shares outstanding. So in conclusion, we're pleased to have delivered revenue and adjusted it above the top end of our guidance for the quarter and to have delivered double-digit growth in adjusted EBITDA, adjusted net income, and non-GAAP earnings per share while getting on track with our buyback program.

Speaker Change: Adjusted net income is expected to be between $50 and $53 million, and earnings per share are expected to be $0.32 to $0.34 on a 156.8 million weighted average shares outstanding.

Speaker Change: So in conclusion, we're pleased to have delivered revenue and adjusted EBITDA above the top end of our guidance for the quarter.

Speaker Change: and to have delivered double-digit growth in adjusted EBITDA, adjusted net income, and non-GAAP earnings per share while getting on track with our buyback program.

Rick Booth: We believe our revised guidance fully contemplates year-to-date performance, current conditions, and potential short-term disruptions from recent organizational changes. And we remain confident that we're well positioned for the long term in a large and attractive market that we believe will help us drive shareholder value for a long time to come. And with that, I'll hand it back to Kevin for a few closing thoughts before we take questions.

Speaker Change: We believe our revised guidance fully contemplates year-to-date performance, current conditions, and potential short-term disruptions from recent organizational changes.

Speaker Change: We remain confident that we're well positioned for the long term in a large and attractive market that we believe will help us drive shareholder value for a long time to come.

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

Kevin Coop: Before I open it up to questions, I want to give investors an idea of how we think about judging the success of our strategy. We recognize that the changes we have discussed today will take some time and will require some patience from investors. So let me be clear what we are focusing on achieving. We believe Definitive Healthcare is a growth company and that we can return double-digit revenue growth. It will take some time for us to deliver on that goal, but the opportunity is clearly there.

Kevin Koop: Before I open it up to questions, I want to frame for investors how we think about judging the success of our strategy.

Kevin Koop: We recognize that the changes we have discussed today will take some time and will require some patience from investors.

Kevin Koop: So let me be clear what we are focusing on achieving.

Kevin Koop: Care is a growth company, and that we can return double-digit revenue growth. It will take some time for us to deliver on that goal, but the opportunity is clearly there. We are also committed to delivering high levels of non-gap profitability and continued operating efficiency.

Kevin Coop: We are also committed to delivering high levels of non-gap profitability and continued operating efficiency. Given the highly scalable nature of our business model, we believe that the most effective way to drive durable margin expansion is through faster growth. So we will continue to invest in the most important areas for our clients and maintain a balanced financial profile that drives long-term profit margin expansion. Finally, knowing that no company needs to do everything itself, we plan to expand the reach of our partnership and inorganic growth strategy. We look forward to updating you on our progress on future earnings calls, and with that, I'd like to open it up to questions.

Kevin Koop: Given the highly scalable nature of our business model, we believe that the most effective way to drive durable margin expansion is through faster growth.

Kevin Koop: So we will continue to invest in the most important areas to our clients and maintain a balanced financial profile that drives long-term profit margin expansion.

Kevin Koop: Finally, knowing that no company needs to do everything itself, we plan to expand the reach of our partnership and inorganic growth strategies.

Speaker Change: We look forward to updating you on our progress on future earnings calls. And with that, I'd like to open it up for questions.

Operator: If you would like to ask a question, please press star 1 on your telephone keypad now. You'll be placed in 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. Once again, if you have a question, please press star 1 on your phone now. And our first question today will come from Saket Kalia of Barclays.

Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad now. You'll be placed into the queue in the order received.

Speaker Change: Please be prepared to ask your question when prompted, and please keep to one question and one follow-up question.

Speaker Change: Once again, if you have a question, please press star 1 on your phone now.

Speaker Change: And our first question today will come from Saket Kalia with Barclays.

Saket Kalia: Okay, great. Hey, guys, thanks for taking my questions here, and welcome, Kevin. Well, you know, I really look forward to working with you. Thank you. It's good to be here. Kevin, maybe just to start with you. You know, your prepared remarks were really helpful in sort of framing where you'd like to go with the go-to-market organization. And of course, you're just one month into the role, right, so this might be a little bit of an unfair question, but maybe you could just double-click on how you envision shifting to more of a platform sale, and maybe even higher up, what does a platform sale look like to a definitive customer Does that make sense?

Saket Kalia: Okay, great. Hey guys, thanks for taking my questions here and welcome, Kevin. Well, you know, really look forward to working with you.

Kevin Koop: Thank you. It's good to be here.

Saket Kalia: Kevin, maybe just to start with you, you know, your prepared remarks I thought were really helpful in sort of framing where you'd like to go with the go-to-market organization.

Speaker Change: And of course, you're just one month into the role, right, so this might be a little bit of an unfair question, but maybe you could just double-click on how you envision shifting to more of a platform sale.

Speaker Change: And just maybe even higher level, what does a platform sale look like to a definitive customer? Does that make sense?

Kevin Coop: Yeah, I think so. You know, the first thing I look at the situation is that it's really one of continuity, right? So a lot of stuff was started here prior to my arrival, meaning the reorganization. And it's, it was a rather large and complex one. And obviously, that's going to take some time.

Speaker Change: Yeah, I think so. You know, I think first, we, the way I look at the situation is,

Speaker Change: It's really one of continuity, right? So a lot of stuff was started here prior to my arrival, meaning the reorganization. And it was a rather large and complex one. And obviously, that's going to take some time.

Kevin Coop: And there are areas that there was probably more impact than we had anticipated. But recognizing the situation, it's familiar to me, it's what I signed up for, Frankly, it's what I sought, is we've got a quality asset, a large, strategic, valuable segment, and things were already underway. And so when we think about moving from more of a point solution to a platform, what that really means is with a flatter GTM, with a more simplified approach, that's more efficient and effective.

Speaker Change: There are areas that there was probably more impact than we had anticipated, but recognizing the situation, it's familiar to me, it's what I signed up for, frankly, it's what I sought, is we've got a quality asset, large strategic valuable segment, and

Speaker Change: Things were already underway. And so when we think about moving from more of a point solution to a Platform what that really means is with a flatter GTM with a more simplified approach that's more efficient and effective

Kevin Coop: And you start to stitch together the products that, today, are still, for the most part, often sold as individual point solutions. You're starting to sell those products through a much more unified go-to-market, and that's what the product organization is already doing. So this is something that was started prior to my arrival, Saket, where you've got a much more simplified roadmap that is taking what was, which was significantly larger in the number of things that were going on that were just very difficult to execute on concurrently.

Speaker Change: And you start to stitch together the products that...

Speaker Change: Today are still for the most part often sold as individual point solutions.

Speaker Change: You're starting to sell those products through a much more unified go-to-market, and it's what the product organization is already doing. So this is something that was started prior to my arrival, Socket, where you've got a much more simplified roadmap.

Speaker Change: That is taking what was it was significantly larger and number of things that were going on that were just very difficult to

Kevin Coop: And by focusing on fewer things, interoperability, a common UI UX, the ability for our customers to access more solutions through a single simplified interface, it makes it easier to sell, it makes it easier for our customers to consume, and ultimately, that affects your renewal rate and will start to help with areas of churn and others that we're focusing on.

Speaker Change: to execute on concurrently. And by focusing on fewer things, interoperability, a common UI UX, the ability for our customers to access more solutions through a single simplified interface.

Speaker Change: It makes it easier to sell, it makes it easier for our customers to consume, and ultimately that affects your renewal rate and will start to help with areas in churn and others that we're focused on.

Saket Kalia: That makes a lot of sense. And maybe just on that point, maybe that's a good dovetail into my follow-up question for you, Rick. Could you just talk about how net revenue retention might sort of trend through the rest of this year, even anecdotally? You know, I think what we said in prior calls is that we're starting to lap some of the periods of higher churn. And you can correct me there if I'm wrong, but when does that sort of translate into maybe some improvement in that overall NRR metric?

Speaker Change: That makes a lot of sense and maybe just on that point, maybe that's a good dovetail into my follow-up question for you, Rick.

Rick Booth: Could you just talk about how net revenue retention

Rick Booth: might sort of trend through the rest of this year, even anecdotally. You know, I think what we said in prior calls is that we're starting a lap.

Rick Booth: Some of the periods of higher churn, and you correct me there if I'm wrong, but when does that sort of translate into maybe some improvement in that overall NRR metric?

Rick Booth: Thank you, Saket. We still have half the year to go. Q4 is typically our largest bookings quarter, so what we're really focused on is progressing those second half opportunities. We are not reiterating our NDR guidance today because of the slow start to first half bookings, particularly the late Q2 shortfall, and our current guidance scenario does not depend on NDR improving year over year, but it's too soon to put a finer point on it.

Speaker Change: Thank you, Saket. We still have half the year to go.

Speaker Change: Q4 is typically our largest bookings quarter.

Speaker Change: So, what we're really focused on is progressing those second half opportunities.

Speaker Change: We are not reiterating our NDR guidance today because of the slow start to first half bookings, particularly the late Q2 shortfall, and our current guidance scenario does not depend on NDR improving year over year, but it's too soon to put a finer point on it.

Saket Kalia: That's very helpful. Thanks, guys.

Speaker Change: That's very helpful. Thanks, guys.

Craig Hettenbach: And our next question will come from Craig Hettenbach with Morgan Stanley. Thank you.

Speaker Change: And our next question will come from Craig Hettenbach with Morgan Stanley .

Craig Hettenbach: Thank you. A question for Kevin, and I appreciate all the context in your prepared remarks. You know, understanding if there's going to be some patience required as you retool here, what are some of the things you would point to in terms of proof points that, you know, over the next couple of quarters, you'd be hoping that you could share with the investment community in terms of progress on the turnaround?

Craig Heddenbach: Thank you. Question for Kevin, and appreciate all the context in your prepared remarks.

Craig Heddenbach: You know, understanding if there's going to be some patience required as you retool here, what are some of the things you would point to in terms of proof points that, you know, over the next couple quarters you'd be hoping that you can share with the investment community in terms of progress on the turnaround?

Kevin Coop: Part of this is that you've really got to be disciplined in your focus on root cause, right? Root cause analysis.

Speaker Change: Yes, so I think...

Speaker Change: Part of this is you've really got to be disciplined in your focus on root cause, right, root cause analysis. And, you know, the good news is, I think, for us is that when we look at the market in general and you look at the segments that we service.

Kevin Coop: And, you know, the good news is, I think for us, that when you look at the market in general, and you look at the segments that we service, you've got basically an increasing focus of customers on ROI. You've got some goodness in areas like, you know, frankly, diversified is showing a point of relative strength. We've got provider where our data visualization and extension of populi into that segment are really helping our renewals. Care Buoyance is in line with expectations for the year. And we've got biopharma, which is still challenged.

Speaker Change: You've got basically an increasing focus of customers on ROI.

Speaker Change: You've got some goodness in areas like, you know, frankly, diversified is showing a point of relative strength. We've got provider where our data visualization and extension of populi into that segment, it's really helping our renewals.

Speaker Change: Care Buoyance is in line with expectations for the year and we've got biopharma which is still challenged.

Kevin Coop: And so as you start to really look at this in a more simplified focus, you know, you're gonna, it's the metrics we already talk about with you, right? It's just, you're gonna be able to see hopefully some very quick uptick as we look at, you know, what I would call kind of low hanging fruit with the simplification process around what, where do we have our right to win the prioritization around our segmentation strategy.

Speaker Change: And so as you start to really look at this in a more simplified focus, you know, you're good. It's the metrics we already talked about with you, right? It's just you're going to be able to see hopefully some very quick uptick as we look at

Speaker Change: You know what I would call kind of low-hanging fruit with the simplification process around what where do we have our right to win the prioritization around our segmentation strategy

Kevin Coop: The fact that we've had a change in our go-to-market strategy, while that wasn't expected, you know, the upshot of that is it's allowing me to take a more directive hand in getting closer to the customer with more customer intimacy. I'm seeing customers, I'm going out with the sales organization, and you can really, very quickly start to determine where and what we need to do, whether it's pricing and packaging, whether it's different sales motions, or how we're actually taking products to market.

Speaker Change: The fact that we've had a

Speaker Change: A change in our go-to-market, while that wasn't expected, you know, the upshot of that is it's allowing me to take a more directive.

Speaker Change: I'm going out with the sales organization, and you can really very quickly start to determine where and what we need to, whether it's pricing and packaging, whether it's different sales motions, or how we're actually taking products to market.

Kevin Coop: And that's what I've got a lot of experience in, and that's what I'm focused on doing so that when we talk to you in the next quarter, we hope to have a significantly different story that we'll be able to start talking about, and it'll make it a much more enjoyable conversation.

Speaker Change: and that's what I've got a lot of experience in and that's what I'm focused on doing so that we could show when we talk to you in the next quarter we're hoping to have a significantly different story that we'll be able to start talking about and it'll make it a much more enjoyable conversation.

Craig Hettenbach: And then just to follow up for Rick, understanding there was a lot of work done early in the year in terms of RE-ORG and taking costs down, which has helped margins this year. Given the lower run rate for the back half of the year, are you doing anything around the edges in terms of costs and how you're thinking about that today and as you segue into next year? Thanks for acknowledging.

Speaker Change: And then just to follow up for Rick, understanding there was a lot of work done early in the year in terms of RE-ORG and taking costs down which have helped margins this year.

Rick Booth: Given the lower run rate for the back half of the year, are you doing anything around the edges in terms of cost and how you're thinking about that today and as you segue into next year?

Rick Booth: Thanks for acknowledging. We're proud and pleased with our revised lower run rate cost structure. You know, we did manage to expand EBITDA margin by a full 450 points year over year. We feel good about that as a baseline, and of course, we continue to manage costs prudently, but we are not planning any new incremental.

Speaker Change: Thanks for acknowledging. We're proud and and pleased with our revised lower

Speaker Change: We did manage to expand EBITDA margin by a full 450 points year-over-year. We feel good about that as a baseline. Of course, we continue to manage costs prudently, but we are not planning any new incremental...

Rick Booth: Rifts, or other actions of that type.

Speaker Change: Rifts, or other actions of that type.

Joe Vruwink: And our next question will come from Joe Vruwink with Baird.

Speaker Change: Got it. Thank you.

Speaker Change: Their next question will come from Joe Vruwink with Baird.

Joe Vruwink: Great. Hi everyone.

Joe Verwink: Great. Hi, everyone. Kevin, thanks for all the detail around the go-to-market strategy. When you think about moving away from point solution focus, taking a more platform approach to selling,

Kevin Coop: Kevin, thanks for all the detail around the go-to-market strategy. When you think about moving away from the point solution focus, taking a more platform approach to selling, would you characterize that as macro-agnostic, just in the sense that it's ultimately better for customers in all ways? The capability they get to consume at once probably makes deal closing likelier, and that's the two-sided benefit. So that's my macro-agnostic comment. Or do you think this action is maybe aimed at or better suited for an improving macro, and so DH gets leverage on the upside when things do start to come through in a better way?

Joe Verwink: Would you characterize that as macro-agnostic, just in the sense that it's ultimately better for customers in all ways, the capability they get to consume at once?

Speaker Change: Probably makes deal closing likelier, and that's the two-sided benefit. So that's my macro-agnostic comment.

Speaker Change: Or do you think this action is maybe aimed or better suited for an improving macro and so DH gets leverage on the upside when things do start to come through in a better way?

Kevin Coop: Yeah, I mean, it's an interesting question. I mean, for sure, I think that an improving macro market environment will help no matter what, right? It will get better if the market improves, then everybody ought to improve, right? It's just sort of natural, but the reality of whether or not the sales cycles are elongating, whether you have more stringent approval processes, people are delaying decisions, and maybe there's a heightened focus on ROI, especially in some segments, which we can't control.

Speaker Change: Yeah, I mean, it's a it's an interesting question. I mean, for sure, I think that the an improving macro market environment will will help no matter what, right, it will get better if the market improves, then

Speaker Change: Everybody ought to improve, right? It's just sort of natural, but...

Speaker Change: The reality of whether or not the sales cycles are elongating, whether you have more stringent approval processes.

Speaker Change: People are deferring decisions and maybe there's a heightened focus on ROI, especially in some segments, which we can't control.

Kevin Coop: I kind of look at that independent of what we need to be able to do to grow because that's not really, you're not going to hear a lot of that emphasis on this call. Maybe you've heard more of that in the past, and that despite whatever the macro challenges are, we have a lot of goodness, and we need to reinforce more on what's working and less on what isn't working, more favorably, that's only going to help us for sure.

Speaker Change: I kind of look at that independent of what we need to be able to do to grow, because that's not really, you're not going to hear a lot of that emphasis on this call, maybe you've heard more of that in the past, and that despite whatever the macro challenges are, we have a lot of goodness, and we need to reinforce more on what's working,

Speaker Change: and less on what isn't working. And so I look at this as we need to grow and we will grow regardless of the macro environment. And if the macro market turns more favorable, that's only going to help us, for sure.

Joe Vruwink: Okay, that's a great answer. And then I just want to be clear in my understanding of where the sales disruptions occurred. If I look at enterprise accounts that grew, you know, if I calculate ARR per total account, it looks like that value grew. So I'm wondering, was it more in the total customer logo churn and maybe that small and medium exposed where you undershot expectations as trying to reconcile what happened towards the end of the quarter?

Speaker Change: Okay, that that's a great answer. And then I just want to be clear at my understanding on where the sales disruptions occurred. If I look at

Speaker Change: Enterprise Accounts that grew, you know, if I calculate ARR per total account.

Speaker Change: It looks like that value grew, so I'm wondering, was it more in the total customer logo churn and maybe that small and medium exposed where you undershot expectations as trying to reconcile what happened towards the end of the quarter?

Kevin Coop: Yeah, I think it's a couple things, right? So, first of all, we didn't just have one big disruption. It happened a couple of times, right?

Speaker Change: Yeah, I think it's a couple things, right? So first of all, we didn't just have one big disruption. It happened at a couple of times, right? So number one, you've sort of, you know,

Kevin Coop: So, number one, you'd sort of, you know, you've exacerbated it by creating trauma over a longer period. You know, balanced growth is always the key, right? You need to have an eye on profitability all the time. But when you do the majority of the restructuring the way we did it, where we eliminated a lot of overlay resources, we minimized a lot of spans and layers, we looked for efficiencies in areas, and sometimes those were actually well thought through, and I think they're great. We're going to do more of it in other areas, and without getting into the details, they probably didn't have the impact that we thought. We're probably going to have to re-evaluate those decisions.

Speaker Change: You've exacerbated it by creating trauma over a longer period. Balanced growth is always the key. You need to have an eye on profitability all the time.

Speaker Change: But when you have the majority of the restructuring the way we did it, where we eliminated a lot of overlay resources, we minimized a lot of spans and layers.

Speaker Change: We looked for efficiencies in areas, and sometimes those were actually well thought through, and I think they're great. We're going to do more of it in other areas, and without getting into the detail, they probably didn't have the impact that we thought. We're going to have to probably reevaluate those decisions.

Kevin Coop: But, for example, we have more quota-carrying enterprise reps than we did prior. That was offset slightly at the lower end of the market, but that does. Through that reorganization, you know, you have books of business being moved around, you've got sales reps being reallocated into different markets, you know, from the outside and on a PowerPoint, it probably looks like it's going to be particularly efficient. But when you have people, sales teams are complex, adaptive systems, just like a technology infrastructure. And, you know, the human dynamic sometimes gets affected in ways that aren't calculated, probably completely.

Speaker Change: But for example, we have more quota carrying enterprise reps than we did prior. That was offset slightly at the lower end of the market. But that does align our teams with the biggest market opportunity.

Speaker Change: But through that reorganization, you know, you have with books of business being moved around, you've got sales reps being reallocated into different markets.

Speaker Change: You know, from the outside and on a PowerPoint, it probably looks like it's going to be particularly efficient. But when you have people, you know, sales teams are complex adaptive systems, just like a technology infrastructure. And, you know, the people dynamic sometimes gets affected in ways that aren't

Speaker Change: Calculated probably completely and so

Kevin Coop: And so, you know, while that's where I started off by saying some of the things that we did, I think we're actually really, we're seeing some real green shoots and productivity in other areas, and we need to address it pretty quickly. And so that's coming back to my initial comment about, you know, it's as simple as it is, you've got a flattened GTM with more customers in focus. We start to focus on more efficiency and effectiveness.

Speaker Change: You know, while that's where I started off by saying some of the things that we did, I think we're actually really we're seeing some real green shoots and productivity in other areas, we need to address it pretty quickly. And so that's

Speaker Change: Coming back to my initial comment about, you know, it's as simple as it is. You've got a flattened GTM with more customer enthusiasm focus. We start to focus on more efficiency and effectiveness.

Kevin Coop: And you've got this notion around bringing things more towards a quote-unquote platform as opposed to a point solution through the way we entitle our deals, contract for the deals, the product team, the way they're building them to bring them to market, and ultimately the compensation structure that we put in place for our enterprise sales team. This starts to show some immediate returns, and that's where I think I'm hoping that we will be able to do this in a way, not just hope, what I expect is that we will have a very different story here in about 90 days, to be able to start to show some proof points on how that's starting to impact the business.

Speaker Change: And you've got this notion around bringing things more towards a quote unquote platform as opposed to a point solution through the way we we entitle our deals, contract for the deals, the product team, the way they're building them to bring them to market, and ultimately the compensation structure that we put in our enterprise sales team.

Joe Vruwink: Okay, great. Thank you very much.

Speaker Change: You know, it starts to show some immediate returns. And that's where I think, you know, I'm hoping that we will be able to do this in a way not hoping what I expect is that we will have a very different story here in about 90 days, to be able to start to show show some proof points on how that's starting to impact the business.

Speaker Change: Okay, great. Thank you very much.

David Grossman: And we'll move next to David Grossman with Stiepel.

Speaker Change: And we'll move next to David Grossman with Steeple.

David Grossman: Thank you. Kevin, thanks.

David Grossman: Thank you. Kevin, thanks. You've given us a great sense of operationally your sense for the business and these changes that you want to make. And if I think back just maybe at a higher level, the company went public,

Speaker Change: You know during a health care bubble really and now we've got the exact opposite more of a health care recession

Kevin Coop: You've given us a great sense of operationally, your sense of the business and these changes that you want to make. And if I think back just maybe, at a higher level, the company went public during a health care bubble, really, and now we've got the exact opposite, more of a health care recession. So as you think about this, you know, in the strategic changes that you've undertaken, perhaps you could relate that to the shift in the value proposition for the industry going forward, because the environment is so much different today and probably will be so much different tomorrow, vis-a-vis what it may have been two or three years ago.

Speaker Change: So as you think about this...

Speaker Change: You know, and the strategic changes that you've undertaken.

Speaker Change: Perhaps you could...

Speaker Change: Relate that to the shift in the value proposition for the industry going forward because

Speaker Change: The environment is so much different today and probably be so much different tomorrow.

Speaker Change: Vis-a-vis what it may have been two or three years ago.

Kevin Coop: Yeah, so, you know, we have a situation where, and this isn't just isolated to healthcare, right? You have, with the technology improvements that are happening at such an accelerated rate these days, the proof points that you may have had two years ago are going to change, and there's no difference in the segment that we compete in.

Speaker Change: Yeah, so, you know, we have a situation where, and it's not just isolated to healthcare, right? You have a with the technology improvements that are happening.

Speaker Change: at such an accelerated rate these days, the proof points that you may have two years ago are going to change. And there's no difference in the segment that we compete in. So we have, you know, as

Kevin Coop: As great as we believe we are and as good-looking and fantastic as they are, we have competitors that are not standing still either, and we've got more of them. And that's actually, I think, in a way, it's actually very healthy because it starts to spur a sense of urgency around what was the original value proposition for the IPO. A lot of that still remains constant today.

Speaker Change: As great as we believe we are and as good looking and fantastic, we have competitors that are not standing still either, and we've got more of them, and that's actually, I think, in a way, it's actually very healthy, because it starts to spur a sense of urgency around what was the original value proposition for the IPO. A lot of that still remains constant today.

David Grossman: We have fantastic data. We've got truly differentiated data, especially as it relates to our reference and affiliation data. We are enhancing that with better data visualization to make it a more easy-to-consume solution for our customers, which is underway, with a simplified product roadmap that's bringing more urgency and acceleration to it. So I kind of look at that as actually, David, that we've gotten into a market now where even though you have a great team, tenured leaders, great domain expertise, we've got accountability that we're driving into the organization.

Speaker Change: We have fantastic data. We've got truly differentiated data, especially as it relates to our reference and affiliation data.

Speaker Change: We are enhancing that with better data visualization to make it a more easy-to-consume solution to our customers, which is underway, with a simplified product roadmap that's bringing more urgence and acceleration to it.

Speaker Change: I kind of look at that as actually, David, that, you know, we've gotten into a market now where even though you have a great team, tenured leaders, great domain expertise,

Speaker Change: We've got accountability that we're driving into the organization. The fact that the market is a bit challenged here.

David Grossman: The fact that the market is a bit challenged here is necessity breeds innovation, and it's really rallied the team, and the folks that I was very pleasantly surprised today, even more than when I came in, are really focusing on our biggest challenges with our best customers. And so I'd love to be in a market where you don't have any competitors and people aren't innovating, but that's hard to find. So I think, in this case, it's going to benefit us.

Speaker Change: is, you know, Necessity Breeds, you know, Innovation.

Speaker Change: It's really rallied the team and the folks that I was very pleasantly surprised today, even more than when coming in, are really focusing on our biggest challenges with our best customers.

Speaker Change: You know, I'd love to be in a market where you don't have any competitors and people aren't innovating, but that's that's hard to find. So, so I think in this case, it's actually being it's going to it's going to benefit us.

David Grossman: Right. All right. Well, thank you for that.

David Grossman: And Rick, I have a quick question just about the implied guide for the fourth quarter. It looks like both revenue and margin are expected to be down sequentially. Is there some dynamic at play there? Or maybe you could just give us a little bit more color if my math is right.

Speaker Change: Right. All right. Well, thank you for that. And Rick, I have a quick question just about the implied guide for the fourth quarter. It looks like both revenue and margin

Rick Booth: is expected to be down sequentially. Is there some dynamic at play there? Or maybe you could just give us a little bit more color if my math is right.

Rick Booth: Your math is right on, David. And the dynamic that's in play is we are celebrating the anniversary in the third quarter, the anniversary of Populi.

Rick Booth: Your math is right, David, and the dynamic that's in play is we anniversary in the third quarter, the anniversary of of Populi, and

Rick Booth: And as we've assessed the potential impact of the sales reorg and other factors, we have removed any assumption of improvements in our churn rate, and we're not assuming an increase in the close rate on pipeline. So those two things together result in the sequential decline that you're seeing, and that sequential decline is greater in professional services throughout the second half than it is in subscriptions. ProServices is a smaller number, but we just want to be clear in terms of what we're seeing.

Speaker Change: As we've assessed the potential impact of the sales reorg and other factors, we have removed any assumption of improvements in our

Speaker Change: In our churn rate, and we're not assuming an increase in the close rate on pipeline. So those two things together result in the sequential decline that you're seeing. That sequential decline is greater.

Speaker Change: and Professional Services throughout the second half than it is in subscription.

Speaker Change: Pro services is a smaller number, but we just want to be clear in terms of what we're seeing.

David Grossman: So just to be clear, Populi, how does that impact the sequential dynamic? Wouldn't that be a year-over-year dynamic, or not?

Populi: So just to be clear, Populi, how does that impact the sequential dynamic? Wouldn't that be a year-over-year dynamic, or?

Rick Booth: Sorry that that

Populi: Sorry, that, that.

David Grossman: Set this up going into, sorry, I thought you were asking about the year-over-year revenue decline. So we're down 7% year-over-year in the second half. Okay. Now, the impact of the sequential revenue is more conservative bookings assumptions and assuming no improvement in churn.

Populi: that

Speaker Change: Set this up going into, sorry, I thought you were asking about the year-over-year revenue decline. So we're down 7% year-over-year in the second half. Okay, now the the impact of the sequential revenue is more conservative bookings assumptions and assuming no improvement in churn.

Rick Booth: Got it. Okay, very good. Thank you.

Speaker Change: Got it. Okay, very good. Thank you.

Ryan McDonald: Our next question will come from Ryan McDonald with Needham and Company.

Speaker Change: Thank you.

Speaker Change: Our next question will come from Ryan McDonald with Needham & Company.

Ryan McDonald: Hey, this is Matt Shea on for Ryan. Thanks for taking the question and I appreciate all the color on the internal changes. But maybe thinking about external, could you just expand on the incremental deal scrutiny you're seeing or any changes to call out, and I know price sensitivity has been an issue in the past. So curious if pricing changes are potentially on the table or if sales cycle improvement really just revolves around moving towards a more packaged sale that will help better communicate that ROI.

Speaker Change: Hey, this is Matt Shea on for Ryan. Thanks for taking the question and appreciate all the color on the internal changes, but

Matt Shea: Maybe thinking about external, could you just expand on the incremental deal scrutiny you're seeing or any changes to call out? And I know

Speaker Change: Price sensitivity has been an issue in the past, so I'm curious if pricing changes are potentially on the table or if sales cycle improvement really just revolves around moving towards a more packaged sale that will help better communicate that ROI.

Kevin Coop: Yeah, I wouldn't say that it's, you know, 30 days into this, and I'm sorry. Does this matter for me?

Matt Shea: This is Matt. I'm for Ryan McDonald.

Matt Shea: This is Matt. I'm for Ryan McDonald. Oh, yeah, Matt.

Kevin Coop: Oh, yeah, Matt. So Matt, I wouldn't say that there's a pricing and packaging plan. But I can tell you that as we're evaluating different solutions, and it varies by solution to solution, you have to always be aware of the market dynamics of what the market, you know, the demand curve, and what your supply cost is. And so we're looking at that to fundamentally understand it goes back to my kind of root cause, you know, comment earlier.

Speaker Change: To fundamentally understand, it goes back to my kind of root cause, you know?

Kevin Coop: If you're seeing longer sales cycles, and the approval process is increasing, and with some of the additional scrutiny, you know, because there has not been a definitive answer, but other companies in the market that have had some data issues, and there's been an increasing, you know, compliance and other regulatory scrutiny for whatever reason, you have to be thinking about what that does to your pricing strategy, right, you've got price elasticity, and your customer segmentation is So, you know, I'm not trying to dodge the question, but that's something I look at as basically product 101.

Speaker Change: Comment earlier. If you're seeing

Speaker Change: And with some of the additional scrutiny, you know, because there has not related to definitive but other companies in the market that have had some data issues and there's been increasing, you know, compliance and other regulatory scrutiny for whatever reason, you know, you have to be thinking about, well, what does that do to your pricing strategy, right? You've got price elasticity and your customer segmentation as two core components.

Kevin Coop: You've got to constantly be reevaluating the market dynamics of what's happening, including what the demand curve might be for the supply that you're offering. So we're going to continue to evaluate that, not just now, but in the future. Fair enough. Yeah, I'm probably jumping the gun on asking you this early. So maybe just shifting over to the product roadmap, I was wondering, you know, given the simplification, if you could just provide an update on Populi, are you still planning on rolling this out to other end markets in the second half of the year? And should we expect any pipeline lift from that? Or just where does Populi stand right now in your R&D priorities? Yeah, I think it's very important. I mean, we've got that.

Speaker Change: So, we're going to continue to evaluate that, not just now, but in the future.

Speaker Change: Fair enough, yeah, probably jumping the gun on asking you this early.

Speaker Change: So maybe just shifting over to the to the product roadmap, was wondering, you know, given the simplification, if you could just provide an update on on Populi, are you still planning on rolling this out to other end markets in the second half of the year? And should we expect any pipeline lift from that? Or just where does Populi stand right now in your R&D priorities?

Kevin Coop: Yeah, I think it's very important. We've got that integrated into the entire product roadmap. We have the team, and it's been, you know, from my perspective, coming in, having been involved in many acquisitions and integrations, I think that's a really standout way that it was done. The teams are blended. We've got leadership that we took from the best of breed from two different companies, and they've really embraced the definitive brand. And we're seeing that as a major data visualization component that's being pushed through to all of our end users. Thanks, guys.

Speaker Change: Yeah, I think it's very important. I mean, we've got that being integrated into the entire product roadmap. We have the team, it's been, you know, from my perspective coming in, having been involved in many acquisitions and integrations, I think that's a really standout way that it was done.

Speaker Change: The teams are blended, we've got leadership that we took best to breed from two different companies and they've really embraced the Definitive brand and we're seeing that as a major data visualization component that's being pushed through to all of our end users.

Allen Lutz: Allen Lutz with Bank of America. Hi, this is Hanna.

Speaker Change: Thanks, guys.

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

Hannah Lee: Hi, this is Hannah Lee for Allen Lutz. Thanks for taking the question. I'm just wondering if you can talk about what you've been seeing in terms of the M&A environment and if you expect any changes around your M&A priorities.

Kevin Coop: Well, I think, you know, to be a successful businessperson, you need to constantly be looking at this from a concept. You need a concept of time. You need to look at everything you're doing in a build, buy, or partner manner. I don't think that Definitive historically has probably really leveraged the partnership aspect or angle as much as we can. So that is something that, even in 30 days, we've really started to ramp up to look at how we can go faster with a greater sense of urgency. And I think there's going to be a lot of opportunity out there. I think that Definitive is in pretty good shape. And Rick can comment on that.

Speaker Change: Well, I think, you know, to be a.

Speaker Change: You know any any well-run operation you're going to constantly be looking at this from a concept you need a concept of time

Speaker Change: You need to look at everything you're doing in a build, buy, or partner manner. I don't think that Definitive historically has probably really leveraged the partnership aspect or angle as much as we can, so that is something that even in 30 days we've really started to ramp up to look at how we can go faster with a greater sense of urgency.

Speaker Change: And I think there's going to be a lot of opportunity out there, you know, I think that Definitive is in pretty good shape, and Rick can comment on that, but I think our capital structure is great, the board is super supportive, and it's a fantastic board of directors.

Rick Booth: But I think our capital structure is great. The board is super supportive, and it's a fantastic board of directors. And we're going to evaluate it as part of kind of a multi-pronged growth strategy opportunistically. And I think there's going to be a lot of opportunity that is going to show itself.

Speaker Change: We're going to evaluate those as part of a multi-pronged growth strategy opportunistically. I think there's going to be a lot of opportunity that is going to show itself to us.

Speaker Change: Great, that's helpful. Thank you.

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

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

Jon: Hi, thanks for taking the question. This is Jon for Brian. Maybe just a double click on the longer sales cycle commentary. Any commonality you're seeing there? Any specific GOG call out or segments where you're seeing the longer sales cycle? Or is it just broad? And then I have a quick follow up.

John: Hi, thanks for taking the question. This is John for Brian . Maybe just to double click on the longer sales cycle commentary, any commonality you're seeing there, any specific GOG call out or segments where you're seeing the longer sales cycle, or is it just broad based? And then I have a quick follow up.

Kevin Coop: You know, it's 30 days in, so I don't know if I can really give you a definitive answer, but looking at the data, it does appear to be pretty broad-based, which does indicate that it's probably more of just kind of a macro in general as opposed to a segment issue. But, you know, I think we probably need to take that and come back with a little bit more information, with a little bit more sensitive analysis, unless Rick, I think you can add. That's exactly right, Kevin. Yep.

Speaker Change: You know, it's 30 days in, so I don't know if I can really give you a definitive, but looking at the data, it does appear to be pretty broad based.

Speaker Change: which does indicate that it's probably more just kind of a macro in general as opposed to a segment issue.

Speaker Change: But, you know, I think we probably need to take that and come back with a little bit more.

Speaker Change: Thank you.

Rick Booth: Kevin. Yep.

Speaker Change: with a little bit more sensitive analysis, unless Rick, you think you can add? That's exactly right, Kevin. Yep.

Jon: Okay, perfect. Thanks.

Speaker Change: Okay, perfect. Thanks. And maybe just following up with Rick, you're on the net retention. How would you maybe stack rank the drivers of the net downfills? Is it primarily a function of biotech combining, seeking operations, competitive pressures, or is it just downsizing of just sales and marketing spend in the enterprise? Just curious to get more color there.

Rick Booth: Yeah, so we saw more pressure on the up cell and more delays but not outright losses on new sales. And so, as a result, the churn, although it did improve year over year at an overall level, the impacts were fairly similar with a little bit more of an impact on churn in biopharma. Life sciences continues to be, sorry, I meant life sciences, not biopharma, but life sciences continues to have a relatively elevated churn rate compared to what we were seeing in 2022.

Rick Booth: And maybe just follow up with Rick, you're on net retention. How would you maybe stack rank the drivers of the net downsells? Is it primarily a function of biotech combining seizing operations, competitive pressures, or is it just downsizing of just sales and marketing spend in the enterprise? Just curious to get more color there. Yeah, so we saw more pressure on the upsell.

Speaker Change: Yeah, so we saw more pressure on the upsell and more...

Speaker Change: Delays but not outright losses on new sales and so as a result the the churn although it did improve year over year

Speaker Change: At an overall level, the impacts were fairly similar, with a little bit more of an impact on churn in biopharma. Life Sciences continues to be, sorry, I meant Life Sciences, not biopharma, but Life Sciences continues to have a relatively elevated churn rate compared to what we were seeing in 2022.

Rick Booth: And our next question comes from Jared Haase with William, excuse me, William Blair.

Speaker Change: Thank you very much.

Speaker Change: And our next question comes from Jared Haase with William, excuse me, William Blair.

Jared Haase: Yeah, good afternoon. And thanks for taking the questions. I wanted to ask, maybe, for clarification.

Jared Hayes: Yeah, good afternoon and thanks for taking the questions.

Speaker Change #101: I wanted to ask maybe a clarification. So the shift from point solution to platform and kind of the change in that selling process.

Speaker Change #102: I know there's a lot of focus on being more efficient with sales, but with moving to that platform approach, do you expect that to ultimately lead?

Speaker Change #103: to sort of longer sales cycles on average because it's a larger and more complicated sale. Now, I'm wondering if that would almost create like sort of an air pocket as you're kind of looking to move back to growth, but if clients need more time to kind of get the buy-in because it's a larger and larger budget allocation or just a more complicated decision criteria.

Kevin Coop: So the shift from point solution to platform and kind of the change in that selling process. I know there's a lot of focus on being more efficient with sales, but with moving to that platform approach, do you expect that to ultimately lead to sort of longer sales cycles on average because it's a larger and more complicated sale? Now, I'm wondering if that would almost create sort of an air pocket as you're kind of looking to move back to growth, but if clients need more time to kind of get the buy-in because it's a larger and larger budget allocation or just a more complicated decision criteria.

Kevin Coop: Yeah, I mean, my experience has not been the case, but I think part of it's the devil's in the detail, right? So if you're talking about more of a complex multi-product sale that has multiple buying personas, that might be, but if you're selling more products to the same personas, that's probably not the case. And even if, take for argument's sake, that it did slightly elongate the sale cycle, more products per customer is very easy to draw a correlation to improve renewal rates, and you will have a better value per customer over time, and there's a lot of goodness. Your NPI is going to, your NPS score is going to go up.

Speaker Change #104: Yeah, I mean my experience has not been the case, but I think part of it's in devils in the detail, right? So if you're talking about more of a complex Multiproduct sale that has multiple buying personas that might be but if you're selling more products to the same personas

Speaker Change #104: That's probably not the case and even if

Speaker Change #104: Take for argument's sake that it did slightly elongate the sales cycle.

Speaker Change #105: More products per customer is very easy to draw a correlation to improve renewal rates.

Speaker Change #105: and you will have a better value per customer over time and there's a lot of goodness your NPI is going to your your NPS score is going to go up I mean there's just a lot of goodness that comes from that.

Kevin Coop: I mean, there's just a lot of goodness that comes from that. And so, you know, I wish I, you know, I had a proof point to tell you this here, but my experience of doing this for 30 years is it is not more difficult to sell more than one product. And it also provides a way for you to go back to your existing customers who are happy and to sell them more products and upsell them over time.

Speaker Change #105: And so.

Speaker Change #106: I wish I, you know, it's.

Speaker Change #106: I had a proof point to tell you this here, but my experience of doing this for 30 years is it is not more difficult to sell more than one product. In fact, it's easier and it also provides a way for you to go back to your existing customers who are happy and to sell them more products and upsell them over time.

Jared Haase: Yeah, that makes sense. I think that the emphasis on ROI should be easier, or at least theoretically, it should be easier to make that clear with kind of an enterprise or multi-product approach.

Kevin Koop: Yeah, that makes sense. I think the emphasis on ROI should be easier, or at least theoretically should be easier to make that clear with kind of an enterprise or multi-product approach. So appreciate that. Maybe just as a quick follow-up, Kevin, for you kind of stepping into the role here. Would be curious to hear your thoughts just on corporate culture in general, kind of from a high level. Obviously, a lot of moving parts, a lot of

Kevin Coop: So appreciate that. Maybe just as a quick follow-up, Kevin, for you kind of stepping into the role here, I would be curious to hear your thoughts on corporate culture in general, kind of from a high level. Obviously, a lot of moving parts, a lot of areas or opportunities for improvement that you've detailed here, just as you kind of work through that, how do you kind of maintain culture and morale and all of that sort of thing in order to keep everyone, you know, aligned and moving in the right direction? Yeah, I mean, it's always a great question because it's the secret sauce.

Speaker Change #107: Areas or Opportunities for Improvement that you've detailed here, just as you kind of work through that, how do you kind of maintain culture and morale and all of that sort of thing in order to keep everyone, you know, aligned and moving in the right direction.

Kevin Coop: Yeah, I mean, it's always a great question because it's the secret sauce that if you don't get that right, right, things start to deteriorate pretty rapidly. And I think that the reality here is definitive.

Kevin Koop: Yeah, I mean, it's always a great question, because it's the it's the secret sauce that if you don't get that right, right, things start to deteriorate pretty rapidly. And I think

Kevin Coop: And it was It's a testament to, you know, Jason Krantz and his original, you know, vision behind what he's built a great business. You've got a very team and family approach, but it isn't just that people get along and have that sort of chemistry. You've also got a very tenured and domain-focused workforce. You've got a lot of tenured domain experts that go through the organization, like we have people, many people that are very critical that have been here for eight years, 10 years, right?

Jason Krantz: The reality here is definitive, and it's a testimony to Jason Krantz and his original vision behind what he's built, a great business.

Speaker Change #109: is you've got a very team and family approach, but it isn't just.

Speaker Change #109: that people are that get along and have that sort of chemistry.

Speaker Change #110: You've also got a very tenured and domain, you've got a lot of tenured domain experts that go through the organization. Like we have people, many people that are very critical that have been here for eight years, 10 years, right. So even as a relatively young company, we have very, very tenured people. And so part of my challenge was to basically

Kevin Coop: So even as a relatively young company, we have very, very tenured people. And so part of my challenge was to basically, it's on me to be able to create and continue that culture where people want to stay and be part of the team, as we start to evolve into a much more hyper-growth company, which has, you know, more expectations for performance, as well as continue to build products. And what was, at one point, maybe a little bit of an easier macro environment.

Speaker Change #110: It's on me to be able to create and continue that culture to where people want to stay and be part of the team as we start to evolve into a much more hyper growth.

Speaker Change #110: Company, which has, you know, more expectations on performance, as well as continue to build products in what was at one point, maybe a little bit of an easier macro environment. So I think that the opportunity here for us is, you've got to retain that corporate memory and those domain experts, and you need to bring in and leaven into it some external folks that are going to augment the team in a way that it doesn't change what is ultimately the very, you know, we have a lot of goodness here that we don't want to lose.

Kevin Coop: So I think that the opportunity here for us is you've got to retain that corporate memory and those domain experts, and you need to bring in and leave out some external folks that are going to augment the team in a way that it doesn't change what is ultimately the very, you know, we have a lot of goodness here that we don't want to lose. And so that's one of the reasons that I joined, through very extensive conversations with the board.

Speaker Change #111: And so that's one of the reasons that I joined is through very extensive conversations with the board and you know not only the founder but many of the executives here is I think we have that kind of like-minded approach of we're going to build something great and we have a great foundation and now that this the question is you've got to kind of redouble your effort on.

Kevin Coop: And, you know, not only the founder but many of the executives here, I think we have that kind of like-minded approach of we're going to build something great, and we have a great foundation. And now this, the question is, you've got to kind of redouble your effort on kind of the organizational design, getting a couple extra people that are the secret sauce on the boat, and then everybody needs to start rolling in the same direction.

Speaker Change #111: I'm going to come back to this because I think that while it's simple, it's really critical here is you have to just have a very simplified

Kevin Coop: And I'm going to come back to this, because I think that while it's simple, it's really critical here: you have to just have a very simplified, balanced approach, fewer things that are done well, that you can measure, and that you can report on and add to it. And Simplifying is actually more difficult than expanding, right? And so that first 30 days, we really spent a lot of time on that, and I'm very comfortable that we've got the right people now on the right problems, and we've got the right focus, and we're going to start to see some acceleration.

Speaker Change #111: balanced approach, fewer things that are done well, that you can measure and that you can report on and add to it. And

Speaker Change #111: Simplifying is actually more difficult than expanding, right? And so that first 30 days was really spending a lot of time on that. And I'm very comfortable that we've got the right people now on the right problems, and we've got the right focus, and we're going to start to see some acceleration.

Kevin Coop: That concludes our question and answer session. I'd like to turn the conference over to Mr. Coop for a closing remark.

Speaker Change #111: That concludes our question and answer session. I'd like to turn the conference over to Mr. Koop for closing remarks.

Kevin Coop: Yeah, just want to thank everybody for their time today. It was a pleasure talking to you, and I'm looking forward to future conversations. That concludes our time together today. Thank you.

Mr. Koop: I just want to thank everybody for their time today. It was a pleasure talking to you, and I'm looking forward to future conversations.

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

Mr. Koop: That concludes our time together today. Thank you.