Definitive Healthcare Corp.

Next, we'll hear from Jeff Guerra of Stevens Inc.

Yeah, good afternoon. Thanks for taking the question. I want to go further on the life science and market. The two highlighted wins in the release are both life science or biopharma related. And you also gave several more examples on the call. So I think clearly you have some proof points of value with those kind of large and sophisticated customers. And it all kind of contrasts with the broader decline you've described for that segment. So I was hoping you could elaborate on the life science segment, the kind of overall demand environment, the recent win rate that DFIN has had within that segment. And lastly, just when the claims disruption will stop being a factor for that segment. Thanks.

Perfect. So I will start with the last first, which if you think about the likely cohort cycle that we'll be in. So, having returned to historical levels of claims data, and in fact, now in the first quarter, we're now above historical levels, and often those customers were buying data based on records and size of data payload, So when you have potentially, let's say, a 30% decline in records, that was what was the factor pushing on our downsell pressure, which we've largely worked through. Now that we've returned to those historical levels, we expect that the customers that we are now entitling today will actually not experience the same level of down pressure when they come up for their renewals. We started to see that shift as we were repairing the claims data set later last year. But, you know, unfortunately, a lot of buying decisions are made earlier than we were able to get that in market. And so, we think we're seeing the tail of it now, right? It's not a perfect science, but we believe that we've sort of experienced the worst of it. We're out of it. We've repaired the data supply chain, and that that should, going forward, should be significantly improved. In addition to that, The core question about the commercialization, you've got to work your way through the R&D stage one cycle to get to stage two. And we don't really control that. So that's the one thing that's outside of our control. But what we can do is we can make sure that those customers that are still actively in the business of working with our data today to commercialize current products and market, including through our digital activation and ad tech assistance, that we're maximizing the relationships to the best that we can in the short term while we wait for that to return.

From Deutsche Bank, we have George Hill.

Hey, good afternoon, guys. Thanks for taking the question. There's a lot of talk about AI. I was wondering if you could talk about how you guys are using AI to change how you package and product the data assets that you have. And can you talk about how it changes how your clients will consume or ingest that data? And kind of one of the things I wanted to talk about is do you expect AI to have an inflationary or deflationary impact on like your ASPs?

Yeah, so the first thing I would say about AI in general with healthcare, which we think is why we believe that this is a tailwind, is that the technology itself isn't sufficient to effectively control maneuver inside of the complex environment that is healthcare. So understanding the domain, it's very different than other vertical applications, and understanding the, including with the data that we have, much of which is proprietary, that contextual expertise combined with our data, we think is a very durable advantage for definitive. Then you have to look at why that complexity, well, it's, well, let's, It's relatively straightforward as an executive to a company. It is less so understanding the relationship of a physician to a practice location, to the affiliated practice locations, to the reference pathways of affiliated surgery centers and other care sites, and then ultimately the reference data that needs to be mapped to both technographic data, insurance networks, and consumer personas. So just as a sort of like high level, it's super complex. So now when you have that domain expertise and that contextual expertise along with the differentiated data, we're basically applying the AI initially in order to allow us to go to harness that and to accelerate both internally and externally what we already do today. So the deep vertical data assets based on curated proprietary and domain specific data sets are not easily replicated in that longitudinal data that we have which requires if you wanted to do any kind of time series analysis or historical understanding of patterns or market analysis, you wouldn't even be able to get access to that. So the first thing that we're doing is we're using AI internally with our engineering and development teams, which are already massively using it. We've been using it in some areas through machine learning and whatnot for a while, but that is now a major part of our internal commercial and engineering effort. The second thing that we've done is we've deployed that now in our operational efficiencies for things like our customer success, call centers, and to make our internal teams more effectively. And then the third is the product, which we haven't really talked about in too much detail, but the first elements that are coming out this quarter, so that's soon to be discussed in greater detail, is what we expect to be coming out later this year. So we've got this tremendous amount of diverse data. It's used in multiple ways. Example, HCP targeting or market share analysis. our next generation product architecture that leverage AI will enable customers to more rapidly unlock the insights that they already rely on today in a more democratic fashion. And we believe that this is going to not only increase usage and the ability for people to access that platform, but it's thereby going to drive more value, which will at the very least protect our current revenue rate. And ideally, as we bring more online, it'll allow us to price in and more across the website.

That's very helpful. Thank you.

Once again, everyone, to ask a question, press star one. And we'll hear from David Grussman of Stiefel.

Great, thank you. Sorry to ask you to repeat this, but I think there are various dynamics that are affecting year-over-year compares as we migrate through the year, both on revenue margin and I think also on the CRPO and RPO. Can you just Briefly, very briefly, just summarize what those are just to make sure that we've got them all.

Sure, David. So let's start with kind of the CRPO element. So really what's driving a significant portion of that decline, so it's declining 12 points year over year, that's consistent with what it was when we exited Q4, is this dynamic of having... sold fewer multi-year deals and seeing a shift towards single-year deals. So that's creating about a $15 million headwind year over year, which is about half of that total CRPO decline. So that kind of shows why CRPO is demonstrating a decline at a greater rate than what we're expecting from a top-line standpoint. The other component that I would say drives a bit of the disconnect between CRPO and our revenue outlook is that we continue to expect double-digit growth throughout the year in professional services revenue, and that's a combination of our professional services and analytics work in addition to the digital activation revenue stream, which has been ramping up here. And those are components that just really aren't going to show up in CRPO. Some of those, we don't really kind of see those bookings until we're much closer to recognizing that revenue. So that drives another little bit of that disconnect on that standpoint. The other thing to just recall from a top line perspective, in Q1 I mentioned that we still had a couple of points of benefit from the data partnership that we had signed back at the end of 24. We didn't start the revenue recognition on that until partway through Q1 of last year, so there was a little bit of lift here in Q1, but we've now fully anniversary that, so that's no longer a compare element as we hit second quarter and beyond.

Okay, got it.

So just – no, I mean, if that was everything, I just wanted to make sure I have everything. So is that reflected then in the sequential revenue growth, you know, in the second quarter, the two-point benefit that you got in one queue, right? So you're losing about, what, a million two in revenue sequentially? Is that something?

We're actually – Yeah, we're not actually losing revenue sequentially because that's more of the way it showed up last year. So just from a compare standpoint. But if you look at kind of the midpoint of our guide has total revenue, roughly flat essentially as you move through the remainder of the year. So there's a stability there at the midpoint of the guide. And then there would be more of a sequential increase as we get up to the higher end of the guide.

Right. I got it. Okay. So that's just in the base last year. It had nothing to do with the first quarter, right?

Correct. Correct.

Okay. And then on the CRPO, when do you think you comp out, you know, the first part of your explanation in terms of duration, usually duration of deals?

Yeah, we definitely expect to continue to see that live with us for the next several quarters. And we can provide more color on what we think that's looking like as we get closer to the end of the year. But that is a dynamic that we do expect to see and do continue to expect to see double-digit declines in CRPO for the next couple of quarters. given the multi-dynamic and when that pops up.

So does that mix shift, though, continue into 2027, though, in terms of how you, you know, year-over-year compare?

Yeah, I think there's an element here, too, that's going to depend on the mix of the signings that we deliver in the back end of this year, and if there's more kind of multi-year components within that. So it's a little hard to say, like, when you're going to fully kind of anniversary, because there's a mixed element there. But if we kind of assume that the shift that we've seen now lives through, then we're probably another couple of quarters of this, and then I would expect to see a little bit more of a stabilization and a tighter correlation of CRPO to revenue.

Got it. And then just the final one I think was claims disruption. Kevin, I think you said that you're back above historical levels. So does that suggest then that that's no longer a headwind as we migrate through 26?

Yeah, I would say that the way we think about the claims data disruption is, you know, we got the due claims data source in the initial one in early part of Q4. And at that point, a lot of customers had already made kind of their renewal decisions. And we think about the timing of we do over, you know, 30% of our annual renewals in December and January. I don't think that us getting that new data source didn't really have the ability to impact and influence those decision points. It's something that, you know, in addition to bringing on an additional new data source that will come into product here shortly, we think that it certainly won't be the headwind that it has been as we move forward. But I think we need to see how kind of the next couple of quarters of renewals play out. But we're confident that we've taken kind of the right actions to get, you know, the incremental claims data, like, back into product and back into customer hands.

Got it. Great. Thanks very much.

We have no further questions at this time. I'll turn the program back over to our host for any additional or closing comments.

Thank you everybody for joining this afternoon. We appreciate the questions and looking forward to talk to you again in 90 days.

That concludes our meeting for today.

You may now disconnect. The host has ended this call.