Welcome to Definitive Healthcare's Q4 2023 Earnings Call. Our host for today's call is Jason Krantz. [Operator Instructions]. I would now like to turn the call over to your host, Mr. Krantz, you may begin..

Good afternoon, and thank you for joining us today to review Definitive Healthcare's financial results. Joining me on the call today are Jason Krantz, Founder, Executive Chairman and Interim CEO; and Rick Booth, our CFO.

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 health care commercial intelligence solutions, our competitive position, customer behaviors and use of our solutions, our financial guidance, our planned investments, generating value for our customers and shareholders and the anticipated impacts of global macroeconomic conditions on our business results and clients and on the health care industry generally.

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 in the Investor Relations portion of our website. Additionally, we will discuss non-GAAP financial measures on this conference call.

Please refer to the tables in our earnings release 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'd like to turn the call over to Jason..

First, we will continue to invest heavily in our core and proprietary data asset. We will continue to focus on improving data quality as well as expanding the breadth and depth of our data.

Some specific examples include investment in non-standard affiliations, such as management service organizations and independent provider associations as well as new data and analytics on cancer and infusion centers. Second, we are expanding the use of our Populi Claims Analytics and visualization platform to serve all of our end markets.

Since acquiring this platform in July of 2023, we have seen lower attrition and more rapid expansion in our provider business. With this new platform, we have been able to deliver solutions that get into our clients' workflow as they look to expand their markets, reduce leakage and strengthen their physician networks.

We see tremendous opportunity here to build on this success by leveraging this technology with our valuable life sciences and diversified customers. This enhanced solution will launch early in the second half of 2024, and we believe will have a measurable impact on our expansion in churn metrics.

Third, we'll continue to invest in AI and data science to drive more insights for our clients. Our work here, which is a continuation of the deep data science that we have been focused on since we were founded, is concentrated in three key areas.

First, we are using AI and data science to become more efficient across our organization by automating our work. Second, we continue to derive new data and insights using AI. Our proprietary data on the entire health care ecosystem gives us the unique ability to layer on AI to create new intelligence that cannot be found elsewhere.

A few new examples of this include a geographic proxy to help providers understand where their patients come from and a new influence score that measures the impact of scientific activity such as event presentations and scientific publications.

Thirdly, we are collaborating with our customers to explore ways in which we can overlay this technology into our front end to help our users leverage our data and intelligence more quickly. Finally, just after year-end, we completed another acquisition, purchasing the Carevoyance product line from H1.

Carevoyance is a software platform utilized by sales and marketing teams in med tech to identify the physicians and facilities that can benefit most from their medical technology or device.

While this acquisition is small from a revenue standpoint, we are excited that it provides our clients in the valuable medtech segment with a workflow solution that can leverage our Atlas data set to drive more meaningful interactions with physicians and hospital executives.

This product is already being sold by our commercial team and is quickly being integrated into our overall platform. Early client response has been positive and illustrates the value of combining our best-in-class data assets with software that is purpose-built for the needs of our end markets.

Additionally, in 2024, we will remain keenly focused on customer retention. As discussed, we believe the product initiatives we are putting in place such as enhancing our core data asset and expanding the use of our Populi Claims Analytics platform will result in reduced churn.

However, we will also continue the work we started last year of improving our service and delivery efforts that began to positively impact our churn metrics as the year came to a close. The future of Definitive Healthcare is bright. We compete in a complex and dynamic market with a TAM that is more than $10 billion and growing.

We have a combination of unique and proprietary data assets along with powerful products that solve mission-critical client problems, and we have an extraordinarily talented workforce that innovates and constantly redefines how data and analytics can be leveraged in health care.

With that, let me turn the call over to Rick to walk through the numbers.

Rick?.

Thanks, Jason. I'll start with a detailed review of our Q4 results before finishing with our guidance for Q1 and full year 2024. In all my remarks, I will be discussing our results on a non-GAAP basis unless otherwise noted. We delivered solid results for the quarter. Both revenue and adjusted EBITDA were within our guided range.

We remain focused on what we can control, despite the challenging economic conditions and continue to advance our efforts to operate more efficiently while delivering innovation for clients, both of which we expect to position us well as the market recovers. Highlights include 9% revenue growth compared to Q4 2022 and 13% revenue growth for the year.

30% adjusted EBITDA margins for the quarter and for the full year. And our 2023 revenue growth plus the adjusted EBITDA margin was 43%. And for the full year 2023, we generated $68.6 million of unlevered free cash flow, which is up 20% versus 2022. Turning to our results in more detail.

Revenue for the fourth quarter was $65.9 million, up 9% from the prior year and in line with our guidance. This amount includes $3.2 million of professional services as large clients engage us to work on some of their most challenging issues in the fourth quarter as in prior year.

Pro forma organic revenue growth was 7% in the quarter and 11% for the full year. We ended the quarter with 566 enterprise customers which we define as customers with at least $100,000 in ARR. This was an increase of nearly 30 enterprise customers or 5% year-over-year.

As a reminder, these customers represent the majority of our ARR and are a key focus of our go-to-market program. Our total customer count, which includes smaller customers, was just over 2,900 at the end of Q4, down about 150 from Q4 2022. And that smaller customers have been disproportionately impacted by current conditions.

Net dollar retention for 2023 was 96% for enterprise customers and 91% overall. Although these are declines from year-end 2022, many of our actions in 2023 were specifically targeted to customer suggestions for enhanced data, analytics and service, and we began to see the payoff from these adjustments.

We expect at least 100 to 200 basis points of improvement in overall 2024 NDR by year-end. Gross profit was $55.8 million, up 4% from Q4 2022.

Gross margin, 84.7%, decreased 350 basis points from the fourth quarter of 2022 due to the impact of both the incremental data sources we introduced earlier in 2023 as well as the impact of Populi, whom we acquired late in Q3 of 2023. We expect full year 2024 gross margin to be fairly consistent with the fourth quarter of this year.

Sales and marketing expense was $20.4 million, down 3% from Q4 2022. And as a percentage of revenue, sales and marketing expense was 31% of revenue, down over 350 basis points from the fourth quarter of 2022.

The year-over-year decrease reflects the changes we have made to drive efficiencies in sales and marketing, focusing on the markets and activities with the highest return on investment.

We expect us to continue to see operating leverage from sales and marketing in 2024 of 200 to 300 basis points relative to the fourth quarter of 2023 and for that improvement in sales efficiency to build throughout the year. Product development expense was $8 million, up 7% from the fourth quarter of 2022.

As a percentage of revenue, product development expenses were 12% of revenue, consistent with the fourth quarter of 2022. We believe investing in our platform and using our existing data sets to launch or enhance multiple products is a highly effective and efficient way for us to increase the value we deliver to customers.

Jason touched on some examples of these earlier, and we will continue to invest in the multiple opportunities we have identified on our long-term product road map.

We expect full year 2024 product development as a percentage of revenue to be fairly consistent with full year 2023, which implies up to 100 basis points of operating leverage relative to Q4 2023 building throughout the year. G&A expense was $8.5 million, up 6% from the fourth quarter of 2022.

As a percentage of revenue, G&A expenses were 13% of revenue, which is about flat to last year. We expect operating leverage of 100 to 200 basis points in G&A as a percentage of revenue in 2024, and for that improvement in efficiency to build throughout the year as well.

Adjusted operating income was $18.3 million, up 12% from the fourth quarter of 2022. As a percentage of revenue, operating income was 28% of revenue, up 80 bps versus the fourth quarter of 2022. The year-over-year margin increase was primarily due to efficiencies in sales and marketing, as I discussed previously.

Adjusted EBITDA was $19.8 million, a 16% increase from Q4 2022. As a percentage of revenue, adjusted EBITDA was 30% of revenue. up nearly 200 basis points from Q4 of 2022. As we move through 2024, we expect to continue to see year-over-year improvements in our adjusted EBITDA margin.

We expect to reinvest some of the yield on the efficiency actions that we've taken and we continue to look for areas in which we can reallocate investments to optimize growth. Taking into account the timing effects discussed above, we would expect EBITDA margins to build throughout the year.

Adjusted net income in Q4 was $10.6 million or $0.07 per diluted share based on 155.6 million weighted average shares outstanding. Turning to cash flow, Definitive Healthcare is high margins, upfront billing and low CapEx requirements provide substantial free cash flow generation. We focus on trailing 12-month cash flows due to seasonality.

Operating cash flows were $41.2 million on a trailing 12-month basis, up 16% from $35.6 million in the comparable period a year ago. Unlevered free cash flow was $68.6 million on a trailing 12-month basis, up 20% from the comparable period a year ago.

Unlevered free cash flow was 27% of revenue on a TTM basis, effectively converting 92% of our TTM adjusted EBITDA of $74.5 million into cash. On the balance sheet, we ended the quarter with $308 million in cash and short-term investments with strong adjusted EBITDA profitability and only $256 million of debt.

We believe that we are well positioned to fund both organic and inorganic growth initiatives. Current revenue performance obligations of $187 million were up 2% year-over-year. and total revenue performance obligations were flat year-over-year. Deferred revenue of $97.4 million was down 3% year-over-year.

note that as expected, cRPO and deferred revenue grew more slowly than revenue, and I'll have more to say about that in guidance. Moving now to guidance for Q1. We believe it's prudent to assume that current macroeconomic conditions continue to extend through the first quarter as well.

Assuming this is the case, in Q1, we would expect total revenue in the range of $63 million to $65 million for a revenue growth rate of 6% to 10%, adjusted operating income in the range of $18 million to $19 million, adjusted EBITDA in the range of $19.5 million to $20.5 million for a 30% to 32% adjusted EBITDA margin.

And finally, adjusted net income in the range of $12 million to $13 million were $0.07 to $0.08 per diluted share to be reported on 157.4 million weighted average shares outstanding. For the full year 2024, we expect revenue of $263 million to $269 million or a 5% to 7% growth rate.

It's worth noting that we do expect our revenue growth rate to continue to moderate as we move through the first few quarters of the year, given current economic conditions. along with the anniversary of the Populi acquisition in the second half. I'd like to pause here to comment on our expected revenue growth.

versus the growth in cRPO of 2% mentioned earlier. We believe cRPO growth of 2% understates expected revenue growth for 3 reasons. First, some customers have discretionary opt-out clauses in their contracts, which means that they do not show up in cRPO. Without these contracts, cRPO would have been up 4% year-over-year.

Second, we saw improved renewal and retention late in the fourth quarter and in January and we expect that to continue through 2024. And third, we expect to grow in our transactional and services work, which is not fully included in cRPO. Overall, these three changes bridge the gap from cRPO growth for expected revenue growth of 5% to 7%.

As in 2023, we'll keep a careful eye on cost and operating efficiency to ensure we drive growth in the most efficient way as possible. When we see revenue upside, we will try to reinvest it to deliver efficient growth, while also ensuring we continue to deliver attractive margins.

Following this strategy, adjusted operating income is expected to be between $78 million and $82 million. Adjusted EBITDA is expected to be between $84 million and $88 million, for a full year margin of 32% to 33%. Adjusted net income is expected to be between $59 million and $63 million.

Earnings per diluted share are expected to be $0.37 to $0.40 on 159.3 million weighted average shares outstanding. Our guidance for 2024 reflects our balanced view of the year. demonstrated our ability to adapt to a tougher macro backup, focused on driving efficiency and investing to meet clients' needs today and for the future.

So to summarize, 2023 was another solid year for Definitive Healthcare. We took several actions to improve our margin profile and added meaningful capabilities to our platform through organic innovation and strategic acquisitions.

We believe that we are well positioned for the long term because we have developed a clear leadership position in a large and attractive market that we believe will support high levels of predictable revenue growth, profitability and capital efficiency for the long term.

And with that, I'll hand it back to Jason for a few closing thoughts before we take questions..

Before I open it up to questions, I want to thank all of our customers and employees for their commitment and support of Definitive Healthcare.

The work that we are doing together is incredibly important as we look to help our customers transform the health care system by driving down costs, increasing quality and helping our customers bring new devices and life-saving therapies to patients worldwide.

I'm proud of the impact our platform and our teams continue to have on the marketplace, and we have been externally recognized for the second year in a row by the Boston Business Journal as one of their middle market leaders. We also continue to receive recognition for our strong workplace culture.

In Q4, we are recognized as a Best Place to Work in our India office and also received the Silver Stevie Award in the category of Employer of the Year and Health Products and Services for the second year in a row. With that, I would like to open it up for questions. Thank you..

[Operator Instructions]. And our first question today comes from Stephanie Davis with Barclays..

Hey guys, thank you for taking my questions. Jason, you mentioned a ton of new products this year, both inorganic and organic.

Can you walk us through what you're viewing as more near-term opportunities for where you've seen the greatest level of initial client interest? And a follow-up to that, you mentioned how it could improve the churn that you see.

Do you have any color on the number of solutions per client in your renewing client book compared to some of the attrition?.

Yes. So thanks for the question, Stephanie. I appreciate it. In terms of -- as you think about products that we're going to be launching that are going to have near-term impact this year. The one that we're most excited about in the shortish term is our claims analytics platform.

So this is a platform that we bought as part of the Populi acquisition that allows us to create visualizations in very specific analytics that allow our clients to solve specific problems that they're looking to solve.

These are things like how to identify physicians to grow their network or how to size markets as you're thinking about how to invest your resources from a clinical trial standpoint or from a geographic expansion standpoint.

So we saw -- when we rolled this out to providers after the acquisition, we saw an almost immediate impact in our ability to inflect expansion sales as well as to reduce churn as we're able to meet their needs more specific -- in a better way than we were before.

So that we are going to be expanding that to the rest of our clients, probably in the very beginning of H2. So that will be expanded to our life sciences clients and our diversified clients, and we expect to have a similar impact in our ability to, again, meet those needs more quickly and deliver value more quickly for our clients..

Following up on that analytics side of things, the recent change outages probably puts an opportunity for some competitive bids out there for health care data and analytics solutions.

Are you seeing any opportunities in the recent outages as you go to market?.

I think it's too early to say what -- what is going to impact -- what the impact is going to be from all of the things that are happening in that change right now. What we're focused on is the things that we can control.

So we're continuing to make sure that we put our investment dollars in the products that are most important and that we see the quickest time to value for our customers and then making sure that we have a go-to-market team that's able to articulate our vision and deliver the type of value that our customers are looking for..

Thank you..

And our next question comes from Craig Hettenbach with Morgan Stanley..

Yes, thank you.

On the comments of improved retention late into the quarter and into January, is there anything else you can share in terms of color by end market or customers? And then also, what gives you the confidence that that's kind of back on the right trend as you move through the year?.

Hi, Craig. The impact that we saw, as we mentioned, was later in the quarter, and it was really across the entire customer base for the most part. We believe that there were two key things driving that.

The first was we spent a lot of effort in the second half of the year, really focused on how do we improve the deliverability for our clients of all of our products specifically our claims analytics. So that was a big focus of ours. And how can we improve that deliverability and drive additional service for those clients. So that had immediate effect.

The second, which was expressed more in our provider market was the impact which I talked about of how we've productized the Populi platform with new claims analytics and new visualizations to help them provide a market more specifically.

So as we think about how this all translates into 2024, the investments that we made in high-quality data, high service, high touch, that will all continue into 2024. Our clients are seeing the benefit of that.

And then as we roll out and expand the product offering that I just mentioned to Stephanie's question, that should also impact churn in the second half of the year..

Got it. And then just as a follow-up, Jason, with the recent change in CEO and you're coming back interim basis, you mentioned this is a year of growth.

Can you just touch on just the strategy here and what you're maybe tweaking at the margin?.

Yes. I think it's -- as you start about it, it's just a change in mindset as the beginning of it. So as you think about 2023, it was just a year where we had to do things like work on our cost structure and figure out how to set ourselves up, create that foundation for long-term growth and profitability, which has always been so important to us.

So the mindset this year is just much more of a growth. It's -- we're on our front row. We're thinking about what are the different product investments that we need to make to go drive the type of impact that we're going to have with our clients. And we talked a little bit about the restructuring that we did in our sales force.

That restructuring is really designed to put more resources and more impact on our largest enterprise clients that we think had the most opportunity for expansion, also had the lower churn rate.

So that will be -- in order to serve those clients, it's all about product innovation and what can we bring to the market to solve a vast number of problems across all their therapeutic areas or all the different functions of the organization.

So that's really where we're focused right now is how do we innovate, how do we meet clients' needs, how do we get -- expand the use cases that we solve for them..

Thank you..

And we'll move next to Craig Jones with Stifel..

Hi, thanks for taking the question here. I'm just thinking about the retention, did you say that it was going to improve 100, 200 basis points by the end of the year. And then I was wondering if there's any way to give a breakdown kind of how you're thinking about by client size, some of those metrics you give annually..

Yes. We reported NDR on an annual basis, and we would expect it in our next fourth quarter call, but we would see roughly 100 to 200 basis point improvement..

Okay. So year-over-year, not just like say, December to December or something like that, but you're saying.....

Right. annual -- it's an annual disclosure. So it effectively is December to December. And we don't break that out more finely between industry groups. We do comment if we see something that is different from the trend as we go through the year, but it's an annual disclosure..

Okay. Got it.

And then on the acquisition, how much revenue do you expect from that? And then how much from the Populi as well?.

Both very, very small tuck-in acquisitions and are fully considered in our guidance material..

Perfect. Thank you..

Our next question will come from Ryan MacDonald with Needham & Company..

Hey thanks for taking the questions. This is Matt Shea on for Ryan. So it seems like the diversified segment has been an area of outperformance with the 40% ARR number being up from historical levels that were closer to, say, 20% or 30%.

So is it fair to say that this end market has been more insulated from the macro? Or why do you think it has been so durable? And then how meaningful do you expect the contributions from this segment to be to the 2024 growth outlook?.

Let me just clarify.

I think you're comparing against the disclosures we made in our IPO where we broke customer verticals into four groupings, one of which was diversified and one of which was software and IT, adding those together, that's roughly the 40% in the way that we're talking about it now, which is three verticals to emphasize the biggest markets.

Our single largest TAM is in life sciences and our next largest provider, and we're lumping to rest into what we're calling diversified, which is roughly the 40%. Now within that, it has been a good performing segment for us, but I didn't want to confuse you with the 20% versus 40%..

Okay. That's a helpful clarification. I guess pivoting nice to see the improvement in the retention late in Q4 in January and that should help mitigate the churn. But for those who have, you talked about last quarter strategy is to recapture churn customers.

Just curious if you could provide an update on like how those efforts are going? And then what kind of win back expectations you're incorporating into the year, if any? Or is that just peer upside? Thanks guys..

Yes. We have always won back customers. So I don't think that there's anything new that I would think of as sort of outsized for this year.

We have a heavy effort on making sure that any customer that churns we go back and especially if it was budget due to all the all the problems that people are having within 2023, that we go back and we have a conversation with them. And many of these get a tremendous amount of value out of definitive, so are likely to sign up in the future.

We factored some of that into our guidance. We believe it's a little hard to predict how much of that is going to happen in 2024 versus 2025 and beyond, but it's an effort that we will continue to work on and we believe we'll be some solid upside for us in years to come..

We'll move next to Allen Lutz with Bank of America..

Good afternoon, thanks for taking the questions. Rick, I'm trying to back into why revenue growth should exceed cRPO growth. If we look back to 2023, cRPO growth was a little bit less than 7% and it's effectively where you're guiding revenue 5% to 7% for 2024.

I guess as we think about the things that you called out, opt-out causes, improved renewals, transaction services not included.

How much of that -- is any of that different than how you were reporting cRPOs in 2023? And just trying to look at this, should we assume that if cRPO growth remains at 2% that, that should point to 5% to 7% revenue growth from here? Thanks..

No. We've got a couple of things that are going on. So when you look further back, particularly early in 2023 or at the end of 2022, we had fewer out clauses those have come in disproportionately through acquisition. So we inherited contracts.

We also -- we are we are now realizing some revenue from a product called activations which helps people complete that last mile of actually delivering marketing to the target person. We have that in provider right now.

That's new that came in through Populi and then the final is the acquisition of Carevoyance came at -- in early 2024, and that is contemplated in our guidance..

Okay. Great. And then I wanted to touch quickly on M&A. Has there been any change in valuations as you look at some of these assets, you mentioned a company you acquired in early 2024. Just trying to get a sense of what you're seeing out there versus maybe 3 or 6 months ago? Thanks..

Yes. I think we commented on this at the last -- last earnings call as well. The prices definitely seem like they're coming back to a more reasonable level, although it does vary in the market, the A+ assets are still at a very, very high price. But I think there's going to be more and more opportunities over the coming year.

We're going to continue to focus a tremendous amount of attention on finding more tuck-in assets, where we can either bring new data into our ecosystem or we now leverage data into other software and use cases by buying those types of innovations. So it will continue to be a focus of ours.

We believe prices are going in the right direction, but it's probably not quite where we'd like it to be still..

Great. Thank you..

[Operator Instructions].We'll take our next question from Jared Haase with William Blair..

Thanks for taking the questions. Maybe just taking a step back a little bit, looking beyond 2024, would just be curious to hear how you sort of frame what the right way to think about margin expansion is longer term.

Obviously, you've got north of 200 basis points implied in 2024, but a lot of kind of one-off dynamics impacting the comparison here this year. So it would just be great to hear some context as to how you would frame kind of the multiyear margin expansion story..

Thanks for pointing that out and asking the question. We value both growth and profitability. So we take both seriously. And we will continue to reinvest where we see appropriate in order to drive shareholder value.

Over time, I would expect our margins to continue to expand, not ready to quantify that in the form of a long-term model, just given the current dynamism, but it's something we take very seriously..

And then maybe, Jason, for you. I think in the prepared remarks, you mentioned you're seeing strong sort of top of the funnel demand for the products and services that you offer.

Any way to unpack that a little bit further, maybe just any additional data points you're able to share? And maybe if you're able to sort of compare and contrast kind of what that looks like going into 2023? Thanks..

Yes. We had strong demand in 2023 as well. So I think it's a continuation of strong top of the funnel demand. I think that the reality is customers need to have our products in order to grow. And 2023 just was a year of people worrying much more about cost than growth.

And as a result, as we talked about sales cycles get elongated and decisions are stalled, but the top of the funnel demand for what we offer is still extraordinarily high.

So we're excited about what we're able to do once the market conditions continue to improve in terms of driving both new logo growth as well as expansion with their existing clients..

Your next question will come from Brian Peterson with Raymond James..

This is John McCary on for Brian. Thanks for taking the questions. So we've seen some competitors call out slightly lower study starts. And I know that's only one of many variables that would impact the addressable market for Definitive.

But just kind of curious if you could frame what potential impact you're seeing from that right now in the demand environment?.

Sorry, what was the competitor you're saying?.

So we've just seen some competitors, whether that be like IQVIA or some other names out there discussing lower study starts.

Just curious what impact that may be having on your demand environment?.

That should have no short-term -- short- to medium-term impact on what we do. So we tend to really start to sell the clients once they're Phase 2 and forward. We do a little bit in that earlier stage, and we've talked about the impact of that with the small biotechs really struggling this year.

That's been that did have an impact on us from a churn perspective, in particular, within the biotech market and the pharma market globally. But overall, we don't -- this is not the core part of our business and it makes up a small part of what we do. So we're not very concerned about it..

Got you. That makes sense. And then could you give us an update on customer conversations you're having around the sales force and Snowflake integrations? You announced a couple of quarters ago, there was an exciting development. Just hoping we could hear a little bit more about that. Thanks..

Yes, sure. And I talked about it a little bit in my prepared remarks of the client that did the Snowflake acquisition as they look to enter the real estate company. So we are -- this is very exciting for our clients. Overall, integrations with our client workflow is a big part of our strategy.

We want to be able to deliver our data where and when clients need it. so that they can use it throughout the organization. So we do -- we have an integration with Databricks, we have integration with Snowflake, we have an integration with Salesforce. So all of those types of things, they're highly used by our clients overall.

Over 50% of our clients have some sort of integration. We are also investing more in connectors to make these integration is even more seamless for our clients. So we'll be able to connect into things like Power BI and Tableau very seamlessly through all those Snowflake and Databricks type of platforms. So exciting stuff overall.

Our clients are very bullish on their ability to leverage our data inside of their platforms..

[Operator Instructions] And our next question will come from George Hill with Deutsche Bank..

Good evening guys. [Indiscernible] Yes, So I guess, Jason, one of the first question for you, I'd ask is we're starting to see the biotech and life sciences fundraisings like will start to come back.

I know that you said you saw an uptick in retention in Q4 and into January, but I'd be interested in what the pipeline looks like in the life sciences space, given the return of the capital markets? And then I have a follow-up for Rick..

Yes. The pipeline -- the top of the funnel demand across all of our markets is strong. We think Life Sciences, that's our biggest TAM overall. So in some of our restructuring efforts, we have put more resources on our enterprise clients.

As I mentioned, a lot of those are within our Life Sciences group, although they do cover all of the different markets that we cover. We have enterprise clients and diversified and provider, of course, as well.

And then as we've talked about, a lot of the product investments that we're making, will be heavily weighted towards Life Sciences and that should benefit over the short to medium term.

So our new claims analytics platform being pushed into life sciences as well as some of the data science and AI that I talked about around how we're using AI to actually to measure the clinical impact of scientific embeds and publications.

That's the type of thing that is extremely interesting to life sciences companies, both the commercial organization as well as medical affairs. So all of that is driving a lot of excitement in the life sciences area for us..

That's helpful. And I guess, Rick, my follow-up is like, I guess, can you help me square the retention commentary with kind of Slide 13 in the slide deck, which kind of shows a continued erosion of the net dollar retention across the customer base.

I guess kind of is what we're seeing is that we're -- like the clients are staying more that they kind of continue to mix down from an average dollars per client perspective? I'm just kind of trying to square those data points..

It's a great question. So remember that the NDRs that we're presenting are annual, and we talked about increasing churn in the early part of the year, leaving Q4 we saw a strong rebound. So that's too late in 2023 to offset the -- the declines that you note.

But given that, that was tied to operating changes that we've spent a lot of time making and that we've seen it continue into the first month of the year. That gives us confidence we will be able to continue to drive that as we move through the rest of the year..

Okay. So when we're looking at this slide this time next year, we should probably expect to see those numbers go up..

Exactly. Yes..

Okay, helpful. Thank you very much..

[Operator Instructions]. It appears we have no further questions at this time. I'd like to turn the conference back to our moderators for any additional or closing remarks..

Well, I just want to thank everyone once again for taking the time to listen to us and ask a really thoughtful cloudy. We appreciate it. As I mentioned earlier, we're incredibly excited about the opportunity ahead of us. We believe we have the data products and an extraordinarily talented workforce to take advantage of a huge and growing market.

So thank you once again. Have a great night, everyone. We appreciate it..

This concludes today's conference call. Thank you for attending..