Definitive Healthcare Corp. Class A ((DH)) has held its Q2 earnings call. Read on for the main highlights of the call.

Summer Sale - Claim 70% Off TipRanks

• Unlock powerful investing tools with TipRanks Premium to make smarter, more confident investment decisions
• Subscribe to TipRanks Smart Investor Newsletter, and discover new investing opportunities with data-backed stock picks

Definitive Healthcare’s latest earnings call struck a cautious but constructive tone. Management acknowledged clear revenue headwinds, including a 9% year‑over‑year decline in Q2 and softer bookings in life sciences and professional services. At the same time, they highlighted strong profitability, robust free cash flow and improving retention metrics as reasons to believe the business can return to growth over time.

Profitability Surpasses Expectations

Definitive Healthcare delivered adjusted EBITDA of $14.6M in Q2, representing a 26% margin and landing modestly above the high end of guidance. On the back of this performance, the company raised full‑year adjusted EBITDA guidance to a range of $57M to $59M, with margins expected between 26% and 27% and the midpoint increased by $1M.

Free Cash Flow Remains a Bright Spot

Cash generation continues to be a key strength for the company, with about $50M of unlevered free cash flow produced over the trailing 12 months. In Q2 alone, unlevered free cash flow was $11.6M, while operating cash flow over the same 12‑month period exceeded $41M and EBITDA‑to‑free‑cash conversion held near 75% despite a roughly 5‑point drop from last year.

Revenue Performance and Transparency

Second‑quarter total revenue came in at $55.2M, and subscription revenue reached $52.8M, both within previously issued guidance ranges. Management spent time detailing the trends and drivers behind the numbers, aiming to better align investor expectations with the realities of the current demand environment and mix between subscription and services.

Net Dollar Retention Shows Improvement

Net dollar retention improved year over year on a trailing 12‑month basis for the second straight quarter, which management called a critical proof point. They believe this rising retention is an early indicator that churn and downsells are stabilizing and that the company can gradually rebuild growth from its existing customer base over time.

Turbo and Broader AI Innovation

The company launched a pilot of Turbo, its AI‑powered healthcare intelligence platform, with strategic customers and is targeting general availability before the end of 2026. While management does not expect Turbo to materially impact 2026 revenue, they see it as a potential driver of better retention and upside in 2027, with AI already being embedded across data collection and core products.

Faster Integrations and Time‑to‑Value

Operationally, Definitive Healthcare reported significant progress on integrations, completing more than 50% additional integrations year over year. At the same time, the time required to integrate has been cut by more than half, enabling quicker customer adoption and even contributing to at least one early renewal and expansion through a Salesforce‑embedded connector.

Customer Wins and Activation Momentum

Biopharma posted its strongest new‑business quarter in three years outside of Q4, and the company secured four notable customer win‑backs, including a six‑figure three‑year deal in the diversified segment. In digital activation, Definitive Healthcare added ten new agency partners that will be active in 2026, seven new direct activation customers year to date, and highlighted at least one activation relationship that has grown beyond $300K.

Gross Margin Context and Expansion

Adjusted gross profit was $44.2M in Q2, translating to an 80% margin and a 12% decline year over year on a reported basis. However, after stripping out a one‑time data‑contract credit from the prior year period, management said adjusted gross margin actually expanded by roughly 100 basis points, underscoring underlying efficiency gains.

Disciplined, Targeted Investment Strategy

The company emphasized continued discipline on expenses while still funding strategic initiatives, particularly in software and AI. Capitalized software development surpassed $2M in Q2, up around $700K from a year ago, allowing Definitive Healthcare to invest in product innovation without materially compromising its margin profile.

Top‑Line Decline and Tightened Revenue Outlook

Despite the operational and profit progress, top‑line pressure was evident as total revenue fell 9% year over year to $55.2M, with subscription revenue down by a similar 9%. Reflecting these dynamics, full‑year 2026 revenue guidance was tightened to a range of $220M to $222M, representing an expected decline of 8% to 9% compared with the prior year.

Life Sciences and Professional Services Weakness

Management noted that demand from life sciences customers has been slower to bounce back than hoped, weighing on performance in that segment. Professional services bookings were also lighter than expected, especially traditional analytics engagements, a trend that hurt Q2 results and is anticipated to constrain Q3 services revenue even as it grows from a lower base.

Deferred Revenue and RPO Under Pressure

Deferred revenue ended Q2 at $89M, down 12% year over year, while current remaining performance obligations stood at $150M, also down 12%. Total remaining performance obligations declined 18%, reflecting a reduction in multi‑year deals and highlighting a more cautious purchasing behavior among customers.

Shift Toward Shorter Deal Durations

The company continues to see customers favor single‑year contracts over longer‑term commitments, a shift that reduces visible backlog. This trend is a key driver behind lower RPO and deferred revenue levels and underscores the need for strong retention and upsell efforts to maintain and grow recurring revenue.

Near‑Term Guidance Reflects Caution

For Q3, Definitive Healthcare guided revenue to a range of $54M to $55M, implying an 8% to 10% year‑over‑year decline and signaling limited near‑term recovery in the top line. Subscription revenue is expected to be flat sequentially, while professional services should grow at double‑digit rates from a smaller base but still perform below earlier expectations.

Claims‑Driven Downsells Still Lingering

Earlier gaps in claims data led to customer downsells, particularly in life sciences, and those effects are still working their way through the business. While management said claims coverage has now been restored to levels above historical norms and is beginning to normalize relationships, they cautioned that it is still early to see the full benefit on revenue.

Forward‑Looking Guidance and Outlook

Looking ahead, the company’s guidance reflects a balance of near‑term revenue pressure and improving profitability. For Q3, they expect adjusted operating income of $10.5M to $11.5M and adjusted EBITDA of $13.5M to $14.5M, with a margin of 25% to 27%, while full‑year 2026 outlook calls for $220M to $222M in revenue, adjusted EBITDA of $57M to $59M and EPS between $0.18 and $0.20.

Definitive Healthcare’s earnings call painted a picture of a business navigating meaningful top‑line challenges but strengthening its financial foundation. Investors will be watching to see whether improving net dollar retention, customer win‑backs and new AI‑driven offerings can eventually offset current headwinds and return the company to a sustainable growth path.