Definitive Healthcare (DH) - 2025 Q2 - Quarterly Report

Part I. FINANCIAL INFORMATION This section covers the company's financial statements, management's discussion and analysis, market risk disclosures, and controls Item 1. Condensed Consolidated Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and notes on key financial events Condensed Consolidated Balance Sheets Key Balance Sheet Items (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $80,984 | $105,378 | | Goodwill | $216,752 | $393,283 | | Total assets | $770,145 | $1,089,389 | | Term loan (current & long-term) | $169,035 | $243,118 | | Total liabilities | $358,912 | $482,195 | | Total equity | $411,233 | $607,194 | Condensed Consolidated Statements of Operations Performance Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $60,750 | $63,737 | $119,941 | $127,217 | | Gross Profit | $46,613 | $50,454 | $90,373 | $100,836 | | Loss from Operations | $(4,170) | $(369,641) | $(188,956) | $(385,890) | | Goodwill Impairment | $0 | $363,641 | $176,531 | $363,641 | | Net Loss | $(9,265) | $(306,187) | $(164,358) | $(318,905) | | Net Loss per Share (Basic & Diluted) | $(0.07) | $(1.81) | $(1.05) | $(1.90) | Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $35,370 | $30,629 | | Net cash provided by (used in) investing activities | $73,383 | $(9,100) | | Net cash used in financing activities | $(134,406) | $(31,316) | | Net decrease in cash and cash equivalents | $(25,653) | $(9,787) | Notes to the Condensed Consolidated Financial Statements - The company acquired Carevoyance for $13.7 million in cash, adding $7.1 million in goodwill and $7.0 million in intangible assets[40][41] - A $176.5 million non-cash goodwill impairment charge was recorded in Q1 2025 due to a sustained decrease in stock price and market capitalization[59][184] - The credit agreement was amended in January 2025, establishing a $175.0 million term loan and a $50.0 million revolving credit facility, with $69.1 million of principal repaid[66][67][73] - The company repurchased 11.6 million shares for $40.2 million under its stock repurchase programs in H1 2025[103][105] - TRA liability decreased from $63.2 million to $31.2 million, driven by a $17.8 million remeasurement and $13.8 million in payments[121] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting macroeconomic headwinds, sales challenges, and lower renewal rates, leading to expected revenue decline and a significant goodwill impairment charge Recent Developments and Challenges - A $176.5 million non-cash goodwill impairment charge was recorded in Q1 2025 due to a sustained decrease in stock price[140] - Sales disruptions from go-to-market team changes in 2024 are impacting new customer acquisition and upsells, affecting 2025 results[145] - Macroeconomic conditions are causing longer deal cycles, deferred purchasing, and increased customer churn, especially among smaller and Life Sciences customers[151] - Executive transitions include a new CFO appointment and the elimination of the Chief Operating Officer role[147][148] Key Metrics - Total customer count decreased from approximately 2,600 in June 2024 to 2,400 in June 2025[156] - Enterprise Customers (>$100k ARR) decreased from 537 to 510 over the same period[156] Remaining Performance Obligations (in thousands) | Obligation Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current (cRPO) | $170,327 | $188,050 | | Non-current | $91,084 | $105,673 | | Total | $261,411 | $293,723 | Results of Operations Comparison of Results for the Three Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $60,750 | $63,737 | -5% | | Gross Profit | $46,613 | $50,454 | -8% | | Operating Expenses | $50,783 | $420,095 | -88% | | Loss from Operations | $(4,170) | $(369,641) | 99% | - Q2 2025 revenue decreased by $3.0 million (5%) year-over-year, primarily due to a $3.8 million decline in subscription revenue, with operating expenses significantly lower due to a non-recurring $363.6 million goodwill impairment charge in the prior year[189][191] Comparison of Results for the Six Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $119,941 | $127,217 | -6% | | Gross Profit | $90,373 | $100,836 | -10% | | Operating Expenses | $279,329 | $486,726 | -43% | | Loss from Operations | $(188,956) | $(385,890) | 51% | - H1 2025 revenue decreased by $7.3 million (6%) year-over-year, with operating expenses lower due to a reduced goodwill impairment charge of $176.5 million compared to $363.6 million in the prior period[195][197] Non-GAAP Financial Measures Adjusted EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Loss | $(9,265) | $(306,187) | $(164,358) | $(318,905) | | Adjusted EBITDA | $18,656 | $20,919 | $33,362 | $40,942 | | Adjusted EBITDA Margin | 31% | 33% | 28% | 32% | Liquidity and Capital Resources - As of June 30, 2025, the company held $81.0 million in cash, $103.2 million in short-term investments, and $49.7 million available under its Revolving Credit Facility[212] - Net cash from operating activities increased to $35.4 million in H1 2025 from $30.6 million in H1 2024[218][219] - Cash used in financing activities totaled $134.4 million in H1 2025, primarily for $73.4 million in net debt repayments, $40.2 million in stock repurchases, and $13.8 million in TRA payments[221] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risks are interest rate fluctuations on variable-rate debt, mitigated by interest rate caps, with inflation and foreign currency risks deemed less material - The company faces interest rate risk on its $170.6 million variable-rate 2021 Term Loan, mitigated by an interest rate cap agreement[244] - A hypothetical 1.0% interest rate change would impact H1 2025 interest expense by approximately $0.9 million[244] - Inflation has not materially affected the business, but significant future inflationary pressure could harm results if not offset by price increases[242] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[246] - No material changes to internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025[247] Part II. OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered sales of equity securities, and other required disclosures Item 1. Legal Proceedings The company is involved in various legal proceedings, but their resolution is not expected to materially affect financial position or results - The ultimate resolution of current legal proceedings is not expected to materially affect financial position, results of operations, or cash flows[251] Item 1A. Risk Factors No material changes to the company's risk factors have occurred since the filing of its 2024 Annual Report on Form 10-K - No material changes in risk factors have occurred since the filing of the 2024 Form 10-K[252] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details the exchange of LLC Units for Class A Common Stock and the company's stock repurchases, including 5,959,137 shares bought back in Q2 2025 for $19.0 million - During Q2 2025, 601,827 LLC Units were exchanged for an equivalent number of Class A Common Stock shares[253] Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | Total Cost (approx.) | | :--- | :--- | :--- | :--- | | April 2025 | 2,320,497 | $2.55 | $5.9M | | May 2025 | 1,524,675 | $3.33 | $5.1M | | June 2025 | 2,113,965 | $3.76 | $7.9M | | Total | 5,959,137 | $3.18 | $19.0M | - Approximately $58.1 million remained available for repurchase under the 2025 Repurchase Program as of June 30, 2025[255][257] Item 3. Defaults Upon Senior Securities No defaults upon senior securities to report - None[258] Item 4. Mine Safety Disclosures Not applicable to the company's operations - Not applicable[259] Item 5. Other Information No other material information to report - No trading arrangements to report[260] Item 6. Exhibits Lists exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer - Lists exhibits filed with the report, including CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906[263]