Definitive Healthcare Corp.

Greetings and welcome to the Definitive Health Care Third Quarter 2021 Earnings Call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Venue from ICR. Thank you. You may begin.

Good afternoon, and thank you for joining us today to review Definitive Healthcare's third quarter 2021 financial results. Joining the call today are Jason Krantz, Definitive Healthcare's founder and CEO, and Rick Booth, Definitive Healthcare CFO. During this call, we will make four looking statements, including but not limited to statements related to our market and future growth opportunities, the benefits of our healthcare commercial intelligence solutions, our competitive position, customer behaviors, our financial guidance, our planned investments, and the anticipated impact of the COVID-19 pandemic on our business and results of operation, as well as on our clients, the healthcare industry generally, and the macroeconomic environment. Any forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the risk factor section of our filings with the SEC. Actual results may differ materially from any forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the cautionary statement included in the earnings release that we have just posted to the investor relations portion of our website. Additionally, we will discuss non-GAAP financial measures on this conference call. References during this call to profitability are on an adjusted EBITDA basis. Please refer to the table in our earnings release on the Investor Relations portion of our website for a reconciliation of these measures to the most directly comparable GAAP financial measure. With that, I'd like to turn the call over to Jason.

Thanks, Brian. I would like to welcome everyone to Definitive Healthcare's third quarter earnings call. Our first as a publicly traded company. We were thrilled to complete our successful IPO in September. which was an important milestone for the company. However, as proud as I am of everything that we have accomplished so far, I know that we are just at the beginning of delivering on our vision to be the premier provider of healthcare commercial intelligence. I want to thank our investors for their confidence in definitive healthcare and thank every one of our employees for all they do every day to make our customers successful. On today's call, I want to start by reviewing our success in the third quarter. Then, Since I didn't have the opportunity to meet all of you during our IPO Roadshow, I will provide a brief introduction to our business, our strategy, and the market opportunity we are targeting. Let me start with a quick review of our third quarter financial results. For the third quarter, we continued to deliver on the three financial characteristics that make definitive healthcare a unique investment opportunity, which are the combination of high growth, high profitability, and a tremendous amount of visibility into our future performance. From a growth standpoint, we delivered total revenue of $43.1 million, which represents 43% year-over-year growth. At the same time, we continued to produce exceptional profitability, as indicated by our adjusted EBITDA of $15.5 million, which translates into a 36% margin, as well as our unlevered free cash flow of $11.5 million. Finally, we continue to produce revenues that are almost exclusively subscription-based, and the majority of which are multi-year contracts. Rick, of course, will dive into these numbers in much greater detail, but before I hand the meeting over to him, I'd like to dive into our business and what I believe makes Definitive such a special company. As we all know, the healthcare sector is huge. It's a $4 trillion market that represents 18% of annual U.S. GDP and touches over 300 million patients in the US. However, in addition to being large, the healthcare industry is constantly changing and meaningfully more complex than other industries, creating huge challenges for the companies that sell into healthcare. That is where we come in. I founded Definitive Healthcare to help companies analyze, navigate, and sell into the complex healthcare ecosystem. We bring clarity and in-depth knowledge of the entire market And we have a deep understanding of the interconnected relationships between physicians, hospitals, providers, insurance companies, government regulators, and the patients themselves. Let me provide you an example of what this complexity looks like. Take a pharmaceutical company developing a new drug. To be successful, not only does this company need to develop a new cutting edge technology that provides benefits beyond the current standard of care, but they also need to convince multiple parties of the value of this drug, including physicians who utilize the product, hospitals where the procedure is taking place, the patients who ultimately take the drug, and the insurance companies and government agencies that will pay for it. We help companies across this whole process. First, by helping them identify the best experts from around the globe to assist in designing new drug trial protocols. Then, as the company progresses towards approval and beyond, We help them size their markets and segment physicians with our advanced analytics trends. And we layer in payer reimbursement to help them develop and execute upon the optimal commercialization effort. But let's take a telehealth company. A telehealth company needs to not only understand existing technology infrastructure at a hospital or a physician group, but they also need to understand the web of relationships with physicians and surgery centers and how this is changing over time. And finally, if they can understand the distinct business problems of their targets, perhaps it's a quality problem or a customer service problem, they can go to market with exactly the right message to make sure they can grow as quickly as possible. We provide the intelligence and insight on every provider across the healthcare ecosystem to help our customers develop go-to-market strategies, as well as the tactical information like position location data and executive information to execute upon those strategies. So how do we do it? We have defined a new category called Healthcare Commercial Intelligence, which provides customers with a comprehensive, integrated picture of the entire healthcare system. We do this by combining three key elements. First, we have comprehensive, in-depth, and proprietary intelligence on healthcare providers across the entire continuum of healthcare. We track every provider across the US, including physicians, hospitals, imaging centers, skilled nursing facilities, and much more. And we understand the complex affiliations between these organizations to provide deep insight on the care they provide and their underlying business. We've collected and built this proprietary hub of information over the last 10 years from hundreds of thousands of different sources, including websites, industry journals, publications, and over 700,000 phone calls that our teams make every year. Second, our proprietary AI engine takes the information that we gather from these hundreds of thousands of sources and applies sophisticated data science techniques to cleanse it, link it, and create new intelligence. I like to call this our flywheel of innovation. With our flywheel of innovation, we are constantly ingesting new information and we're applying new algorithms to our data to create new insight for our customers. And over the last 10 years, we have been able to create a comprehensive view of the entire healthcare ecosystem that doesn't exist anywhere else. And now that we have that hub of intelligence, we can innovate at an even more accelerated pace by creating new, powerful, predictive insights with information we already have. And finally, all of this is delivered through a modern, intuitive SaaS platform that puts the right information in the hands of customers to make real time, actionable business decisions. We have productized the ability for customers to quickly analyze and act, thereby increasing their chances of commercial success in the complex ecosystem. So who do we sell this offering to? We play in an extraordinarily large market. We sell to anyone who wants to sell into or compete within the complex healthcare ecosystem. This includes life science organizations like biotech and medical device firms, healthcare IT companies, healthcare providers themselves, like hospitals and large physician groups, and a whole group of diversified companies. These are companies that sell to many industries, but understand that healthcare is a critical market and to succeed in healthcare requires specific commercial intelligence. These companies include organizations as varied as commercial real estate firms, food suppliers, and wood flooring companies. In total, there are over 100,000 companies that we believe are potential buyers of our product. And today we count less than 3% of these companies as customers. As a result, we estimate our TAM to be $10 billion and growing every day as healthcare continues to expand and we continue to innovate and develop TAM expanding disruptive products. We help all of these customers solve a broad range of high stakes business problems, including sales and marketing, where we help our customers utilize our platform to access actionable intelligence that generates highly targeted go-to-market strategies and effective marketing campaigns. We also help our customers with clinical research and product development, where they use the definitive healthcare platform to identify experts across the globe within a specific disease area in order to find important sites for clinical trials and make data-driven investment decisions. Our customers also use definitive healthcare in developing their strategy. They size markets and understand therapeutic adjacencies to make better business decisions about investments in new therapeutics, diagnostics, and technologies. We help our customers with talent acquisition by helping them identify and engage the right candidates for healthcare roles, including nurses, physicians, and hospital executives. And finally, physician network management. This is a multi-billion dollar problem for the industry. We help our customers strengthen their networks by identifying the most attractive physicians, and then we help them understand existing referral patterns and affiliations. And importantly, how are these changing over time? These are all high stakes problems for our customers that the definitive healthcare platform helps solve. And as we innovate every day, we are constantly coming up with new ways to solve even more important business issues for this critical sector. As you look at how we have disrupted the market, we have created something that is highly unique and proprietary. Our customers tell us that our platform has many unique advantages available nowhere else, including deep healthcare expertise, a full comprehensive 360-degree view of the entire market, and a modern integrated platform that productizes our insights to provide immediate insights as opposed to long, expensive one-off consulting engagements. As we look to the future, we are incredibly focused on continuing our trajectory of high growth and profitability. And we will do this in four key ways. First, we will continue to acquire new customers by making significant investments in sales to grow our team and in marketing to generate more inbound demand. With less than 3% penetration today into a market opportunity of 100,000 companies, we have significant opportunity ahead of us. Second, We will continue to expand within our existing client base. We have a land and expand model that has been highly successful as evidenced by our strong net retention rates with our enterprise customers. We can expand within our existing client base by adding users, moving into new functions or therapeutic areas, or selling them new product modules. In fact, we have 14 modules today that we can sell to existing customers and a typical new customer will buy just over two. leaving a substantial opportunity to grow and expand these relationships. Third, we will continue to innovate. In fact, this innovation will accelerate as we are able to leverage our proprietary hub of intelligence to create new insights more and more quickly off of data we already have. This innovation will continue to expand our product portfolio, which provides additional opportunities to increase wallet share with customers, and expanded in new markets or new functions within our existing customers. For example, we rarely sold to healthcare providers three years ago, but as we innovated and created more intelligence and tools to develop and manage physician networks, our products has become a natural fit and we have seen rapid growth in this new large market. And finally, we'll opportunistically pursue strategic acquisitions. While nearly all of our growth historically has been organic, We have made selective tuck-in acquisitions that enable a new capability or extend our data set, which can be applied to our existing customers. We maintain an active M&A pipeline and being public provides us with greater flexibility. We believe selective acquisitions can be an efficient way to accelerate product innovation and extend our value proposition. With that background, let's look at our third quarter performance in more detail. We had a great quarter across the board. with strength in each of our core markets, from life sciences to healthcare IT to diversified companies who want to sell into the healthcare ecosystem. I'd like to highlight several of our key wins in the quarter. In the life sciences space, we had several six-figure new logo wins, including a large pharmaceutical technology company that chose definitive healthcare to accelerate its push into the hospital and health system market. This customer has a new drug delivery implant recently approved by the FDA, and it found significant value in our intelligence about executives, affiliations, procedure volumes, and doctors. Notably, this customer plans to incorporate our hospital data into its VIVA installation to improve the quality of the data in its CRM. We had multiple wins this quarter with technology vendors as well. One of these customers was a cloud-based electronic health record vendor that targets small practices with less than 10 doctors. This customer selected Definitive Healthcare to size, segment, and then sell more effectively into this very hard-to-reach market. It also will use our technology stack data to analyze its competitive landscape. Additionally, we signed a six-figure deal in Q3 with one of the market leaders in the electronic health record market. This customer plans to use our platform to identify which practices are using its competition software, understand usage data like hospital bed counts and clinical metrics, and gain insight into the nature of the practices patients using claims data. Finally, we had a number of big wins at diversified companies who are looking to sell into the healthcare market. For example, one of the world's leading venture capital firms signed a significant deal with us to help them size and evaluate the market for potential investments in the healthcare space. In addition, one of the largest global logistics providers subscribed to the definitive healthcare platform to help validate location and address data and ensure accurate package delivery. We also had two construction companies sign on in Q3 to leverage our hospital view product to identify growing hospital systems that might need new facilities or other infrastructure improvements. These are just some of the many deals we signed in Q3. I want to thank all of these customers for their partnership and congratulate our hardworking commercial team on their success. Definitive Healthcare continues to deliver product innovations in response to customer demand. Some of these recent innovations include an expansion of the physician view product to include new intelligence around physician specialties, which allows clients to precisely target healthcare providers based on specific areas of focus. Users can now leverage this claims-based specialty data to identify individual physicians more accurately, which means companies can sharpen their sales strategies with a better picture of their audience. In the quarter, we also expanded our hospital view product to include new intelligence around organization charts. This new feature enables users to easily map out a hospital's different departments and sub-departments to understand the many layers of management and to identify the right people who may be searching for their product or service. In our Monaco product line, we made significant enhancements to our expert profiles, including adding indexed medical keywords to publications, clinical trials, grants, and industry payments. These additions make it even easier for medical affairs professionals to identify exactly the right clinical and scientific expert to assist in product development. Before I turn the call over to our CFO, Rick Booth, I want to take a moment to highlight the recent announcement that Robert Musselwhite has joined our executive leadership team as definitive healthcare's president. Robert is one of the brightest minds in the healthcare industry, having served as a longtime CEO of the advisory board company, and most recently as the CEO of OptumInsight. We were thrilled when Robert joined definitive healthcare's board of directors earlier this year, where he immediately made important contributions to the company. As Robert learned more about our vision, he appreciated the size of the market opportunity and wanted to take a hands-on role. I'd also like to welcome Kathleen Winters to our board of directors. Kathleen is an accomplished finance and operations executive, most recently serving as the chief financial officer of ADP. Her experience at ADP, as well as her prior experience at the fast-growing MSCI, will be invaluable to definitive healthcare in our board. We're thrilled to have Kathleen join the board, and I'm confident that we will benefit from her expertise in multiple areas. To wrap up, I would like to take a moment to thank all the creative, energetic, and dedicated employees of Definitive Healthcare. It is this amazing group of talented individuals that leads to our success. And it is these individuals who have created a culture of collaboration and decisiveness and inclusion and honesty. And it is these individuals that are working hard every day to help our customers transform healthcare as we know it. Definitive Healthcare delivered excellent third quarter results that reflect the strong momentum we have across all parts of our business. Customers and prospects increasingly recognize our ability to solve some of the most challenging and valuable issues facing their business. We believe we are well positioned to continue to deliver an attractive and unique combination of growth profitability, and high predictability for the foreseeable future, generating significant value for long-term shareholders. I'd now like to turn the call over to Rick Booth to walk you through the numbers. Rick?