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 September 30, 2023.
Third Quarter 2023 Financial
Highlights:
Amounts referencing Q3 2022 and trailing
twelve-month periods (excluding revenue) are as restated
-
Revenue was $65.3 million, an increase of 14% from
$57.4 million in Q3 2022.
-
Net loss was ($248.7) million, or 381% of revenue,
compared to ($6.9) million, or 12% of revenue in Q3
2022.
-
Adjusted Net Income was $14.6 million, compared to
$8.8 million in Q3 2022.
-
Adjusted EBITDA was $21.7 million, or 33% of
revenue, compared to $16.4 million, or 29% of revenue in Q3
2022.
-
Cash flow from operations was $9.5 million in the
quarter or 15% of revenue. For the trailing twelve-month period,
cash flow from operations was $32.3 million, or 13% of
revenue.
-
Unlevered free cash flow was $17.7 million in the
quarter, or 27% of revenue. For the trailing twelve-month period,
unlevered free cash flow was $54.1 million, or 22% of revenue.
“Revenue and adjusted EBITDA for the quarter
were both above the high-end of our guidance ranges for the
quarter,” said Robert Musslewhite, CEO of Definitive Healthcare.
“We were pleased with our increased adjusted EBITDA profitability
in the quarter. We have been focused on becoming more efficient
across all parts of the organization and it is nice to see that
work yielding some measurable results. As we continue to pursue the
large and growing healthcare commercial intelligence market, we’ll
continue to take a balanced approach between growth and
profitability and invest in strategic areas that should lay the
foundation for faster growth when market conditions improve.”
Recent Business and Operating
Highlights:
Customer Wins
In the third quarter, Definitive Healthcare grew
its enterprise client base by 10% year-over-year, ending the
quarter with 555 enterprise customers, defined as those customers
with more than one hundred thousand dollars in annual recurring
revenue. Significant customer wins included:
-
A win-back at a leading diagnostic genomics vendor offering a full
spectrum of clinically relevant genetic testing. This customer
ended its prior Definitive Healthcare contract in December 2022,
and then reached out in the second quarter of 2023, ultimately
signing a multi-year enterprise agreement in August for access to
both the Atlas Reference and Affiliation Dataset and the Atlas
All-Payors Claims Dataset. This customer plans to integrate
Definitive Healthcare data into its CRM system to improve targeted
marketing outreach to clinicians.
-
A patient engagement vendor purchased access to the updated Atlas
Technology Install Dataset. Within hours of receiving access to the
Dataset, the client ran a report to identify 225 new targets that
had its top competitor’s software installed, along with the contact
information of the purchasing decision-maker.
-
A large academic medical center in California expanded its contract
with Populi, which Definitive Healthcare acquired in July 2023.
This customer was using Populi’s network intelligence and market
intelligence products, and added population intelligence and
campaign activation services. With this expanded product suite, the
customer will be able to hyper-segment and target consumers based
off clinical propensities and a wealth of other behavioral,
demographic, and social determinants of health elements. The
customer plans to run omnichannel digital marketing campaigns to
recruit more patients in a highly competitive urban market.
-
A commercial-stage biopharmaceutical company focused on
transformative medicines purchased a subscription to the Passport
Analytics Suite. This firm plans to submit its New Drug Application
to the US FDA before the end of 2023, with regulatory filings in
additional markets to follow in 2024. This company will use the
Passport Planning and Performance modules to assist in the
implementation of an evidence plan and to assess the current
standard of care, diagnostic path, health economics, treatment
path, and outcomes for patients with amyloid cardiomyopathy.
-
The American division of the world’s largest dairy and cheese
manufacturer purchased access to the Atlas Reference and
Affiliation Dataset to help it expand its presence in both
hospitals and long-term care facilities. This customer wants to
target Group Purchasing Organizations for integrated delivery
networks and plans to use the Atlas Dataset to understand the
networks and relationships between different facilities. It plans
to integrate Definitive Healthcare’s proprietary data into their
Salesforce.com instance to better identify strategic accounts,
develop customized pricing proposals, and reach out to the right
individuals with purchasing authority for food services.
Innovation
As previously announced, earlier this year, an
independent third-party research firm ranked Definitive Healthcare
as #1 for each of the top 10 uses cases for healthcare reference
and affiliation data among diversified customers. The company
continues to invest to maintain this leadership position and has
made a number of enhancements to the Atlas Dataset this year,
including:
-
21% increase in the number of healthcare professionals in our
database
-
43% increase in the number of practice locations
-
120% increase in the number of pharmacy claims
-
21% increase in the number of pharmacy patients
-
More than 3.5 billion new commercial claims
The company also launched a new Atlas Behavioral
Health Dataset that leverages AI and advanced data science to
provide customers with a comprehensive view of behavioral
healthcare care settings across the provider landscape. Customers
can leverage the Atlas Behavioral Health Dataset to better
identify, segment, and research the unique facilities and treatment
locations that are part of a patient’s behavioral care journey.
In August 2023, the company also made
significant improvements to the Atlas Technology Install Dataset.
Definitive Healthcare updated data on more than 1.5 million
technology installations for hospitals, health systems, ambulatory
surgery centers, and physician groups, by collecting data from
multiple new sources and applying its proprietary cleansing and
linking algorithms to generate new intelligence. Clients can
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,
health information management, human resources, and more.
Business Outlook
Based on information as of November 2, 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.
Fourth Quarter
2023:
-
Revenue is expected to be in the range of $65.5 –
$66.5 million, an 8-10% increase year over year.
-
Adjusted Operating Income is expected to be in the
range of $17.5 – $18.5 million.
-
Adjusted EBITDA is expected to be in the range of
$19 – $20 million.
- Adjusted Net
Income is expected to be $11.5 – $12.5 million.
- Adjusted Net
Income Per Diluted Share is expected to be $0.06 –
$0.08 per share on approximately 155.6 million weighted-average
shares outstanding.
Conference Call Information
Definitive Healthcare will host a conference
call on November 2, 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 December 2, 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,” “will,” “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,
customer behavior and use of our solutions, 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: 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, the evolving
conflict in Israel and surrounding areas, 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 GAAP or non-GAAP 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 September 30, 2023 that will
be filed following this earnings release, 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, goodwill impairments, 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 Gross Profit
excluding acquisition-related depreciation and amortization and
equity compensation costs and Adjusted Gross Margin is defined as
Adjusted Gross Profit as a percentage of revenue. 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, goodwill impairments, transaction,
integration, and restructuring expenses and other non-recurring
expenses.
We define Adjusted Net Income as Adjusted
Operating Income less interest expense, net, recurring income tax
benefit, foreign currency (loss) gain, and 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) |
|
|
September 30, 2023 |
|
December 31, 2022 |
Assets |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
77,460 |
|
|
$ |
146,934 |
|
Short-term investments |
|
|
229,565 |
|
|
|
184,939 |
|
Accounts receivable, net |
|
|
41,308 |
|
|
|
58,799 |
|
Prepaid expenses and other current assets |
|
|
14,667 |
|
|
|
12,686 |
|
Current portion of deferred contract costs |
|
|
12,396 |
|
|
|
10,387 |
|
Total current assets |
|
|
375,396 |
|
|
|
413,745 |
|
Property and
equipment, net |
|
|
4,628 |
|
|
|
4,464 |
|
Operating
lease right-of-use assets, net |
|
|
9,951 |
|
|
|
9,681 |
|
Other
assets |
|
|
3,414 |
|
|
|
4,683 |
|
Deferred
contract costs, net of current portion |
|
|
16,132 |
|
|
|
14,596 |
|
Intangible
assets, net |
|
|
336,027 |
|
|
|
350,722 |
|
Goodwill |
|
|
1,073,986 |
|
|
|
1,324,733 |
|
Total assets |
|
$ |
1,819,534 |
|
|
$ |
2,122,624 |
|
Liabilities and Equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts payable |
|
|
5,567 |
|
|
|
3,948 |
|
Accrued expenses and other current liabilities |
|
|
35,986 |
|
|
|
26,855 |
|
Current portion of deferred revenue |
|
|
89,713 |
|
|
|
99,692 |
|
Current portion of term loan |
|
|
13,750 |
|
|
|
8,594 |
|
Current portion of operating lease liabilities |
|
|
2,126 |
|
|
|
1,521 |
|
Total current liabilities |
|
|
147,142 |
|
|
|
140,610 |
|
Long term
liabilities: |
|
|
|
|
Deferred revenue, net of current portion |
|
|
68 |
|
|
|
236 |
|
Term loan, net of current portion |
|
|
245,866 |
|
|
|
255,765 |
|
Operating lease liabilities, net of current portion |
|
|
9,873 |
|
|
|
9,969 |
|
Tax receivable agreements liability, net of current portion |
|
|
138,736 |
|
|
|
155,111 |
|
Deferred tax liabilities |
|
|
65,461 |
|
|
|
75,737 |
|
Other long-term liabilities |
|
|
8,938 |
|
|
|
3,251 |
|
Total liabilities |
|
|
616,084 |
|
|
|
640,679 |
|
|
|
|
|
|
Equity: |
|
|
|
|
Class A Common Stock, par value $0.001, 600,000,000 shares
authorized, 116,281,962 and 105,138,273 shares issued and
outstanding at September 30, 2023 and December 31, 2022,
respectively |
|
|
116 |
|
|
|
105 |
|
Class B Common Stock, par value $0.00001, 65,000,000 shares
authorized, 39,781,946 and 39,129,867 shares issued and
outstanding, respectively, at September 30, 2023, and 50,433,101
and 48,923,952 shares issued and outstanding, respectively at
December 31, 2022 |
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
|
1,077,332 |
|
|
|
970,207 |
|
Accumulated other comprehensive income |
|
|
3,051 |
|
|
|
3,668 |
|
Accumulated deficit |
|
|
(217,217 |
) |
|
|
(25,062 |
) |
Noncontrolling interests |
|
|
340,168 |
|
|
|
533,027 |
|
Total equity |
|
|
1,203,450 |
|
|
|
1,481,945 |
|
Total liabilities and equity |
|
$ |
1,819,534 |
|
|
$ |
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 September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
|
(As
Restated) |
|
|
|
(As
Restated) |
|
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
Revenue |
|
$ |
65,325 |
|
|
$ |
57,382 |
|
|
$ |
185,483 |
|
|
$ |
162,054 |
|
|
Cost of
revenue: |
|
|
|
|
|
|
|
|
|
Cost of revenue exclusive of amortization(1) |
|
|
8,663 |
|
|
|
6,569 |
|
|
|
25,293 |
|
|
|
18,717 |
|
|
Amortization |
|
|
3,232 |
|
|
|
3,155 |
|
|
|
9,676 |
|
|
|
14,113 |
|
|
Gross profit |
|
|
53,430 |
|
|
|
47,658 |
|
|
|
150,514 |
|
|
|
129,224 |
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
Sales and marketing(1) |
|
|
22,804 |
|
|
|
21,184 |
|
|
|
70,929 |
|
|
|
66,062 |
|
|
Product development(1) |
|
|
10,759 |
|
|
|
9,205 |
|
|
|
30,872 |
|
|
|
24,761 |
|
|
General and administrative(1) |
|
|
14,545 |
|
|
|
14,349 |
|
|
|
42,294 |
|
|
|
35,440 |
|
|
Depreciation and amortization |
|
|
9,795 |
|
|
|
10,037 |
|
|
|
29,073 |
|
|
|
30,105 |
|
|
Transaction, integration, and restructuring expenses |
|
|
3,505 |
|
|
|
2,945 |
|
|
|
9,666 |
|
|
|
6,362 |
|
|
Goodwill impairment |
|
|
287,400 |
|
|
|
— |
|
|
|
287,400 |
|
|
|
— |
|
|
Total operating expenses |
|
|
348,808 |
|
|
|
57,720 |
|
|
|
470,234 |
|
|
|
162,730 |
|
|
Loss from operations |
|
|
(295,378 |
) |
|
|
(10,062 |
) |
|
|
(319,720 |
) |
|
|
(33,506 |
) |
|
Other
expense, net |
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(433 |
) |
|
|
(2,466 |
) |
|
|
(1,434 |
) |
|
|
(6,930 |
) |
|
Other income, net |
|
|
29,589 |
|
|
|
5,628 |
|
|
|
25,161 |
|
|
|
9,716 |
|
|
Total other income, net |
|
|
29,156 |
|
|
|
3,162 |
|
|
|
23,727 |
|
|
|
2,786 |
|
|
Net loss before income taxes |
|
|
(266,222 |
) |
|
|
(6,900 |
) |
|
|
(295,993 |
) |
|
|
(30,720 |
) |
|
Benefit from income taxes |
|
|
17,534 |
|
|
|
15 |
|
|
|
19,728 |
|
|
|
654 |
|
|
Net loss |
|
|
(248,688 |
) |
|
|
(6,885 |
) |
|
|
(276,265 |
) |
|
|
(30,066 |
) |
|
Less: Net loss attributable to noncontrolling interests |
|
|
(77,162 |
) |
|
|
(3,865 |
) |
|
|
(84,110 |
) |
|
|
(12,979 |
) |
|
Net loss attributable to Definitive Healthcare Corp. |
|
$ |
(171,526 |
) |
|
$ |
(3,020 |
) |
|
$ |
(192,155 |
) |
|
$ |
(17,087 |
) |
|
Net loss per
share of Class A Common Stock: |
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(1.50 |
) |
|
$ |
(0.03 |
) |
|
$ |
(1.72 |
) |
|
$ |
(0.17 |
) |
|
Weighted
average Class A Common Stock outstanding: |
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
114,527,514 |
|
|
|
102,904,565 |
|
|
|
111,533,166 |
|
|
|
99,776,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Amounts
include equity-based compensation expense as follows: |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
Cost of revenue |
|
$ |
276 |
|
|
$ |
236 |
|
|
$ |
830 |
|
|
$ |
698 |
|
|
Sales and marketing |
|
|
2,728 |
|
|
|
2,260 |
|
|
|
8,297 |
|
|
|
11,062 |
|
|
Product development |
|
|
3,236 |
|
|
|
2,171 |
|
|
|
9,566 |
|
|
|
5,301 |
|
|
General and administrative |
|
|
5,754 |
|
|
|
4,466 |
|
|
|
16,792 |
|
|
|
7,949 |
|
|
Total equity-based compensation expense |
|
$ |
11,994 |
|
|
$ |
9,133 |
|
|
$ |
35,485 |
|
|
$ |
25,010 |
|
|
|
|
|
|
|
|
|
|
|
|
Definitive
Healthcare Corp. |
Condensed
Consolidated Statements of Cash Flows |
(amounts in
thousands; unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
(As
Restated) |
|
|
|
(As
Restated) |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Cash
flows provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(248,688 |
) |
|
$ |
(6,885 |
) |
|
$ |
(276,265 |
) |
|
$ |
(30,066 |
) |
Adjustments
to reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
432 |
|
|
|
469 |
|
|
|
1,391 |
|
|
|
1,721 |
|
Amortization of intangible assets |
|
|
12,595 |
|
|
|
12,723 |
|
|
|
37,358 |
|
|
|
42,497 |
|
Amortization of deferred contract costs |
|
|
3,445 |
|
|
|
2,283 |
|
|
|
9,475 |
|
|
|
6,274 |
|
Equity-based compensation |
|
|
11,994 |
|
|
|
9,133 |
|
|
|
35,485 |
|
|
|
25,010 |
|
Amortization of debt issuance costs |
|
|
176 |
|
|
|
176 |
|
|
|
527 |
|
|
|
527 |
|
Provision for doubtful accounts receivable |
|
|
354 |
|
|
|
763 |
|
|
|
820 |
|
|
|
769 |
|
Non-cash restructuring charges |
|
|
(143 |
) |
|
|
— |
|
|
|
155 |
|
|
|
1,023 |
|
Goodwill impairment charge |
|
|
287,400 |
|
|
|
— |
|
|
|
287,400 |
|
|
|
— |
|
Tax receivable agreement remeasurement |
|
|
(29,675 |
) |
|
|
(5,253 |
) |
|
|
(24,977 |
) |
|
|
(8,583 |
) |
Deferred income taxes |
|
|
(17,304 |
) |
|
|
(42 |
) |
|
|
(19,728 |
) |
|
|
(719 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
5,486 |
|
|
|
(2,816 |
) |
|
|
19,370 |
|
|
|
12,454 |
|
Prepaid expenses and other current assets |
|
|
(2,237 |
) |
|
|
1,235 |
|
|
|
(5,808 |
) |
|
|
2,554 |
|
Deferred contract costs |
|
|
(3,913 |
) |
|
|
(3,224 |
) |
|
|
(13,020 |
) |
|
|
(10,070 |
) |
Contingent consideration |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,400 |
) |
Accounts payable, accrued expenses, and other liabilities |
|
|
1,434 |
|
|
|
6,825 |
|
|
|
(1,589 |
) |
|
|
5,832 |
|
Deferred revenue |
|
|
(11,869 |
) |
|
|
(4,702 |
) |
|
|
(14,113 |
) |
|
|
(3,024 |
) |
Net cash
provided by operating activities |
|
|
9,487 |
|
|
|
10,685 |
|
|
|
36,481 |
|
|
|
39,799 |
|
Cash
flows (used in) provided by investing activities: |
|
|
|
|
|
|
|
|
Purchases of property, equipment, and other assets |
|
|
(305 |
) |
|
|
(1,878 |
) |
|
|
(2,383 |
) |
|
|
(3,455 |
) |
Purchases of short-term investments |
|
|
(80,814 |
) |
|
|
(54,309 |
) |
|
|
(213,613 |
) |
|
|
(217,266 |
) |
Maturities of short-term investments |
|
|
72,083 |
|
|
|
52,000 |
|
|
|
174,830 |
|
|
|
96,000 |
|
Cash paid for acquisitions, net of cash acquired |
|
|
(45,023 |
) |
|
|
203 |
|
|
|
(45,023 |
) |
|
|
(56,296 |
) |
Net cash
used in investing activities |
|
|
(54,059 |
) |
|
|
(3,984 |
) |
|
|
(86,189 |
) |
|
|
(181,017 |
) |
Cash
flows used in financing activities: |
|
|
|
|
|
|
|
|
Repayments of term loans |
|
|
(1,718 |
) |
|
|
(1,718 |
) |
|
|
(5,156 |
) |
|
|
(5,156 |
) |
Taxes paid related to net share settlement of equity awards |
|
|
(782 |
) |
|
|
(2,745 |
) |
|
|
(3,397 |
) |
|
|
(2,745 |
) |
Payment of contingent consideration |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,100 |
) |
Payments under tax receivable agreement |
|
|
— |
|
|
|
— |
|
|
|
(246 |
) |
|
|
— |
|
Payments of equity offering issuance costs |
|
|
— |
|
|
|
— |
|
|
|
(30 |
) |
|
|
(1,299 |
) |
Member distributions |
|
|
(7,866 |
) |
|
|
(1,652 |
) |
|
|
(10,693 |
) |
|
|
(6,939 |
) |
Net cash
used in financing activities |
|
|
(10,366 |
) |
|
|
(6,115 |
) |
|
|
(19,522 |
) |
|
|
(17,239 |
) |
Net
(decrease) increase in cash and cash equivalents |
|
|
(54,938 |
) |
|
|
586 |
|
|
|
(69,230 |
) |
|
|
(158,457 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
13 |
|
|
|
40 |
|
|
|
(244 |
) |
|
|
(213 |
) |
Cash and cash equivalents, beginning of period |
|
|
132,385 |
|
|
|
228,202 |
|
|
|
146,934 |
|
|
|
387,498 |
|
Cash and cash equivalents, end of period |
|
$ |
77,460 |
|
|
$ |
228,828 |
|
|
$ |
77,460 |
|
|
$ |
228,828 |
|
Supplemental cash flow disclosures: |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
3,681 |
|
|
$ |
2,898 |
|
|
$ |
10,772 |
|
|
$ |
7,248 |
|
Income taxes |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
136 |
|
|
$ |
— |
|
Acquisitions: |
|
|
|
|
|
|
|
|
Net assets acquired, net of cash acquired |
|
$ |
52,659 |
|
|
$ |
(203 |
) |
|
$ |
52,659 |
|
|
$ |
97,296 |
|
Working capital adjustment receivable |
|
|
164 |
|
|
|
— |
|
|
|
164 |
|
|
|
— |
|
Initial cash investment in prior year |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(40,000 |
) |
Contingent consideration |
|
|
(7,800 |
) |
|
|
— |
|
|
|
(7,800 |
) |
|
|
(1,000 |
) |
Net cash paid for acquisitions |
|
$ |
45,023 |
|
|
$ |
(203 |
) |
|
$ |
45,023 |
|
|
$ |
56,296 |
|
Supplemental disclosure of non-cash investing
activities: |
|
|
|
|
|
|
|
|
Capital expenditures included in accounts payable and accrued
expenses |
|
$ |
283 |
|
|
$ |
4,504 |
|
|
$ |
283 |
|
|
$ |
4,504 |
|
Supplemental disclosure of non-cash financing
activities: |
|
|
|
|
|
|
|
|
Unpaid equity offering costs included in accrued expenses |
|
$ |
— |
|
|
$ |
147 |
|
|
$ |
— |
|
|
$ |
147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
(As
Restated) |
|
|
|
(As
Restated) |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
Net cash
provided from operating activities |
$ |
9,487 |
|
|
$ |
10,685 |
|
|
$ |
36,481 |
|
|
$ |
39,799 |
|
|
Purchases of property, equipment, and other assets |
|
(305 |
) |
|
|
(1,878 |
) |
|
|
(2,383 |
) |
|
|
(3,455 |
) |
|
Interest paid in cash |
|
3,681 |
|
|
|
2,898 |
|
|
|
10,772 |
|
|
|
7,248 |
|
|
Transaction, integration, and restructuring expenses paid in
cash(a) |
|
3,648 |
|
|
|
3,249 |
|
|
|
9,511 |
|
|
|
5,744 |
|
|
Earnout payment(b) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,400 |
|
|
Other non-recurring items(c) |
|
1,196 |
|
|
|
1,178 |
|
|
|
3,072 |
|
|
|
4,614 |
|
|
Unlevered Free Cash Flow |
$ |
17,707 |
|
|
$ |
16,132 |
|
|
$ |
57,453 |
|
|
$ |
60,350 |
|
|
|
|
|
|
|
|
|
|
|
(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
plans announced in the first and third quarters 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 September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
(As
Restated) |
|
|
|
(As
Restated) |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
Net
loss |
$ |
(248,688 |
) |
|
$ |
(6,885 |
) |
|
$ |
(276,265 |
) |
|
$ |
(30,066 |
) |
|
Add: Income tax benefit |
|
(17,534 |
) |
|
|
(15 |
) |
|
|
(19,728 |
) |
|
|
(654 |
) |
|
Add: Interest expense, net |
|
433 |
|
|
|
2,466 |
|
|
|
1,434 |
|
|
|
6,930 |
|
|
Add: Other income, net |
|
(29,589 |
) |
|
|
(5,628 |
) |
|
|
(25,161 |
) |
|
|
(9,716 |
) |
|
Loss from operations |
|
(295,378 |
) |
|
|
(10,062 |
) |
|
|
(319,720 |
) |
|
|
(33,506 |
) |
|
Add: Amortization of intangible assets acquired through business
combinations |
|
11,666 |
|
|
|
12,478 |
|
|
|
34,589 |
|
|
|
41,698 |
|
|
Add: Equity-based compensation |
|
11,994 |
|
|
|
9,133 |
|
|
|
35,485 |
|
|
|
25,010 |
|
|
Add: Transaction, integration, and restructuring expenses |
|
3,505 |
|
|
|
2,945 |
|
|
|
9,666 |
|
|
|
6,362 |
|
|
Add: Goodwill impairment charge |
|
287,400 |
|
|
|
— |
|
|
|
287,400 |
|
|
|
— |
|
|
Add: Other non-recurring items |
|
1,196 |
|
|
|
1,178 |
|
|
|
3,072 |
|
|
|
4,614 |
|
|
Adjusted Operating Income |
|
20,383 |
|
|
|
15,672 |
|
|
|
50,492 |
|
|
|
44,178 |
|
|
Less: Interest expense, net |
|
(433 |
) |
|
|
(2,466 |
) |
|
|
(1,434 |
) |
|
|
(6,930 |
) |
|
Less: Recurring income tax benefit |
|
355 |
|
|
|
15 |
|
|
|
2,549 |
|
|
|
533 |
|
|
Less: Foreign currency (loss) gain |
|
(86 |
) |
|
|
375 |
|
|
|
184 |
|
|
|
1,133 |
|
|
Less: Tax impacts of adjustments to net loss |
|
(5,643 |
) |
|
|
(4,840 |
) |
|
|
(15,747 |
) |
|
|
(13,804 |
) |
|
Adjusted Net Income |
$ |
14,576 |
|
|
$ |
8,756 |
|
|
$ |
36,044 |
|
|
$ |
25,110 |
|
|
Shares for Adjusted Net Income Per Diluted Share(a) |
|
154,970,793 |
|
|
|
155,524,190 |
|
|
|
154,592,703 |
|
|
|
154,835,056 |
|
|
Adjusted Net Income Per Share |
$ |
0.09 |
|
|
$ |
0.06 |
|
|
$ |
0.23 |
|
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
|
|
(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 162,910,958 and 158,940,807 as of
September 30, 2023 and 2022, respectively. |
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted Gross Profit and Margin to GAAP Gross Profit and
Margin |
(in thousands;
unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
(in
thousands) |
|
Amount |
|
% of Revenue |
|
Amount |
|
% of Revenue |
|
Amount |
|
% of Revenue |
|
Amount |
|
% of Revenue |
Reported gross profitand
margin |
|
$ |
53,430 |
|
82 |
% |
|
$ |
47,658 |
|
83 |
% |
|
$ |
150,514 |
|
81 |
% |
|
$ |
129,224 |
|
80 |
% |
Amortization
of intangible assets acquired through business combinations |
|
|
2,303 |
|
4 |
% |
|
|
2,910 |
|
5 |
% |
|
|
6,907 |
|
4 |
% |
|
|
13,314 |
|
8 |
% |
Equity
compensation costs |
|
|
276 |
|
— |
|
|
|
236 |
|
— |
|
|
|
830 |
|
— |
|
|
|
698 |
|
— |
|
Adjusted gross profit and margin |
|
$ |
56,009 |
|
86 |
% |
|
$ |
50,804 |
|
89 |
% |
|
$ |
158,251 |
|
85 |
% |
|
$ |
143,236 |
|
88 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted EBITDA to GAAP Net Loss |
(in thousands;
unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 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 |
$ |
(248,688 |
) |
|
(381 |
)% |
|
$ |
(6,885 |
) |
|
(12 |
)% |
|
$ |
(276,265 |
) |
|
(149 |
)% |
|
$ |
(30,066 |
) |
|
(19 |
)% |
Interest expense, net |
|
433 |
|
|
1 |
% |
|
|
2,466 |
|
|
4 |
% |
|
|
1,434 |
|
|
1 |
% |
|
|
6,930 |
|
|
4 |
% |
Income tax benefit |
|
(17,534 |
) |
|
(27 |
)% |
|
|
(15 |
) |
|
(0 |
)% |
|
|
(19,728 |
) |
|
(11 |
)% |
|
|
(654 |
) |
|
(0 |
)% |
Depreciation & amortization |
|
13,027 |
|
|
20 |
% |
|
|
13,192 |
|
|
23 |
% |
|
|
38,749 |
|
|
21 |
% |
|
|
44,218 |
|
|
27 |
% |
EBITDA and margin |
|
(252,762 |
) |
|
(387 |
)% |
|
|
8,758 |
|
|
15 |
% |
|
|
(255,810 |
) |
|
(138 |
)% |
|
|
20,428 |
|
|
13 |
% |
Other income, net(a) |
|
(29,589 |
) |
|
(45 |
)% |
|
|
(5,628 |
) |
|
(10 |
)% |
|
|
(25,161 |
) |
|
(14 |
)% |
|
|
(9,716 |
) |
|
(6 |
)% |
Equity-based compensation(b) |
|
11,994 |
|
|
18 |
% |
|
|
9,133 |
|
|
16 |
% |
|
|
35,485 |
|
|
19 |
% |
|
|
25,010 |
|
|
15 |
% |
Transaction, integration, and restructuring expenses(c ) |
|
3,505 |
|
|
5 |
% |
|
|
2,945 |
|
|
5 |
% |
|
|
9,666 |
|
|
5 |
% |
|
|
6,362 |
|
|
4 |
% |
Goodwill impairment(d) |
|
287,400 |
|
|
440 |
% |
|
|
— |
|
|
0 |
% |
|
|
287,400 |
|
|
155 |
% |
|
|
— |
|
|
0 |
% |
Other non-recurring items(e) |
|
1,196 |
|
|
2 |
% |
|
|
1,178 |
|
|
2 |
% |
|
|
3,072 |
|
|
2 |
% |
|
|
4,614 |
|
|
3 |
% |
Adjusted EBITDA and margin |
$ |
21,744 |
|
|
33 |
% |
|
$ |
16,386 |
|
|
29 |
% |
|
$ |
54,652 |
|
|
29 |
% |
|
$ |
46,698 |
|
|
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 plans announced in the first and third quarters of
2023 and impairment and restructuring charges related to office
relocations. (d) Goodwill impairment represents a non-cash, pretax,
goodwill impairment charge of $287.4 million recorded during the
three months ended September 30, 2023. We experienced a decline in
our market capitalization as a result of a sustained decrease in
our stock price, which represented a triggering event requiring our
management to perform a quantitative goodwill impairment test as of
September 30, 2023. As a result of the impairment test, we
determined that the fair value of our single reporting unit was
lower than its carrying value and, accordingly, recorded this
impairment charge. (e) 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, as well as
professional fees incurred in the third quarter of 2023 related to
the filing delay and restatement of our previously issued financial
statements, filed concurrently with our Quarterly Report on Form
10-Q for the second quarter of 2023. In addition, these expenses
include sales tax accrual charges recorded during the three and
nine months ended September 30, 2023, of $0.3 million and $0.9
million, respectively and during the three and nine months ended
September 30, 2022, of $0.6 million and $1.9 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. |
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