Definitive Healthcare Corp.

Welcome to the Definitive Healthcare Q3 2023 earnings call. Our host for today's call is Robert Musselwhite. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I would now like to turn the call over to your host, Mr. Musselwhite. You may begin.

Good afternoon, and thank you for joining us today to review Definitive Healthcare's quarterly financial results. Joining me on the call today are Robert Musselwhite, CEO, Jason Krantz, the founder and executive chairman, and Rick Booth, CFO. During this call, we will make forward-looking statements, including but not limited to statements related to our market and future performance and growth opportunities, ability to mitigate churn, the benefits of our healthcare commercial intelligence solutions, our competitive position, customer behaviors and use of our solutions, our financial guidance, our planned investments, generating value for our customers and shareholders, and the anticipated impacts of global macroeconomic conditions on our business, results, and clients, and on the healthcare industry generally. Any forward-looking statements 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 sections and elsewhere in our filings with the SEC. Actual results may differ materially from any forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements to reflect events that may arise after this conference call, except as required by law. For more information, 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. Please refer to the tables in our earnings release on the investor relations portions of our website for reconciliation of these measures to their most directly comparable GAAP financial measure. With that, I'd like to turn the call over to Robert.

Thanks, Matt, and thanks to all of you for joining us this afternoon to review Definitive Healthcare's third quarter financial results. On today's call, I'll provide an overview of our third quarter results, provide some perspective on business trends and what we are seeing in the market, and review some of our key wins from the third quarter. Then I will turn it over to Jason to highlight some of our latest product innovations. I'll begin by reviewing our third quarter financial results. Our total revenue was $65.3 million, which represents 14% year-over-year growth. and our adjusted EBITDA was $21.7 million, which translates into a 33% margin. Revenue and adjusted EBITDA for the quarter were both above the high end of our guidance ranges for the quarter. We were pleased with our increased profitability in the quarter on a non-GAAP basis. We have been focused on becoming more efficient across all parts of the organization, and it is nice to see that work yielding some measurable results. Revenue growth was consistent with what we have seen in recent quarters and continues to reflect the difficult macroeconomic conditions facing some of our key markets. Looking at the quarter in more detail, the good news is that despite the challenging macro, customers are continuing to engage with us in many different ways. Most importantly, we signed sizable new deals in each of our target markets with both new and existing customers. Demand generation also remains solid as frontline go-to-market and product development professionals are actively planning for investments in growth when their businesses begin to improve. For example, we are conducting a record number of product demos for prospective customers interested in Definitive Healthcare's platform. While this type of activity is a positive sign for future growth, our end markets still remain pressured by the macroeconomic environment. The trends for new business, whether with new or existing customers, We're consistent with what we have seen over the past year. Budget scrutiny remains elevated, client decision processes are slow and complex, and getting transactions through the final buying stages is challenging. This dynamic is true across the business at the moment, but it is most acute with smaller companies, particularly biotech firms that have been dealing with funding constraints for a number of quarters. We also continue to see these dynamics play out in our renewals. As the challenging market environment persists and customers scrutinize their budgets more tightly, they not only have pulled back on new spending, but have also in some cases sought to reduce their existing spend. And this has led to a modest increase in both downsell and churn in our most impacted end markets. In the midst of these conditions, we are very focused on being sure we control what we can control, and we are thus implementing a series of initiatives to try to minimize churn as much as possible in this environment. These include internal data science analysis to help identify our accounts most at risk and focus the efforts of our account managers and customer success team, extra executive interaction and intervention with key clients, and concerted value delivery initiatives from our product and professional services teams. Additionally, we have run a series of outreach campaigns to our customer base aimed at helping our clients utilize our data and solutions as effectively as possible to help their businesses during this time. The good news is that companies that have made larger investments in definitive healthcare generally continue to renew at higher rates than our smaller clients. And while our efforts are in the early stages, we are seeing signs that the work is worthwhile and, as a result, expect to mitigate the incremental churn we have seen. In addition, we have seen some customers that churned in the past return to us, realizing the importance and value of leveraging our data in their efforts. In a moment, I'll highlight one specific example of a customer like this. Stories like these and the consistent expansion we are seeing among many of our existing enterprise customers give us great confidence in the long-term land and expand opportunity in our business. It's important to remember that it remains early in the growth opportunity in the healthcare commercial intelligence market. and there are numerous opportunities to expand our data sets and develop new solutions that enhance the value definitive healthcare can deliver for customers. We've always taken a balanced approach between growth and profitability and continue to invest in strategic areas to lay the foundation for faster growth when market conditions improve. Our customers consistently tell us that they need high-quality, actionable data that helps them make more informed decisions about their business. In a higher cost of capital world, companies face constraints on the number of growth investments they can pursue. This dynamic makes an unsuccessful clinical trial or a poorly designed go-to-market plan even more costly. We believe the combination of the Atlas data set and our commercial intelligence platform has positioned Definitive Healthcare to be the partner of choice for any company looking to make more efficient and effective investments in the healthcare market. And we are confident that this demand will drive strong growth for us into the future. I would now like to spend a few minutes highlighting some of those customer wins from the third quarter that demonstrate the numerous ways customers are generating business value from the definitive healthcare platform. In the life sciences space, we had a significant win back at a leading diagnostic genomics vendor that offers a full spectrum of clinically relevant genetic testing. This customer ended its prior definitive healthcare contract in December of 2022, and then reached out to us in the second quarter of 2023, ultimately signing a multi-year enterprise agreement in August for access to both our Atlas reference and affiliation data set and our Atlas all-payer claims. This customer plans to integrate our data into its CRM system to improve targeted marketing outreach to clinicians. In August, we released a significant update to the Atlas technology install data set. That update contributed to multiple wins in the quarter, including one particular win at a patient engagement software vendor. Within hours of receiving access to the data set, the client ran a report to identify 225 new targets that had its top competitor's software installed, along with the name, phone number, and email address of the purchasing decision maker. Thrilled with these quick results, the client continues to use our data to shape its messaging and value proposition to those targets, in addition to identifying other prospects using its competition. Also in August, we announced our acquisition of Populi, a leading provider of healthcare commercial intelligence to the provider market. Populi had multiple strong wins in the quarter, both before and after the acquisition, but its most important win was an enterprise upsell at a large academic medical center in California. This customer, which was already using Populi's network intelligence and market intelligence products, purchased our population intelligence and campaign activation services. With this expanded product suite, the customer will be able to hyper-segment and target consumers based off clinical propensities and a wealth of other behavioral, demographic, and social determinants of health elements. The customer plans to run omni-channel digital marketing campaigns to recruit more patients in a highly competitive urban market. Turning to our passport analytics suite, we had a multi-year enterprise win at a commercial-stage biopharmaceutical company focused on transformative medicines treating genetic diseases. This firm plans to submit its new drug application to the FDA before the end of 2023, with regulatory filings and additional markets to follow in 2024. This company will use the passport planning and performance modules to assist in the implementation of an evidence plan and to assess the current standard of care, diagnostic path, health economics, treatment path, and outcomes for patients with amyloid cardiomyopathy. Finally, as you know by now, I always like to include a unique customer from outside the healthcare industry that sells its product or service into healthcare organizations. In the third quarter, we were chosen by the American Division of the world's largest dairy and cheese manufacturer to help it expand its presence in both hospitals and long-term care facilities. This customer wants to target group purchasing organizations for integrated delivery networks and plans to use our Atlas reference and affiliation data set to understand the networks and relationships between different facilities. In particular, it plans to integrate our proprietary data into its Salesforce.com instance to better identify strategic accounts, develop customized pricing proposals, and reach out to the right individuals with purchasing authority for food services. With that, I'd like to turn it over to Jason to talk about what we're doing on the product and innovation front.