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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-40815

 

Definitive Healthcare Corp.

(Exact name of registrant as specified in its charter)

 

 

Delaware

86-3988281

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

550 Cochituate Road

Framingham, MA

01701

(Address of principal executive offices)

(Registrant’s telephone number, including area code)

 

(Zip Code)

(508) 720-4224

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Trading Symbol(s)

 

Name of each exchange on which registered

 

Class A Common Stock, $0.001 par value

DH

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

Accelerated Filer

 

 

 

 

Non-accelerated Filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No

As of November 5, 2021, the number of outstanding shares of the registrant’s Class A Common Stock was 88,263,333 shares.

 

 


 

Definitive Healthcare Corp.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended September 30, 2021

TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

 

 

 

 

 

 

 

Cautionary Note Regarding Forward-Looking Statements

3

 

 

 

Part I.

FINANCIAL INFORMATION

 

 

 

 

 

Condensed Consolidated Balance Sheets – September 30, 2021 and December 31, 2020

4

 

 

 

 

Condensed Consolidated Statements of Operations – Three and Nine Months Ended September 30, 2021 and 2020

5

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss – Three and Nine Months Ended September 30, 2021 and 2020

6

 

 

 

 

 

Condensed Consolidated Statements of Changes in Members’ Equity and Total Equity – Three and Nine Months Ended September 30, 2021 and 2020

7

 

 

 

 

Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2021 and 2020

10

 

 

 

 

Notes to Condensed Consolidated Financial Statements – September 30, 2021

11-27

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

40

 

 

 

Item 4.

Controls and Procedures

41

 

 

 

Part II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

42

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

 

 

 

Item 5.

Other Information

42

 

 

 

Item 6.

Exhibits

43

 

 

Signatures

44

 

2


 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods, or by the inclusion of forecasts or projections. Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance, such as those contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, regional, national or global political, economic, business, competitive, market and regulatory conditions and the following:

 

 

 

the inability to generate substantially all of our revenue and cash flows from sales of subscriptions to our platform and any decline in demand for our platform and the data we offer could have a material adverse effect on our business, financial condition and results of operations;

 

 

 

the competitiveness of the market in which we operate, such that if we do not compete effectively, it could have a material adverse effect on our business, financial condition and results of operations;

 

 

 

the failure to maintain and improve our platform, or develop new modules or insights for healthcare commercial intelligence, whereby competitors could surpass the depth, breadth or accuracy of our platform;

 

 

 

the inability to obtain and maintain accurate, comprehensive or reliable data, could result in reduced demand for our platform;

 

 

 

the risk that our recent growth rates may not be indicative of our future growth;

 

 

 

the inability to achieve or sustain profitability in the future compared to historical levels as we increase investments in our business;

 

 

 

the loss of our access to our data providers, which could negatively impact our platform and could have a material adverse effect on our business, financial condition and results of operations;

 

 

 

the failure to respond to advances in healthcare commercial intelligence could result in competitors surpassing the depth, breadth or accuracy of our platform;

 

 

 

an inability to attract new customers and expand subscriptions of current customers, whereby our revenue growth and financial performance will be negatively impacted;

 

 

 

the risk of cyber-attacks and security vulnerabilities could have a material adverse effect on our reputation, business, financial condition and results of operations;

 

 

 

if our security measures are breached or unauthorized access to data is otherwise obtained, our platform may be perceived as not being secure, customers may reduce the use of or stop using our platform, and we may incur significant liabilities; and

 

 

 

the other factors set forth under “Risk Factors.”

 

See “Risk Factors” for a further description of these and other factors. For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this Quarterly Report, including under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Any forward-looking statement made by us speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

3


 

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DEFINITIVE HEALTHCARE CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except number of shares)

(Unaudited)

 

 

 

September 30, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

 

189,752

 

 

 

24,774

 

Accounts receivable, net

 

 

27,886

 

 

 

33,108

 

Prepaid expenses and other current assets

 

 

3,642

 

 

 

3,016

 

Current portion of deferred contract costs

 

 

5,359

 

 

 

2,947

 

Total current assets

 

 

226,639

 

 

 

63,845

 

Property and equipment, net

 

 

4,697

 

 

 

3,248

 

Other assets

 

 

747

 

 

 

472

 

Deferred contract costs, net of current portion

 

 

9,388

 

 

 

5,952

 

Deferred tax asset

 

 

161

 

 

 

161

 

Intangible assets, net

 

 

366,723

 

 

 

410,237

 

Goodwill

 

 

1,261,444

 

 

 

1,261,444

 

Total assets

 

$

1,869,799

 

 

$

1,745,359

 

Liabilities and Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

 

7,055

 

 

 

5,662

 

Accrued expenses and other current liabilities

 

 

19,296

 

 

 

17,321

 

Current portion of deferred revenue

 

 

69,811

 

 

 

61,060

 

Current portion of term loan

 

 

6,875

 

 

 

4,680

 

Total current liabilities

 

 

103,037

 

 

 

88,723

 

Long term liabilities:

 

 

 

 

 

 

Deferred revenue

 

 

368

 

 

 

140

 

Tax receivable agreements liability

 

 

146,106

 

 

 

 

Term loan, net of current portion

 

 

265,388

 

 

 

457,197

 

Deferred tax liabilities

 

 

71,341

 

 

 

 

Other long-term liabilities

 

 

475

 

 

 

3,736

 

Total liabilities

 

 

586,715

 

 

 

549,796

 

Commitments and Contingencies (Note 11)

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Members' equity

 

 

 

 

 

1,195,694

 

Class A Common Stock, par value $0.001, 600,000,000 shares authorized, 88,263,333 shares issued, and outstanding at September 30, 2021

 

 

88

 

 

 

 

Class B Common Stock, no par value, 65,000,000 shares authorized, 60,020,525 shares issued and 57,220,661 outstanding at September 30, 2021

 

 

 

 

 

 

Additional paid-in capital

 

 

700,773

 

 

 

 

Accumulated other comprehensive income (loss)

 

 

24

 

 

 

(131

)

Accumulated deficit

 

 

(7,978

)

 

 

 

Noncontrolling interests

 

 

590,177

 

 

 

 

Total equity

 

 

1,283,084

 

 

 

1,195,563

 

Total liabilities and equity

 

$

1,869,799

 

 

$

1,745,359

 

 

See notes to condensed consolidated financial statements

4


 

DEFINITIVE HEALTHCARE CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except share amounts and per share data)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

43,084

 

 

$

30,073

 

 

$

119,841

 

 

$

84,659

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue exclusive of amortization shown below

 

 

5,129

 

 

 

2,619

 

 

 

13,895

 

 

 

7,876

 

Amortization

 

 

5,356

 

 

 

4,794

 

 

 

15,896

 

 

 

14,278

 

Gross profit

 

 

32,599

 

 

 

22,660

 

 

 

90,050

 

 

 

62,505

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

14,376

 

 

 

8,292

 

 

 

39,003

 

 

 

23,542

 

Product development

 

 

4,746

 

 

 

2,618

 

 

 

12,817

 

 

 

7,566

 

General and administrative

 

 

7,880

 

 

 

2,538

 

 

 

18,891

 

 

 

8,105

 

Depreciation and amortization

 

 

9,760

 

 

 

10,112

 

 

 

28,814

 

 

 

30,037

 

Transaction expenses

 

 

(137

)

 

 

40

 

 

 

3,332

 

 

 

748

 

Total operating expenses

 

 

36,625

 

 

 

23,600

 

 

 

102,857

 

 

 

69,998

 

Loss from operations

 

 

(4,026

)

 

 

(940

)

 

 

(12,807

)

 

 

(7,493

)

Other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency transaction gain

 

 

119

 

 

 

 

 

 

143

 

 

 

 

Interest expense, net

 

 

(7,186

)

 

 

(9,022

)

 

 

(23,956

)

 

 

(27,802

)

Loss on extinguishment of debt

 

 

(9,873

)

 

 

 

 

 

(9,873

)

 

 

 

Total other expense, net

 

 

(16,940

)

 

 

(9,022

)

 

 

(33,686

)

 

 

(27,802

)

Net loss

 

 

(20,966

)

 

 

(9,962

)

 

 

(46,493

)

 

 

(35,295

)

Less: Net loss attributable to Definitive OpCo prior to the Reorganization Transactions

 

 

(7,816

)

 

 

(9,962

)

 

 

(33,343

)

 

 

(35,295

)

Less: Net loss attributable to noncontrolling interests

 

 

(5,172

)

 

 

 

 

 

(5,172

)

 

 

 

Net loss attributable to Definitive Healthcare Corp.

 

$

(7,978

)

 

$

 

 

$

(7,978

)

 

$

 

Net loss per share of Class A Common Stock:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.09

)

 

N/A

 

 

$

(0.09

)

 

N/A

 

Weighted average Common Stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (1)

 

 

88,263,333

 

 

N/A

 

 

 

88,263,333

 

 

N/A

 

(1) Basic and diluted net loss per share of Class A Common Stock is applicable only for the period from September 15, 2021 through September 30, 2021, which is the period following the initial public offering ("IPO") and related Reorganization Transactions (as defined in Note 1 to the Unaudited Consolidated Financial Statements). See Note 16 for the number of shares used in the computation of net loss per share of Class A Common Stock and the basis for the computation of net loss per share.

See notes to condensed consolidated financial statements

5


 

DEFINITIVE HEALTHCARE CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net loss

 

$

(20,966

)

 

$

(9,962

)

 

$

(46,493

)

 

$

(35,295

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

11

 

 

 

 

 

 

155

 

 

 

 

Comprehensive loss

 

 

(20,955

)

 

 

(9,962

)

 

 

(46,338

)

 

 

(35,295

)

Less: Net loss attributable to Definitive OpCo prior to the Reorganization Transactions

 

 

(7,818

)

 

 

 

 

 

(33,201

)

 

 

 

Less: Comprehensive loss attributable to noncontrolling interests

 

 

(5,167

)

 

 

 

 

 

(5,167

)

 

 

 

Comprehensive loss attributable to Definitive Healthcare Corp.

 

$

(7,970

)

 

$

(9,962

)

 

$

(7,970

)

 

$

(35,295

)

See notes to condensed consolidated financial statements

6


 

 

DEFINITIVE HEALTHCARE CORP.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ EQUITY AND TOTAL EQUITY

(amounts in thousands, except share and unit amounts)

(Unaudited)

 

 

AIDH TopCo, LLC (Prior to Reorganization Transactions)

 

Definitive Healthcare Corp.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

Other

 

 

 

 

 

 

Members'

 

Class A

 

Class A

 

Class B

 

Class B

 

Paid-In

 

Accumulated

 

Comprehensive

 

Noncontrolling

 

Total

 

 

Equity

 

Stock

 

Amount

 

Stock

 

Amount

 

Capital

 

Deficit

 

(Loss) Income

 

Interests

 

Equity

 

Balance at December 31, 2020

$

1,195,694

 

 

 

$

 

 

 

$

 

$

 

$

 

$

(131

)

$

 

$

1,195,563

 

Net loss prior to Reorganization Transactions

 

(10,487

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,487

)

Other comprehensive income (loss) prior to Reorganization Transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

163

 

 

 

 

163

 

Equity-based compensation prior to Reorganization Transactions

 

406

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

406

 

Balance at March 31, 2021

 

1,185,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32

 

 

 

 

1,185,645

 

Net loss prior to Reorganization Transactions

 

(15,040

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,040

)

Other comprehensive income (loss) prior to Reorganization Transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

 

(19

)

Equity-based compensation prior to Reorganization Transactions

 

1,615

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,615

 

Members' contributions prior to Reorganization Transactions

 

5,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,500

 

Distributions to members prior to Reorganization Transactions

 

(3,328

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,328

)

Balance at June 30, 2021

 

1,174,360

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

 

1,174,373

 

Net loss prior to Reorganization Transactions

 

(7,816

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,816

)

Other comprehensive loss prior to Reorganization Transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

(2

)

Equity-based compensation prior to Reorganization Transactions

 

(278

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(278

)

Distributions to members prior to Reorganization Transactions

 

(3,811

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,811

)

Impacts of Reorganization Transactions and Intial Public Offering IPO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7


 

Initial effect of the Reorganization Transactions and IPO on noncontrolling interests

 

(1,162,455

)

 

72,871,733

 

 

73

 

 

61,262,052

 

 

 

 

351,075

 

 

 

 

 

 

593,861

 

 

(217,446

)

Issuance of Class A Common Stock in IPO, net of costs of $11,394

 

 

 

17,888,888

 

 

18

 

 

 

 

 

 

441,400

 

 

 

 

 

 

 

 

441,418

 

Repurchase of Definitive Healthcare Corp. shares in connection with the IPO

 

 

 

(2,497,288

)

 

(3

)

 

 

 

 

 

(63,209

)

 

 

 

 

 

 

 

(63,212

)

Repurchase of Definitive OpCo units in connection with IPO

 

 

 

 

 

 

 

(1,169,378

)

 

 

 

(29,600

)

 

 

 

 

 

 

 

(29,600

)

Net loss subsequent to Reorganization Transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,978

)