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, Mass., Feb. 28, 2024 (GLOBE NEWSWIRE) -- 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:

  • Revenue was $65.9 million, an increase of 9% from $60.6 million in Q4 2022. 
  • Net (Loss) Income was ($13.4) million, or (20)% of revenue, compared to $5.9 million, or 10% of revenue in Q4 2022.  
  • Adjusted Net Income was $10.6 million, compared to $10.3 million in Q4 2022.   
  • Adjusted EBITDA was $19.8 million, or 30% of revenue, compared to $17.0 million, or 28% of revenue in Q4 2022.  
  • Cash Flow from Operations was $4.7 million in the quarter.
  • Unlevered Free Cash Flow was $11.1 million in the quarter.

Full Year 2023 Financial Highlights:

  • Revenue was $251.4 million for the year, an increase of 13% from $222.7 million for the full year 2022. 
  • Net Loss was ($289.6) million, or (115)% of revenue, compared to ($24.2) million, or (11)% of revenue for the full year 2022.  
  • Adjusted Net Income was $46.7 million, compared to $35.4 million for the full year 2022.   
  • Adjusted EBITDA was $74.5 million, or 30% of revenue, compared to $63.7 million, or 29% of revenue for the full year 2022.  
  • Cash Flow from Operations was $41.2 million for the full year 2023.
  • Unlevered Free Cash Flow was $68.6 million for the full year 2023.

“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.”

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:

  • A Swiss robotics company, focused on minimally invasive surgery, plans to utilize our platform across their sales and marketing organization to create a game plan for entering the U.S. market by identifying and targeting the most valuable opportunities for their products within the surgery center, hospital, and individual physician market.
  • A New Jersey-based biopharma company, focused on oncology therapies for patients with limited treatment options, selected our Monocl platform to help their marketing and Medical Affairs teams grow their Key Opinion Leader network to support the launch of a new combination therapy to treat patients with liver cancer.
  • One of the largest not-for-profit, integrated health care systems based in Massachusetts, selected our new Populi platform to help them build their physician network by analyzing diagnoses and procedure volumes in their markets, physician referral patterns, and service line utilization.
  • A global leader in commercial real estate commercial services and investment selected Definitive Healthcare to help them map out their clients’ market opportunities including specific pain points by geography. Additionally, they’re integrating our data into their Snowflake instance which is an integration partnership that we launched last year that reinforces our goal of becoming heavily integrated into our clients’ workflow.

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:  

  • Revenue is expected to be in the range of $63.0 – $65.0 million, a 6-10% increase year over year. 
  • Adjusted Operating Income is expected to be in the range of $18.0 – $19.0 million. 
  • Adjusted EBITDA is expected to be in the range of $19.5 – $20.5 million. 
  • Adjusted Net Income is expected to be $12.0 – $13.0 million. 
  • Adjusted Net Income Per Diluted Share is expected to be $0.07 – $0.08 per share on approximately 157.4 million weighted-average shares outstanding. 

Full Year 2024:  

  • Revenue is expected to be in the range of $263.0 – $269.0 million, a 5-7% increase from the prior year at the midpoint. 
  • Adjusted Operating Income is expected to be in the range of $78.0 – $82.0 million. 
  • Adjusted EBITDA is expected to be in the range of $84.0 – $88.0 million. 
  • Adjusted Net Income is expected to be $59.0 – $63.0 million. 
  • Adjusted Net Income Per Diluted Share is expected to be $0.37 – $0.40 per share on approximately 159.3 million weighted-average shares outstanding. 

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. 

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 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. 

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. 

Investor Contact: 
Brian Denyeau 
ICR for Definitive Healthcare 
brian.denyeau@icrinc.com
646-277-1251 

Media Contact: 
Danielle Johns 
djohns@definitivehc.com


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 
     
   -   - 



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 
        



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 provided by (used in) 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 
        



        
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.
        


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.
(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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