Q1 2025 Definitive Healthcare Corp Earnings Call
Operator: Welcome to Definitive Healthcare's Q1 2025 Later, we will conduct a question and answer.
Welcome to definitively the health Care's Q1, 2025 earnings call later, we will conduct a question and answer session.
Operator: I would now like to turn the call over to your host. Good afternoon. Thank you for joining us today to review Definitive Healthcare's financial results. Joining me on the call today are Kevin Coop, our Chief Executive Officer, Rick Booth, our CFO, and Casey Heller, our SVP of Finance.
I would now like to turn the call over to your host you may begin.
Speaker Change: Good afternoon. Thank you for joining us today to review definitive Healthcare's financial results joining me on the call today are Kevin Coop, Our Chief Executive Officer, Rick Booth, our CFO and Casey Heller SVP of finance.
Operator: 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 differentiated data and healthcare commercial intelligence solutions, our competitive position, customer behaviors and use of our solutions, customer growth, our financial guidance, our planned investments and operational strategy, generating value for our customers and shareholders, the anticipated impacts of global macroeconomic conditions on our business, results, and customers, and on the healthcare industry generally, and on our ability to successfully transition executive leadership. 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 the benefits of our differentiated data and health care commercial intelligence solutions.
Speaker Change: Imperative position customer behaviors and the use of our solutions customer growth, our financial guidance, our planned investments and operational strategy generating value for our customers and shareholders. The anticipated impacts of global macroeconomic conditions on our business results in customers and on the health care industry generally and on our ability to successfully.
Speaker Change: <unk> executive leadership.
Speaker Change: Any forward looking statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Form Act of 1995.
Operator: 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.
Speaker Change: For looking statements involving number of risks and uncertainties, including those discussed in the risk factor section and elsewhere in our filings with the SEC.
Speaker Change: 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 is required by law.
Operator: 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: 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.
Operator: 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 reconciliation of these measures to their most directly comparable GAAP financial measure.
Speaker Change: 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: 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 Defendant of Health Care's first quarter 2025 financial results. On today's call, I'll provide key highlights from our first quarter performance and provide an update on our progress against our key strategic priorities for the year. Let me begin by reviewing our financial results for the first quarter, which were above the high end of our guidance ranges on both the top and bottom line. Our total revenue was $59.2 million, down 7% year-over-year.
Kevin: Thanks, Matt, and thanks to all of you for joining us this afternoon to review Definitive Health Care's first quarter 2025 financial results.
Speaker Change: On today's call, I'll provide key highlights from our first quarter performance and provide an update on our progress against our key strategic priorities for the year.
Speaker Change: Let me begin by reviewing our financial results for the first quarter, which were above the high end of our guidance ranges on both the top and bottom line.
Speaker Change: Our total revenue was 59.2 million, down 7% year over year. This was ahead of our expectations for the quarter due to an outperformance and professional services and more in period subscription revenue due to deal timing.
Kevin Coop: This was ahead of our expectations for the quarter due to an outperformance in professional services and more in-period subscription revenue due to deal timing. While we are pleased with our top line results relative to our expectations heading into the quarter, we continue to work through the impact of lower retention rates. Adjusted EBITDA was $14.7 million, which was well ahead of expectations and represents a 25% margin. This performance illustrates our commitment to controlling cost and the scalable nature of our business model. Unlevered free cash flow performance for the trailing 12 months was also strong with 91% conversion from adjusted EBITDA over that same period.
Speaker Change: While we are pleased with our top-line results relative to our expectations heading into the quarter, we continue to work through the impact of lower retention rates.
Speaker Change: Adjusted EBITDA was 14.7 million, which was well ahead of expectations and represents a 25% margin. This performance illustrates our commitment to controlling cost and the scalable nature of our business model.
Kevin Coop: Operationally, I would frame the first quarter as a solid start. We continue to see improvement with relative signs of strength in new business, particularly with new logo. While renewal rates stabilized in Q1 at the same levels observed throughout the second half of 2024, retention rates remain lower than we believe are achievable. New logo activity was solid across all end markets, which demonstrates the ongoing demand from customers for differentiated, actionable data. And these wins illuminate what most resonates with new customers and will help us build a more repeatable and predictable new business motion. In terms of renewals, we delivered on our first goal of stabilization during the quarter.
Speaker Change: Operationally, I would frame the first quarter as a solid start to the year. We continue to see improvement, with relative signs of strength and new business, particularly with new local wins.
Speaker Change: While renewal rates stabilized in Q1, at the same levels observed throughout the second half of 2024, retention rates remain lower than we believe are achievable.
Speaker Change: New local activity was solid across all end markets, which demonstrates the ongoing demand from customers for differentiated actionable data, and these wins illuminate what most resonates with new customers and will help us build a more repeatable and predictable new business in this motion over time.
Speaker Change: In terms of renewals, we delivered on our first goal of stabilization during the quarter.
Kevin Coop: Improving churn remains our highest priority, and each of our strategic priorities for 2025 are expected to benefit renewal rates over time. There is a natural lag between implementing operational changes and observing their positive impact on renewal rates, so it will take time before we expect to deliver consistent improvement, but we remain confident in our operational strategy.
Speaker Change: Improving churn remains our highest priority, and each of our strategic priorities for 2025 are expected to benefit renewal rates over time.
Speaker Change: There is a natural lag between implementing operational changes and observing their positive impact on renewal rates, so it will take time before we expect to deliver consistent improvement, but we remain confident in our operational strategy.
Kevin Coop: As we discussed on our last call, we are mobilizing the entire company towards enhancing our value proposition and performance across four areas of strategic focus. As a reminder, the four key pillars of our platform and value proposition are differentiated data, data delivery and integrations, driving customer success, and enabling our customers' digital engagement with providers and consumers. I would like to take a moment to provide an update on the progress made across each of these focus areas.
Speaker Change: As we discussed on our last call, we are mobilizing the entire company towards enhancing our value proposition and performance across four areas of strategic focus.
Speaker Change: As a reminder, the four key pillars of our platform and value proposition are differentiated data, data delivery and integrations, driving customer success, and enabling our customers' digital engagement with providers and consumers.
Speaker Change: I would like to take a moment to provide an update on the progress made across each of these focus areas.
Kevin Coop: Let's start with David. This is our North Star and the foundation for the value Definitive delivers for customers. Critical to our differentiated data are the steps we take to ensure our data is of the highest quality as well as the unmatched breadth and depth of our coverage of the entire healthcare ecosystem. Unlike other solutions in the market, we have built our leading reference and affiliations data by combining the best data from a diverse set of sources. This includes our own proprietary primary research, public sources including government data and websites of health care organizations, key opinion leader data, as well as third party claims. Together, we use these sophisticated sourcing methods to build differentiated datasets with deep profiles on each provider and the high-quality historical relationships and affiliations.
Let's start with the data.
Speaker Change: This is our North Star and the Foundation for the Value Definitive Delivers for Cospers. Critical to our differentiated data are the steps we take to ensure our data is of the highest quality, as well as the unmatched breadth and depth of our coverage of the entire healthcare
Speaker Change: Unlike other solutions in the market, we have built our leading reference and affiliations data by combining the best data from a diverse set of sources.
Speaker Change: This includes our own proprietary primary research, public sources including government data and websites of healthcare organizations, key opinion leader data, as well as third-party claims data.
Speaker Change: Together, we use these sophisticated sourcing methods to build differentiated data sets with deep profiles on each provider and the high quality historical relationships and affiliations.
Kevin Coop: The result is a rich and actionable data set required by, and specific to, the healthcare market, our customers' demand to support their need to access, assess, and monitor changes in the rapidly evolving healthcare market. This approach offers a significant advantage over claims derived in model data alone, which will not capture a significant percentage of the facility. Our complex systematic processes have been built over a decade. We are in the process of expanding, improving, and diversifying our data sources and processes to further strengthen and broaden our data quality so we can provide customers with continuous innovation and to generate increasing value from the definitive platform they have come to expect and deserve.
Speaker Change: The result is a rich and actionable data set required by and specific to the healthcare market our customers demand to support their need to access, assess, and monitor changes in the rapidly evolving healthcare marketplace.
Speaker Change: This approach offers a significant advantage over claims derived and modeled data alone which will not capture a significant percentage of the facilities. Our complex systematic processes have been built over a decade.
Speaker Change: We are in the process of expanding, improving and diversifying our data sources and processes to further strengthen and broaden our data quality so we can provide customers with continuous innovation and to generate increasing value from the definitive platform they have come to expect and deserve.
Kevin Coop: This will include extending that advantage with modern data science and partnerships. We are confident that this comprehensive approach to data collection and analysis was critical in the analysis that led to our selection as the primary healthcare data partner for the global strategic partnership we announced last quarter. A foundation of differentiated data is ultimately only as good as our ability to deliver that data to customers and seamlessly integrate our first-party data with whatever third-party data sources are relevant to each customer, which leads to our second pillar, that of seamless integration. Seamless integration is the core of our Master Data Management, or MDM, strategy, which is designed to ensure our customers can leverage the Defendant platform as an essential component of how they solve key business challenges as simply as possible.
Speaker Change: This will include extending that advantage with modern data science and partnerships. We are confident that this comprehensive approach to data collection and analysis was critical in the analysis that led to our selection as the primary healthcare data partner for the global strategic partnership we announced last quarter.
Speaker Change: A foundation of differentiated data is ultimately only as good as our ability to deliver that data to customers and seamlessly integrate our first party data with whatever third party data sources are relevant to each customer which leads to our second pillar that of seamless integration.
Kevin Coop: Master Data Management, in this case, is essentially matching and appending data pinned to our unique token, the Definitive ID. So, in addition to our historical solutions that provide direct access through our software, our evolution includes customer engagement through both our unified software platform and by leveraging our integration application and APIs that may also include advanced analytics support. In Q1, we saw strong double-digit growth in the number of engagements where we work with clients to integrate our data with their various tools and systems. Historically, we have seen retention rates be approximately 10 points higher when customers and clients integrate Definitive into their other data sources.
Speaker Change: Master Data Management in this case is essentially matching and appending data to our unique token, the Definitive ID.
Speaker Change: So, in addition to our historical solutions to provide direct access to our software, our evolution includes customer engagement through both our unified software platform and by leveraging our integration application and APIs that may also include advanced analytics support.
Speaker Change: In Q1, we saw a strong double-digit growth in the number of engagements where we work with clients to integrate our data with their various tools and systems.
Speaker Change: Historically, we have seen retention rates be approximately 10 points higher when customers and clients integrate definitive into their other data sources.
Kevin Coop: The key here is that we are adapting to the changing needs of the market by helping our customers solve their challenges in the manner that they want to engage. That could be via our software directly, providing simple APIs to our data, or deploying our data science and advanced analytics resources to partner in the development of insights by matching and appending our data with both their first and third party data sources. And this approach has the added benefit of leading to deeper relationships with our customers, which leads to our next pillar. I'm pleased with the progress we have made in our third pillar, that of customer success.
Speaker Change: The key here is that we are adapting to the changing needs of the market by helping our customers solve their challenges in the manner that they want to engage.
Speaker Change: That could be via our software directly, providing simple APIs to our data, or deploying our data science in advanced analytics resources to partner in the development of insights by matching and appending our data with both their first and third-party data sources.
Speaker Change: And this approach has the added benefit of leading to deeper relationships with our customers which leads to our next pillar.
Speaker Change: I'm pleased with the progress we have made in our third pillar, that of customer success.
Kevin Coop: As mentioned last quarter, at the start of the year, we took several steps to streamline and simplify many of our operations to improve our customer engagement, including the creation of a center of excellence for our analytics and data science teams, integrating our customer success and value delivery team, and revamping their comp incentives, and hiring a new chief customer officer. I'm pleased to report that we've done an excellent job operationalizing these changes with nearly no disruption to our performance. Our leadership in this area has quickly assessed the organizational needs and taken swift action to address structural needs and reorient our focus on the voice of customer and retention.
Speaker Change: As mentioned last quarter, at the start of the year we took several steps to streamline and simplify many of our operations to improve our customer engagement, including the creation of a center of excellence for our analytics and data science teams.
Speaker Change: Integrating our customer success and value delivery team and revamping their compensinums and hiring a new chief customer officer. I'm pleased to report we've done an excellent job operationalizing these changes with nearly no disruption to our performance.
Speaker Change: Our leadership in this area has quickly assessed the organizational needs and taken swift action to address structural needs and reorient our focus on the voice of customer and retention.
Kevin Coop: A core component of customer success starts with how we sell and onboard our customers, so I am pleased to report we are also making solid progress on refining our GTM and customer support engagement model. As discussed last quarter, we are developing a higher-touch, service-enabled delivery model for life sciences customers, many of whom have more intensive data requirements and more sophisticated queries. For example, we began working with a biotech company specializing in rare genetic diseases through an analytics partnership with our medical affairs team. Over the past 18 months, our work has expanded across multiple disease areas and teams. This partnership led them to invite us into a commercial analytics RFP for an expanded indication of their top therapy asset.
Speaker Change: A core component of customer success starts with how we sell and onboard our customers, so I am pleased to report we are also making solid progress on refining our GTM and customer support engagement models.
Speaker Change: As discussed last quarter, we are developing a higher touch service enabled delivery model for life sciences customers, many of whom have more intensive data requirements and more sophisticated queries. For example, we begin working with a biotech company specializing in rare genetic diseases through an analytics partnership with our medical affairs team.
Speaker Change: Over the past 18 months, our work has expanded across multiple disease areas and teens.
Speaker Change: This partnership led them to invite us into a commercial analytics RFP for an expanded indication of their top therapy asset. It's rare for a client to engage the same partner across both medical affairs and commercial functions, which is a testament to our reputation and the value that we bring.
Kevin Coop: It's rare for a client to engage the same partner across both medical affairs and commercial functions, which is a testament to our reputation and the value that we bring. In terms of our final pillar, we are making progress on enhancing our digital engagement capabilities for our provider and diversified customers. We believe there is a significant opportunity for the Definitive Platform to not be just a data provider, but also a partner that can automatically operationalize the insights customers derive from our data. Importantly, there are multiple ways we can go to market with digital engagement, our traditional GTM motion of selling direct to customers and partnering with agencies who do this work on behalf of our customers.
Speaker Change: In terms of our final pillar, we are making progress on enhancing our digital engagement capabilities for our provider and diversified customers.
Speaker Change: We believe there is a significant opportunity for the definitive platform to not be just a data provider, but also a partner that can automatically operationalize the insights customers derive from our data.
Speaker Change: Importantly, there are multiple ways we can go to market with digital engagement. Our traditional GTM motion of selling direct to customers and partnering with agencies who do this work on behalf of our customers.
Kevin Coop: In Q1, we expanded our go-to-market reach with both agencies and customers that directly source their digital activations, signing two leading healthcare advertising agencies in addition to a significant direct Both agencies are currently ramping up, and we expect to see activation in Q2, with momentum continuing to build in the second half of 2025. In our direct selling efforts, we signed a competitive deal with a New York regional health system.
Speaker Change: In Q1, we expanded our go-to-market reach with both agencies and customers to directly source their digital activations, signing two leading healthcare advertising agencies in addition to a significant direct deal.
Speaker Change: Both agencies are currently ramping up and we expect to see activation in Q2 with momentum continuing to build in the second half of 2025.
Speaker Change: In our direct selling efforts, we signed a competitive deal with a New York Regional Health System. The agreement includes consumer audience activation as part of a broader solution spanning population intelligence and campaign management, and as an example of the success we intend to drive through this pillar of focus.
Kevin Coop: The agreement includes consumer audience activation as part of a broader solution spanning population intelligence and campaign management and is an example of the success we intend to drive through this pillar of For more information visit www.fema.gov The common link between these four pillars is our belief that there are a number of ways that we can increase the value we deliver to customers and ensure Definitive is a critical part of their daily business work. By focusing on our differentiated data, developing more intimate, flexible customer engagements, and through relentless focus on customer success through all stages of the customer relationship, we believe we will meaningfully improve our retention metrics, leverage our distribution assets to deliver new solutions, establish consistency in our results, and return our enterprise to growth.
Speaker Change: The common link between these four pillars is our belief that there are a number of ways that we can increase the value we deliver to customers and ensure definitive is a critical part of their daily business workflows.
Speaker Change: By focusing on our differentiated data, developing more intimate, flexible customer engagements and through relentless focus on customer success through all stages of the customer relationship.
We believe we will meaningfully improve our retention metrics.
Speaker Change: Leverage our distribution assets to deliver new solutions, establish consistency in our results, and return our enterprise to growth.
Kevin Coop: While Q1 was a solid start to the year, we do have more work ahead of us.
Speaker Change: While Q1 was a solid start to the year, we do have more work ahead of us.
Kevin Coop: As I approach the one-year anniversary as CEO of Definitive, I strongly believe that we have successfully identified the right key areas that need to be improved, we've assembled the right team, and we are moving with velocity to implement our action plans against clearly defined Thank you. Notably, we have successfully implemented these changes without disrupting our progress towards As you'll hear shortly, we remain on track to deliver against our full year financial targets, even after taking into account the recent increase in economic uncertainty. This puts us on target to begin generating sequential revenue growth in the near term, while continuing to closely manage our cost structure and identify additional ways to drive We are committed to establishing a track record of consistent execution against the targets we've laid out for R&D.
Speaker Change: As I approach the one-year anniversary as CEO of Definitive, I strongly believe that we have successfully identified the right key areas that need to be improved. We've assembled the right team and we are moving with velocity to implement our action plans against clearly defined objectives.
Speaker Change: Notably, we have successfully implemented these changes without disrupting our progress towards stability.
Speaker Change: As you'll hear shortly, we remain on track to deliver against our full-year financial targets even after taking into account the recent increase in economic uncertainty.
Speaker Change: This puts us on target to begin generating sequential revenue growth in the near term while continuing to closely manage our cost structure and identify additional ways to drive efficiencies.
Speaker Change: We are committed to establishing a track record of consistent execution against the targets we've laid out for our investors.
Rick Booth: With that, I would like to turn the call over to Rick one final time as our CFO and to thank him for his many contributions to Definitive over the past four years. He will review our first quarter results in more detail, and then Casey will provide an update on our second quarter and full year financial guidance.
Speaker Change: With that, I would like to turn the call over to Rick one final time as our CFO and to thank him for his many contributions to definitive over the past four years. He will review our first quarter results in more detail and in case he will provide an update on our second quarter and full year financial guidance.
Rick Booth: Rick. Thanks, Kevin. I'll start with a detailed review of our first quarter results. As always, in all my remarks, I'll be discussing our results on a non-GAAP basis, unless otherwise new. In Q1, we were pleased to deliver above the high end of our guided range. We remain focused on what we can control and continue to advance our efforts to operate more efficiently while delivering innovation for our clients. In the first quarter, we delivered $59.2 million of revenue. with $3 million above the midpoint of guidance and down 7% compared to the first quarter of 2025. Delivered $14.7 million of adjusted EBITDA in the period.
Rick: Thanks, Kevin. I'll start with a detailed review of our first quarter results. As always, in all my remarks, I'll be discussing our results on a non-GAAP basis unless otherwise noted.
Rick: In Q1, we're pleased to deliver above the high end of our guided ranges
Rick: 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: In the first quarter, we delivered $59.2 million of revenue. This was $3 million above the midpoint of guidance, and down 7% in compared to the first quarter, $2024.
Rick: We delivered 14.7 million of adjusted EBITDA on the period. This was 4 million above the midpoint of guidance for a 25% adjusted EBITDA margin.
Rick Booth: This was $4 million above the midpoint of guidance for a 25% adjusted EBITDA margin. On a dollar basis, adjusted EBITDA was down 27% from the same period in the prior year, reflecting the flow-through effects of lower revenue. Adjusted net income was $7 million, resulting in $0.05 non-GAAP earnings per share in the And we generated $67.1 million of unlevered free cash flow on a trailing 12-month basis . . equal to 91% of adjusted EBITDA for the same period. On a dollar basis, unlevered free cash flow is down 12% versus the 12 months prior. Turning to our results in more detail, as I mentioned, revenue for the first quarter was $59.2 million.
Rick: Adjusted net income with $7 million, resulting in five cents, non-GAAP earnings per share in the period.
Rick: And we generated $67.1 million of unlevered free cash flow on a trailing 12-month basis.
Rick: Equal to 91% of adjusted EBITDA for the same period. On a dollar basis, unleavoured free cash flow is down 12% versus the 12 months prior.
Rick: Turning to our results in more detail. As I mentioned, revenue for the first quarter was $59.2 million. This was above the high end of our guided range and down 7% from the same period of the prior year.
Rick Booth: This was above the high end of our guided range and down 7% from the same period of the prior year. Subscription revenue for the first quarter declined 7% from the same period of the prior year, while professional services revenue returned to growth and grew 9% in the For more information visit www.fema.gov Subscription revenues continue to be impacted as renewal rates are not yet back to our desired level. Adjusted gross profit was $47.1 million, down 11% from Q1 2024. And as a percentage of revenue, the adjusted gross profit margin of 79.5% decreased approximately 410 basis points from Q1 2021.
Rick: Subscription revenue for the first quarter declined 7% from the same period of the prior year, while professional services revenue returned to growth and grew 9% in the quarter.
Rick: Subscription revenues continue to be impacted, as renewal rates are not yet back to our desired levels.
Rick: Adjusted Gross Profit was $47.1 million, down to 11% from Q1, 2024 [inaudible]
Rick: And as a percentage of revenues, the adjusted Gross profit margin of 79.5%, decreased approximately at least 410 basis points from Q1 2024.
Rick Booth: This reflects both the decline in revenue and the largely fixed nature of most of our current costs. Adjusted sales and marketing expenses were $19.5 million, flat year-over-year. As a percentage of revenue, sales and marketing expenses were 32.9% of revenue, about 220 basis points higher than the prior year. For 2025, we expect sales and marketing as a percentage of revenue to increase approximately 150 to 200 basis points relative to the full year 2024 because of the revenue . Adjusted Product Development Expense was $7.4 million, up 2% from Q1 2024. As a percentage of revenue, product development expense was 12.5%, up about 100 basis points from Q1 2012.
Rick: This reflects both the decline in revenue and the largely fixed nature of most of our current costs.
Rick: Adjusted sales and marketing expenses were $19.5 million, flat, year over year. As a percentage of revenue, sales and marketing expenses were 32.9% of revenue, about 220 basis points higher than the prior year.
Rick: For 2025, we expect sales and marketing as a percentage of revenue to increase the approximately 150 to 200 basis points relative to the full year 2024 because of the revenue pressure.
Rick: Adjusted product development expense was $7.4 million, up 2% from Q1 2024, as a percentage of revenue product development expense was 12.5%, up about 100 basis points from Q1 2024.
Rick Booth: We believe targeted investments in our platform and using both existing and new data sets to launch or enhance multiple products is an effective and efficient way to increase the value we deliver to customers. We intend to continue prudently investing in the highest ROI opportunities on our long-term product road map and we expect full year 2025 product development as a percentage of revenue to be up approximately 100 basis points compared to the full year 2025. Adjusted G&A expense was $7.6 million, up 6% from Q1 2024. As a percentage of revenue, G&A expenses were 12.9% of revenue, which is up 150 basis points compared to Q1 2024.
Rick: We believe targeted investments in our platform and using both existing and new data sets to launch or enhance multiple products is an effective and efficient way to increase the value we deliver to customers.
Rick: We intend to continue prudently investing in the highest ROI opportunities on our long-term product roadmap, and we expect full-year 2025 product development as a percentage of revenue to be up approximately 100 basis points compared to the full year 2024.
Rick: Adjusted G&A expense was $7.6 million, up 6% from Q1 2024 24.
Rick: As a percentage of revenue, GNA expenses were 12.9% of revenue, which is up 150 basis points compared to Q1 in 2024.
Rick Booth: We expect G&A expense as a percentage of revenue in 2025 to increase by approximately 100 to 150 basis points year-over-year. Adjusted Operating Income of $12 million, was down 35% from Q1 2021. As a percentage of revenue, Adjusted Operating Income was 20%, down from 29% in Q1 2024 due to the revenue pressure in the period. Adjusted EBITDA was $14.7 million, a 27% decrease from Q1 of 2024. And as a percentage of revenue, adjusted EBITDA was 25% of revenue, down 670 basis points from Q1, 2020. Adjusted net income was $7 million, or $0.05 per diluted share, based on 151.8 million weighted average shares outstanding in Q1.
Rick: We expect GNA expense as a percentage of revenue in 2025 to increase by approximately 1,100 to 150 basis points year-over-year.
Rick: Adjusted operating income of $12 million was down 35% from Q1 in 2024.
Rick: As a percentage of revenue, adjust about operating income was 20%, down from 29% in 2021-24 due to the revenue pressure in the period.
Rick: Adjusted EBITDA was $14.7 million, a 27% decrease from Q1 of 2024.
Rick: And as a percentage of revenue, adjusted EBITDA was 25% of revenue, down 670 basis points from Q1, 2024.
Rick: Adjusted net income was $7 million or $5 cents per delivery chair based on $151.8 million weighted average shares outstanding in Q1.
Rick Booth: Turning the 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 flow due to season. Operating cash flows were $67.7 million on a trailing 12-month basis, up 58% from $42.8 million in the comparable period a year ago, as we benefited from strong collections and a higher deferred revenue related to the data partnership entered into at the end of Unlevered free cash flow was $22.9 million in the quarter. On a trailing 12-month basis, unlevered free cash flow was $67.1 million, down 12% from the comparable period a year.
Rick: Turning the cash flow, Definitive Healt cares high margins, upfront billing, and low capex requirements provide substantial free cash flow generation.
We focus on trailing 12-month cash flow due to seed inhality.
Rick: Operating cash lows were $67.7 million on a trailing 12-month basis.
Rick: Up 58% from 42.8 million dollars in the comparable period a year ago, as we benefited from strong collections and a higher deferred revenue related to the data partnership entered into at the end of Q4.
Rick: Unleivered free cash flow was $22.9 million in the quarter on a trailing 12-month basis. Unleivered free cash flow was $67.1 million, down 12% from the comparable period a year ago.
Rick Booth: This is 91% of our TTM adjusted EBITDA of $73.8 million over the same period. In the first quarter, we repurchased approximately 5.6 million shares for a total of $21.2 million. This leaves $77 million remaining under the existing authorization. At the end of Q1, current revenue performance obligations of $182 million were about equal to the year-end total. Total Revenue Performance Obligations were up 4% year-over-year, and Deferred Revenue of $113 million was up 4% year-over-year. One final bit of accounting before guidance.
Rick: This is 91% of our TTM Adjusted EBITDA of 73.8 million over the same period.
Rick: In the first quarter, we repurchased approximately 5.6 million shares for a total of $21.2 million. This leads $77 million remaining under the existing authorization.
Rick: At the end of Q1, current revenue performance obligations of $182 million were about equal to the year-end total.
Rick: Total revenue performance obligations were up 4% euro of a year, and deferred revenue of $113 million was up 4% euro of a year.
Rick: One final bit of accounting before guidance, the stock price decline caused us to book a further $176.5 million of goodwill impairment as of March 31st.
Rick Booth: The stock price decline caused us to book a further $176.5 million of goodwill impairment as of March 31st. That write-down also generated approximately $19.1 million of gain on the remeasurement of the TRA liability and a $10.5 million deferred income tax . As a reminder, these are non-cash accounting charges, have no impact on our debt covenants, and all impacts are excluded from our adjusted.
Rick: That right now also generated approximately 19.1 million dollars of gain on the remasurment of the TRA liability and a 10.5 million dollar deferred income tax benefit.
Rick: As a reminder, these are non-cash accounting charges, have no impact on our debt covenants, and all impacts are excluded from our adjusted earnings.
Casey Heller: And now, I'll turn the call over to Kasey to take you through guidance. Thank you, Rick. As you heard from Kevin and Rick, we delivered a solid performance in Q1. We exceeded our guidance range on the top and bottom lines for the quarter, but continue to be impacted by pressures on renewals. For the second quarter, we expect to deliver $58.5 to $60 million in revenue, a decrease of 6% to 8% compared to the second quarter of 2024. Within that, we expect subscription revenues to grow modestly in Q2 compared to Q1. From a non-GAAP profitability perspective for the second quarter, we expect to deliver adjusted operating income of $12 to $13 million.
Casey: And now, I'll turn the call over to Casey to take you through guidance.
Thank you Rick.
Speaker Change: As you heard from Kevin and Rick, we delivered a solid performance in Q1. We've seated our guidance range on the top and bottom lines for the quarter, but continue to be impacted by pressures on renewals.
Speaker Change: For the second quarter, we expected deliver $58.5 to $60 million in revenue, a decrease of 68% compared to the second quarter of 2024.
Speaker Change: Within that, we expect subscription revenues to grow modestly in Q2 compared to Q1.
Speaker Change: From a non-GAAP profitability perspective for the second quarter, we expect to deliver adjusted operating income of 12 to 13 million dollars.
Casey Heller: Adjusted EBITDA of $15 to $16 million, reflecting a 25 to 27% adjusted EBITDA margin. Adjusted net income of $6.5 to $7.5 million, or approximately $0.04 to $0.05 per diluted share on 147.9 million weighted average shares. From a cost standpoint, there's one unique item impacting the second quarter to call out, which is already contemplated within the guidance ranges provided. As a result of a renegotiation on an existing data contract, we will observe a one-time credit of approximately $1 million in the second quarter. This will contribute to sequential improvement in our non-GAAP profitability for the period over Q1.
Speaker Change: Adjusted EBITDA of $15 to $16 million, reflecting a 25 to 27% adjusted EBITDA margin.
Speaker Change: Adjusted net income of $6.5 to $7.5 million or approximately $4.5 per diluted share on 147.9 million weighted average shares.
Speaker Change: From a cost standpoint, there's one unique item impacting the second quarter to call out which is already contemplated within the guidance ranges provided.
Speaker Change: As a result of a renegotiation on an existing data contract, we will observe a one-time credit of approximately $1 million in the second quarter. This will contribute to sequential improvement in our non-GAAP profitability for the period over Q-1.
Casey Heller: Shifting to full year 2025, we are tightening our revenue range based on our performance in the first quarter from both a revenue and booking standpoint. We now expect to deliver revenue of $234 to $240 million for a 5% to 7% decline year over year. This raises the bottom end of our prior range by $4 million while holding the upper end of the prior guide. We believe this approach prudently balances the outperformance from Q1 and the fact that we are a third of the way through the year with the increasingly uncertain macro environment facing all businesses.
Speaker Change: Shifting to Folier 2025, we are tightening our revenue range based on our performance in the first quarter from both the revenue and booking standpoint
Speaker Change: We now expect to deliver revenue of $234 to $240 million for a 5% to 7% decline year-over-year.
Speaker Change: This raises the bottom end of our prior range by $4 million while holding the upper end of the prior guide.
Speaker Change: We believe this approach prudently balances the outperformance from Q1 and the fact that we are a third of the way through the year with the increasingly uncertain macro environment facing all businesses.
Casey Heller: And we remain committed to delivering on the non-gap profit margins we shared with you all at the end of February. We are holding our prior non-gap profit guidance of adjusted operating income of $49 to $53 million, adjusted EBITDA of $61 to $65 million for a full year margin of 26 to 28 percent. Adjusted net income is expected to be between $30 to $34 million, and earnings per share are now expected to be $0.20 to $0.23 on a basis of 148.8 million weighted average shares outstanding, which incorporates the share repurchase activity through Q1.
Speaker Change: And we remain committed to delivering on the non-GAAP profit margins we shared with you all at the end of February . We are holding our prior non-GAAP profit guidance of adjusted operating income of $49 to $53 million.
Speaker Change: Adjusted EBITDA of $61 to $65 million for a full-year margin of 26 to 28 percent [inaudible]
Speaker Change: Adjusted net income is expected to be between 30 to 34 million dollars, and earnings per share are now expected to be 20 to 23 cents on a basis of 148.8 million weighted average shares outstanding, which incorporates the sharey purchase activity through Q1.
Casey Heller: With eight months left to go in the year and our focus on the operational areas Kevin highlighted earlier, we believe it is important to guide prudently. We're focused on continuing to meet our profit commitments while providing the business with the flexibility needed for investments supporting our strategic initiatives.
Speaker Change: With eight months left to go in the year and our focus on the operational areas Kevin highlighted earlier, we believe it is important to guide prudently. We're focused on continuing to meet our profit commitments while providing the business with the flexibility needed for investments supporting our strategic initiatives.
Casey Heller: I'd like to wrap up by reiterating that we're pleased with the start to the year and remain focused on our key operational and strategic objectives focused on improving retention, returning definitive to growth, and increasing long-term shareholder value.
Speaker Change: I'd like to wrap up by reiterating that we're placed with the start to the year and remain focused on our key operational and strategic objectives focused on improving retention, returning definitive to growth and increasing long-term shareholder value. And with that, I would like to open it up for questions.
Operator: And with that, I would like to open it up for questions. you would like to ask a question. Press star 1 on your telephone keypad now and it will be placed into the queue when the order receives. Please be prepared to ask your questions. Please keep in mind, please try to keep your one question and one follow-up. Once again, if you would like to ask a question... Star 1 on your phone now.
Speaker Change: If you would like to ask a question, please press star 1 on a telephone keypad now and we placed
Speaker Change: Please be prepared to ask your question when prompted. Please try to keep your one question and one follow-up. Once again, if you would like to ask the question, please press star 1 on your phone now.
Jared Haase: Our first question comes from Jared Haase from William Blair. Yeah, thanks, guys.
Speaker Change: And our first question comes from Jared Haase, from Liam Blair. Please go ahead, Jared.
Kevin Coop: And Rick, all the best to you in the future. Been great working with you these past few years. Kevin, maybe to double-click on some of your comments around the data integrations in the prepared remarks. You know, I appreciate the comments you shared in terms of what you typically see, you know, on user engagement and higher retention with those data integration partnerships. You know, what determines if you're actually able to integrate the data in the client's workflow? So are there certain systems that are just, you know, a little more challenging to work with? Or, you know, is it sometimes an issue for data security reasons, something along those lines?
Jared Haas: Yeah, thanks guys, and Rick, all the best to you in the future. Been great working with you these past few years.
Kevin, maybe to double-click on...
Jared Haas: Some of your comments around the data inaugurations in the prepared remarks.
Kevin Coop: And then I guess related to that, are you able to offer incentives maybe around pricing or something like that to kind of encourage the integrated adoption, just given, you know, the value that you're able to see? Yeah, so Jared, it's it's kind of a combination, right? You've got, you've got the elements around Data sharing, you've got to facilitate the data interactions, the data sets, whether that's through, you know, through Snowflake, Databricks. Our integrations come in the form of integration. We have modules which already have connectors that we can actually work in for like Salesforce.com, which are already there.
and the value that you're able to see.
Speaker Change: Yes, so Jared, it's kind of a combination, right? You've got the elements around.
Speaker Change: Data sharing. You've got to facilitate the data interactions, the data sets, whether that's through, you know, through snowflake, data bricks.
Speaker Change: Our integrations come in the form of integration. We have modules which already have connectors that we can actually work in for like a Salesforce.com which are already there.
Kevin Coop: And we also have the analytics capabilities to ensure that we can leverage, you know, the analytical resources that might help them do that in a more complicated mastering of data perspective, like with Match and Append, which is part of what we're looking to do and to drive more of those engagements with a broader set around use cases in that area, which that's, I think, what you're seeing with the double-digit increase in the number of integrations. Part of it is just doing it with intention. People need differentiated data. They are looking for the access of that data, often through our UI UX, which we still continue to offer.
Speaker Change: and we also have the analytics capabilities to ensure that we can leverage.
Speaker Change: You know the analytical resources that might help them do that in a more complicated mastering of data perspective like with match and append which is part of what we're looking to do and to drive more of those engagements with a broader set around use cases in that area which
Speaker Change: That's I think what you're seeing with the double-vision increase in the number of integrations. Part of it is just doing it with intention. People need differentiated data.
Speaker Change: They are looking for the access of that data often through our UI UX, which we still continue to offer and then we also have the ability to offer them that seamless integration either through pre-built connectors in the first place.
Jared Haase: And then we also have the ability to offer them that seamless integration, either through pre-built connectors or through a more complex master data management relationship where we're providing them and augmenting their own efforts with our own advanced analytics system. So I think in a very short time this year, we're already seeing the fruits of that, that it's proving out. And not only is it helping them unlock more value with our data, but it's going to, we know that just based on the data, the data analysis, that our retention rates will also increase as well. Got it.
Speaker Change: or through a more complex master-data management relationship where we're providing them and augmenting their own efforts with our own advanced analytics system. So, I think in a very short time this year, we're already seeing the fruits of that that's proving out and not only is it helping them unlock more value with our data, but it's going to, we know that just based on the data analysis that our retention rates will also increase.
as well.
Jared Haase: That's helpful.
Speaker Change: John , that's helpful. Thank you. And then maybe as a follow-up, I wanted to come back to the work you're doing with agencies now. So, just number one was hoping to kind of unpack the agency's strategy a little bit more and just tell you're thinking about the impact that might have on the go-to-market motion, and then also wanted to clarify if there was any meaningful contribution from the agency channel assumed here in the forward guidance for 2025, and also wanted to clarify too, are those agents your-
Operator: Thank you.
Jared Haase: And then maybe as a follow-up, I wanted to come back to the work you're doing with agencies now. So just number one was hoping to kind of unpack the agency strategy a little bit more and just how you're thinking about, you know, the impact that might have on the go-to-market motion. And then also wanted to clarify, you know, if there was any meaningful contribution from the kind of the agency channel assumed here in the Forward Guidance for 2025. And also wanted to clarify too, are those agency relationships, do you think of that as sort of unlocking, you know, any specific client segment, like small and mid-sized organizations?
Speaker Change: Relationships, do you think of that as sort of unlocking any specific client segment like small and mid-size organizations next?
Kevin Coop: I think it's applicable to all size customer segments in the segment, primarily with provider diversified. If you think of it in the simplest form, people need their data, they need data, they need the differentiated data, and they want to do something with that. And we usually say that it's a very obvious adjacency or a logical next step for our business is We historically were able to help them there, but without, again, similar to the integrations, without the intention of actually helping them with that next step, we sort of, you know, I think we missed an opportunity, which we're attempting to capitalize now.
I think it's applicable to all-size customer segment.
in to say that primarily with provider and diversified, what we...
Speaker Change: If you think of it in the simplest form, people need their data, they need data, they need the differentiated data, and they want to do something with that, and we usually say that it's a very obvious adjacency or a logical next step for our business, is...
Kevin Coop: So, it's a relatively straightforward solution. We provide great differentiated data, and then we help our customers activate or put that into execution, whether they want to leverage that directly themselves through, say, a Google or a HubSpot or whatever platform they desire, or they may wish to do so through an agency. The secondary component of the agency relationship is by having your data there already, agencies themselves are dealing with customers that want to activate, and we become an option for them on a kind of go forward and a more of a transactional basis, which will take a little longer to build.
Speaker Change: So it's a relatively straightforward solution. We provide great differentiated data, and then we help our customers activate or put that into execution, whether they want to leverage that directly themselves through say a Google or a HubSpot or whatever platform they desire or they may wish to do so through an agency.
Kevin Coop: So, we think that the digital strategy with the two components of it, we believe we'll see quicker return on the direct channels as that builds. Where I think longer term the agencies represent it even bigger because you're basically leveraging different distribution channels and that will build over time, but that will take a little bit longer. Both of which we expect to start to show some contribution this year.
Speaker Change: Well, I think longer term, the agency's represented even bigger because you're basically leveraging different distribution channels and that will build over time, but that will take a little bit longer, both of which we expect to start to show some contribution this year.
Jared Haase: Perfect. That makes sense.
Craig Hettenbach: Thank And our next question comes from Craig Hettenbach from Morgan Stanley. Please go ahead, Craig. Thanks. And nice to see the stabilization in the business, Kevin. Can you touch on just you mentioned kind of a lag in terms of a lot of the processes and changes you put in place. What do you think is kind of a reasonable time frame that you would see kind of an inflection on the growth? Yeah, I think you'll have to, you will see that start to, to show up in year. But if you think about the processes and the operationalization of what we're doing.
Perfect. I make sense. Thank you.
Speaker Change: And our next question comes from Craig Hettenbach from Morton Stanley. Please go ahead, Craig.
Craig Hetendock: Thanks, and nice to see the stabilization of the business, Kevin. Can you touch on just, you mentioned kind of a lag in terms of a lot of the processes and changes you put in place? What do you think is kind of a reasonable time frame that you would see kind of reflection on the growth rate here?
Craig Hetendock: Yeah, I think you'll have to see, you'll see that start to, to show up in year.
Craig Hetendock: But if you think about the processes and the operationalization of what we're doing.
Kevin Coop: Our vertical strategy, our GT emotion has always been segmented by in-market. So this is really just an evolution of an existing strategy. And, you know, different markets have different use cases and needs, and our pricing and packaging should reflect that reality. Customer size is important, and we intend to manage our business with the appropriate pricing and packaging, including how we support and configure our customer solutions according to their needs. Part of that is this integration strategy that we just talked about here, or I just responded to, our master data management in digital. But also, it's an evolution towards more of a segmented vertical approach, which we're positive to see, we're pleased to see some positive signs in bookings in our life sciences clients, which were well ahead of last year in Q1.
Craig Hetendock: Our vertical strategy. Our GT emotion has always been segmented by end market. So this is really just an evolution of an existing strategy.
Craig Hetendock: And, you know, different markets have different use cases in need, and our pricing and packaging should reflect that reality.
Craig Hetendock: Customer size is important, and we intend to manage our business with the appropriate pricing and package including how we support and configure our customer solutions according to their needs.
Craig Hetendock: Part of that is this integration strategy that we just talked about here, or I just respond to, our Master Data Management and Digital, but also it's an evolution towards more of a segmented vertical approach which we're positive to see, we're pleased to see some positive signs in bookings we're pleased to see some positive signs in bookings, we're pleased to see some positive signs in bookings, we're pleased
Craig Hetendock: and our Life Sciences clients, which were well ahead of last year in Q1.
Kevin Coop: So what we're doing is we're aligning the support functions, whether that's success, onboarding, how we engage with integration, the attached services that can come with the customer arrangement. By bringing all those together, which it's easy to say it's harder to do, that takes a little bit of time.
Craig Hetendock: So what we're doing is we're aligning the support functions, whether that's success onboarding, how we engage with integration, the attached services that can come with the customer arrangement, by bringing all of those together, which it's easy to say it's harder to do that takes a little bit of time.
Kevin Coop: Now that we're seeing that in the go-to-market emotion across both the front end of how the customers are entitled, sold, and onboarded, we're expecting to start to see that flow through, but that takes a little bit of time for that all to get into motion, and we're well away on the journey, but we still have more work. Got it.
Craig Hetendock: Now that we're seeing that in the go-to-market emotion across both the front end of how we actually a customer, the customers are entitled, sold and onboarded, we're expecting to start to see that flow through, but that takes a little bit of time for that all to get into motion and we're well away on the journey, but we still have more work to do.
Kevin Coop: And then just as a follow-up, you called out a customer win-back in the press Is this an area, if I think about the churn over the last few years, there's been a lot of industry dynamics there as well, is this something that, you know, you can kind of build on just from winning customers that might have went elsewhere? Or do you think it's really going to be more new logo relationships that drive the inflection? That's a good question. As I think about the answer to that, to try to be very You know, trying to be thoughtful.
Craig Hetendock: Got it. And then just as a follow-up, you called out a customer win-back in the press release.
Speaker Change: Is this an area, if I think about the journal last year, it's been a lot of industry dynamics there as well. Is this something that, you know, you can kind of build on just from winning customers that might have went elsewhere or do you think it's really going to be more new logo relationships that drive the inflection from here?
Thank you.
Speaker Change: That's a good question, as I think about the answer to that, to try to be very—
You know, trying to be thoughtful.
Kevin Coop: We're going to have the opportunity because, first of all, with the first pillar being data quality. With the best. data quality that we can provide, coupled with the best service that our customers demand, we believe that we, with our differentiated data, can create that durable competitive advantage around that data set, and we do not need to resort to competing on price with low-cost providers. What that'll also do... is we believe that over time, because the quality of data is important, not as much even as breadth of data, but depth of data and quality of data, that people will realize that that we are the Hi.
Speaker Change: We're going to have the opportunity because, first of all, with the first pillar being data quality.
With the best...
Data, Quality that we can provide [inaudible]
Speaker Change: Coupled with the best service that our customers demand we believe that we with our differentiated data can create that durable competitive advantage around that data set and we do not need to resort to competing on price with low cost providers.
What that'll also do.
Speaker Change: is we believe that over time, because the quality of data is important, not as much even as breadth of data, but depth of data and quality of data, that people will realize that we are the...
Speaker Change: High Value Provider, and that we will be able to win back customers that may have left us in the past. At the same time, there are massive numbers of customers out there that have yet to experience the awesomeness of our data, and we think we can continue to still win new logos and drive.
Kevin Coop: high value provider, and that we will be able to win back customers that may have left us in the past. At the same time, there are massive numbers of customers out there that have yet to experience the awesomeness of our data. And we think we can continue to still win new logos and drive. that drive that as well. And I think we've seen that again year to date. I think we're seeing some good green shoots of that. And I feel very confident that our go-to-market motion is only going to strengthen. Thanks for that.
Speaker Change: that drive that as well. And I think we've seen that again year to date. I think we're seeing some good green shoots of that. And I feel very confident that our go-to-market motion is only gonna strengthen it.
Got it. Thanks for that.
David: And our next question comes from David.
Speaker Change: And our next question comes from David Grossman from Steeple. Let's go ahead, David.
David: Go ahead, David. Thank you. Good afternoon. You know, I'm wondering maybe if we could just step back. I'm just trying to reconcile the first quarter actual, the second quarter guide and the implied, you know, kind of revenues in the back half of the year. It feels kind of flattish, you know, like you're kind of guiding the flattish sequential revenue of the balance of the year or something like that, and maybe similarly on the EBIT downline. So, you know, I heard what you said about, you know, professional services, I guess, came in better than expected. More in-period subscription revenues.
David Grossman: Thank you. Good afternoon. You know, I'm wondering maybe if we could just step back. I'm just trying to reconcile the first quarter.
David Grossman: Actual, the second quarter guide and the implied, you know, kind of revenues in the back half of the year and it feels kind of flatish, you know, like you're you're kind of guiding the flatish sequential revenue of the balance of the year or something like that [inaudible]
David Grossman: and maybe similarly on EBITDA online. So, you know, I heard what you said about, you know, professional services, I guess, came in better than expected and Um, um,
more in-period subscription revenues.
David: So. Maybe you could reconcile all that to kind of what the implied guide is for the balance of the year so we just understand fundamentally kind of how you're thinking about the balance of the year and how. Results could actually, you know, kind of vary from what's your kind of underlying assumption.
David Grossman: Maybe you could reconcile all that to kind of what the implied guide is for the balance of the year. So we just understand fundamentally kind of how you're thinking about the balance of the year and and and how. Thank you.
David Grossman: Results could actually, you know, kind of vary from what your kind of underlying assumptions
Casey Heller: Absolutely, David. Happy to walk you through that. So we're certainly pleased with our first quarter performance and our ability to outperform our guide on the quarter. And as you mentioned, we called out having benefited from an uptick in professional services projects, which drove part of the beat, as well as some timing benefit on the skew of some subscription bookings throughout the quarter. So both of those things improved our Q1 revenue versus our initial expectations, and will lessen the sequential lift from Q1 to Q2 compared to what we were initially expecting when we spoke at the end of February.
Absolutely David, happy to walk you through that.
David Grossman: So, we're certainly pleased with our first quarter performance and our ability to outperform our guide on the quarter and as you mentioned we called out having benefited from an uptick and professional services projects Thanks for your time, and I'll see you next time.
David Grossman: which drove part of the B as well as some timing benefit on the skew of some subscription bookings throughout the quarter.
David Grossman: So both of those things improved our Q1 revenue versus our initial expectations and we'll lessen the sequential lift from Q1 to Q2 compared to what we were initially expecting when we spoke at the end of February .
Casey Heller: So as we look at second quarter, we are expecting to see an overall similar revenue growth rate to what we delivered in Q1. And our guidance really reflects a number of potential scenarios, which does include a modest step up within subscription revenues going from Q1 to Q2. So we view this really as just kind of a prudent guide, given some of the uncertainty being faced of the business from the last year, and that's the view of stabilizing subscription revenues is an encouraging sign of progress for us. And we're still continuing to focus on those core actions being taken across the business to improve our renewal rates.
David Grossman: So, as we look at second quarter, we are expecting to see an overall similar revenue growth rate to what we delivered in Q1 and our guidance really reflects the number of potential scenarios which does include a modest step up within subscription revenues going from Q1 to Q2.
David Grossman: So we view this really just kind of a prudent guide given some of the uncertainty being faced of the business from the last year and that's the view of stabilizing subscription revenues is an encouraging sign of progress for us.
David Grossman: We're still continuing to focus on those core actions being taken across the business to improve our renewal rates.
Casey Heller: And we'll see how that continues to play out over the next few months. Now, when we look at the second half of the year, you're right that at the midpoint, that top line revenue is essentially flatlined. But there is opportunity for continued sequential growth at the high end of the range. Just given where we are at this point in the year, we just it's important to prudently guide so that we're guiding you to an achievable number under any number of scenarios. But yes, that upper end of our revenue guidance range would suggest stronger sequential growth as we move through the year.
David Grossman: and we'll see how that continues to play out over the next few months. Now when we look at the second half of the year
Speaker Change: You're right that at the midpoint that top line revenue is essentially flatlined, but there is opportunity for continued sequential growth at the high end of the range.
Speaker Change: But yes, that upper end of our revenue guidance range would suggest stronger sequential growth as we move through the year. But we just still have a lot of work to do when we're focused on driving those operational improvements and executing against our strategic objectives.
Casey Heller: But we just still have a lot of work to do when we're focused on driving those operational improvements and executing against our strategic objectives. Right.
David: So just to think at a very high level then, I mean, you were down sequentially in March reflecting, you know, kind of higher churn than new business, right, or renewals and the combination of new bookings and renewals. And so it sounds like your assumption of the year, at least at the midpoint of that range, is that, you know, the kind of churn, if you will, in the bookings, you know, the new bookings kind of offset one another. Is that... You know, kind of a fair way to think about the midpoint of the guide for the balance of the year.
Speaker Change: Right, so just to think at a very high level then, I mean you were down sequentially in March reflecting.
Speaker Change: You know, kind of higher term than new business, right? Or renewals and the combination of new books and renewals and so it sounds like your assumption of the year at least at the midpoint of that range. [inaudible]
Speaker Change: is that, you know, the kind of churn, if you will, and the bookings, you know, the new bookings kind of offset with another, is that...
Speaker Change: You know, kind of a fair way to think about the midpoint of the guys or the balance of the year.
David: Yeah, that's a good way to think about it. And a lot of that has to do with the skew of our renewals. So the skew of our renewals are very much weighted to December and January. So obviously, we've got January behind us at this point. So just the level of business that we've got renewed throughout the year just becomes a little bit steadier so that we do have the opportunity for the new logos that we're signing and the expansion bookings within existing clients are to have a little bit more ability to overcome, you know, what kind of falls out through churn or through downsell dynamics.
Speaker Change: Yeah, that's a good way to think about it, and a lot of that has to do with the skew of our renewals, so the skew of our renewals are very much weighted to December and January .
Speaker Change: So obviously we've got January behind us at this point. So just the level of business that we've got renewed throughout the year just becomes a little bit steadier so that we do have the opportunity for the new locals that we're signing and the expansion bookings within existing clients are have a little bit more ability to overcome.
Speaker Change: You know, what kind of falls out through churn or through down cell dynamics, so that kind of drives a bit of that stabilization that we talked about.
David: So that kind of drives a bit of that stabilization that we talked about.
David: Data, and then maybe just a clarification because, you know, I think that you disclose, you know, obviously, the number of customers over, you know, $100,000. And, you know, that has been going down sequentially, you know, for several quarters. So, is most of that, you know, really clients just spending less? Or can you distinguish between how much of that is, you know, lost customers that have churned versus those that are just kind of dropping below that threshold? Yeah, it's certainly the mix of both of those dynamics. And at the same time, we are actually adding new enterprise clients as well.
Got it. And then...
Speaker Change: Maybe just a clarification because I think that you disclose the number of customers over 100,000
Speaker Change: Dollars, and yeah, that has been going down sequentially, you know, for several quarters. [inaudible]
Speaker Change: Is most of that really clients just spending less, or can you distinguish between how much of that is you know, lost customers that have churned versus those that are just kind of dropping below that threshold?
Speaker Change: Yeah, it's certainly the mix of both of those dynamics and at the same time we are actually adding new enterprise clients as well so you've got a roughly even size kind of component through just ultimate losses as well as down cell driven. That's netting that decline.
David: So you've got a roughly even sized kind of component through just ultimate losses as well as downsell driven that's netting that decline. Got it.
David: Okay, that's it for me. Thanks very much. Thanks, David.
Okay, that's it for me. Thanks very much.
Thanks, David.
George Hill: And our next question comes from George Hill from Deutsche Bank. Please go ahead, George. Good afternoon.
Speaker Change: And our next question comes from George Hill from Deutsche Bank. Please go ahead, George.
Kevin Coop: I'd just kind of be interested from an end market demand, like, what is the, what are the most important fraud cell modules that customers are looking for right now? And I guess, kind of, I'll ask the macro uncertainty question, like, which of the solutions that you guys sell do you feel like is best positioned to help a lot of your provider clients, given the macro uncertainty around Medicaid and tariffs? Yeah, so you've got a quite a bit in that question. So first, I think the tariff aspect of it for our business is relatively De Minimis, if any.
George Hill: Yeah, good afternoon. I just kind of be interested from an end market demand, like, what is the, one of the most important fraud cell modules that customers are looking for right now? And I just kind of, I'll ask the macro on certain questions, like, which are the solutions?
Speaker Change: that you guys tell, do you feel like it's best position to help all of your provider clients given the macro uncertainty around Medicaid and tariffs?
Demenamous, if any.
Kevin Coop: If any, it would be more around biopharma. We don't really see that as directly impacting stage two clinical use cases, but theoretically it could have an impact on review and evaluation of new drugs and vaccines and devices, which could have some downstream impact. But we haven't seen anything there yet, and we don't expect that we're going to see much there at all. So while it's probably not zero, it's pretty close to it. So we don't really see any major issue with that. As it relates to the use cases or modules and what's most in demand, we see pretty broad demand across all segments for our differentiated data.
If any, it would be more around Biopharma.
Speaker Change: We don't really see that as directly impacting stage two, stage two clinical use cases.
Speaker Change: But theoretically, it could have impact on review and evaluation of new drugs and vaccines and devices which could have some downstream impact but we haven't seen anything there yet and we don't expect that we're going to see much there at all so well it's probably not zero it's pretty close to it so we don't really see any any major issue with that.
is
Speaker Change: As it relates to the use cases or modules and what's most in demand,
Speaker Change: We see pretty broad demand across all segments for our differentiated data.
Kevin Coop: And the access for it, I think if you if you looked at even the most recent quarter and we talked about in Q4, we've seen strong business and logo wins that are ahead of expectations in Q1. And we saw new logo performance and sales across the product sets that we offer across all of our end markets. And so it's been pretty broad. And really what we're focusing on there to drive the next level of returning to growth, it's really around that first pillar, which is quality of data. So we will be able to mitigate both the downsell pressure and we can continue to delight our customers with the best quality data.
Speaker Change: And the access for it, I think, if you looked at even the most recent quarter.
and we talked about it in 2-4.
Speaker Change: We've seen strong business and logo wins that are ahead of expectations in Q1 and we saw new logo performance and sales across the products sets that we offer across all of our end markets.
Speaker Change: and so it's been pretty broad and really what we're focusing on there to drive the next level of returning to growth, it's really around that first pillar which is quality of data.
Speaker Change: So we will be able to mitigate both the down sell pressure and we can continue to delight our customers with the best quality data So I think that's the key pillar I don't think it's so much of the use cases it is you have to ensure that you're really offering you know the best and best in class data that you can [inaudible] I think that's the key pillar I think that's the key pillar I think that's the key pillar
Kevin Coop: So I think that's that's the key pillar. I don't think it's so much of the use cases. It is you have to ensure that you're really offering, you know, the best and best in class data that you can.
Kevin Coop: Yeah, I don't know if I could just clarify. I was actually asking if you guys have any solutions that specifically help your customers with respect to tariffs and kind of put the proposal in the open. Yeah. I got you. I'm sorry, I didn't catch that.
Speaker Change: Yeah, I don't know if I can just clarify. I was actually asking if you guys have any solutions that specifically help your customers with respect to tariffs and kind of put the proposal you'll contribute. Yeah.
Speaker Change: I got you, I'm sorry, I didn't get that. Well, so just a baby.
Kevin Coop: Well, so just to maybe, for the purposes of just kind of clearing what we have, we've got really, you know, if you want to look at solutions by use case, you want to look at solutions by industry, it isn't so much as identifying where the tariffs are going to impact. But we've got a very deep, sweet, around view, which is everything from hospitals, physicians, payers, prescriptions, imaging clinics. So as you really start to look at, you know, things like market analysis, commercialization of devices, launching new drugs and therapies, and finding customers and the strategies that relate to that.
Speaker Change: for the purposes of this kind of query we have. We've got really...
Speaker Change: You know, if you want to look at solutions by use case, you want to look at solutions by industry, it isn't so much as identifying where the tariffs are going to impact but we've got
A very deep...
Sweet Around View, which is everything from hospitals, physicians...
Payers, prescriptions [inaudible]
Speaker Change: Imaging Clinics, so as you really start to look at things like market analysis, commercialization of devices.
Kevin Coop: So there's a lot around that, that downstream potentially is related to tariffs. Particularly, it's not helping to identify what the tariffs will impact. But theoretically, downstream, it could have an impact on, for example, commercialization of a device that may have some components that are that are affected by the tariff downstream. But we that would be that would be way out in the future.
Speaker Change: Theoretically downstream, it could have an impact on, for example, commercialization of a device that may have some components that are affected by the tariff downstream. But that would be way out in the future for us.
Oh, okay, thank you.
David Larsen: And our next question comes from David Larsen from BTIG. Please go ahead, David.
Speaker Change: And our next question comes from David Larsen, from BTIG. Please go ahead, David.
Jenny Shen: Hi, this is Jenny Shen on for Dave. It's encouraging to hear that churn is improving. What was the churn as a percentage for your total base in the quarter? What was that compared to last quarter and also a year ago? And then also, if you could speak about the competitive environment, that'd be very helpful. We also cover some other pharma services names like Viva, Doximity, they've done really well. IQVIA's TAS division has done well. So it sounds like demand for solutions that can assist with the pharma drug launch and commercialization process are seeing good demand.
Speaker Change: Hi, this is Jenny Shen on for a day. It's encouraging to hear that churn is improving. What was the churn as a percentage for your total base in the quarter? What was that compared to last quarter and also a year ago?
Speaker Change: And then also, if you could speak about the competitive environment, that would be very helpful.
Speaker Change: We also cover some other Pharma services names like Viva, Doc Sumney, they've done really well, IQVS, TAS Division, as well, so it sounds like demand for solutions that can assist with the Pharma drug launch and commercialization process are seeing good demand.
Rick Booth: What's your view of the competitive environment? Do you run into those guys when you're out in the market? Thanks. Sure. Thanks, Jenny. So, I'll start with addressing the turn in renewal rate question. So, our Q1 renewal rates were pretty consistent with what we saw in the second half of last year, but they are down relative to Q1 of 2024. So, that for us is continuing to put a little bit of pressure on our net dollar retention rate. But the stabilization is encouraging. We're encouraged certainly by the fact that it's not getting worse. We think we've got our arms around it and that a lot of the operational actions that we're taking will result in improved renewal rates later in the year, and that will start to show up in our results.
Speaker Change: What's your view of the competitive environment? Do you run into those guys when you're out in the market? Thanks.
Speaker Change: Sure, thanks, Jenny. So I'll start with addressing the turn-in renewal rate question. So our Q1 renewal rates were pretty consistent with what we saw in the second half of last year, but they are
Down relative to Q1 of 2024.
Speaker Change: So that for us is continuing to put a little bit of pressure on our net dollar retention rate, but the stabilization is encouraging. We're encouraged, certainly by the fact that it's not getting worse. We think we've got our arms around it and that a lot of the operational actions that we're taking will result in improved renewal rates.
Speaker Change: Later in the year and that will start to show up in our results.
Kevin Coop: As far as what we're seeing competitively, we really haven't seen radical shifts in the quarter. Certainly, some of the dynamics in life sciences, we continue to see pressures due to the current funding environment, interest rates, regulatory uncertainty. The new macro volatility and uncertainty certainly plays into that a little bit. So, we're cautious on the potential impact for our customers going forward, but remain focused on really what we can control. So, I really don't think we've observed any changes amongst the competitive dynamics over the course of Q1. Yeah, and Jenny, what I would add to that is, and you referenced some other players in the space that also have similar, although in different stages, especially in the clinical asset stages.
Speaker Change: As far as what we're seeing competitively, we really haven't seen radical shifts in the quarter.
Speaker Change: Certainly some of the dynamics in life sciences, we continue to see pressures due to the current funding environment, interest rates, regulatory uncertainty.
Speaker Change: The new macro volatility and uncertainty certainly plays into that a little bit, so we're cautious on the potential impact for our customers going forward, but remain focused on really what we can control. So I really don't think we've observed any changes amongst the competitive dynamics over the course of Q1.
Kevin Coop: We don't have first stage, where I think you're seeing the beginnings of that come back now, which is more advantageous. We do not have clinical assets. So when we're talking about the commercializing, or commercialization, or launching in therapies, and especially in biopharma, that would really be stage one. Stage two, or later, and that will have a lag. So I don't think that's a. perfect comparison directly. And a lot of the commentary that I've read in that market as well, I think we're experiencing similar pressures across the board, as there is volatility with the current funding environment, interest rates and regulatory uncertainty, which is elongating the decision cycle.
Speaker Change: We don't have first stage where I think you're seeing the beginnings of that come back now, which is more advantageous. We do not have clinical assets.
Speaker Change: So when we are talking about the commercializing or commercialization or launching in therapies and especially in biopharma that would really be stage two or later and that will have a lag so I don't think that's a
Speaker Change: Perfect comparison, directly. And a lot of the commentary that I've read in that market as well, I think we're experiencing similar
Speaker Change: Pressures across the board as there is volatility with the current funding environment interest rates and regulatory uncertainty, which is elongating the decision cycle. It's increasing the number of RFPs.
Kevin Coop: It's increasing the number of RFPs that are out there. And it is creating a little bit more of a cooling effect on buying decisions and evaluation timelines. And I do think that's pretty consistent across everyone. The good news is that it is seeing is that first stage clinical assets do appear to be Showing some signs of life, that's good for stage two, and so we just have to wait our time for that to work its way through the market.
Speaker Change: They're out there and it is creating a little bit more of a cooling effect on buying decisions and evaluation timelines. And I do think that's pretty consistent across everyone. The good news is that it is seeing is that first stage clinical assets do appear to be
Speaker Change: Showing some signs of life that's good for stage two, and so we just have to wait our time for that to work its way through the market.
Operator: Thanks and congratulations. As a reminder, if you would like to ask a question... Star 1 on your phone. And at this time, there appears to be no further questions.
Great, thanks and congrats on the quarter.
Speaker Change: As a reminder, if you would like to ask a question, please press star one on your phone now.
Operator: And with that, this concludes today's conference call.
Operator: I want to thank everyone for attending and have a great rest of your day. The host has ended this call. Goodbye.
Speaker Change: The host has ended this call goodbye.