Recent Developments and Financial Performance

Definitive Healthcare, a leading healthcare data and analytics company, has experienced several notable developments in recent quarters that have impacted its financial results.

Acquisitions In January 2024, the company completed the acquisition of the Carevoyance business line from H1 Insights, Inc. for $13.7 million. Carevoyance is a product that helps medical technology (MedTech) customers improve their marketing and sales efforts.

Goodwill Impairment During the first quarter of 2025, Definitive Healthcare experienced a significant decline in its stock price, which triggered a requirement to test the company’s goodwill for impairment. As a result, the company recorded a non-cash goodwill impairment charge of $176.5 million. This charge did not affect the company’s liquidity or debt covenants.

Restructuring Charges In 2024, Definitive Healthcare implemented a restructuring plan to reduce costs and improve profitability. This plan resulted in a workforce reduction of approximately 150 employees and $7.2 million in restructuring charges during the first quarter of 2024. The company also incurred additional charges related to the consolidation of office space.

Sales Execution Challenges The 2024 restructuring plan led to disruptions in Definitive Healthcare’s sales efforts, impacting both new customer acquisition and upsell opportunities with existing customers. This, combined with lower than historical renewal rates, has continued to impact the company’s results in 2025.

Executive Transitions Definitive Healthcare experienced significant executive changes in 2024, including the departure of the Chief Financial Officer, who will be leaving the company in June 2025. The board of directors has appointed a new CFO to replace him.

Macroeconomic Conditions The company’s customers have been impacted by difficult macroeconomic conditions, such as high inflation, rising interest rates, and market volatility. This has resulted in lengthened sales cycles, deferred purchasing decisions, and increased customer churn, particularly among smaller customers and in the Life Sciences market. Definitive Healthcare expects these macroeconomic pressures to continue to impact its growth in 2025.

Key Factors Affecting Performance

Acquiring New Customers Definitive Healthcare’s growth depends on its ability to attract new customers to its platform. The company has identified over 100,000 potential customers in the healthcare ecosystem that could benefit from its services. However, new customer acquisition has been challenged by the macroeconomic environment and sales execution issues.

Expanding Relationships with Existing Customers The company believes there is significant opportunity to generate additional revenue from its existing customer base of approximately 2,475 customers as of March 31, 2025. Definitive Healthcare’s customer-centric teams are focused on driving increased platform usage and adoption, which the company believes will lead to expansion opportunities.

Continuing to Innovate and Expand the Platform Definitive Healthcare’s growth is driven by its ability to innovate and expand its platform capabilities. The company plans to continue investing significantly in engineering and research and development to enhance its functionality and facilitate expansion into new use cases and customer segments.

Key Metrics

Net Dollar Retention (NDR) Definitive Healthcare tracks its NDR, which measures the growth in usage of its platform by existing customers. The company’s NDR is an important indicator of the health of its business and future growth prospects.

Current Remaining Performance Obligations (cRPO) cRPO represents the amount of contracted future revenue that has not yet been recognized, including both deferred revenue and non-cancelable contracted amounts. This metric helps the company evaluate the health of its business and identify trends affecting its growth. However, cRPO can be influenced by various factors, such as seasonality and contract terms, so it should be reviewed in conjunction with other financial metrics.

Components of Results of Operations

Revenue Definitive Healthcare derives approximately 97% of its revenue from subscription services, with the remainder coming from professional services. Subscription revenue is recognized ratably over the contract term, while professional services revenue is recognized at a point in time.

The company’s revenue declined 7% in the first quarter of 2025 compared to the same period in 2024, primarily due to lower subscription revenue. This was driven by the sales execution challenges and macroeconomic pressures mentioned earlier, which have impacted both new customer acquisition and renewal rates.

Cost of Revenue Cost of revenue, excluding amortization, consists of direct expenses related to supporting and operating the company’s SaaS platform, such as data and infrastructure costs, and personnel costs for professional services, customer support, and data research teams.

Amortization expense includes the amortization of technology and data acquired through business combinations and asset purchases. This expense is expected to increase if Definitive Healthcare makes additional acquisitions in the future.

The company has also been impacted by changes in the healthcare claims data market, as data providers have reviewed pricing, availability, and use terms, which may negatively affect the prices Definitive Healthcare pays for such data.

Gross Profit and Margin Gross profit is revenue less cost of revenue, and gross margin is gross profit as a percentage of revenue. Definitive Healthcare’s gross profit and margin have been and will continue to be affected by various factors, including data and hosting costs, the introduction of new features and functionality, and the expansion of customer support and service teams.

The company expects its gross profit margin for 2025 to decrease due to the anticipated revenue declines and its largely fixed cost structure.

Operating Expenses Definitive Healthcare’s operating expenses primarily consist of personnel costs, such as salaries, bonuses, and stock-based compensation, as well as non-personnel costs like facilities, technology, and marketing.

The company has made efforts to contain operating expenses in response to macroeconomic conditions, including implementing restructuring plans. However, inflation, particularly increases in the cost of labor, have negatively impacted operating expenses, and this is expected to continue.

Key operating expense categories include:

• Sales and marketing: Focused on driving new customer acquisition and expanding relationships with existing customers.
• Product development: Investing in systems optimization, product improvements, and the development of new features and capabilities.
• General and administrative: Covering executive, finance, legal, HR, and other corporate functions.
• Depreciation and amortization: Primarily related to amortization of intangible assets from acquisitions.
• Transaction, integration, and restructuring expenses: Costs associated with M&A activities and the 2024 restructuring plan.
• Goodwill impairment: The $176.5 million non-cash charge recorded in the first quarter of 2025 due to the decline in the company’s stock price.

Other Income and Expenses Other income and expenses include interest expense on debt, interest income on cash and investments, and other items such as foreign currency transaction gains/losses and changes in the company’s Tax Receivable Agreement liability.

The significant increase in other income in the first quarter of 2025 was primarily driven by a $18.4 million gain from the remeasurement of the Tax Receivable Agreement liability, which was higher due to the goodwill impairment charge.

Liquidity and Capital Resources

As of March 31, 2025, Definitive Healthcare had $106.1 million in cash and cash equivalents, $94.6 million in short-term investments, and $49.7 million available under its revolving credit facility. The company’s principal sources of liquidity are its cash on hand, short-term investments, and cash flows from operations.

The company’s principal uses of liquidity include capital expenditures, acquisitions, debt service, stock repurchases, and distributions to members. Definitive Healthcare believes its current liquidity sources will be sufficient to meet its needs for at least the next 12 months and in the long term. However, the company’s liquidity and ability to fund its operations are dependent on its future financial performance, which could be impacted by macroeconomic conditions.

Definitive Healthcare has a credit agreement that provides for a $175 million term loan facility and a $50 million revolving credit facility. The company recently amended this agreement, which resulted in a $69.1 million repayment of the term loan and a $25 million reduction in the revolving facility. This transaction led to a $0.5 million loss on partial debt extinguishment.

The company also has a stock repurchase program in place, with $100 million authorized for share buybacks through the end of 2025. As of March 31, 2025, Definitive Healthcare has repurchased 10.4 million shares of its Class A common stock under this program.

Outlook and Key Risks

Definitive Healthcare expects its revenue to decline in 2025 compared to 2024, driven by the continued impact of sales execution challenges, macroeconomic pressures, and lower than historical renewal rates. The company also anticipates that its gross profit margin will decrease due to the revenue declines and its largely fixed cost structure.

Key risks facing the company include:

• Continued macroeconomic volatility and its impact on customer spending and churn
• Challenges in acquiring new customers and expanding relationships with existing customers
• Potential future goodwill impairments if the company’s market capitalization declines further
• Disruptions in the healthcare claims data market and the ability to acquire data at favorable prices
• Inflation and its effect on operating expenses, particularly labor costs

Overall, Definitive Healthcare has faced a number of headwinds in recent quarters that have negatively impacted its financial performance. The company is focused on navigating the current macroeconomic environment, improving its sales execution, and continuing to innovate and expand its platform to drive long-term growth. However, the near-term outlook remains challenging, and the company’s ability to weather these storms will be critical to its future success.