• Total Revenue: $62.3 million, down 6% year-over-year.
• Adjusted EBITDA: $17.5 million, down 12% year-over-year.
• Adjusted EBITDA Margin: 28%.
• Unlevered Free Cash Flow: 92% conversion from adjusted EBITDA, up 6% year-over-year.
• Net Dollar Retention: 90% for enterprise customers, 85% overall.
• Enterprise Customers: 519, a decrease of 21 year-over-year.
• Total Customer Count: Approximately 2,500, down about 250 year-over-year.
• Adjusted Gross Profit Margin: 80.7%, down 400 basis points from Q4 2023.
• Adjusted Sales and Marketing Expenses: $18.9 million, down 7% from Q4 2023.
• Adjusted Product Development Expense: $7.3 million, down 8% from Q4 2023.
• Adjusted G&A Expense: $7.7 million, down 10% from Q4 2023.
• Adjusted Operating Income: $15.8 million, down 14% from Q4 2023.
• Adjusted Net Income: $12.6 million or $0.08 per diluted share.
• Operating Cash Flows: $58.2 million on a trailing 12-month basis, up 41% year-over-year.
• Deferred Revenue: $93.4 million, down 4% year-over-year.
• Guidance for Q1 2025 Revenue: $55.5 million to $57 million, a decrease of 10% to 13% year-over-year.
• Guidance for Full Year 2025 Revenue: $230 million to $240 million, a 5% to 9% decline year-over-year.
• Guidance for Full Year 2025 Adjusted EBITDA: $61 million to $65 million, margin of 26% to 28%.

• Warning! GuruFocus has detected 4 Warning Signs with DH.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Definitive Healthcare Corp (NASDAQ:DH) exceeded the high end of their guidance ranges for both top and bottom line in Q4 2024.
• The company reported strong unlevered free cash flow performance with a 92% conversion from adjusted EBITDA, up 6% year-over-year.
• Definitive Healthcare Corp (NASDAQ:DH) successfully secured new business in Q4, including new logos and upsell cross-sell activities with existing customers.
• The company is focusing on enhancing their master data management capabilities, which is expected to strengthen data quality and make their solutions more integrated into customer workflows.
• Definitive Healthcare Corp (NASDAQ:DH) is investing in initiatives to improve customer success and retention, including the appointment of a new Chief Customer Officer and aligning compensation incentives with sales.

Negative Points

• Total revenue for Q4 2024 was $62.3 million, down 6% year-over-year, reflecting customer retention challenges.
• Churn rates remained elevated, particularly in the life sciences sector, with net dollar retention at 90% for enterprise customers and 85% overall.
• The company experienced a decrease in enterprise customers, with a reduction of 21 year-over-year and 11 quarter-over-quarter.
• Adjusted EBITDA for Q4 2024 was $17.5 million, down 12% year-over-year, indicating pressure from declining revenue.
• Definitive Healthcare Corp (NASDAQ:DH) provided guidance for Q1 2025 with an expected revenue decline of 10% to 13% year-over-year, citing continued pressure on renewals.

Q & A Highlights

Q: Can you provide more details on the churn dynamics experienced at year-end, particularly in comparison to previous quarters in 2024? Is the churn still concentrated in life sciences? A: Richard Booth, CFO: The churn was more pronounced in life sciences and was similar to Q3 but unfavorable compared to Q4 2023. We reported an 85% net dollar retention (NDR) and are guiding to low to mid-80s NDR for the upcoming year. Kevin Coop, CEO: The churn was heavily impacted by downsells rather than outright churn, indicating customers still see value. We are focusing on aligning our resources and strategies to improve retention rates over time.

Q: Regarding the 2025 outlook, are you assuming the elongation in sales cycles will persist? Is there potential for quicker realization of deals? A: Richard Booth, CFO: Q1 is expected to be the low point of the year due to churn dynamics and only a partial quarter of revenue from a new data deal. We expect revenue declines to moderate as we move through the year, with sequential growth in Q2 and further improvements in the second half. The high end of our guidance assumes modest improvements in renewal rates and sales productivity.

Q: Could you share insights on the outlook for new customers versus cross-sell and upsell opportunities? Are there specific markets where you expect faster recovery? A: Richard Booth, CFO: We don't typically break out guidance between new logos and upsells. Recently, we've seen stronger performance with new logos, while upsells have faced pricing pressure. Kevin Coop, CEO: Our efforts are focused on improving retention and value delivery, which should support recovery across markets.

Q: Have you observed any shifts in marketing budgets from digital to in-person channels in the life sciences sector? How does this impact your business? A: Kevin Coop, CEO: We haven't seen a significant shift impacting us. Our positioning in life sciences is more of a lag indicator, and while there are macro challenges, our digital activation efforts are gaining traction. We plan to expand these efforts across other verticals.

Q: Can you elaborate on the reasons behind client downsells and the operational changes being made to address these issues? A: Kevin Coop, CEO: Downsells are influenced by factors we can control, such as improving customer onboarding and success through integrated teams and aligning compensation incentives. We're also focusing on pricing and packaging strategies tailored to different end markets to enhance customer retention and satisfaction.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.