Definitive Healthcare at Raymond James Conference: Strategic Focus on Retention

On Tuesday, 04 March 2025, Definitive Healthcare (NASDAQ: DH) participated in the Raymond James & Associates’ 46th Annual Institutional Investors Conference. The company outlined its strategic initiatives to tackle current challenges, such as customer churn and elongated sales cycles, while aiming for sustainable growth. Despite a challenging outlook with a low Net Dollar Retention (NDR) rate, the company is optimistic about its new strategies focusing on data quality and customer service.

Key Takeaways

• Definitive Healthcare is addressing a high churn rate and aiming to improve customer retention.
• The company plans to enhance data quality and customer integration as part of its strategy.
• Financial expectations for 2025 include a low point in Q1, with improvements anticipated later in the year.
• M&A activity is being approached cautiously, with a preference for partnerships.
• The company is reorganizing its sales force to boost new logo productivity.

Financial Results

• NDR for 2024 was reported at 85%, with expectations for it to remain in the low to mid-80% range in 2025.
• Adjusted EBITDA margins are projected to be between 26% and 28%.
• The trading multiple is anticipated to be five to six times EBITDA, positioning Definitive Healthcare as an attractive investment.
• Q1 of 2025 is expected to be a low point due to costs from a new partnership and increased payroll taxes.

Operational Updates

• Definitive Healthcare is focusing on data quality through new partnerships to enhance its data capabilities.
• The company is streamlining integration and master data management processes to improve customer experience.
• A verticalized service approach is being implemented to deliver more value.
• Activations are being enabled to allow customers to engage directly from within the platform.
• The sales force is being reorganized to drive productivity and new logo generation.

Future Outlook

• The company is focusing on its traditional strengths in diversified and provider sectors.
• Strategic plans include exploring more partnerships over acquisitions.
• Challenges include the time needed for new data partnerships to reach full financial expression and external factors affecting growth.
• Opportunities exist in monetizing professional service delivery capabilities and using AI for margin expansion.

Q&A Highlights

• Sales force reorganization aims to enhance new logo productivity.
• Elongated decision-making processes are observed in the biopharma sector.
• Pricing and packaging are being reconsidered from a segmentation and vertical perspective.
• The hurdle for acquisitions has increased, with a focus on organic growth opportunities.
• AI is used internally for efficiencies and master data management.

For a detailed account of the conference call, please refer to the full transcript below.

Full transcript - Raymond James & Associates’ 46th Annual Institutional Investors Conference 2025:

Brian Peterson, Analyst, Raymond James: Alright, everyone. We’re gonna go ahead and get started. My name is Brian Peterson on the app on the application software team at Raymond James. Very happy to have Definitive Healthcare with us today. We’re gonna make this pretty interactive.

So if you have any questions, feel free to raise your hand. But, Kevin, Rick, thanks for taking the talk. Yeah. So maybe I’ll start with you, just kind of a high level overview of Definitive Healthcare and where you guys are making a difference in the market.

Kevin, CEO, Definitive Healthcare: So Rick, you don’t you want to

Brian Peterson, Analyst, Raymond James: Rick, you want to start with

Rick, Definitive Healthcare: that? I think it was

Brian Peterson, Analyst, Raymond James: just a high level intro on the company.

Rick, Definitive Healthcare: Yes. So Definitive Healthcare, we provide healthcare commercial intelligence, which means any customer who’s trying to provide a good or a service into the healthcare delivery system in The United States potential customer. And we spend about a quarter of The U. S. Economy on healthcare, so it’s roughly a $4,000,000,000,000 market.

And we’re about $250,000,000 in revenue. And we’re trading at a very attractive multiple of EBITDA these days.

Brian Peterson, Analyst, Raymond James: And so Kevin, I know you’ve been at the helm for a couple of quarters. We maybe just love to understand what attracted you to the company and some of the early learnings you have so far a few quarters in?

Kevin, CEO, Definitive Healthcare: Yes. So the space that we’re in is, it’s attractive in the sense that we’ve got a great team. The people that we have in the company primarily to a large degree were attracted because of the mission. You’re helping in a pretty mission critical area where folks were inclined more than just from a commercial perspective. I found the situation that we’re in where the company needs to return to growth and the fundamentals that were underlying it were attractive, but also the fact that it’s a challenge and a little bit of a turnaround was something that I was looking for.

And our data is as expected differentiated. We’ve got a great, especially around our reference affiliation data is differentiated and has got some real durable competitive advantage. And we have our customers, which I found very interesting in my early diligence, were very avid. We have a very good relationship with our customers. And a lot of times when you have companies that may have stalled in growth, you have other challenges of which we aren’t manifesting a lot of those.

So that was a very attractive space.

Brian Peterson, Analyst, Raymond James: And what are some of the key initiatives that you have in place as you’re starting to really put your impression on the company?

Kevin, CEO, Definitive Healthcare: So we’re trying to focus sort of a little bit of Back to the Future and being very intentional about the first pillar is differentiated data. You need to continue to maintain your data advantage, especially as it rough and affiliation data. We have the need for greater integration with our partners, which in the ecosystem, which when you look at the foundational underlying data, customers that have integrated the data directly with their platforms renew at a higher rate. So that’s what we want to do more of. And then really it’s around customer intimacy and renewal, like the biggest challenge for Definitive is simply our churn rate and our renewal rate.

And we’ve initiated a lot of things around the front end go to market in our new sales and new logo generation, which is actually showing pretty good promise, especially over the last several months of the year. That’s actually up and it’s showing good green shoots. We’re not claiming victory. I’ve only been there for a few months, but a couple of months doesn’t make a trend. But I think that area is one that we’ve been able to see some pretty good traction on it.

The area that we need to really focus on though is retaining and the on boarding and the post sales customer implementation. And so a lot of what we’re doing with intent is around integrating that post sales implementation, onboarding and customer success and value delivery as part of the upfront sales process, so that the handoff from sale to customer support is seamless as possible.

Brian Peterson, Analyst, Raymond James: Is there maybe double click on that a little bit if we’re thinking about what was done previously to what you think is done now? And how long do you think that may take to drive some of the improved retention that you’re hoping to get?

Kevin, CEO, Definitive Healthcare: So our front end go to market sales motions have always been segmented by vertical or by segment. We did not have the same infrastructure set up for our value delivery, which was centralized, but it was centralized in a way that you had this sort of handoff that wasn’t directly focused to the customer. And so we do have for a relatively small company, a fairly complex set of markets that we compete in medical device, biopharma falls under the life sciences umbrella. We’ve also got a provider segment and then a diversified segment, which is everybody else that sells to hospitals or providers. And aligning your post sales resources along that vertical strategy is really important in order to ensure that you not only are delivering on the promise of what you’ve sold them, but that the compensation structure is set up in a way that there is ongoing incentive for both the seller and the post sales teams to ensure that that handoff happens as seamless as possible.

So several months ago, that wasn’t the case. The sales team was chartered to sell something, move on to the next new logo. And then there was a customer support team that would then pick it up and ensure that the last mile was done. And unfortunately and or fortunately, however you want to look at it, that’s the most important part of the process.

Rick, Definitive Healthcare: This is very helpful, because we’ve always had verticalized sales and marketing. But now and that led to the handoff from the initial sales process into value delivery. So now you have an integrated team where you’re bringing customer success and pro services in as part of the last mile of the close for a much smoother customer process. It allows us to meet customers in the way in which they’d like to be

Brian Peterson, Analyst, Raymond James: served. And what about sort of made some of these changes? And you mentioned some of the anything you can share on the early feedback in terms of like the value of delivery or customer stats or NPS scores and anything that you guys can quantify?

Kevin, CEO, Definitive Healthcare: I don’t think we’ve actually been reporting on that externally there. But I can tell you that, and it’s intuitive, customers that have integrated and have and the more integration, whether it’s through an integration with a platform or that have used master data management and done more synthesization of the data, the renewal rates are significantly higher than customers that have simply bought it or are using it through an interface. And like even if they’re using it through our front UI, UX and it’s sort of obvious when you think about it, right? We have a complex set of data. In our most recent earnings call, we gave a number of illustrations of the types of master data and customer implementations that we do that was probably overly complex in some cases I’ve heard, but it does have a lot of detail there.

And when you look at the way they’re using the data, if you don’t provide the attached services or the implementation to get that actually as promised into play, you risk not actually having that completed. And if it isn’t completed, when you expect people to renew, they’re going to be less likely to renew. So what we’re doing is we’re doing it with more intention to ensure what we sold is going to come with the services to ensure that it has been implemented in a way that we’re confident that’s going to have a higher satisfaction and it’s ultimately going to lead to a higher retention rate.

Brian Peterson, Analyst, Raymond James: And what about in terms of kind of the overall sales rep productivity picture? Like where do we stand today and where are you hoping to get over time?

Rick, Definitive Healthcare: That’s been a green shoot. So last year, we set about reorganizing the sales force in large part in order to drive new logo productivity, and that was very successful. Now the inadvertent side effect was that we lost some of the continuity across the sales cycle, which we’re now addressing. So the good news in this is that we see strong demand in this space. Our new logo production has been good.

And we’ve talked about two of the four pillars in terms of the data integration, which we have lots of historical information. The deepening data integration improves our renewal rates. And then changing the way in which we engage from a customer service and pro service perspective, it’s still early days. So we don’t have any external metrics on that, but it’s more in line with what we’re seeing in the marketplace. And frankly, it’s just good common sense.

Thanks to Kevin for coming in and spending two months with the customers and walking end to end through the process in the customer’s shoes in order to highlight that for our attention.

Brian Peterson, Analyst, Raymond James: And what have you seen in terms of trends by various end markets across the customer segment? Anything that you’d call out there in terms of kind of sales cycles or demand?

Kevin, CEO, Definitive Healthcare: Yes. I would say for sure, we’re seeing elongated decisioning, especially as it relates to biopharma. And that’s partly because of the macro environment, which isn’t helpful. You’ve also got the stage that we happen to play in, in that space, which is around second stage clinical trials, which is a lagging which will lag obviously the return in stage one. I do think that competition is heating up in some areas like our med device where there are low priced smaller options, which are attempting to compete on price, which is which puts pressure on it.

I think we’re doing well and competing on those dynamics. I don’t think we’re we are not capitulating on that. We don’t want to be a low price leader. And I know everybody says that, but I don’t think it’s a good strategy, especially when you have high quality data. I don’t think we need to be.

We are adding services to it, which I think you can compete both. It’s possible down the road, you can actually offer a price sensitive option. I think the old adage that you can compete on price, quality and service, you can pick two, but you can’t be all three. I think you can offer all three depending on choice kind of like an Uber esque kind of approach, right? You can pick what you want, but you have to have an appropriate service level that will allow you to offer a lower price over time.

But today, we have the best quality data. We’re going to extend that data quality. That’s our first pillar. And we want to provide more attached services and to that quality. And we think that’s a winning strategy for us.

Brian Peterson, Analyst, Raymond James: And you mentioned some data partnerships in the fourth quarter call. Can you talk about like the opportunity to say, like obviously, the data quality is pretty clear, but what is the opportunity to kind of expand the data set that you have today?

Kevin, CEO, Definitive Healthcare: So we announced one that was a large global data provider that not only has data assets that we now have access to, but there’s also components around Master Data Management and MDM as it’s called for short. It really is the way to take our definitive ID, which is a unique identifier, which we’ve already linked our Refnafill and claims data to it. And then you’re able to link that identifier to a customer’s own first party data, which would be information that they have in their own data lake or other third party data. So think of it as a token or a key that allows you to then easily link large data sets together in a very efficient way. The value there is even if in some cases like take, for example, claims data, which is less differentiated because it’s somewhat of a commodity, even if you find a lower cost provider of that data, it isn’t linked.

And so you lose some of that goodness. So this partnership that we did not only gave us a lot of the tools, things like called like an identity graph and other things that you need to do more sophisticated master data management, it also provided a lot of consumer data and consumer intelligence data, which gives you a more real wide view of our existing customer base. So there’s a lot of complexity there. But in essence, if you think about what Rick and I were talking about this the other day on the earnings call, you can either build it yourself, which could take you years and cost thousands of lives and millions of dollars or you could possibly do it more quickly, time to market through partnerships in a way that will accelerate and get you better access. And so one of the components that I really insist on coming in was, we’ve got to basically be innovative and we need to build and do that ourselves organically if it’s strategic.

And if there are areas that we think we can go with greater intent on acceleration and it isn’t strategic and we can actually get access to those strategic assets, we should do that, which is an example of this. And then the third element is, this is also an area where we have a little bit of a bidirectional deal. We actually also are selling them components that we have, which help them as well. So there’s also a revenue component to it as well over time. So I think it’s a good illustration of the type of partnership that I think say very successful, which we’ll hopefully do more of in the near term.

Brian Peterson, Analyst, Raymond James: And I know everyone’s always adjusting pricing and packaging. I know you mentioned some pricing dynamics maybe in the lower end of the market. Like what are you seeing in terms of kind of the pricing component out there? And is that an opportunity for you longer term?

Kevin, CEO, Definitive Healthcare: Yes. So the way we’re thinking about the pricing and packaging or the price elasticity side of the equation is any sort of high functioning product organization, product marketing organization is going to be looking at it from a segmentation and a vertical perspective, and at the same time, the appropriate pricing and packaging and go to market motions that would support that segment. As I mentioned earlier, we’re already competing in four segments. We’ve taken two of them and we’ve put it into one called Life Sciences. We know that they have different characteristics.

The provider customer versus the diversified customer is going to be very different than our Life Sciences customer. It has very different retention rates, insurance rates and the way we support those customers. So I think there’s an opportunity for us here over the coming months here to continue to report back to our stakeholders is to expose a little bit more of that data, so that people can see how the business is operating. And I think we think that’s going to be very illuminating for our investors as we start to apply the appropriate approaches to both churn and our go to market based on this sort of vertical and segmentation approach.

Brian Peterson, Analyst, Raymond James: And I do want to hit on you mentioned pharma before, but I know the regulatory environment comes up quite a bit and we have a new administration. What are you hearing out there? And what is that has that influenced customer buying activity at all?

Kevin, CEO, Definitive Healthcare: I think it would be hard to argue that it isn’t at least the top of mind, right? Everybody is talking about it. But I do not believe that it has really shown itself today in our cycle. I wouldn’t attribute anything that we’re experiencing related to that. But I’m sure that it is increasing the heightened concern around it.

And I think it would probably be more problematic for the stage one folks than it would be for us at this point.

Brian Peterson, Analyst, Raymond James: And Rick, maybe just one for you, I know you guys just reported, but kind of walk us through the 2025 outlook, what you’re expecting from growth and how do you kind of balance the net new versus the NDR side of things in terms of the growth that we

Rick, Definitive Healthcare: have? Yes. So we just reported our full year 2024 results. And as part of that, we reported NDR of 85%, which is a long way from where we want it to be. Our response to that has been to be extremely transparent, fact based in everything that we’re doing and everything that we’re reporting.

So we set the stage by being very open about that renewal challenge, also sharing the expectation that absent improvement will end at an NDR in the low to mid 80% range. And we’re basing our guidance on that. We’ve been very explicit about the upper end and the lower end of that range. Now even at those revenue levels, we’re going to deliver 26% to 28% adjusted EBITDA margins.

Brian Peterson, Analyst, Raymond James: And

Rick, Definitive Healthcare: so we’re trading at a very attractive right now forward looking five to six times EBITDA. So you don’t need to believe in a miraculous turnaround. The evidence that we will provide as we go through there is step one, we know that the dynamics that will drive Q1 very well. There’s several that are coming through. One, we’ll absorb a full quarter of the cost new partnership with only a partial quarter of revenue and will also absorb the normal beginning of calendar year increase in payroll taxes and benefits.

So why does that matter even though they sound like details? This will set up Q1 to be a clear low point. You’ll see that in our guidance. As we step forward from Q1 to Q2, you’ll gain the benefit of a full quarter of that partnership revenue plus some of the cost relief plus we’ve got additional cost reduction actions, which are well underway in planning. So that will be the first visible proof point.

And then as we continue into the third and fourth quarters, we expect to show continued improvement in our revenue growth rate, which in this case will be lessening the scope of shrinking and improving margins, setting ourselves up for a much more investable 2026. So yes, we’re not entering the year where we wanted to. We’ve kept an eagle eye on both Q4 renewals and what we’ve seen so far during the year. But we’ve got four key pillars that we’re deploying in order to fix that. The first is data quality.

You highlighted the new data partnership. The second is integration and master data management, which makes that data much easier to use. The third is our service approach, where we’ve talked about verticalizing the value delivery. And the fourth is activations in which we actually enable customers to reach out to customers directly from within our platform, still using Google or Facebook or other social media, but actually being able to measure the results within the platform. So we think we’ve got a better than fighting chance with those four actions to improve our trajectory.

And given this entry point for a small cap value story, that could be very interesting.

Brian Peterson, Analyst, Raymond James: And Rick, maybe how should we think about it? I know you’re putting a lot of these plans in place so far in 2025 or started in 2024, working on them in ’25. How would you answer the question in terms of just what do you think the long term growth and margin profile of the business looks like?

Rick, Definitive Healthcare: I think I’ve got to own a bit of a pivot in strategy here. When we went public in 2021, selling into many of these spaces was a lot easier than it is today. And so we put a lot of emphasis on total addressable market. At that time, we had a $5,000,000,000 market cap and we were growing in strong double digits. The good news is as a small cap value play, we don’t need a gigantic TAM.

What we’re finding is the competitive intensity in biopharma and life sciences is greater than it is in our traditional strength in diversified and provider. We’ve got 60% of the business in our traditional strengths of diversified and provider. Those businesses are showing a higher renewal rate and there’s fewer direct competitors. So I feel good about our chances pivoting more into those areas. And that unleashes some cost opportunities because it’s much more complex to serve, particularly with the product strategy, some of those life science markets.

So by freeing ourselves to serve them a bit more with service, that gives us further confidence in our ability to maintain profitability at very satisfactory levels across the full range of our revenue guidance. We’ve been clear about what we expected at the top end. We’ve been clear about what we expect at the bottom end. And we have clear scenarios in action. So depending on what we see, we can take the appropriate action.

Brian Peterson, Analyst, Raymond James: And how would maybe like I am, maybe not this year, but like thinking about M and A longer term as part of the playbook. I know historically, it’s been a big part. Where should we be thinking about M and A going forward?

Rick, Definitive Healthcare: M and A, we continue to be active in scanning the market, but we’re bringing more options to the table. Traditionally, we’ve had more of a software centric buy the asset in order to get the capabilities. Some of those acquisitions were done at frankly pretty high multiples back when we were trading at pretty high multiples. One of the things I appreciate about Kevin joining us from a more traditional data environment is the prevalence of partnerships. You know, why buy the cow to get the milk?

So for example, this data partnership, which evolved when they approached us based on the quality of the data in order to use our data in targeting their customers, eventually morphed into both sharing data, gaining access to some of their data and also taking advantage of their already developed tools, allows us to move faster and didn’t require any capital off of our balance sheet other than $10,000,000 of CapEx to start it. So we’re very active, but the hurdle for doing a full acquisition is much higher now. You got to find someone who’s trading at a deeper discount in intrinsic value than we are. And they’ve got to have a high hurdle on execution because we’ve got enough organic opportunities in front of us right there.

Brian Peterson, Analyst, Raymond James: Anything with audience?

Kevin, CEO, Definitive Healthcare: Yes. So

Brian Peterson, Analyst, Raymond James: I think you talked about this on

Kevin, CEO, Definitive Healthcare: the call, but despite the data partnership, you guys are showing margin improvement this year. But where do you see leverage in the model? Like, talk about where you’re actually able to scale over some of the lines?

Rick, Definitive Healthcare: Yes. So there’s a few of those items. One is just optically, the nature of the data partnership is that it’s a relatively fixed cost model. And so we’re taking an artificial hit in the beginning of the year in Q1. So that will show the ability to expand gross margins as we go through time.

We’re also looking at the some of our other data partnerships that can be made redundant through the use of this data source. And we continue on the motion that we’ve always had of measuring our operating efficiency and pivoting as we need to. With more of a partnership strategy, you’ll see more opportunities to be thoughtful about where we’re doing our own product development, our own engineering. And we also have fairly powerful pro service delivery capabilities that have been less than fully monetized because of that product centric approach that we’ve been taking. So you’ll notice the way that expresses itself financially is a wider revenue range and a narrower EBITDA range.

Brian Peterson, Analyst, Raymond James: Where are you guys in terms of using GenAI? We hear a lot about driving internal efficiencies and it’s early in a lot of these efforts. But can you talk about the opportunity to maybe use AI internally to generate margin expansion?

Kevin, CEO, Definitive Healthcare: Yes. We already actually do use quite a bit of AI internally related to our internal efficiencies, language modeling. We do it with a lot of our master data today. The part that I think though that gets a lot of press is more around agents, the CHET GPT and things like that. And for us, especially in some of our traditional businesses like the provider space or with in claims data, you start to get into some relatively risky compliance areas about deploying that.

So I think at least at this point, while we and we have, by the way, done some prototyping with partners internally and we’ve actually even shared that more broadly with our board. But it’s not really readily apparent how we’re going to monetize that. I think there’s going to be a lot of press on it. So given where we are, I think to deploy a large amount of effort around the agent side is going to would be relatively probably not advisable. But we are actually expanding the use of it as it relates into our use of efficiencies and even in our advanced analytics teams with customers.

Brian Peterson, Analyst, Raymond James: And maybe talk about the importance of data in a Gen AI world and maybe it’s early in terms of customers doing a lot with this, but I’d love to understand any early use cases and how your data set can really play into maybe next gen ideas in terms of Gen AI.

Rick, Definitive Healthcare: That was actually where I was about to go. Oh, yes, sir. To talk about the ability to combine these disparate data sources around universal identifiers. So, healthcare space proper by partnering with another large outside data provider who’s not focused on healthcare, but is focused on businesses in general. You get to index those two together, which means you have deeper, higher quality data for your customers to deploy whatever form of AI works for them.

So internally, we do a lot with machine learning and predictive analytics, less with the large language models and all of that because hallucination would be a big problem for us. But on the customer side, quality data is foundational for whatever you’re doing. And we think that this master data management enabled by the dual indices will be powerful for that. But we’re more an indirect beneficiary than a direct beneficiary.

Brian Peterson, Analyst, Raymond James: Maybe we have time for one more for the audience. Well, maybe just lastly then for me. As we think about 2025, I know you mentioned kind of the key pillars that you have that are in place. Like when do you feel like you’ll have a good assessment of which ones are successful or which ones aren’t? And is it really kind of fair to say on ’twenty six that that’s when a lot of these will be fully, fully impacting the overall results?

Rick, Definitive Healthcare: You want that one or you want me

Brian Peterson, Analyst, Raymond James: to take that one?

Kevin, CEO, Definitive Healthcare: Well, I know I would probably answer a little bit more. Yes, it’s more guidance for that. I would probably be a little more forthright maybe than Rick’s going to be a little more nuanced on that, but so you probably should answer it.

Rick, Definitive Healthcare: I’ve got lots of experience here. I think one of the themes that we’ve tried to embrace is to be candid and transparent. So these, for example, the new data partnership, it’s going to take time for it to reach the full expression financially. We’ve talked about some of the contractual elements that will come into earnings as early as Q2. I think for that to really reach full expression, it will be very late in 2025.

You’ll see that in stats like ending NDR and in our commentary as we go through. But that’s why we went into particular detail trying to give people milestones and strategies. So we’ve expressed four pillars of operating strategy and we’ve got a clear sequencing in our guidance that will allow you to ask pointed questions around, okay, what are you seeing from the new data partnership? How did you do on those Q2 cost reduction initiatives, etcetera, etcetera. So by tracking those four pillars, again, Star expressed guidance and listening for the qualitative feedback, I think you’ll get a good sense of that.

And then as Kevin alluded to, over time, we’re continuing to deepen our vertical focus within the business, and we’ll see that eventually come into shareholder communication. I like that answer, right? That’s not a 2025

Brian Peterson, Analyst, Raymond James: commitment.

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