Definitive Healthcare Corp.

Good afternoon. Thank you for joining us today to review Definitive Healthcare's financial results. Joining me on the call today are Kevin Koop, Chief Executive Officer, and Casey Heller, Chief Financial Officer. During this call, we will make forward-looking statements, including but not limited to statements related to our market and future performance and growth opportunities, the benefits of our differentiated data and healthcare commercial intelligence solutions, our competitive position, customer behaviors, and use of our solutions, customer growth, renewals, and retention, our financial guidance, our planned investments, and operational strategy, generating value for our customers and shareholders, and the anticipated impacts of global macroeconomic conditions on our business, results in customers, and on the healthcare industry generally. Any forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the risk factor section and elsewhere in our filings with the SEC. Actual results may differ materially from any forward-looking statement. The company undertakes no obligation to revise or update any forward-looking statements to reflect events that may arise after this conference call, except as required by law. For more information, please refer to the cautionary statement included in the earnings release that we have just posted to the investor relations portion of our website. We will discuss non-GAAP financial measures on this conference call. Please refer to the tables in our earnings release and investor presentation on the investor relations portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure. With that, I'd like to turn the call over to Kevin. Kevin?

Thank you, Jonathan, and thanks to all of you for joining us this afternoon to review Definitive Healthcare's fourth quarter 2025 financial results. On today's call, I'll provide highlights from our fourth quarter performance, review the operational progress we've made in 2025, and outline our key strategic priorities for 2026. Let me begin by reviewing our financial results for the fourth quarter, which were at or above the high end of our guidance ranges on both the top and bottom line. Total revenue was $61.5 million, down 1% year over year. We outperformed our revenue expectations on both subscription and professional services revenues. Adjusted EBITDA was $18.1 million, representing a margin of 29%, which was $1.1 million above the high end of our guidance. Our continued strong profitability performance is a testament to the underlying power of our business model and our ongoing expense discipline. We continue to generate solid cash flow, delivering approximately 55 million of unlevered free cash flow for the trailing 12 months. Our financial performance for 2025 compares favorably to the initial guidance we provided to investors last February. Setting appropriate expectations and delivering consistent financial results with transparency was one of the promises I made to investors when I became CEO, and I am pleased that we were able to meet that objective in 2025. I would now like to review our operational performance for the year, supported by the four strategic pillars of data differentiation, integrations, customer success, and innovation that we laid out for investors at the beginning of 2025. Before going into more detail, I do want to emphasize that we have made strong, meaningful progress in each area and can confidently report that as we enter 2026 with a much stronger foundation for the future. While we are seeing improvements in all areas of focus, the expected benefits from these improvements will take time to fully be realized, and that improvement trajectory is reflected in the 2026 guidance that Casey will review later. Starting with data differentiation, we delivered an important milestone in the second half of the year with the release of our fall expansion pack, which included bringing online a new claims data source. As you know, the claims market underwent a significant data disruption over the past 12 to 18 months, and with these releases, we have now restored our claims data volumes to above historical levels. Continuing to expand and strengthen our data assets with new elements that are not easily sourced remains foundational to our strategy. For example, we recently strengthened our core reference and affiliation data for healthcare executives and healthcare providers by adding mobile phone data. Overall, I am pleased with the progress we made in remediating the claims data market disruption, expanding our core data assets with new elements, ensuring our focus remains on maintaining our data differentiation equality, and expanding the value of our data over the course of 2025. This will remain a foundational priority going forward into 2026 and beyond. Our second pillar focused on seamless integrations. A core part of our strategy is ensuring it is as simple as possible for customers to utilize our data sets, proprietary software, and analytical capabilities. Being an open platform is a foundational tenet of our product strategy, and we have successfully deepened the number of our integrations in 2025, including Snowflake, Databricks, and the recent introduction of an important HubSpot integration in Q4. We launched a new pilot program with physician data and Salesforce, which we expect to be generally available this quarter. And we've been focused on increasing the automation of our integrations, which has dramatically shortened the time to integrate by about 25% over the course of 2025. This improves customer satisfaction and gets our data into the hands of our customers faster. Ensuring ease of integration to our customers' systems of record and systems of insight effectively improves retention as we know that those customers that are integrated will renew at higher rates than those that are not integrated. We are already seeing examples of this in action, including an important one in Q4. A large nonprofit academic-affiliated integrated health system operating multiple hospitals, outpatient clinics, and specialty service lines selected our population intelligence platform to enable more targeted segmentation within the region and surrounding markets. They needed to drive patient volumes across key inpatient and outpatient service lines while capturing additional market share. A core pain point was the significant internal effort required for data mining, layering, modeling, and assumption-based analysis, which limited their ability to align resources around broader growth and strategy initiatives. Our seamless approach to integration and our agnostic capabilities that enabled flexible access to their systems were critical to this win where we delivered clean, enriched, and actionable data directly into their existing workflows, allowing them to hydrate records and uncover incremental patient leads more efficiently. Turning to our third pillar, customer success, I am pleased with the improvement we have made throughout the year to improve customer satisfaction, ease of use, and value-added services that will increase the stickiness of our solutions. While we will always be looking to iterate and improve our processes, I am confident that the steps we took in 2025 have built a strong, durable, and repeatable customer engagement process. Retention improvement is more than just a customer success effort, though. product development, data quality, and GTM execution all play a significant role. The realignment of our focus across all functional groups working in service to a shared goal of improving the customer journey, including how they are compensated, is making a difference. Importantly, we have seen retention rates improve year over year for each of the past three quarters, including with the larger cohort of renewals we have in the fourth quarter. The impact of our coordinated customer-facing effort can be seen where our newly integrated commercial teams collaborated on an early risk identification which proved critical in converting what was forecasted as a churn risk into a successful multi-year renewal. This example shows how proactive focus on addressing customer concerns will deliver tailored solutions that restore confidence in service of retention, not individual objectives. The integrated team approach with sales, support, and success working together with a shared goal of producing happy customers benefits both the customer and our own retention goals. These changes are complex and took the early part of the year to put into effect with the impact showing improvement in the second half of the year. Intuitively, the improved sales, onboarding, training, and success process will begin to show up as those customers experience the benefits in time. Therefore, we expect that the improved trajectory that we can already see will continue to accelerate, especially as the impact begins to show up in the new business we are signing now and starts renewing later this year, without the legacy impact of prior disruptions from the claims situation or past organizational miscues. Finally, we had a notably successful year delivering against our fourth pillar, innovation, and our focus on digital engagement. This pillar has been focused on several distinct sub-areas. The first is digital activations, which enables customers to combine our data with other digital assets to generate actionable customer engagement. Over the course of the year, we signed nearly 30 agencies and already have more than a third of them actively generating bookings for definitive healthcare. As a reminder, there is a natural lag between signing up of an activation customer or partner and when they begin generating revenue. We had ambitious growth plans for our activation business in 2025, and I am pleased to report that we outperformed this target. We are also tracking excellent progress building from the agency activation channel, and we expect our early successes in this channel will make it easier to directly sign customer activation programs in 2026. Second is partnerships, where we are building a dedicated partnership team that will help customers seeking syndication rights and new distribution channels. One example of this type of partnership was launched last quarter with Bombora and their curated ecosystem audiences. This platform helps distribute off-the-shelf and fully customizable audiences for activation on a variety of platforms such as the Trade Desk, Yahoo DSP, Reddit, or data marketplaces like LiveRamp. It extends the reach of our specialized intelligence and addressable audiences to the customer bases of these platforms that need to access comprehensive views of the healthcare organizations and professionals across the entire ecosystem. In addition, we see AI as a core enabling technology for growth that DH can harness with several important incumbent advantages. First, our proprietary data is our powerful foundation. Definitive is a data company first. AI presents a way to retrieve, analyze, and harness data. Our advantage is the proprietary data itself, much of which is not publicly available, as well as within our data curation system and processes. An AI model is only as good as the data it ingests, and our advantage is taking today's high-performing AI models and applying them to our domain-specific proprietary and differentiated data. Second, In addition to the proprietary nature of our data, the longitudinal aspect of our data from over 15 years of intensive accumulation cannot be recreated. This data is critical to a customer that needs to understand how the healthcare ecosystem and its affiliations have changed over time. Third, contextual expertise. In-depth domain expertise is required to effectively operate as a trusted partner in healthcare, and our customers rely on us for that expertise. Competing in healthcare is complex. To provide effective AI workflow and analytics, it is essential to have that deep understanding of the complex relationships among the healthcare providers and their corresponding use cases, which require years of expertise to develop. Contextual relevancy and accuracy is required by this industry. The importance is evidenced by the fact that 60% of our largest life sciences customers leverage our advanced analytics expertise in addition to our data, and half of our top 20 customers across all verticals rely on contextual domain expertise and advanced analytical insights. Finally, embedded customer relationships. As we integrate GenAI into our products, beginning with our flagship VIEW platform next quarter, Our deep relationships with approximately 2,300 customers provide integration points for rapid deployment. Because our pricing and packaging strategy is based on value, not seats, the increased capabilities unlocked with GenAI will drive both new use cases and adoption of new offerings such as digital activation. Almost 50% of our customers already integrate our data directly into their systems of insight and record via CRM connectors, APIs, or lake-to-lake, and our next-gen SaaS platform will offer another accelerant to our integrated strategic focus area, which we know drives increased retention. Overall, we have accomplished much in 2025, and I want to thank the entire definitive team for delivering these improvements and advancing our strategy. In 2026, we expect to build upon the progress we made last year. The signs of success, especially in the second half of the year, have reinforced our belief that we have the right strategy in place. As we look ahead to 2026, our key priorities remain unchanged from our 2025 pillars. As noted above, different pillars are in different phases of maturation and delivering success, but as the year unfolds, we will be focused on investing incremental dollars in those areas showing the most promise. Given the success ramp we are seeing, we anticipate there will be opportunity to accelerate digital activation with our customers, extend our partnership and distribution efforts, and we have confidence that our Gen AI enablement of view will provide new and incremental upsell cross-sell opportunities later this year. Our primary strategic objective remains that of returning the business to consistent revenue growth. The fundamental to that objective is improving retention, and we remain confident that the steps we are taking can and will deliver that outcome over time. While the macro environment remains challenging, we will continue to focus on those areas we can control, and we will be making the investments necessary to steadily improve operational performance. With that, I'd like to turn this over to Casey to discuss our financial results in greater detail. Casey?

Thank you, Kevin. In all my remarks, I will be discussing our results on a non-GAAP basis, unless otherwise noted. As Kevin mentioned, 2025 was an important year for Definitive that saw tangible improvement on our four strategic pillars and put us in a better position to meet our long-term objectives. I'm pleased by our ability to close 2025 by outperforming on both revenue and adjusted EBITDA, while executing against those core strategic objectives. This reflects the continuation of our disciplined approach to managing the business while we have continued to face top-line pressures and a dynamic macro environment. In the fourth quarter, we delivered revenue of $61.5 million, down 1% year-over-year, adjusted EBITDA of $18 million, reflecting a 29% margin and expanding approximately 120 basis points year-over-year, and adjusted net income of $16 $8.6 million, resulting in $0.06 of non-GAAP earnings per share in the period, all of which were at or above the high end of our guidance for the quarter. We also delivered $2.5 million of unlevered free cash flow in the quarter and $54.9 million on a trailing 12-month basis. Turning to our results in more detail, revenue of $61.5 million was above the high end of our guidance range and represents a 1% decline year-over-year. Subscription revenues of $58.5 million declined 3% year-over-year or declined 7%, excluding data partnership contributions, and were modestly ahead of our expectations for the quarter. And we did again see modest improvements in our Q4 renewal rates year-over-year, but not to the extent we had hoped. Professional services revenue in the quarter was strong, up 49% year-over-year, and outperformed our expectations. This was a combination of delivering on traditional analytics engagements as well as a ramp up in our digital activations activity. Adjusted gross profit in the fourth quarter was $50.2 million, which was flat from Q4 24. As a percentage of revenue, the adjusted gross profit margin of 82% expanded about 100 basis points year over year, driven by some short-term benefit to our cost structure. in the period as we had removed one data source from product, but we're still in the process of onboarding an additional source that will come online in the next month or two. This temporarily reduced COGS in Q4. Adjusted EBITDA was $18 million and reflects a 29% margin, which, as I mentioned, expanded about 120 basis points versus Q4 of 24 and was above the high end of our guidance, boosted by the revenue beat. Looking quickly at our full year results, Total revenue was $241.5 million, a 4% decline year over year. Adjusted EBITDA was $70.4 million, a 29% margin. And unlevered free cash flow was $54.9 million. In terms of operating metrics, we saw gross dollar retention improve about two points year over year, reflecting the initial impact of the actions we've been taking to stabilize the business. At the same time, net dollar retention declined due to the ongoing pressure in our upsell motion. As we discussed throughout the year, the lower upsell opportunities put downward pressure on NDR in 2025. We're confident that the combination of the actions we have taken to restore claims volume and the innovation in products we'll be releasing in Q2 will provide exciting new upsell and cross-sell opportunities that will positively improve net dollar retention in 2026. Turning to cash flow, our business continues to generate strong free cash flow due to our high margin model, upfront billing, and low reoccurring CapEx requirements. Operating cash flows for full year 2025 were $53.8 million, down 8% from the prior year, reflecting the revenue decline, but was partially offset by strong working capital performance. And we generated $54.9 million of unlevered free cash flow in 2025. Our conversion rate of adjusted EBITDA to unlevered free cash flow was 78%, which is down about 14 points year over year. Adjusting for some one-time CapEx spend that largely occurred in Q125, the conversion rate is 87% over the last 12 months. This cash generation provides flexibility to continue investing in growth, as noted by the tick-up in capitalized software spend as we restarted our organic innovation engine in 2025. As a result of that, we capitalized about $6 million of software development spend, a $5 million increase over the prior year. At the end of Q4, deferred revenue of $99 million was up 6% year-over-year, and total remaining performance obligations declined 18% year-over-year. Current remaining performance obligations of $165 million were flat quarter-over-quarter but declined 12% year-over-year. As mentioned last quarter, we've now wrapped on the initial contributions from our data partnership agreement, which explained the favorable year-over-year CRPO growth that we printed exiting Q3. There are other dynamics impacting CRPO as well. In 2025, we saw a greater percentage of our new logo additions signed one year versus multi-year commitments than in prior years. This impacts both RPO as well as CRPO. Let me explain why. If you went back to the end of 2024, there was approximately $100 million of CRPO on our books related to commitments that extended beyond 2025. As we enter 2026, this amount is $85 million. This $15 million difference reflects the lower average duration of our contract portfolio entering the year and is a drag to CRPO growth. Before providing guidance on Q1 and the full year, I'd like to take a moment to frame where we believe the business is as we enter 2026. We made significant progress in 2025 across each of our strategic priorities and are confident we have set a solid foundation for the business to return to growth in the future. However, as Kevin mentioned, based on the timing of when these changes will be implemented, we will not see the full impact of these investments in 2026. This is reflected in our guidance for the year. Now moving to guidance for Q1, we expect total Q1 revenue of $54-56 million, a revenue decrease of 5-9% year-over-year compared to Q1-25. The sequential decline in revenue reflects that the improvement in renewal rates in Q4 only modestly improved year-over-year. As a reminder, a substantial portion of our yearly renewals occur in this timeframe. Also keep in mind that there will be a partial period benefit to growth this quarter from the data partnership, that began generating revenue during Q1-25. Taking these factors into account, in Q1, we expect adjusted operating income of $9.5 to $10.5 million, adjusted EBITDA of $12 to $13 million, or 22 to 23% adjusted EBITDA margin in Q1, and adjusted net income of $4 to $5 million, or approximately $0.03 per diluted share on 143.2 million weighted average shares outstanding. the full year 2026 we expect revenue of 220 to 226 million dollars for a six to nine percent decline year over year for the full year we expect total revenue dollars to be roughly flat sequentially through the year with a modest uptick in the second half relative to the first half and we continue to proactively manage our cost base while making targeted investments in growth areas from a non-gap profitability perspective The largely fixed nature of our costs mean that most of the revenue decrease will flow through and create negative operating leverage. We expect sales and marketing expense of 32 to 33% of revenue, development expense of 12 to 13% of revenue, and G&A expense of 12 to 13% of revenue. We expect development expense to be modestly higher year over year as we make targeted investments for growth, while we expect to see sales and marketing as well as G&A expense reduced year-over-year as we drive efficiencies across support functions in each area. Translating that into dollars, in 2026, we expect adjusted operating income of $41.5 to $46.5 million, adjusted EBITDA of $53 to $58 million for a full-year margin of 24 to 26%, This guide reflects our ongoing commitment to maintaining strong margins while investing in our key growth areas. The decline from 2025 levels is due to a combination of ongoing pressure on revenue and more than a point of impact from the one-time expense credits we recognized in the second and third quarter of 2025 that will not repeat this year. Adjusted net income is expected to be between $21 to $26 million. And earnings per share are expected to be 14 to 17 cents on 145.4 million weighted average shares outstanding. And while we don't explicitly guide on unlevered free cash flow, it's important to note that we do expect to see adjusted EBITDA to unlevered free cash flow conversion improving by several points in 2026 relative to 2025 given lower planned cap expense. As we wrap up, I'd like to reiterate that while we continue to face top-line pressures, we remain committed to non-GAAP profitability and maintaining a solid margin profile while balancing investments for a return to growth in the future. We are confident that we have the right strategy and are committed to continuing to make progress against our key initiatives that over time we expect will improve customer retention, return definitive growth, and drive long-term shareholder value. And with that, I would like to open it up for questions.