Definitive Healthcare (US:DH)2025-05-08 20:22Part I. FINANCIAL INFORMATION Financial Statements For the quarter ended March 31, 2025, Definitive Healthcare reported a significant net loss of $155.1 million, primarily due to a $176.5 million goodwill impairment, with revenue decreasing 7% to $59.2 million and total assets declining to $808.7 million Condensed Consolidated Balance Sheets Total assets decreased to $808.7 million from $1,089.4 million as of March 31, 2025, primarily due to goodwill impairment, while total liabilities also declined to $372.8 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $808,657 | $1,089,389 | | Cash and cash equivalents | $106,099 | $105,378 | | Goodwill | $216,752 | $393,283 | | Total Liabilities | $372,752 | $482,195 | | Term loan (current & long-term) | $171,135 | $243,118 | | Tax receivable agreements liability | $23,124 | $49,511 | | Total Equity | $435,905 | $607,194 | Condensed Consolidated Statements of Operations Q1 2025 revenue decreased 6.8% to $59.2 million, resulting in a $184.8 million operating loss due to a $176.5 million goodwill impairment, leading to a $107.2 million net loss Q1 2025 vs Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $59,191 | $63,480 | | Gross Profit | $43,760 | $50,382 | | Goodwill Impairment | $176,531 | $0 | | Loss from Operations | ($184,786) | ($16,249) | | Net Loss | ($155,093) | ($12,718) | | Net Loss Attributable to Definitive Healthcare Corp. | ($107,228) | ($9,518) | | Net Loss Per Share (Basic and Diluted) | ($0.95) | ($0.08) | Condensed Consolidated Statements of Cash Flows Operating cash flow increased to $26.1 million in Q1 2025, while financing activities used $109.7 million for debt repayment and share repurchases, maintaining cash at $106.1 million Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $26,066 | $16,589 | | Net cash provided by (used in) investing activities | $83,545 | ($24,034) | | Net cash used in financing activities | ($109,706) | ($17,194) | | Cash and cash equivalents, end of period | $106,099 | $105,994 | Notes to the Condensed Consolidated Financial Statements Notes detail a $176.5 million goodwill impairment, a new $175.0 million term loan, 5.6 million share repurchases for $21.2 million, and a $20.7 million TRA liability remeasurement gain - In Q1 2025, a sustained decrease in the company's stock price triggered a quantitative goodwill impairment test, resulting in a non-cash, pre-tax goodwill impairment charge of $176.5 million56 - On January 16, 2025, the company amended its credit agreement, establishing a new $175.0 million term loan facility and a $50.0 million revolving credit facility, maturing in January 2030. Proceeds were used to repay existing debt6465 - During Q1 2025, the company repurchased 5.6 million shares of Class A Common Stock for an aggregate price of $21.2 million under its 2025 Repurchase Program101 - The Tax Receivable Agreement (TRA) liability decreased by $34.7 million in Q1 2025, primarily due to a $20.7 million remeasurement gain and $13.8 million in payments to TRA parties114 Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported a 7% revenue decrease to $59.2 million in Q1 2025, impacted by sales challenges and a $176.5 million goodwill impairment, with Adjusted EBITDA at $14.7 million Recent Developments and Challenges Recent challenges include a $176.5 million goodwill impairment, sales disruptions from a 2024 restructuring reducing ~150 employees, and macroeconomic pressures causing longer deal cycles and higher customer churn - A goodwill impairment charge of $176.5 million was recorded in Q1 2025 due to a sustained decrease in the company's stock price and market capitalization133 - The 2024 Restructuring Plan, which reduced the workforce by ~150 people, created disruptions to sales efforts, impacting new customer acquisition and upsells135137 - The company is experiencing difficult macroeconomic conditions, leading to lengthened deal cycles, deferred purchasing decisions, and heightened customer churn, particularly in the Life Sciences market and with smaller customers139 Key Metrics and Performance Key metrics show total customers decreased to ~2,475 and enterprise customers to 512 in Q1 2025, with current RPO declining to $181.8 million, reflecting macroeconomic challenges Customer Count Trend (Updated Methodology) | Metric | March 31, 2024 | March 31, 2025 | | :--- | :--- | :--- | | Total Customers | ~2,700 | ~2,475 | | Enterprise Customers | 541 | 512 | Remaining Performance Obligations (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current RPO (cRPO) | $181,772 | $188,050 | | Total RPO | $281,574 | $293,723 | Results of Operations Comparison (Q1 2025 vs Q1 2024) Q1 2025 revenue decreased 7% to $59.2 million, while operating expenses surged to $228.5 million due to a $176.5 million goodwill impairment, partially offset by increased other income - Revenue decreased by 7% YoY, primarily due to a $6.9 million decrease in revenue from customers existing prior to 2025, partially offset by a $2.6 million increase from new customers175 - Operating expenses increased by 243% YoY, driven by the $176.5 million goodwill impairment. This was partially offset by a $7.3 million decrease in transaction, integration, and restructuring expenses, as the prior year included significant costs from the 2024 Restructuring Plan177 Non-GAAP Financial Measures Adjusted Gross Profit was $47.1 million (80% margin) in Q1 2025, while Adjusted EBITDA decreased to $14.7 million (25% margin) from $20.0 million (32% margin) in Q1 2024 Adjusted EBITDA Reconciliation (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss | ($155,093) | ($12,718) | | Goodwill impairment | $176,531 | $0 | | Equity-based compensation | $7,319 | $15,582 | | Transaction, integration, and restructuring expenses | $1,265 | $8,534 | | Adjusted EBITDA | $14,706 | $20,023 | | Adjusted EBITDA Margin | 25% | 32% | Liquidity and Capital Resources Liquidity as of March 31, 2025, included $106.1 million cash and $94.6 million short-term investments, with $49.7 million available on the revolver, supporting operations for the next twelve months - Principal sources of liquidity are cash on hand ($106.1 million), short-term investments ($94.6 million), and availability under the revolving credit facility ($49.7 million)192 - In Q1 2025, the company amended its credit agreement, resulting in a new $175.0 million term loan and a $50.0 million revolver. Net repayments on the term loan during the quarter were $71.3 million201204 - The company repurchased 10.4 million shares in total under its repurchase programs as of March 31, 2025212 Quantitative and Qualitative Disclosures about Market Risk Primary market risk is interest rate exposure on the $172.8 million variable-rate term loan, where a 1.0% increase would raise quarterly interest expense by approximately $0.4 million, mitigated by interest rate caps - The company is subject to interest rate risk on its $172.8 million term loan. A hypothetical 1.0% increase in interest rates would impact quarterly interest expense by approximately $0.4 million223 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO have concluded that the company's disclosure controls and procedures were effective as of March 31, 2025225 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls226 Part II. OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings, but management does not anticipate a material adverse effect on its financial position or operations - The company states that the ultimate resolution of current legal proceedings is not expected to have a material adverse effect on its financials230 Risk Factors No material changes to the company's risk factors have occurred since the 2024 Annual Report on Form 10-K filing - No material changes to risk factors have occurred since the 2024 Form 10-K filing231 Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2025, the company issued 441,443 Class A Common Stock shares for LLC Units and repurchased 5,604,751 shares at an average price of $3.75 per share - In Q1 2025, 441,443 LLC Units were exchanged for an equivalent number of Class A Common Stock shares232 Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2025 | 940,134 | $4.58 | | Feb 2025 | 1,700,622 | $4.94 | | Mar 2025 | 2,963,995 | $2.81 | | Total | 5,604,751 | $3.75 | Defaults Upon Senior Securities The company reported no defaults upon senior securities - The company reported no defaults upon senior securities235 Other Information The company reported no other information under this item - The company reported no other information under this item237 Exhibits This section lists exhibits filed with the Form 10-Q, including officer certifications and corporate agreements incorporated by reference