Definitive Healthcare Corp. Q2 FY2025 earnings call

Key Points - Q2 results were above high end of guidance ranges for top and bottom line. - Renewal rates showed modest improvement, with Q2 renewals being the strongest in over a year, particularly in diversified and life science segments (making up nearly 90% of annual recurring revenue). - Strategic pillars: - Differentiated data: Expanding data assets, diversifying data sources, and leveraging partnerships (e.g., global strategic data partnership signed end of last year). - Seamless integration: Flexible data access methods (APIs, proprietary software, analytical capabilities) driving new business wins and improved retention. - Customer success: Focus on consistent, proactive service with seamless onboarding contributing to improved retention rates. - Innovation: Progress in digital engagement, with agencies using health care segments to enhance media campaign targeting, and direct efforts with health care systems showing growth.

Total revenue for Q2 2025 was $60.8 million, down 5% year-over-year. Subscription revenue declined 6%, but professional services revenue was up 46% year-over-year. The data partnership launched earlier this year contributed a couple of points to overall revenue. Adjusted EBITDA was $18.7 million, representing a 31% margin. Unlevered free cash flow for the trailing 12 months was $57 million. Adjusted gross profit was $50 million, down 6% from Q2 2024, with an adjusted gross profit margin of 82% (down ~110 basis points from Q2 2024).

Forward-Looking Statements - Q3 revenue expected to be $59 million to $60 million, a 4% to 6% decline year-over-year. - Full-year revenue now projected at $237 million to $240 million, a 5% to 6% decline year-over-year (raising the bottom end of prior range by $3 million). - Adjusted EBITDA for full year expected $64 million to $67 million, with a margin of 27% to 28%. - Adjusted net income expected between $32.5 million to $34.5 million, and EPS expected $0.22 to $0.23.

Risks - Macroeconomic conditions impacting buying decisions, regulatory uncertainty, and cooling effect on evaluation timelines. - Continued pressures in life sciences, including down selling and potential upsell challenges. - Need to navigate through large renewal periods in December and January, which are critical for the business.

Q: What are you seeing in the sales cycles for your biopharma or health care provider clients? Are time lines in those segments changed compared to earlier in the year?

A: Kevin D. Coop - We're seeing life sciences still experiencing latency, with more RPs and elongated time to decision.

Q: Are there anything in the macro trends where health care provider consolidation or payer provider dynamics influencing your go-to-market strategy?

A: Kevin D. Coop - Focus on highest quality data, building integration capabilities, and customer satisfaction; macro environment will settle, and focus on controllable factors will produce results.

Q: Are you seeing anything in particular in terms of what you've done and what you've changed favorably impacting the retention rate?

A: Kevin D. Coop - Q2 renewals were strongest in over a year, due to customer success focus, including seamless onboarding, and impact across diversified and life science segments.

Q: Are these contracts with agencies expected to come on towards the end of 2025 or more in 2026? And are these agencies primarily working with pharma clients?

A: Kevin D. Coop - Effort is proceeding as planned, with activation expected to pick up in Q4 2025 and 2026; agencies span across different industries, not just pharma.

Q: The focus on stemming the down sales in life sciences, is that related to the higher touch delivery model for those customers? And is receptivity to higher touch changing?

A: Kevin D. Coop - Life sciences customers need attach services, tech-enabled services, and data science assistance; focus on master data and integration is key, and receptivity is being addressed through higher touch delivery.