DH - NASDAQ

Welcome to Definitive Healthcare Corp.'s Q1 2025 earnings call. Later, we will conduct a question and answer session. I would now like to turn the call over to your host. You may begin.

Good afternoon. Thank you for joining us today to review Definitive Healthcare Corp.'s financial results. Joining me on the call today are Kevin Coop, our Chief Executive Officer, Rick Booth, our CFO, and Casey Heller, our SVP of Finance. During this call, we will make forward-looking statements, including, but not limited to, statements related to our market and future performance and growth opportunities, the benefits of our differentiated data and healthcare commercial intelligence solutions, our competitive position, customer behaviors and the use of our solutions, customer growth, our financial guidance, our planned investments and operational strategy, generating value for our customers and shareholders, the anticipated impacts of global macroeconomic conditions on our business, results and customers on the healthcare industry generally, and on our ability to successfully transition executive leadership. 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 and elsewhere in our filings with the SEC. Actual results may differ materially from any 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 statement included in the earnings release that we have just posted to the Investor Relations portion of our website. We will discuss non-GAAP financial measures on this conference call. Please refer to the tables in our earnings release and investor presentation on the Investor Relations portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure. With that, I would like to turn the call over to Kevin. Thanks, Matt.

And thanks to all of you for joining us this afternoon to review Definitive Healthcare Corp.'s first quarter 2025 financial results. On today's call, I'll provide key highlights from our first-quarter performance and provide an update on our progress against our key strategic priorities for the year. Let me begin by reviewing our financial results for the first quarter, which were above the high end of our guidance ranges on both the top and bottom lines. Our total revenue was $59.2 million, down 7% year over year, ahead of our expectations for the quarter due to an outperformance in professional services and more in-period subscription revenue due to deal timing. While we are pleased with our top line results relative to our expectations heading into the quarter, we continue to work through the impact of lower retention rates. Adjusted EBITDA was $14.7 million, which was well ahead of expectations and represents a 25% margin. This performance illustrates our commitment to controlling costs and the scalable nature of our business model. Unlevered free cash flow performance for the trailing twelve months was also strong, with 91% conversion from adjusted EBITDA over that same period. Operationally, I would frame the first quarter as a solid start to the year. We continue to see improvement, with relative signs of strength in new business, particularly with new logo wins. While renewal rates stabilized in Q1, at the same levels observed throughout the second half of 2024, retention rates remain lower than we believe are achievable. New logo activity was solid across all end markets, which demonstrates the ongoing demand from customers for differentiated actionable data. These wins illuminate what most resonates with new customers and will help us build a more repeatable and predictable new business motion over time. In terms of renewals, we delivered on our first goal of stabilization during the quarter. Improving churn remains our highest priority, and each of our strategic priorities for 2025 are expected to benefit renewal rates over time. There is a natural lag between implementing operational changes and observing their positive impact on renewal rates, so it will take time before we expect to deliver consistent improvement, but we remain confident in our operational strategy. As we discussed on our last call, we are mobilizing the entire company towards enhancing our value proposition and performance across four areas of strategic focus: As a reminder, the four key pillars of our platform and value proposition are differentiated data, data delivery and integrations, driving customer success, and enabling our customers' digital engagement with providers and consumers. I would like to take a moment to provide an update on the progress made across each of these focus areas. Let's start with data. This is our North Star and the foundation for the value Definitive delivers for customers. Critical to our differentiated data are the steps we take to ensure our data is of the highest quality, as well as the unmatched breadth and depth of our coverage of the entire healthcare ecosystem. Unlike other solutions in the market, we have built our leading reference and affiliations data by combining the best data from a diverse set of sources. This includes our own proprietary primary research, public sources including government data and websites of healthcare organizations, key opinion leader data, as well as third-party claims data. Together, we use these sophisticated sourcing methods to build differentiated datasets with deep profiles on each provider and the high-quality historical relationships and affiliations. The result is a rich and actionable dataset required by, and specific to, the healthcare market our customers demand to support their need to access, assess and monitor changes in the rapidly evolving healthcare marketplace. This approach offers a significant advantage over claims-derived and model data alone, which will not capture a significant percentage of the facilities. Our complex systematic processes have been built over a decade. We are in the process of expanding, improving and diversifying our data sources and processes to further strengthen and broaden our data quality so we can provide customers with continuous innovation, and to generate increasing value from the Definitive platform they have come to expect and deserve. This will include extending that advantage with modern data science and partnerships. We are confident that this comprehensive approach to data collection and analysis was critical in the analysis that led to our selection as the primary healthcare data partner for the global strategic partnership we announced last quarter. A foundation of differentiated data is ultimately only as good as our ability to deliver that data to customers and seamlessly integrate our first-party data with whatever third-party data sources are relevant to each customer, which leads to our second pillar, that of seamless integration. Seamless integration is the core of our master data management or MDM strategy, which is designed to ensure our customers can leverage the Definitive platform as an essential component of how they solve key business challenges as simply as possible. Master data management in this case is essentially matching and appending data to our unique token, the Definitive ID. So in addition to our historical solutions to provide direct access through our software, our evolution includes customer engagement through both our unified software platform and by leveraging our integration application and APIs that may also include advanced analytics support. In Q1, we saw strong double-digit growth in the number of engagements where we work with clients to integrate our data with their various tools and systems. Historically, we have seen retention rates be approximately 10 points higher when customers and clients integrate Definitive into their other data sources. The key here is that we are adapting to the changing needs of the market by helping customers solve their challenges in the manner that they want to engage. That could be via our software directly, providing simple APIs to our data, or deploying our data science and advanced analytics resources to partner in the development of insights by matching and appending our data with both their first and third-party data sources. And this approach has the added benefit of leading to deeper relationships with our customers, which leads to our next pillar. I'm pleased with the progress we have made in our third pillar, that of customer success. As mentioned last quarter, at the start of the year, we took several steps to streamline and simplify many of our operations to improve our customer engagement, including the creation of a center of excellence for our analytics and data science teams, integrating our customer success and value delivery team, and revamping their comp incentives and hiring a new Chief Customer Officer. I'm pleased to report that we've done an excellent job operationalizing these changes with nearly no disruption to our performance. Our leadership in this area has quickly assessed the organizational needs and taken swift action to address structural needs and reorient our focus on the voice of the customer and retention. A core component of customer success starts with how we sell and onboard our customers, so I am pleased to report we are also making solid progress on refining our go-to-market and customer support engagement models. As discussed last quarter, we are developing a higher-touch service-enabled delivery model for life sciences customers, many of whom have more intensive data requirements and more sophisticated queries. For example, we began working with a biotech company specializing in rare genetic diseases through an analytics partnership with our medical affairs team. Over the past eighteen months, our work has expanded across multiple disease areas and teams. This partnership led them to invite us into a commercial analytics RFP for an expanded indication of their top therapy asset. It's rare for a client to engage the same partner across both medical affairs and commercial functions, which is a testament to our reputation and the value that we bring. In terms of our final pillar, we are making progress on enhancing our digital engagement capabilities for our provider and diversified customers. We believe there is a significant opportunity for the Definitive platform to not be just a data provider, but also a partner that can automatically operationalize the insights customers derive from our data. Importantly, there are multiple ways we can go to market with digital engagement. Our traditional go-to-market motion of selling directly to customers and partnering with agencies who do this work on behalf of our customers. In Q1, we expanded our go-to-market reach with both agencies and customers to directly source their digital activations, signing two leading healthcare advertising agencies in addition to a significant direct deal. Both agencies are currently ramping up, and we expect to see activation in Q2 with momentum continuing to build in the second half of 2025. In our direct selling efforts, we signed a competitive deal with a New York regional health system. The agreement includes consumer audience activation as part of a broader solution spanning population intelligence and campaign management and is an example of the success we intend to drive through this pillar of focus. The common link between these four pillars is our belief that there are a number of ways that we can increase the value we deliver to customers and ensure Definitive is a critical part of their daily business workflows. By focusing on our differentiated data, developing more intimate, flexible customer engagements, and through relentless focus on customer success through all stages of the customer relationship, we believe we will meaningfully improve our retention metrics, leverage our distribution assets to deliver new solutions, establish consistency in our results, and return our enterprise to growth. While Q1 was a solid start to the year, we do have more work ahead of us. As I approach the one-year anniversary as CEO of Definitive, I strongly believe that we have successfully identified the right key areas that need to be improved, we've assembled the right team, and we are moving with velocity to implement our action plans against clearly defined objectives. Notably, we have successfully implemented these changes without disrupting our progress toward stability. As you'll hear shortly, we remain on track to deliver against our full-year financial targets even after taking into account the recent increase in economic uncertainty. This puts us on target to begin generating sequential revenue growth in the near term while continuing to closely manage our cost structure and identify additional ways to drive efficiencies. We are committed to establishing a track record of consistent execution against the targets we've laid out for our investors. With that, I would like to turn the call over to Rick one final time as our CFO and to thank him for many contributions to Definitive over the past four years. He will review our first-quarter results in more detail, and then Casey will provide an update on our second quarter and full-year financial guidance. Rick?

Thanks, Kevin. I'll start with a detailed review of our first-quarter results. As always, in all my remarks, I'll be discussing our results on a non-GAAP basis unless otherwise noted. In Q1, we were pleased to deliver above the high end of our guided ranges. We remain focused on what we can control and continue to advance our efforts to operate more efficiently while delivering innovation for our clients. In the first quarter, we delivered $59.2 million of revenue, which was $3 million above the midpoint of guidance and down 7% compared to the first quarter of 2024. We delivered $14.7 million of adjusted EBITDA in the period, which was $4 million above the midpoint of guidance for a 25% adjusted EBITDA margin. On a dollar basis, adjusted EBITDA was down 27% from the same period in the prior year, reflecting the flow-through effects of lower revenue. Adjusted net income was $7 million, resulting in 5¢ non-GAAP earnings per share in the period. We generated $67.1 million of unlevered free cash flow on a trailing twelve-month basis, equal to 91% of adjusted EBITDA for the same period. On a dollar basis, unlevered free cash flow was down 12% versus the twelve months prior. Turning to our results in more detail, as I mentioned, revenue for the first quarter was $59.2 million. This was above the high end of our guided range and down 7% from the same period of the prior year. Subscription revenue for the first quarter declined 7% from the same period of the prior year, while professional services revenue returned to growth and grew 9% in the quarter. Subscription revenues continue to be impacted as renewal rates are not yet back to our desired levels. Adjusted gross profit was $47.1 million, down 11% from Q1 2024, and as a percentage of revenue, the adjusted gross profit margin of 79.5% decreased approximately four ten basis points from Q1 2024. This reflects both the decline in revenue and the largely fixed nature of most of our current costs. Adjusted sales and marketing expenses were $19.5 million, flat year over year. As a percentage of revenue, sales and marketing expenses were 32.9% of revenue, about two twenty basis points higher than the prior year. For 2025, we expect sales and marketing as a percentage of revenue to increase approximately 150 to 200 basis points relative to the full year 2024 because of the revenue pressure. Adjusted product development expense was $7.4 million, up 2% from Q1 2024. As a percentage of revenue, product development expense was 12.5%, up about 100 basis points from Q1 2024. We believe targeted investments in our platform and using both existing and new datasets to launch or enhance multiple products is an effective and efficient way to increase the value we deliver to customers. We intend to continue prudently investing in the highest ROI opportunities on our long-term product roadmap, and we expect full year 2025 product development as a percentage of revenue to be up approximately 100 basis points compared to the full year 2024. Adjusted G&A expense was $7.6 million, up 6% from Q1 2024. As a percentage of revenue, G&A expenses were 12.9% of revenue, which is up 150 basis points compared to Q1 2024. We expect G&A expense as a percentage of revenue in 2025 to increase by approximately 100 to 150 basis points year over year. Adjusted operating income of $12 million was down 35% from Q1 2024. As a percentage of revenue, adjusted operating income was 20%, down from 29% in Q1 2024, due to the revenue pressure in the period. Adjusted EBITDA was $14.7 million, a 27% decrease from Q1 of 2024, and as a percentage of revenue, adjusted EBITDA was 25% of revenue, down six seventy basis points from Q1 2024. Adjusted net income was $7 million or $0.05 per diluted share, based on 151.8 million weighted average shares outstanding in Q1. Turning to cash flow, Definitive Healthcare's high margins, upfront billing, and low CapEx requirements provide substantial free cash flow generation. We focus on trailing twelve-month cash flow due to seasonality. Operating cash flows were $67.7 million on a trailing twelve-month basis, up 58% from $42.8 million in the comparable period a year ago, as we benefited from strong collections and a higher deferred revenue related to the data partnership entered into at the end of Q4. Unlevered free cash flow was $22.9 million in the quarter. On a trailing twelve-month basis, unlevered free cash flow was $67.1 million, down 12% from the comparable period a year ago. This is 91% of our TTM adjusted EBITDA of $73.8 million over the same period. In the first quarter, we repurchased approximately 5.6 million shares for a total of $21.2 million. This leaves $77 million remaining under the existing authorization. At the end of Q1, current revenue performance obligations of $182 million were about equal to the year-end total. Total revenue performance obligations were up 4% year over year, and deferred revenue of $113 million was up 4% year over year. One final bit of accounting before guidance. The stock price decline caused us to book a further $176.5 million of goodwill impairment as of March 31. That write-down also generated approximately $19.1 million of gain on the remeasurement of the TRA liability, and a $10.5 million deferred income tax benefit. As a reminder, these are noncash accounting charges that have no impact on our debt covenants, and all impacts are excluded from our adjusted earnings. And now I'll turn the call over to Casey to take you through guidance.

Thank you, Rick. As you heard from Kevin and Rick, we delivered a solid performance in Q1. We exceeded our guidance range on the top and bottom lines for the quarter but continue to be impacted by pressures on renewals. For the second quarter, we expect to deliver $58.5 to $60 million in revenue, a decrease of 6% to 8% compared to the second quarter of 2024. Within that, we expect subscription revenues to grow modestly in Q2 compared to Q1. From a non-GAAP profitability perspective for the second quarter, we expect to deliver adjusted operating income of $12 to $13 million, adjusted EBITDA of $15 to $16 million, reflecting a 25% to 27% adjusted EBITDA margin, adjusted net income of $6.5 to $7.5 million, or approximately $0.40 to $0.50 per diluted share on 147.9 million weighted average shares. From a cost standpoint, there's one unique item impacting the second quarter to call out, which is already contemplated within the guidance ranges provided. As a result of a renegotiation on an existing data contract, we will observe a one-time credit of approximately $1 million in the second quarter. This will contribute to sequential improvement in our non-GAAP profitability for the period over Q1. Shifting to full-year 2025, we are tightening our revenue range based on our performance in the first quarter from both a revenue and booking standpoint. We now expect to deliver revenue of $234 million to $240 million, or a 5% to 7% decline year over year. This raises the bottom end of our prior range by $4 million while holding the upper end of the prior guide. We believe this approach prudently balances the outperformance from Q1 and the fact that we are a third of the way through the year with the increasingly uncertain macro environment facing all businesses. And we remain committed to delivering on the non-GAAP profit margins we shared with you all at the February. We are holding our prior non-GAAP profit guidance of adjusted operating income of $49 to $53 million, adjusted EBITDA of $61 to $65 million for a full-year margin of 26% to 28%. Adjusted net income is expected to be between $30 to $34 million, and earnings per share are now expected to be $0.20 to $0.23 on a basis of 148.8 million weighted average shares outstanding, which incorporates the share repurchase activity through Q1. With eight months left to go in the year and our focus on the operational areas Kevin highlighted earlier, we believe it is important to guide prudently. We're focused on continuing to meet our profit commitments while providing the business with the flexibility needed for investments supporting our strategic initiatives. I'd like to wrap up by reiterating that we're pleased with the start to the year and remain focused on our key operational and strategic objectives, focused on improving retention, returning Definitive to growth, and increasing long-term shareholder value. And with that, I would like to open it up for questions.

If you would like to ask a question, please press 1 on your telephone keypad now and you will be placed into the queue in the order received. Please be prepared to ask your question when prompted. Please keep in mind you please try to keep your one question and one follow-up. Once again, if you would like to ask a question, please press 1 on your phone now.

And our first question comes from Jared Haas from William Blair. Please go ahead, Jared.

Yeah. Thanks, guys. And Rick, all the best to you in the future. Been great working with you these past few years. Kevin, maybe to double-click on some of your comments around the data integrations in the prepared remarks. I appreciate the comments you shared in terms of what you typically see on user engagement and higher retention with those data integration partnerships. You know, what determines if you're actually able to integrate the data in the client's workflow? So are there certain systems that are a little more challenging to work with, or are there sometimes issues for data security reasons, something along those lines? And then, I guess, related to that, are you able to offer incentives maybe around pricing or something like that to kind of encourage the integrated adoption just given the value that you're able to see?

Yeah. So, Jared, it's kind of a combination. Right? You've got the elements around data sharing. You've got to facilitate the data interactions. The datasets, whether that's through, you know, through Snowflake, Databricks. Our integrations come in the form of integration. We have modules which already have connectors that we can actually work in a Salesforce.com, which are already there. We also have the analytics capabilities to ensure that we can leverage the analytical resources that might help them do that in a more complicated master mastering of data perspective, like with matching a pen, which is part of what we're looking to do and to drive more of those engagements with a broader set around use cases in that area, which that's, I think, what seeing with the double-digit increase in the number of integrations. Part of it is just doing it with intention. People need differentiated data. They are looking for the access of that data often through our UI UX, which we still continue to offer. And then we also have the ability to offer them that seamless integration either through prebuilt connectors, or through a more complex master data management relationship where we're providing them and augmenting their own efforts with our advanced analytics system. So I think in this very short time this year, we're already seeing the fruits of that it's proving out. And not only is it helping them unlock more value with our data, but it's going to, we know that just based on the data, the data analysis that our retention rates will also increase as well.

Got it. That's helpful. Thank you. And then maybe as a follow-up, I wanted to come back to the work you're doing with agencies now. So just number one, I was hoping to kind of unpack the agency strategy a little bit more and just how you're thinking about the impact that might have on the go-to-market motion. And then also wanted to clarify, you know, if there was any meaningful contribution from the kind of the agency channel assumed here in the forward guidance for 2025. And also wanted to clarify too, are those agency relationships, do you think of that as unlocking any specific client segment, like small and mid-sized organizations? Thanks.

I think it's applicable to all size customer segments in the segment, primarily with provider diversified. What we if you think of it in the simplest form, people need their data. They need data. They need the differentiated data, and they want to do something with that. Usually say that it's a very obvious adjacency or a logical next step for our business is we historically were able to help them there, but without again, similar to the integrations, without the intention of actually helping them with that next step, we sort of, you know, I think we missed we missed an opportunity, which we're attempting to capitalize now. It's a relatively straightforward solution. We provide great differentiated data, and then we help our customers activate or put that into execution whether they want to leverage that directly themselves through, say, a Google or a HubSpot or whatever platform they desire, or they may wish to do so through an agency. The secondary component of the agency relationship, by having your data there already, agencies themselves are dealing with customers that want to activate, and we become an option for them on a kind of go-forward and a more of a transactional basis, which will take a little longer to build. So we think that the digital strategy with the two components of it, you'll we believe we'll see quicker return on the direct channels as that builds, where I think longer-term, the agencies represents an even bigger because you're basically leveraging different distribution channels, and that will build over time. But that will take a little bit longer. Both of which we expect to start to show some contribution this year.

Perfect. That makes sense. Thank you.

And our next question comes from Craig Hettenbach from Morgan Stanley. Please go ahead, Craig.

Thanks. And nice to see the stabilization in the business, Kevin. Can you touch on just you mentioned a kind of a lag in terms of a lot of the process and changes you put in place. What do you think is a kind of reasonable time frame that you would see kind of an inflection on the growth rate here?

Yeah. I think you'll have to see that start to show up in the year. But if you think about the processes and the operationalization of what we're doing, our vertical strategy, our GTMotion has always been segmented by end market. So this is just an evolution of an existing strategy. And different markets have different use cases and needs. And our pricing and packaging should reflect that reality. Customer size is important, and we intend to manage our business with the appropriate pricing and packaging, including how we support and configure our customer solutions according to their needs. Part of that is this integration strategy that I just talked about here. Our master data management in digital is also an evolution towards more of a segmented vertical approach, which we're positive to see we're pleased to see some positive signs in bookings. In our life sciences clients, which were well ahead of last year in Q1. So what we're doing is we're aligning the support functions, whether that's success, onboarding, how we engage with integration, be it the attached services that could come with the customer arrangement. By bringing all those together, which it's easy to say it's harder to do, that takes a little bit of time. Now that we're seeing that in the go-to-market motion across both the front end of how we actually customers are entitled, sold, onboarded, expecting to start to see that flow through, but that takes a little bit of time for all to get into motion. And we're well along on the journey, but we still have more work to do.

Got it. And then just as a follow-up, you called out a customer win back in the press release. Is this an area, if I think about the churn over the last year, there's been a lot of industry dynamics there as well. Is this something that you can build on just from winning customers that might have gone elsewhere? Or do you think it's really going to be more new logo relationships that drive the inflection from here?

That's a good question. As I think about the answer to that, to try to be very thoughtful. We're going to have the opportunity because, first of all, with the first pillar being data quality. With the best data quality that we can provide, coupled with the best service that our customers demand, we believe that we, with our differentiated data, can create that durable competitive advantage around that dataset, and we do not need to resort to competing on price with low-cost providers. What that'll also do is we believe that over time, because the quality of data is important. Not as much even as breadth of data, but depth of data and quality of data, that people will realize that we are the high-value provider that we will be able to win back customers that may have left us in the past. At the same time, there are massive numbers of customers out there that have yet to experience the awesomeness of our data, and we think we can continue to still win new logos and drive that as well. And I think we've seen that again year to date. I think we're seeing some good green shoots of that. And, I feel very confident that our go-to-market motion is only going to strengthen.

Got it. Thanks for that.

And our next question comes from David Grossman from Stifel. Please go ahead, David.

Thank you. Good afternoon. I'm wondering maybe if we could just step back. I'm just trying to reconcile the first quarter actual, the second quarter guide and the implied kind of revenues in the back half of the year. It feels kind of flattish, like you're kind of guiding to flattish in sequential revenue in the balance of the year or something like that. And maybe similarly on the EBITDA line. So I heard what you said about professional services, I guess, came in better than expected. And more in-period subscription revenues. So maybe you could reconcile all that to what the implied guide is for the balance of the year so we just understand fundamentally how you're thinking about the balance of the year and how results could actually vary from your underlying assumptions.

Absolutely, David. Happy to walk you through that. So we're certainly pleased with our first-quarter performance, and ability to outperform our guide on the quarter. As you mentioned, we called out having benefited from an uptick in professional services projects, which drove part of the beat as well as some timing benefit on the SKU of some subscription bookings throughout the quarter. So both of those things improved our Q1 revenue versus our initial expectation. And we'll lessen the sequential lift from Q1 to Q2 compared to what we were initially expecting when we spoke about it in February. As we look at the second quarter, we are expecting to see an overall similar revenue growth rate to what we delivered in Q1. Our guidance reflects a number of potential scenarios, which does include a modest step up within subscription revenues going from Q1 to Q2. So we view this really just as a prudent guide given some of the uncertainty being faced over the business from the last year. The view of stabilizing subscription revenues is an encouraging sign of progress for us. We are still continuing to focus on those core actions being taken across the business to improve our renewal rates, and we'll see how that continues to play out over the next few months.

Right. So just to think at a very high level, then. I mean, you were down sequentially in March reflecting kind of higher churn than new business, right, or renewals and the combination of new book and renewals? It sounds like your assumption for the year, at least at the midpoint of that range, is that the kind of churn, if you will, on the bookings, the new bookings kind of offset one another. Is that a fair way to think about the midpoint of the guide for the balance of the year?

Yes. That's a good way to think about it, and a lot of that has to do with the SKU of our renewals. The SKU of our renewals are very much weighted to December and January. So, obviously, we've got January behind us at this point. So just the level of business that we've got renewed throughout the year just becomes a little bit steadier so that we do have the opportunity for the new logos that we're signing and the expansion bookings within existing clients to have a little bit more ability to overcome what kind of falls out through churn or through down-sell dynamics. So that kind of drives that stabilization that we talked about.

Got it. Then maybe just a clarification because I think you disclosed, you know, obviously, the number of customers over $100,000, and yeah, that has been going down sequentially for several quarters. So is most of that clients just spending less? Or can you distinguish between how much of that is lost customers that have churned versus those that are just kind of dropping below that threshold?

Yes, it's certainly the mix of both of those dynamics. At the same time, we are actually adding new enterprise clients as well. So you've got, it's a roughly even-sized kind of component through just ultimate losses as well as down-sell driven. That's netting that decline.

Got it. Okay. That's it for me. Thanks very much.

Thanks, David.

And our next question comes from George Hill from Deutsche Bank. Please go ahead, George.

Yes. Good afternoon. I'd just kind of be interested from an end market demand perspective. What are the most important cross-sell modules that customers are looking for right now? And I guess kind of I'll ask the macro uncertainty question. What are the solutions that you guys sell that you feel are best positioned to help all of your provider clients given the macro uncertainty around Medicaid and tariffs?

Yeah. So you've got quite a bit in that question. So first, I think the tariff aspect of it for our business is relatively de minimis, if any. If any, it would be more around biopharma. We don't really see that as directly impacting stage two clinical use cases. But theoretically, it could have an impact on the review and evaluation of new drugs, vaccines, and devices, which could have some downstream impact. But we haven't seen anything there yet, and we don't expect that we're going to see much there at all. So while it's probably not zero, it's pretty close to it. We don't see any major issue with that. As it relates to the use cases or modules and what's most in demand, we see pretty broad demand across all segments for our differentiated data. The access for it, I think, if you looked at even the most recent quarter and as we talked about in Q4, we've seen strong business and logo wins that are ahead of expectations. In Q1, we saw new logo performance and sales across the product sets that we offer across all of our end markets. So it's been pretty broad. Really, what we're focusing on there to drive the next level of returning to growth is really around that first pillar, which is the quality of data. We will be able to mitigate both the down-sell pressure, and we can continue to delight our customers with the best quality data. I think that's the key pillar. I don't think it's so much of the use case as it is that you have to ensure that you're offering the best in class data that you can.

Yeah. I don't know if I could just clarify. I was actually asking if you guys have any solutions that specifically help your customers with respect to tariffs and kind of put the proposal to the previous speaker.

I gotcha. I'm sorry. I didn't catch that. Well, so just to maybe for the purposes of clarity, what we have, we've got really, you know, if you want to look at solutions by use case, you want to look at solutions by industry, it isn't so much as identifying where the tariffs are gonna impact. But we've got a very deep suite around view, which is everything from hospitals, physicians, payers, prescriptions, imaging clinics. As you really start to look at things like market analysis, commercialization of devices, launching new drugs and therapies, and finding customers and the strategies that relate to that. So there's a lot around that downstream that is potentially related to tariffs. Particularly, it's not helping to identify what the tariffs will impact, but theoretically, downstream, it could have an impact on, for example, the commercialization of a device that may have some components that are affected by the tariff downstream. But that would be way out in the future for us.

Thank you.

And our next question comes from David Larson from BTIG. Go ahead, David.

Hi. This is Jenny Shen on for Dave. It's encouraging to hear that churn is improving. What was the churn as a percentage for your total base in the quarter? What was that compared to last quarter and also a year ago? And then also if you could speak about the competitive environment, that would be very helpful. We also cover some other pharma services names like Veeva, Doximity. They've done really well. IQVIA's TAS division has done well. So it sounds like demand for solutions that can assist with the pharma drug launch and commercialization process are seeing good demand. What's your view of the competitive environment? Do you run into those guys when you're out in the market? Thanks.

Sure. Thanks, Jenny. So I'll start with addressing the churn and renewal rate question. Our Q1 renewal rates were pretty consistent with what we saw in the second half of last year, but they are down relative to Q1 of 2024. So that for us is continuing to put a little bit of pressure on our net dollar retention rate. But the stabilization is encouraging. We're encouraged certainly by the fact that it's not getting worse. We think we've got our arms around it. The operational actions we're taking will result in improved renewal rates later in the year, and that will start to show up in our results. As far as what we're seeing competitively, we really haven't seen radical shifts in the quarter. Certainly, some of the dynamics in life sciences, we continue to see pressures due to the current funding environment, interest rates, regulatory uncertainty. The new macro volatility and uncertainty certainly plays into that a little bit. We're cautious on the potential impact for our customers going forward, but remain focused on what we can control. I really don't think we've ever observed any changes amongst the competitive dynamics over the course of Q1.

Yeah. And, Jenny, what I would add to that is and you referenced some other players in the space that also have similar although in different stages, especially in the clinical asset stages. We don't have first stage where I think you're seeing the beginnings of that come back now, which is more advantageous. We do not have clinical assets. So when we are talking about the commercializing or commercialization or launching therapies, and especially in biopharma, that would really be stage two or later. That will have a lag. So I don't think that's a perfect comparison directly. A lot of commentary that I've read in that market as well, I think we're experiencing similar pressures across the board as there is volatility with the current funding environment, interest rates, and regulatory uncertainty, which is elongating the decision cycle. It's increasing the number of RFPs that are out there, and it's creating a little bit more of a cooling effect on buying decisions and evaluation timelines. I do think that's pretty consistent across everyone. The good news, though, that it is seeing is that first stage clinical assets do appear to be showing some signs of life. That's good for stage two, and so we just have to wait our time for that to work its way through the market.

Great. Thanks. Congrats on the quarter.