Welcome to Definitive Healthcare's Q4 2023 Earnings Call. Our host for today's call is Jason Krantz. I would now like to turn the call over to Mr. Krantz; you may begin.

Good afternoon, and thank you for joining us today to review Definitive Healthcare's financial results. Joining me on the call today are Jason Krantz, Founder, Executive Chairman and Interim CEO; and Rick Booth, our 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, 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 Factors section and elsewhere in our filings with the SEC. Actual results may differ materially from any forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the cautionary statement included in the earnings release that we have just posted in 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 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 Jason.

Thanks, Matt, and thanks to all of you for joining us this afternoon to review Definitive Healthcare's Fourth Quarter and Full Year 2023 financial results. Let me begin by saying that I'm excited to be back as Definitive Healthcare's CEO on an interim basis. Definitive Healthcare plays a unique and differentiated role in the healthcare ecosystem, providing thousands of companies with the data and analytics to help them more effectively commercialize in the large and complex healthcare market. I am energized to once again help Definitive capitalize upon the significant opportunity. On today's call, I will provide an overview of our fourth quarter results, review our performance for 2023 overall, and discuss the future as we position Definitive Healthcare for our next stage of growth. For the fourth quarter, our total revenue was $65.9 million, representing 9% year-over-year growth, and adjusted EBITDA was $19.8 million, a 30% margin. For the full year, total revenue was $251.4 million, representing 13% year-over-year growth, and adjusted EBITDA was $74.5 million, a 30% margin. We are pleased with our performance during the quarter. We continued to show growth in a difficult macro environment, and we delivered upon the 30% full year adjusted EBITDA margin that we guided to at the beginning of the year. Our clients continue to view Definitive Healthcare as critical to solving their most important commercialization problems. They use our products and data to analyze what markets to invest in, who the most important prospects are in those markets, and how to deliver targeted messaging to the right decision-makers. This showed up in our fourth quarter leading results, which exhibited strong top-of-the-funnel demand for our products. But consistent with the trends of 2023, we continue to experience longer sales cycles as uncertainty remained in some of the key markets that we serve. Positively, late in the quarter, we began to see the benefits of the product and delivery investments we made during 2023 with a meaningful increase in customer retention across our business, a trend we expect to continue into 2024. Additionally, our success in adding 12 new enterprise clients during the quarter demonstrates that our data and products are must-haves for these essential customers. Importantly, our enterprise clients, which renew at a higher rate and have the most opportunity for expansion, now account for 65% of our total ARR, up from 61% a year ago. I will discuss later how we are allocating even more resources and attention to this segment going forward. From an end market perspective, life sciences, which makes up almost half of our ARR remained under pressure during the year. The impact of a challenging financing environment impacted the lower end of the market, and customer churn remained elevated across the entire industry as these organizations continue to adjust to changing market dynamics. Despite this, we had a number of exciting customer wins and expansions in life sciences during the quarter, including a New Jersey-based biopharma company focused on oncology therapies for patients with limited treatment options that selected our Monocl platform to help their marketing and medical affairs teams grow their key opinion leader network in support of the launch of a new combination therapy to treat patients with liver cancer. Additionally, in medtech, we signed on a Swiss robotics company, which is focused on minimally invasive surgery. This company plans to utilize our platform across their sales and marketing organization to create a game plan for entering the U.S. market by identifying and targeting the most valuable opportunities for their products within the surgery center, hospital, and individual physician market. Within our provider market, which now accounts for more than 10% of our ARR, we saw improved conditions as this market has started to recover from the challenges created by COVID and staffing shortages. The acquisition of Populi has had an immediate impact on our ability to meet the complex needs of this large and dynamic market, resulting in greater deal velocity with both new and existing customers as well as a significant reduction in customer churn. Based on this success, we plan to expand the Populi solution to our other end markets in 2024 and which we believe will have a similar impact across our entire business. A key win in this segment included one of the largest not-for-profit integrated healthcare systems in Massachusetts that selected our new Populi platform to help them build their physician network by analyzing diagnoses and procedure volumes in their markets, physician referral patterns, and service line utilization. Finally, our diversified customers, which account for about 40% of our ARR performed well in 2023. This market is comprised of customers across a variety of industries that leverage Definitive Healthcare as a must-have in order to effectively sell their goods and services into the complex multitrillion-dollar healthcare market. An example of a great win during this quarter was a global leader in commercial real estate that selected Definitive Healthcare to help them map out their clients' market opportunities. Additionally, they're integrating our data into their Snowflake instance, which is an integration partnership that we launched last year that reinforces our goal of becoming heavily integrated into our clients' workflow. We were also pleased with our ability to increase adjusted EBITDA margins during the quarter. During 2023 and into the beginning of 2024, we took proactive actions to manage expenses and increase efficiency. These actions allowed us to deliver on our full-year adjusted EBITDA margin goal of 30%, and the benefits of these efforts will help drive an expected 200 basis point increase in adjusted EBITDA margin in 2024. Importantly, however, our cost reduction efforts are intended to also give us room to invest throughout the year in the most attractive growth opportunities for our business. As part of the restructuring announcement we made in January, we made several organizational changes, all of which we believe set us up for long-term profitability and growth. First, we streamlined our go-to-market team by reducing overlays and allocating more resources to our most important enterprise clients. These changes will allow us to increase go-to-market productivity by creating more direct accountability amongst our sales team. Additionally, our shift in research allocation to enterprise clients will allow us to build deeper relationships, ensure these organizations fully benefit from the entirety of our offering, and provide more direct feedback to our product development efforts. Second, we reallocated resources within our product organization to areas we believe can have the most immediate impact on our business. This includes an investment in our claims analytics platform and more resources dedicated to artificial intelligence and data science. Finally, we have increased our investment in our Bangalore office to leverage tremendous talent and expertise in that region, particularly in biopharma, data science, and engineering. We expect this investment will not only result in cost savings over time, but will also impact the speed at which we are able to innovate. While the decision to restructure is always difficult, we believe the changes that we have made create a more sustainable long-term cost structure and free us up to allocate investment dollars to the highest opportunity areas. As we turn to the future, 2024 is a year that will be focused on growth and innovation, by digging deep into how we can further help our customers achieve the commercialization success for which they have been turning to us for the last 13 years. Our product work in 2024 will build on our solid foundation of proprietary and differentiated data, powerful and flexible analytical products, and deep subject matter expertise, all of which feed our flywheel of innovation that enables our offerings to evolve at a rapid pace to meet the changing and complex needs of our customers. In 2024, we are focused on the following four areas: First, we will continue to invest heavily in our core and proprietary data asset. We will continue to focus on improving data quality as well as expanding the breadth and depth of our data. Some specific examples include investment in non-standard affiliations, such as management service organizations and independent provider associations, as well as new data and analytics on cancer and infusion centers. Second, we are expanding the use of our Populi Claims Analytics and visualization platform to serve all of our end markets. Since acquiring this platform in July of 2023, we have seen lower attrition and more rapid expansion in our provider business. With this new platform, we have been able to deliver solutions that get into our clients' workflow as they look to expand their markets, reduce leakage, and strengthen their physician networks. We see tremendous opportunity here to build on this success by leveraging this technology with our valuable life sciences and diversified customers. This enhanced solution will launch early in the second half of 2024, and we believe will have a measurable impact on our expansion in churn metrics. Third, we'll continue to invest in AI and data science to drive more insights for our clients. Our work here, which is a continuation of the deep data science that we have been focused on since we were founded, is concentrated in three key areas. First, we are using AI and data science to become more efficient across our organization by automating our work. Second, we continue to derive new data and insights using AI. Our proprietary data on the entire healthcare ecosystem gives us the unique ability to layer AI to create new intelligence that cannot be found elsewhere. A few new examples of this include a geographic proxy to help providers understand where their patients come from and a new influence score that measures the impact of scientific activity such as event presentations and scientific publications. Thirdly, we are collaborating with our customers to explore ways in which we can overlay this technology into our front end to help our users leverage our data and intelligence more quickly. Finally, just after year-end, we completed another acquisition, purchasing the Carevoyance product line from H1. Carevoyance is a software platform utilized by sales and marketing teams in med tech to identify the physicians and facilities that can benefit most from their medical technology or device. While this acquisition is small from a revenue standpoint, we are excited that it provides our clients in the valuable medtech segment with a workflow solution that can leverage our Atlas data set to drive more meaningful interactions with physicians and hospital executives. This product is already being sold by our commercial team and is quickly being integrated into our overall platform. Early client response has been positive and illustrates the value of combining our best-in-class data assets with software that is purpose-built for the needs of our end markets. Additionally, in 2024, we will remain keenly focused on customer retention. As discussed, we believe the product initiatives we are putting in place such as enhancing our core data asset and expanding the use of our Populi Claims Analytics platform will result in reduced churn. However, we will also continue the work we started last year of improving our service and delivery efforts that began to positively impact our churn metrics as the year came to a close. The future of Definitive Healthcare is bright. We compete in a complex and dynamic market with a TAM that is more than $10 billion and growing. We have a combination of unique and proprietary data assets along with powerful products that solve mission-critical client problems, and we have an extraordinarily talented workforce that innovates and constantly redefines how data and analytics can be leveraged in healthcare. With that, let me turn the call over to Rick to walk through the numbers.

Thanks, Jason. I'll start with a detailed review of our Q4 results before finishing with our guidance for Q1 and full year 2024. In all my remarks, I will be discussing our results on a non-GAAP basis unless otherwise noted. We delivered solid results for the quarter. Both revenue and adjusted EBITDA were within our guided range. We remain focused on what we can control, despite the challenging economic conditions and continue to advance our efforts to operate more efficiently while delivering innovation for clients, both of which we expect to position us well as the market recovers. Highlights include 9% revenue growth compared to Q4 2022 and 13% revenue growth for the year. 30% adjusted EBITDA margins for the quarter and for the full year. And our 2023 revenue growth plus the adjusted EBITDA margin was 43%. And for the full year 2023, we generated $68.6 million of unlevered free cash flow, which is up 20% versus 2022. Turning to our results in more detail. Revenue for the fourth quarter was $65.9 million, up 9% from the prior year and in line with our guidance. This amount includes $3.2 million of professional services as large clients engage us to work on some of their most challenging issues in the fourth quarter as in the prior year. Pro forma organic revenue growth was 7% in the quarter and 11% for the full year. We ended the quarter with 566 enterprise customers which we define as customers with at least $100,000 in ARR. This was an increase of nearly 30 enterprise customers or 5% year-over-year. As a reminder, these customers represent the majority of our ARR and are a key focus of our go-to-market program. Our total customer count, which includes smaller customers, was just over 2,900 at the end of Q4, down about 150 from Q4 2022. And that smaller customers have been disproportionately impacted by current conditions. Net dollar retention for 2023 was 96% for enterprise customers and 91% overall. Although these are declines from year-end 2022, many of our actions in 2023 were specifically targeted to customer suggestions for enhanced data, analytics, and service, and we began to see the payoff from these adjustments. We expect at least 100 to 200 basis points of improvement in overall 2024 NDR by year-end. Gross profit was $55.8 million, up 4% from Q4 2022. Gross margin, 84.7%, decreased 350 basis points from the fourth quarter of 2022 due to the impact of both the incremental data sources we introduced earlier in 2023 as well as the impact of Populi, whom we acquired late in Q3 of 2023. We expect full year 2024 gross margin to be fairly consistent with the fourth quarter of this year. Sales and marketing expense was $20.4 million, down 3% from Q4 2022. And as a percentage of revenue, sales and marketing expense was 31% of revenue, down over 350 basis points from the fourth quarter of 2022. The year-over-year decrease reflects the changes we have made to drive efficiencies in sales and marketing, focusing on the markets and activities with the highest return on investment. We expect us to continue to see operating leverage from sales and marketing in 2024 of 200 to 300 basis points relative to the fourth quarter of 2023, and for that improvement in sales efficiency to build throughout the year. Product development expense was $8 million, up 7% from the fourth quarter of 2022. As a percentage of revenue, product development expenses were 12% of revenue, consistent with the fourth quarter of 2022. We believe investing in our platform and using our existing data sets to launch or enhance multiple products is a highly effective and efficient way for us to increase the value we deliver to customers. Jason touched on some examples of these earlier, and we will continue to invest in the multiple opportunities we have identified on our long-term product roadmap. We expect full year 2024 product development as a percentage of revenue to be fairly consistent with full year 2023, which implies up to 100 basis points of operating leverage relative to Q4 2023 building throughout the year. G&A expense was $8.5 million, up 6% from the fourth quarter of 2022. As a percentage of revenue, G&A expenses were 13% of revenue, which is about flat to last year. We expect operating leverage of 100 to 200 basis points in G&A as a percentage of revenue in 2024, and for that improvement in efficiency to build throughout the year as well. Adjusted operating income was $18.3 million, up 12% from the fourth quarter of 2022. As a percentage of revenue, operating income was 28% of revenue, up 80 bps versus the fourth quarter of 2022. The year-over-year margin increase was primarily due to efficiencies in sales and marketing, as I discussed previously. Adjusted EBITDA was $19.8 million, a 16% increase from Q4 2022. As a percentage of revenue, adjusted EBITDA was 30% of revenue, up nearly 200 basis points from Q4 of 2022. As we move through 2024, we expect to continue to see year-over-year improvements in our adjusted EBITDA margin. We expect to reinvest some of the yield on the efficiency actions that we've taken, and we continue to look for areas in which we can reallocate investments to optimize growth. Taking into account the timing effects discussed above, we would expect EBITDA margins to build throughout the year. Adjusted net income in Q4 was $10.6 million or $0.07 per diluted share based on 155.6 million weighted average shares outstanding. Turning to cash flow, Definitive Healthcare is high margins, upfront billing, and low CapEx requirements provide substantial free cash flow generation. We focus on trailing 12-month cash flows due to seasonality. Operating cash flows were $41.2 million on a trailing 12-month basis, up 16% from $35.6 million in the comparable period a year ago. Unlevered free cash flow was $68.6 million on a trailing 12-month basis, up 20% from the comparable period a year ago. Unlevered free cash flow was 27% of revenue on a TTM basis, effectively converting 92% of our TTM adjusted EBITDA of $74.5 million into cash. On the balance sheet, we ended the quarter with $308 million in cash and short-term investments with strong adjusted EBITDA profitability and only $256 million of debt. We believe that we are well positioned to fund both organic and inorganic growth initiatives. Current revenue performance obligations of $187 million were up 2% year-over-year, and total revenue performance obligations were flat year-over-year. Deferred revenue of $97.4 million was down 3% year-over-year. Note that as expected, cRPO and deferred revenue grew more slowly than revenue, and I'll have more to say about that in guidance. Moving now to guidance for Q1. We believe it's prudent to assume that current macroeconomic conditions continue to extend through the first quarter as well. Assuming this is the case, in Q1, we would expect total revenue in the range of $63 million to $65 million for a revenue growth rate of 6% to 10%, adjusted operating income in the range of $18 million to $19 million, adjusted EBITDA in the range of $19.5 million to $20.5 million for a 30% to 32% adjusted EBITDA margin. And finally, adjusted net income in the range of $12 million to $13 million or $0.07 to $0.08 per diluted share to be reported on 157.4 million weighted average shares outstanding. For the full year 2024, we expect revenue of $263 million to $269 million or a 5% to 7% growth rate. It's worth noting that we do expect our revenue growth rate to continue to moderate as we move through the first few quarters of the year, given current economic conditions, along with the anniversary of the Populi acquisition in the second half. I'd like to pause here to comment on our expected revenue growth versus the growth in cRPO of 2% mentioned earlier. We believe cRPO growth of 2% understates expected revenue growth for three reasons. First, some customers have discretionary opt-out clauses in their contracts, which means that they do not show up in cRPO. Without these contracts, cRPO would have been up 4% year-over-year. Second, we saw improved renewal and retention late in the fourth quarter and in January, and we expect that to continue through 2024. And third, we expect to grow in our transactional and services work, which is not fully included in cRPO. Overall, these three changes bridge the gap from cRPO growth for expected revenue growth of 5% to 7%. As in 2023, we'll keep a careful eye on cost and operating efficiency to ensure we drive growth in the most efficient way as possible. When we see revenue upside, we will try to reinvest it to deliver efficient growth while also ensuring we continue to deliver attractive margins. Following this strategy, adjusted operating income is expected to be between $78 million and $82 million. Adjusted EBITDA is expected to be between $84 million and $88 million, for a full year margin of 32% to 33%. Adjusted net income is expected to be between $59 million and $63 million. Earnings per diluted share are expected to be $0.37 to $0.40 on 159.3 million weighted average shares outstanding. Our guidance for 2024 reflects our balanced view of the year, demonstrated our ability to adapt to a tougher macro backdrop, focused on driving efficiency and investing to meet clients' needs today and for the future. So to summarize, 2023 was another solid year for Definitive Healthcare. We took several actions to improve our margin profile and added meaningful capabilities to our platform through organic innovation and strategic acquisitions. We believe that we are well-positioned for the long term because we have developed a clear leadership position in a large and attractive market that we believe will support high levels of predictable revenue growth, profitability, and capital efficiency for the long term. And with that, I'll hand it back to Jason for a few closing thoughts before we take questions.

Before I open it up to questions, I want to thank all of our customers and employees for their commitment and support of Definitive Healthcare. The work that we are doing together is incredibly important as we look to help our customers transform the healthcare system by driving down costs, increasing quality, and helping our customers bring new devices and life-saving therapies to patients worldwide. I'm proud of the impact our platform and our teams continue to have on the marketplace, and we have been externally recognized for the second year in a row by the Boston Business Journal as one of their middle market leaders. We also continue to receive recognition for our strong workplace culture. In Q4, we were recognized as a Best Place to Work in our India office and also received the Silver Stevie Award in the category of Employer of the Year and Health Products and Services for the second year in a row. With that, I would like to open it up for questions. Thank you.

Our first question today comes from Stephanie Davis with Barclays.

Hey, guys, thank you for taking my questions. Jason, you mentioned a ton of new products this year, both inorganic and organic. Can you walk us through what you're viewing as more near-term opportunities for where you've seen the greatest level of initial client interest? And a follow-up to that, you mentioned how it could improve the churn that you see. Do you have any color on the number of solutions per client in your renewing client book compared to some of the attrition?

Thank you for the question, Stephanie. In terms of products we're launching that will have a near-term impact this year, the one we're most excited about is our claims analytics platform. We acquired this platform through the Populi acquisition, and it enables us to create visualizations and specific analytics that help our clients address particular challenges. These challenges include identifying physicians to expand their network and sizing markets for resource allocation in clinical trials or geographic expansion. After rolling this out to providers post-acquisition, we noticed an immediate positive effect on our expansion sales and a reduction in churn, as we were better able to meet their specific needs. We plan to extend this to the rest of our clients at the beginning of the second half of the year, including our life sciences and diversified clients, and we expect it to similarly enhance our responsiveness and the value we provide to our clients.

Following up on that analytics side of things, the recent change outages probably puts an opportunity for some competitive bids out there for healthcare data and analytics solutions. Are you seeing any opportunities in the recent outages as you go to market?

I think it's too early to say what the impact is going to be from all of the things that are happening in that change right now. What we're focused on is the things that we can control. So we're continuing to make sure that we put our investment dollars in the products that are most important and that we see the quickest time to value for our customers and then making sure that we have a go-to-market team that's able to articulate our vision and deliver the type of value that our customers are looking for.

And our next question comes from Craig Hettenbach with Morgan Stanley.

Yes, thank you. On the comments of improved retention late into the quarter and into January, is there anything else you can share in terms of color by end market or customers? And then also, what gives you the confidence that that's kind of back on the right trend as you move through the year?

Hi, Craig. The impact that we saw, as we mentioned, was later in the quarter, and it was really across the entire customer base for the most part. We believe that there were two key things driving that. The first was we spent a lot of effort in the second half of the year really focused on how do we improve the deliverability for our clients of all of our products specifically our claims analytics. So that was a big focus of ours. And how can we improve that deliverability and drive additional service for those clients. So that had immediate effect. The second, which was expressed more in our provider market was the impact that we talked about of how we've productized the Populi platform with new claims analytics and new visualizations to help them provide a market more specifically. So as we think about how this all translates into 2024, the investments that we made in high-quality data, high service, high touch, that will all continue into 2024. Our clients are seeing the benefit of that. And then as we roll out and expand the product offering that I just mentioned to Stephanie's question, that should also impact churn in the second half of the year.

Got it. And then just as a follow-up, Jason, with the recent change in CEO and you're coming back on an interim basis, you mentioned this is a year of growth. Can you just touch on just the strategy here and what you're maybe tweaking at the margin?

Yes. I think it's a change in mindset as we begin this year. Looking back at 2023, it was a time for us to work on our cost structure and establish a foundation for long-term growth and profitability, which is crucial for us. This year, our mindset is much more focused on growth. We are strategically considering the various product investments needed to create significant impact for our clients. We previously discussed the restructuring of our sales force, which aims to allocate more resources and deliver greater value to our largest enterprise clients that present the most expansion opportunities and have lower churn rates. To serve these clients effectively, we are concentrating on product innovation and what we can offer to address a wide range of challenges across their therapeutic areas and organizational functions. Our current focus is to innovate, meet client needs, and expand the use cases we address for them.

And we'll move next to Craig Jones with Stifel.

Hi, thanks for taking the question here. I'm just thinking about the retention, did you say that it was going to improve 100, 200 basis points by the end of the year? And then I was wondering if there's any way to give a breakdown kind of how you're thinking about by client size, some of those metrics you give annually.

Yes. We reported NDR on an annual basis, and we would expect it in our next fourth quarter call, but we would see roughly 100 to 200 basis point improvement.

Okay. So year-over-year, not just like say, December to December or something like that, but you're saying....

It's an annual disclosure running from December to December. We do not provide a more detailed breakdown by industry groups, but we do make comments if we notice any deviations from the trend throughout the year.

Okay. Got it. And then on the acquisition, how much revenue do you expect from that? And then how much from the Populi as well?

Both very, very small tuck-in acquisitions and are fully considered in our guidance material.

Our next question will come from Ryan MacDonald with Needham & Company.

Hey thanks for taking the questions. This is Matt Shea on for Ryan. So it seems like the diversified segment has been an area of outperformance with the 40% ARR number being up from historical levels that were closer to, say, 20% or 30%. So is it fair to say that this end market has been more insulated from the macro? Or why do you think it has been so durable? And then how meaningful do you expect the contributions from this segment to be to the 2024 growth outlook?

Let me just clarify. I think you're comparing against the disclosures we made in our IPO where we broke customer verticals into four groupings, one of which was diversified and one of which was software and IT, adding those together, that's roughly the 40% in the way that we're talking about it now, which is three verticals to emphasize the biggest markets. Our single largest TAM is in life sciences, and our next largest provider, and we're lumping to rest into what we're calling diversified, which is roughly the 40%. Now within that, it has been a good performing segment for us, but I didn't want to confuse you with the 20% versus 40%.

Okay. That's a helpful clarification. I guess pivoting nice to see the improvement in the retention late in Q4 in January, and that should help mitigate the churn. But for those who have, you talked about last quarter strategy is to recapture churn customers. Just curious if you could provide an update on how those efforts are going? And then what kind of win back expectations you're incorporating into the year, if any? Or is that just peer upside? Thanks guys.

Yes. We have always won back customers. So I don't think that there's anything new that I would think of as sort of outsized for this year. We have a heavy effort on making sure that any customer that churns we go back, and especially if it was budget due to all the problems that people are having within 2023, that we go back and we have a conversation with them. Many of these get a tremendous amount of value out of Definitive, so are likely to sign up in the future. We factored some of that into our guidance. We believe it's a little hard to predict how much of that is going to happen in 2024 versus 2025 and beyond, but it's an effort that we will continue to work on and we believe will be some solid upside for us in years to come.

We'll move next to Allen Lutz with Bank of America.

Good afternoon, and thank you for the questions. Rick, I'm trying to understand why revenue growth should be greater than cRPO growth. Looking back at 2023, cRPO growth was just under 7%, and your revenue guidance for 2024 is 5% to 7%. Considering the factors you mentioned like opt-out clauses, improved renewals, and transaction services not being included, is any of this different from how you reported cRPOs in 2023? If cRPO growth stays at 2%, should we expect that to indicate 5% to 7% revenue growth going forward? Thank you.

No. We have a few developments happening. If we look back, especially at the beginning of 2023 or the end of 2022, we had fewer opt-out clauses, which have mainly come in through acquisitions. We inherited contracts and are now starting to generate revenue from a product called activations that assists with delivering marketing to the intended audience. This is currently available in the provider, and it was introduced through Populi. Additionally, the acquisition of Carevoyance, which occurred in early 2024, is included in our guidance.

We'll take our next question from Jared Haase with William Blair.

Thanks for taking the questions. Maybe just taking a step back a little bit, looking beyond 2024, I would just be curious to hear how you sort of frame what the right way to think about margin expansion is longer term. Obviously, you've got north of 200 basis points implied in 2024, but a lot of kind of one-off dynamics impacting the comparison here this year. So it would just be great to hear some context as to how you would frame kind of the multiyear margin expansion story.

Thanks for pointing that out and asking the question. We value both growth and profitability. So we take both seriously. And we will continue to reinvest where we see appropriate in order to drive shareholder value. Over time, I would expect our margins to continue to expand, not ready to quantify that in the form of a long-term model, just given the current dynamism, but it's something we take very seriously.

And then maybe, Jason, for you. I think in the prepared remarks, you mentioned you're seeing strong sort of top-of-the-funnel demand for the products and services that you offer. Any way to unpack that a little bit further, maybe just any additional data points you're able to share? And maybe if you're able to sort of compare and contrast kind of what that looks like going into 2023?

Yes. We had strong demand in 2023 as well. So I think it's a continuation of strong top-of-the-funnel demand. I think that the reality is customers need to have our products in order to grow. And 2023 just was a year of people worrying much more about cost than growth. And as a result, as we talked about, sales cycles get elongated and decisions are stalled, but the top of the funnel demand for what we offer is still extraordinarily high. So we're excited about what we're able to do once the market conditions continue to improve in terms of driving both new logo growth as well as expansion with their existing clients.

Your next question will come from Brian Peterson with Raymond James.

This is John McCary on for Brian. Thanks for taking the questions. So we've seen some competitors call out slightly lower study starts. And I know that's only one of many variables that would impact the addressable market for Definitive. But just curious if you could frame what potential impact you're seeing from that right now in the demand environment?

Sorry, what was the competitor you're saying?

So we've just seen some competitors, whether that be like IQVIA or some other names out there discussing lower study starts. Just curious what impact that may be having on your demand environment?

That should have no short- to medium-term impact on what we do. We typically start to sell to clients once they reach Phase 2 and beyond. We do some business in the earlier stages, and we've noted the challenges faced by small biotechs this year. This has affected us in terms of churn, particularly in the biotech and pharma markets globally. However, overall, this is not the core part of our business, and it constitutes a small portion of our operations. Therefore, we are not very concerned about it.

Got you. That makes sense. And then could you give us an update on customer conversations you're having around the sales force and Snowflake integrations? You announced a couple of quarters ago, there was an exciting development. Just hoping we could hear a little bit more about that. Thanks.

Certainly. I mentioned earlier about a client that acquired Snowflake as they aim to enter the real estate sector. This is an exciting opportunity for our clients. Integrating with our client workflows is a significant aspect of our strategy. We aim to provide our data at the right time and place so clients can utilize it across their organization. We currently have integrations with Databricks, Snowflake, and Salesforce, which are widely used by our clients. More than half of our clients have some form of integration. We are also investing in additional connectors to enhance these integrations, allowing seamless connections to platforms like Power BI and Tableau via Snowflake and Databricks. Overall, this is great news, and our clients are optimistic about their ability to utilize our data within their platforms.

And our next question will come from George Hill with Deutsche Bank.

Good evening, everyone. Jason, one of my first questions for you is regarding the return of fundraising in the biotech and life sciences sector. You mentioned a rise in retention in Q4 and into January, but I’d like to know how the pipeline looks in life sciences now that the capital markets are reopening. I also have a follow-up question for Rick.

Yes. The demand at the beginning of our sales process across all markets is strong. We believe that Life Sciences represents our largest total addressable market. In our restructuring efforts, we have allocated more resources to our enterprise clients, many of whom are within our Life Sciences group, though they span all the markets we serve. We have enterprise clients across diverse sectors and providers as well. As we've discussed, many of our product investments are focused on Life Sciences, which should provide benefits in the short to medium term. For instance, our new claims analytics platform is being integrated into Life Sciences, along with some data science and AI developments aimed at assessing the clinical impact of scientific studies and publications. This is particularly appealing to Life Sciences companies, both in their commercial and medical affairs divisions. All of this is generating significant excitement in the Life Sciences sector for us.

That's helpful. Rick, can you clarify how the retention comments align with Slide 13, which indicates a decline in net dollar retention across our customer base? Are we seeing that while clients are staying, they are spending less on average? I'm trying to understand how these data points fit together.

It's a great question. So remember that the NDRs that we're presenting are annual, and we talked about increasing churn in the early part of the year, leaving Q4 we saw a strong rebound. So that's too late in 2023 to offset the declines that you note. But given that, that was tied to operating changes that we've spent a lot of time making, and that we've seen it continue into the first month of the year. That gives us confidence we will be able to continue to drive that as we move through the rest of the year.

It seems there are no further questions at this time. I would like to hand the conference back to our moderators for any additional or closing remarks.

Well, I just want to thank everyone once again for taking the time to listen to us and ask really thoughtful questions. We appreciate it. As I mentioned earlier, we're incredibly excited about the opportunity ahead of us. We believe we have the data products and an extraordinarily talented workforce to take advantage of a huge and growing market. So thank you once again. Have a great night, everyone. We appreciate it.

This concludes today's conference call. Thank you for attending.