Definitive Healthcare Corp

Previous wording

Definitive Healthcare is a leading provider of healthcare commercial intelligence. Our solutions are designed to provide accurate and comprehensive information on healthcare providers and their activities to help our customers optimize everything from product development to go-to-market planning and sales and marketing execution. Delivered through our software as a service (“SaaS”) platform, our intelligence has become important to the commercial success of our approximately 2,600 customers as of June 30, 2024. We generally define a customer as a company that maintains one or more active paid subscriptions to our platform.

Current wording

Definitive Healthcare is a leading provider of healthcare commercial intelligence. Our solutions are designed to provide accurate and comprehensive information on healthcare providers and their activities to help our customers optimize everything from product development to go-to-market planning and sales and marketing execution. Delivered through our software as a service (“SaaS”) platform, our intelligence has become important to the commercial success of our approximately 2,570 customers as of September 30, 2024. We generally define a customer as a company that maintains one or more active paid subscriptions to our platform.

Previous wording

During the first quarter of 2024, we committed to a restructuring plan intended to reduce operating costs, improve operating margins, and continue advancing our ongoing commitment to profitable growth (the “2024 Restructuring Plan”). The 2024 Restructuring Plan provided for a reduction of the Company’s current workforce by approximately 150 people. During the three and six months ended June 30, 2024, we incurred restructuring and related charges of $0.6 million and $7.8 million, respectively, consisting primarily of severance payments, employee benefits, and related cash expenses. These charges were recognized within transaction, integration, and restructuring expenses in our unaudited condensed consolidated statements of operations. We do not expect to incur any additional material charges associated with the 2024 Restructuring Plan.

Current wording

During the first quarter of 2024, we committed to a restructuring plan intended to reduce operating costs, improve operating margins, and continue advancing our ongoing commitment to profitable growth (the “2024 Restructuring Plan”). The 2024 Restructuring Plan provided for a reduction of the Company’s current workforce by approximately 150 people. During the three and nine months ended September 30, 2024, we incurred restructuring and related charges of $0.2 million and $8.0 million, respectively, consisting primarily of severance payments, employee benefits, and related cash expenses. These charges were recognized within transaction, integration, and restructuring expenses in our unaudited condensed consolidated statements of operations. We do not expect to incur any additional material charges associated with the 2024 Restructuring Plan.

Previous wording

During the second quarter of 2024, 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 June 30, 2024. 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 a non-cash, pre-tax, goodwill impairment charge of $363.6 million for the three months ended June 30, 2024. The goodwill impairment charge did not affect our liquidity or the financial covenants in our outstanding debt agreement. See Note 7. Goodwill and Intangible Assets. Our reporting unit is at risk for future goodwill impairments if we experience a continued decline in our market capitalization or worsening macroeconomic conditions.

Current wording

During the second and third quarters of 2024, we experienced declines in our market capitalization as a result of sustained decreases in our stock price, which represented triggering events in both periods requiring our management to perform quantitative goodwill impairment tests as of the end of each reporting period. As a result of the impairment tests, we determined that the fair value of our single reporting unit was lower than its carrying value and, accordingly, recorded a non-cash, pre-tax, goodwill impairment charges $228.2 million and $363.6 million during the three months ended September 30, 2024 and June 30, 2024, respectively. The goodwill impairment charges did not affect our liquidity or the financial covenants in our outstanding debt agreement. See Note 7. Goodwill and Intangible Assets. Our reporting unit is at risk for future goodwill impairments if we experience a continued decline in our market capitalization or worsening macroeconomic conditions.

Previous wording

As part of the 2024 Restructuring Plan, we made significant changes to our go-to-market team that reduced overlay expenses, created a separate group and sales motion for our small and medium sized customers, and allocated more resources to our Enterprise Customers. These changes created disruptions to our sales efforts in the first half of 2024, impacting both new customer acquisition and upsell to existing customers, which we expect will continue to impact our results through the second half of 2024.

Current wording

As part of the 2024 Restructuring Plan, we made significant changes to our go-to-market team that reduced overlay expenses, created a separate group and sales motion for our small and medium sized customers, and allocated more resources to our Enterprise Customers. These changes have created disruptions to our sales efforts in 2024, impacting both new customer acquisition and upsell to existing customers, which we expect will continue to impact our results for the remainder of 2024 and into 2025.

Previous wording

Our current and prospective customers and their business spendings are impacted by difficult macroeconomic conditions to varying degrees and as a result, in some cases we are observing deal cycles lengthen for new and existing customers, in part as a result of more stringent approval processes, as well as a significant number of deferred purchasing decisions. We are also experiencing heightened customer churn. These trends have been particularly pronounced for smaller customers and in the Life Science and Provider markets. This churn impacted our revenue growth in 2023 and in the first half of 2024, and we expect this will continue to impact our growth in 2024. Additionally, we are monitoring the impacts of data source disruption currently impacting the industry. We are continuing to evaluate these and other past and potential future direct and indirect impacts on our business and results of operations.

Current wording

Our current and prospective customers and their business spendings are impacted by difficult macroeconomic conditions to varying degrees and as a result, in some cases we are observing deal cycles lengthen for new and existing customers, in part as a result of more stringent approval processes, as well as a significant number of deferred purchasing decisions. We are also experiencing heightened customer churn. These trends have been particularly pronounced for smaller customers and in the Life Science and Provider markets. This churn has impacted our revenue growth since 2023, and we expect this will continue to have an impact on our growth into fiscal year 2025.

Previous wording

In the second quarter of 2024, we completed a project to refresh our customer hierarchy methodology to reflect industry consolidation and to better reflect our go-to-market strategy as we increased resources and focus on Enterprise Customers. In some cases, this consolidated certain existing customer legal entities under larger parent accounts, and therefore reduced total customer count. As a result, our customer counts are not directly comparable to previously reported values and prior year customer counts have been revised to also reflect the updated customer hierarchy methodology. We believe this view of customer counts better reflects our updated selling and go-to-market strategy. Using the updated methodology, our total customer count, which includes smaller customers, was approximately 2,600 as of June 30, 2024 compared with approximately 2,800 customers as of June 30, 2023. Though our total customer count has decreased as smaller customers have churned at disproportionately higher rates due to current macroeconomic conditions, our Enterprise Customer accounts have increased by 32 to 537 customers, as adjusted, as of June 30, 2024 compared with 505 customers, as adjusted, as of June 30, 2023.

Current wording

In the second quarter of 2024, we completed a project to refresh our customer hierarchy methodology to reflect industry consolidation and to better reflect our go-to-market strategy as we increased resources and focus on Enterprise Customers. In some cases, this consolidated certain existing customer legal entities under larger parent accounts, and therefore reduced total customer count. As a result, our customer counts are not directly comparable to previously reported values and prior year customer counts have been revised to also reflect the updated customer hierarchy methodology. We believe this view of customer counts better reflects our updated selling and go-to-market strategy. Using the updated methodology, our total customer count, which includes smaller customers, was approximately 2,570 as of September 30, 2024 compared with approximately 2,750 customers as of September 30, 2023. Though our total customer count has decreased as smaller customers have churned at disproportionately higher rates due to current macroeconomic conditions, our Enterprise Customer count has increased by one to 530 customers, as adjusted, as of September 30, 2024 compared with 529 customers, as adjusted, as of September 30, 2023.

Previous wording

We believe there is a significant opportunity to generate additional revenue from our existing customer base of approximately 2,600 customers, as adjusted, as of June 30, 2024.

Current wording

We believe there is a significant opportunity to generate additional revenue from our existing customer base of approximately 2,570 customers, as adjusted, as of September 30, 2024.

Previous wording

Our cRPO will continue to be impacted by macroeconomic challenges, which have resulted in elongating deal cycles as customers implement more stringent approval processes or push out final decisions to later periods. We have also observed cancelations due to the impacts of such challenges on the financial condition of our customers, particularly in the life science and provider markets. We expect this trend to reduce our revenue growth rate for 2024 relative to 2023.

Current wording

Our cRPO will continue to be impacted by macroeconomic challenges, which have resulted in elongating deal cycles as customers implement more stringent approval processes or push out final decisions to later periods. We have also observed cancelations due to the impacts of such challenges on the financial condition of our customers, particularly in the life science and provider markets. We expect this trend will continue to reduce our revenue growth rate for 2024 relative to 2023.

Previous wording

We seek to enhance our platform, data and business through internal development and through acquisitions of and investments in businesses that broaden and strengthen our platform. During the six months ended June 30, 2024, we completed the purchase of assets comprising the Carevoyance business line of H1 Insights, Inc., a product that helps MedTech customers to improve segmentation, targeting, and prospect engagement. Acquisitions can result in transaction costs, amortization expenses and other adjustments as purchase accounting requires that all assets acquired and liabilities assumed be recorded at fair value on the acquisition date. Refer to Note 2. Acquisitions in the notes to our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q for further details.

Current wording

We seek to enhance our platform, data and business through internal development and through acquisitions of and investments in businesses that broaden and strengthen our platform. During the nine months ended September 30, 2024, we completed the purchase of assets comprising the Carevoyance business line of H1 Insights, Inc., a product that helps MedTech customers to improve segmentation, targeting, and prospect engagement. Acquisitions can result in transaction costs, amortization expenses and other adjustments as purchase accounting requires that all assets acquired and liabilities assumed be recorded at fair value on the acquisition date. Refer to Note 2. Acquisitions in the notes to our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q for further details.

Previous wording

For the six months ended June 30, 2024, we derived approximately 97% of our revenue from subscription services and the remainder from professional services. Our subscription services consist primarily of subscription fees for access to our platform. Our subscription contracts typically have a term ranging from 1 to 3 years and are non-cancellable. We typically bill for services in advance annually, and we typically require payment at the beginning of each annual period. Our subscription revenue is recognized ratably over the contract term. Our professional services revenue typically is derived from non-recurring consulting services which are generally capable of being distinct and can be accounted for as separate performance obligations. Revenue related to these professional services is recognized at the time the services are performed.

Current wording

For the nine months ended September 30, 2024, we derived approximately 97% of our revenue from subscription services and the remainder from professional services. Our subscription services consist primarily of subscription fees for access to our platform. Our subscription contracts typically have a term ranging from 1 to 3 years and are non-cancellable. We typically bill for services in advance annually, and we typically require payment at the beginning of each annual period. Our subscription revenue is recognized ratably over the contract term. Our professional services revenue typically is derived from non-recurring consulting services which are generally capable of being distinct and can be accounted for as separate performance obligations. Revenue related to these professional services is recognized at the time the services are performed.

Previous wording

As part of the 2024 Restructuring Plan, we made significant changes to our go-to-market team that reduced overlay expenses, created a separate group and sales motion for our small and medium sized customers, and allocated more resources to our Enterprise Customers. These changes disrupted our sales efforts in the first half of 2024, coupled with continued macroeconomic headwinds and sales execution challenges in the second quarter. Although subscription renewals were in line with expectations, upsells, new business, and professional services, inclusive of transactional services and one-time consulting arrangements, were more heavily impacted than anticipated. Based on these impacts, we expect our revenue to decline in the second half of 2024 compared with the same periods in the prior year.

Current wording

As part of the 2024 Restructuring Plan, we made significant changes to our go-to-market team that reduced overlay expenses, created a separate group and sales motion for our small and medium sized customers, and allocated more resources to our Enterprise Customers. These changes disrupted our sales efforts in the first half of 2024, coupled with continued macroeconomic headwinds and sales execution challenges in the second quarter. Although subscription renewals were in line with expectations, upsells, new business, and professional services, inclusive of transactional services and one-time consulting arrangements, were more heavily impacted than anticipated. Based on these impacts, we expect our revenue to decline in the final quarter of 2024 and into 2025 compared with the respective prior year periods.

Previous wording

During 2023, additional third-party data sources, inclusive of sources obtained through the acquisition of Populi in July 2023, were rolled out to our customers, which resulted in, and is expected to continue to result in, an increase in cost of revenue, including amortization.

Current wording

During 2023, additional third-party data sources, inclusive of sources obtained through the acquisition of Populi in July 2023, were rolled out to our customers, which resulted in, and is expected to continue to result in, an increase in cost of revenue, including amortization. We have been observing changes in the healthcare claims data market as a result of data source disruption earlier this year, including how data providers are reviewing pricing, data availability, and use terms, all of which may negatively impact the prices at which we acquire such data.

Previous wording

We expect that gross profit margin for 2024 will continue to be impacted by the expansion of data sources, as described above, and costs associated with the acquisitions of Populi and Carevoyance, in addition to the anticipated second half 2024 revenue decline discussed above.

Current wording

We expect that gross profit margin for 2024 will continue to be impacted by the expansion of data sources, as described above, and costs associated with the acquisitions of Populi and Carevoyance, in addition to the anticipated second half 2024 revenue decline discussed above. We expect revenue declines to continue as we enter 2025. Revenue declines, in combination with our largely fixed cost structure, are expected to result in a decrease in gross profit margin in 2025.

Previous wording

Product development. Product development expenses primarily consist of personnel costs such as salaries, bonuses, stock-based compensation, and other employee-related benefits for our engineering, data science and product teams, as well as non-personnel costs including overhead costs. We believe that our core technologies and ongoing innovation represent a significant competitive advantage for us, and we continue to invest in systems optimization and product improvements for our customers, enhance our software development team and invest in automation and A.I. to drive higher quality data and deeper insights.

Current wording

Product development. Product development expenses primarily consist of personnel costs such as salaries, bonuses, stock-based compensation, and other employee-related benefits for our engineering, data science and product teams, as well as non-personnel costs including overhead costs. We believe that our core technologies and ongoing innovation represent a significant competitive advantage for us, and we continue to invest in systems optimization and product improvements for our customers, enhance our software development team and invest in automation and artificial intelligence (“A.I.”) to drive higher quality data and deeper insights.

Previous wording

When testing goodwill for impairment, we have the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If we elect to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely than not that carrying value exceeds its fair value, we perform a quantitative goodwill impairment test. Under the quantitative goodwill impairment test, if our reporting unit’s carrying amount exceeds its fair value, we will record an impairment charge based on that difference. We performed interim goodwill impairment tests during the three months ended June 30, 2024 and concluded that the carrying value of the single reporting unit exceeded its fair value and recorded a $363.6 million non-cash, pre-tax goodwill impairment charge for the three months ended June 30, 2024.

Current wording

When testing goodwill for impairment, we have the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If we elect to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely than not that carrying value exceeds its fair value, we perform a quantitative goodwill impairment test. Under the quantitative goodwill impairment test, if our reporting unit’s carrying amount exceeds its fair value, we will record an impairment charge based on that difference. We performed interim goodwill impairment tests during the second and third quarters of 2024 and concluded in each instance that the carrying value of the single reporting unit exceeded its fair value and recorded a $363.6 million and a $228.2 million non-cash, pre-tax goodwill impairment charge during each respective three-month period.

Previous wording

Revenue increased $7.1 million, or 6%, in the six months ended June 30, 2024 compared with the same period in the prior year, due to higher subscription revenue of $6.0 million and higher professional services revenue of $1.1 million. Approximately $5.5 million of the overall increase in revenue was driven by the addition of new customers in 2024, while $1.6 million of the increase was the result of net growth from customers that existed prior to the start of 2024.

Current wording

Revenue decreased $2.6 million, or 4%, in the three months ended September 30, 2024 compared with the same period in the prior year due to lower subscription revenue of $1.7 million and lower professional services revenue of $0.9 million. Revenue attributable to customers that existed prior to the start of 2024 decreased $7.9 million, which was partially offset by a $5.3 million increase in revenue from new customers in 2024.

Previous wording

Cost of revenue increased $3.3 million, or 14%, in the six months ended June 30, 2024 compared with the same period in the prior year. This increase was driven primarily by a $3.0 million increase in hosting fees and data subscription costs as a result of expanded customer usage of our platform and the Populi acquisition and an increase of $0.3 million in amortization expense resulting from new data purchases. Moderate increases in other costs were offset by a slight decrease in personnel costs driven primarily by the 2024 Restructuring Plan.

Current wording

Cost of revenue increased $1.8 million, or 15%, in the three months ended September 30, 2024 compared with the same period in the prior year. This increase was driven primarily by a $1.6 million increase in hosting fees and data subscription costs as a result of expanded customer usage of our platform and the Populi acquisition and an increase of $0.4 million in amortization expense resulting from new data purchases. These increases were partially offset by a $0.2 million decrease in personnel costs driven primarily by the 2024 Restructuring Plan.

Previous wording

Operating expenses, which include a goodwill impairment charge of $363.6 million during the three months ended June 30, 2024 (refer to Note 7. Goodwill and Intangible Assets for further details), increased $358.2 million, or 579%, during the three months ended June 30, 2024 compared with the same period in the prior year. The increase to operating expense as compared to the prior-year period was primarily due to the goodwill impairment charge, as well as:

Current wording

Operating expenses, which included a goodwill impairment charge of $228.2 million incurred during the three months ended September 30, 2024 compared with $287.4 million incurred during the three months ended September 30, 2023 (refer to Note 7. Goodwill and Intangible Assets for further details), decreased $74.4 million, or 21%, during the three months ended September 30, 2024 compared with the same period in the prior year. The decrease to operating expense as compared to the prior-year period was primarily due to a lower goodwill impairment charge in the current period, as well as:

Previous wording

A decrease in sales and marketing expense of $4.8 million for the six months ended June 30, 2024, primarily due to lower personnel costs, including stock-based compensation expense, resulting from the 2024 Restructuring Plan;

Current wording

A decrease in sales and marketing expense of $2.7 million for the three months ended September 30, 2024, primarily driven by lower personnel costs, including stock-based compensation expense, resulting from the 2024 Restructuring Plan, along with a decrease in consulting fees;

Previous wording

A decrease in general and administrative expense of $1.1 million for the three months ended June 30, 2024, primarily due to lower personnel costs, including stock-based compensation expense, resulting from departures of certain executive-level employees in 2024, partially offset by increased fees and severance costs associated with a strategic transition initiative separate from our 2024 Restructuring Plan;

Current wording

A decrease in general and administrative expense of $3.2 million for the three months ended September 30, 2024, primarily driven by lower personnel costs, including stock-based compensation expense, resulting from departures of certain executive-level employees in 2024, relief from sales tax exposure during the year, including penalties and interest, resulting from voluntary disclosure agreements, and lower professional service fees and franchise taxes;

Previous wording

Total other income, net was $44.3 million for the six months ended June 30, 2024 compared to total other expense, net of $5.4 million in the same period in the prior year. The overall change was primarily attributable to a $44.0 million TRA liability remeasurement gain in the first half of 2024, primarily driven by the impairment of goodwill, as well as changes in future realizability of tax attributes payable under the TRA, compared with a $4.7 million TRA liability remeasurement loss in the comparable prior year period. Interest income earned from our short-term investments also increased by $1.2 million to $7.6 million in the first half of 2024 compared with $6.4 million in the comparable prior year period.

Current wording

Total other income, net was $23.8 million for the three months ended September 30, 2024 compared to $29.2 million in the same period in the prior year. The decrease was primarily driven by a decrease in the TRA liability remeasurement gain of $5.5 million in the three months ended September 30, 2024 compared with the same period in the prior year. The TRA liability remeasurement gain, which is driven primarily by the impairment of goodwill, as well as changes in future realizability of tax attributes payable under the TRA, was lower in the current period primarily as a result of a $59.2 million decrease in the goodwill impairment charge during the three months ended September 30, 2024 compared with the same period in the prior year. This decrease was partially offset by an increase in interest income earned from our short-term investments of $0.3 in the three months ended September 30, 2024 compared with the same period in the prior year and a decrease in interest expense of $0.1 million during the three months ended September 30, 2024 compared with the same period in the prior year.

Previous wording

Benefit from income taxes was $21.9 million for the three months ended June 30, 2024 compared to $1.5 million in the comparable prior year period. The overall increase was primarily attributed to the impairment of goodwill during the current period, resulting in a reduction of indefinite-lived deferred tax liabilities.

Current wording

Benefit from income taxes was $13.7 million for the three months ended September 30, 2024 compared to $17.5 million in the comparable prior year period. The overall decrease was primarily attributed to a smaller impairment of goodwill during the current period compared with the same period in the prior year.

Previous wording

Revenue increased $2.8 million, or 5%, in the three months ended June 30, 2024 compared with the same period in the prior year, due to higher subscription revenue of $2.7 million and higher professional services revenue of $0.1 million. Revenue attributable to new customers in 2024 increased $3.5 million, which was partially offset by a $0.7 million decrease in revenue from customers that existed prior to the start of 2024.

Current wording

Revenue increased $4.4 million, or 2%, in the nine months ended September 30, 2024 compared with the same period in the prior year, due to higher subscription revenue of $4.3 million and higher professional services revenue of $0.1 million. Revenue attributable to new customers in 2024 increased $10.9 million, which was partially offset by a $6.5 million decrease in revenue from customers that existed prior to the start of 2024.

Previous wording

Cost of revenue increased $2.1 million, or 19%, in the three months ended June 30, 2024 compared with the same period in the prior year. This increase was driven primarily by a $1.5 million increase in hosting fees and data subscription costs as a result of expanded customer usage of our platform and the Populi acquisition, an increase of $0.3 million in amortization expense resulting from new data purchases, and a $0.2 million increase in personnel costs.

Current wording

Cost of revenue increased $5.1 million, or 15%, in the nine months ended September 30, 2024 compared with the same period in the prior year. This increase was driven primarily by a $4.4 million increase in hosting fees and data subscription costs as a result of expanded customer usage of our platform and the Populi acquisition, an increase of $0.7 million in amortization expense resulting from new data purchases, and an increase in other costs of $0.5 million. These increases were partially offset by a $0.5 million decrease in personnel costs driven primarily by the 2024 Restructuring Plan.

Previous wording

Operating expenses, which include a goodwill impairment charge of $363.6 million during the six months ended June 30, 2024 (refer to Note 7. Goodwill and Intangible Assets for further details), increased $365.3 million, or 301%, during the six months ended June 30, 2024 compared with the same period in the prior year. The increase to operating expense as compared to the prior-year period was primarily due to the goodwill impairment charge, as well as:

Current wording

Operating expenses, which include goodwill impairment charges of $591.8 incurred during the nine months ended September 30, 2024 compared with $287.4 million incurred during the nine months ended September 30, 2023 (refer to Note 7. Goodwill and Intangible Assets for further details), increased $290.9 million, or 62%, during the nine months ended September 30, 2024 compared with the same period in the prior year. The increase to operating expense as compared to the prior-year period was primarily driven by higher goodwill impairment charges in the current period, partially offset by:

Previous wording

A decrease in sales and marketing expense of $3.2 million for the three months ended June 30, 2024, primarily due to lower personnel costs, including stock-based compensation expense, resulting from the 2024 Restructuring Plan;

Current wording

A decrease in sales and marketing expense of $7.5 million for the nine months ended September 30, 2024, primarily driven by lower personnel costs, including stock-based compensation expense, resulting from the 2024 Restructuring Plan;

Previous wording

An increase in general and administrative expense of $1.7 million for the six months ended June 30, 2024, primarily due to increased stock-based compensation expense resulting from new equity grants in the current year and the acceleration of certain shares in connection with the departure of executive-level employees and increased fees and severance costs associated with a strategic transition initiative separate from our 2024 Restructuring Plan. These increases were partially offset by relief from sales tax exposure during the year, including penalties and interest, resulting from voluntary disclosure agreements, and lower professional service fees;

Current wording

A decrease in general and administrative expense of $1.5 million for the nine months ended September 30, 2024, primarily driven by expense relief from sales tax exposure during the year, including penalties and interest, resulting from voluntary disclosure agreements, lower professional service fees, and lower recruiting fees. These decreases were partially offset by increased stock-based compensation expense resulting from new equity grants in the current year and the acceleration of certain shares in connection with the departure of executive-level employees, and increased fees and severance costs associated with a strategic transition initiative separate from our 2024 Restructuring Plan;

Previous wording

A decrease in depreciation and amortization expense of $0.5 million for the six months ended June 30, 2024, primarily driven by certain customer relationship intangible assets utilizing economic consumption amortization methods with lower amortization in the current period; and

Current wording

A decrease in depreciation and amortization expense of $0.9 million for the nine months ended September 30, 2024, primarily driven by certain customer relationship intangible assets utilizing economic consumption amortization methods with lower amortization in the current period; and

Previous wording

A decrease in transaction, integration, and restructuring expenses of $0.7 million for the three months ended June 30, 2024, due primarily to higher costs incurred in the second quarter of 2023 associated with the Populi acquisition, partially offset by increased costs in the current period associated with the impairment of assets resulting from the consolidation of certain leased office facilities.

Current wording

A decrease in transaction, integration, and restructuring expenses of $0.3 million for the nine months ended September 30, 2024, primarily driven by a gain on the adjustment to the Populi contingent consideration in the current period, along with higher acquisition related costs in the prior year period, partially offset by costs incurred in the current period associated with the 2024 Restructuring Plan and impairment charges resulting from the consolidation of certain leased office facilities.

Previous wording

Total other income, net was $41.6 million for the three months ended June 30, 2024 compared to total other expense, net of $1.0 million in the same period in the prior year. The overall change was primarily attributable to a $41.7 million TRA liability remeasurement gain in the second quarter of 2024, driven primarily by the impairment of goodwill, as well as changes in future realizability of tax attributes payable under the TRA, compared with a $1.1 million TRA liability remeasurement loss in the comparable prior year period. Interest income earned from our short-term investments also increased by $0.1 million to $3.7 million in the second quarter of 2024 compared with $3.6 million in the comparable prior year period. Lastly, fluctuations in foreign currency rates and transactions resulted in a $0.1 million loss in the second quarter of 2024 compared with a $0.4 million gain in the comparable prior year period.

Current wording

Total other income, net was $68.1 million for the nine months ended September 30, 2024 compared to $23.7 million in the same period in the prior year. The overall change was primarily attributable to a $68.2 million TRA liability remeasurement gain in the nine months ended September 30, 2024, primarily driven by the impairment of goodwill, as well as changes in future realizability of tax attributes payable under the TRA, compared with a $25.0 million TRA liability remeasurement gain in the comparable prior year period. The increase in the TRA liability remeasurement gain year-over-year was primarily driven by an increase in the goodwill impairment charges of $304.4 million in the nine months ended September 30, 2024 compared with the same period in the prior year. Interest income earned from our short-term investments also increased by $1.5 million to $11.4 million in the nine months ended September 30, 2024 compared with $9.9 million in the comparable prior year period.

Previous wording

Benefit from income taxes was $22.7 million for the six months ended June 30, 2024 compared to $2.2 million in the comparable prior year period. The overall increase was primarily attributed to the impairment of goodwill during the current period, resulting in a reduction of indefinite-lived deferred tax liabilities.

Current wording

Benefit from income taxes was $36.4 million for the nine months ended September 30, 2024 compared to $19.7 million in the comparable prior year period. The overall increase was primarily attributed to a larger impairment of goodwill during the current period compared with the same period in the prior year.

Previous wording

We present “Adjusted EBITDA” as a measure of our operating performance. EBITDA is defined as earnings before (i) debt-related costs, including interest expense, (ii) interest income, (iii) income taxes, and (iv) depreciation and amortization. Management further adjusts EBITDA in its presentation of Adjusted EBITDA to exclude (i) other (income) expense, (ii) equity-based compensation, (iii) transaction, integration, and restructuring expenses, (iv) goodwill impairments, and (v) other non-core items. We exclude these items because they are by nature non-cash, non-recurring, and/or unrelated to our core operations, and therefore we do not believe them to be representative of ongoing operational performance. 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 these metrics provide useful measures to investors to assess our operating performance and in measuring the profitability of our operations on a consolidated level.

Current wording

We present “Adjusted EBITDA” as a measure of our operating performance. EBITDA is defined as earnings before (i) debt-related costs, including interest expense, (ii) interest income, (iii) income taxes, and (iv) depreciation and amortization. Management further adjusts EBITDA in its presentation of Adjusted EBITDA to exclude (i) other income, (ii) equity-based compensation, (iii) transaction, integration, and restructuring expenses, (iv) goodwill impairments, and (v) other non-core items. We exclude these items because they are by nature non-cash, non-recurring, and/or unrelated to our core operations, and therefore we do not believe them to be representative of ongoing operational performance. 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 these metrics provide useful measures to investors to assess our operating performance and in measuring the profitability of our operations on a consolidated level.

Previous wording

Goodwill impairment represents a non-cash, pre-tax, goodwill impairment charge of $363.6 million recorded during the three months ended June 30, 2024. 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 June 30, 2024. 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.

Current wording

Goodwill impairment represents non-cash, pre-tax, goodwill impairment charges. We experienced declines in our market capitalization as a result of sustained decreases in our stock price, which represented triggering events requiring our management to perform quantitative goodwill impairment tests as of the end of the second and third quarters of 2024 and the third quarter of 2023. As a result of the impairment tests conducted in each respective period, we determined that the fair value of our single reporting unit was lower than its carrying value and, accordingly, recorded these impairment charges.

Previous wording

As of June 30, 2024, we had $120.9 million of cash and cash equivalents, $175.6 million of short-term investments, and $74.4 million available under our revolving credit facility. Our principal sources of liquidity are cash and cash equivalents and short-term investments on hand, primarily from our IPO and follow-on offering, as well as the cash flows we generate from operations. Our principal uses of liquidity have been, and are expected to continue to be, primarily for investment in long-term growth of the business through capital expenditures, acquisitions, and repurchases of our Class A Common Stock, as well as debt services (see Note 9. Long-Term Debt for further details) and distributions to members of Definitive OpCo.

Current wording

As of September 30, 2024, we had $137.6 million of cash and cash equivalents, $167.8 million of short-term investments, and $74.4 million available under our revolving credit facility. Our principal sources of liquidity are cash and cash equivalents and short-term investments on hand, primarily from our IPO and follow-on offering, as well as the cash flows we generate from operations. Our principal uses of liquidity have been, and are expected to continue to be, primarily for investment in long-term growth of the business through capital expenditures, acquisitions, and repurchases of our Class A Common Stock, as well as debt services (see Note 9. Long-Term Debt for further details) and distributions to members of Definitive OpCo.

Previous wording

Net cash provided by operating activities was $30.6 million during the six months ended June 30, 2024, primarily as a result of a net loss of $318.9 million, offset by non-cash charges of $356.5 million. The non-cash charges were primarily comprised of a $363.6 million goodwill impairment charge recorded during the second quarter of 2024, equity compensation costs of $24.4 million, amortization of intangible assets of $24.3 million, amortization of deferred contract costs of $7.5 million, and a gain on remeasurement of the TRA of $44.0 million. The net decrease in operating assets and liabilities of $6.9 million for the six months ended June 30, 2024 was primarily driven by cash outflows resulting from lower accounts payable, accrued expenses, and other liabilities, collectively, of $10.3 million, an increase in deferred contract costs of $5.7 million, an increase in prepaid expenses and other assets of $4.3 million, and a decrease in deferred revenue of $1.3 million due to the timing of billings and cash received in advance of revenue recognition for subscription services. These factors were partially offset by and a decrease in accounts receivable of $15.2 million.

Current wording

Net cash provided by operating activities was $50.1 million during the nine months ended September 30, 2024, primarily as a result of a net loss of $506.7 million, offset by non-cash charges of $567.0 million. The non-cash charges were primarily comprised of $591.8 million in goodwill impairment charges recorded during the nine months ended September 30, 2024, a gain on remeasurement of the TRA of $68.2 million, amortization of intangible assets of $36.8 million, a decrease in deferred taxes of $36.6 million, equity compensation costs of $30.7 million, and amortization of deferred contract costs of $11.5 million. The net decrease in operating assets and liabilities of $10.2 million for the nine months ended September 30, 2024 was primarily driven by cash outflows resulting from a decrease in deferred revenue of $12.1 million due to the timing of billings and cash received in advance of revenue recognition for subscription services, an increase in deferred contract costs of $8.3 million, an increase in prepaid expenses and other assets of $7.2 million, and lower accounts payable, accrued expenses, and other liabilities, collectively, of $5.2 million. These factors were partially offset by a decrease in accounts receivable of $23.1 million.

Previous wording

Cash used in investing activities during the six months ended June 30, 2024 was $9.1 million, driven primarily by $123.9 million in purchases of short-term investments and $13.5 million in cash paid, net of cash acquired, for the acquisition of Carevoyance in the first quarter of 2024, partially offset by $129.1 million in maturities of short-term investments.

Current wording

Cash used in investing activities during the nine months ended September 30, 2024 was $0.1 million, driven primarily by $192.7 million in purchases of short-term investments and $13.5 million in cash paid, net of cash acquired, for the acquisition of Carevoyance in the first quarter of 2024, partially offset by $207.5 million in maturities of short-term investments.

Previous wording

Cash used in financing activities during the six months ended June 30, 2024 was $31.3 million, driven by payments of $7.0 million under the TRA, payments of $7.0 million for repurchases of our Common Stock, repayments of the 2021 Term Loan (as defined below) of $6.9 million, taxes paid related to the net share settlement of equity awards of $6.8 million, distribution payments to members of $2.7 million, and payments of contingent consideration of $1.0 million.

Current wording

Cash used in financing activities during the nine months ended September 30, 2024 was $43.4 million, driven by payments of $15.0 million for repurchases of our Class A Common Stock, repayments of the 2021 Term Loan (as defined below) of $10.3 million, taxes paid related to the net share settlement of equity awards of $7.3 million, payments of $7.0 million under the TRA, distribution payments to members of $2.8 million, and payments of contingent consideration of $1.0 million.

Previous wording

The 2021 Term Loan is subject to annual amortization of principal, payable in equal quarterly installments on the last day of each fiscal quarter, commencing on the Initial Amortization Date, equal to approximately 2.5% per annum of the principal amount of the term loans in the first year and second year after the Initial Amortization Date and approximately 5.0% per annum of the principal amount of the term loans in the third year, fourth year, and fifth year after the Initial Amortization Date. A balloon payment of approximately $220.0 million will be due at maturity. There was $250.9 million outstanding on the 2021 Term Loan at June 30, 2024.

Current wording

The 2021 Term Loan is subject to annual amortization of principal, payable in equal quarterly installments on the last day of each fiscal quarter, commencing on the Initial Amortization Date, equal to approximately 2.5% per annum of the principal amount of the term loans in the first year and second year after the Initial Amortization Date and approximately 5.0% per annum of the principal amount of the term loans in the third year, fourth year, and fifth year after the Initial Amortization Date. A balloon payment of approximately $220.0 million will be due at maturity. There was $247.5 million outstanding on the 2021 Term Loan at September 30, 2024.

Previous wording

Financing obligations generally include repayment of principal amounts of the 2021 Term Loan, lease payments, and purchase obligations. There have been no material changes to our financing obligations during the six months ended June 30, 2024. Refer to Note 5. Leases and Note 14. Commitments and Contingencies in our Annual Report on Form 10-K filed with the SEC on February 28, 2024 for further information.

Current wording

Financing obligations generally include repayment of principal amounts of the 2021 Term Loan, lease payments, and purchase obligations. There have been no material changes to our financing obligations during the nine months ended September 30, 2024. Refer to Note 5. Leases and Note 14. Commitments and Contingencies in our Annual Report on Form 10-K filed with the SEC on February 28, 2024 for further information.

Previous wording

The timing and the amount of any repurchased Class A Common Stock will be determined by our management based on its evaluation of market conditions and other factors. The repurchase program will be funded using our working capital. Any repurchased shares of Class A Common Stock will be retired. The repurchase program does not obligate us to acquire any particular amount of Class A Common Stock, and the repurchase program may be suspended or discontinued at any time at our discretion. As of June 30, 2024, 1,258,565 shares of Class A Common Stock have been repurchased under the repurchase program.

Current wording

The timing and the amount of any repurchased Class A Common Stock will be determined by our management based on its evaluation of market conditions and other factors. The repurchase program will be funded using our working capital. Any repurchased shares of Class A Common Stock will be retired. The repurchase program does not obligate us to acquire any particular amount of Class A Common Stock, and the repurchase program may be suspended or discontinued at any time at our discretion. As of September 30, 2024, 3,144,516 shares of Class A Common Stock have been repurchased under the repurchase program.