All right. Good afternoon, everyone. My name is Brian Peterson. I'm an application software analyst here at Raymond James. Very happy to have Definitive Healthcare back this year. Rick, thanks so much for coming. We're gonna do a fireside chat. Feel free to raise your hand. We can make this interactive. I know we just had lunch, so everyone's gotta wake up a little bit. Rick, maybe just to get started, you know, I think there's some people in the, in the room new to the story. You know, I'd love to maybe start with a brief overview or company background. Absolutely. Definitive Healthcare provides healthcare commercial intelligence. What that means is that within the $4 trillion U.S. healthcare system, there's a bewildering variety of decision makers and providers and payers and other healthcare participants. If you've got a new innovation that you want to sell into them, whether it be a technology, a biopharmaceutical or anything else, it's really hard to figure out how to compete and win within that healthcare ecosystem. What we have done is we have developed a comprehensive map of the U.S. healthcare system and embedded it in a SaaS platform that enables any company to figure out the best way to bring their product or service to market to be adopted into the healthcare system. Yeah. Great overview. Maybe kind of start on the data side and talk about, you know, what advantages your data sources and the value that you can kind of provide and what does that give you in terms of a potential competitive moat? Absolutely. The first most important thing to do is to understand the potential size of the market that you're providing. By utilizing our data sources, people can understand the volume of procedures of a given type, who the people are that are performing those procedures, what their economic interests are in terms of both the operating performance of the hospitals from quality and a cost perspective, as well as the claimed reimbursement. It's really a comprehensive 360-degree view that they can't otherwise obtain. That's supplemented with reference and affiliation data. Once you determine the locations and the physicians that really drive the procedure they're trying to influence, you can then follow them back upstream into their GPOs, their physician groups, and the executive decision-making in order to get to the decision makers. All of that information is proprietary information that we've developed over the last 10 years. The key difference between what we provide and what other people provide is most people start with claims data. Claims data, which you may be familiar with from IQVIA or others, that's really oriented around the billing entity. That's literally like the invoicing entity. You might have tens or hundreds of physicians that are billing under a particular code. It's really a long way from the on-the-ground insights to who's providing that care where and how you can contact the right buyer. When you frame your market opportunity for that, you know, how can you unpack that? I know there's different areas of the market. How would you size that and would love to kind of maybe understand how you're building up the TAM. Yeah. We did both internal and external studies, leveraging McKinsey among others, in order to estimate our total addressable market. We believe that our total addressable market is at least $10 billion. One could argue for a higher value, we'll leave that aside for now. Within that, we actually break it down so that we say life sciences is about 60% of that total addressable market because life sciences is big, it's fast-growing, and it's super data intensive and only becoming more so as more and more of our biotech insights are being driven computationally as opposed to through traditional lab science. 60% life sciences. About 20% in the providers themselves. Think large hospital chains. Think about the challenges for them of managing their low-margin businesses, to make sure that they keep those fixed cost facilities full going upstream and downstream for affiliation information to get referrals in and downstream to control the patient journey and make sure that they're keeping them within network where they have the best control over both cost and quality of care that are critical for them. Those two verticals constitute about 80% of the TAM. There's another 10% in software and IT that is specific to the healthcare system. Think about your EMRs and that sort of thing. Finally, there's another 10% of diversified, which is, you know, my favorite example is waste management, 'cause I couldn't believe that waste management needed a specialized healthcare application until I learned, that what they are really interested in doing is understanding the composition of your waste through the procedures that are performed because removing biohazardous waste and chemically hazardous waste is higher margin for them than just hauling normal trash. Like any industry, the deeper you get into it, the more fascinating it can become, at least for me. All right. Even unpacking some of those, I would love to understand how much of it is kind of displacement versus greenfield, right? Maybe how sophisticated are some of your customers in really investing into that market? Yeah. It is primarily greenfield. There's not a lot of substitution going on at this stage of this market. If you think about the 100,000 potential customers out there, we've landed in 3,000 of them. A lot of white space left. We often find within a given customer, they will have a solution that meets part of their needs. The omnipresent example is IQVIA that people use for pharmaceutical sales rep compensation. You know, that is a well-defined need. It's a well-defined data set. You know, people have built their entire compensation systems around it, and it's pretty static. When you have a static need with a static application and someone that can simply keep providing that static data, it works pretty well. Now, their platform doesn't allow you to interoperate with the information in real time, nor do they have the same approach to artificial intelligence based on longitudinal reference and affiliation data that we do, that we believe allows us to give unique insights. You'll often find like the new business group as opposed to the sales operations group wanting to use our platform to size markets, marketing wanting to use it to develop campaigns, et cetera, et cetera. There's, at this stage, plenty of room for people to coexist, and I would say almost every one of our customers, that's, you know, in the life sciences space has multiple data sources If you mentioned the 3,000, what is the specific catalyst or what are you trying to do to drive the adoption of kind of the net new logo side in that kind of 100,000 customer opportunity? Yeah. That's good old-fashioned digital marketing. At time of IPO, we had an LTV to CAC of over 10. In the current economic conditions, it's come down some. It's probably around eight right now. Apply a highly efficient go-to-market motion. This platform demos extremely well. It's a technology-first sale. Those of you that haven't, feel free to go onto the website, watch demos or request a free trial. Most popular thing for people to do is to look up their own doctor and see how they score on health outcomes and all that sort of stuff. It's good fun if you're into that sort of thing. It's really easy to use. It demos well. You know, if we can get people, you know, interested with some intellectual property, then we get a demo, then we have a pretty good conversion rate. Then it's a question of how large that opportunity is. You know, we can land and expand over time. Now, that would be what I just described as most applicable to the diversified and software IT space. Within, within life sciences, it's a more sophisticated go-to-market motion because those folks have deeper use cases. There, it's more true marketing led, a little less digital marketing led, where we're leading with content, and we already have existing relationships. That's where you've heard us talk a lot recently about deepening our global account managers or GAMs, doing deeper account management. You know, some of these relationships, our largest relationships are multimillion dollar per year. It's deepening that enterprise sales approach. Well, even thinking about the land and expand, I mean, are there some ROI examples that you can share? Like, hey, you started here, and there's a significant ROI, and then that leads to the expansion. I'm curious kinda how that land and expand motion works. Yeah. A classic example would be rare disease. You start in a rare disease environment where a single patient can be tens or even $100,000 per year of incremental revenue to the pharma company. We have some examples, and there's more on the website. You know, identifying a child for treatment in Alaska that otherwise would not have received this drug. You know, based on analysis of the patient information, we determined that there was a cluster of cases of this rare disease up in Alaska, and they were being served through this health system, they had not been prescribed the appropriate drug. There's examples like that. Once you have one of those within an organization, you can often cornerstone on that and put it out elsewhere. We have kind of customer use cases supported by ROI for 40 customers, including videos. For those of you are of the generation that does TikTok instead of reading case studies. Feel free to go onto the website for that. All right. Well, okay, we have net new, we kinda have land and expand. I mean, what is the right way to think about kind of the balance of? Brian's feeling picked on. Well, yeah. I'm actually not a TikTok user. I got other problems. Yeah, right. Just thinking about the growth vectors, you know, net new versus land and expand, you know, how do we think about the relative importance of each of those, like maybe taking a little bit of a longer-term lens? Yeah. It's a really good question. Let me think about how to frame it within the data. Both are important. We don't have a single customer, even multimillion-dollar customers, we don't have a single customer that we believe is using the full depth of our capabilities across the full breadth of their organization. There is room to grow within every single existing account. The expansion motion is critically important. The continued new logo acquisition is critically important because we've only landed at 3,000 of those 100,000 potential opportunities. In terms of the relative balance, in the last few years, if you were to look at the expansion of our ARR, it was about two-thirds new logo, one-third expansion within any given year. We're a little more cautious than that in this upcoming year. We think it's probably closer to an even balance of new logo versus expansion, only because we saw the downturn impacting us first and hardest in new business as opposed to upsell. Existing customers had that strong understanding of the power of the platform. You know, our large customers have 110% NDR, et cetera, et cetera. That's kind of what we're seeing in the short term. Wait. Maybe talk about, you know, new products and kind of the cadence of that too. I know you're mentioning, you know, some new data sets and the value proposition. You know, what about the kind of the R&D cadence and how do you think about, you know, new products that will be kinda added to the platform? We have what I think is, if it's possible to say such a thing, just a beautiful flywheel of innovation in that we start with this highly proprietary reference and affiliation data, and then every bit of additional information that we add to it makes the entirety more valuable. For example, when we added the best key opinion leader information from Monocl, they were scouring all of the leading academic journals, so they could tell you the best oncology researchers in the world. Within six months of adding that information into our database, we were able to then pair it with our claims information to say, "Okay," and now you can also see which of those leading researchers is also a clinical practitioner, because you may want someone who is both, you know, a leading name in publication and a clinical practitioner to play a key role in doing your clinical trial. That's an example of where 1 + 1 = 2 and a half or three because of the power to do that. Likewise, we added analytics from Analytical Wizards. What the Atlas Data set and the expansion of the claims universe of both medical and prescription with increasing overlap between the two does, is that spins off another generation of innovations, which hopefully will have an immediate impact, or at least a shorter-term impact on NDR rates, on GDR rates, on win rates on new business, and ultimately on our ability to be appropriately rewarded for our platform improvements via price increases over time. I was gonna ask, actually, you stole my question, but, you know, just what is the early feedback on the Atlas Data set? You know, is there any way to kinda frame what that could mean from, like, a revenue per customer perspective, just thinking about the incremental opportunity there? Yeah. It's super early days. I don't have any quantitative feedback. Since all of our existing claims customers now get access to additional information. It's unequivocally a good thing. I think the open question is how that plays out with newer prospects in terms of win rates and how it plays out with existing customers as we get to renewals. It's too early to say on that, but the early feedback has been highly positive that we've heard from the folks with whom we were piloting it and that sort of thing. That's great. you know, I do wanna ask a macro question. I feel like everyone's kinda asking that here. you know, I'd love to maybe understand, and I know that the end market is much more resilient, but what did you see from a macro perspective in 2022, and how did that influence anything about your guidance for 2023? It's a great question. In 2022, we started strong. We saw in Q2 some slowness emerging. That was around the time that interest rates and inflation were both kicking up. CFOs everywhere started scrutinizing incremental spend. We first saw that show up in terms of the pace of new bookings closing. By Q3, we had seen that accelerate. We'd seen that extend to significant upsells. We were observing from an industry vertical perspective, more pressure in life sciences and providers, to vertical segments that are going through well-known difficulties. We were laser-focused on getting a sense of what was happening in our customer base and our close rates in Q4. We did not see an improvement in Q4. It was similar to Q3. I would characterize both as disappointing quarters in terms of expanding ARR. We have pivoted our go-to-market approach to emphasize GAMs. We've pivoted our product development approach to emphasize broader platform improvements. We think those are the right commercial moves for us to make. We also have a more tenured sales force at this point, but we're not counting on any of that in our guidance for the year. What we have done for our guidance for the year is to assume the conditions that we saw in the second half of the year continue throughout 2023. You know, it's possible that things will get better. It's equally possible that things could be a little less benign. In any case, given the stability and the predictability of our business model, the majority of that impact would be felt in 2024. Is there anything that you can share about maybe earlier stage pipe and how that's trended? I know you have a lot of new products and customers out there. I'd be curious just maybe the status of the pipeline? There's tremendous demand at the top of the funnel. Clearly, the market exists out there. People are interested in these solutions. The releasing of that budget into buying decisions seems to be disrupted right now, not just for us, but for every other industry participant that with whom we've been speaking. On the one hand, this would be the opportunity for me to talk about record pipeline and all of that. But, you know, I'm not up here 'cause I'm a great comedian or marketing guy. I say, I continue to watch that ultimate conversion of pipeline into bookings and how that then shows up in our CRPO, which is a great leading indicator. We maintain our fingers right on the pulse of this business, and we communicate very transparently. As we go through the upcoming year, as we see trends, you'll hear about trends. I think we're an interesting company for folks to watch, even if you're, even if you're interested in the segment overall and you're not yet a shareholder. I'll open it up to the audience if there's any questions. All right, margins. Already pretty impressive growth opportunity in front of you. You know, I think there's been more of an emphasis on margins from an investor base today, particularly on software. Has anything changed for you, and how are you thinking about, you know, that balance of growth versus profitability as we head into 2023 here? I think we're in the early days of a large market opportunity, I believe that businesses must be profitable and should be profitable. The way in which we're balancing those two competing objectives is within 2023, we opted to pivot our investment within our existing spend envelope, which means maintaining our margin. You know, that's a one-year pause in what has been our margin expansion thesis. We expect to return to expanding margins in 2024. I really manage around the Rule of 40 saying, "Okay, you know, we have two levers to create value, and we can and will use both, you know, both growing revenue and growing EBITDA margins over time. Maybe on M&A, I mean, the synergies from Monocl have been really strong. You know, what are you seeing in the M&A pipeline? given the interest rate environment, has your thought process or appetite around incremental M&A changed? We're extremely interested in M&A. This is, you know, I think a platform that is almost uniquely well suited to doing the right high-value tuck-in acquisitions. We're extremely disciplined, so we look for a product or a technology that we can integrate very quickly and where each side adds value to the other. We look for a sales and marketing fit that is complete. I think a lot about the last mile of sales and marketing. It's easy to be in the same vertical but then find that your existing relationships don't translate. We do hard due diligence on the product, hard due diligence on the customer relationships and the sales. We need to believe that they can operate at attractive long-term margins, and many of the companies that we look at are losing EBIT, losing money on EBITDA in the beginning. We have to X-ray their gross margins and think about their growth profiles to make sure that we're comfortable with that. Finally, we need to get them at a shareholder value friendly price. There's more companies becoming available, but not necessarily the best companies yet. We continue to kiss a lot of frogs, but we're not gonna, terrible analogy, but we're not gonna compromise on quality for the sake of getting a deal done. We'll remain rigorous, and, you know, we'll hopefully get to do one or two deals in the upcoming year. Yeah. No, no kissing of the frogs. No, no frog kissing. So- Yeah, sorry. Erase that from the tape. Maybe taking a longer-term lens from a product perspective, you know, what are you most excited about, right? I know there's a lot of things that you're working on, but, like, what do you think is really, like, one of the most compelling opportunities for the product portfolio? I think this is an amazing platform. It is so intuitive and easy to use. Just this space, when you step back and think about it, medical innovation is accelerating, not decelerating. The role that data plays in driving that is dramatically accelerating. There's regulatory pressure to share more and more of this data so that we can improve our system. It makes a difference to all of our lives. I think this is an incredibly compelling space. You know, we're still in the early days. I think that Definitive Healthcare is gonna be a winner in this space. Even if we're not, you know, it will be because somebody else is doing the same thing that we're trying to do now, and they somehow figure out a different or unique way to get there faster. You know, we'll see them while they're trying. Maybe just I'll end it here. You know, for investors listening in, you know, what would you say the kinda key takeaways should be from looking at Definitive Healthcare? Like, what message would you leave them with? I think this is an incredibly attractive business model. You know, high gross margins, almost 100% conversion of adjusted EBITDA to unlevered free cash flow with a clearly large and growing market opportunity. You know, what you really need to diligence is your confidence in our competitive differentiation. To help you do that, we've put extensive information on the IR website around the Atlas Data set, kind of what is it, how does it work, how is it bought, combined with 40 customer case studies of how they use it to create value. We'd love to have you as shareholders. Great rundown. Thanks, Rick. Appreciate it. Thanks, everyone.