Definitive Healthcare Corp. Q4 FY2024 earnings call

• Financial results for Q4 were above guidance ranges for top and bottom line. - Experienced mixed operational results with new business secured but elevated churn. - Key operational initiatives include combining med device sales channel into biopharma team, integrating customer success and value delivery teams, adding a chief customer officer, and centralizing analytics/data science capabilities. - Focus on 4 pillars: differentiated data, data delivery/integrations, driving customer success, enabling digital engagement. - Highlighted new logo wins in behavioral mental health and industrial/gas sectors.

Total revenue for Q4 2024 was $62.3 million, down 6% year-over-year. Adjusted EBITDA was $17.5 million, down 12% year-over-year. Adjusted EBITDA margin was 28%. Unlevered free cash flow had 92% conversion from adjusted EBITDA, up 6% year-over-year in dollar terms. Subscription revenue decreased 4% Y/Y, professional services revenue declined more significantly. Enterprise customers with over $100,000 in ARR were 519, down 21 Y/Y and 11 Q/Q. Net dollar retention for 2024 was 90% for enterprise customers and 85% overall.

• Q1 2025 revenue expected to be $55.5 million to $57 million, down 10% to 13% Y/Y. Adjusted operating income expected $7.5 million to $8.5 million, adjusted EBITDA $10.5 million to $11.5 million. - Full-year 2025 revenue expected $230 million to $240 million, down 5% to 9% Y/Y. Adjusted operating income $49 million to $53 million, adjusted EBITDA $61 million to $65 million. Expect Q2 margins stronger than Q1 and second half stronger than first half.

• Elevated churn rates, particularly in life sciences. - Macroeconomic and funding dynamics in biopharma/life sciences impacting retention. - Elongated sales cycles and pricing pressure affecting upsells.

Q: Double-click on churn dynamics, sizing, and root causes?

A: Churn was similar to Q3 but unfavorable Y/Y, more pronounced in life sciences, driven by downsells not outright loss. Operational changes like combining go-to-market, integrating success teams, adjusting compensation aim to address this.

Q: Elongation in sales cycle and upside potential?

A: Q1 expected low point, revenue declines to moderate Y/Y. Q2 benefits from full partnership revenue, second half compares easier. Guidance reflects range of outcomes based on renewal and sales productivity.

Q: Shifting budgets from digital to in-person in pharma? Impact on Definitive?

A: Less pronounced impact on Definitive, as it's more a lagging indicator in life sciences. Current digital activation efforts show traction but not significantly affected by budget shifts.

Q: Specifics on why clients downsell and operational changes to address?

A: Downselling related to both macro/funding and operational factors. Changes include combining centers of excellence, aligning compensation with customer success, centralizing data science, and adjusting pricing/packaging for different end markets.

Q: Pressure on pricing among new prospects and lowering prices as option?

A: Average contract size increased, not competing on price but quality. Focus on maintaining best-in-class data and adding services rather than lowering prices.

Q: Macro trends outside pharma and go-to-market initiatives?

A: Go-to-market initiatives applicable across customer base, including master data management and digital activation, benefiting both life sciences and other verticals like providers.

Q: New master data management deal details?

A: Deal took ~90 days, supports digital activation and MDM. Pipeline for similar relationships exists, leveraging strategic partnerships to accelerate product strategy.