Definitive Healthcare Corp. Q2 FY2026 earnings call

• Overall Financial Performance

  • Q2FY26 results met or exceeded top and bottom line guidance ranges; adjusted EBITDA came in at $14.6 million for a 26% margin, modestly above the high end of guidance
  • Trailing 12-month unlevered free cash flow reached $50 million, with a 75% conversion rate from trailing 12-month adjusted EBITDA
  • Net dollar retention improved year-over-year on a trailing 12-month basis for the second consecutive quarter, putting the company on track to hit full-year retention targets

• Strategic Pillar Progress

  • Data differentiation: The company continues to invest in new proprietary data sources, expanding verified provider location data to over 4.4 million locations and launching the new ACE 3.0 AI-augmented estimation methodology to address industry-wide incomplete claims coverage. This data differentiation drove multiple competitive wins in the quarter, including a major financial services institution and a behavioral health claims deal.
  • Seamless integrations: The company completed 50% more customer integrations year-over-year while reducing average integration time by over 50%. Higher integration rates drive higher customer usage, stronger retention, and larger account expansions, demonstrated by an early renewal and expansion of a large diversified account and a new native integration with VIVA Vault CRM for a top biopharma partner.
  • Unified customer success: Aligning all customer-facing teams into a unified commercial organization has enabled proactive issue identification and retention. In Q2, the team saved an at-risk six-figure account that was at risk of churn due to a customer budget oversight, retaining the business and creating a path for future expansion.
  • Innovation and digital engagement: Natural language conversational search now accounts for ~40% of interactions on the company's expert intelligence platform, simplifying complex customer workflows. Digital activation has moved from proof of concept to full production, with 10 new agency partners and 7 new direct activation customers added year-to-date, and existing customers increasing activation spend.

• New Product Launch: Turbo AI Platform

  • The company launched the pilot of Turbo, a new AI-powered healthcare intelligence platform that unifies all of the company's proprietary data assets to enable natural language, autonomous decision support rather than basic data retrieval. Pilot testing with a select cross-segment group of strategic customers began this month, with general availability targeted before the end of 2026. AI is being embedded across the entire company data value chain and internal operations, not just as a product feature, leveraging the company's differentiated data, domain expertise, and existing customer base as a competitive advantage.

Total company Q2FY26 revenue was $55.2 million, a 9% year-over-year decline. Of this total, subscription revenue accounted for 95.7% of total revenue at $52.8 million, also declining 9% year-over-year. Professional services revenue made up the remaining 4.3% of total revenue and underperformed internal expectations for the quarter due to lighter bookings for traditional analytics engagements. By end market, diversified and provider segments collectively represent over 60% of total company revenue, and these segments are further along in returning to growth, forming a foundation for future expansion. The life sciences segment has seen a slower recovery from recent headwinds, though the company reports early positive traction from recent operational changes to this segment.

• Q3FY26 Guidance: Total revenue is expected to be $54 to $55 million, representing an 8 to 10% year-over-year decline. Subscription revenue is expected to be flat sequentially from Q2, while professional services revenue is expected to grow double-digit sequentially but come in lower than originally anticipated. Adjusted EBITDA is projected to be $13.5 to $14.5 million, for a 25% to 27% margin, and adjusted net income is expected to be $5.5 to $6.5 million, or 4 to 5 cents per diluted share.
• Full Year 2026 Guidance: The revenue guidance range has been tightened to $220 to $222 million, representing an 8 to 9% year-over-year decline, reflecting weaker than expected professional services bookings in Q2 that will impact second half results. Despite the lower revenue outlook, the midpoint of full year adjusted EBITDA guidance has been raised by $1 million to $57 to $59 million, for a full-year margin of 26 to 27% (an increase of ~100 basis points from prior guidance) due to proactive cost management. Full year adjusted net income is expected to be $27 to $29 million, or 18 to 20 cents per diluted share.

• Ongoing top line pressure driven by the slow recovery in the life sciences segment and weaker than expected demand for traditional professional services analytics engagements
• Customer preference for shorter single-year deals over multi-year commitments has driven a 18% year-over-year decline in total remaining performance obligations, creating near term revenue visibility challenges
• Macro economic uncertainty continues to impact customer budgeting and spending across end markets, leading to ongoing churn and downsell risk
• Full impact of operational changes to improve the life sciences segment will take longer than originally anticipated to materialize

Q: With the Turbo AI platform's general availability targeted for late 2026, is any Turbo revenue included in current guidance, and what is the planned commercial model? Will it be bundled, a premium SKU, or usage-based?

A: No material 2026 revenue from Turbo is included in guidance, with most impact expected in 2027. The main 2026 benefit is expected to be improved retention ahead of the December-January peak renewal season. Pricing and commercial model are still being evaluated: existing customers with full data access may see different pricing than smaller customers with limited data sets, and a tiered usage-based model is planned for future rollout. The company is currently focused on gathering pilot customer feedback ahead of general availability.

Q: Now that claims data coverage has been restored to above historical levels, has the company restarted claims upsell/cross-sell in the life sciences segment, and are there early signs of large pharma commercial budgets increasing?

A: Downsell driven by incomplete claims coverage has started to lessen after recent data expansions, though it is still early to see full benefits. While large pharma budgets have not shown significant broad improvement, the biopharma segment had its strongest new business quarter outside of Q4 in three years, which is an encouraging early improvement. The company is prepared to capture additional demand as conditions improve, especially following the Turbo launch.

Q: Are there early signs customers are returning to multi-year deal commitments, and what conditions would drive this shift?

A: Trends between multi-year and single-year deals are starting to normalize slightly, but there has not been a major shift back to multi-year deals, reflecting ongoing customer caution in the current macro environment. The company offers incentives for multi-year deals but does not view a shift back to multi-year commitments as a critical dependency for continued operational progress. Normal historical dynamics already see new customers sign multi-year deals before shifting to single-year renewals, so the current mix is not unusual for the business.