Greetings, and welcome to Definitive Healthcare First Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, David Samuels, General Counsel. Thank you, and over to you.

Good afternoon, and thank you for joining us today to review Definitive Healthcare's First Quarter 2022 Financial Results. During the call today are Jason Krantz, Definitive Healthcare's Founder and CEO; Robert Musslewhite, Definitive Healthcare's President; and Rick Booth, Definitive Healthcare's Chief Financial Officer. During this call, we will make forward-looking statements, including, but not limited to, statements relating to our markets and future growth opportunities, the benefits of our health care commercial intelligence solutions, our competitive position, customer behaviors, our financial guidance, our planned investments and the anticipated impact from the COVID-19 pandemic on our business and results of operations as well as on our clients, the health care industry generally and the macroeconomic environment. Any forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our filings with the SEC. Actual results may differ materially from forward-looking statements. The company undertakes no obligation to revise or update any forward-looking statements to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the cautionary statements included in the earnings release that we just posted to the Investor Relations portion of our website. Additionally, we will discuss non-GAAP financial performance measures on this conference call. References on this call to profitability are on an adjusted EBITDA basis. Please refer to the tables in our earnings release on the Investor Relations portion of our website for a reconciliation of these measures to the most directly comparable GAAP financial measures. With that, I'd like to turn the call over to Jason.

Thanks, David. I would like to thank all of you for joining us this afternoon to discuss Definitive Healthcare's first quarter results. Before we go into more details on the quarter, I want to comment quickly on the news that went out today at the same time as our earnings press release. As you've likely read by now, I'm excited to announce that Robert Musslewhite, our current President, will become the Chief Executive Officer of Definitive Healthcare, effective August 1, 2022. At that time, I will move into the role of Executive Chairman. This transition is exciting for the company and for me. For the company, Robert brings a wealth of health care industry expertise and a deep familiarity with running a public health care-focused SaaS company. He is the perfect person to lead Definitive Healthcare through our next period of growth. On a personal level, transitioning to the Executive Chairman role will let me focus my attention on parts of the business I'm most passionate about, specifically product development and strategy while still partnering with Robert on broader long-term company strategy and mergers and acquisitions. Robert and I have developed a fantastic partnership over the last almost a year working together and I'm excited about continuing our partnership to take Definitive Healthcare to the next level. Now let's get back to our Q1 results. We got off to a strong start in 2022, with important wins across each of our core markets and continued progress on our innovation road map. Our performance demonstrates the significant market opportunity for health care commercial intelligence, which we deliver through our comprehensive SaaS-based platform, our industry-leading data and our proprietary data science-based analytics. We are at the very early stages of a $10 billion and growing market opportunity and we believe that we are in a great position to generate strong growth and significant profitability for years to come. Let's start today by quickly reviewing our financial results for the quarter, which was highlighted by the company crossing $200 million in annualized revenue for the first time. Our total revenue was $50.1 million, which represents 36% year-over-year growth. And our adjusted EBITDA was $14 million, which translates into a 28% margin. These impressive results reinforce our ability to generate high growth and substantial profitability while at the same time investing organically and inorganically to support our long-term objectives. I'm now going to hand it over to Robert to talk more about some of the drivers of the success as well as to highlight some key customer wins during the quarter.

Thanks, Jason. Before I comment on our business strategy and customer wins, I want to say that I'm tremendously excited to move into the CEO role at Definitive Healthcare. I'm passionate about the company's mission to transform data, analytics and expertise into health care commercial intelligence and I'm a big believer in the company and the culture that Jason and all the employees have built. We have a fantastic opportunity in front of us. I also want to take a moment to thank Jason for his outstanding leadership over the past 11 years. It's the rare CEO who can start a company and lead it past $200 million in annualized revenue and through an IPO. I look forward to continuing to partner with Jason in his new role as Executive Chairman to take Definitive Healthcare to the next level. Now I'd like to spend a few minutes providing some details on the deep competitive differentiation that Definitive Healthcare has developed over the past 11 years. As we have discussed in the past, the $4 trillion U.S. health care market is incredibly complex and difficult to navigate effectively. Our mission is to simplify this complexity for any company doing business anywhere within the health care ecosystem, and we believe we do this better than anyone else. We believe our differentiation stems from 3 key factors: the first is that we are the only company that can provide complete coverage of the entire health care ecosystem. Over the past 11 years, we have leveraged powerful data science and engaged in extensive proprietary research that has enabled us to have nearly 100% coverage of all aspects of the health care market. Physicians, hospitals, imaging centers, clinics, home health agencies and other entities. We have built a sophisticated data ingestion engine powered by proprietary…

Thanks, Robert. We had a very active first quarter on the product development front. Most notably with the introduction of the Passport Analytics Suite. Built on the powerful analytics engine we acquired with Analytical Wizards in February, we believe the Passport Analytics Suite is a game changer to the life sciences customers. For the first time, life sciences customers can optimize their entire commercialization process, all the way from early stage business planning to real-time product performance and marketing optimization to drive superior post-launch results. One of the most exciting aspects of the Passport Analytics Suite is that we now enable life sciences customers to integrate virtually any internal or third-party data source into our platform and run on-demand analytics at scale. The suite can integrate internal sales and marketing data as well as third-party big data on claims, EMR, lab data, diagnostics data as well as data from Definitive Healthcare's proprietary platform including the Definitive ID and our industry-leading provider reference and affiliation data. The Passport Analytics Suite is comprised of 2 modules, planning and performance and promotional analytics. Passport planning and performance optimizes the pathway to FDA approval and subsequent commercialization by improving market opportunity selection, accelerating clinical trials and informing business decisions. Passport promotional analytics helps life sciences organizations maximize revenue and profit by improving customer segmentation, maximizing impact of promotional tactics and effectively allocating omnichannel budget. We have gotten off to a strong start with Analytical Wizards, which continued its impressive track record of success as it won a big deal at a large 10,000-employee pharmaceutical company. This company purchased Passport Promotional Analytics to consolidate data about its global marketing spend into a single location and then run on-demand analytics to better allocate its investments and maximize the marketing return. Analytical Wizards also upsold incremental business…

Thanks, Jason. Q1 was another strong quarter, highlighted by rapid revenue growth and strong profitability. I'll start my remarks with a quick overview of our business model from a financial perspective, then provide a detailed review of our quarterly results before finishing with our outlook for Q2 and full year 2022. As always, in all my remarks, I'll be discussing our results on a non-GAAP basis, unless otherwise noted. First, let me remind everyone of some of the key attributes that make Definitive Healthcare's business model so compelling. We are a high-growth subscription business, selling into a $10 billion and growing total addressable market with low single-digit market penetration. We have excellent forward-looking visibility through our multiyear contracts and high net dollar retention rates. We operate profitably with high gross margins and a very efficient customer acquisition engine. We innovate efficiently by building on our proprietary data assets and data science platform. And finally, upfront billings and low CapEx requirements help us translate profits directly into cash flow and shareholder value. Our Q1 results illustrate how this business model plays out in practice. Highlights include 36% revenue growth compared to Q1 '21, 28% adjusted EBITDA margin, a 34% unlevered free cash flow margin over the prior 12 months and revenue growth plus trailing 12-month unlevered cash flow margin was 69%, putting us well above the Rule of 40. We believe this combination of high growth, high visibility and attractive profitability positions us well both in current conditions and for many years ahead. Turning to our results in more detail. Revenue for the fourth quarter was $50.1 million, up 36% from prior year and 4% above the midpoint of our guidance. Our revenue growth continues to be driven by strong sales momentum, particularly among enterprise customers. We ended the quarter with…

[Operator Instructions] The first question comes from the line of Craig Hettenbach with Morgan Stanley.

I really appreciate the color on new customer wins and activity. Can you just maybe expand upon that, particularly on the upsell efforts and as it relates to your increased sales coverage? So as sales are able to focus on a small number of accounts as we go forward, how do you think that plays in the ability to increase upsell traction with customers?

Yes. Thanks for the question. Appreciate it. We have -- as you know -- so we verticalized our teams about 3 years ago, and we verticalized our account executive team and our customer success team who works with existing accounts about 1.5 years ago now, which is an important transition for us. And at the same time, we -- as you said, we've reduced the number of companies that each of them sell to. So we're finding that to be very, very helpful from an upsell standpoint. So they're able to understand the customers better and then spend a lot more time working with different functions and different therapeutic areas within life sciences companies in particular. So we're in the early stages of that, but we're seeing benefits already. And we think as we continue to innovate and create new opportunities to expand with those customers, that strategy is going to pay off.

Appreciate that. And just as a follow-up, one area of concern that we have heard is just the funding environment in biotech, given the lack of capital markets activity. Can you just touch on kind of how that potentially plays into your business and any influence you're seeing in terms of bookings and engagements on the biotech side?

Sure. So as Rick said, we had an extremely strong Q1, and that strength is really across all customer segments. So what I think is really great about our business is we sell to anybody that wants to sell and compete in health care. So we sell to life sciences, but we also sell to HCIT providers and then all of the companies -- diversified companies that sell to many industries, including health care. So we have a tremendous amount of diversity in our client base, which is great. But we've seen strength in all of the areas, both on the new logo side as well as upsell side. So we're excited about where we're going really across the entire business.

The next question comes from the line of DJ Hynes with Canaccord.

Jason, Robert, congrats to you guys on the expanded roles. But maybe that's a good place to start, Jason, I'd love to get just any additional color on kind of your thinking that went into the transition and why it was kind of now the right time to do it?

Yes. Thanks. Great question. I think now is actually the perfect time to do it. So obviously, we're lucky enough to have Robert and to start to build that partnership with him over the last year or so. Robert is an amazing leader with tremendous experience in SaaS-based businesses within health care. So we're really excited about that. The business is performing fantastically right now. We've got -- we're doing well. We have a great strategy. We've got a really good product vision to continue to execute upon. So all of that makes for a really great time. And then from a management structure across the entire company, our ELT is really strong. We've built that up over the last 3 years or so. And we've invested heavily in management throughout the entire organization. So it puts us in a great position to make this transition. And it allows me to spend more of my time on areas that I'm super passionate about. So product development and strategy, I'll definitely lean in more on M&A as that becomes -- continues to be an important part of our business over time. So there's some real upsides as we get to partner in a slightly different way over the coming years.

Yes. Makes sense and great to hear. Maybe a follow-up on Analytical Wizards. So the press release and you've talked about in the past, some really big customer exposure, right? 6 to 10 top pharma, 4 of the 7 top biotechs. Were most of these customers already pulling Definitive data into Analytical Wizards before the deal? Or does the acquisition kind of materially change your opportunity with these large customers?

It really varies. Some of them do and some of them don't, and that's okay. What Analytical Wizards brings to us is our ability to be data-agnostic and be able to take data from all different parts of the health care ecosystem. And clients can choose to pull in Definitive data with that. Many of these clients obviously use our best-in-class affiliations data and our reference data and increasing their claims data as well. And we see that continue to expand over time. But the fact that we can bring in other data, internal data and third-party data is just a tremendous new capability for us as we look to increase our presence in large pharmaceutical companies.

The next question comes from the line of Jonathan Yong with Credit Suisse.

Congrats, Robert and Jason for the role as well. Just in relation -- following up on Craig's question, just in relation to the current macro environment. Based on your results, it doesn't look like things are slowing down, and it still looks pretty strong. I guess, have conversations evolved with new and existing customers? And if that's leading to kind of new or expanded opportunities? Or more or less, just any commentary there?

I don't think we've seen a tremendous change. In addition to selling to a wide variety of customers, our customers are using our data to drive growth and to figure out ways to do that more effectively and efficiently. And we have a tremendous ROI with our clients. So I think that exists in all different market environments, especially in health care. It's interesting, if you think back to 2020, so COVID hit and that essentially shut down health care as we know it. And all of our clients are involved in health care in that way. And in that year, I think we grew 38% in that year. So I think it just gives a sense of the must-have nature of the data and the intelligence that we provide. So it's a tribute to what we're doing, and I think it bodes well as we go into various different environments in the future.

That's really helpful. And then just going back to the Analytical Wizards. I guess it's early days and they did get a nice big win there. But I guess, how is the pipeline been developing since the close? Has there been any openings on cross-sell opportunities or things of that nature?

Yes. It's been really great since closing. We've been thrilled, first of all, with the team and the expertise they bring around analytics. The integration is going quite well. We feel like the teams have worked together really cooperatively. On the pipeline question, where we're seeing a ton of interest, it's use cases around advanced analytics for targeting things like brand optimization use cases, being able to pull various data points to measure campaign effectiveness across multiple channels, things like that. So I'd say the pipeline creation has been a whole new level of analytic requests for us in especially our larger biopharma clients.

And it's been nice to see.

[Operator Instructions] The next question comes from the line of David Grossman with Stifel.

I think this question has already come up a couple of times. And so I thought I would just maybe ask it a little more directly instead. Over the recent past or even historically, have you ever seen any cyclical components in your model? And if you have -- how would you rank them in relative importance?

We have not seen cyclical things happening within our business to date. So over the last 11 years. Obviously, we've been growing very fast every single year throughout that, including, as I mentioned, in 2020, we grew 38%. So we haven't seen anything. So I think, you think about the tailwinds of our business, first of all, you have health care, which is a growing market, continued aging population. So it's just tremendous tailwinds with that. The second is the move towards more digital. People are trying to use data in more effective ways to drive sales productivity and drive marketing productivity and reach our customers in better, more effective ways. All of those trends, I think, are really accelerating. So in different macro environments, I think we're going to continue to see those trends as tailwinds for us that will offset any short-term changes that might be happening in the macro community.

And just one other macro question, Jason. How does wage inflation kind of play into your model or your pricing model? Is that something that's fairly dynamic? Or is it something that flows through on renewals? Or how should we think about that given that you're ramping headcount fairly aggressively?

Yes. So as we think about pricing, we -- I think we've talked about this a little bit on past calls, but we did a pricing study a couple of years ago and we think we are -- we have a lot of pricing power in the marketplace. We think that our -- the offerings that we have can suffer a much higher price. But we are taking a very methodical approach to capturing that. And we really do that in 3 ways. The first is our new logo prices go up every single year. So our ACV of a new logo has gone up double digits every single year. We would expect that to be the case again this year. In addition to that, we -- at the time of IPO, there was about 60% of our contracts were in multiyear deals. The vast majority of them have price escalators automatically built in, which is above most inflation and kind of similar to current inflationary environment. And then at renewal time, the majority of time, we'll actually renew our clients for a higher dollar amount. And that's really reflective not only of just kind of inflation in general, but we just -- we keep investing in the platform, bringing in new data sets, creating new, more powerful analytics and insight for our clients, and we're able to charge more as a result. So that theme and that focus of our organization will continue through this environment.

On the cost side, we've talked a lot about our amazing culture. This is the sort of time when it really pays dividends. And we pay a lot of attention to the labor situation, as you point out, we're scaling quickly. And our outlook includes the impact of any expected inflation.

[Operator Instructions] As we have no further questions, ladies and gentlemen, we have reached the end of question-and-answer session. And I would like to turn the call back to Jason Krantz for closing remarks.

Thanks. Once again, I just want to thank everybody for joining us today and listening to the earnings call. Once again, we couldn't be more excited about what we've created. We have a highly differentiated product that we continue to invest in and deepen that competitive moat over time. And playing in a big market, a $10 billion-plus market with that type of product is something we're excited about. So we think we're in a great position to continue to produce results like we did this quarter where we can drive long-term growth and profitability. And I want to thank everyone for their support and look forward to talking more with you.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.