SEC Filing | Definitive Healthcare Corp

View:

Download DOC

Download PDF

Download XLS

Download XBRL

10-Q

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

☐ 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

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

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.

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

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

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

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


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	)	—	(5,172	)