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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

 

Current Report

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

February 28, 2024

 

Definitive Healthcare Corp.

(Exact name of Registrant as Specified in Its Charter)

Commission File Number 1-40815
Delaware		86-3988281
(State of Incorporation)		(IRS Employer Identification No.)
	492 Old Connecticut Path, Suite 401
	Framingham, Massachusetts 01701
	(Address of Principal Executive Offices)

508 720-4224

Registrant’s telephone number, including area code

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol		Name of Each Exchange on Which Registered
Class A Common Stock, $0.001 par value		DH		The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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Item 2.02 Results of Operations and Financial Condition.

On February 28, 2024, Definitive Healthcare Corp. (the “Company”) issued a press release announcing its financial results for the fourth quarter and fiscal year ended December 31, 2023. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

The information furnished in this Item 2.02 on this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, regardless of any general incorporation language in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

99.1	Press Release Dated February 28, 2024 (furnished herewith pursuant to Item 2.02)
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

DEFINITIVE HEALTHCARE CORP.
By:	/s/ Richard Booth
Name:	Richard Booth
Title:	Chief Financial Officer
Date: February 28, 2024

 

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Definitive Healthcare Reports Financial Results for Fourth Quarter and Full Fiscal Year 2023

Fourth quarter revenue grew 9% year-over-year to $65.9 million

Full year 2023 revenue grew 13% year-over-year to $251.4 million

Framingham, MA (February 28, 2024) – Definitive Healthcare Corp. (“Definitive Healthcare” or the “Company”) (Nasdaq: DH), an industry leader in healthcare commercial intelligence, today announced financial results for the quarter and full year ended December 31, 2023.

Fourth Quarter 2023 Financial Highlights:

 

 

 

 

 

 

Full Year 2023 Financial Highlights:

 

“We are pleased with our performance in 2023. We delivered double-digit revenue growth year-over-year in a difficult macro environment, along with 30% full-year adjusted EBITDA margin, for Rule of Forty performance,” said Jason Krantz, Founder, Executive Chairman, and Interim CEO of Definitive Healthcare. “At the same time, we continued to make investments in innovative products that will help us continue to drive long term growth and profitability for our shareholders.”

 

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Recent Business and Operating Highlights:

Customer Wins

In the fourth quarter, Definitive Healthcare grew its enterprise client base by 28, or 5% year-over-year, ending the quarter with 565 enterprise customers, defined as those customers with more than $100,000 in annual recurring revenue. Customer wins included:

 

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Business Outlook

Based on information as of February 28, 2024, the Company is issuing the following financial guidance. This guidance includes the effect of the acquisition of the Carevoyance product suite.

First Quarter 2024:

 

Full Year 2024

 

 

We do not provide a quantitative reconciliation of the forward-looking non-GAAP financial measures included in this press release to the most directly comparable GAAP measures due to the high variability and difficulty to predict certain items excluded from these non-GAAP financial measures; in particular, the effects of equity-based compensation expense, taxes and amounts under the tax receivable agreement, deferred tax assets and deferred tax liabilities, and transaction, integration, and restructuring expenses. We expect the variability of these excluded items may have a significant, and potentially unpredictable, impact on our future GAAP financial results.

 

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Conference Call Information

Definitive Healthcare will host a conference call on February 28, 2024, at 5:00 p.m. (Eastern Time) to discuss the Company's full financial results and current business outlook. Participants may access the call at 1-877-358-7298 or 1-848-488-9244. Shortly after the conclusion of the call, a replay of this conference call will be available through March 28, 2024 at 1-800-645-7964 or 1-757-849-6722. The replay passcode is 1765#. A live audio webcast of the event will be available on Definitive Healthcare’s Investor Relations website at https://ir.definitivehc.com/.

About Definitive Healthcare

At Definitive Healthcare, our passion is to transform data, analytics and expertise into healthcare commercial intelligence. We help clients uncover the right markets, opportunities and people, so they can shape tomorrow’s healthcare industry. Our SaaS platform creates new paths to commercial success in the healthcare market, so companies can identify where to go next. Learn more at definitivehc.com.

Forward-Looking Statements

This press release includes forward-looking statements that reflect our current views with respect to future events and financial performance. Such statements are provided under the “safe harbor” protection of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can generally be identified by words or phrases written in the future tense and/or preceded by words such as “likely,” “will,” “should,” “may,” “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “continues,” “assumes,” “would,” “potentially” or similar words or variations thereof, or the negative thereof, references to future periods, or by the inclusion of forecasts or projections, but these terms are not the exclusive means of identifying such statements. Examples of forward-looking statements include, but are not limited to, statements we make regarding our outlook, financial guidance, the benefits of our healthcare commercial intelligence solutions, our competitive position, customer behaviors and use of our solutions, the market, industry and macroeconomic environment, our business, growth strategies, product development efforts and future expenses, customer growth and statements reflecting our expectations about our ability to execute on our strategic plans, achieve future growth and profitability and achieve our financial goals.

Forward-looking statements in this press release are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the following: our inability to realize expected business or financial benefits from acquisitions and the risk that our acquisitions or investments could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our business, financial condition and results of operations; our inability to achieve the anticipated cost savings, operating efficiencies or other benefits of our internal restructuring activities; global geopolitical tension and difficult macroeconomic conditions; actual or potential changes in international, national, regional and local economic, business and financial conditions, including recessions, inflation, high interest rates, volatility in the capital markets and related market uncertainty; the impact of challenging macroeconomic conditions on our new and existing customers; our inability to acquire new customers and generate additional revenue from existing customers; our inability to generate sales of subscriptions to our platform or any decline in demand for our platform and the data we offer; the competitiveness of the market in which we operate and our ability to compete effectively; the failure to maintain and improve our platform, or develop new modules or insights for healthcare commercial intelligence; the inability to obtain and maintain accurate, comprehensive or reliable data, which could result in reduced demand for our platform; the risk that our recent growth rates may not be indicative of our future growth; the inability to achieve or sustain GAAP or non-GAAP profitability in the future as we increase investments in our business; the loss of our access to our data providers; the failure to respond to advances in healthcare

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commercial intelligence; an inability to attract new customers and expand subscriptions of current customers; our ability to successfully transition executive leadership; the risk of cyber-attacks and security vulnerabilities; litigation, investigations or other legal, governmental or regulatory actions; the possibility that our security measures are breached or unauthorized access to data is otherwise obtained; the risk that additional material weaknesses or significant deficiencies that will occur in the future; and the risks of being required to collect sales or other related taxes for subscriptions to our platform in jurisdictions where we have not historically done so.

Additional factors or events that could cause our actual performance to differ from these forward-looking statements may emerge from time to time, and it is not possible for us to predict all of them. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, our actual financial condition, results of operations, future performance and business may vary in material respects from the performance projected in these forward-looking statements.

For additional discussion of factors that could impact our operational and financial results, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 that will be filed following this earnings release, as well as our Current Reports on Form 8-K and other subsequent SEC filings, which are or will be available on the Investor Relations page of our website at ir.definitivehc.com and on the SEC website at www.sec.gov.

All information in this press release speaks only as of the date on which it is made. We undertake no obligation to publicly update this information, whether as a result of new information, future developments or otherwise, except as may be required by law.

Website

Definitive Healthcare intends to use its website as a distribution channel of material company information. Financial and other important information regarding the Company is routinely posted on and accessible through the Company’s website at https://www.definitivehc.com/. Accordingly, you should monitor the investor relations portion of our website at https://ir.definitivehc.com/ in addition to following our press releases, SEC filings, and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about the Company when you enroll your email address by visiting the “Email Alerts” section of our investor relations page at https://ir.definitivehc.com/.

Non-GAAP Financial Measures

We have presented supplemental non-GAAP financial measures as part of this earnings release. We believe that these supplemental non-GAAP financial measures are useful to investors because they allow for an evaluation of the Company with a focus on the performance of its core operations, including providing meaningful comparisons of financial results to historical periods and to the financial results of peer and competitor companies. Our use of these non-GAAP terms may vary from the use of similar terms by other companies in our industry and accordingly may not be comparable to similarly titled measures used by other companies and are not measures of performance calculated in accordance with GAAP. A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included at the end of this press release.

We refer to Unlevered Free Cash Flow, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Operating Income, Adjusted Net Income and Adjusted Net Income Per Diluted Share as non-GAAP financial measures. These non-GAAP financial measures are not required by or prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”). These are supplemental financial measures of our performance and should not be considered substitutes for cash provided by (used in) operating activities, loss from operations, net (loss) income, net (loss) income margin, gross profit, gross margin, or any other measure derived in accordance with GAAP.

 

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We define Unlevered Free Cash Flow as net cash provided by (used in) operating activities less purchases of property, equipment and other assets, plus cash interest expense, and cash payments related to transaction, integration, and restructuring related expenses, earnouts, and other non-core items. Unlevered Free Cash Flow does not represent residual cash flow available for discretionary expenditures since, among other things, we have mandatory debt service requirements.

We define EBITDA as earnings before debt-related costs, including interest expense, net and loss on extinguishment of debt, income taxes and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted to exclude certain items of a significant or unusual nature, including other income and expense, equity-based compensation, goodwill impairments, transaction, integration, and restructuring expenses and other non-core expenses. 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 that Adjusted EBITDA and Adjusted EBITDA Margin provide useful measures to investors to assess our operating performance because these metrics eliminate non-core and unusual items and non-cash expenses, which we do not consider indicative of ongoing operational performance. We believe that these metrics are helpful to investors in measuring the profitability of our operations on a consolidated level.

We define Adjusted Gross Profit as gross profit excluding acquisition-related depreciation and amortization and equity-based compensation costs and Adjusted Gross Margin is defined as Adjusted Gross Profit as a percentage of revenue. Adjusted Gross Profit and Adjusted Gross Margin are key metrics used by management and our board of directors to assess our operations. We exclude acquisition-related depreciation and amortization expenses as they have no direct correlation to the cost of operating our business on an ongoing basis. A small portion of equity-based compensation is included in cost of revenue in accordance with GAAP but is excluded from our Adjusted Gross Profit calculations due to its non-cash nature.

We define Adjusted Operating Income as loss from operations plus acquisition related amortization, equity-based compensation, goodwill impairments, transaction, integration, and restructuring expenses and other non-core expenses.

We define Adjusted Net Income as Adjusted Operating Income less interest expense, net, recurring income tax benefit, foreign currency (loss) gain, and tax effects of adjustments. We define Adjusted Net Income Per Diluted Share as Adjusted Net Income divided by diluted outstanding shares.

In evaluating our non-GAAP financial measures, you should be aware that in the future we may incur expenses similar to those eliminated in these presentations.

 

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Investor Contact:

Brian Denyeau

ICR for Definitive Healthcare

brian.denyeau@icrinc.com

646-277-1251

Media Contact:

Danielle Johns
djohns@definitivehc.com

 

 

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Definitive Healthcare Corp.
Consolidated Balance Sheets
(amounts in thousands, except number of shares and par value; unaudited)
		December 31, 2023				December 31, 2022
Assets
Current assets:
Cash and cash equivalents			130,976				146,934
Short-term investments			177,092				184,939
Accounts receivable, net			59,249				58,799
Prepaid expenses and other assets			13,120				12,686
Deferred contract costs			13,490				10,387
Total current assets			393,927				413,745
Property and equipment, net			4,471				4,464
Operating lease right-of-use assets, net			9,594				9,681
Other assets			2,388				4,683
Deferred contract costs, net of current portion			17,320				14,596
Intangible assets, net			323,121				350,722
Goodwill			1,075,080				1,324,733
Total assets		$	1,825,901			$	2,122,624
Liabilities and Equity
Current liabilities:
Accounts payable			5,787				3,948
Accrued expenses and other liabilities			51,529				26,855
Deferred revenue			97,377				99,692
Term loan			13,750				8,594
Operating lease liabilities			2,239				1,521
Total current liabilities			170,682				140,610
Long-term liabilities:
Deferred revenue			9				236
Term loan			242,567				255,765
Operating lease liabilities			9,372				9,969
Tax receivable agreements liability			127,000				155,111
Deferred tax liabilities			67,163				75,737
Other liabilities			9,934				3,251
Total liabilities			626,727				640,679
Equity:
Class A Common Stock, par value $0.001, 600,000,000 shares authorized, 116,562,252 and 105,138,273 shares issued and outstanding at December 31, 2023 and 2022, respectively			117				105
Class B Common Stock, par value $0.00001, 65,000,000 shares authorized, 39,762,700 and 39,168,047 shares issued and outstanding, respectively, at December 31, 2023, and 50,433,101 and 48,923,952 shares issued and outstanding, respectively, at December 31, 2022			—				—
Additional paid-in capital			1,086,581				970,207
Accumulated other comprehensive income			2,109				3,668
Accumulated deficit			(227,450	)			(25,062	)
Noncontrolling interests			337,817				533,027
Total equity			1,199,174				1,481,945
Total liabilities and equity		$	1,825,901			$	2,122,624

 

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Definitive Healthcare Corp.
Consolidated Statements of Operations
(amounts in thousands, except share amounts and per share data; unaudited)
		Three Months Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
Revenue		$	65,932			$	60,599			$	251,415			$	222,653
Cost of revenue:
Cost of revenue exclusive of amortization (1)			9,447				7,149				34,740				25,866
Amortization			3,066				2,646				12,742				16,759
Gross profit			53,419				50,804				203,933				180,028
Operating expenses:
Sales and marketing (1)			23,605				23,523				94,534				89,585
Product development (1)			11,569				10,129				42,441				34,890
General and administrative (1)			16,567				16,121				58,861				51,561
Depreciation and amortization			9,935				10,040				39,008				40,145
Transaction, integration, and restructuring expenses			1,823				1,528				11,489				7,890
Goodwill impairment			—				—				287,400				—
Total operating expenses			63,499				61,341				533,733				224,071
Loss from operations			(10,080	)			(10,537	)			(329,800	)			(44,043	)
Other (expense) income, net:
Interest expense, net			(125	)			(1,483	)			(1,559	)			(8,413	)
Other (expense) income, net			(1,982	)			863				23,179				10,579
Total other (expense) income, net			(2,107	)			(620	)			21,620				2,166
Loss before income taxes			(12,187	)			(11,157	)			(308,180	)			(41,877	)
(Provision for) benefit from income taxes			(1,175	)			17,044				18,553				17,698
Net (loss) income			(13,362	)			5,887				(289,627	)			(24,179	)
Less: Net loss attributable to noncontrolling interests			(3,129	)			(3,978	)			(87,239	)			(16,957	)
Net (loss) income attributable to Definitive Healthcare Corp.		$	(10,233	)		$	9,865			$	(202,388	)		$	(7,222	)
Net (loss) income per share of Class A Common Stock:
Basic		$	(0.09	)		$	0.09			$	(1.79	)		$	(0.07	)
Diluted		$	(0.09	)		$	0.06			$	(1.79	)		$	(0.07	)
Weighted average Common Stock outstanding:
Basic			116,418,495				105,082,585				112,764,537				101,114,105
Diluted			116,418,495				154,006,454				112,764,537				101,114,105
(1) Amounts include equity-based compensation expense as follows:
		Three Months Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
Cost of revenue		$	267			$	244			$	1,097			$	942
Sales and marketing			3,110				2,446				11,407				13,508
Product development			3,572				2,504				13,138				7,805
General and administrative			6,305				6,230				23,097				14,179
Total equity-based compensation expense		$	13,254			$	11,424			$	48,739			$	36,434

 

 

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Definitive Healthcare Corp.
Consolidated Statements of Cash Flows
(amounts in thousands; unaudited)
	Three Months Ended December 31,								Year Ended December 31,
	2023				2022				2023				2022
Cash flows provided by (used in) operating activities:
Net (loss) income	$	(13,362	)		$	5,887			$	(289,627	)		$	(24,179	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		562				472				1,953				2,193
Amortization of intangible assets		12,439				12,214				49,797				54,711
Amortization of deferred contract costs		3,488				2,542				12,963				8,816
Equity-based compensation		13,254				11,424				48,739				36,434
Amortization of debt issuance costs		175				175				702				702
Provision for doubtful accounts receivable		554				556				1,374				1,325
Non-cash restructuring charges related to office leases		—				—				155				1,023
Goodwill impairment charge		—				—				287,400				—
Tax receivable agreement remeasurement		1,507				(1,134	)			(23,470	)			(9,717	)
Changes in fair value of contingent consideration		302				1,250				302				1,250
Deferred income taxes		1,015				(17,087	)			(18,713	)			(17,806	)
Changes in operating assets and liabilities:
Accounts receivable		(18,559	)			(25,676	)			811				(13,222	)
Prepaid expenses and other assets		(1,348	)			(2,681	)			(7,156	)			(127	)
Deferred contract costs		(5,770	)			(5,182	)			(18,790	)			(15,252	)
Contingent consideration		—				—				—				(6,400	)
Accounts payable, accrued expenses and other liabilities		2,919				(2,694	)			1,330				3,138
Deferred revenue		7,533				15,714				(6,580	)			12,690
Net cash provided by (used in) operating activities		4,709				(4,220	)			41,190				35,579
Cash flows (used in) provided by investing activities:
Purchases of property, equipment, and other assets		(594	)			(4,871	)			(2,977	)			(8,326	)
Purchases of short-term investments		(45,595	)			(120,695	)			(259,208	)			(337,961	)
Maturities of short-term investments		100,596				57,680				275,426				153,680
Cash paid for acquisitions and investments, net of cash acquired		—				—				(45,023	)			(56,296	)
Net cash provided by (used in) investing activities		54,407				(67,886	)			(31,782	)			(248,903	)
Cash flows used in financing activities:
Repayments of term loans and delayed draw term loan		(3,438	)			(1,719	)			(8,594	)			(6,875	)
Taxes paid related to net share settlement of equity awards		(1,035	)			(1,371	)			(4,432	)			(4,116	)
Payment of contingent consideration		—				—				—				(1,100	)
Payments under tax receivable agreement		—				—				(246	)			—
Payments of equity offering issuance costs		—				(435	)			(30	)			(1,734	)
Member distributions		(1,589	)			(5,932	)			(12,282	)			(12,871	)
Net cash used in financing activities		(6,062	)			(9,457	)			(25,584	)			(26,696	)
Net increase (decrease) in cash and cash equivalents		53,054				(81,563	)			(16,176	)			(240,020	)
Effect of exchange rate changes on cash and cash equivalents		462				(331	)			218				(544	)
Cash and cash equivalents, beginning of year		77,460				228,828				146,934				387,498
Cash and cash equivalents, end of year	$	130,976			$	146,934			$	130,976			$	146,934
Supplemental cash flow disclosures:
Cash paid during the year for:
Interest	$	3,684			$	3,195			$	14,456			$	10,443
Income taxes		—				—				136				—
Acquisitions:
Net assets acquired, net of cash acquired	$	—			$	—			$	52,678			$	97,296
Working capital adjustment receivable		—				—				145				—
Initial cash investment in prior year		—				—				—				(40,000	)
Contingent consideration		—				—				(7,800	)			(1,000	)
Net cash paid for acquisitions	$	—			$	—			$	45,023			$	56,296
Supplemental disclosure of non-cash investing activities:
Capital expenditures included in accounts payable and accrued expenses and other current liabilities	$	47			$	1,166			$	47			$	1,166

 

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Definitive Healthcare Corp.

Reconciliations of Non-GAAP Financial Measures to Closest GAAP Equivalent

 

Reconciliation of GAAP Operating Cash Flow to Unlevered Free Cash Flow
(in thousands; unaudited)
	Three Months Ended December 31,								Year Ended December 31,
	2023				2022				2023				2022
Net cash provided from operating activities	$	4,709			$	(4,220	)		$	41,190			$	35,579
Purchases of property, equipment, and other assets		(594	)			(4,871	)			(2,977	)			(8,326	)
Interest paid in cash		3,684				3,195				14,456				10,443
Transaction, integration, and restructuring expenses paid in cash (a)		1,521				582				11,032				6,326
Earnout payment (b)		—				—				—				6,400
Other non-core items (c)		1,803				1,947				4,875				6,561
Unlevered Free Cash Flow	$	11,123			$	(3,367	)		$	68,576			$	56,983
(a) Transaction and integration expenses paid in cash primarily represent legal, accounting, and consulting expenses related to our acquisitions. Restructuring expenses paid in cash relate to our restructuring plans announced in the first and third quarters of 2023 and exit costs related to office relocations. (b) Earnout payment represents final settlement of contingent consideration included in cash flow from operations. (c) Non-core items represent expenses driven by events that are typically by nature one-time, non-operational, and unrelated to our core operations.

 

Reconciliation of GAAP Net Loss to Adjusted Net Income and
GAAP Operating Loss to Adjusted Operating Income
(in thousands, except per share amounts; unaudited)
	Three Months Ended December 31,								Year Ended December 31,
	2023				2022				2023				2022
Net (loss) income	$	(13,362	)		$	5,887			$	(289,627	)		$	(24,179	)
Add: Income tax provision (benefit)		1,175				(17,044	)			(18,553	)			(17,698	)
Add: Interest expense, net		125				1,483				1,559				8,413
Add: Other expense (income), net		1,982				(863	)			(23,179	)			(10,579	)
Loss from operations		(10,080	)			(10,537	)			(329,800	)			(44,043	)
Add: Amortization of intangible assets acquired through business combinations		11,510				11,969				46,099				53,667
Add: Equity-based compensation		13,254				11,424				48,739				36,434
Add: Transaction, integration and restructuring expenses		1,823				1,528				11,489				7,890
Add: Goodwill impairment charge		—				—				287,400				—
Add: Other non-core items		1,803				1,947				4,875				6,561
Adjusted Operating Income		18,310				16,331				68,802				60,509
Less: Interest expense, net		(125	)			(1,483	)			(1,559	)			(8,413	)
Less: Recurring income tax benefit (a)		(1,175	)			1,197				1,374				1,730
Less: Foreign currency (loss) gain		(475	)			(271	)			(291	)			862
Less: Tax impacts of adjustments to net (loss) income		(5,886	)			(5,469	)			(21,633	)			(19,273	)
Adjusted Net Income	$	10,649			$	10,305			$	46,693			$	35,415
Shares for Adjusted Net Income Per Diluted Share (b)		155,560,756				154,006,454				154,836,706				153,601,602
Adjusted Net Income Per Diluted Share	$	0.07			$	0.07			$	0.30			$	0.23
(a) Non-recurring income tax (benefit) provision items were primarily driven by the impact of changes in the state effective tax rate during the fourth quarter of 2022. (b) Diluted Adjusted Net Income Per Share is computed by giving effect to all potential weighted average Class A common stock and any securities that are convertible into Class A common stock, including Definitive OpCo units and restricted stock units. The dilutive effect of outstanding awards and convertible securities is reflected in diluted earnings per share by application of the treasury stock method assuming proceeds from unrecognized compensation as required by GAAP. Fully diluted shares are 163,153,442 and 159,134,761 as of December 31, 2023 and 2022, respectively.

 

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Reconciliation of Adjusted Gross Profit and Margin to GAAP Gross Profit and Margin
(in thousands; unaudited)
		Three Months Ended December 31,																Year Ended December 31,
		2023								2022								2023								2022
(in thousands)		Amount				% of Revenue				Amount				% of Revenue				Amount				% of Revenue				Amount				% of Revenue
Reported gross profit and margin		$	53,419				81	%		$	50,804				84	%		$	203,933				81	%		$	180,028				81	%
Amortization of intangible assets acquired through business    combinations			2,137				3	%			2,401				4	%			9,044				4	%			15,715				7	%
Equity-based compensation costs			267				0	%			244				0	%			1,097				0	%			942				0	%
Adjusted gross profit and margin		$	55,823				85	%		$	53,449				88	%		$	214,074				85	%		$	196,685				88	%

 

Reconciliation of Adjusted EBITDA to GAAP Net Loss
(in thousands; unaudited)
	Three Months Ended December 31,																Year Ended December 31,
	2023								2022								2023								2022
	Amount				% of Revenue				Amount				% of Revenue				Amount				% of Revenue				Amount				% of Revenue
Net loss and margin	$	(13,362	)			(20	)%		$	5,887				10	%		$	(289,627	)			(115	)%		$	(24,179	)			(11	)%
Interest expense, net		125				0	%			1,483				2	%			1,559				1	%			8,413				4	%
Income tax provision (benefit)		1,175				2	%			(17,044	)			(28	)%			(18,553	)			(7	)%			(17,698	)			(8	)%
Depreciation & amortization		13,001				20	%			12,686				21	%			51,750				21	%			56,904				26	%
EBITDA and margin		939				1	%			3,012				5	%			(254,871	)			(101	)%			23,440				11	%
Other expense (income), net (a)		1,982				3	%			(863	)			(1	)%			(23,179	)			(9	)%			(10,579	)			(5	)%
Equity-based compensation (b)		13,254				20	%			11,424				19	%			48,739				19	%			36,434				16	%
Transaction, integration, and restructuring expenses (c )		1,823				3	%			1,528				3	%			11,489				5	%			7,890				4	%
Goodwill impairment (d)		—				0	%			—				0	%			287,400				114	%			—				0	%
Other non-core items (e)		1,803				3	%			1,947				3	%			4,875				2	%			6,561				3	%
Adjusted EBITDA and margin	$	19,801				30	%		$	17,048				28	%		$	74,453				30	%		$	63,746				29	%
(a) Primarily represents foreign exchange and TRA liability remeasurement gains and losses. (b) Equity-based compensation represents non-cash compensation expense recognized in association with equity awards made to employees and directors. (c) Transaction and integration expenses primarily represent legal, accounting, and consulting expenses and fair value adjustments for contingent consideration related to our acquisitions. Restructuring expenses relate to our restructuring plans announced in the first and third quarters of 2023 and impairment and restructuring charges related to office closures and relocations.

 

		Three Months Ended December 31,								Year Ended December 31,
(in thousands)		2023				2022				2023				2022
Merger and acquisition due diligence and transaction costs		$	1,309			$	12			$	5,419			$	1,580
Integration costs			129				266				934				3,765
Fair value adjustment for contingent consideration			302				1,250				302				1,250
Restructuring charges for severance and other separation costs			83				—				4,679				—
Office closure and relocation restructuring charges and impairments			—				—				155				1,295
Total transaction, integration and restructuring expense		$	1,823			$	1,528			$	11,489			$	7,890

 

(d) Goodwill impairment represents a non-cash, pretax, goodwill impairment charge of $287.4 million recorded during the quarter ended September 30, 2023. We experienced a sustained decline in our stock price and market capitalization, which represented a triggering event and required us to perform a goodwill impairment test as of September 30, 2023. As a result of our quantitative 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.

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(e) Other non-core items represent expenses driven by events that are typically by nature one-time, non-operational, and/or unrelated to our core operations. These expenses are comprised of non-core legal and regulatory costs isolated to unique and extraordinary litigation, legal and regulatory matters that are not considered normal and recurring business activity including sales tax accrual charges inclusive of penalties and interest for sales taxes that we may have been required to collect from customers in 2023 and certain previous years, professional fees related to the filing delay and restatement of our previously issued financial statements filed concurrently with our Quarterly Report on Form 10-Q for the second quarter of 2023, and other non-recurring legal and regulatory matters. Other non-core items also include non-recurring strategic consulting fees associated with a strategic initiative to restructure and transform the Company through commercial and operational reorganization that right sizes the organization as well as professional fees related to financing, capital structure changes, and other non-recurring set-up costs related to public company operations.

 

		Three Months Ended December 31,								Year Ended December 31,
(in thousands)		2023				2022				2023				2022
Non-core legal and regulatory		$	(60	)		$	1,327			$	2,370			$	3,696
Consulting fees for non-recurring strategic restructuring			1,977				—				1,977				—
Professional fees for set-up of Up-C, TRA, tax and public company infrastructure			—				435				—				2,467
Other non-core expenses			(114	)			185				528				398
Total other non-core items		$	1,803			$	1,947			$	4,875			$	6,561

 

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