Definitive Healthcare Corp. (“Definitive Healthcare” or the
“Company”) (Nasdaq: DH), an industry leader in healthcare
commercial intelligence, today announced financial results for the
quarter ended June 30, 2023.
Second Quarter 2023 Financial
Highlights:
Amounts referencing Q2 2022 and trailing
twelve-month periods (excluding revenue) are as restated
-
Revenue was $61.0 million, an increase of 12% from
$54.5 million in Q2 2022.
-
Net loss was ($11.6) million, or 19% of revenue,
compared to ($10.1) million, or 19% of revenue in Q2
2022.
-
Adjusted Net Income was $12.4 million, compared to
$8.8 million in Q2 2022.
-
Adjusted EBITDA was $17.2 million, or 28% of
revenue, compared to $16.3 million, or 30% of revenue in Q2
2022.
-
Cash flow from operations was $12.0 million in the
quarter or 20% of revenue. For the trailing twelve-month period,
cash flow from operations was $33.5 million, or 14% of
revenue.
-
Unlevered free cash flow was $18.9 million in the
quarter, or 31% of revenue. For the trailing twelve-month period,
unlevered free cash flow was $52.5 million, or 22% of revenue.
“Our second quarter revenue and adjusted EBITDA
were in-line with our expectations. Our ability to continue
delivering on our goal of balanced growth and profitability in a
difficult economy is a reminder of the inherent value of our
commercial intelligence platform and the efficiency of our business
model,” said Robert Musslewhite, CEO of Definitive Healthcare. “Our
performance in the quarter was driven by new and existing customer
wins in each of our target markets. We continue to see solid demand
generation and are having an increasing number of strategic
conversations with customers about their long-term investment
priorities.”
Restatement of Previously Issued Financial
Statements
On August 1, 2023, the Company filed an 8-K with the Securities
and Exchange Commission (“SEC”) announcing that previously issued
audited consolidated financial statements as of December 31, 2022
and 2021 and for the years ended December 31, 2022, 2021 and 2020,
included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2022 (the “2022 Annual Report”), and the
Company’s unaudited condensed consolidated financial statements
included in the Quarterly Reports on Form 10-Q for the quarterly
periods within those years (“Historical Quarterly Reports”), as
well as the unaudited condensed consolidated financial statements
included in the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2023 (the “Q1 2023 Quarterly Report” and,
together with the 2022 Annual Report and the Historical Quarterly
Reports, the “Reports” and all financial statements included in the
Reports, collectively the “Affected Financials”), should no longer
be relied upon. Similarly, related press releases, shareholder
communications, investor presentations or other communications
describing relevant portions of the Affected Financials should no
longer be relied upon. The restatement was necessary to correct
material misstatements related to the collection of sales taxes
from customers and resulted in the Company recording an aggregate
increase to previously reported general and administrative expense
of $8.5 million through March 31, 2023, with an offset to accrued
expenses. The Company expects to make adjustments to the sales tax
liability in future periods as and if it obtains any waivers of
interest and penalties or other benefits from its voluntary
disclosures and as and if it obtains additional documentation from
customers supporting exemption from sales tax. On August 14, 2023,
the Company filed Amendment No. 1 on Form 10-K/A to our Annual
Report on Form 10-K for the year ended December 31, 2022 ("2022
Form 10-K/A”)and Amendment No. 1 on Form 10-Q/A to our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2023 ("Q1 2023
Form 10-Q/A”)to restate the Affected Financials. The Company has
taken certain remedial actions and plans to continue to enhance
controls over sales taxes. Additional information can be found in
the 2022 Form 10-K/A and Q1 2023 Form 10-Q/A filed with the SEC on
August 14, 2023.
Recent Business and Operating
Highlights:
Customer Wins
In the second quarter, Definitive Healthcare
grew its enterprise client base by 8% year-over-year, ending the
quarter with 527 enterprise customers, defined as those customers
with more than one hundred thousand dollars in annual recurring
revenue. Significant customer wins included:
-
A global immunology company chose Definitive Healthcare for a
multi-year enterprise contract to profile Key Opinion Leaders
across multiple separate disease states using the Atlas AI tools
that were introduced in Q1. This client will leverage claims-based
specialty analysis, expert ranking, and KOL industry collaborations
to rank KOL’s based on a proprietary mix of clinical and scientific
activity and drive greater efficiency for its medical affairs
team.
-
A Spanish multinational pharmaceutical and chemical manufacturer
signed a 3-year contract to gain better visibility into their
market share and spot trends and opportunities in real time.
Definitive Healthcare will allow this company to easily identify
the providers treating relevant patients and to track those
providers back to the clinics, group practices, and IDN’s with whom
they are affiliated. In addition, by leveraging the new integration
capabilities that were introduced in the first quarter of this
year, this company will put this powerful data in the hands of
their front-line employees to drive their daily efforts.
-
A global on‑demand financial and human capital software provider
signed an enterprise agreement to integrate physician data from the
Atlas Dataset into their Salesforce.com instance. This company
intends to use the Atlas Dataset as its single-source-of-truth as
it increases its focus on the healthcare vertical. With the Atlas
Dataset, this company can size and segment their total market
opportunity and build an integrated sales and marketing strategy,
all while reducing the time and effort associated with de-duping,
updating, and maintaining key account and contact data.
-
A large biotech focused on developing and commercializing
biopharmaceuticals for rare diseases driven by genetic causes
purchased the Passport Planning and Performance Suite. This company
plans to use Passport to help monitor and report upon a Risk
Evaluation and Mitigation Strategy study for a drug currently in
development and to develop a comprehensive patient journey and
Real-World Evidence plan.
-
A nonprofit organization that provides reproductive healthcare and
education in the United States signed a multi-year enterprise deal.
This organization plans to use the Atlas Reference and Affiliation
Dataset in combination with the Atlas All-Payor Claims and Latitude
Reporting Suite to better understand where it can and should expand
its services, based on the distance that patients travel for care
and the services provided by existing OB/GYNs in that region. In
addition, the organization will utilize Definitive Healthcare
solutions to identify care deserts, or areas where there is limited
or no access to prenatal and maternal care.
Innovation
Today, the Company made two significant
announcements that further expand its competitive
differentiation.
First, Definitive Healthcare announced its
acquisition of Populi, a provider-focused data and analytics
company that works with healthcare organizations to optimize
physician relationships, reduce network leakage, and expand market
share. This acquisition furthers Definitive Healthcare’s commitment
to leadership in the healthcare commercial intelligence market
across the entire healthcare ecosystem, including life sciences,
providers, and diversified industries.
The Populi acquisition will deepen Definitive
Healthcare’s value to its provider clients, helping them drive
growth and expansion with the addition of powerful analytics and
visualizations that are utilized across multiple departments and
functions. To learn more about Populi, visit
https://www.definitivehc.com/populi.
Second, Definitive Healthcare announced a
significant expansion to the technology installation data within
the Atlas Dataset. In the coming months, we expect that the Atlas
Technology Install Dataset will receive updates to more than 1.5
million technology installations for hospitals, health systems,
ambulatory surgery centers, and physician groups. With this new
data, overall coverage of technology installs by vendors is
expected to increase by nearly 10% and technology installs by
products by over 20%. Clients will benefit from accurate
intelligence on hospital, physician, and ambulatory surgery center
usage of technology across 15 primary categories such as clinical
systems, electronic health records (EHR), health information
management (HIM), human resources, and more.
In addition to better data on confirmed
technology installations, Definitive Healthcare has also added a
“signal score strength,” which provides intelligence on
installations that are not confirmed but that Definitive
Healthcare’s proprietary data-science algorithms have inferred as
installations.
Restructuring
On July 27, 2023, the Company committed to a
restructuring plan (the “Plan”) intended to reduce operating costs,
improve operating margins, and continue advancing its ongoing
commitment to profitable growth. The Plan, which the Company
expects to be substantially complete by the end of the third
quarter of 2023, provides for a reduction of its current workforce
by 42 people, or approximately 4 percent of its total
workforce.
Business Outlook
Based on information as of August 14, 2023, the
Company is issuing the following financial
guidance. This guidance includes the dilutive effect of
the acquisition of Populi and assumes no change in external
conditions.
Third Quarter
2023:
-
Revenue is expected to be in the range of $63.0 –
$64.5 million, a 10-12% increase year over year.
-
Adjusted Operating Income is expected to be in the
range of $16.0 – $17.0 million.
-
Adjusted EBITDA is expected to be in the range of
$17.5 – $18.5 million.
- Adjusted Net
Income is expected to be $9.5 – $10.5 million.
- Adjusted Net
Income Per Diluted Share is expected to be $0.05 –
$0.07 per share on approximately 156.9 million weighted-average
shares outstanding.
Full Year 2023: Based on
current macroeconomic conditions and business trends, we expect
revenue will be in the lower half of our existing revenue range. We
expect profitability will be in the upper half of our existing
profitability guidance ranges. That full-year guidance is as
follows.
-
Revenue is expected to be in the range of $249.0 –
$255.0 million, up 12% – 15% from prior year.
-
Adjusted Operating Income is expected to be in the
range of $61.5 – $65.5 million.
-
Adjusted EBITDA is expected to be in the range of
$67.0 – $71.0 million.
- Adjusted Net
Income is expected to be $30.0 – $34.0
million.
- Adjusted Net
Income Per Diluted Share is expected to be $0.19 – $0.23
per share on approximately 155.4 million weighted-average shares
outstanding.
Conference Call Information
Definitive Healthcare will host a conference
call on August 14, 2023, at 5:00 p.m. (Eastern Time) to discuss the
Company's full financial results and current business outlook.
Participants may access the call at 1-877-358-7298 or
1-848-488-9244. Shortly after the conclusion of the call, a replay
of this conference call will be available through September 13,
2023 at 1-800-645-7964 or 1-757-849-6722. The replay passcode is
1765#. A live audio webcast of the event will be available on the
Definitive Healthcare’s Investor Relations website at
https://ir.definitivehc.com/.
About Definitive Healthcare
At Definitive Healthcare, our passion is to
transform data, analytics and expertise into healthcare commercial
intelligence. We help clients uncover the right markets,
opportunities and people, so they can shape tomorrow’s healthcare
industry. Our SaaS platform creates new paths to commercial success
in the healthcare market, so companies can identify where to go
next. Learn more at definitivehc.com.
Forward-Looking
Statements
This press release includes forward-looking statements that
reflect our current views with respect to future events and
financial performance. Such statements are provided under the “safe
harbor” protection of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include all statements that do
not relate solely to historical or current facts, and can generally
be identified by words or phrases written in the future tense
and/or preceded by words such as “likely,” “should,” “may,”
“anticipates,” “intends,” “plans,” “seeks,” “believes,”
“estimates,” “expects” or similar words or variations thereof, or
the negative thereof, references to future periods, or by the
inclusion of forecasts or projections, but these terms are not the
exclusive means of identifying such statements. Examples of
forward-looking statements include, but are not limited to,
statements we make regarding our outlook, financial guidance, our
expectation that we will make adjustments to the sales tax
liability in future periods as and if we obtain additional sales
tax exemption certificates from customers and any benefits from our
voluntary disclosures, the expected benefits from the acquisition
of Populi, the assumptions underlying our internal restructuring
activities and the expected benefits to be achieved therefrom, the
market, industry and macroeconomic environment, our business,
growth strategies, product development efforts and future expenses,
customer growth and statements reflecting our expectations about
our ability to execute on our strategic plans, achieve future
growth and profitability and achieve our financial
goals.
Forward-looking statements in this press release are based on
our current expectations and assumptions regarding our business,
the economy and other future conditions. Because forward-looking
statements relate to the future, by their nature, they are subject
to inherent uncertainties, risks and changes in circumstances that
are difficult to predict. As a result, our actual results may
differ materially from those contemplated by the forward-looking
statements. Important factors that could cause actual results to
differ materially from those in the forward-looking statements
include the following: changes in the effects of the restatement on
our financial statements or financial results; our ability to
obtain additional sales tax exemption certificates from customers;
our ability to obtain any waivers of interest and penalties or
other benefits from our voluntary disclosures; our inability to
realize expected business or financial benefits from acquisitions
and the risk that our acquisitions or investments could prove
difficult to integrate, disrupt our business, dilute stockholder
value and adversely affect our business, financial condition and
results of operations; our inability to achieve the anticipated
cost savings, operating efficiencies or other benefits of our
internal restructuring activities, the war between Russia and
Ukraine, global geopolitical tension and worsening macroeconomic
conditions; actual or potential changes in international, national,
regional and local economic, business and financial conditions,
including recessions, inflation, rising interest rates, volatility
in the capital markets and related market uncertainty; the impact
of worsening macroeconomic conditions on our new and existing
customers; our inability to acquire new customers and generate
additional revenue from existing customers; our inability to
generate sales of subscriptions to our platform or any decline in
demand for our platform and the data we offer; the competitiveness
of the market in which we operate and our ability to compete
effectively; the failure to maintain and improve our platform, or
develop new modules or insights for healthcare commercial
intelligence; the inability to obtain and maintain accurate,
comprehensive or reliable data, which could result in reduced
demand for our platform; the risk that our recent growth rates may
not be indicative of our future growth; the inability to achieve or
sustain profitability in the future compared to historical levels
as we increase investments in our business; the loss of our access
to our data providers; the failure to respond to advances in
healthcare commercial intelligence; an inability to attract new
customers and expand subscriptions of current customers; the risk
of cyber-attacks and security vulnerabilities; litigation,
investigations or other legal, governmental or regulatory actions;
the possibility that our security measures are breached or
unauthorized access to data is otherwise obtained; the risk that
additional material weaknesses or significant deficiencies that
will occur in the future; and the risks of being required to
collecting sales or other related taxes for subscriptions to our
platform in jurisdictions where we have not historically done
so.
Additional factors or events that could cause our actual
performance to differ from these forward-looking statements may
emerge from time to time, and it is not possible for us to predict
all of them. Should one or more of these risks or uncertainties
materialize, or should any of our assumptions prove incorrect, our
actual financial condition, results of operations, future
performance and business may vary in material respects from the
performance projected in these forward-looking
statements.
For additional discussion of factors that could impact our
operational and financial results, refer to our Quarterly Report on
Form 10-Q for the three months ended June 30, 2023 that will be
filed following this earnings release, our 2022 Form 10-K/A and our
Q1 2023 Form 10-Q/A, as well as our Current Reports on Form 8-K and
other subsequent SEC filings, which are or will be available on the
Investor Relations page of our website at ir.definitivehc.com and
on the SEC website at www.sec.gov.
All information in this press release speaks only as of the date
on which it is made. We undertake no obligation to publicly update
this information, whether as a result of new information, future
developments or otherwise, except as may be required by
law.
Website
Definitive Healthcare intends to use its website as a
distribution channel of material company information. Financial and
other important information regarding the Company is routinely
posted on and accessible through the Company’s website at
https://www.definitivehc.com/. Accordingly, you should monitor the
investor relations portion of our website at
https://ir.definitivehc.com/ in addition to following our press
releases, SEC filings, and public conference calls and webcasts. In
addition, you may automatically receive email alerts and other
information about the Company when you enroll your email address by
visiting the “Email Alerts” section of our investor relations page
at https://ir.definitivehc.com/.
Non-GAAP Financial
Measures
We have presented supplemental non-GAAP
financial measures as part of this earnings release. We believe
that these supplemental non-GAAP financial measures are useful to
investors because they allow for an evaluation of the Company with
a focus on the performance of its core operations, including
providing meaningful comparisons of financial results to historical
periods and to the financial results of peer and competitor
companies. A reconciliation of GAAP to Non-GAAP results has
been provided in the financial statement tables included at the end
of this press release.
We refer to Unlevered Free Cash Flow, Adjusted
EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, Adjusted
Gross Margin, Adjusted Operating Income, and Adjusted Net Income as
non-GAAP financial measures. These non-GAAP financial measures are
not prepared in accordance with generally accepted accounting
principles in the U.S., (“GAAP”). These are supplemental financial
measures of our performance and should not be considered
substitutes for net (loss) income, gross profit, gross margin, or
any other measure derived in accordance with GAAP.
We define Unlevered Free Cash Flow as net cash
provided from operating activities less purchases of property,
equipment and other assets, plus cash interest expense, and cash
payments related to transaction, integration, and restructuring
related expenses, earnouts, and other non-recurring items.
Unlevered Free Cash Flow does not represent residual cash flow
available for discretionary expenditures since, among other things,
we have mandatory debt service requirements.
We define EBITDA as earnings before debt-related
costs, including interest expense, net and loss on extinguishment
of debt, income taxes and depreciation and amortization. Adjusted
EBITDA is defined as EBITDA adjusted to exclude certain items of a
significant or unusual nature, including other income and expense,
equity-based compensation, transaction, integration, and
restructuring expenses and other non-recurring expenses. Adjusted
EBITDA Margin is defined as Adjusted EBITDA as a percentage of
revenue. Adjusted EBITDA and Adjusted EBITDA Margin are key metrics
used by management and our board of directors to assess the
profitability of our operations. We believe that Adjusted EBITDA
and Adjusted EBITDA Margin provide useful measures to investors to
assess our operating performance because these metrics eliminate
non-recurring and unusual items and non-cash expenses, which we do
not consider indicative of ongoing operational performance. We
believe that these metrics are helpful to investors in measuring
the profitability of our operations on a consolidated
level.
We define Adjusted Gross Profit as revenue less
cost of revenue (excluding acquisition-related depreciation and
amortization and equity compensation costs) and Adjusted Gross
Margin means Adjusted Gross Profit as a percentage of revenue.
Adjusted Gross Profit differs from gross profit, in that gross
profit includes acquisition-related depreciation and amortization
expense and equity compensation costs. Adjusted Gross Profit and
Adjusted Gross Margin are key metrics used by management and our
board of directors to assess our operations. We exclude
acquisition-related depreciation and amortization expenses as they
have no direct correlation to the cost of operating our business on
an ongoing basis. A small quantity of equity-based compensation is
included in cost of revenue in accordance with GAAP but is excluded
from our Adjusted Gross Profit calculations due to its non-cash
nature.
We define Adjusted Operating Income as income
(loss) from operations plus acquisition related amortization,
equity-based compensation, transaction, integration, and
restructuring expenses and other non-recurring
expenses.
We define Adjusted Net Income as Adjusted
Operating Income less interest expense, net, other expense, net,
excluding TRA liability remeasurement expense and recurring income
tax expense including the incremental tax effects of adjustments to
arrive at Adjusted Operating Income. We define Adjusted Net Income
Per Diluted Share as Adjusted Net Income divided by diluted
outstanding shares.
Our use of these non-GAAP terms may vary from
the use of similar terms by other companies in our industry and
accordingly may not be comparable to similarly titled measures used
by other companies and are not measures of performance calculated
in accordance with GAAP. Our presentation of these non-GAAP
financial measures are intended as supplemental measures of our
performance that are not required by, or presented in accordance
with, GAAP. These non-GAAP financial measures should not be
considered as alternatives to (loss) income from operations, net
(loss) income, gross profit, gross margin, earnings per share or
any other performance measures derived in accordance with GAAP, or
as measures of operating cash flows or liquidity.
We do not provide a quantitative reconciliation
of the forward-looking non-GAAP financial measures included in this
press release to the most directly comparable GAAP measures due to
the high variability and difficulty to predict certain items
excluded from these non-GAAP financial measures; in particular, the
effects of equity-based compensation expense, taxes and amounts
under the tax receivable agreement, deferred tax assets and
deferred tax liabilities, and transaction, integration, and
restructuring expenses. We expect the variability of these excluded
items may have a significant, and potentially unpredictable, impact
on our future GAAP financial results.
In evaluating our non-GAAP financial measures,
you should be aware that in the future we may incur expenses
similar to those eliminated in these presentations.
Investor Contact: Brian Denyeau ICR
for Definitive
Healthcare brian.denyeau@icrinc.com646-277-1251
Media Contact: Danielle
Johns djohns@definitivehc.com
Definitive
Healthcare Corp. |
Condensed
Consolidated Balance Sheets |
(amounts in
thousands, except number of shares and par value; unaudited) |
|
|
|
|
|
|
|
|
|
(As
Restated) |
|
|
June 30, 2023 |
|
December 31, 2022 |
Assets |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
132,385 |
|
|
$ |
146,934 |
|
Short-term investments |
|
|
218,515 |
|
|
|
184,939 |
|
Accounts receivable, net |
|
|
44,519 |
|
|
|
58,799 |
|
Prepaid expenses and other current assets |
|
|
13,734 |
|
|
|
12,686 |
|
Current portion of deferred contract costs |
|
|
11,889 |
|
|
|
10,387 |
|
Total current assets |
|
|
421,042 |
|
|
|
413,745 |
|
Property and
equipment, net |
|
|
4,488 |
|
|
|
4,464 |
|
Operating
lease right-of-use assets, net |
|
|
8,697 |
|
|
|
9,681 |
|
Other
assets |
|
|
3,938 |
|
|
|
4,683 |
|
Deferred
contract costs, net of current portion |
|
|
16,171 |
|
|
|
14,596 |
|
Intangible
assets, net |
|
|
325,794 |
|
|
|
350,722 |
|
Goodwill |
|
|
1,324,733 |
|
|
|
1,324,733 |
|
Total assets |
|
$ |
2,104,863 |
|
|
$ |
2,122,624 |
|
Liabilities and Equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts payable |
|
|
3,650 |
|
|
|
3,948 |
|
Accrued expenses and other current liabilities |
|
|
33,238 |
|
|
|
26,855 |
|
Current portion of deferred revenue |
|
|
97,495 |
|
|
|
99,692 |
|
Current portion of term loan |
|
|
12,031 |
|
|
|
8,594 |
|
Current portion of operating lease liabilities |
|
|
1,713 |
|
|
|
1,521 |
|
Total current liabilities |
|
|
148,127 |
|
|
|
140,610 |
|
Long term
liabilities: |
|
|
|
|
Deferred revenue, net of current portion |
|
|
150 |
|
|
|
236 |
|
Term loan, net of current portion |
|
|
249,166 |
|
|
|
255,765 |
|
Operating lease liabilities, net of current portion |
|
|
9,004 |
|
|
|
9,969 |
|
Tax receivable agreements liability, net of current portion |
|
|
163,298 |
|
|
|
155,111 |
|
Deferred tax liabilities |
|
|
78,569 |
|
|
|
75,737 |
|
Other long-term liabilities |
|
|
1,090 |
|
|
|
3,251 |
|
Total liabilities |
|
|
649,404 |
|
|
|
640,679 |
|
|
|
|
|
|
Equity: |
|
|
|
|
Class A Common Stock, par value $0.001, 600,000,000 shares
authorized, 113,085,164 and 105,138,273 shares issued and
outstanding at June 30, 2023 and December 31, 2022,
respectively |
|
|
113 |
|
|
|
105 |
|
Class B Common Stock, par value $0.00001, 65,000,000 shares
authorized, 42,861,612 and 41,548,822 shares issued and
outstanding, respectively, at June 30, 2023, and 50,433,101 and
48,923,952 shares issued and outstanding, respectively at December
31, 2022 |
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
|
1,050,714 |
|
|
|
970,207 |
|
Accumulated other comprehensive income |
|
|
3,252 |
|
|
|
3,668 |
|
Accumulated deficit |
|
|
(45,691 |
) |
|
|
(25,062 |
) |
Noncontrolling interests |
|
|
447,071 |
|
|
|
533,027 |
|
Total equity |
|
|
1,455,459 |
|
|
|
1,481,945 |
|
Total liabilities and equity |
|
$ |
2,104,863 |
|
|
$ |
2,122,624 |
|
|
|
|
|
|
Definitive
Healthcare Corp. |
Condensed
Consolidated Statements of Operations |
(amounts in
thousands, except share amounts and per share data; unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
|
(As
Restated) |
|
|
|
(As
Restated) |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenue |
|
$ |
60,957 |
|
|
$ |
54,548 |
|
|
$ |
120,158 |
|
|
$ |
104,672 |
|
Cost of
revenue: |
|
|
|
|
|
|
|
|
Cost of revenue exclusive of amortization (1) |
|
|
8,078 |
|
|
|
6,198 |
|
|
|
16,630 |
|
|
|
12,148 |
|
Amortization |
|
|
3,090 |
|
|
|
5,580 |
|
|
|
6,444 |
|
|
|
10,958 |
|
Gross profit |
|
|
49,789 |
|
|
|
42,770 |
|
|
|
97,084 |
|
|
|
81,566 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Sales and marketing (1) |
|
|
24,702 |
|
|
|
23,585 |
|
|
|
48,125 |
|
|
|
44,878 |
|
Product development (1) |
|
|
10,229 |
|
|
|
8,706 |
|
|
|
20,113 |
|
|
|
15,556 |
|
General and administrative (1) |
|
|
13,670 |
|
|
|
10,056 |
|
|
|
27,749 |
|
|
|
21,091 |
|
Depreciation and amortization |
|
|
9,688 |
|
|
|
10,194 |
|
|
|
19,278 |
|
|
|
20,068 |
|
Transaction, integration, and restructuring expenses |
|
|
3,571 |
|
|
|
2,107 |
|
|
|
6,161 |
|
|
|
3,417 |
|
Total operating expenses |
|
|
61,860 |
|
|
|
54,648 |
|
|
|
121,426 |
|
|
|
105,010 |
|
Loss from operations |
|
|
(12,071 |
) |
|
|
(11,878 |
) |
|
|
(24,342 |
) |
|
|
(23,444 |
) |
Other
expense, net |
|
|
|
|
|
|
|
|
Interest (expense) income, net |
|
|
(221 |
) |
|
|
(2,580 |
) |
|
|
(1,001 |
) |
|
|
(4,464 |
) |
Other (expense) income, net |
|
|
(797 |
) |
|
|
4,103 |
|
|
|
(4,428 |
) |
|
|
4,088 |
|
Total other (expense) income, net |
|
|
(1,018 |
) |
|
|
1,523 |
|
|
|
(5,429 |
) |
|
|
(376 |
) |
Net loss before income taxes |
|
|
(13,089 |
) |
|
|
(10,355 |
) |
|
|
(29,771 |
) |
|
|
(23,820 |
) |
Benefit from income taxes |
|
|
1,484 |
|
|
|
213 |
|
|
|
2,194 |
|
|
|
639 |
|
Net loss |
|
|
(11,605 |
) |
|
|
(10,142 |
) |
|
|
(27,577 |
) |
|
|
(23,181 |
) |
Less: Net loss attributable to noncontrolling interests |
|
|
(3,039 |
) |
|
|
(4,656 |
) |
|
|
(6,948 |
) |
|
|
(9,114 |
) |
Net loss attributable to Definitive Healthcare Corp. |
|
$ |
(8,566 |
) |
|
$ |
(5,486 |
) |
|
$ |
(20,629 |
) |
|
$ |
(14,067 |
) |
Net loss per
share of Class A Common Stock: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.08 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.19 |
) |
|
$ |
(0.14 |
) |
Weighted
average Class A Common Stock outstanding: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
111,768,782 |
|
|
|
99,203,697 |
|
|
|
110,011,177 |
|
|
|
98,186,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts
include equity-based compensation expense as follows: |
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Cost of revenue |
|
$ |
296 |
|
|
$ |
230 |
|
|
$ |
554 |
|
|
$ |
462 |
|
Sales and marketing |
|
|
2,920 |
|
|
|
5,056 |
|
|
|
5,569 |
|
|
|
8,802 |
|
Product development |
|
|
3,319 |
|
|
|
1,841 |
|
|
|
6,330 |
|
|
|
3,130 |
|
General and administrative |
|
|
5,828 |
|
|
|
1,878 |
|
|
|
11,038 |
|
|
|
3,483 |
|
Total equity-based compensation expense |
|
$ |
12,363 |
|
|
$ |
9,005 |
|
|
$ |
23,491 |
|
|
$ |
15,877 |
|
|
|
|
|
|
|
|
|
|
Definitive
Healthcare Corp. |
Condensed
Consolidated Statements of Cash Flows |
(amounts in
thousands; unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
|
(As
Restated) |
|
|
|
(As
Restated) |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Cash
flows provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(11,605 |
) |
|
$ |
(10,142 |
) |
|
$ |
(27,577 |
) |
|
$ |
(23,181 |
) |
Adjustments
to reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
446 |
|
|
|
727 |
|
|
|
959 |
|
|
|
1,252 |
|
Amortization of intangible assets |
|
|
12,332 |
|
|
|
15,047 |
|
|
|
24,763 |
|
|
|
29,774 |
|
Amortization of deferred contract costs |
|
|
3,170 |
|
|
|
2,116 |
|
|
|
6,030 |
|
|
|
3,991 |
|
Equity-based compensation |
|
|
12,363 |
|
|
|
9,005 |
|
|
|
23,491 |
|
|
|
15,877 |
|
Amortization of debt issuance costs |
|
|
175 |
|
|
|
175 |
|
|
|
351 |
|
|
|
351 |
|
Provision for doubtful accounts receivable |
|
|
444 |
|
|
|
(3 |
) |
|
|
466 |
|
|
|
6 |
|
Non-cash restructuring charges |
|
|
141 |
|
|
|
1,023 |
|
|
|
298 |
|
|
|
1,023 |
|
Tax receivable agreement remeasurement |
|
|
1,146 |
|
|
|
(3,492 |
) |
|
|
4,698 |
|
|
|
(3,330 |
) |
Deferred income taxes |
|
|
(1,651 |
) |
|
|
(233 |
) |
|
|
(2,424 |
) |
|
|
(677 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
6,918 |
|
|
|
6,744 |
|
|
|
13,884 |
|
|
|
15,270 |
|
Prepaid expenses and other current assets |
|
|
225 |
|
|
|
627 |
|
|
|
(3,571 |
) |
|
|
1,319 |
|
Deferred contract costs |
|
|
(5,086 |
) |
|
|
(3,547 |
) |
|
|
(9,107 |
) |
|
|
(6,846 |
) |
Contingent consideration |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,400 |
) |
Accounts payable, accrued expenses, and other liabilities |
|
|
832 |
|
|
|
2,005 |
|
|
|
(3,023 |
) |
|
|
(993 |
) |
Deferred revenue |
|
|
(7,813 |
) |
|
|
(4,571 |
) |
|
|
(2,244 |
) |
|
|
1,678 |
|
Net cash
provided by operating activities |
|
|
12,037 |
|
|
|
15,481 |
|
|
|
26,994 |
|
|
|
29,114 |
|
Cash
flows (used in) provided by investing activities: |
|
|
|
|
|
|
|
|
Purchases of property, equipment, and other assets |
|
|
(740 |
) |
|
|
(783 |
) |
|
|
(2,078 |
) |
|
|
(1,577 |
) |
Purchases of short-term investments |
|
|
(42,547 |
) |
|
|
(53,398 |
) |
|
|
(132,799 |
) |
|
|
(162,957 |
) |
Maturities of short-term investments |
|
|
44,627 |
|
|
|
44,000 |
|
|
|
102,747 |
|
|
|
44,000 |
|
Cash paid for acquisitions, net of cash acquired |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(56,499 |
) |
Net cash
provided by (used in) investing activities |
|
|
1,340 |
|
|
|
(10,181 |
) |
|
|
(32,130 |
) |
|
|
(177,033 |
) |
Cash
flows used in financing activities: |
|
|
|
|
|
|
|
|
Repayments of term loans |
|
|
(1,719 |
) |
|
|
(1,719 |
) |
|
|
(3,438 |
) |
|
|
(3,438 |
) |
Taxes paid related to net share settlement of equity awards |
|
|
(1,085 |
) |
|
|
— |
|
|
|
(2,615 |
) |
|
|
— |
|
Payment of contingent consideration |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,100 |
) |
Payments under tax receivable agreement |
|
|
— |
|
|
|
— |
|
|
|
(246 |
) |
|
|
— |
|
Payments of equity offering issuance costs |
|
|
— |
|
|
|
— |
|
|
|
(30 |
) |
|
|
(1,299 |
) |
Member distributions |
|
|
(2,827 |
) |
|
|
(5,029 |
) |
|
|
(2,827 |
) |
|
|
(5,287 |
) |
Net cash
used in financing activities |
|
|
(5,631 |
) |
|
|
(6,748 |
) |
|
|
(9,156 |
) |
|
|
(11,124 |
) |
Net increase
(decrease) in cash and cash equivalents |
|
|
7,746 |
|
|
|
(1,448 |
) |
|
|
(14,292 |
) |
|
|
(159,043 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
(322 |
) |
|
|
(145 |
) |
|
|
(257 |
) |
|
|
(253 |
) |
Cash and cash equivalents, beginning of period |
|
|
124,961 |
|
|
|
229,795 |
|
|
|
146,934 |
|
|
|
387,498 |
|
Cash and cash equivalents, end of period |
|
$ |
132,385 |
|
|
$ |
228,202 |
|
|
$ |
132,385 |
|
|
$ |
228,202 |
|
Supplemental cash flow disclosures: |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
3,616 |
|
|
$ |
2,579 |
|
|
$ |
7,091 |
|
|
$ |
4,350 |
|
Income taxes |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
136 |
|
|
$ |
— |
|
Acquisitions: |
|
|
|
|
|
|
|
|
Net assets acquired, net of cash acquired |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
97,499 |
|
Initial cash investment in prior year |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(40,000 |
) |
Contingent consideration |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,000 |
) |
Net cash paid for acquisitions |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
56,499 |
|
Supplemental disclosure of non-cash investing
activities: |
|
|
|
|
|
|
|
|
Capital expenditures included in accrued expenses |
|
$ |
60 |
|
|
$ |
3,500 |
|
|
$ |
60 |
|
|
$ |
3,500 |
|
|
|
|
|
|
|
|
|
|
Definitive
Healthcare Corp. |
Reconciliations of Non-GAAP Financial Measures to Closest
GAAP Equivalent |
|
|
|
|
|
|
|
|
Reconciliation
of GAAP Operating Cash Flow to Unlevered Free Cash Flow |
(in thousands;
unaudited) |
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
(As
Restated) |
|
|
|
(As
Restated) |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Cash flow
from operations |
$ |
12,037 |
|
|
$ |
15,481 |
|
|
$ |
26,994 |
|
|
$ |
29,114 |
|
Purchases of property, equipment, and other assets |
|
(740 |
) |
|
|
(783 |
) |
|
|
(2,078 |
) |
|
|
(1,577 |
) |
Interest paid in cash |
|
3,616 |
|
|
|
2,579 |
|
|
|
7,091 |
|
|
|
4,350 |
|
Transaction, integration, and restructuring expenses paid in cash
(a) |
|
3,430 |
|
|
|
1,185 |
|
|
|
5,863 |
|
|
|
2,495 |
|
Earnout payment (b) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,400 |
|
Other non-recurring items (c) |
|
600 |
|
|
|
1,259 |
|
|
|
1,876 |
|
|
|
3,436 |
|
Unlevered Free Cash Flow |
$ |
18,943 |
|
|
$ |
19,721 |
|
|
$ |
39,746 |
|
|
$ |
44,218 |
|
|
|
|
|
|
|
|
|
(a) Transaction and
integration expenses paid in cash primarily represent legal,
accounting, and consulting expenses related to our acquisitions.
Restructuring expenses paid in cash relate to our restructuring
plan announced in the first quarter of 2023 and exit costs related
to office relocations. (b) Earnout payment represents final
settlement of contingent consideration included in cash flow from
operations. (c) Non-recurring items represent expenses driven by
events that are typically by nature one-time, non-operational, and
unrelated to our core operations. |
|
|
|
|
|
|
|
|
Reconciliation of
GAAP Net Loss to Adjusted Net Income and |
GAAP Operating Loss
to Adjusted Operating Income |
(in thousands,
except per share amounts; unaudited) |
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
(As
Restated) |
|
|
|
(As
Restated) |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net
loss |
$ |
(11,605 |
) |
|
$ |
(10,142 |
) |
|
$ |
(27,577 |
) |
|
$ |
(23,181 |
) |
Add: Income tax benefit |
|
(1,484 |
) |
|
|
(213 |
) |
|
|
(2,194 |
) |
|
|
(639 |
) |
Add: Interest expense, net |
|
221 |
|
|
|
2,580 |
|
|
|
1,001 |
|
|
|
4,464 |
|
Add: Other expense (income), net |
|
797 |
|
|
|
(4,103 |
) |
|
|
4,428 |
|
|
|
(4,088 |
) |
Loss from operations |
|
(12,071 |
) |
|
|
(11,878 |
) |
|
|
(24,342 |
) |
|
|
(23,444 |
) |
Add: Amortization of intangible assets acquired through business
combinations |
|
11,556 |
|
|
|
14,769 |
|
|
|
22,923 |
|
|
|
29,220 |
|
Add: Equity-based compensation |
|
12,363 |
|
|
|
9,005 |
|
|
|
23,491 |
|
|
|
15,877 |
|
Add: Transaction, integration, and restructuring expenses |
|
3,571 |
|
|
|
2,107 |
|
|
|
6,161 |
|
|
|
3,417 |
|
Add: Other non-recurring items |
|
600 |
|
|
|
1,259 |
|
|
|
1,876 |
|
|
|
3,436 |
|
Adjusted Operating Income |
|
16,019 |
|
|
|
15,262 |
|
|
|
30,109 |
|
|
|
28,506 |
|
Less: Interest expense, net |
|
(221 |
) |
|
|
(2,580 |
) |
|
|
(1,001 |
) |
|
|
(4,464 |
) |
Less: Recurring income tax benefit |
|
1,484 |
|
|
|
213 |
|
|
|
2,194 |
|
|
|
518 |
|
Less: Foreign currency gain |
|
349 |
|
|
|
611 |
|
|
|
270 |
|
|
|
758 |
|
Less: Tax impacts of adjustments to net loss |
|
(5,246 |
) |
|
|
(4,703 |
) |
|
|
(10,104 |
) |
|
|
(8,964 |
) |
Adjusted Net Income |
$ |
12,385 |
|
|
$ |
8,803 |
|
|
$ |
21,468 |
|
|
$ |
16,354 |
|
Shares for Adjusted Net Income Per Diluted Share (a) |
|
155,599,967 |
|
|
|
154,658,469 |
|
|
|
155,352,114 |
|
|
|
154,422,508 |
|
Adjusted Net Income Per Share |
$ |
0.08 |
|
|
$ |
0.06 |
|
|
$ |
0.14 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
(a) Diluted Adjusted
Net Income Per Share is computed by giving effect to all potential
weighted average Class A common stock and any securities that are
convertible into Class A common stock, including Definitive OpCo
units and restricted stock units. The dilutive effect of
outstanding awards and convertible securities is reflected in
diluted earnings per share by application of the treasury stock
method assuming proceeds from unrecognized compensation as required
by GAAP. Fully diluted shares are 161,996,676 and 158,992,716 as of
June 30, 2023 and 2022, respectively. |
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted EBITDA to GAAP Net Loss |
(in thousands;
unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
|
|
(As
Restated) |
|
|
|
|
|
(As
Restated) |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
Amount |
|
% of Revenue |
|
Amount |
|
% of Revenue |
|
Amount |
|
% of Revenue |
|
Amount |
|
% of Revenue |
Net loss and margin |
$ |
(11,605 |
) |
|
(19 |
)% |
|
$ |
(10,142 |
) |
|
(19 |
)% |
|
$ |
(27,577 |
) |
|
(23 |
)% |
|
$ |
(23,181 |
) |
|
(22 |
)% |
Interest
expense, net |
|
221 |
|
|
— |
|
|
|
2,580 |
|
|
5 |
% |
|
|
1,001 |
|
|
1 |
% |
|
|
4,464 |
|
|
4 |
% |
Income tax
benefit |
|
(1,484 |
) |
|
(2 |
)% |
|
|
(213 |
) |
|
— |
|
|
|
(2,194 |
) |
|
(2 |
)% |
|
|
(639 |
) |
|
(1 |
)% |
Depreciation
& amortization |
|
12,778 |
|
|
21 |
% |
|
|
15,774 |
|
|
29 |
% |
|
|
25,722 |
|
|
21 |
% |
|
|
31,026 |
|
|
30 |
% |
EBITDA and margin |
|
(90 |
) |
|
— |
|
|
|
7,999 |
|
|
15 |
% |
|
|
(3,048 |
) |
|
(3 |
)% |
|
|
11,670 |
|
|
11 |
% |
Other
expense (income), net(a) |
|
797 |
|
|
1 |
% |
|
|
(4,103 |
) |
|
(8 |
)% |
|
|
4,428 |
|
|
4 |
% |
|
|
(4,088 |
) |
|
(4 |
)% |
Equity-based
compensation(b) |
|
12,363 |
|
|
20 |
% |
|
|
9,005 |
|
|
17 |
% |
|
|
23,491 |
|
|
20 |
% |
|
|
15,877 |
|
|
15 |
% |
Transaction,
integration, and restructuring expenses(c ) |
|
3,571 |
|
|
6 |
% |
|
|
2,107 |
|
|
4 |
% |
|
|
6,161 |
|
|
5 |
% |
|
|
3,417 |
|
|
3 |
% |
Other
non-recurring items(d) |
|
600 |
|
|
1 |
% |
|
|
1,259 |
|
|
2 |
% |
|
|
1,876 |
|
|
2 |
% |
|
|
3,436 |
|
|
3 |
% |
Adjusted EBITDA and margin |
$ |
17,241 |
|
|
28 |
% |
|
$ |
16,267 |
|
|
30 |
% |
|
$ |
32,908 |
|
|
27 |
% |
|
$ |
30,312 |
|
|
29 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Primarily
represents foreign exchange and TRA liability remeasurement gains
and losses. (b) Equity-based compensation represents non-cash
compensation expense recognized in association with equity awards
made to employees and directors. (c) Transaction and integration
expenses primarily represent legal, accounting, and consulting
expenses and fair value adjustments for contingent consideration
related to our acquisitions. Restructuring expenses relate to our
restructuring plan announced in the first quarter of 2023 and
impairment and restructuring charges related to office relocations.
(d) Non-recurring items represent expenses driven by events that
are typically by nature one-time, non-operational, and unrelated to
our core operations. These expenses are comprised primarily of
professional fees related to financing, capital structure changes,
and other non-recurring set-up costs related to public company
operations. In addition, these expenses include sales tax accrual
charges recorded during the three and six months ended June 30,
2023, of $0.2 million and $0.6 million, respectively and during the
three and six months ended June 30, 2022, of $0.7 million and $1.2
million, respectively, after we became aware of a state sales tax
liability for sales taxes that we may have been required to collect
from customers in 2023 and in certain previous years, which amounts
include assumed maximum penalties and interest. |
Reconciliation of
Adjusted Gross Profit and Margin to GAAP Gross Profit and
Margin |
(in thousands;
unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
(in
thousands) |
|
Amount |
|
% of Revenue |
|
Amount |
|
% of Revenue |
|
Amount |
|
% of Revenue |
|
Amount |
|
% of Revenue |
Reported gross profit and
margin |
|
$ |
49,789 |
|
82 |
% |
|
$ |
42,770 |
|
78 |
% |
|
$ |
97,084 |
|
81 |
% |
|
$ |
81,566 |
|
78 |
% |
Amortization
of intangible assets acquired through business combinations |
|
|
2,314 |
|
4 |
% |
|
|
5,302 |
|
10 |
% |
|
|
4,604 |
|
4 |
% |
|
|
10,404 |
|
10 |
% |
Equity
compensation costs |
|
|
296 |
|
— |
|
|
|
230 |
|
— |
|
|
|
554 |
|
— |
|
|
|
462 |
|
— |
|
Adjusted gross profit and margin |
|
$ |
52,399 |
|
86 |
% |
|
$ |
48,302 |
|
89 |
% |
|
$ |
102,242 |
|
85 |
% |
|
$ |
92,432 |
|
88 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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