Q3 2024 Definitive Healthcare Corp Earnings Call
Any forward looking statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.
Forward looking statements involve a number of risks and uncertainties, including those discussed in the risk factors section and elsewhere in our filings with the SEC actual results may differ materially from any forward looking statements. The company undertakes no obligation to revise or update any forward looking statements to reflect events that may arise. After this conference call, except as required by law for more information.
<unk>. Please refer to the cautionary statement included in the earnings release that we have just posted to the Investor relations portion of our website. Additionally.
Additionally, we will discuss non-GAAP financial measures on this conference call. Please refer to the tables in our earnings release 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.
Thanks, Matt and thanks to all of you for joining US. This afternoon to review definitive Healthcare's third quarter 2024 financial results.
Been an exciting and active time here and today I will provide you with an update on the initial progress we've made to position the company for a return to top and bottom line growth.
Let me begin by reviewing our financial results for the quarter, which I'm pleased to share were above the high end of our guidance ranges on both the top and bottom line.
Our total revenue was $62 7 million down 4% year over year. This decline was expected as renewal rates improved year over year, but they are still well below our potential and we also anniversaried the acquisition of popular this quarter.
Adjusted EBITDA was $20 6 million down 5% year over year, and adjusted EBITDA margin was 33% consistent with the prior year. Despite the decline in revenue thanks to earlier cost actions and ongoing cost discipline.
As indicated on our last earnings call, we do expect to see some volatility as we implement improvements in our operational execution focus areas for.
For example, the results this quarter were mixed.
Positively we delivered on our new logo and upsell expectations for the quarter.
We saw improvement in expansion sales activity compared to Q2.
As well as some nice wins that we call win back customers, which are customers, who had previously churn, but have now returned as their financial situations improved or are they realize the value they were missing out without access to our data and solutions.
While early we believe these dynamics are a positive indication for the future.
Conversely, our churn rates remained elevated.
Thank you very much.
As I'll discuss in more detail shortly, investing in our customer success programs to ensure customers realize the full benefit of definitive healthcare platform is a top priority. We believe there are levers within our control to improve the retention dynamics of the business, and we have already begun work on implementing those levers.
Still, it will take time for these changes to positively impact our financial results.
With that backdrop, let me provide some color on our progress against our strategic plan.
As I mentioned last quarter, one of the early learnings from my time here is that we need to dedicate ourselves to simplifying all aspects of our business.
As part of that process, I believe having a common platform to our product portfolio is an important step to simplifying both our product development and go-to-market. Let me explain how moving towards that goal will help us.
Defendant of Healthcare is committed to organic product development and we've augmented that with several acquisitions over the years like Monocle, Analytical Wizards, Populi, and Carevoiance.
The result is a portfolio of products that leverage a highly differentiated data set to solve a complex array of business challenges for our customers ranging from product development sales intelligence and optimization go to market planning and market intelligence.
The result is a portfolio of products that leverage a highly differentiated data set to solve a complex array of business challenges for our customers ranging from product development, sales intelligence, and optimization, go-to-market planning, and market intelligence.
So while the visual solutions and their value propositions are compelling in many cases, they are siloed, meaning they don't currently share the same data they lack a unified UI UX or even something as straightforward as a single sign on when.
So while the individual solutions and their value propositions are compelling, in many cases they are siloed, meaning they don't currently share the same data, they lack a unified UI UX, or even something as straightforward as a single sign-on.
When we talk about developing a true platform addressing those issues. So a customer has the ability to deploy access and derive value easily from a unified product framework rather than individual products is what we're focusing on delivering.
When we talk about developing a true platform, addressing those issues so a customer has the ability to deploy, access, and derive value easily from a unified product framework, rather than individual products, is what we are focusing on delivering.
The benefits of this will be multifold.
The benefits of this will be multi-fold.
First from a product development perspective, we will greatly simplify and integrate our existing solutions, making them easier and more cost effective to maintain.
First, from a product development perspective, we will greatly simplify and integrate our existing solutions, making them easier and more cost effective to maintain. It will also simplify the development of new solutions going forward that can leverage this existing investment.
It will also simplify the development of new solutions going forward that can leverage this existing investment.
For example.
Once our data is on a common platform not only does it become more powerful when combined but our data science team can more easily leverage it to create new insights, allowing us to provide our clients with robust master data management solutions as well as to provide direct access through our powerful UI or direct connections to their CRM and other datasets.
For example,
Once our data is on a common platform, not only does it become more powerful when combined, but our data science team can more easily leverage it to create new insights, allowing us to provide our clients with robust, mastered data management solutions, as well as to provide direct access through our powerful UI or direct connections to their CRM and other data sets.
Second.
And our go to market efforts, our common platform will make it significantly easier to upsell and cross sell over time. Our approach is meant to meet our customers' initial business needs today and lay the foundation for a frictionless upsell process in the future.
Second, in our go-to-market efforts, a common platform will make it significantly easier to upsell and cross-sell over time. Our approach is meant to meet our customers' initial business needs today and lay the foundation for a frictionless upsell process in the future.
Ultimately, we want to offer customers a seamless user experience, we're accessing a new solution is as simple as the click of a mouse.
Ultimately, we want to offer customers a seamless user experience where accessing a new solution is as simple as the click of a mouse.
The most important benefit is that it will deliver more value to our customers in a unified and simplified manner. It will also make definitive stickier with customers and improve retention rates.
The most important benefit is that it will deliver more value to our customers in a unified and simplified manner. It will also make definitive stickier with customers and improve retention rates.
Customers will be better positioned for success with the initial solutions, they deploy and as they adopt more of the platform. We will then become operationally embedded and increasingly a strategic partner in solving their business challenges.
Customers will be better positioned for success with the initial solutions they deploy and as they adopt more of the platform, we will then become operationally embedded and increasingly a strategic partner in solving their business challenges.
Having a deeper understanding of what our customers want from us will help definitive strengthen our value proposition in all phases of customer engagement.
Having a deeper understanding of what our customers want from us will help definitive strengthen our value proposition in all phases of customer engagement.
We are still in the early days of this process, but I am confident this platform approach should meaningfully improve our sales efficiency over time.
I have now been able to personally see this value by participating in both sales calls and customer reviews in the field.
Through active conversations with customers and prospects I've confirmed that our data is differentiated and considered best in class, especially our referenced an affiliation data.
I have also learned firsthand the definitive is considered a strategic partner for many specialized and complex use cases that require technical domain expertise in the end markets, where we compete.
There were clear indications that many customers want to be able to do more with definitive data and we have a significant opportunity to expand our value proposition in the future.
We can address this both with products as well as by addressing the challenge of how our customer facing teams are deployed.
With differentiated data quality, a simplified and easy access product strategy and more effective operational deployment of our customer success and advanced analytical resources I expect that we will see meaningful progress in servicing our customers that will drive improvement in both our retention and revenue growth.
In addition to moving towards a more common platform, we continue to innovate and develop new solutions based on the needs of our customers.
In Q3, we introduced two new product enhancements that are examples of the ongoing product innovation that enhances our value proposition over time.
Market forecast is a new predictive analytics solution that will help health care organizations identify high growth markets and better position themselves to improve patient retention and acquisition and expand into new market opportunities.
Monaco conferences is a new solution that makes it easier for Biopharma and med tech customers to effectively leverage their attendance and investment and industry conferences.
Turning to our sales performance in the quarter I would now like to highlight a few customer wins that demonstrate our growth opportunity.
First I'd like to highlight a Q3 win back customer in 2023, a leading health organization dedicated to Alzheimer's care support and research decided to switch to a lower cost alternative however, they quickly realized that the alternative fell short of their needs.
<unk> returned to definitive, citing our comprehensive data and strong commitment to partnering with them for success.
Next a California based pharmaceutical company dedicated to developing life changing treatments for ophthalmology diseases is chosen definitive to assess the market potential for our new long term drug delivery platform.
Our data and insights are empowering them to better understand the landscape of surgeons performing minimally invasive glaucoma surgeries, enabling more informed decisions.
Lastly, I want to spotlight a recent success demonstrates the strength of our solutions across both the healthcare <unk> and consumer markets.
Speaker Change: Specialty food and beverage company catering to individuals' with swallowing difficulties as chosen definitive to support its sales and marketing efforts.
Speaker Change: Their sales team is leveraging view to engage physicians in skilled nursing facilities, who play a critical role as Influencers and refers for these specialized products.
Speaker Change: Simultaneously their marketing team is using popular to drive targeted digital marketing campaigns aimed at consumers with special and specific dietary needs.
Speaker Change: Overall, Q3 was a productive and important quarter.
Speaker Change: We have implemented more rigor around transparency and accuracy in our forecasting our.
Speaker Change: Our product innovation team continues to deliver new solutions we.
Speaker Change: We signed important new customer and expansion wins, and we've made progress executing on our strategic priorities.
Speaker Change: We are developing a clear vision of where we're taking this business and we are 100% focused on execution and accountability.
Speaker Change: As we discussed on our last earnings call. This is a work in progress and it will take time for changes, we are making to positively impact our financial results.
Speaker Change: This will require some patience from investors.
Speaker Change: As Rick will discuss we expect continued revenue volatility in the fourth quarter in the upcoming year.
Rick: We expect revenue to decline sequentially in Q4 and into early next year. Our goal is to return the business to sequential revenue growth in the second half of 2025, which is the first important milestone we need to achieve to return to sustainable year over year growth on both the top and bottom lines.
Rick: We are committed to drive to this target, while continuing to generate high levels of profitability and cash flow.
Rick: We are in the midst of planning for 2025, and we will provide more color on our next earnings call, but we believe it is important to be transparent with investors and to set expectations appropriately.
Rick: I'd like to finish by discussing two items, we announced a short time ago. The first is that our board has approved a $100 million expansion of our share buyback program, we expect to complete our activities under this authorization by the end of 2025 <unk>.
Rick: This buyback authorization reflects our confidence in the long term prospects of the business and our strong cash flow generation and our commitment to enhancing shareholder value.
Rick: The second is that following discussions regarding the scope of the CFO role, Rick Booth will be leaving definitive healthcare to pursue other opportunities.
Rick: I want to thank Rick for his many contributions over the last four years, including establishing a strong finance team, taking the company public and acting as a strategic sounding board to both management and the board.
Rick: We have every confidence in a smooth CFO transition and.
Rick: On a personal level, Rick has been a tremendous partner and friend to me during my Onboarding and I look forward to continuing to work with them closely during this transition period.
Rick: Rick will remain with definitive until June 1st of next year 2025 to ensure an orderly transition during which time, we will begin a search process that evaluates both internal and external candidates.
Rick: I will now turn the call over to Rick to cover our financials in more detail Rick.
Rick Booth: Thanks, Kevin.
Rick Booth: The last four years have been an incredible experience, including multiple financings and the opportunity to work with an amazing team of people I am proud of the team's accomplishments and believe <unk> is well positioned to deliver long term growth and profitability.
Rick Booth: On today's call I'll start by reviewing our Q3 results in detail and then finish with our guidance for the remainder of the year and some comments on 2025.
Rick Booth: And all my remarks, I'll be discussing our results on a non-GAAP basis, unless otherwise noted.
Rick Booth: In Q3, we were pleased to deliver revenue adjusted EBITDA and earnings per share all above the high end of our guided ranges.
Rick Booth: We remain focused on what we can control and continue to advance our efforts to operate more efficiently while delivering innovation for our clients.
Rick Booth: In the third quarter, we delivered $62 $7 million of revenue. This was down 4% compared to Q3 2023, because although renewal rates were better than in the same period in the prior year Theyre, not yet where we would like them to be and we also anniversaried the acquisition of poverty line.
Rick Booth: And we delivered $26 million of adjusted EBITDA in the period down 5% from the same period in the prior year.
Rick Booth: Thanks to earlier cost actions and ongoing cost discipline, even on the declining revenue base, our adjusted EBITDA margins grew nearly flat year over year at 33%.
Rick Booth: Reflecting our focus on shareholder value adjusted net income and non-GAAP earnings per share each grew 6% and 5% respectively over Q3 dollars 23.
Rick Booth: And we generated $24 3 million of Unlevered free cash flow in the quarter.
Rick Booth: $85 $2 million on a trailing 12 month basis.
Rick Booth: 58% versus the 12 months prior.
Turning to our results in more detail.
Rick Booth: Revenue for the third quarter was $62 $7 million down 4% from the prior year, but above the high end of our guided range.
Rick Booth: As expected subscription revenue decreased by low single digits, while professional services revenue declined more significantly.
Rick Booth: The key driver of the revenue decrease is that renewal rates are not yet back to our desired levels, especially for our life science customers.
Rick Booth: We ended the quarter with 530 enterprise customers.
Rick Booth: Defined as customers with more than $100000 in <unk> per year.
Rick Booth: This was an increase of one enterprise customer year over year, and a decrease of seven customers quarter over quarter.
Rick Booth: As a reminder, enterprise customers represent roughly two thirds of our IRR and are a key focus of our go to market programs.
Rick Booth: Our total customer account, which includes smaller customers was approximately 2570 at the end of Q3 down about 200 from Q3, 2023, and <unk> 30 from the previous quarter as current conditions have disproportionately impacted smaller customers.
Rick Booth: Adjusted gross profit was $51 $7 million down.
Rick Booth: Down 8% from Q3 2023.
Rick Booth: As a percentage of revenue the adjusted gross profit margin of 82, 4% decreased approximately 330 basis points from Q3 2023. This reflects our declining revenue and the largely fixed nature of most of our costs.
Rick Booth: Sales and marketing expense were $19 3 million down 3% from Q3 2023.
As a percentage of revenue sales and marketing expenses were 38% of revenue consistent with Q3 2023.
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 150 basis points relative to 2023.
Rick Booth: Product development expense was $6 1 million.
Rick Booth: Down 19% from Q3 2023.
Rick Booth: As a percentage of revenue product development expense was nine 7% of revenue down from 11, 5% of revenue in Q3 2023 as the current quarter benefited from modest onetime savings.
We believe investing in our platform and using both existing and new datasets from launch or enhanced multiple products is an effective and efficient way to increase the value we deliver to customers.
Rick Booth: We will continue to prudently investing in the highest ROI opportunities on our long term product roadmap.
Rick Booth: We expect the full year 2020 for product development expense as a percentage of revenue to be down 50 to 100 basis points compared to the full year 2023.
Rick Booth: G&A expense was $6 7 million gallons.
Rick Booth: Down 13% from Q3 2023.
Rick Booth: As a percentage of revenue G&A expenses were 10, 7% of revenue, which is an improvement of 110 basis points compared to Q3 2023.
Rick Booth: We expect G&A expense as a percentage of revenue in 2024 to improve by approximately 150 basis points year over year.
Rick Booth: Adjusted operating income of $19 million was down 7% from Q3 2023.
Rick Booth: As a percentage of revenue operating income was 30% of revenue.
Rick Booth: 80 points from Q3 2023.
Rick Booth: The year over year margin decrease is a result of the revenue decline in the period.
Rick Booth: Adjusted EBITDA was $20 6, million% to 5% decrease from Q3 2023.
Rick Booth: As a percentage of revenue adjusted EBITDA was 33% of revenue consistent with Q3 2023.
Rick Booth: For the full year 2024, we expect to see a 100 to 200 basis point improvement in our adjusted EBITDA margin versus 2023.
Rick Booth: We expect to continue to make investments in the areas that are most important to us and our clients and maintain a balanced financial profile that drives long term profit margin expansion when revenue returns to growth.
Rick Booth: Adjusted net income was $15 4 million or <unk> <unk> per diluted share.
Rick Booth: Based on the 155 5 million weighted average shares outstanding.
Turning to cash flow.
Rick Booth: Definitive healthcare has high margins upfront billing and low capex requirements provide substantial free cash flow generation we.
Rick Booth: We focus on trailing 12 month cash flow due to seasonality.
Rick Booth: Operating cash flows were $54 $8 million on a trailing 12 month basis of 70% from $32 $3 million in the comparable period, a year ago as we benefited from strong collections.
Rick Booth: And lower deferred commission costs.
Rick Booth: Unlevered free cash flow was $24 $3 million in the quarter on a trailing 12 month basis Unlevered free cash flow was $85 2 million up 58% from the comparable period a year ago.
Rick Booth: Unlevered free cash flow was 33% of revenue on a TTM basis or 105% of our TTM adjusted EBITDA of 81 4 million.
Rick Booth: On the balance sheet, we ended the quarter with over $305 million in cash and short term investments.
Rick Booth: With strong adjusted EBITDA profitability, and only $247 5 million of debt. We believe we are well positioned to fund both organic and inorganic initiatives.
Rick Booth: Within the third quarter, we repurchased approximately one 9 million shares at an average price per share of $4 24.
Rick Booth: For a total of $8 million this leaves $5 million remaining under the existing authorization.
Rick Booth: Because we continue to believe that our stock is an attractive value. The board has authorized repurchase of up to $100 million in shares. In addition to the remaining amount under the existing authorization.
With such buybacks are expected to be completed before year end 2025.
Rick Booth: This buyback authorization reflects our strong cash flow generation, our confidence in the long run and prospects of the business and our commitment to enhancing shareholder value.
Rick Booth: We are confident that our existing cash and investments will allow us to execute on our buyback of this scale, while retaining strategic M&A flexibility as needed.
Rick Booth: Current revenue performance obligations of $164 million were down 4% year over year as reported.
Rick Booth: We're down 3% year over year, when adjusting for contracts excluded from <unk> due to opt out causes.
Rick Booth: Total revenue performance obligations were down 3% year over year and deferred revenue of $86 $2 million was down 4% year over year.
The current stock price caused us to book, a further $228 2 million goodwill impairment as of September 30th.
Rick Booth: That write down also generated approximately $23 $8 million of gain on the remeasurement of the TRA liability.
Rick Booth: And a $13 8 million deferred income tax benefit.
Rick Booth: As a reminder, these are noncash accounting charges.
Rick Booth: Have no impact to our debt covenants and all impacts are excluded from our adjusted earnings.
Rick Booth: Shifting to guidance, we continue to expect revenue to decrease sequentially in Q4, as we continued to be impacted by the low first half bookings and elevated churn.
Rick Booth: In addition to the strong Q3 financial results, we now expect a modest improvement in our full year 2024, our profit outlook compared to what we talked about in our last earnings call.
Rick Booth: The improvement incorporates both the Q3 beat to our expectations.
Rick Booth: And an improved outlook for Q4.
Rick Booth: For Q4, we expect total revenue of $60 million to $61 million.
Rick Booth: A revenue decrease of 7% to 9% year over year, when compared to Q4 of 2023.
Rick Booth: Within total revenue, we expect subscription revenue to be down low single digits with a more significant year over year decrease in professional services revenue.
Rick Booth: Similar to what we observed in Q3.
Rick Booth: The key driver of the revenue decrease is that renewal rates are not yet back to our desired levels, especially for our life science customers.
Rick Booth: As a result.
Rick Booth: We expect to report an overall MBR of 85% to 87% for the calendar year 2024.
Rick Booth: From a profitability perspective, we expect adjusted operating income of $14 million to $15 million.
Rick Booth: Adjusted EBITDA of $16 million to $17 million.
Rick Booth: We're 26% to 28% adjusted EBITDA margin in Q4.
Rick Booth: And adjusted net income of 10, five to $11 5 million.
Rick Booth: Or <unk> <unk> per diluted share on 154 4 million weighted average shares outstanding.
Rick Booth: We will formally guide 2025, when we announce our Q4 results, but I can share some preliminary remarks as we approach year end.
Rick Booth: Due to a recurring revenue model 2020 for bookings are the primary driver of 2025 revenue.
Rick Booth: The fourth quarter is an important sales and renewal quarters for us. So there is still a range of potential outcomes, but as of today <unk> is our single best predictor of 2025 revenue performance.
Rick Booth: The 4% year over year decrease in CRP O provides a solid indication of the revenue pressure, we expect in 2025.
We continue to examine a range of scenarios for the upcoming year and expect the year over year decreases in revenue will moderate as we move through the year, but we do expect that 2025 revenue will be less in 2024.
Rick Booth: As we've discussed renewal rates are one of the biggest drivers of our results and we continue to work through that product and operational changes required to best serve our customers.
As we work through those operational adjustments, we're focusing on those with the best return on investment.
Rick Booth: Nonetheless, we do expect our adjusted EBITDA margin to contract by at least a few hundred basis points in 2025 compared to 2024 as revenue declines flowed through the P&L.
Rick Booth: We will provide more specifics when we guide 2025 results, which.
Rick Booth: Which we expect to do in our Q4 earnings call.
Rick Booth: So in conclusion, we're pleased to have again delivered revenue and adjusted EBITDA above the top end of our quarterly guidance and strong unlevered free cash flow generation.
Rick Booth: We remain confident that we're well positioned for the long term in the 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: Thanks, Rick.
Kevin: I want to reiterate my excitement about the future for dependent of health care.
Kevin: We have an incredible team that is committed to driving real value for our customers in a market with a large and growing Tam.
Kevin: We have proprietary data assets to create a true competitive edge and we are confident that the work we're doing to drive innovation and operational efficiency will translate into long term growth and profitability.
Speaker Change: And with that I would like to open it up for questions.
Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad now you'll.
Speaker Change: You will be placed into the queue in the order received.
Speaker Change: 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 press star one on your phone now.
Speaker Change: And our first question will come from David Larsen with BTG.
Hi, This is Jenny Chen on for Dave Thanks for taking my questions and congrats on the quarter.
Speaker Change: Just wanted to ask.
Speaker Change: More about the overall demand environment with pharma I know you.
Speaker Change: Mention win back customers.
Speaker Change: From what we've been seeing with a lot of the Crs, they're facing a lot of them.
Speaker Change: Pressure Q2 pharma undergoing some re prioritization with IRI.
Speaker Change: Just wondering if that has any impact on you guys I know.
Speaker Change: You guys are focused on a different area than the Crs, but a lot of the pharma companies have actually reported pretty strong results. So just what youre seeing in the broader demand environment.
Speaker Change: Thanks Jenny.
Speaker Change: While we've seen some modest improvement in some of our segments like provider of diversified the pressures in life science.
But unlike perhaps other companies that may have more clinical assets or our other solutions definitive primarily enters at stage two clinical trials or later.
Speaker Change: And so we are not surprised to see a delayed impact from market improvements for our solutions.
Speaker Change: And as investments move through the clinical trial process, we do expect to benefit.
Speaker Change: One of the good things about our business model is that it has a very attractive it has attractive economics as revenue grows.
Speaker Change: Right now we're experiencing the flip side of that equation is the reality of our fixed costs that we are focused on churn rate reduction right now as a way to help return to growth, which will also allow us to realize those inherent advantages in our business model, but I think the big.
Speaker Change: Primary.
Speaker Change: Point, though theyre trying to make there is that I think given the fact that were stage two clinical trials or later and it's a very specific use case in that area, that's probably why perhaps sometimes that data point it doesn't exactly lineup.
Speaker Change: Got it that makes sense. Thank you.
Speaker Change: And we'll move next to George Hill with Deutsche Bank.
Speaker Change: Yeah. Thanks for taking the question I guess could you guys talk about the kind of visibility you feel like you have to growth in the back half of 2025 and kind of like what drives the assumption that the growth will resume there and I guess I would just kind of love. The most current update that you guys can provide on like the selling funnel and the sales pipeline and the demand environment and weather.
Speaker Change: Youre seeing whether youre seeing it kind of continue to weaken or whether it's stabilizing okay.
Speaker Change: Yes.
Speaker Change: It's a good question a couple of different components to that I'm sure as part of this with if not this question others will get to go to market. Some of the learnings you do have.
Speaker Change: An outline of what you just asked related to that but as it relates to the growth forecast and I'll, let Rick talk a little bit more specifics about maybe some of the metrics and how to start to to gauge that I think it's important.
Speaker Change: To frame itself from the perspective of we're really focusing on operational execution understanding that it is very important to regain trust.
Speaker Change: And that means we need to realistically communicate transparency conservative fashion. So that we really ensure that we're able to deliver on our promises to both the investors and stakeholders and while we're seeing some early indications of improvements in many areas and I will talk shortly I'm sure about some of the more identified and promising opportunities for improvement.
Speaker Change: Until we have more empirical data on that we're trying to really remain cautious in our predictions, but I'll, let Rick maybe you want to amplify that a little bit with some of the specifics on how you think about it yes.
Rick Booth: First let me be clear on two things one we're not formally guiding 2025, yes fourth quarter is a really important quarter for us into that.
Rick Booth: Though we expect to be.
Rick Booth: The declines to moderate and to get to sequential growth in the in the second half of the year. We are guiding on a full year basis for revenue to be down one no mistake about that.
Rick Booth: There is an inherent seasonality.
Rick Booth: Seasonality in our in our business, where our bookings begin to ramp in the fourth quarter and that tends to be a stronger quarter for pro services as well all of those those are a small part of our business.
Speaker Change: Does that help inform your question.
Speaker Change: Yes, it does and I can circle up offline with more detail.
Thank you.
Speaker Change: Our next question will come from Craig <unk> with Morgan Stanley.
Speaker Change: Hi, This is <unk> on for Greg.
Speaker Change: Great. Thanks for taking my question.
Speaker Change: First thanks for the preliminary colorful 2025.
Speaker Change: Wondering if there has been any changes in the approach.
Speaker Change: Looking into next year again.
Speaker Change: Management changes this year and the continued headwinds.
Speaker Change: Yes.
Speaker Change: Kevin Kevin's approach is very helpful.
Speaker Change: On spending time with customers is very operational and so I think on the margin.
Speaker Change: Provide a little bit of conservatism not getting ahead of changes in operating results.
Speaker Change: Okay.
Speaker Change: Thank you and my follow up is.
Speaker Change: All I know kind of bucket that position has been historically part of the dose strategy.
Speaker Change: But I believe you guys have also talked about to then bring in the IBM partnership can.
Speaker Change: Can you provide more color on what's the strategy there and I'm wondering if that does.
Speaker Change: Company, where assets that the.
Speaker Change: Partnering with us.
Speaker Change: Yes, I think a very.
Speaker Change: They have a sophisticated and well developed go to market you need to have both your indirect.
Speaker Change: Direct channels working in harmony and so we have added to the team to go to market team. We have brought in to augment that team with folks that I've worked with in the past that are able to bring in a slightly different focus around partnerships. It is going to be a pillar of what we want to do going forward and.
As Rick stated as far as going into next year, it'll be something that we will be talking about at the end of next quarter as part of our go forward plan, but that will be one of the pillars that we are going to rely on to help get us back to growth trajectory.
Speaker Change: Okay.
Speaker Change: As a reminder, if you would like to ask a question. Please signal by pressing star one at this time.
Speaker Change: And we'll move next to Stephanie Davis with Barclays.
Stephanie Davis: Hi, guys.
Speaker Change: Anthony Thank you for taking our question.
Speaker Change: Kevin Thank you.
Speaker Change: Right.
Speaker Change: And.
Speaker Change: I was hoping you could revisit your comments.
Speaker Change: Ron.
Speaker Change: Thank you Jake.
Speaker Change: Okay great.
Speaker Change: I'm sorry.
Speaker Change: Talking about stepping back from the non differentiated offerings into more of a partnership strategy that you could just talk more about maybe where you see your opportunity for market leadership.
Dave: Thank you Dave.
Speaker Change: Sure and I think specifically.
Speaker Change: Specifically I think I may have said, we need to be a number two or number three I don't even know if it was top three I think it was actually top one or two.
Speaker Change: And that was primarily focusing on as you enter new markets and you're doing your.
Speaker Change: Through product marketing your.
Speaker Change: We're advancing into new solutions, but in the meantime, and as I mentioned I think in my prepared remarks today.
Speaker Change: The reality of changing.
Speaker Change: Last quarter with.
Speaker Change: My assumption of the.
Speaker Change: Direct management of our selling team has really been a blessing and I've been spending a lot of time with our customers process prospects partner sellers and support teams, which was giving me more of a direct access to those folks that I, probably would have had otherwise and I now have more empirical data from firsthand experience that did not own.
Speaker Change: Validates that we have solid data assets good customer relationships the opportunity to help our customers do more with our data, but the strategy of remaining focused on our simplified offering.
Speaker Change: Our integrated solutions within a common platform from Acs views.
Speaker Change: Our focus on the enterprise customers, which has shown a lot of promise and far as improvement and early indications that that's working we need to take that same approach to other segments as well, we think that's replicable and frankly deploying our advanced analytics teams and more direct manner to assist our customers with their complex master data management needs as well as directed.
Speaker Change: <unk> to drive better revenue and value is going to help our retention efforts. So I think.
Speaker Change: The notion around.
Speaker Change: Simplification.
Speaker Change: Et cetera.
Speaker Change: More intimate access with the customer is proving to be the right. One and we're just now the question is just to get more velocity into the ecosystem.
Speaker Change: Got it. Thank you. Thank you very helpful.
Speaker Change: Once again, if you'd like to ask a question. Please press star one at this time.
Speaker Change: Okay.
Speaker Change: While we're waiting for the next question I will just add on a tiny bit too to Kevin's answer there.
Speaker Change: Absolutely not out of the M&A market I wouldn't want to create the impression that there.
Speaker Change: We are.
Speaker Change: Certainly anyone who is listening that has an attractive candidate. Please bring it to us we've got plenty of capital on our on our balance sheet to support those moves in addition to the significant buyback, which we announced today.
Speaker Change: And we do have a question from David Larsen with BTG.
Speaker Change: Yes.
Speaker Change: Hey can you just talk about the demand environment, you're seeing in the health system space for pop health value based care as well as the med tech space and sort of your growth expectations are in that most divisions. Thanks very much.
Speaker Change: That was a little bit Carl I didn't get.
Speaker Change: Healthy health care system.
Speaker Change: Thinking about the appetite for the.
Speaker Change: Population intelligence and then also in Med Tech.
Speaker Change: So I think the App, if youre looking at the market demand the way we have been.
Speaker Change: Assessing this is we've been thinking of it in terms of our provider market diversified and then a broadly which med tech with Walt in our life Sciences area.
Speaker Change: And we're seeing.
Speaker Change: Pretty robust demand in most areas. So I don't think there's a differentiation there that there has been any change I think the challenge for US has been youre seeing elongated sales time sales cycles, you are seeing different budgetary pressures in different areas and and frankly the.
Speaker Change: That.
Speaker Change: The decision tree of the number of people that would be involved in the decision has actually increased and so it's more of a I think it's time issue than youre seeing any sort of fundamental shift in end market demand.
Speaker Change: Okay, that's great and can you maybe talk a bit more about the competitive environment, Viva and <unk> they have very deep robust.
Data systems, obviously, you have some very significant competitive advantage there, but just any color on.
Speaker Change: On the competitive market.
Speaker Change: Win rate and stuff like that would be help on the life Sciences side. Thank you.
Speaker Change: So I don't know if we're actually quoting win rates Rick do we have statistically yes, we do not we do not tend to get into those I would say that we are.
Speaker Change: We're seeing strong support from our existing customers.
Speaker Change: Particularly around renewals more pressure on ourselves.
Speaker Change: Not hearing a ton.
Speaker Change: Of competitive losses against the Veeva is the world.
Speaker Change: I would caveat as always all within the next one way or the other we haven't noticed a profound shift there.
Speaker Change: Okay. Appreciate it thank you.
Speaker Change: And we'll move next to Allen Lutz with Bank of America.
Speaker Change: This is Hannah Lee on for Alan.
Speaker Change: Could you just talk about like with the unified platform are you thinking about any potential pricing changes.
Speaker Change: Well, there's the components around the competitive dynamic of you can compete on quality service and price and I don't know if I would characterize it as pricing changes as much as a more sophisticated delivery option, where you have the ability.
Speaker Change: <unk> for the customer to dictate what is most important to them. It's very difficult to have a single size offering that provides the same white glove service at all price points. So if you choose we're going to have and we're going to maintain a ruthless vigilance around quality and we are.
Speaker Change: Going to continue to maintain leadership as the premier data quality standard, but the notion around are you optimizing for service.
Which could mean speed.
Speaker Change: Speed it could mean.
Speaker Change: Access to.
Speaker Change: More resources around Master data management or are you going to optimized price.
Speaker Change: That's the change that we're considering here is how do we become a more sophisticated delivery mechanism for those folks that are actually optimizing for price.
Speaker Change: Got it that's helpful. Thank you.
Ryan Macdonald: And our next question will come from Ryan Macdonald with Needham.
Ryan Macdonald: Hi, Thanks for taking my questions and I apologize. If this was covered earlier, but as you think about this unified product strategy and sort of the integrations required the progress you need to make here.
Ryan Macdonald: Can you just talk about general timeframe for when you think this can be completed and then as you think about sort of the preliminary commentary you gave for 25 and sort of I think it was a return to sequential growth in the back half on the top line is this is completion of this sort of unification on the product.
Ryan Macdonald: <unk> side.
Ryan Macdonald: A crucial or sort of a critical component to being able to get back to that growth in the back half of next year or is that more market dependent if you will.
Speaker Change: Yes, that's a.
Speaker Change: A good question and the way I would think about.
Speaker Change: Sort of a unified product strategy, there's multiple elements to that and I think the first and most important rung of that.
Speaker Change: Ladder. So to speak is you've got to have it's because of the way you access and use the product right. So the simplified and ease of access to our product strategy with single sign on it needs to be easy to access and that's really sort of that UI UX interface, which once that's critical unified the.
Speaker Change: Fact that we might not have completely unified lets say the data supply chain or or some of the back office components of our infrastructure from the customer's perspective, it really doesn't matter. It does put pressure on the.
Speaker Change: The infrastructure of the cost and potentially what we have to do to support the customer, but thats something thats relatively straightforward and we're working on that now and that is sort of imminent.
Speaker Change: So I think that's the first step and so that'll start to show some immediate improvements to get the fully indicate integrated.
Speaker Change: Back office supply chain all the other things comes along with that that may take longer and while not made they take longer it will take longer but that's sort of behind the scenes. So as we talk about this more especially going into the 2025 annual operating plan and our three year plan, which were underway right. Now I think we will be able to give you a better color on that as we start to talk about forecasting how thats going to be it.
Speaker Change: <unk> next year, but I do see.
Speaker Change: The unification and ease of use is a very important pillar to start to address some of the retention and churn dynamics that we have that we have to address and it is improving and we have seen.
Speaker Change: The improvement over the past three quarters, but in order for that to start to show meaningful improvement to allow us to get back to those growth rates and accelerate the velocity to get to those growth rates. We've got <unk>, we've got to see more improvement on that so I think thats going to be very important.
Speaker Change: Thanks, Kevin I appreciate the color.
Speaker Change: And this concludes.
Speaker Change: <unk> a question and answer session I would like to turn the conference back to Mr. Cooper for any additional or closing remarks.
Mr. Cooper: I just want to thank everybody for their time I. Appreciate you joining and we look forward to continue to keep updating you on our progress and talking to you next quarter.
Speaker Change: Thank you.
Speaker Change: And this concludes today's conference call. Thank you for joining.
Speaker Change: The host has ended this call.
Speaker Change: [music].
Speaker Change: [music].
Welcome to definitive health Care's Q3, 2024 earnings call later, we will conduct a question and answer session I would now like to turn the call over to your host you may begin.
Speaker Change: 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. 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 health care 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 health care industry generally.
Speaker Change: Any forward looking statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.
Speaker Change: Forward looking statements involve a number of risks and uncertainties, including those discussed in the risk factors section and elsewhere in our filings with the SEC actual results may differ materially from any forward looking statements. The company undertakes no obligation to revise or update any forward looking statements to reflect events that may arise. After this conference call, except as required by law for more information.
Speaker Change: <unk>. 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: 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: Thanks, Matt and thanks to all of you for joining US. This afternoon to review definitive Healthcare's third quarter 2024 financial results.
It's been an exciting and active time here and today I will provide you with an update on the initial progress we've made to position the company for a return to top and bottom line growth.
Kevin: Let me begin by reviewing our financial results for the quarter, which I am pleased to share were above the high end of our guidance ranges on both the top and bottom line.
Kevin: Our total revenue was $62 7 million down 4% year over year. This decline was expected as renewal rates improved year over year, but they're still well below our potential and we also anniversaried the acquisition of popular this quarter.
Kevin: Adjusted EBITDA was $20 6 million down 5% year over year, and adjusted EBITDA margin was 33% consistent with the prior year. Despite the decline in revenue thanks to earlier cost actions and ongoing cost discipline.
Kevin: As indicated on our last earnings call, we do expect to see some volatility as we implement improvements in our operational execution focus areas.
Kevin: For example, the results this quarter were mixed.