Definitive Healthcare Corp. (NASDAQ:DH) Q4 2022 Earnings Call Transcript

They’re cutting a lot of spend. And so those are places that are just harder to get in or harder to upsell or just tend to be places where we don’t always control the sort of budget environment that we’re selling into. And you might have been talking to someone for three months and have a really good conversation and then the budget environment changes in the last hour. So, again, look, I’m hopeful that things turn the right direction and that we get a little relief on this, but we have not assumed that in our planning for this year.

Brian Peterson: Appreciate the color. Thank you.

Robert Musslewhite: Yes, thanks.

Operator: Thank you. Our next question comes from the line of Anne Samuel from JPMorgan. Please go ahead.

Anne Samuel: Hi, thanks for taking my question. This was maybe just a little bit of a follow-up on what you were just talking about. I was wondering if maybe you could talk about some of the differences between what you’re seeing in the demand environment for life sciences versus provider, where the headwinds are more pronounced and maybe which one you expect to recover first?

Robert Musslewhite: Well, that’s a good question. I guess I’ll start with the end of your question, which is we haven’t assumed any recovery in the plan that we’ve put out. So from an assuming and sort of looking forward, we’ve assumed that the environment we’re in is the environment we’re in, and we’re going to function as best we can against that. In terms of just what we’re seeing kind of life sciences versus provider, certainly, it’s been more acute for us in the smaller life science, and that’s been a strong point for us over the years. We have a great value proposition in that market. There’s just a lot of financial strain there, where either really just come in with inability to continue to spend external money or at least just heavy budget scrutiny and both of those impact our ability to grow with those clients.

Provider is a little different story. Providers tend to be okay over the long-term, not necessarily super high margin but usually not low margin either. I think at the end of last year was tough and there were a lot of things working against provider economics. I’d expect that market over time to be a great market for us. I just don’t know when things will open back up. So, hopefully, that gives you as much color as I can at this point. I wish I could look forward and tell you that one is going to recover sooner than the other and that they’re both going to recover really quickly. But that’s, again, not what we have in our outlook right now.

Anne Samuel: Very helpful. Thank you.

Operator: Thank you. Our next question comes from the line of Allen Lutz from Bank of America. Please go ahead.

Allen Lutz: Hi, thanks for taking the questions. I guess one for Rick. If we look at sort of the KPIs here, enterprise customers still growing, total customers still growing pretty nicely here, even though you’ve talked about how the macro is impacting the business. I guess to ask the sequential question another way, is there any way to size the contribution in 4Q from professional services? Or what’s not going to repeat in 1Q? And then how should we think about growth of total customers, especially in the first quarter or first half of the year? Is that — could that potentially dip? Just trying to kind of frame what’s driving the sequential change in revenue from 4Q to 1Q? Thanks.

Rick Booth: Yes, there’s several million-dollar anticipated difference between Q4 professional services and Q1 professional services, which is normal and customary for the Analytical Wizards project work that they still do. Overall, professional services are only about 2% of our revenue but they do tend to be back-end loaded. And thank you, by the way, for acknowledging the underlying strength of the business.