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What changed in Definitive Healthcare Corp.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Definitive Healthcare Corp.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+258 added−441 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-27)

Top changes in Definitive Healthcare Corp.'s 2023 10-K

258 paragraphs added · 441 removed · 164 edited across 2 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

149 edited+84 added−269 removed338 unchanged
Biggest changeAs more of our sales efforts target larger Enterprise Customers, our sales cycle may become longer and more expensive, and we may encounter pricing pressure and implementation and configuration challenges that may require us to delay revenue recognition for some complex transactions, all of which could have a material adverse effect on our business, financial condition and results of operations.
Biggest changeIn the event that our service agreements with our Cloud Providers are terminated, or there is a lapse of service, elimination of services or features that we utilize, interruption of internet service provider connectivity or damage to such facilities, we could experience interruptions in access to our platform as well as significant delays and additional expense in arranging or creating new facilities and services and/or re-architecting our cloud offering for deployment on a different cloud infrastructure service provider, which may adversely affect our business, operating results and financial condition. 11 As more of our sales efforts target larger Enterprise Customers, our sales cycle may become longer and more expensive, and we may encounter pricing pressure and implementation and configuration challenges that may require us to delay revenue recognition for some complex transactions, all of which could have a material adverse effect on our business, financial condition and results of operations.
Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our Class A Common Stock include: • variations in our quarterly or annual results of operations; • changes in our earnings estimates (if provided) or differences between our actual results of operations and those expected by investors and analysts; • the contents of published research reports about us or our industry or the failure of securities analysts to cover our Class A Common Stock; • additions or departures of key management personnel; • any increased indebtedness we may incur in the future; • announcements by us or others and developments affecting us; • actions by institutional stockholders; • litigation and governmental investigations; • legislative or regulatory changes; • judicial pronouncements interpreting laws and regulations; • changes in government programs; • changes in market valuations of similar companies; • sales of substantial amounts of our Class A Common Stock in the public markets; • speculation or reports by the press or investment community with respect to us or our industry in general; • announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic relationships, joint ventures or capital commitments; and • general market, political and economic conditions, including local conditions in the markets in which we operate.
Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our Class A Common Stock include: • variations in our quarterly or annual results of operations; • changes in our earnings estimates (if provided) or differences between our actual results of operations and those expected by investors and analysts; • the contents of published research reports about us or our industry or the failure of securities analysts to cover our Class A Common Stock; 41 • additions or departures of key management personnel; • any increased indebtedness we may incur in the future; • announcements by us or others and developments affecting us; • actions by institutional stockholders; • litigation and governmental investigations; • legislative or regulatory changes; • judicial pronouncements interpreting laws and regulations; • changes in government programs; • changes in market valuations of similar companies; • sales of substantial amounts of our Class A Common Stock in the public markets; • speculation or reports by the press or investment community with respect to us or our industry in general; • announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic relationships, joint ventures or capital commitments; and • general market, political and economic conditions, including local conditions in the markets in which we operate.
Acquisitions and other transactions, arrangements and investments involve numerous risks and could create unforeseen operating difficulties and expenditures, including: • potential failure to achieve the expected benefits on a timely basis or at all; • difficulties in, and the cost of, integrating operations, technologies, solutions and platforms; • diversion of financial and managerial resources from existing operations; • the potential entry into new markets in which we have little or no experience or where competitors may have stronger market positions; • potential write-offs of acquired assets or investments and potential financial and credit risks associated with acquired customers; • differences between our values and those of our acquired companies; • difficulties in re-training key employees of acquired companies and integrating them into our organizational structure and corporate culture; • difficulties in, and financial costs of, addressing acquired compensation structures inconsistent with our compensation structure; • inability to generate sufficient revenue to offset acquisition or investment costs; • inability to maintain, or changes in, relationships with customers and partners of the acquired business and costs to optimize any redundant data provider agreements; • challenges converting and forecasting the acquired company’s revenue recognition policies including subscription-based revenue and revenue based on the transfer of control, as well as appropriate allocation of the customer consideration to the individual deliverables; 12 • difficulty with, and costs related to, transitioning the acquired technology onto our existing platform and customer acceptance of a new or changed platform on a temporary or permanent basis; • augmenting the acquired technologies and platforms to the levels that are consistent with our brand and reputation; • potential for acquired platforms to impact the financial performance of existing platform; • increasing or maintaining the security standards for acquired technology consistent with our platform; • potential unknown liabilities associated with the acquired businesses, including risks associated with acquired technologies; • challenges relating to the structure of an investment, such as governance, accountability and decision-making conflicts that may arise in the context of a joint venture or other majority ownership investments; • a material adverse effect on our results of operations because of the depreciation and amortization of amounts related to acquired intangible assets, fixed assets and deferred compensation; • additional stock-based compensation; • the loss of acquired unearned revenue and unbilled unearned revenue; • delays in customer purchases due to uncertainty related to any acquisition; • ineffective or inadequate controls, procedures and policies at the acquired company; • in the case of foreign acquisitions, challenges caused by integrating operations over distance and across different languages, cultures and political environments; • currency and regulatory risks and potential additional cybersecurity and compliance risks resulting from entry into new markets; • tax effects and costs of any such acquisitions, including the related integration into our tax structure and assessment of the impact on the realizability of our future tax assets or liabilities; and • potential challenges by governmental authorities, including the U.S.
Acquisitions and other transactions, arrangements and investments involve numerous risks and could create unforeseen operating difficulties and expenditures, including: • potential failure to achieve the expected benefits on a timely basis or at all; • difficulties in, and the cost of, integrating operations, technologies, solutions and platforms; • diversion of financial and managerial resources from existing operations; • the potential entry into new markets in which we have little or no experience or where competitors may have stronger market positions; • potential write-offs of acquired assets or investments and potential financial and credit risks associated with acquired customers; • differences between our values and those of our acquired companies; • difficulties in re-training key employees of acquired companies and integrating them into our organizational structure and corporate culture; • difficulties in, and financial costs of, addressing acquired compensation structures inconsistent with our compensation structure; • inability to generate sufficient revenue to offset acquisition or investment costs; • inability to maintain, or changes in, relationships with customers and partners of the acquired business and costs to optimize any redundant data provider agreements; • challenges converting and forecasting the acquired company’s revenue recognition policies including subscription-based revenue and revenue based on the transfer of control, as well as appropriate allocation of the customer consideration to the individual deliverables; • difficulty with, and costs related to, transitioning the acquired technology onto our existing platform and customer acceptance of a new or changed platform on a temporary or permanent basis; • augmenting the acquired technologies and platforms to the levels that are consistent with our brand and reputation; • potential for acquired platforms to impact the financial performance of existing platform; • increasing or maintaining the security standards for acquired technology consistent with our platform; 13 • potential unknown liabilities associated with the acquired businesses, including risks associated with acquired technologies; • challenges relating to the structure of an investment, such as governance, accountability and decision-making conflicts that may arise in the context of a joint venture or other majority ownership investments; • a material adverse effect on our results of operations because of the depreciation and amortization of amounts related to acquired intangible assets, fixed assets and deferred compensation; • additional stock-based compensation; • the loss of acquired unearned revenue and unbilled unearned revenue; • delays in customer purchases due to uncertainty related to any acquisition; • ineffective or inadequate controls, procedures and policies at the acquired company; • in the case of foreign acquisitions, challenges caused by integrating operations over distance and across different languages, cultures and political environments; • currency and regulatory risks and potential additional cybersecurity and compliance risks resulting from entry into new markets; • tax effects and costs of any such acquisitions, including the related integration into our tax structure and assessment of the impact on the realizability of our future tax assets or liabilities; and • potential challenges by governmental authorities, including the U.S.
Under the Tax Receivable Agreement, we are required to make cash payments to the TRA Parties equal to 85% of the tax benefits, if any, that Definitive Healthcare Corp. actually realizes, or in certain circumstances are deemed to realize, as a result of (i) certain tax attributes that Definitive Healthcare Corp. acquired from the Blocker Companies, (ii) certain tax basis adjustments resulting from (a) acquisitions by Definitive Healthcare Corp. of LLC Units from existing holders and (b) future redemptions or exchanges of LLC Units by holders of LLC Units for Class A Common Stock or other consideration and (iii) certain payments made under the Tax Receivable Agreement.
Under the Tax Receivable Agreement, we are 38 required to make cash payments to the TRA Parties equal to 85% of the tax benefits, if any, that Definitive Healthcare Corp. actually realizes, or in certain circumstances are deemed to realize, as a result of (i) certain tax attributes that Definitive Healthcare Corp. acquired from the Blocker Companies, (ii) certain tax basis adjustments resulting from (a) acquisitions by Definitive Healthcare Corp. of LLC Units from existing holders and (b) future redemptions or exchanges of LLC Units by holders of LLC Units for Class A Common Stock or other consideration and (iii) certain payments made under the Tax Receivable Agreement.
In addition, our insurance may not cover all claims made against us, and defending a suit, regardless of its merit, could be costly and divert management’s attention. Further, such insurance may not be available to us in the future on economically reasonable terms, or at all. We may be subject to legal liability for collecting, displaying or distributing information.
In addition, our insurance may not cover all claims made against us, and defending a suit, regardless of its merit, could be costly and divert management’s attention. Further, such insurance may not be available to us in the future on economically reasonable terms, or at all. 28 We may be subject to legal liability for collecting, displaying or distributing information.
The accuracy of these judgments may be adversely affected by several factors, including significant: • underperformance relative to historical or projected future operating results; • changes in the manner of our use of acquired assets or the strategy for our overall business; • negative industry or economic trends; or • decline in our market capitalization relative to net book value for a sustained period.
The accuracy of these judgments may be adversely affected by several factors, including significant: • underperformance relative to historical or projected future operating results; 34 • changes in the manner of our use of acquired assets or the strategy for our overall business; • negative industry or economic trends; or • decline in our market capitalization relative to net book value for a sustained period.
Under the Amended LLC Agreement, Definitive OpCo is required from time to time to make pro rata distributions in cash to us and the other holders of LLC Units at certain assumed tax rates in amounts that are intended to be sufficient to cover the income taxes payable on our and the other LLC Unit holders’ respective allocable shares of the taxable income of 34 Definitive OpCo.
Under the Amended LLC Agreement, Definitive OpCo is required from time to time to make pro rata distributions in cash to us and the other holders of LLC Units at certain assumed tax rates in amounts that are intended to be sufficient to cover the income taxes payable on our and the other LLC Unit holders’ respective allocable shares of the taxable income of Definitive OpCo.
Such competition may result in pricing pressures, reduced profit margins or lost market share, or a failure to grow or maintain our market share, any of which could have a material adverse effect on our business, financial condition and results of operations. Our competitors may expand their operations to internally 7 analyze data relating to the healthcare ecosystem.
Such competition may result in pricing pressures, reduced profit margins or lost market share, or a failure to grow or maintain our market share, any of which could have a material adverse effect on our business, financial condition and results of operations. Our competitors may expand their operations to internally analyze data relating to the healthcare ecosystem.
Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information or our information technology systems, or those of the third parties upon whom we rely.
Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive data or our information technology systems, or those of the third parties upon whom we rely.
We expect our operating expenses to increase in future periods, and if our revenue growth does not increase to offset these anticipated increases in our operating expenses, it will have a material adverse effect on our business, financial condition 8 and results of operations and we may not be able to achieve or maintain profitability.
We expect our operating expenses to increase in future periods, and if our revenue growth does not increase to offset these anticipated increases in our operating expenses, it will have a material adverse effect on our business, financial condition and results of operations and we may not be able to achieve or maintain profitability.
Because patent applications can take years to issue and are often afforded confidentiality for some 27 period of time there may currently be pending applications, unknown to us, that later result in issued patents that could cover one or more aspects of our technology and services.
Because patent applications can take years to issue and are often afforded confidentiality for some period of time there may currently be pending applications, unknown to us, that later result in issued patents that could cover one or more aspects of our technology and services.
However, if we were to cease participation in the management of Definitive OpCo, or if Definitive OpCo itself becomes an investment company, our interest in Definitive OpCo, could be deemed an “investment security” for purposes of the 1940 Act. 36 We and Definitive OpCo intend to conduct our operations so that we will not be deemed an investment company.
However, if we were to cease participation in the management of Definitive OpCo, or if Definitive OpCo itself becomes an investment company, our interest in Definitive OpCo, could be deemed an “investment security” for purposes of the 1940 Act. We and Definitive OpCo intend to conduct our operations so that we will not be deemed an investment company.
These claims, lawsuits and proceedings could include labor and employment, wage and hour, commercial, intellectual property, data privacy, antitrust, alleged securities law violations or other investor claims and other matters. The number and significance of these potential claims and disputes may increase as our business expands.
These claims, lawsuits and proceedings could include labor and employment, wage and hour, commercial, intellectual property, data privacy and security, antitrust, alleged securities law violations or other investor claims and other matters. The number and significance of these potential claims and disputes may increase as our business expands.
The success of any enhancement to our platform depends on several factors, including availability, frequent updates, analytics reflecting current healthcare commercial intelligence, competitive pricing, adequate quality testing, integration with existing 9 technologies and overall market acceptance.
The success of any enhancement to our platform depends on several factors, including availability, frequent updates, analytics reflecting current healthcare commercial intelligence, competitive pricing, adequate quality testing, integration with existing technologies and overall market acceptance.
Instead, any excess cash payments made by us to a TRA Party will be netted against any future cash payments that we might otherwise be required to make to such TRA Party, as applicable, under the terms of the Tax Receivable Agreement.
Instead, any excess cash payments made by us to a TRA Party will be netted against any future cash payments that we might 39 otherwise be required to make to such TRA Party, as applicable, under the terms of the Tax Receivable Agreement.
If we need additional capital and cannot raise it on acceptable terms, or at all, we may not be able to, among other things: • develop new features, intelligence modules, updates, integrations, capabilities and enhancements; • continue to provide synthesis of real-time data; • hire, train and retain employees; • respond to competitive pressures or unanticipated working capital requirements; or • pursue acquisition opportunities. 17 We have recently undertaken internal restructuring activities, and may do so again in the future.
If we need additional capital and cannot raise it on acceptable terms, or at all, we may not be able to, among other things: • develop new features, intelligence modules, updates, integrations, capabilities and enhancements; • continue to provide synthesis of real-time data; • hire, train and retain employees; • respond to competitive pressures or unanticipated working capital requirements; or • pursue acquisition opportunities. 18 We have recently undertaken internal restructuring activities, and may do so again in the future.
For the avoidance of doubt, our amended and restated certificate of incorporation provides that the foregoing exclusive forum provision does not apply to actions brought to enforce any liability or duty created by the Securities Act or the Exchange Act, or any rules or regulations promulgated thereunder, or any other claim or cause of action for which the federal courts have exclusive jurisdiction. 40 Our amended and restated certificate of incorporation provides that, unless we consent in writing to an alternative forum, the federal district courts of the United States shall be the sole and exclusive forum for the resolution of any action asserting a claim arising under the Securities Act or the rules and regulations promulgated thereunder.
For the avoidance of doubt, our amended and restated certificate of incorporation provides that the foregoing exclusive forum provision does not apply to actions brought to enforce any liability or duty created by the Securities Act or the Exchange Act, or any rules or regulations promulgated thereunder, or any other claim or cause of action for which the federal courts have exclusive jurisdiction. 44 Our amended and restated certificate of incorporation provides that, unless we consent in writing to an alternative forum, the federal district courts of the United States shall be the sole and exclusive forum for the resolution of any action asserting a claim arising under the Securities Act or the rules and regulations promulgated thereunder.
Any measures that we may take to enforce our rights could require us to expend significant financial or other resources. We may be subject to claims by others that we are infringing on their intellectual property rights.
Any measures that we may take to enforce our rights could require us to expend significant financial or other resources. 30 We may be subject to claims by others that we are infringing on their intellectual property rights.
In addition, provisions of our amended and restated certificate of incorporation and amended and 39 restated bylaws may make it more difficult for, or prevent a third-party from, acquiring control of us without the approval of our Board.
In addition, provisions of our amended and restated certificate of incorporation and amended and restated bylaws may make it more difficult for, or prevent a third-party from, acquiring control of us without the approval of our Board.
Any successful action by state or foreign taxing authorities to compel us to collect and remit sales tax, use tax, VAT or other taxes, either retroactively and/or prospectively, could have a material adverse effect on our business, financial condition and results of operations. 30 Risks Related to Accounting and Financial Reporting Matters Deferred revenue and change in deferred revenue may not be accurate indicators of our future financial results.
Any successful action by state or foreign taxing authorities to compel us to collect and remit sales tax, use tax, VAT or other taxes, either retroactively and/or prospectively, could have a material adverse effect on our business, financial condition and results of operations. 33 Risks Related to Accounting and Financial Reporting Matters Deferred revenue and change in deferred revenue may not be accurate indicators of our future financial results.
Any failure or perceived failure by us to comply with federal, state or foreign laws or regulation, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our reputation, business, financial condition and results of operations.
Any failure or perceived failure by us to comply with federal, state or foreign laws or regulation, our internal policies and procedures or our contracts governing our processing of personal data could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our reputation, business, financial condition and results of operations.
If the use of the Internet generally, or our platform specifically, is adversely affected by these or other issues, we could be forced to incur substantial costs, demand for our platform could decline, and our results of operations and financial condition could be harmed. 28 Risks Related to Certain Tax Matters Unanticipated changes in our effective tax rate and additional tax liabilities may impact our financial results.
If the use of the Internet generally, or our platform specifically, is adversely affected by these or other issues, we could be forced to incur substantial costs, demand for our platform could decline, and our results of operations and financial condition could be harmed. 31 Risks Related to Certain Tax Matters Unanticipated changes in our effective tax rate and additional tax liabilities may impact our financial results.
The market price of our Class A Common Stock may fluctuate or may 37 decline significantly in the future and you could lose all or part of your investment.
The market price of our Class A Common Stock may fluctuate or may decline significantly in the future and you could lose all or part of your investment.
The loss of key employees, including members of our management team, as well as certain of our sales, data scientists or other technology employees could disrupt our operations and have an adverse effect on our ability to grow and maintain our business. 14 If we fail to protect and maintain our brand, our reputation may be harmed and our ability to attract and retain customers will be impaired.
The loss of key employees, including members of our management team, as well as certain of our sales, data scientists or other technology employees could disrupt our operations and have an adverse effect on our ability to grow and maintain our business. 15 If we fail to protect and maintain our brand, our reputation may be harmed and our ability to attract and retain customers will be impaired.
If there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.
If there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as Europe) at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.
The privacy, security and breach notification rules promulgated under HIPAA establish a set of national privacy and security standards for the protection of PHI, by health plans, health care clearinghouses, and certain health care providers, referred to as covered entities, and the business associates with whom such covered entities contract for services that involve creating, receiving, maintaining or transmitting PHI.
The privacy, security and breach notification rules promulgated under HIPAA establish a set of national privacy and security standards for the protection of PHI, by health plans, health care clearinghouses, and certain health care providers, referred to as covered entities, and the business associates with whom such covered entities contract for services that involve creating, receiving, maintaining or transmitting PHI, and their covered subcontractors.
Our potential liability for information distributed by us to others could require us to implement measures to reduce our exposure to such liability, which may require us to expend substantial resources and limit the attractiveness of our analytics to users. 26 Risks Related to Intellectual Property We may not be able to adequately protect our proprietary and intellectual property rights in our data analytics or data science.
Our potential liability for information distributed by us to others could require us to implement measures to reduce our exposure to such liability, which may require us to expend substantial resources and limit the attractiveness of our analytics to users. 29 Risks Related to Intellectual Property We may not be able to adequately protect our proprietary and intellectual property rights in our data analytics or data science.
Our current and prospective customers are impacted by worsening macroeconomic conditions to varying degrees and as a result, in some cases we are observing deal cycles lengthen for new and existing customers, as well as more stringent approval processes and deferred purchasing decisions, which we expect will impact our growth unless macroeconomic conditions improve.
Our current and prospective customers are impacted by difficult macroeconomic conditions to varying degrees and as a result, in some cases we are observing deal cycles lengthen for new and existing customers, as well as more stringent approval processes and deferred purchasing decisions, which we expect will impact our growth unless macroeconomic conditions improve.
These laws and regulations may also be interpreted and applied inconsistently from jurisdiction to jurisdiction which may make compliance difficult or impossible in certain circumstances. Our platform involves use and disclosure of de-identified data, which must be de-identified in accordance with applicable laws, including Health Insurance Portability and Accountability Act (“HIPAA”).
These laws, regulations, and other obligations may also be interpreted and applied inconsistently from jurisdiction to jurisdiction which may make compliance difficult or impossible in certain circumstances. Our platform involves use and disclosure of de-identified data, which must be de-identified in accordance with applicable laws, including Health Insurance Portability and Accountability Act (“HIPAA”).
Certain of our customers may be either “business associates” or “covered entities” under HIPAA, including certain of our customers that are not traditional healthcare providers. For example, some of our customers are medical device companies that may work with physicians or researchers from whom they receive PHI for data analysis purposes, thus triggering compliance obligations under HIPAA.
Certain of our customers may be either “business associates” or “covered entities” under HIPAA, including certain of our customers that are not traditional healthcare providers. For example, some of our customers are medical device companies that may work with healthcare professionals or researchers from whom they receive PHI for data analysis purposes, thus triggering compliance obligations under HIPAA.
Because the content in our database is collected from various sources and distributed to others, we may be subject to claims for breach of contract, defamation, negligence, unfair competition or copyright or trademark infringement or claims based on other theories, such as breach of laws related to privacy and data protection.
Because the content in our database is collected from various sources and distributed to others, we may be subject to claims for breach of contract, defamation, negligence, unfair competition or copyright or trademark infringement or claims based on other theories, such as breach of laws related to data privacy and security.
Changes in public perception regarding the practices of the healthcare ecosystem may result in political pressure to increase the regulation of healthcare companies in one or more of the areas described above, which may negatively impact demand for our platform. 15 • Our business depends on the overall economic health of our existing and prospective customers.
Changes in public perception regarding the practices of the healthcare ecosystem may result in political pressure to increase the regulation of healthcare companies in one or more of the areas described above, which may negatively impact demand for our platform. 16 • Our business depends on the overall economic health of our existing and prospective customers.
We do not know whether we will continue to achieve similar customer acquisition, retention and subscription growth rates in future periods as we have in the past, including in light of recently worsening macroeconomic conditions, which we have seen result in lengthening deal cycles that we expect will continue until macroeconomic conditions improve.
We do not know whether we will continue to achieve similar customer acquisition, retention and subscription growth rates in future periods as we have in the past, including in light of recently difficult macroeconomic conditions, which we have seen result in lengthening deal cycles that we expect will continue until macroeconomic conditions improve.
On that basis, we believe that our interest in Definitive OpCo is an “investment security” as that term is used in the 1940 Act.
On that basis, we believe that our interest in Definitive OpCo is not an “investment security” as that term is used in the 1940 Act.
For example, deteriorating macroeconomic conditions have impacted our existing and prospective customers and their business spendings, which has in some cases resulted in longer deal cycles, more stringent approval processes and deferred purchasing decisions, and we expect this to continue until macroeconomic conditions improve.
For example, difficult macroeconomic conditions have impacted our existing and prospective customers and their business spendings, which has in some cases resulted in longer deal cycles, more stringent approval processes and deferred purchasing decisions, and we expect this to continue until macroeconomic conditions improve.
Risks Related to Our Business and Industry We generate substantially all of our revenue and cash flows from sales of subscriptions to our platform and any decline in demand for our platform and the data we offer could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Our Business and Industry We generate substantially all of our revenue from sales of subscriptions to our platform and any decline in demand for our platform and the data we offer could have a material adverse effect on our business, financial condition and results of operations.
For example, worsening macroeconomic conditions have impacted our existing and prospective customers, which has in some cases resulted in longer deal cycles, more stringent approval processes and deferred purchasing decisions, and we expect this to continue until macroeconomic conditions improve.
For example, difficult macroeconomic conditions have impacted our existing and prospective customers, which has in some cases resulted in longer deal cycles, more stringent approval processes and deferred purchasing decisions, and we expect this to continue until macroeconomic conditions improve.
Accordingly, our estimates of our total addressable market should not be taken as indicative of our ability to grow our business. 16 Our business could be negatively affected by changes in search engine algorithms and dynamics or other traffic-generating arrangements.
Accordingly, our estimates of our total addressable market should not be taken as indicative of our ability to grow our business. 17 Our business could be negatively affected by changes in search engine algorithms and dynamics or other traffic-generating arrangements.
If our customers declare bankruptcy or otherwise dissolve, they may terminate their agreements with us or we may not be able to recoup the full payment of fees owed to us. • The implications of precision medicine treatments, changes in the practices of prescribing physicians and patients, changes with respect to payer relationships, the policies and preferences of healthcare professionals and healthcare organizations with respect to the sales and marketing efforts of healthcare companies, changes in the regulation of the sales and marketing efforts and pricing practices of healthcare companies, and other factors such as the impact of public health crises (including COVID-19), could lead to a significant reduction in businesses that use our platform or otherwise change the demand for our platform.
If our customers declare bankruptcy or otherwise dissolve, they may terminate their agreements with us or we may not be able to recoup the full payment of fees owed to us. • The implications of precision medicine treatments, changes in the practices of prescribing providers and patients, changes with respect to payer relationships, the policies and preferences of healthcare professionals and healthcare organizations with respect to the sales and marketing efforts of healthcare companies, changes in the regulation of the sales and marketing efforts and pricing practices of healthcare companies, and other factors such as the impact of public health crises, could lead to a significant reduction in businesses that use our platform or otherwise change the demand for our platform.
Compliance with global Privacy Laws has and will continue to require valuable management and employee time and resources, and failure to comply with these regulations could include severe penalties and could reduce demand for our solutions.
Compliance with global privacy obligations has and will continue to require valuable management and employee time and resources, and failure to comply with these regulations could include severe penalties and could reduce demand for our solutions.
It is not possible to predict the broader consequences of this conflict, which have included or could include further sanctions, embargoes, regional instability, prolonged periods of higher inflation, geopolitical shifts, and adverse effects on macroeconomic conditions, currency exchange rates and financial markets, all of which could have a material adverse effect on our business, financial condition and results of operations.
It is not possible to predict the broader consequences of these conflicts, which have included or could include further sanctions, embargoes, regional instability, prolonged periods of higher inflation, geopolitical shifts, and adverse effects on macroeconomic conditions, currency exchange rates and financial markets, all of which could have a material adverse effect on our business, financial condition and results of operations.
The functional and operational requirements and costs of compliance with such laws and regulations may adversely impact our business, and failure to enable our solutions to comply with such laws and regulations could lead to significant fines and penalties imposed by regulators, as well as claims by our customers or third parties.
The functional and operational requirements and costs of compliance with such obligations may adversely impact our business, and failure to enable our solutions to comply with such obligations could lead to significant fines and penalties imposed by regulators, as well as claims by our customers or third parties.
Our customers may or may not renew their subscriptions as a result of a number of factors, including their satisfaction or dissatisfaction with our platform, decreases in the number of users at the organization, our pricing or pricing structure, the pricing or capabilities of the products and services offered by our competitors, the effects of economic conditions (including as a result of general economic downturns and recently worsening macroeconomic conditions) or reductions in our paying customers’ spending levels.
Our customers may or may not renew their subscriptions as a result of a number of factors, including their satisfaction or dissatisfaction with our platform, decreases in the number of users at the 10 organization, our pricing or pricing structure, the pricing or capabilities of the products and services offered by our competitors, the effects of economic conditions (including as a result of general economic downturns and difficult macroeconomic conditions) or reductions in our paying customers’ spending levels.
A substantial portion of our revenue and cash flows from sales of our subscriptions to our platform to customers in the healthcare ecosystem, and factors that adversely affect it, including mergers within the healthcare ecosystem or regulatory changes, could also adversely affect us.
A substantial portion of our revenue and cash flows from sales of our subscriptions to our platform to customers in the healthcare ecosystem, and factors that adversely affect it, including health reform measures and mergers within the healthcare ecosystem or regulatory changes, could also adversely affect us.
These domestic and international legislative and regulatory initiatives could adversely affect our customers’ ability or desire to collect, use, process, store and disclose personal information and health data using our solutions, or to license data products from us, which could reduce demand for our solutions.
These domestic and foreign legislative and regulatory initiatives could adversely affect our customers’ ability or desire to collect, use, process, store and disclose personal data and health data using our solutions, or to license data products from us, which could reduce demand for our solutions.
We have seen this happen in response to recently worsening macroeconomic conditions and expect it will continue until they improve. In particular, these trends have been more pronounced for our existing and prospective life science and provider customers.
We have seen this happen in response to difficult macroeconomic conditions and expect it will continue until they improve. In particular, these trends have been more pronounced for our existing and prospective life science and provider customers.
In addition, to facilitate these acquisitions or investments, we may seek additional equity or debt financing, which may not be available on terms favorable to us or at all, including in light of recently worsening macroeconomic conditions such as rising interest rates and volatility in the capital markets, and may affect our ability to complete subsequent acquisitions or investments and increase the risks of owning our Class A Common Stock.
In addition, to facilitate these acquisitions or investments, we may seek additional equity or debt financing, which may not be available on terms favorable to us or at all, including in light of difficult macroeconomic conditions such as high interest rates and volatility in the capital markets, and may affect our ability to complete subsequent acquisitions or investments and increase the risks of owning our Class A Common Stock.
Our customers use our platform for business activities that are subject to a complex regime of global laws and regulations, including requirements for maintenance of electronic records and electronic signatures, requirements regarding processing of health data, and other laws and regulations.
Our customers use our platform for business activities that are subject to a complex regime of global laws and regulations, including requirements for maintenance of electronic records and electronic signatures, requirements regarding processing of health data, healthcare fraud and abuse, and other laws and regulations.
To comply with the requirements of being a public company, including the Sarbanes-Oxley Act, we continue to undertake various actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff or outsourcing certain functions to third parties, which could have a material adverse effect on our business, financial condition and results of operations.
To comply with the requirements of being a public company, including the Sarbanes-Oxley Act, we continue to undertake various actions, such as further developing and refining internal controls and procedures and hiring accounting or internal audit staff or outsourcing certain functions to third parties, which could have a material adverse effect on our business, financial condition and results of operations.
Additionally, increasing our sales to enterprise organizations (both existing and prospective customers generating more than $100,000 in ARR, which we refer to as “Enterprise Customers”) requires increasingly sophisticated and costly sales and account management efforts targeted at senior management and other personnel and generally involve longer sales cycles.
Additionally, increasing our sales to enterprise organizations (including customers generating more than $100,000 in ARR, which we refer to as “Enterprise Customers”) requires increasingly sophisticated and costly sales and account management efforts targeted at senior management and other personnel and generally involve longer sales cycles.
Failure to comply with these laws may result in, among other things, civil and criminal liability, negative publicity, damage to our reputation and liability under contractual provisions. These Privacy Laws may also increase our compliance costs and influence or limit the types of services we can provide.
Our actual or perceived failure to comply with these laws may result in, among other things, civil and criminal liability, negative publicity, damage to our reputation and liability under contractual provisions. These obligations may also increase our compliance costs and influence or limit the types of services we can provide.
We may require additional financing, and we may not be able to obtain debt or equity financing on favorable terms, if at all. The terms of any additional debt financing may be similar or more restrictive than our current debt facilities. Recently worsening macroeconomic conditions, including rising interest rates and volatility in the capital markets, exacerbate this risk.
We may require additional financing, and we may not be able to obtain debt or equity financing on favorable terms, if at all. The terms of any additional debt financing may be similar or more restrictive than our current debt facilities. Difficult macroeconomic conditions, including high interest rates and volatility in the capital markets, exacerbate this risk.
Demand for our solutions could be affected by factors that affect the healthcare ecosystem, including: • Changes in regulations could negatively impact the business environment for our healthcare customers. Healthcare laws and regulations are rapidly evolving and may change significantly in the future.
Demand for our solutions could be affected by factors that affect the healthcare ecosystem, including: • Changes in regulations could negatively impact the business environment for us, our data sources, or our healthcare customers. Healthcare laws and regulations are rapidly evolving and may change significantly in the future.
Our revenue growth may slow or our revenue may decline for a number of other reasons, including reduced demand for our platform, increased competition, a decrease in the growth or reduction in size of our overall market, failure to capitalize on growth opportunities, and the impacts to our business from macroeconomic factors such as the Russia-Ukraine war, global geopolitical tension, and more recently, rising inflation and interest rates, volatility in the capital markets and related market uncertainty.
Our revenue growth may slow or our revenue may decline for a number of other reasons, including reduced demand for our platform, increased competition, a decrease in the growth or reduction in size of our overall market, failure to capitalize on growth opportunities, and the impacts to our business from macroeconomic factors such as the Russia-Ukraine war, the evolving conflict in Israel and surrounding areas, global geopolitical tension, and more recently, inflation and high interest rates, volatility in the capital markets and related market uncertainty.
Consequently, a target customer’s decision to use our solutions may be an enterprise-wide decision and, if so, these types of sales would require us to provide greater levels of education regarding the use and benefits of our platform, as well as education regarding privacy and data protection laws and regulations to prospective customers.
Consequently, a target customer’s decision to use our solutions may be an enterprise-wide decision and, if so, these types of sales would require us to provide greater levels of education regarding the use and benefits of our platform, as well as education regarding data privacy and security obligations to prospective customers.
Although we have no present intention to issue any shares of our preferred stock, we may do so in the future under appropriate circumstances. 41 It em 1B. Unresolved Staff Comments. None. It em 2. Properties.
Although we have no present intention to issue any shares of our preferred stock, we may do so in the future under appropriate circumstances. 45 It em 1B. Unresolved Staff Comments. None.
For the year ended December 31, 2022, we derived 97% of our revenue and cash flows from subscription services, and we expect to continue to generate substantially all of our revenue from the sale of subscriptions to our platform.
For the year ended December 31, 2023, we derived 97% of our revenue from subscription services, and we expect to continue to generate substantially all of our revenue from the sale of subscriptions to our platform.
Our level of indebtedness could have a material adverse effect on our business, financial condition and results of operations. The total principal amount of debt outstanding, excluding unamortized debt issuance costs, under the 2021 Credit Agreement as of December 31, 2022 was $266.4 million.
Our level of indebtedness could have a material adverse effect on our business, financial condition and results of operations. The total principal amount of debt outstanding, excluding unamortized debt issuance costs, under the 2021 Credit Agreement as of December 31, 2023 was $257.8 million.
As a result, we have experienced, and expect to continue to experience, additional costs associated with being a public company, including costs associated with compliance with the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act, or Section 404, the adoption of certain accounting standard updates upon losing such status, and additional disclosure requirements.
We have experienced, and expect to continue to experience, costs associated with being a public company, including costs associated with compliance with the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act, or Section 404, the adoption of certain accounting standard updates, and additional disclosure requirements.
In light of macroeconomic conditions and their actual and potential future impacts on our business, we have made and expect to continue to make efforts to contain our operating expenses, including implementing a restructuring plan in the first quarter of 2023.
In light of macroeconomic conditions and their actual and potential future impacts on our business, we have made and expect to continue to make efforts to contain our operating expenses, including implementing restructuring plans in the first and third quarters of 2023 and in the first quarter of 2024.
In addition, as of December 31,2022, our pre-IPO owners held directly or indirectly a total of 50,433,101 LLC Units that, subject to applicable time-vesting conditions (some of which have already been met), can ultimately be redeemed or exchanged for our Class A Common Stock.
In addition, as of December 31, 2023, our pre-IPO owners held directly or indirectly a total of 39,762,700 LLC Units that, subject to applicable time-vesting conditions (some of which have already been met), can ultimately be redeemed or exchanged for our Class A Common Stock.
Additionally, the use of certain open-source software in certain manners requires that other licensees be granted the right to make any derivative works of any proprietary software linked to or used with the open-source code, or make such proprietary software available to others on terms that are unfavorable to such licensee or at no cost.
Any of the foregoing could disrupt and harm our business. 19 Additionally, the use of certain open-source software in certain manners requires that other licensees be granted the right to make any derivative works of any proprietary software linked to or used with the open-source code, or make such proprietary software available to others on terms that are unfavorable to such licensee or at no cost.
In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, loss of sensitive data and income, and diversion of funds.
In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, ability to provide our products or services, loss of sensitive data and income, and diversion of funds.
Our business, brand, reputation and ability to attract and retain customers depends upon the satisfactory performance, reliability and availability of our platform.
As a result, our business, brand, reputation and ability to attract and retain customers depends upon the satisfactory performance, reliability, and availability of our platform and solutions.
In connection with these actions, we estimate that we will incur pre-tax cash restructuring and related charges of approximately $2.0 million to $2.5 million in the first quarter of 2023, consisting primarily of severance payments, employee benefits, and related cash expenses, as well as an immaterial non-cash stock-based compensation charge related to the vesting of share-based awards for employees who are terminated.
In connection with these actions, we estimate that we will incur pre-tax cash restructuring and related charges of approximately $6.5 million to $7.2 million in the first half of 2024, consisting primarily of severance payments, employee benefits, and related cash expenses, as well as a non-cash stock-based compensation charge related to the vesting of share-based awards for employees who are terminated.
This can effectively render what was previously proprietary software open-source software. 18 It is possible under the terms of certain open-source licenses (often called “copyleft” or “viral” licenses), if we combine our proprietary software with open-source software in a certain manner, that we could be required to release the source code of our proprietary software and make our proprietary software available under open-source licenses.
It is possible under the terms of certain open-source licenses (often called “copyleft” or “viral” licenses), if we combine our proprietary software with open-source software in a certain manner, that we could be required to release the source code of our proprietary software and make our proprietary software available under open-source licenses.
We are a holding company and our principal asset is our ownership of 68.2% of the outstanding LLC Units (as of December 31, 2022), exclusive of unvested LLC Units. We have no independent means of generating revenue.
We are a holding company and our principal asset is our ownership of 74.9% of the outstanding LLC Units (as of December 31, 2023), exclusive of unvested LLC Units. We have no independent means of generating revenue.
Goodwill and acquired intangible assets with an indefinite life are tested for impairment at least annually or when events and circumstances indicate that fair value of a reporting unit may be below their carrying value.
GAAP”), goodwill and intangible assets with an indefinite life are not amortized but are subject to a periodic impairment evaluation. Goodwill and acquired intangible assets with an indefinite life are tested for impairment at least annually or when events and circumstances indicate that fair value of a reporting unit may be below their carrying value.
We could be, from time to time, subject to claims brought by our customers in connection with commercial disputes or other proceedings.
We could be subject to claims brought by our customers, which could be costly and time consuming to defend. We could be, from time to time, subject to claims brought by our customers in connection with commercial disputes or other proceedings.
Penalties will vary significantly depending on factors such as the date of the violation, whether the business associate knew or should have known of the failure to comply, or whether the business associate’s failure to comply was due to willful neglect. Mandatory penalties for HIPAA violations can be significant.
Penalties will vary significantly depending on factors such as the date of the violation, whether the business associate knew or should have known of the failure to comply, or whether the business associate’s failure to comply was due to willful neglect. Penalties for HIPAA violations can be significant. A single breach incident can result in violations of multiple standards.
If we are unable to protect our computer systems, software, networks, data and other technology assets, or there is a perception that we have failed to do so, we may be subject to government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms.
If we (or a third party upon whom we rely) experience a security incident or are unable to protect our computer systems, software, networks, sensitive data and other technology assets, or there is a perception that we have failed to do so, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive data (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions in our operations (including availability of data); financial loss; and other similar harms.
While in light of macroeconomic conditions we have made efforts to contain our operating expenses, including implementation of a restructuring plan (the "Plan") in the first quarter of 2023, such efforts may not achieve the cost savings that we initially expect.
While in light of macroeconomic conditions we have made efforts to contain our operating expenses, including implementation of restructuring plans (the "Plans") in the first and third quarters of 2023 and in the first quarter of 2024, such efforts may not achieve the cost savings that we expect.
Our solutions utilize open-source software, and any failure to comply with the terms of one or more of these open-source licenses could adversely affect our business. Our solutions include software subject to open-source licenses.
Our solutions utilize open-source software, and any failure to comply with the terms of one or more of these open-source licenses could adversely affect our business. Our solutions include software subject to open-source licenses and we may incorporate third-party open source software in our solutions in the future.
Any violation or allegation of violations of economic and trade sanctions laws, export controls, the FCPA or other applicable anti-corruption laws, or anti-money laundering laws could subject us to significant sanctions, including civil or criminal fines and penalties, disgorgement of profits, injunctions and debarment from government contracts, as well as related stockholder lawsuits and other remedial measures, all of which could adversely affect our reputation, business, financial condition and results of operations, and could also result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, any of which could have a material adverse effect on our reputation, business, results of operations and prospects. 25 We could be subject to claims brought by our customers, which could be costly and time consuming to defend.
Controls intended to prevent access to our platform from certain geographies may not be effective in all cases. 27 Any violation or allegation of violations of economic and trade sanctions laws, export controls, the FCPA or other applicable anti-corruption laws, or anti-money laundering laws could subject us to significant sanctions, including civil or criminal fines and penalties, disgorgement of profits, injunctions and debarment from government contracts, as well as related stockholder lawsuits and other remedial measures, all of which could adversely affect our reputation, business, financial condition and results of operations, and could also result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, any of which could have a material adverse effect on our reputation, business, results of operations and prospects.
This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us.
This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to process personal data, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us.
Even if we were to prevail in such a dispute, any litigation regarding our or others’ intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations.
Even if we were to prevail in such a dispute, any litigation regarding our or others’ intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations. The occurrence of infringement claims may grow as the market for our products grows.
There is also a trend toward countries enacting data localization or other country specific requirements, which could be problematic to cloud software providers.
There is also a trend toward countries enacting data localization or other country specific requirements, which could be problematic to cloud software providers that we rely on to conduct our business.
However, we cannot guarantee that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all.
We maintain insurance policies that cover certain security and privacy damages. However, we cannot guarantee that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all.
In addition, if we are no longer able to maintain accuracy in our data and analytics, we may face legal claims by our customers, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, if we are no longer able to maintain accuracy in our data and analytics, we may face legal claims by our customers, which could have a material adverse effect on our business, financial condition and results of operations. 8 We have experienced rapid growth in recent periods, and our recent growth rates may not be indicative of our future growth.
If customers do not renew their subscriptions or renew on less favorable terms, we fail to add more users, or if we fail to expand subscriptions of existing customers, our revenue may decline or grow less quickly than anticipated and we may not be able to achieve our anticipated LTV from our customer relationships, which could have a material adverse effect on our business, financial condition and results of operations. 10 We may fail to offer the optimal pricing and packaging of our solutions, which could negatively impact our growth strategy and ability to effectively compete in the market.
If customers do not renew their subscriptions or renew on less favorable terms, we fail to add more users, or if we fail to expand subscriptions of existing customers, our revenue may decline or grow less quickly than anticipated and we may not be able to achieve our anticipated LTV from our customer relationships, which could have a material adverse effect on our business, financial condition and results of operations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

15 edited+10 added−8 removed16 unchanged
Biggest changeAlso, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/Deloitte & Touche LLP Boston, Massachusetts February 27, 2023 64 Changes in Internal Control Over Financial Reporting During the quarter ended December 31, 2022, no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Biggest changeBecause of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Excluding the effect of the interest rate swap agreement, a hypothetical 1.0% increase or decrease in the interest rate associated with borrowings under the 2021 Credit Agreement would result in an approximately $2.7 million impact to interest expense on an annual basis. Foreign Currency Exchange Risk To date, the majority of our sales contracts have been denominated in U.S. dollars.
Excluding the effect of the interest rate swap agreement, a hypothetical 1.0% increase or decrease in the interest rate associated with borrowings under the 2021 Credit Agreement would result in an approximately $2.6 million impact to interest expense on an annual basis. Foreign Currency Exchange Risk To date, the majority of our sales contracts have been denominated in U.S. dollars.
Our consolidated financial statements, together with the reports of our independent registered public accounting firm, appear beginning on page F-1 of this Annual Report for the year ended December 31, 2022. It em 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None. I tem 9A. Controls and Procedures.
Our consolidated financial statements, together with the reports of our independent registered public accounting firm, appear beginning on page F-1 of this Annual Report for the year ended December 31, 2023. It em 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. I tem 9A. Controls and Procedures.
Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Definitive Healthcare Corp. and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Definitive Healthcare Corp. and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, to provide reasonable assurance regarding the reliability of financing reporting and the preparation of financial statements for external purposes in accordance with U.S generally accepted accounting principles.
Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, to provide reasonable assurance regarding the reliability of financing reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.
Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer and oversight of the board of directors, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022, based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).
Under the supervision and participation of our Chief Executive Officer and our Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2023, based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).
In order to reduce the interest rate risk on our debt, we have entered into an interest rate swap agreement on a portion of our borrowings. As of December 31, 2022, the total principal balance outstanding was $266.4 million.
In order to reduce the interest rate risk on our debt, we have entered into an interest rate swap agreement on a portion of our borrowings. As of December 31, 2023, the total principal balance outstanding was $257.8 million.
As the impact of foreign currency exchange rates has not been material to our historical results of operations, we have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency becomes more significant.
As the impact of foreign currency exchange rates has not been material to our historical results of operations, we have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency becomes more significant. 69 Ite m 8. Financial Statements and Supplementary Data.
Interest Rate Risk Our cash, cash equivalents and short-term investments primarily consist of cash on hand and highly liquid investments in money market funds, U.S. government securities and commercial paper. As of December 31, 2022 we had cash and cash equivalents of $146.9 million and short-term investments of $184.9 million.
Interest Rate Risk Our cash, cash equivalents and short-term investments primarily consist of cash on hand and highly liquid investments in money market funds, U.S. government securities and commercial paper. As of December 31, 2023 we had cash and cash equivalents of $131.0 million and short-term investments of $177.1 million.
Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this Annual Report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).
Evaluation of Disclosure Controls and Procedures As of December 31, 2023, our management carried out an evaluation, under the supervision and participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer), of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)).
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
In our opinion, because of the effect of the material weakness identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated February 27, 2023, expressed an unqualified opinion on those financial statements.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB) the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 28, 2024, expressed an unqualified opinion on those financial statements. 71 Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Controls Over Financial Reporting.
Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. It em 9B. Other Information. None.
Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Definitive Healthcare Corp.
Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2022.
Our management identified control deficiencies, as previously disclosed, that, individually or in the aggregate, constitute a material weakness in our internal control over financial reporting and has concluded that our internal control over financial reporting was not effective as of December 31, 2023.
Deloitte & Touche LLP, an independent registered public accounting firm, has audited our consolidated financial statements included in this Annual Report and issued its report on the effectiveness of our internal control over financial reporting, which is included herein. 63 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Definitive Healthcare Corp.
Deloitte & Touche LLP, our independent registered public accounting firm, has audited our consolidated financial statements included in this Annual Report and issued its report, which is included herein, stating that the Company's internal controls over financial reporting were not effective as of December 31, 2023. 70 Changes in Internal Control Over Financial Reporting There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Removed
Our operating results are subject to market risk from interest rate fluctuations on our 2021 Term Loan, which bears a variable interest rate based on the Term SOFR Rate plus an applicable margin. As of December 31, 2022, the total principal balance outstanding was $266.4 million.
Added
Based on our management’s evaluation, management concluded that our disclosure controls and procedures were not effective as of December 31, 2023 as a result of the material weakness discussed below.
Removed
Impact of Inflation We do not believe inflation has had a material effect on our business, financial condition, or results of operations.
Added
Notwithstanding this material weakness, our management concluded that our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”).
Removed
However, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset higher costs through price increases and our inability or failure to do so could potentially harm our business, financial condition, and results of operations.
Added
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Removed
Credit Risk Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, and trade and other receivables. We hold cash with reputable financial institutions that often exceed federally insured limits.
Added
We identified a material weakness in the design of our controls over the collection and remittance of sales taxes, as well as the accurate recording of our sales tax obligations in the financial statements. This material weakness remains unremediated as of December 31, 2023.
Removed
We manage our credit risk by concentrating our cash deposits and short-term investments with high-quality financial institutions and periodically evaluating the credit quality of those institutions. The carrying value of cash and short-term investments approximates fair value. 62 Ite m 8. Financial Statements and Supplementary Data.
Added
Remediation Efforts to Address Material Weakness In response to the identified material weakness, management, with the oversight of the Audit Committee of the Board of Directors, has designed and implemented measures to improve our internal control over financial reporting and remediate the material weakness.
Removed
Based on such evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of December 31, 2022 to provide reasonable assurance that information to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and (ii) accumulated and communicated to management, including our principal executive and principal financial officers or persons performing similar functions, as appropriate to allow timely decisions regarding disclosure.
Added
Our efforts include a number of actions: • We immediately engaged additional third-party tax experts to assist in the review of the classification for sales tax purposes of our existing products and services; • We have designed and implemented additional sales tax nexus reviews, including controls over the monitoring of changes in our products and service offerings and identification of new and/or enhanced products and services, to put in place effective review controls over the classification of products and services for sales tax purposes; and • We have designed and implemented controls over the collection, control, and subsequent monitoring of applicable documentation of exempt status from customers in affected jurisdictions.
Removed
Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Controls Over Financial Reporting.
Added
Our management believes that the measures described above will remediate the material weakness and strengthen our overall internal control over financial reporting. The material weakness will not be considered remediated until the applicable remediated controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Removed
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Added
Material Weakness A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Added
The following material weakness has been identified and included in management's assessment: The Company did not have appropriately designed controls over the collection, remittance and accurate recording of sales tax obligations in the financial statements.
Added
This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2023, of the Company, and this report does not affect our report on such financial statements. /s/Deloitte & Touche LLP Boston, Massachusetts February 28, 2024 Item 9B.

Other DH 10-K year-over-year comparisons