Definitive Healthcare Stock

Thank you. Good day, everyone, and welcome to Definitive Healthcare's Q2 FY '26 earnings call. [Operator Instructions] Now, I'll turn the call over to your host, Jonathan Paris. Please go ahead.

Good afternoon, and thank you for joining us to review Definitive Healthcare's financial results. Joining me on today's call are Kevin Coop, our Chief Executive Officer, and [ Casey Heller ], our Chief Financial Officer. Before we begin, I'd like to remind you that today's discussion may include forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995.

These statements include, among others, statements about our market opportunity, future performance, growth in financial guidance, the benefits of our data and health and commercial intelligence solutions, our competitive position, customer behavior, adoption, growth, renewals, and retention, planned investments and operating strategy, value creation for customers and shareholders, and the expected impact of macroeconomic conditions on our business, customers, and the healthcare industry.

Forward-looking statements are based on our current expectations and assumptions as of today and are subject to risks and uncertainties that could cause actual results to differ materially. For more information, please refer to the cautionary statement in today's earnings release, as well as the risk factors and other information included in our filings with the SEC, including our most recent Form 10-K and Form 10-Q. You should not place undue reliance on forward-looking statements, and Definitive Healthcare undertakes no obligation to update them except as required by law.

During the call, we may also discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures, along with related definitions and limitations, are included in today's earnings release and investor presentation, each of which is available on the Investor Relations section of our website. For any forward-looking non-GAAP measures, the earnings release also explains why quantitative reconciliation is not available without unreasonable efforts and identifies the relevant unavailable items. With that, I'll 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 second quarter 2026 financial results. On today's call, I'll provide highlights from our second quarter performance and give an update on our progress against our key strategic priorities for this year. Let me begin by reviewing our financial results for the second quarter, which were in line or exceeded the guidance ranges on both the top and bottom line.

Total revenue was $55.2 million, down 9% year-over-year. Adjusted EBITDA was $14.6 million, representing a margin of 26%, which was modestly above the high end of our guidance. We continue to do an effective job of managing expenses while investing in our core growth initiatives. We continue to generate solid cash flow, delivering approximately $50 million of unlevered free cash flow for the trailing 12 months. In general, we are successfully tracking against the targets we set forth at the beginning of the year.

Our diversified and provider businesses continue to be further along in returning to growth. Importantly, these end markets represent over 60% of our revenue, and the improvement in these segments represents a critical foundation to build upon in the coming quarters. The response in our life sciences segment has been slower. We are encouraged by signs that the changes we are making to the business are positively impacting the segment, but it is taking longer to have the full impact we are targeting. We remain confident we will see a more meaningful benefit from these changes over time.

Our confidence that growth can be improved comes from several important proof points. First and foremost, it is the improvement in our net dollar retention rate. It was once again up several points year-over-year on a trailing 12-month basis in Q2. This is the second consecutive quarter of year-over-year improvement and puts us in strong position to sustain it for the full year. And we're starting to see improvement in life sciences as our biopharma segment had the strongest new business quarter in 3 years outside of Q4.

Included amongst those wins were 4 important win-back customers that had left DH prior to the start of 2025. The win-backs are reinforcement to our belief that ultimately data quality and superior service will drive longer-term value for our customers over price alone. We have been pleased to see that this is not only in our life sciences segment. We are continuing to see win-backs across our other end markets as well. A good example this quarter was a 6-figure, 3-year win-back in our diversified business.

The customer left us at the end of last year for a lower cost competitor, having concluded that they no longer needed access to our full data set. Over the following months, our team stayed engaged, and when a business leader came back to explore a subscription for a single team, that conversation grew into a 6-figure enterprise agreement. This win reinforces a recurring theme. Even customers who believed that an alternative would be just good enough come to recognize that the cost of an inferior data set outweighs the savings.

Again, this is an important validation of the business value our data and products deliver for our customers and reinforce that our focus on data quality and service rather than price was the right path. Our conviction that we are focused on the right things remains strong and that those areas of focus are responding. Importantly, these are areas all within our control. I would now like to provide an update on our operational progress against our 4 key strategic pillars. As a reminder, these pillars are data differentiation, integrations, customer success, and innovation.

Let me begin with data differentiation. Data is at the heart of our value proposition, and we continue to invest in sourcing new proprietary data types and to extend our lead in our core reference and affiliation data sets. We are also increasingly leveraging AI to increase the population of our data collection and quality assurance. We are introducing a new estimation methodology, ACE 3.0, that applies modern data science and machine learning to help address the industry-wide challenge of incomplete claims coverage, and we expanded our practice location data to more than 4.4 million verified provider locations, improving the precision and recency of our data collection our customers can rely on for territory planning, outreach, and segmentation.

This differentiation is showing up in our wins. In the quarter, we added a major financial services institution in our diversified business whose tax-exempt markets team needed a reliable way to monitor health system consolidation, affiliations, and organizational hierarchies. They selected Definitive for our differentiated reference and affiliation data, delivered through an automated monthly feed directly into their existing workflows, choosing us over a competitor they evaluated earlier in the process. We also won a competitive claims deal in the behavioral health market where our coverage and the combination of claims with our reference and affiliation data separated us from other vendors.

Our second pillar is seamless integrations. Basically, making it as fast and simple as possible for customers to access our data alongside their other systems they rely on is a critical aspect of delivering value and building durable relationships. Our data continues to show that customers who integrate Definitive directly into their systems of record and insight use us more often, which makes us a stickier, more strategic part of their operations and strengthens our renewal rates over time. And we've continued to accelerate the time to integrate.

Compared to the second quarter of last year, we completed over 50% more integrations year-over-year, while also reducing the time to integrate by more than 50%. A good illustration this quarter was an early renewal and expansion with a large diversified account. Adding our Salesforce-embedded connector for their enterprise healthcare team turned a manual, list-driven process into a workflow-native experience and expanded their annual commitment to us. Also, in collaboration with a top-tier biopharma partner, we successfully launched a native integration that embeds our key opinion leader intelligence data directly into the Veeva Vault CRM, which is used widely by life sciences, clinical, and medical affairs teams, a capability we can now extend to additional pharma clients as they adopt that platform.

Turning to our third pillar, customer success, we continue to see the benefit of aligning all functional teams that support the customer journey into a unified commercial organization. That alignment lets us engage earlier and more proactively to identify issues before they become problems and uncover opportunities to do more for our customers. A prime example of this quarter was a renewal that had not been budgeted for by the customer and was therefore at real risk of churning due to a budget oversight.

Our integrated commercial team was able to identify this issue early, and through persistent cross-functional engagement, our team reestablished the value and partnered with the customer to overcome their budget challenge. This integrated motion successfully retained the business, satisfied the customer's critical need, and converted a 6-figure save with a path to further expansion in the future as a strategic partner.

Finally, we continue to make progress against our fourth pillar, innovation, and our focus on digital engagement. With our foundation built on data, quality, and service, we are shifting more of our effort to this fourth pillar over the second half of 2026. For product, customers are increasingly using conversational natural language search to simplify complex research workflows. Since launching our natural language search experience earlier this year, we've seen customers replace multiple manual search and filtering steps with a single connected query.

For example, a medtech company rapidly identifying decision-makers across functions and geographies, and a healthcare logistics company building a connected view of target facilities by combining financials, ownership, and network relationships. In our expert intelligence platform, multi-turn conversational search now accounts for roughly 40% of interactions with our AI search feature. In digital activation, we successfully demonstrated real value-add in our proof-of-concept stage and have now rapidly moved into full production with our momentum building on 2 fronts.

We've added 10 new agency partners that are now activating in 2026 that were not active with us in 2025. This core group of agencies has grown activation spend meaningfully year-over-year. At the same time, we have added 7 new direct activation customers this year-to-date, and current customers are embracing our digital solutions more aggressively. For example, one longstanding population intelligence customer moved from an initial test into a total activation commitment of more than $300,000.

The takeaway is that our activation growth is now being driven by both new direct customers as well as by rising adoption and spend across our agency ecosystem, which gives us a broader and more scalable path forward. We are also encouraged by the performance customers are seeing. One partner running campaigns at our audiences reported registration rates well above the benchmarks they typically expect for hard-to-reach conditions, and this supports our belief that combining high-quality data with ease of digital activation execution will be a winning combination.

The most significant milestone this quarter is the launch of Turbo, our new AI-powered healthcare intelligence platform that accelerates how healthcare teams access, process, and turn data into action. Turbo unifies our proprietary healthcare intelligence built on billions of signals spanning providers, organizations, claims, affiliations, key opinion leaders, and consumer data to power autonomous decision-making rather than simple data retrieval. Customers can ask complex questions in natural language and make faster, better-informed commercial, strategic, and product decisions.

With DH trusted data as the foundational layer, Turbo will deliver reusable capabilities or skills to power workflows and experiences tailored to the appropriate persona or strategic role, be that commercial, sales, product, marketing, or strategy, with agentic AI providing a future state of always-on continuous monitoring, alerts, and notifications. Our launch begins with an initial stage pilot with a select group of strategic customers this month. We have curated this pilot to ensure it represents a broad customer base that spans both healthcare systems, life sciences organizations, and customers in our diversified segment, which capture all others who sell into the healthcare ecosystem.

We are targeting general availability before the end of the year, and our commercial teams are preparing broad market conversations this quarter to align demand with launch, and feedback from our pilot customers will help shape the final experience. While AI is foundational to our next-generation commercial and product strategy, it is important to note that we view AI as a company-wide transformation, not simply a set of product features. We are embedding it across our data value chain to improve how we source, curate, and enrich our data, AI-native capabilities directly into our products.

And we have already equipped our teams with AI tools that improve productivity and decision-making across the entire company. Our advantage is the combination of proprietary, differentiated healthcare data, our deep contextual domain expertise, and our scaled and trusted customer relationships across thousands of embedded customers, the foundation on which these AI investments compound.

To summarize, we remain focused on delivering upon our commitments for the full year by executing on the things within our control while maintaining disciplined expense management. We will continue to focus our resources in the highest value areas that we believe will best position the company to improve retention and return to consistent, predictable revenue growth over time. With that, let me turn the call over to [ Casey ] to review the financials in more detail.

Thank you, Kevin. In all my remarks, I will be discussing our results on a non-GAAP basis, unless otherwise noted. As Kevin mentioned, we delivered a solid quarter with our revenue performance within the guided range and profit metrics above the high end of our guide. I'll walk through the financial results in more detail, including our revenue trends, market performance, and outlook.

In the second quarter, we delivered revenue of $55.2 million, down 9% year-over-year, adjusted EBITDA of $14.6 million, reflecting a 26% margin, and adjusted net income was $7.5 million, resulting in $0.05 of non-GAAP earnings per share in the period. We also delivered $11.6 million of unlevered free cash flow in the quarter and $50 million on a trailing 12-month basis. Now moving to our results in more detail. Revenue of $55.2 million was within our guided range and represents a 9% decline year-over-year.

Subscription revenues of $52.8 million declined 9% year-over-year, and we again delivered improvement year-over-year in net dollar retention on a trailing 12-month basis. Professional services revenue underperformed our expectations for the quarter, as bookings were lighter for traditional analytics engagements, despite the strength in digital activation. The weaker analytics engagements will also impact Q3 expectations in professional services, as I'll touch on later. Adjusted gross profit in the quarter was $44.2 million, which is down 12% year-over-year.

As a percentage of revenue, the adjusted gross profit margin of 80% contracted 230 basis points as reported. However, in Q2 2025, we had a one-time credit from a data contract renegotiation. We spoke of that last year, and adjusting for the one-time credit that did not repeat, we expanded adjusted gross margin by 100 basis points year-over-year. And as I mentioned earlier, adjusted EBITDA was $14.6 million and reflected a 26% margin.

Despite the continued top-line pressures, we've continued to prudently manage the business and focus investments on the initiatives that will return Definitive to revenue growth over time. Those same one-time credits that benefited COGS in Q2 of last year drove approximately three-quarters of the adjusted EBITDA margin contraction year-over-year. Turning to cash flow, our business continues to generate strong free cash flow due to our high-margin model, upfront billing, and low recurring CapEx requirements.

On a trailing 12-month basis, operating cash flows were over $41 million, and we generated $50 million of unlevered free cash flow. Our conversion rate of trailing 12-month adjusted EBITDA to unlevered free cash flow was 75%, which is down about 5 points year-over-year, primarily reflecting unique items that benefited the prior year. This cash generation provides flexibility to continue investing in growth. Consistent with last quarter, we continue to make organic product investments with an emphasis on expanding our AI capabilities.

And we saw another quarter of increased capitalized software development spend, totaling over $2 million, up about $700,000 from the prior year. At the end of Q2, deferred revenue of $89 million was down 12% year-over-year, and total remaining performance obligations declined 18% year-over-year. Current remaining performance obligation of $150 million declined 12% year-over-year. The total remaining performance obligations and current remaining performance obligations year-over-year declines are similar to what we've reported in both Q4 and Q1 and continue to be impacted by the shift towards single-year deals versus multi-year commitments that we discussed the last 2 quarters.

With a solid start to the year behind us and continued progress against our objectives, let me turn to our outlook. For the third quarter, we expect total revenue of $54 million to $55 million, a revenue decrease of 8% to 10% year-over-year compared to Q3 of 2025. Within the revenue guide, we expect subscription revenue to be flat sequentially from Q2 to Q3, and we expect to deliver double-digit professional services revenue growth but at a lower level than originally anticipated.

This results in expected adjusted operating income of $10.5 million to $11.5 million, adjusted EBITDA of $13.5 million to $14.5 million, or a 25% to 27% adjusted EBITDA margin in Q3, adjusted net income of $5.5 million to $6.5 million, or approximately $0.04 to $0.05 per diluted share on 145 million weighted average shares outstanding.

For the full year 2026, we expect revenue of $220 million to $222 million for an 8% to 9% decline year-over-year. This tightens our guidance range based on our first-half performance and visibility into the back half of the year. Our outlook on professional services for the year has weakened versus what we projected 90 days ago. Given the shorter duration of those agreements and the light Q2 bookings, we expect this to have an impact to our second-half top-line outlook, which is reflected in the tightened range on our guide.

Despite the full-year revenue guide tightening around the lower end of our prior range, we are in a position to again raise the midpoint on our profit guidance for the year as a result of our continued work to proactively manage our cost base while making targeted investments in growth areas that have us excited about the future. For 2026, we now expect adjusted operating income of $45.5 million to $47.5 million, adjusted EBITDA of $57 million to $59 million for a full-year margin of 26% to 27%.

This guide increases the midpoint by $1 million, as well as raising the adjusted EBITDA margin by approximately 100 basis points, reflecting the solid start to the first half of the year and our ongoing commitment to maintaining strong margins while investing in our key growth areas. Adjusted net income is expected to be between $27 million to $29 million, and earnings per share are expected to be $0.18 to $0.20 on approximately 145 million weighted average shares outstanding.

In closing, I'd like to emphasize that despite the ongoing pressure on our top line, our priority remains clear, preserving non-GAAP profitability and healthy margins while making disciplined investments that position us for renewed growth. We are moving forward with our plan to ensure that we are able to continue to grow and being confident in our strategic direction, and we're seeing meaningful traction on our core pillars. Progress we believe will strengthen customer retention, put us back on a path to accelerated growth, and create lasting value for our shareholders. And with that, I would like to open it up for questions.

[Operator Instructions] Our first question today comes from Ryan McDonald of Needham & Company.

Hey, this is Matt Shea on for Ryan. Thanks for taking the question. Congrats on the launch of Turbo. Maybe with GA targeted for late 2026, is there any Turbo revenue contemplated in the current guidance? And then what are kind of your early thinking? It sounds like some of this is probably still in development, but what's sort of your early thinkings around the commercial model? Do you look at this more of like a bundled retention uplift, or do you kind of plan out rolling out a new premium SKU or more of a usage-based model? Thanks.

Thanks for the question, Matt. A couple of elements. One, as it relates to our guide, we're not anticipating any material impact to the 2026 top-line revenue. Definitely expected to be more impactful in 2027, but what we do expect it to have an impact on, given the rollout later in the year, as we're introducing it to customers, we do think that it has the opportunity to help with retention, and given December and January are our largest renewal periods, we're really hopeful that we'll get a chance to influence some of those early as we're spending time with customers on the new platform.

The other piece around kind of the early thinking on the model of it, I will say that the pricing on it is still being evaluated ahead of its GA launch later this year. We are taking a pretty thoughtful approach to how we're assessing the potential for different structures by cohort. So what I mean by that is, there may be a difference between a customer who already has access to the majority of our data, they would be expecting to get a lot of value out of the platform quickly, versus a smaller customer with a limited data set will have the opportunity for greater data module upsells.

So, over time, we do plan to be introducing a usage-based element with tiered pricing as well that will calibrate a bit. But for us right now, we really are just focused on launching the pilots and getting that early kind of customer feedback ahead of GA. This is really exciting for us.

Okay, really helpful, [ Casey ]. Thank you. And then life sciences remains a bit of a drag, it sounds like. Wondering, now that the claims data is restored above historical levels and in product, have you reopened the claims upsell cross-sell motion into the life sciences base? And then maybe if we just take a step back, are you seeing any early evidence that large pharma commercialization budgets are turning at all? I'm assuming that the guidance doesn't assume anything or just kind of assumes the environment stays muted, but just curious qualitatively if you're starting to see any of that budge.

Yes, on the claims data piece, I think that where we are starting to see a little bit kind of a normalization where that was driving a significant amount of downsell, we're seeing that start to lessen. You know, after we added in additional claims data back in the fall and then additional data source, we added on into product here in second quarter. We're hopeful that there still is some more benefit to come on that as we move forward, but I think it still is a little bit early days there.

And then as we look at kind of the pharma spend, I don't know if we're seeing necessarily significant change in the large pharmas right now, but certainly some of the elements that Kevin touched on in his prepared remarks around having a really solid new logo quarter in biopharma. You know, he mentioned that it was our largest new logo period for biopharma outside of a Q4 in 3 years. Like, that's very encouraging to us. So I think we are starting to see some improvements, but of course, you know, we are hopeful that there will be more progress to come, and we're keeping kind of our eyes open for some of those bright spots. And we're ready to capture that, particularly as we're getting ready to launch Turbo.

Okay, great. Appreciate all the color.

Once again, everyone, [Operator Instructions] We will proceed with Craig Hettenbach of Morgan Stanley.

Hi, this is Jay for Craig. Thanks for taking my question. Just on the current RPO trends, as you kind of move through the back of 2026, are you seeing any early signs that customers are willing to recommit to multi-year deals? Or what kind of conditions, whether that's like product improvements, AI adoptions or macro stabilizers, would be in place to drive that shift? Thank you.

Yes, it's a great question. You know, I think that we are starting to see some of the trends around multi-year and single-year deals start to normalize a bit, but I'm not sure that we're seeing like a big shift back towards multi-year. And I think that's just more reflective of the kind of the current environment. I mean, I can even say from how we look at things internally, you know, we're always watching for, you know, where we can be opportunistic. And I think for us right now, that kind of leads to single years.

The other thing that I would point to is even if you go back a couple of years, it was much more common for us to sign, you know, multi-year agreements with a new customer, and then at renewal, they would shift to single year. So I do think there's a bit of just that kind of very normal dynamic for us that comes through. Of course, we're always looking at different ways that we can incent customers to lock in for multi-year. But that would be great. But I would not say that that's kind of a critical component and or dependency for us to be able to continue to make progress.

Great. Thank you.

We have no further questions at this time. That will conclude our meeting today. Thanks everyone for joining.

Good day, and welcome to Definitive Healthcare's Q1 Fiscal Year '26 Earnings Call. [Operator Instructions] Now I'd like to turn the call over to your host. You may begin.

Good afternoon, and thank you for joining us to review Definitive Healthcare's financial results. Joining me on today's call are Kevin Coop, our Chief Executive Officer; and Casey Heller, our Chief Financial Officer. Before we begin, I'd like to remind you that today's discussion may include forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. These statements include, among others, statements about our market opportunity, future performance, growth and financial guidance, the benefits of our data and health care commercial intelligence solutions, our competitive position, customer behavior, adoption, growth, renewals and retention, planned investments and operating strategy, value creation for customers and shareholders and the expected impact of macroeconomic conditions on our business, customers and the health care industry.

Forward-looking statements are based on our current expectations and assumptions as of today and are subject to risks and uncertainties that could cause actual results to differ materially. For more information, please refer to the cautionary statement in today's earnings release as well as the risk factors and other information included in our filings with the SEC, including our most recent Form 10-K and Form 10-Q. You should not place undue reliance on forward-looking statements, and Definitive Healthcare undertakes no obligation to update them, except as required by law.

During the call, we will also discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures, along with related definitions and the limitations are included in today's earnings release and investor presentation, each of which is available on the Investor Relations section of our website. For any forward-looking non-GAAP measures, the earnings release also explains why a quantitative reconciliation is not available without unreasonable efforts and identifies the relevant unavailable items. With that, I 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 first quarter 2026 financial results. On today's call, I'll provide highlights from our first quarter performance and give an update on the progress we continue to make on our key strategic priorities for this year. Let me begin by reviewing our financial results for the first quarter, which were at or above the high end of our guidance ranges on both the top and bottom line. Total revenue was $55.9 million, down 6% year-over-year. The adjusted EBITDA was $15.3 million, representing a margin of 27%, which was $2.3 million above the high end of our guidance. The outperformance is a reflection of our ongoing success in driving expense discipline across the business while investing in initiatives that we believe will return the business to top line growth.

Additionally, the quarter benefited from a timing benefit that will be neutral to the year and slightly lower R&D expense in the P&L as we shifted more investment to innovation, which is reflected in the capitalized software development spend. We continue to generate solid cash flow, delivering approximately $50 million of unlevered free cash flow for the trailing 12 months. We are off to a solid start for 2026 that puts us on track to meet or exceed the full year financial targets we provided to investors at the beginning of the year. Before getting into specifics, let me give you a high-level overview of where the business stands.

Our Diversified and Provider businesses, which combined represent over 60% of total revenue, have again demonstrated modest growth after returning to growth last quarter. This is an important achievement and gives us confidence that our efforts are having the expected impact, and we are investing to make this growth durable. Conversely, our Life Sciences businesses, which make up the remaining portion of revenue, continued to decline and is seeing slower response to the changes we are making. This segment has disproportionately been impacted by the claims disruption we've highlighted in the past as well as a challenging macro environment.

We continue to see positive data points in critical areas. First, net dollar retention rate improved year-over-year in the first quarter on a trailing 12-month basis, and we are increasingly confident that this will continue to be sustained for the full year. Second, we had our highest win-back quarter in over 3 years in the first quarter, which we believe is another positive sign that our product, go-to-market and customer success investments are making the expected impact. Several 6-figure win-backs in diversified and med tech highlight common themes we see emerging. First, other vendors continue to fall short in matching the breadth and quality of our data sets, leaving customers with an incomplete view of the market and an unacceptable trust deficit.

The second, that even customers who are particularly price-sensitive and thought alternative vendors would be good enough, recognize that the cost of an inferior data set far outweighed the trade-off, and this reinforces the need to remain vigilant on both data quality and service. While there is still more to be done to achieve our complete objective of returning to overall growth, these data points strengthen our conviction that we are focusing on the right things and that those areas of focus are responding. Importantly, these are areas of focus that are within our control.

I would like now to provide an update on our operational progress against our 4 strategic pillars. As a reminder, these pillars are data differentiation, integrations, customer success and innovation. Let me begin with data differentiation. Our fall expansion pack release improved the breadth and quality of our claims data and its release was met with overwhelmingly positive feedback. As you know, data is at the heart of our value proposition, and we are continuing to make investments to source new proprietary data types and extend our lead with our core reference and affiliation data sets. We are increasingly focused on leveraging AI to increase the velocity of data collection and quality assurance.

Our data differentiation was key in a 6-figure multiyear win with a life sciences customer who had previously been using a generic multi-vertical data source to target providers treating oncology and rheumatology patients. This customer was frustrated by its limited visibility into affiliation data, prescription patterns and key opinion leader identification. By deploying Definitive, they have meaningfully reduced the time spent on research, improved its KOL identification efforts and improved its sales strategy through better physician targeting.

Our second pillar is focused on seamless integrations. Making it as fast and simple as possible for customers to access our data alongside any other data source they need is critical in delivering value and creating durable customer relationships. In the first quarter, we completed nearly 50 new integrations for customers and reduced the time to integrate by nearly 50% year-over-year. We are continuing our investments in developing new and enhanced integrations. We recently introduced a new HubSpot integration that will enable HubSpot users to access Definitive Healthcare's reference affiliation, financial and clinical data directly within their HubSpot CRM, giving sales teams a detailed view of contacts and accounts.

This is in addition to the enhancements we added in Q4, where we enhanced Salesforce integrations to include our health care provider data directly into a customer's Salesforce instance, thereby improving their sales team's ability to identify, segment and engage physicians. Our data continues to show that customers that integrate Definitive directly into their systems of record and systems of insight utilize Definitive more often, and we become a stickier, more strategic component of their day-to-day operations, which in turn strengthens our renewal rates.

Turning to our third pillar, customer success. We are also witnessing the impact of investments in this area bear fruit. The alignment of all functional teams that support the customer journey has led us to be a more proactive and engaged organization with our customers, which in turn has led to earlier identification of issues before they become problems and a better understanding and responsiveness in identifying opportunities where we can do more for customers. A great example of this in action was an upsell win this quarter with a biopharma customer who is an existing Monocl user. This customer was recently acquired by a larger organization, which gave our team the opportunity to educate the acquirer on the value we are delivering and how it can help the integration efforts of the 2 organizations by streamlining data sharing across the 2 groups.

Finally, we continue to make progress against our fourth pillar, innovation and our focus on digital engagement, which is a critical component to our return to growth strategy. With the progress made in our first pillar, which fortified our foundation in quality and service, we are shifting more effort to this pillar in 2026. We continue to make progress developing our AI capabilities and expect to launch our first AI-enabled solutions to market later this quarter. Our focus is on embedding a next-gen AI-driven interface in our existing platform that will leverage natural language to allow customers to simply and intuitively query our data to uncover new insights that can then be actioned through our persona-driven workflows.

Let me give you a couple of examples. To effectively identify top physicians, a requirement is access to highly accurate reference and affiliation data to resolve treating doctors and verification of roles. Then claims data, leveraging both Rx and Mx data is needed for procedure volumes and patient journeys. Our human-in-the-loop research data, which is also being enhanced with AI, confirms the HCP and HCE status and job functions. It is this breadth and depth, coupled with our contextual expertise that makes this possible. Claims vendors alone, which use modeled represent affiliation data tied to billing IDs not treating MDs or horizontal data vendors, which lack clinical activity entirely, would not be able to achieve the same result.

To give customers the right answer to these type of questions they need requires that contextual expertise as well as longitudinal data and only our data can provide. This is the foundation on which our AI native investments will begin to enhance this coming quarter. In the digital activation area, we now have more than 30 agencies signed up with more than half of them actively generating bookings for Definitive. This is up from roughly 1/3 over the last quarter. Importantly, we are also seeing increased utilization from existing direct and agency customers alongside continued new customer adoption. We are encouraged by the very positive market feedback on audience performance and with a recent benchmark by a leading biopharma solutions company, which showed our audience has delivered a 63% higher click-through rate than a leading competitor.

While it takes time for this agency activity to generate revenue, the growing number of active customers gives us confidence that we will be able to start scaling our activation business later this year in 2026 and beyond. To summarize, we are off to a solid start in 2026, and we are tracking well against our full year objectives. We remain focused on those things within our control, and we are driving improvement across all aspects of the business. We will continue to be opportunistic in investing in high-value areas that we believe will best position the company to improve retention and return the company to consistent predictable revenue growth over time. With that, let me turn the call over to Casey to review the financials in more detail. Casey?

Thank you, Kevin. In all my remarks, I'll be discussing our results on a non-GAAP basis, unless otherwise noted. As Kevin mentioned, we delivered a solid quarter with our performance at or above expectations across our key metrics. I'll walk through the financial results in more detail, including our revenue trends, margin performance and outlook. In the first quarter, we delivered revenue of $55.9 million, down 6% year-over-year. Adjusted EBITDA of $15.3 million, reflecting a 27% margin and expanding approximately 260 basis points year-over-year. And adjusted net income was $8.5 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 $18 million of unlevered free cash flow in the quarter and nearly $50 million on a trailing 12-month basis.

Turning to our results in more detail. Revenue of $55.9 million was at the upper end of our guidance range and represents a 6% decline year-over-year. Consistent with last quarter, the revenue decline is driven by life sciences. Both diversified and provider end markets, which make up 60% of our business continue to grow year-over-year. Overall subscription revenues of $53.6 million declined 7% year-over-year. Given the timing of when we began revenue recognition on our data partnership agreement last year, we still had about 2 points of benefit in the first quarter and will be fully wrapped on the benefit in Q2. We did deliver improvement in our renewal rates in the first quarter year-over-year and quarter-over-quarter. And we're pleased to share that we saw improvement year-over-year in our net dollar retention on a trailing 12-month basis, as Kevin mentioned earlier.

Professional services revenue in the quarter was strong, up 25% year-over-year, driven by a combination of delivering on traditional analytics engagement as well as a ramp-up in our digital activations activity. Adjusted gross profit in the quarter was $45.2 million, which is down 4% year-over-year. As a percentage of revenue, the adjusted gross profit margin of 81% expanded nearly 150 basis points year-over-year, primarily benefiting from the short-term gap between removing one data source and onboarding an additional source that I mentioned last quarter. And as I mentioned earlier, adjusted EBITDA was $15.3 million and reflects a 27% margin, expanding 260 basis points versus prior year.

Despite the continued top line pressures, we've continued to prudently manage the business and focus investments on the initiatives that will return Definitive to revenue growth over time. Q1 adjusted EBITDA margin expansion was driven by the timing gap on the data source changes I mentioned just moments ago and a shift in our product development efforts, which is driving a reduction in R&D expense but an increase in capitalized software development spend. Broader operating efficiencies also supported margin expansion and exceeded expectations. This provides additional flexibility to accelerate investments for growth as opportunities arise as we move through the year.

Turning to cash flow. Our business continues to generate strong free cash flow due to our high-margin model, upfront billing and low recurring CapEx requirements. Operating cash flows on a trailing 12-month basis were $39.3 million, and we generated nearly $50 million of unlevered free cash flow over a trailing 12-month basis. Our conversion rate of the trailing 12-month adjusted EBITDA to unlevered free cash flow was 70%, which is down about 20 points year-over-year, primarily reflecting unique items that benefited the prior year. This cash generation provides flexibility to continue investing in growth. Consistent with last quarter, we continue to make organic product investments with an emphasis on expanding our AI capabilities and saw another quarter of increased capitalized software development spend, totaling nearly $3 million, up over $1.5 million from the prior year.

And at the end of Q1, deferred revenue of $99 million was down 12% year-over-year and total remaining performance obligations declined 18% year-over-year. Current remaining performance obligations of $161 million declined 12% year-over-year. The total remaining performance obligations and current RPO year-over-year declines are similar to what we reported exiting Q4 and continue to be impacted by the shift towards single-year deals versus multiyear commitments that we discussed last quarter. To quickly recap the drivers behind the RPO declines. In 2025, we saw a greater percentage of our new logo additions signed 1 year versus multiyear commitments than in prior years. This impacts both RPO as well as cRPO.

Last quarter, we explained that if you went back to the end of 2024, there was approximately $100 million of RPO on our books related to commitments that extended beyond 2025. As the year progressed, a portion of this would flow into cRPO this quarter as the contract progressed. Now as we fast forward to a year later at the end of 2025, we have $15 million less cRPO tied to multiyear deals expiring after 2026. This makes up a substantial portion of the cRPO year-over-year decline, and this dynamic holds true as we exit Q1.

Before moving to our guidance discussion, there's one additional accounting item to mention. The recent stock price decline has caused us to book a further $197 million goodwill impairment charge as of March 31. That write-down also generated approximately $6.6 million of gain on the remeasurement of the TRA liability and a $3.6 million deferred income tax benefit. As a reminder, these are noncash accounting charges and do not impact our debt covenants and are excluded from our adjusted earnings. We had a solid start to the year and continue to make progress against our financial and operational objectives.

Now turning to guidance for the second quarter. We expect total revenue of $55 million to $56 million, a revenue decrease of 8% to 9% year-over-year compared to Q2 2025. The year-over-year decline worsens modestly versus what we just reported for Q1, largely as a result of the full wrap on the initial contribution from the data partnership. Within the revenue guide, we expect to continue to deliver double-digit professional services revenue growth through the year. This results in expected adjusted operating income of $10.5 million to $11.5 million, adjusted EBITDA of $13.5 million to $14.5 million or a 24% to 26% adjusted EBITDA margin in the second quarter and adjusted net income of $5 million to $6 million or approximately $0.03 to $0.04 per diluted share on 144.2 million weighted average shares outstanding.

For the full year 2026, we expect revenue of $220 million to $226 million for a 6% to 9% decline year-over-year. This remains consistent with the guidance provided on our last call. And we have continued to proactively manage our cost base while making targeted investments in growth areas. As we just discussed, higher capitalized software development spend is shifting costs from development spend to CapEx. This is a classification shift and is cash neutral. And translating that into dollars in 2026, we now expect adjusted operating income of $43.5 million to $47.5 million, adjusted EBITDA of $55 million to $59 million for a full year margin of 25% to 26%. This guide increases the midpoint by $1.5 million and reflects the strong start to the year and our ongoing commitment to maintaining strong margins while investing in our key growth areas.

Adjusted net income is expected to be between $23 million to $27 million and earnings per share are expected to be $0.16 to $0.19 on 144.9 million weighted average shares outstanding. As we wrap up, I want to reiterate that while we are navigating ongoing top line pressures, we remain focused on sustaining non-GAAP profitability and strong margin profile while continuing to invest thoughtfully to support a return to growth. We believe our strategy is sound, and we are making steady progress against our key initiatives, which we expect will enhance retention, reaccelerate growth and drive long-term shareholder value. And with that, I would like to open it up for questions.

[Operator Instructions] Our first question today comes from Craig Hettenbach of Morgan Stanley.

This is Jay on for Craig Hettenbach. Just on the growth side, I understand that life sciences continue to be pressured while diversified and provider has seen some modest growth. So just wondering if you can share your thoughts on whether, I guess, 2027 could be like a return to growth and if you expect some margin improvement from there?

Yes. So our growth prospects and the progress that we've made on our strategic pillars gives us a great deal of confidence that we're focusing on the right things, and that progress is most readily seen now in -- while it's actually improved across all verticals, it's especially showing up initially here in provider and diversified, and that reinforces that confidence. And while that's taking a little longer, we do think that the shift now that we are making from our original focus on data quality integrations and service and success, which is translating into these improved results, moving to the innovation and digital efforts will help us address some of the challenges that still remain in our Life Sciences segment.

In particular, we think digital is going to start to impact that. And then also the claims remediation that we've spent several months repairing with our claims fall pack going into the data supply chain, which now has put us back to at or above historical levels on claims data. That will start to show up in that channel as well. So as Casey was mentioning, we've seen the early indications most pronounced initially now in provider and diversified, and we expect life sciences to be a fast follow.

Next, we have Brian Peterson of Raymond James.

This is Johnathan McCary on for Brian. So one for you, Kevin. I wanted to ask on the integration front. It's good to hear the HubSpot progress building on the Salesforce work last quarter. How far or what inning are we in, in terms of taking care of those integrations? Are we basically through the low-hanging fruit and now we're in the later stages of that? Or how would you characterize the progress thus far?

Yes. So as you know, obviously, we've talked about the materially higher retention rates in customers that are integrated versus those that are not, which is why we made this such a big focus area. I think there's a couple of data points that are particularly helpful in that area. And I'll talk about the productizing integrations in a second. But -- first was improving the speed of our integrations. And last quarter, we mentioned that we had made progress in that area, and we have brought down the average days for integration from what was over 100 days to 73 days in Q4. And we're pleased to be able to report that, that continued to improve. And our average number of days in Q1 was approximately 45 days. So we've radically improved the integration time line from over 100 days now to 45 days.

In addition to that, by making this more of a focus with our go-to-market and customer-facing teams, our velocity has also improved. And we've completed 75% more integrations over the last 6 months than we had the prior 6 months before that. So not only are we doing more integrations, we're doing more faster and getting that in the hands of our customers, which is super helpful. And then more directly to your question was the investments that we're making around productizing those integrations, most recently with HubSpot that enables HubSpot users to access Definitive Healthcare's reference affiliation, financial and clinical data directly from their HubSpot CRM.

That gives a much quicker visibility or a detailed view of contacts and accounts. That adds on to, for example, bringing physicians data into Salesforce last quarter, and we're continuing to make that a priority going forward. So I think it's a combination of all 3 of those things. Speed and velocity of getting more people integrated, making sure that when they are integrated that, that happens much, much faster. And then lastly, increasing the number of ways so that the customers can access our data in the most effective and efficient way possible the way they choose.

Very helpful. And then maybe this could be for Casey or Kevin. But on the new AI tools or AI-enabled platform you're talking about rolling out, I think you said later this quarter. How are you thinking about that? And I realize it's early, but from a monetization perspective, do you think that is more of a retention driver? Is that an incremental SKU or kind of a pricing lever? Just curious how you're thinking about that in the early stages here.

Yes. So I think that the initial -- the good news inside that, and I think that's exactly the right question. We know that this will allow us to, number one, democratize access more effectively across our users because even though the product is very intuitive, it still requires some level of training and access to be able to use our UI/UX today or if you're getting it through a more sophisticated API or lake-to-lake, that's a little bit different story. But talking about the SaaS access, it still requires some level of training.

The AI agentic layer now allows more people to more easily access that data, which that democratization will allow more people to more easily use it, and that will unlock more value. So I think that the most reasonable impact is going to be that will improve retention and it will increase value. And since we've always licensed our products based on value, that actually is in our sweet spot.

The second stage, though, is as you bring out more feature functionality over time, I think that's where you're going to see more likely the pricing power to increase. But that being said, the democratization layer of just getting more value, even more value with just the renewal actually has a positive impact to the revenue profile as well. So I don't really see any -- there's no downside to it, right? So it's going to -- our retention rate gets improved and you bring up more value, which allows you to retain your customers with extracting higher value for their existing solutions. And at the same time, you're bringing on new solutions over time, which are easily integrated into your existing installed customer base, which is going to give you upsell, cross-sell...

From BTIG, we have David Larsen.

This is Jenny Shen on for Dave. Just wanted to ask a little more about that biopharma demand environment. We recently had one of our large CROs that we cover report, and they commented that they're seeing green shoots on the emerging biopharma side with some of the smaller players with funding good and more conservative spending and decision-making with the large pharma companies. Have you seen that dynamic or any notable dynamic on your side? Or has it been pretty consistent throughout?

Yes. So thanks, Jenny, for that question. I think it's helpful initially just to remind folks that the segmentation to appropriately compare kind of apples-to-apples in the space is there are certain providers in the space that have both first stage and second stage clinical assets. So that would be more R&D, early stage drug trial and then later, where we, Definitive primarily play in second stage, which is more around commercialization. We happen to have a very marquee installed customer base with very large biopharma customers, which is great. And so the challenge, though, even if you're seeing some green shoots with smaller emerging providers, that is difficult to offset the larger customers that are actually shifting dollars from commercialization to that first stage clinical investment in R&D.

So what we're still seeing is we're seeing the second stage commercialization efforts are still somewhat muted. That's natural in this type of macro environment that happens cyclically with the biopharma industry. We do see more incremental dollars are being invested in R&D budgets to bulk backup product portfolio. And there's a couple of minor things inside there, for example, patent expirations and that type of thing, which also impact it. And then what this does, though, is it does actually present the potential growth opportunity that as those assets move towards commercialization, which takes time, especially with the larger biopharma customers, which are investing heavily in the short term, that will actually be demand for us later.

And sometimes when you're comparing in that peer group, you have to look at where and what stage they're in, if it's in that R&D stage, which is helping to offset the second stage impact if they have both first and stage clinical assets. And in our case, we do not. So I think that, again, coming back to where we think the opportunities are is that because of our focus on the integration pillar that we were just talking about earlier, which seamlessly integrates our data without sacrificing data quality, that's allowing us to start to show, especially with the increased data quality to offset that bundled offerings from other vendors by combining higher quality with ease of use. And the fact that we've been able to successfully integrate 160 customers last year and move more than 50 this quarter is demonstrating that, that strategy is working. And we know that those integrated customers over time, as they move into commercialization, that will start to show up in our Life Sciences business -- our Life Sciences segment as well.

Next, we'll hear from Jeff Garro of Stephens Inc.

I want to go further on the life science end market. The 2 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 Definitive has had within that segment? And lastly, just when the claims disruption will stop being a factor for that segment?

Perfect. So I will start with the last first, which if you think about the likely -- the 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 unfortunately, a lot of buying decisions are made earlier than we were able to get that in market. And so we are -- 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, it 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 1 cycle to get to Stage 2, 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 in market, including through our digital activation and ad tech assistance that we're maximizing the relationships the best that we can in the short term while we wait for that to return.

From Deutsche Bank, we have George Hill.

Just -- 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 [ HCP? ]

Yes. So the first thing I would say about AI in general with health care, which we think is a -- it's why we believe that this is a tailwind is that the technology itself isn't sufficient to effectively maneuver inside of the complex environment that is health care. 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 -- it's relatively straightforward as an executive to a company 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 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 and 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 will allow us to price in and more cross-sell, upsell.

[Operator Instructions] And we'll hear from David Grossman of Stifel.

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 multiyear 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're continuing 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 got 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 anniversaried that. So that's no longer a compare element as we hit second quarter and beyond.

Okay. Got it. 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 in the second quarter, the 2-point benefit that you had in 1Q, right? So you're losing about what, $1.2 million in revenue sequentially. Does that sound, right?

Yes, we're not actually losing revenue sequentially because that's more of the way it showed up the last year. So it was 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 had nothing to do with the first quarter, right?

Correct. Correct.

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

Yes. 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 multiyear dynamic and when that pops up.

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

Yes. 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 multiyear components within that. But so it's a little hard to say like when you're going to fully kind of anniversary because there's a mix element there. But if we kind of assume that the shift that we've seen now lives through, then we'll probably have 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 it 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?

Yes. I would say that the way we think about the claims data disruption is we got the new claims data source in the initial line 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 30% of our annual renewals in December and January. I don't think that us getting that new data source and really have the ability to impact and influence that -- those decision points.

So it's something that in addition to bringing on an additional new data source that will come into product here shortly, we think that it will 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 the incremental claims data like back into a product and back into customer hands.

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.

Good afternoon. Thank you for joining us today to review Definitive Healthcare's financial results. Joining me on the call today are Kevin Coop, 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 health care 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 health care 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 Factors section and elsewhere in our filings with the SEC. Actual results may differ materially from any forward-looking statements. 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 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 in delivering consistent financial results with transparency was 1 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 4 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 health care executives and health care 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 and quality 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 is dramatically shorten 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 win 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 enable flexible access to their systems were critical to this win where we delivered clean, enriched and actionable data directly into their existing workflows and 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 3 quarters, including with the larger cohort of renewals we had 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 converting what was forecasted as a churn risk into a successful multiyear 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 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 miscue.

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 1/3 of them actively generating bookings for definitive health care. 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, Red it 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 health care 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. AI model is only as good as the data 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 health care 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 health care, and our customers rely on us for that expertise. Competing in health care is complex. To provide effective AI workflow and analytics, it is essential to have that deep understanding of the complex relationships among the health care 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 Gen AI 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 Gen AI 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 in 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 4 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 in 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 $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 declined 3% year-over-year or declined 7%, excluding data partnership contributions, and we're 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 engagement 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 1 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 2. 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 2 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 product 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, up from billing and low recurring 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 onetime CapEx spend that largely occurred in Q1 '25, 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 have 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 1 year versus multiyear commitment 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 million to $56 million, a revenue decrease of 5% to 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 time frame. Also keep in mind that there'll 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 million to $10.5 million, adjusted EBITDA of $12 million to $13 million or 22% to 23% adjusted EBITDA margin in Q1 and adjusted net income of $45 million or approximately $0.03 per diluted share on 143.2 million weighted average shares outstanding.

For the full year 2026, we expect revenue of $220 million to $226 million for a 6% to 9% 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 have continued to proactively manage our cost base while making targeted investments in growth areas.

From a non-GAAP profitability perspective, the largely fixed nature of our costs mean that most of the revenue decrease will flow through and created 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 million to $46.5 million, adjusted EBITDA of $53 million 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 level is due to a combination of ongoing pressure on revenue and more than 1 point of impact from the onetime 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 million to $26 million and earnings per share are expected to be $0.14 to $0.17 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 CapEx spend.

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 to growth and drive long-term shareholder value.

And with that, I would like to open it up for questions.

[Operator Instructions]Our first question today comes from Craig Hettenbach of Morgan Stanley. .

This is Jay for Craig Hettenbach. I was just wondering, can you provide a quick update on the demand environment across your 3 end markets. And then any comments -- other common themes you can share from the large cohort of renewals from the December and January?

Sure. So let me start with the integration strategy and the renewal impact that we're seeing come through our focus on churn improvement. So as we've noted previously, A significant portion of our retention trends were impacted by the industry-wide claims disruption, and we're confident that the actions that we took to remediate the claims data throughout the year will drive improvement in our performance as we move into '26. And as we look at the business from a cohort perspective, the first cohort of renewals, excluding the first quarter of '24, where the disruption occurred was posted this last quarter in Q4. And that performance on a business sold post Q1 '24 basis and up renewal through 2025, shows about a 200 basis points improvement over the previous comparison quarters even extending back to '22.

So this indicates not only is our strategy focused on -- that is focused on data quality, integrations and improve customer experience that, that's working, we now are very confident that it will continue to build in 2026, and it gives us support for confidence in our plan.

And the only other component that I would layer on there is that -- we did see, as I mentioned, improvement in our renewal rates in Q4 year-over-year. They were modest. And what we're seeing in January is fully incorporated into our 2026 guide, more broad than the demand environment. No significant change, but certainly a couple of green shoots that we're continuing to monitor. We started to see sales cycles condense, as I think Kevin mentioned earlier in the prepared remarks. So those are just kind of some of the encouraging signs that I think are pairing a little bit of maybe some benefit in terms of where we're starting to monitor from a macro perspective as well as paired with some of our stronger own sales execution.

And then maybe 1 other data point, which I think would be helpful is we have been focused on integration as we know that integrated customers will renew at a higher rate than those that are not. I mentioned that in the prepared remarks. And in Q4, we added over 60 integrated customers. And to give you kind of perspective on that, we added 160 for the full year. So we're seeing the integration focus starting to accelerate. Our commercial teams are promoting that because it's good for the customer as well as good for us. And we're very confident that, that performance in the fourth quarter, which often is a more difficult quarter to get moving was actually very positive, especially in comparison to the full year.

From Needham, we have Ryan MacDonald.

This is Matt Shea on for Ryan. Maybe just to start, and then I have a quick follow-up. Would love to just double-click on the last question. Anything you can parse out, I guess, between end markets as you went through the renewal cycle, any end markets that maybe surprised you either positive or negative. And then I know in the past, down sales have been more of an issue in the life sciences and pharma end markets. So I would love an update on how that end market in particular is doing.

Yes. Let me give you a little bit of color as far as what we're seeing in terms of the renewal profile across the business. 2025 for us was a year we're really focused on stabilizing the business, and I think that we were able to certainly accomplished that across a number of metrics. So we look at gross dollar retention gross dollar retention improved 2 points year-over-year. That actually was largely driven by our enterprise customers, which are strongly weighted towards the life sciences space, just given the size of the customers that we tend to deal with within life sciences. .

So that's an encouraging component there. But exactly as you mentioned, as we've continued to talk about, we're seeing a little bit of the flip side of that in terms of net dollar retention, which declined a couple of points year-over-year due to the lesser opportunities around upsell and cross-sell opportunities. I think that as where we stand here today and during 2026, we are in a much stronger position. We've remediated the claims data disruption by bringing on a new data source late in '25. We've got an additional data source ready to come online in the next couple of weeks as well to further add to our claims volumes. And Kevin touched on some of the additional new data that we've added into product as well. plus just more broadly restarting our overall product innovation engine.

So we've got a lot more tools in the kit essentially as we stand here at the start of 2026 than we did at the start of '25 and that gives us all the confidence in being able to continue to build upon the stabilization in the gross dollar retention and start to build back that net dollar retention improvement into '26.

Okay. I appreciate that color. I guess maybe if we think about the inputs to the growth outlook for 2026, I know understanding churn is still a topic. But if I assume customer count declines in, call it, the 6% to 7% range like it did in 2025, can get to the midpoint of the 2026 guidance, I have to then assume year-over-year declines in revenue per customer. And despite the downsell pressure you guys have experienced in the last year or 2, you've been able to consistently grow ARPU through that headwind. So maybe just help us reconcile that. Is there more churn in store for 2026 than 2025? Or is it more so that downsells have finally reached the point where we should start to expect ARPU declines? .

I'd say I think that there's an element here of one. Over the last couple of years, we've continued to put more focus on our larger enterprise accounts. I think that, that is still very much aligned to our strategy, but there's also an element here when you think about the mix of our business. Diversified and provider are smaller than life sciences accounts. We are actually growing in diversified and provider, both of those printed growth in Q4. So we've got 60% of the business that has returned to growth. which is really encouraging for us. So I think what you're capturing there is less of a churn issue and more of just a business mix element of the diversified end provider pieces of the business returning to growth and us continuing to pick up and add new customers there that do come in typically at a lower dollar value than some of the larger life sciences clients.

Next, we'll hear from Brian Peterson of Raymond James.

So maybe just started on AI, I wanted to understand how much of your customer conversations are impacted by AI and what you guys would be able to deliver through your data assets, but also I can see scenarios where AI might be distracting or capturing share of budget, maybe away from traditional vendors. I'd love to understand how you're thinking about the net impact of AI so far, at least through 2025.

Yes. So I think the helpful aspect of our solution set and the type of use cases that we sell into it's very health care-specific workflow. These are purpose-built solutions and the data is collected in a way to be delivered in these purpose-built workflows. And it's around sales and marketing intelligence for contact level targeting and territory design, its population and conditioning modeling. It needs to address market sizing, medical affairs planning, even key opinion leader mapping related to influence patterns and how that evolves over time or automating risk related to things like Google fair.

So we've got the type of use cases that we're solving aren't really optional, right? They're very much around commercial execution, product or strategy. And so that's sort of the base layer. Then you also look at it from which I mentioned in my prepared remarks, which was, look, AI modeling is only as good as the data you can mine. And we know that our differentiated data, which is focused on and founded on our best-in-class reference affiliation data set, [indiscernible] gives us a clear advantage. And so the conversations that we're having, it's more around how do we apply and what can we do to apply the and harness AI as it relates to the existing use cases and workflow and health care suite workflows, which is why we believe that is a competitive advantage and a tailwind as opposed to a headwind for us today.

Got it. And I appreciate all the comments on the NDR and the customer dynamics. Are you guys able at this point to say when you think NDR may actually hit a bottom? It's good that you've seen the gross revenue retention improved. Just curious when that KPI should inflect. .

Yes. It's fully our expectation that we're able to improve NDR within 2026. So we view 2025 at the bottom. As I mentioned, I think that there's a lot of work that we did in '25 that really positioned us to be starting 2026 on a stronger footing from a product innovation standpoint as well as the work we've done to add additional data, remediate the claims data issue as well as enhance some of the components that we have within our crown jewel or reference and affiliation data as well. .

And I think -- I'm sorry, I was going to add on, if it's okay, maybe the contextual expertise and why we see the tailwind with AI, especially as it relates to that is as we're bringing the Gen layer to what is already a highly effective front-end platform, that's going to allow us to it sort of democratizes the use today where while the platforms are very powerful, they do require a certain level of expertise and super users to access. And so with what we're doing this quarter, that's going to allow more users to have more access to unlock more value in fact that we are value-based pricing anyway, not seat-based, unlocking more value is going to be really helpful, especially as we focus on net dollar retention in addition to gross dollar retention because that will unlock more cross-sell, upsell and value unlock as we delight our customers with a -- with more value from the products and the platforms that we already have.

Our next question comes from Jared Haase of William Blair. .

Maybe I'll follow up on that point. related to the NDR and I appreciate all of the underlying drivers that give you confidence that, that '25 can mark the bottom here. I guess I just wanted to contextualize because obviously, we've been thinking a lot about some of the product development and innovation initiatives to help drive that. But just to put a fine point on it, I'm curious if you guys are planning any refinement in your go-to-market, specifically targeted towards the sales motion to drive better upsells as well in addition to the product innovation.

Yes. So we've got really -- I would think about it in terms of 5 sort of prongs in that area. You've got the confidence is coming from several key points. Number one, we continue to have an extremely valuable differentiated data that improves our customers' business performance. The second thing that we've got is we are investing to develop purpose-built solutions on top of the purpose solutions with AI, which will make it easier for the customers to actually value and create value from our data. The third, we have already completed our go-to-market and customer success integration, which allowed us to impact the business positively with higher run rates, shorter sales cycles and with a consolidated commercial organization, we're seeing greater alignment, which is showing up in things like radically improved implementation time lines that has already decreased by over 25% year-to-date.

And with the extending our investments in the product, the data and end user development within our 2026 product road map, which is already in there inside the financials, which Casey has already taken you through, that accelerated investment is going to start to produce real tangible outcomes as we bring these innovations to market starting later this quarter.

And finally, we talked about this about a year ago or so, a little bit more than a year ago on our integration strategy. which we know is having a positive impact. You can see, I mentioned we had 60 integrations as opposed to 160 for the full year. And when we look at the retention rates from integrated customers, it's only going up. And we can talk a little bit more about the expansion of the integrations, but I don't think we should underestimate the value that we have as being an agnostic platform where we are able to integrate with the customer systems of insight and systems of record, regardless of what those are and often they use multiple ways because that's how we start to see the sickness come in. So whether they're integrating it through late to lake, whether they need direct API integration or whether they're still accessing and oftentimes, they do directly through our state-of-the-art soon to be an AI-enabled workflow products.

Got you. Okay. That's helpful. And then I guess as my follow-up. So you mentioned the fall expansion pack and some of the big updates you brought in the new claims data source in the fourth quarter as well. When you have big product refreshes or updates like that, I'm just curious how quickly you're able to communicate those upgraded features to the market. I'm wondering how much that factored into the year-end renewal discussions in the December, January time frame. And I guess the specific point around this is I'm trying to think about how much of that is sort of more incremental tailwind in 2026 selling discussions.

That's an excellent question. So given the timing of the fall expansion pack, that really came in at the start of Q4. And most of our customers have already kind of made most of their renewal decisions largely like 90 days out. So I actually don't think that we're seeing the impact from that, the benefit from that showing up in the Q4 renewals just yet. I think we're going to learn about the extent that that's going to boost renewals a lot more here in Q1 and Q2. So I think it's how that relates in terms of the guidance we've put together and put out is, I think that the guidance assumes a modest improvement in renewal rate, but I think that there certainly is still an opportunity that will continue to monitor based on how quickly we see additional uplift and the impact on renewals.

But it's not just the renewals. It's also -- now we've got -- we did a really good job historically of selling claims as an upsell motion and a cross-sell motion into our customers historically. We didn't really do that last year because we needed to address the data disruption. Now that that's been addressed, that opens up that avenue for us as well. So that will certainly be a boost to us in '26. There's a component of it baked into our '26 guide. We're continuing to kind of monitor results for more potential upside, and we'll talk about that more as the year goes on.

[Operator Instructions] Next up, we have George Hill of Deutsche Bank.

I've just got 2 quick ones. Casey, you talked about the NDR improving or bottoming, I guess, in '26. I guess, I don't know if you're willing to talk about like order of magnitude as you think about the recovery, like if you're modeling that going forward, kind of what does that look like? And Kevin, on the claims data, -- are you able to talk about like -- like what amount of enterprise revenue does the claims data products. To what amount of revenue to disclaim data underpin like various product revenue? And is the disruption there enough to consider that product significantly impaired? Or is there a resell process around that, like a reintroduction process as it relates to the claims data product? Are you able to just kind of go back to market with the patches that you guys have made? I understand that's [indiscernible] question. I apologize. .

Well, no, I mean, I get your -- the intent of the question is. So maybe what I'll do is I'll start with sort of the philosophical and the rationale and then maybe Casey can kind of quantify it to the question on both NDR as well as -- how do you size that? So the claims data, it's more -- it's really just a very simple issue that we faced. And it depends on the customer because it wasn't universally spread evenly across the country. So when you have, say, 30% of records that certainly evaporate from the market and if you've entitled your customers to expect a certain number of records and now there's 30% less. Regardless of the reason, there's going to be pressure on rightsizing and downsell pressure when you renew or they want they want to be made right.

And so remediating the claims data was twofold. One, we needed to get the actual accounts back up to historical or better than historical averages, which is where we are now. or above historical averages. At the same time, it gave us the opportunity to increase the quality. Because the one thing that I definitely -- this relates to all of our data and all of our products. Single biggest reason and the #1 factor that our customers report why they select Definitive is because they rely on us for accuracy and quality. Our data needs to be as pristine and accurate as possible. So it's not just -- it wasn't a simple answer.

So now that you've gotten claims data that's been cross-sold very effectively in earlier years, that now creates a dissatisfaction if the revenue -- even if the revenue component was less, it starts to impair other companies that may or other customers that may have acquired that as well. So remediating the volume and the quality the same time was very important, and we are claiming job complete on that, and we feel very good about it, and I think it's starting to show up in the green shoots and the records going forward.

As far as the question on how that impacts NDR and how you would [indiscernible] that, Casey, if I don't know if you want to add.

Yes. I think as far as what's a similar guide around NDR is a modest improvement, a couple of points. I think that was -- again, there'll be more that we'll monitor as we go through a year to be able to show we're on track for that or if we've got the opportunity to do better. But we're confident in being able to deliver a couple of points of improvement on an NDR basis for '26.

Next, we have Jeff Garro, Stephens Inc.. .

I want to ask about renewals and sales activity in the life science end market. And you mentioned positive activity in December year-over-year. want to specifically combine that with the idea that we've heard from others, maybe some life science companies were distracted around December as they negotiated most favored nation pricing agreements with the administration. So curious to the extent you saw that. And what you could tell us about pipeline development here in the first 50 days or so of 2026 as we get past that year-end 2025 period and start to look forward a little bit more as we've heard there's more budget certainty for these large pharma companies.

Yes. So let me start here around some of the dynamics we've seen in the life sciences space. Again, I don't think there's been a ton of change from the elements that we talked about all year. In Q4, there still was pressure around lack of hell activity. But we talked about dollar retention improving about 200 bps on at a total company level. That's a pretty consistent level within life sciences as well. So stabilization of that improvement there, I think, is really important and it's something that where we've been very focused on really kind of stabilizing that component of the business.

As I mentioned earlier, when we've got diversified and provider back to growth. Now it's what what's it take what's that curve and really the slope of that curve will look like around life sciences. And what we're really focused around kind of executing against while continuing to nurture the growth that we're seeing within diversified in the provider space. But I can't say there's really been too significant of changes. I think we still are very highly engaged. We've got a lot of our relationships in the life sciences space are very long standing. In fact, if you look at our logo churn rates, our logo -- sorry, our logo retention rates are extremely high. in the life sciences space.

And that's just an area that I think has been quite consistent for us for a long time. These are customers that have been with us for a long period of time. They value high-quality data. And we really just have these downsell pressures throughout '24 and '25 as a result of claims data disruption, and we feel really good about where we are today and being able to build back the revenue within these accounts over time. And that for us is really just the key component there of what is the slope of the life sciences recovery look like. And from a guidance perspective, we're being pretty prudent on the assumptions within the life sciences space until we get a couple more green shoots under our belt.

Great. I appreciate that. And one more quick one for me. Just discussion about return to organic innovation spend. I wanted to see if there's anything you can add more around the focus areas there and around the timing of product releases and eventual return on that investment. You mentioned 1 release later this quarter. So maybe help us just a little bit more with the cadence of other releases from there.

Yes. As we're looking at our kind of compute capacity management and how we're deploying our resources we're balancing the internal deployment of resources by focusing our engineering or problem-solving teams primarily and our AI-enabled product road map -- and we're doing so with -- if I was going to give you the guidance on there, I would think of it in terms of Q2 is when we're really focusing on getting this into a more of a GA cycle, even though we are launching certain beta programs currently in this quarter, but I would look at it from a Q2 perspective.

We have no further questions at this time. That concludes our meeting today. Thanks, everyone, for joining.

Welcome to Definitive Healthcare's Q3 2025 Earnings Call. [Operator Instructions] I would now like to turn the call to your host. You may begin.

Good afternoon. Thank you for joining us today to review Definitive Healthcare's financial results. Joining me on the call today are Kevin Coop, Chief Executive Officer; and Casey Heller, CFO.

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 health care 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 and customers on the health care 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 Factors sections and elsewhere in our filings with the SEC. Actual results may differ materially from any forward-looking statements. 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 just posted to our 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.

Thank you, Jonathan, and thanks to all of you for joining us this afternoon to review Definitive Healthcare's third quarter 2025 financial results. On today's call, I'll provide highlights from our third quarter performance and an update on our progress against our key strategic priorities for the year.

Let me begin by reviewing our financial results for the third quarter, which were at or above the high end of our guidance ranges on both the top and bottom line. Total revenue was $60 million, down 4% year-over-year. This was driven by another quarter of modest year-over-year improvement in renewal rates. Adjusted EBITDA was $18.9 million, representing a margin of 32%, which was $2 million above the high end of our guidance. This reflects continued operational improvements with our focus on maintaining solid expense discipline. There were also some in-quarter benefits that Casey will review in her detailed remarks shortly. We continue to generate solid cash flow, delivering approximately $51 million in unlevered free cash flow for the trailing 12 months.

From an operational perspective, Q3 represents another quarter of steady progress. I am pleased to report that we are driving incremental improvement across each of our key strategic pillars and I am encouraged by improvements we are seeing in the data across all of these focus areas.

Our new logo production continues to respond the fastest to this attention. Total customer count in Q3 held steady at approximately 2,400. More importantly, our enterprise customer count grew by 10 since last quarter to 520 enterprise customers. This is the highest level we've achieved since Q3 of last year. We believe the improvement in new logos is benefiting from our increased focus on the quality and depth of our differentiated data as well as the intensity we brought to our go-to-market strategy targeting end markets with use cases showing the greatest propensity to invest.

Retention rates also had another quarter of year-over-year improvement. While it remains too early to call this trend durable and we still need to get through our large renewal cohort in December and January, we are pleased to see this metric moving in the right direction. This is an encouraging early sign our customers are responding to this attention and we will continue our efforts that will drive continued improvement going forward.

Turning to the operational update. I'd now like to provide an update on our 4 strategic pillars, which continue to guide our operational focus and investment priorities. As you'll recall, these pillars are differentiated data, data management and seamless integrations, customer success and digital partnerships and innovation.

Starting with differentiated data, which is the foundation of our value proposition. We continue to see validation of our data quality advantage in competitive situations. We are making good progress expanding and deepening our data sets with new sources, including bringing on a new claims data source in Q3 that addresses the data disruption in that market segment over the past year.

But we are not satisfied with just returning to previous levels, so we are on track to add another new data source later this quarter that will return DH to above historical data levels. Again, strengthening our data assets are foundational to our business and will be a continued area of investment and focus, including how we expand and enhance our core reference and affiliation data assets.

Some wins in the quarter that were driven by our differentiated data include a large multinational biopharma chose Definitive Healthcare to support their Medical Affairs team. Historically, their research to identify key opinion leaders in support of multiple product lines was performed manually. They recognized the value leveraging our solutions and data sets would enable them to more quickly and efficiently identify the right key opinion leaders with which to partner. This is a solid example of how our data solves tangible business challenges and builds a strong position for upselling and cross-selling as we support a future customer need.

In another example, a medical device company chose Definitive because their current data provider was lacking critical insights on affiliation hierarchies within integrated delivery networks, which are critical to the effective identification of the correct buying decision makers. Our ability to master complex hospital affiliation data, claims data, contact info and payer mix were key to securing this win. Core to this win was Definitive's ability to leverage and master both our differentiated data with that of third-party data so that the customer could generate highly accurate insights in support of their medical device marketing needs.

Turning to our second pillar, that of seamless integrations. We continue to focus on making our data sets, proprietary software and analytical capabilities available to customers in whatever way is most effective and efficient for their business needs. By meeting our customers' needs in the most efficient and effective manner, we enable our customers to more easily leverage our differentiated data through the systems of record and systems of insight of their choice.

At the same time, we are making it easier for our commercial teams to win new customers. The easier and simpler we make it to embed Definitive into their workflows and processes, the more this will ultimately improve retention. We know that those customers that have integrated our data directly into their systems renew at significantly higher rates.

I would like to add a specific highlight example where we are benefiting from this strategy. We recently signed a 6-figure expansion with a long-time customer who has become a $1 million-plus logo in the diversified market. This customer has steadily expanded their use of Definitive based on our consistent ability to improve the effectiveness of their go-to-market efforts across several of their business units. Our API integration feeds Definitive data directly into their sales force deployment and this tight integration enables their sales teams to efficiently create hierarchies and effectively manage customer contacts. This tight integration has made DH essential to their corporate strategy to leverage data, intelligence and automation to accelerate their revenue growth.

Turning to our third pillar, customer success. We continue to receive positive feedback on the steps we've taken in recent quarters to develop a consistent, repeatable and proactive customer engagement process. Our goal is to ensure customers are easily able to generate value from their investments in our solutions as rapidly as possible, and this required us to revisit the entire process starting from the point we initially engage with a prospective customer, how we ensure maximum value is provided through the sales process, and finally, how we onboard and service their solution.

It is critical that we ensure the customer receives great experience at integration, and ultimately, we maintain this positive relationship throughout the entire customer journey. This is an iterative process, and we will continue to refine and improve our approach going forward as exceptional customer experience requires continuous focus.

As mentioned earlier, we are seeing improvement in retention rates, but we have more objectives to meet before reaching the retention rates we are confident are achievable that will enable us to return to generation of consistent top line growth.

The initiatives highlighted earlier all support and contribute to our customer success goals and include a cross-functional effort that spans all functional areas, including sales, support, product and the relentless pursuit of continuous improvement in our core data assets.

Looking at our last pillar, innovation and our focus on digital engagement. We are making substantive progress in multiple areas. For example, as part of our efforts to support customers' ad tech efforts, we recently launched our first syndicated always-on go-to-market partnership with LiveRamp, where our data will be available in the LiveRamp marketplace. This will enable marketers to self-serve using prebuilt audience segments or request custom health care audiences from us in support of customers activating verified HCP and consumer data across digital channels in a privacy-safe manner.

We also secured another relationship with a significant new strategic partner that is slated to go live at the end of the quarter. While it takes time for these partnerships to begin generating revenue, we are pleased with the progress we are making in building out a broad ecosystem of partners and the validation that their decision to partner with us, Definitive, reinforces in the confidence we have in our approach.

We are also seeing good momentum in expanding our agency presence. In Q3, we signed up another 8 agencies. As discussed last quarter, partnering with agencies to ensure we have the opportunity for DH data to power marketing campaigns they run on behalf of our clients is an important part of our digital strategy.

Leveraging the most accurate data drives better business performance for customers and makes Definitive an increasingly strategic vendor. So getting our data available to those agencies that support digital engagement is critical.

Agency support is only one channel, with another priority focusing on direct sales support. Our commercial teams work directly with customers to support activation campaigns and see some very encouraging results. For example, a large teaching hospital in New England recently expanded from a 5-figure test to a mid-6-figure activation campaign commitment. We believe this is a powerful example of the increased value Definitive can deliver when we give our customers the ability to take our data and close the loop to create augmented, targeted, effective and profitable customer outreach programs. We believe this is a significant opportunity and remains a core area of investment as DH demonstrates we can augment and activate their digital campaigns in a highly effective and seamless manner.

Let me wrap up by saying that I am proud of the Definitive team for all the work they are doing to strengthen the value of our data and the solutions they deliver and improve the way we engage with our customers in all phases of our relationship. And we will continue to ensure we maintain vigilance on capital allocation and operational efficiency.

As we approach the end of 2025, we are confident that the investments and the changes we are making in the business will position us to deliver improved top line and bottom line performance over time and create value for our shareholders.

Now, I would like to turn the call over to Casey to walk you through the numbers. With that, Casey?

Thank you, Kevin. In all my remarks, I will be discussing our results on a non-GAAP basis, unless otherwise noted. Before turning to the specifics, I'd like to step back and provide some context on our quarter. We continue to operate in a dynamic macro environment and our ability to stay disciplined and make progress against our 4 strategic pillars remain central to our success. This alignment and prudent approach are reflected in our Q3 performance, where we again delivered results at or above the high end of guidance on both the top and bottom line.

In the third quarter, we delivered revenue of $60 million, down 4% year-over-year, adjusted EBITDA of $18.9 million, reflecting a 32% margin, and adjusted net income was $9.7 million, resulting in $0.07 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 $17.9 million of unlevered free cash flow in the quarter and nearly $51 million on a trailing 12-month basis.

Turning to our results in more detail. Revenue of $60 million was at the high end of our guidance range and represents a 4% decline year-over-year. Q3 revenue shows a sequential improvement in growth trajectory on total and subscription revenues and is indicative of the progress we are making.

Subscription revenues of $58.2 million declined 4% year-over-year and reflects stabilization in absolute dollars quarter-over-quarter, along with a 2-point trajectory improvement over the subscription growth rate in the prior quarter. And we again are encouraged by the improvement we're seeing on renewal rates. While Q3 is a smaller renewal period in terms of volume of renewals, our renewal rates in Q3 were largely consistent with Q2 and reflects solid improvement year-over-year. Professional services revenue in the quarter showed modest growth and was largely in line with our expectations.

Adjusted gross profit in the third quarter was $49.4 million, which was down 4% from Q3 2024, reflecting the revenue decline. As a percentage of revenue, the adjusted gross profit margin of 82% was roughly flat from Q3 '24. Gross margin in the quarter benefited from our ongoing efforts to improve the efficiency of our cost of goods sold.

We experienced approximately $2.5 million in cost savings in the third quarter. The first is an approximate $1.5 million onetime benefit due to a data contract renegotiation. The second is a net cost reduction of approximately $1 million due to replacing an existing data source that was significantly impacted by the disruption in the claims market with another higher volume data source. This represents run rate savings, a portion of which we will be reinvesting starting in the fourth quarter when we bring another new claims data source online and will add significant value to our customers.

Adjusted EBITDA was $18.9 million and reflects a 32% margin, well above the high end of our guidance for the third quarter. As expected, this is down year-over-year, reflecting the flow-through from lower revenue. But we're maintaining disciplined expense management and continuing to prioritize key strategic investments to position us for an eventual return to growth.

Turning to cash flow. Our business continues to generate strong free cash flow due to our high-margin model, upfront billing and low CapEx requirements. Operating cash flows were $59.2 million on a trailing 12-month basis, up 8% from the comparable period a year ago as we benefited from strong collections and a higher deferred revenue related to data partnership entered into at the end of Q4.

On a trailing 12-month basis, we generated nearly $51 million of unlevered free cash flow. Also on a trailing 12-month basis, our conversion rate of adjusted EBITDA to unlevered free cash flow was 73%, which is down about 30 points year-over-year. This decline reflects higher-than-normal CapEx related to onetime investments largely incurred in Q4 of 2024 and Q1 of 2025.

Excluding onetime CapEx investments, the conversion rate is above 95% over the last 12 months. This cash generation provides flexibility to continue investing in growth while returning capital to shareholders as evidenced by our repurchase of approximately 2 million shares in the quarter for a total of about $9 million with about $49 million remaining under our authorization.

At the end of Q3, deferred revenue of $92 million was up 7% year-over-year and total remaining performance obligations were up 1% year-over-year. Current remaining performance obligations of $165 million were up about 1% year-over-year as reported as well.

As mentioned last quarter, both our revenue results and current remaining performance obligations include the benefit from our data partnership signed late last year. We will anniversary the initial contributions of the multiyear agreement on at the end of Q4. Q3's cRPO growth rate declined mid-single digits, excluding the data partnership contributions. Our performance in the third quarter reflects continued progress against our key initiatives and delivered another solid quarter while we prudently manage the business.

As we look ahead, we continue to be impacted by pressures on renewals and remain cautious on the macro environment. For the fourth quarter, we expect to deliver $59 million to $60 million in revenue, a decrease of 4% to 5% compared to the fourth quarter of 2024. From a non-GAAP profitability perspective, for the fourth quarter, we expect to deliver adjusted operating income of $13.5 million to $14.5 million, adjusted EBITDA of $16 million to $17 million, reflecting a 27% to 29% adjusted EBITDA margin.

At the high end of the guide, adjusted EBITDA margins modestly expand year-over-year in the quarter. In terms of dollars, Q4's adjusted EBITDA is pretty consistent with Q3, adjusting for the onetime credits and factoring in planned investments. Adjusted net income of $8 million to $9 million or approximately $0.05 to $0.06 per diluted share on 145.8 million weighted average shares.

Given we exceeded our expectations in the third quarter, paired with our outlook on Q4, we are again able to raise the midpoint of our full year guide on both revenue and non-GAAP profit. We now expect to deliver revenue of $239 million to $240 million for a 5% decline year-over-year. This raises the bottom end of our prior range by $2 million while holding the upper end of the prior guide. And we're in a position to take up the non-GAAP profit guidance for the year.

We now expect adjusted operating income of $57.5 million to $58.5 million, adjusted EBITDA of $68 million to $69 million for a full year margin of 28% to 29%. This is a $3 million increase to the midpoint of the guided range. Adjusted net income is expected to be between $34 million to $35 million and earnings per share are now expected to be $0.23 to $0.24 on a basis of 146.8 million weighted average shares outstanding, which incorporates the share repurchase activity through the third quarter.

As we wrap up, I want to highlight that we're encouraged by our results through the first 9 months of the year and remain squarely focused on what matters most, improving customer retention, returning Definitive to growth and driving long-term shareholder value.

And with that, I would like to open it up for questions.

[Operator Instructions] And our first question comes from Jared Haase from William Blair.

Maybe for my first one, I wanted to double-click on the competitive takeaway that you mentioned with the med device company. I'm curious, is that typically more common that you're seeing those opportunities for competitive wins? Or are new logos these days kind of more white space opportunity? And then I guess related to that, when you do have a competitive win like in this situation, is there anything you can share in terms of what you typically see as sort of the biggest reasons or maybe the most common gap in the market that's leading a client to make that change to a different vendor?

This is Kevin. We're continuing to see strength in our new logo area as one of the areas that's responding the quickest to our efforts here. We've exceeded our internal expectations across all end markets. And I think that a big component of that is we are still very confident in the broad use case needs for our data.

We are really leaning into the integrations component, which we believe is not only a key focus area for us, but that is also going to help alleviate some of the pressures that we saw on the upsell market. And at the end of the day, it's really how easy can you ingest, leverage and gain insights from the use of the data, does it integrate well and easily into the systems of insight and systems of record, and then ultimately, how accurate is the data, especially as we've rotated our focus on those use cases in areas that we believe are most responsive to the value that we bring in those types of either therapies or purpose-built solutions that we bring into market. So I'd say it's kind of a combination of the integrations component and the quality of the data.

Okay. Great. That makes sense. And then for the follow-up, I wanted to ask on the new claims data that you're bringing online here in the near future. Can you just talk a little bit about, I guess, how strategically important do you think about claims data in terms of the broader product positioning and what you're hearing in terms of what customers need in the market? And I guess, specific to my question, I'm thinking about how much of an incremental lift could some of those new claims data sources have in the near-term growth rate?

Yes, it's a good question. I think it's twofold, though, Jared. There's -- the first element or rung is we had been very successful at selling claims data as an upsell, cross-sell into the market for a number of years along with our differentiated reference and affiliation data. And so with the disruption that occurred in the market, you just had a significant reduction in the amount of data that was available. And even though that was an industry-wide kind of phenomenon that we were impacted by as well, the first thing you have to do is you have to replace that and you have to be able to deliver on what was promised because your customers don't care why. They just know what they've actually contracted for.

And so we're very pleased to be able to report that we have now reached that threshold where we are currently back to parity. But bringing on the additional data to go above historical levels is especially important if you come back to the notion around you need to have the data integrated in the most reliable and effective way. And then if you think about what our customers do with it, they efficiently map and match and append that data so that they can actually tokenize it with accounts to contacts to people. They're mastering the data internally with master files to differentiate the data to both first and third-party data as well as their internal maybe unique identifiers. They're creating complex data relationships and hierarchies that they need that ease of sharing of the data across systems of records and insights.

And in that vein, the amount of data that you're providing -- first of all, we already know that they're contracting for that because they need it for the use cases that we're solving. But that notion around integration highly involved relationships with our customers with the data, that's the importance of having that view across those different relationships that include claims and the reference filled data.

So we think it's very important. And I think that was proven through the success that we had for a number of years. And we are very confident that, that's still where the market is today. And we're very happy that we're kind of back in that, what we consider to be a very competitive position now with that remediation underway.

And our next question comes from Craig Hettenbach from Morgan Stanley.

This is [ Jayjin ] on for Craig Hettenbach. For first question, I was wondering with greater certainty on MFN and tariff policies, have you observed any changes in how pharma clients are allocating budget or approaching spend?

We haven't seen any changes. Again, I think as we've given color previously, our biopharma customers over the last year plus, I think, have seen just tighter budget constraints. And that has kind of shown up in some of the pressures across the life sciences space that we operate in. But no notable changes or tariff-specific impacts at this point in time.

Great. And for my follow-up, it was very encouraging to see the total customer count holding steady and enterprise customers growing. Just wondering if you also saw or have any updates to any improvements in the downselling pressure that you guys have been experiencing as well? And if you could call out any -- worth highlighting what's resonating with these clients?

Yes, absolutely. Thanks for noticing. Certainly, the stabilization of the total client count and the tick up in the enterprise customer counts were encouraging to us from second quarter into third quarter. That downsell pressure for us, again, remains pretty isolated into the life sciences space and touches exactly on kind of your initial question around what we're seeing within the biopharma.

So no real notable kind of changes there. But as we talked about a bit last quarter, that kind of goes into and flows through the life sciences space in terms of what we're seeing on the other side of it in terms of the upsell and being able to increase footprints within the life sciences space, and that also continues to remain challenged.

So last quarter, I did mention that our net dollar retention expectations for 2025 were that we would expect net dollar retention to modestly decline year-over-year compared to 2024. That still remains the case. But again, we are happy that the underlying improvement we're seeing in our renewal rates is going to drive our gross dollar retention to be up year-over-year. And again, that's consistent with what we had said 90 days ago.

And maybe what I would just add to that is I think it's reassuring that if you look at our diversified and life sciences end markets, which are the 2 largest that make up nearly 90% of our annual recurring revenue, they were also very positive to the renewal rates versus Q3 of last year. And so I think we're starting -- it's encouraging because we think that a lot of our focus in these very core areas is starting to show up and it gives us cautious optimism that even though Q3 is a lower volume renewal period, it's a positive sign that the focused operational changes and what we're doing is having a positive impact.

And our next question comes from Nishad Patwardhan from Goldman Sachs.

This is Nishad. I'm on for [ Kash ]. I would like to just double-click on the agency part. You spoke about several agencies beginning to activate campaigns and you also spoke about one of your plans, the New England Hospital going beyond pilot activations. I would like to ask what are the driving factors for these end market customers to expand from testing to actual activation campaigns using Definitive data?

Yes. That's a great question. Thank you for that. So the progress that we're making around digital activations is a logical next step for our business as it leverages the strength of our data and allows customers to primarily develop more targeted effective marketing campaigns. It's augmenting their audience campaigns. So we are able to very effectively show the return on investment and the lift that they get from those augmented audiences, which is very encouraging.

We tie our data directly to their customers' ad tech efforts. And by making the DH data an important part of their MarTech stack, it becomes a relatively simple connection to that always-on GTM partnership. We mentioned LiveRamp, which I think you're referring to there, which will give marketers not only if you're a direct customer of DH -- it allows customers through the LiveRamp platform to self-serve always-on data packages, so to speak, or audiences that they can activate directly to specific health care targets. So the agencies that we've added there continue to expand that, which we'll see as a very long-term channel that's going to build from a revenue perspective.

In addition to that, we're also working with Bombora. And Bombora, which is a -- it's a curated marketplace, they call the curated ecosystem audiences. They just launched it. It's their new marketplace, of which they've got 4 initial inaugural partners. So Definitive along with Crunchbase, G2 and HDInsight will be able to, through this partnership, access our proprietary reference and affiliation data matched up with other activity signals to create that kind of first-to-market health care ecosystem for audiences. And that expands our reach even further into that B2B always-on digital channel.

But the simple and probably the shortest answer -- that was a little bit more than you probably asked there -- is it just takes their current audiences -- because our data is so much more accurate and the veracity is higher, it allows them to provide even better targeting, which is very important if you're trying to leverage and maximize your advertising dollars to reach the right audiences.

And so we've been able to now develop that relationship through these cases, which -- for example, the example customer, where it started off as a very small test, because it was so effective, they in essence -- they increased their commitment tenfold because they know that they're going to be able to get such a significant return on that dollar investment.

Yes. Sounds good. Just a small follow-up on that. Do you have any visibility into which specific verticals are you more -- are moving faster towards production and activation from pilots when it comes to agencies?

I don't think we're -- at this point, we're seeing much differentiation across kind of the verticals. I think that this is something that we're looking to make an impact in across each of our end markets. I think we've had a decent amount of success in the diversified space to date, but then there's a lot of opportunity within the life sciences space as well.

And our next question comes from Brian Peterson from Raymond James.

This is Johnathan McCary on for Brian. So I wanted to double click on the net new motion you talked about, kind of some modest improvements or stabilization in NRR. It also sounded like you guys upticked on tone on the net new side. So I'm just curious like how did that perform versus your expectations? And then I'd be curious where you're seeing more strength as it relates to the partner or the agency ecosystem versus kind of your direct motion, or maybe it's across both. But would be curious, any delineation there?

Yes, absolutely. So as we're kind of taking a look at the business here, Kevin mentioned our new logo performance actually exceeded our internal expectations within the quarter. So that remains encouraging. That's been a pretty solid motion for us here now for several quarters, and we're seeing that broad-based across each of the end markets. And we've been pleased with the improvement we've been making in the renewal rates.

So it really is just kind of that element I touched on a little bit earlier around some of the –- the upsell and downsell pressures, frankly, within the life sciences space are kind of having the drag there overall in terms of what -- how everything kind of gets rolled up at the top.

Touching quickly on the digital activation space. I think that where we're seeing some acceleration is in the direct space at the moment. I think the agencies, those relationships take time to kind of foster. So while we've got, I believe, 20 or so under contract today, they're not all fully activating yet. But it's the building of those relationships that will make our audiences kind of available to all the firms that will be tapping into them over time. And that we view as a really exciting kind of new revenue stream for us that we'll scale over time.

Okay. Great. And then just one kind of follow-up model housekeeping here. In the past, when we talked about adding additional data sources, there's also been some kind of temporary pressure in gross margin. Would you expect that number -- just as we think about framing our model for next year, would you expect the gross margin to remain in the current ballpark? Or should we expect some kind of near-term pressure there from those new data sources?

Yes. So there's a couple of dynamics within the data sources. So first, just from a year-over-year perspective -- certainly, we're not guiding on '26 at this point, but we have been clear in second quarter and then again now as we're talking about what we saw in third quarter. As we've been negotiating even existing data agreements, that have -- those have resulted in a couple of onetime credits. So in second quarter, we had about a $2 million credit. In third quarter, we had about $1.5 million. So those things would not be repeating. So that will provide some year-over-year margin pressure.

But at the same time, as we've been kind of onboarding data sources -- I mentioned that there's another one that we took offline. So we're trying our best to balance this out. And we can talk more about margins and the profile come February, because I think that the revenue profile is going to play a role in that as well.

And in my prepared remarks, I signaled that if you take a look at our current remaining performance obligations for -- coming out of third quarter adjusted for the data partnership that's giving a bit of lift right now, that points to a mid-single-digit decline. So we do expect top line pressure, which will obviously have an impact on what gross margins are going to do next year.

[Operator Instructions] And our next question comes from David Larsen from BTIG.

So it's great to -- this is Jenny Shen on for David Larsen. It's great to hear that retention rates are improving. Can you just speak more on the upsell versus downsell dynamic? So are customers still staying on, it's just that they're spending less, because it looks like the overall customer count still looks pretty solid. And then as a quick follow-up, really appreciated all the color around the new wins and contract expansions. Just any of your thoughts on the future growth algorithm, the balance between new customer adds and expanding within existing customers. Do you expect that to kind of be a 50-50 mix or weighted more heavily one towards other of driving future growth?

I appreciate the question. So touching on kind of a couple of the points you laid out there. So first, maybe just doing a final double-click on the upsell versus downsell dynamics. I think that we've got a healthy motion overall within our diversified and provider spaces, and really where we've been seeing those upsell as well as downsell pressures is really associated within the life sciences space.

So in some cases, we've got pressure year-over-year on an upsell standpoint, where there was greater expansion within existing accounts last year than there was this year within life sciences. And then on the downsell piece, again, it's those same customers that are under certain budget pressures or having their internal teams put under greater scrutiny that we're seeing the downsell components.

But as you pointed out, our customer counts stayed relatively stable quarter-over-quarter, which is encouraging, because these are customers that we have long multiyear relationships with that want to stay with us, see the value and know –- and we know that once their budgets come back, that they'll be reengaging with us as well. So that to us is an encouraging element and an important element in terms of how we're managing these relationships.

I'm trying to think what -- the last part of your question was, and then like kind of going forward the mix of new logo growth versus expansion within existing. The answer is both. I think it's too early to guide on '26 as far as a relative mix between the 2.

But today, where we stand, we've got solid new logo generation. I would expect that to continue. And then again, the expansion within existing accounts, I think that is something that will come back over time as we are continuing our focus around our 4 key pillars here, because all of those things are tied to improving our renewal rates and creating those additional value-added opportunities for our customers. So I think that our growth engine in the future is certainly going to be reflecting both of those components.

Yes. And I would say, Jenny, that the confidence really comes down to 5 or 6 really key points. The first is we know we still have very differentiated and valuable data that improves our customers' business performance. We are investing more and we are rapidly bringing together through that unified UI/UX front-end purpose-built solutions that make it easier for them to get to that data.

The changes that we made in our go-to-market and customer success teams are starting to really show that positive impact that we had hoped for and expected. And you can see that reflected in our enterprise count, which is up in Q3, and we expect to continue to see future benefits from that.

And the benefits that we are seeing from the work that it makes -- it takes time from the personnel, process and people that we talked about last quarter around both go-to-market and success. And then finally, the integration strategy we know is going to have a significantly larger impact than anything if we have more customers engaged not only through our SaaS products on the front end, but also through a more integrated data science and integrated platforms through things like our connectors as well as through APIs and others.

And then lastly, we're extending our existing AI investments into more of a product data and end user development as part of our 2026 road map. And we know that will continue to move the ball forward, too. So we've got a lot of things underway, but it's very focused. It coalesces around the 4 pillars that Casey is talking about. And that's where it kind of ties back to not only addressing some of the existing upsell, cross-sell challenges, but it's going to put more fuel on both new logo and expansion there as well. So we're very -- I feel very optimistic about that.

Congrats on the quarter.

And our next question comes from David Grossman from Stifel.

I think you've addressed the question -- most of the questions that I had. And I did jump on a little late, so I apologize if you may have hit this. But I guess I'm just trying to think through -- we're at this point in the year, right, where a large percentage of your book, I think, renews in the December and January time frame. And you've talked about some very positive improvements to the underlying fundamentals of the offering and your go-to-market strategy, among other dynamics in your business. Yet there's still some kind of cyclical headwinds that we're faced with.

So I'm just trying to -- and perhaps this is an unfair question. Just somehow think about like what's the range of possibility as we think about what the renewals can look like over the next 3 months or so since that really defines what '26 is going to look like and you kind of have to live with that for another 12 months.

So again, probably not a fair question, but just hoping you could provide some context for us to kind of think through that given all these moving pieces in your model right now.

Yes. It may be a difficult question, but it's also very insightful, and that is a very important one for sure. And we know that, especially December and January, those are significant cohorts of renewals for us, and we're very focused on that. We do know that in the macro and competitive environment out there -- although we haven't seen enough notable changes over the last quarter that would alter our view that overall the market seems to be stabilizing when compared with recent periods, but we still remain a little cautious there.

You still have the current funding environment, interest rates, there's some regulatory uncertainty, which certainly impacts a little bit. And -- but we're still focused on what we control, which was increasing the quality of our data, augmenting our integration strategy, ensuring that our master data management efforts are in full swing.

We've actually integrated now into our sales motion, the activation and measurement capabilities that creates that real closed-loop system. And we've got our sales and support teams now integrated in a way that we know that we're hopefully delighting our customers in a much better way than we were a year ago.

And so all that being said, if you haven't been delighting them to the same degree that you are now, these things do take a while to get into the system. And I think your focus on Q4 and really January and December as the primary months is the correct one, and that's why we're so laser-focused on that.

So it's kind of a -- I'm trying to address it as accurately as possible because we share the same focus. So on one hand, we are very confident that what we're doing is going to have that long-term meaningful growth -- return to growth that we are very, very focused on doing. And at the same time, we have to make sure that we maximize our current customer situation and what may or may not have been in motion when we sort of did the transition. And we feel good about that, too. But those 2 months are going to be very important for sure.

And maybe, I don't know, Casey, how you would want to maybe quantify that or any add to that. But that's -- we're trying to focus on what we control, and there is that variable for sure.

Of course. So as Kevin mentioned and as you well know, our December and January renewals make up over 30% of the renewals that we have over the course of the year. So super critical period for us and will certainly shape the trajectory of 2026.

But as we talked about, cRPO is our best kind of forward-looking indicator. But it's not perfect and needs to be looked at in context of the other kind of commentary we give on the business. So in my prepared remarks, we shared that cRPO, excluding the lift from the data partnership, is declining mid-single digits. That's certainly a lot closer to our current trajectory and certainly the numbers that we're looking at for Q4. And I think that, that's the right lens to be looking at in terms of the near term as well.

One dynamic to kind of point out is that given the heavy mix of renewals into December and January, if you look back over the last 2 years, we saw a step down in subscription revenues from Q4 to Q1. I think it's very reasonable to expect kind of a similar approach going from Q4 to Q1 as we head into 2026. So hopefully, that gives you kind of a little bit of color as kind of starting to kind of think about the shape of '26. And of course, we'll give more color when we touch base again in February.

No, no, that was actually really helpful. So can I ask just one follow-up to that, is that if cRPO normalized for the large partnership deal you did last year, comps out in the fourth quarter, is it -- like I don't know all the details of the math. But arithmetically, is it very difficult to get that turning positive in the beginning of next year in the first quarter if you have a really strong renewal kind of period or NRR, I should say, if you will, going into next year?

Yes. I think that there's still just a lot of work for us to do there, and I think it's a little bit tricky to kind of point to, I think, the -- with the – the base of cRPO being roughly $165 million. We're saying it's declining mid-single digits. Excluding the data partnership, it kind of says that there's a chunk there, like call it, roughly $7 million or so to kind of make up for to get you back to a flattish or low single-digit kind of growth standpoint there.

So we're certainly focused on executing to the best of our abilities here. We've got a lot of actions underway by the team to really maximize that renewal period. But our expectation exiting 2025 is that net dollar retention will be down year-over-year, and that's going to have an impact.

And our next question comes from George Hill from Deutsche Bank.

This is Liz on for George. I appreciate the colors on the sort of the preliminary thoughts for next year in terms of renewals and the contract cycles. As we come in to critical times in December and January, how should we think about like the cadence? Can you talk -- speak to the cadence a bit more in terms of Q4 and Q1, where we're typically having, I guess, more of a sales season? And are you anticipating any actions in mitigating the churn? And how should we think about the impact on the customer account? And are you thinking -- I guess on the pricing perspective, are you thinking any actions on the pricing in the next few quarters?

I think there was quite a bit to unpack there. So let us try and do our best on this one. I think that kind of the normal sales seasonality for us, there shouldn't be any kind of change. Again, there's a lot tied toward these renewal periods. So December and January are super important for us. And that's where we remain really focused on having an impact.

And second quarter and third quarter were encouraging. We made a lot of progress on renewals there. Those are certainly smaller renewal periods, but we're hopeful. We've got the team really focused around delivering the best possible outcome for Q4. But there certainly the range of outcomes as far as what that means for 2026 at this point in time.

Related to pricing, I don't think there's any like specific pricing action. I think that in general, we do have modest step-ups and just normal pricing increases built into our agreements as well as built into any of our multiyear agreements as well. So that's kind of normal course in business for us. There's nothing really, I think, unique to touch on from that standpoint.

And then I guess a follow-up on where do you think about the market share growth from here? And are you thinking right now as steady or expanding the market share over the next year?

Yes. For us, I think -- we obviously have guided to a revenue decline for 2025, and the early signals for '26 as well also point to some top line pressure. So we're much more focused on taking the right actions needed to return us to revenue growth. And then we'll take a look at what that means in terms of taking share against the overall market once we kind of hit that point. But for us, this is really about kind of the building blocks and making sure we're executing against the fundamentals and the foundations of our business and our 4 strategic pillars really well because those are the things that are going to improve our renewal base and really get us back to an eventual return to revenue growth.

At this time, we have no further questions. This now concludes today's conference call. We would like to thank everyone for attending. You may now disconnect.