Definitive Healthcare Q2 2025 slides: revenue decline continues but exceeds guidance

Definitive Healthcare Corp (NASDAQ:DH) reported its second quarter 2025 financial results on August 7, 2025, showing continued revenue challenges but with performance exceeding the company’s guidance. The healthcare data analytics provider saw its stock rise slightly in aftermarket trading following the presentation.

Quarterly Performance Highlights

Definitive Healthcare reported Q2 2025 revenue of $60.8 million, representing a 5% year-over-year decline but exceeding the high end of the company’s guided range of $58.5-60.0 million. The revenue decline was primarily driven by a 6% drop in subscription revenue, which accounts for 96% of total revenue. However, professional services revenue grew significantly by 46% year-over-year, now representing 4% of the revenue mix.

The company reported 510 enterprise customers (defined as those with more than $100k in annual recurring revenue), a decrease of 27 customers compared to the same period last year.

Despite the revenue decline, Definitive Healthcare maintained solid profitability metrics. The company reported adjusted EBITDA of $18.7 million, representing a 31% margin. While this marks a decline from the 33% margin in Q2 2024, it significantly exceeded the guided range of 25-27%.

"Our Q2 results were above the high end of the guided range," the company noted in its presentation. "Revenue out-performance, in addition to prudent spending constraints and one-time credits, drove the benefit in adjusted EBITDA above expectations."

Detailed Financial Analysis

Definitive Healthcare’s adjusted gross profit for Q2 2025 was $50.0 million, down 6% year-over-year, with adjusted gross margin at 82% compared to 83% in the prior year period. The company maintained relatively stable operating expenses, with total non-GAAP expenses increasing just 1% to $33.5 million.

Adjusted operating income was $15.6 million, representing a 26% margin, down from 30% in Q2 2024. Adjusted net income came in at $9.7 million or $0.07 per share, compared to $14.2 million or $0.09 per share in the prior year period.

The financial results show a company focused on maintaining profitability despite top-line challenges. Non-GAAP sales and marketing expenses decreased by 2% year-over-year, while product development expenses declined by 4%. General and administrative expenses increased by 15%, bringing total non-GAAP expenses to $33.5 million, a slight 1% increase from the prior year.

Balance Sheet & Cash Flow Analysis

Definitive Healthcare’s cash flow from operations was $9.3 million in Q2 2025, down 34% from $14.0 million in Q2 2024. Unlevered free cash flow (uFCF) was $11.5 million, a 47% decrease year-over-year. The company noted that Q2 uFCF includes $2.3 million of capital expenditure spending.

The company’s balance sheet remains strong with $184.2 million in cash, cash equivalents, and short-term investments as of June 30, 2025. While this represents a 38% decrease from the prior year, the company has also reduced its total debt outstanding by 32% to $170.6 million. Notably, Definitive Healthcare refinanced its debt on January 16, 2025, paying down $69 million during the refinancing.

The company maintains a net leverage ratio of less than 0x, indicating a strong financial position despite the revenue challenges. Additionally, Definitive Healthcare reported $57.1 million in trailing twelve-month unlevered free cash flow, with an 80% conversion rate of adjusted EBITDA to uFCF.

Current remaining performance obligations stood at $170.3 million, essentially flat year-over-year, while total remaining performance obligations increased slightly by 1% to $261.4 million, suggesting some stabilization in the business pipeline.

Forward-Looking Statements & Guidance

Based on the solid performance in the first half of the year, Definitive Healthcare raised its full-year 2025 guidance. The company now expects revenue of $237.0-240.0 million, representing a 5-6% year-over-year decline, and adjusted EBITDA of $64.0-67.0 million, with a 27-28% margin.

For the third quarter of 2025, the company projects revenue of $59.0-60.0 million, a 4-6% year-over-year decline, and adjusted EBITDA of $15.5-16.5 million, representing a 26-28% margin.

"Our full year 2025 guidance reflects our view of the year under existing macroeconomic conditions," the company stated. "The solid performance through the first half of the year combined with our expectations for the remainder gives us the confidence to further improve our full year guide on both revenue and profit."

The raised guidance suggests management sees signs of stabilization in the business despite ongoing revenue challenges. This aligns with the company’s Q1 2025 performance, where it also exceeded guidance with revenue of $59.2 million despite a 7% year-over-year decline.

The company’s share buyback program remains active, with $58 million in authorization remaining as of June 30, 2025. The company has repurchased a total of 16.3 million Class A shares for $62.3 million excluding commissions under its share buyback programs.

While Definitive Healthcare continues to face revenue headwinds, its ability to exceed guidance, maintain strong margins, and generate substantial cash flow provides some optimism for investors as the company navigates through challenging market conditions in the healthcare data analytics sector.

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