News Release

Health Catalyst Reports Third Quarter 2019 Results

News Release

Health Catalyst Reports Second Quarter 2019 Results

August 22, 2019 at 4:05 PM EDT

SALT LAKE CITY, Aug. 22, 2019 (GLOBE NEWSWIRE) -- Health Catalyst, Inc. (Nasdaq: HCAT), a leading provider of data and analytics technology and services to healthcare organizations, today reported financial results for the second quarter ended June 30, 2019.

"Our second quarter results showcase consistent performance across the business.  Strong organic revenue growth demonstrates the continued value our customers are realizing from our Solution," said Dan Burton, CEO of Health Catalyst. "Our recent IPO will provide us with growth capital to continue to execute on our mission to be the catalyst for massive, measurable, data-informed healthcare improvement."

Financial Highlights for the Three Months Ended June 30, 2019

Key Financial Metrics

  Three Months Ended
June 30,
  Year over Year Change
  2019   2018  
GAAP Financial Data: (in thousands, except percentages)
Technology revenue(1) $ 20,085     $ 10,725     87 %
Professional services revenue(1) $ 16,719     $ 12,265     36 %
Total revenue(1) $ 36,804     $ 22,990     60 %
Loss from operations $ (9,363 )   $ (18,811 )   (50 )%
Net loss $ (10,694 )   $ (19,324 )   (45 )%
Other Non-GAAP Financial Data:(2)          
Adjusted Technology Gross Profit $ 13,072     $ 7,479     75 %
Adjusted Technology Gross Margin 65 %   70 %    
Adjusted Professional Services Gross Profit $ 6,193     $ 3,427     81 %
Adjusted Professional Services Gross Margin 37 %   28 %    
Total Adjusted Gross Profit $ 19,265     $ 10,906     77 %
Total Adjusted Gross Margin 52 %   47 %    
Adjusted EBITDA $ (5,749 )   $ (8,028 )   28 %
  1. Organic technology revenue, professional services revenue, and total revenue, excluding Medicity revenue, increased by 33%,  32%, and 32%, respectively, for the three months ended June 30, 2019 compared to the three months ended June 30, 2018.
  2. These measures are not calculated in accordance with generally accepted accounting principles in the United States ("GAAP"). See the accompanying "Non-GAAP Financial Measures" section for more information about these financial measures, including the limitations of such measures, and for a reconciliation of each measure to the most directly comparable measure calculated in accordance with GAAP.

Financial Outlook

Health Catalyst provides forward-looking guidance on total revenue, a GAAP measure, and Adjusted EBITDA, a non-GAAP measure.

For the third-quarter of 2019, we expect:

  • Total revenue between $36.8 million and $38.8 million, and
  • Adjusted EBITDA between $(11.2) million and $(9.2) million

For the full-year of 2019, we expect:

  • Total revenue between $149.8 million and $151.8 million, and
  • Adjusted EBITDA between $(31.7) million and $(29.7) million

We have not reconciled guidance for Adjusted EBITDA to net loss, the most directly comparable GAAP measure, and have not provided forward-looking guidance for net loss, because there are items that may impact net loss that are not within our control or cannot be reasonably predicted.

Quarterly Conference Call

The second quarter 2019 earnings conference call and webcast will be held Thursday, August 22, 2019 at 5:00 p.m. EDT. The conference call can be accessed by dialing 1-877-295-1104 for U.S. participants, or 1-470-495-9486 for international participants, and referencing participant code 3184256. A live audio webcast will be available online at https://ir.healthcatalyst.com/news-and-events/news-releases. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call, at the same web link, and will remain available for approximately 90 days.

About Health Catalyst

Health Catalyst is a leading provider of data and analytics technology and services to healthcare organizations, committed to being the catalyst for massive, measurable, data-informed healthcare improvement. Its customers leverage the cloud-based data platform-powered by data from more than 100 million patient records and encompassing trillions of facts—as well as its analytics software and professional services expertise to make data-informed decisions and realize measurable clinical, financial, and operational improvements. Health Catalyst envisions a future in which all healthcare decisions are data-informed.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements include statements regarding our future growth and our financial outlook for Q3 2019 and full year 2019. Forward-looking statements are subject to risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance.

Important risks and uncertainties that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: (i) changes in laws and regulations applicable to our business model; (ii) changes in market or industry conditions, regulatory environment and receptivity to our technology and services; (iii) results of litigation or a security incident; (iv) the loss of one or more key customers or partners; and (v) changes to our abilities to recruit and retain qualified team members. For a detailed discussion of the risk factors that could affect our actual results, please refer to the risk factors identified in our SEC reports, including, but not limited to the Prospectus related to our initial public offering filed with the SEC on July 24, 2019 and the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2019 expected to be filed with the SEC on or about August 23, 2019.  All information provided in this release and in the attachments is as of the date hereof, and we undertake no duty to update or revise this information unless required by law.

 
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data, unaudited)
 
  As of
June 30,
  As of
December 31,
 
  2019   2018
Assets
     
Current assets:      
Cash and cash equivalents(1) $ 20,819     $ 28,431  
Short-term investments(1) 33,257     4,761  
Accounts receivable, net 34,472     27,696  
Deferred costs 845     649  
Prepaid expenses and other assets 5,632     5,321  
Total current assets 95,025     66,858  
Property and equipment, net 4,180     4,676  
Intangible assets, net 27,538     28,304  
Operating lease right-of-use assets 5,198     6,344  
Other assets 4,041     1,099  
Goodwill 3,694     3,694  
Total assets $ 139,676     $ 110,975  
Liabilities, redeemable convertible preferred stock, and stockholders’ deficit      
Current liabilities:      
Accounts payable $ 3,035     $ 1,812  
Accrued liabilities 8,107     9,203  
Acquisition-related consideration payable 2,200     2,172  
Deferred revenue 34,405     24,755  
Operating lease liabilities 2,761     2,577  
Current portion of long-term debt     1,287  
Total current liabilities 50,508     41,806  
Long-term debt, net of current portion 47,635     18,814  
Acquisition-related consideration payable, net of current portion 2,944     3,770  
Deferred revenue, net of current portion 7,306     7,280  
Operating lease liabilities, net of current portion 3,206     4,228  
Other liabilities 652      
Total liabilities 112,251     75,898  
Commitments and contingencies      
Redeemable convertible preferred stock, $0.001 par value; 23,151,481 and 22,713,694 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively 584,574     409,845  
Stockholders’ deficit:      
Common stock, $0.001 par value; 5,002,426 and 4,779,356 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively 5     5  
Additional paid-in capital      
Accumulated deficit (557,163 )   (374,772 )
Accumulated other comprehensive income (loss) 9     (1 )
Total stockholders’ deficit (557,149 )   (374,768 )
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit $ 139,676     $ 110,975  
  1. Pro forma as adjusted cash, cash equivalents, and short-term investments totaled $248.7 million as of June 30, 2019, after a pro forma adjustment to include the receipt of net proceeds of $194.6 million after deducting total underwriting discounts and commissions of $14.7 million and before deducting estimated offering costs of $4.4 million, from our initial public offering that closed on July 29, 2019.


 
Condensed Consolidated Statements of Operations
(in thousands, except per share data, unaudited)
 
  Three Months Ended June 30,   Six Months Ended June 30,
 
  2019   2018   2019   2018
Revenue:
             
Technology $ 20,085     $ 10,725     $ 40,233     $ 20,176  
Professional services 16,719     12,265     31,784     23,446  
Total revenue 36,804     22,990     72,017     43,622  
Cost of revenue, excluding depreciation and amortization:              
Technology(1) 7,044     3,291     13,796     6,650  
Professional services(1) 10,666     9,227     21,240     17,478  
Total cost of revenue, excluding depreciation and amortization 17,710     12,518     35,036     24,128  
Operating expenses:              
Sales and marketing(1) 10,385     12,004     20,858     18,725  
Research and development(1) 9,710     8,487     19,732     17,192  
General and administrative(1) 6,146     7,241     12,320     11,143  
Depreciation and amortization 2,216     1,551     4,528     3,101  
Total operating expenses 28,457     29,283     57,438     50,161  
Loss from operations (9,363 )   (18,811 )   (20,457 )   (30,667 )
Loss on extinguishment of debt         (1,670 )    
Interest and other expense, net (1,320 )   (506 )   (2,265 )   (1,015 )
Loss before income taxes (10,683 )   (19,317 )   (24,392 )   (31,682 )
Income tax provision (benefit) 11     7     22     (149 )
Net loss $ (10,694 )   $ (19,324 )   $ (24,414 )   $ (31,533 )
Less: accretion (reversal of accretion) of redeemable convertible preferred stock 98,641     (2,078 )   162,656     (12,559 )
Net loss attributable to common stockholders $ (109,335 )   $ (17,246 )   $ (187,070 )   $ (18,974 )
Net loss per share attributable to common stockholders, basic and diluted $ (21.98 )   $ (3.53 )   $ (38.29 )   $ (3.89 )
Weighted-average shares outstanding used in calculating net loss per share attributable to common stockholders, basic and diluted 4,975     4,888     4,885     4,878  
               
Pro forma adjusted net loss per share, basic and diluted(2) $ (0.21 )       $ (0.46 )    
Pro forma as adjusted weighted-average number of shares outstanding used in calculating
Adjusted Net Loss per share, basic and diluted(2)
36,176         35,997      
  1. Includes stock-based compensation expense and tender offer payments deemed compensation expense.
       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2019   2018   2019   2018
Stock-Based Compensation Expense: (in thousands)
Cost of revenue, excluding depreciation and amortization:              
Technology $ 31     $ 17     $ 64     $ 31  
Professional services 140     105     288     205  
Sales and marketing 497     295     1,280     725  
Research and development 213     176     435     353  
General and administrative 517     321     987     640  
Total $ 1,398     $ 914     $ 3,054     $ 1,954  


       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2019   2018   2019   2018
Tender Offer Payments Deemed Compensation Expense: (in thousands)
Cost of revenue, excluding depreciation and amortization:              
Technology $     $ 28     $     $ 28  
Professional services     284         284  
Sales and marketing     3,967         3,967  
Research and development     906         906  
General and administrative     3,133         3,133  
Total $     $ 8,318     $     $ 8,318  

2. Includes pro forma adjustments to net loss attributable to common stockholders and the weighted average number of common shares outstanding directly attributable to the closing of our initial public offering on July 29, 2019 as well as certain other non-GAAP adjustments. Refer to the "Non-GAAP Financial Measures—Pro Forma Adjusted Net Loss Per Share" section below for further details.


Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
 
  Six Months Ended June 30,
  2019   2018
Cash flows from operating activities      
Net loss $ (24,414 )   $ (31,533 )
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization 4,528     3,101  
Loss on extinguishment of debt 1,670      
Amortization of debt discount and issuance costs 516     258  
Investment discount and premium amortization (274 )   (74 )
Change in fair value of warrant liability     (35 )
Gain on sale of property and equipment (34 )   (15 )
Stock-based compensation expense 3,054     1,954  
Change in operating assets and liabilities:      
Accounts receivable, net (6,776 )   (2,825 )
Deferred costs (196 )   358  
Prepaid expenses and other assets (55 )   (1,500 )
Operating lease right-of-use assets 1,146     (1,239 )
Accounts payable, accrued liabilities, and other liabilities (1,644 )   2,810  
Deferred revenue 9,676     6,237  
Operating lease liabilities (838 )   1,096  
Net cash used in operating activities (13,641 )   (21,407 )
       
Cash flows from investing activities      
Purchases of property and equipment (1,063 )   (521 )
Proceeds from the sale of property and equipment 38     15  
Purchase of short-term investments (40,509 )   (2,679 )
Proceeds from the sale and maturity of short-term investments 12,297     14,200  
Purchase of intangible assets (977 )   (18 )
Net cash (used in) provided by investing activities (30,214 )   10,997  
       
Cash flows from financing activities      
Proceeds from the issuance of redeemable convertible preferred stock, net of issuance costs 12,073     33,987  
Proceeds from exercise of stock options 1,625     2,594  
Repurchase of common stock     (8,712 )
Payment of SVB line of credit and mezzanine loan (21,821 )    
Proceeds from credit facilities, net of debt issuance costs 47,169      
Payments of acquisition-related consideration (773 )   (11,136 )
Payments of deferred offering costs (2,030 )    
Net cash provided by financing activities 36,243     16,733  
Net (decrease) increase in cash and cash equivalents (7,612 )   6,323  
       
Cash and cash equivalents at beginning of period 28,431     22,978  
Cash and cash equivalents at end of period $ 20,819     $ 29,301  


Non-GAAP Financial Measures

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States, or GAAP, we believe certain non-GAAP measures, including Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA, Adjusted Net Loss, and Adjusted Net Loss per share, basic and diluted, are useful in evaluating our operating performance. We use this non-GAAP financial information to evaluate our ongoing operations, as a component in determining employee bonus compensation, and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Adjusted Gross Profit and Adjusted Gross Margin

Adjusted Gross Profit is a non-GAAP financial measure that we define as revenue less cost of revenue, excluding depreciation and amortization and excluding stock-based compensation, tender offer payments deemed compensation, and post-acquisition restructuring costs. We define Adjusted Gross Margin as our Adjusted Gross Profit divided by our revenue. We believe Adjusted Gross Profit and Adjusted Gross Margin are useful to investors as they eliminate the impact of certain non-cash expenses and allow a direct comparison of these measures between periods without the impact of non-cash expenses and certain other non-recurring operating expenses. The following is a reconciliation of revenue, the most directly comparable GAAP financial measure, to Adjusted Gross Profit, for the three months ended June 30, 2019 and 2018:

  Three Months Ended June 30, 2019
  (in thousands, except percentages)
  Technology   Professional Services   Total
Revenue $ 20,085     $ 16,719     $ 36,804  
Cost of revenue, excluding depreciation and amortization (7,044 )   (10,666 )   (17,710 )
Gross profit, excluding depreciation and amortization 13,041     6,053     19,094  
Add:          
Stock-based compensation 31     140     171  
Adjusted Gross Profit $ 13,072     $ 6,193     $ 19,265  
Gross margin, excluding depreciation and amortization 65 %   36 %   52 %
Adjusted Gross Margin 65 %   37 %   52 %


  Three Months Ended June 30, 2018
  (in thousands, except percentages)
  Technology   Professional Services   Total
Revenue $ 10,725     $ 12,265     $ 22,990  
Cost of revenue, excluding depreciation and amortization (3,291 )   (9,227 )   (12,518 )
Gross profit, excluding depreciation and amortization 7,434     3,038     10,472  
Add:          
Stock-based compensation 17     105     122  
Tender offer payments deemed compensation 28     284     312  
Adjusted Gross Profit $ 7,479     $ 3,427     $ 10,906  
Gross margin, excluding depreciation and amortization 69 %   25 %   46 %
Adjusted Gross Margin 70 %   28 %   47 %

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted for interest and other expense, net, loss on debt extinguishment, income tax provision (benefit), depreciation and amortization, stock-based compensation, tender offer payments deemed compensation, and post-acquisition restructuring costs. We believe Adjusted EBITDA provides investors with useful information on period-to-period performance as evaluated by management and comparison with our past financial performance and is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance. The following is a reconciliation of our net loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA, for the three months ended June 30, 2019 and 2018:

  Three Months Ended June 30,
  2019   2018
  (in thousands)
Net loss $ (10,694 )   $ (19,324 )
Add:      
Interest and other expense, net 1,320     506  
Loss on extinguishment of debt      
Income tax provision (benefit) 11     7  
Depreciation and amortization 2,216     1,551  
Stock-based compensation 1,398     914  
Tender offer payments deemed compensation     8,318  
Post-acquisition restructuring costs      
Adjusted EBITDA $ (5,749 )   $ (8,028 )

Pro Forma Adjusted Net Loss Per Share

Adjusted Net Loss is a non-GAAP financial measure that we define as net loss attributable to common stockholders adjusted for accretion of redeemable convertible preferred stock, stock-based compensation, amortization of acquired intangibles, loss on debt extinguishment, tender offer payments deemed compensation, and post-acquisition restructuring costs, as applicable. We believe Adjusted Net Loss provides investors with useful information on period-to-period performance as evaluated by management and comparison with our past financial performance and is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.

On July 29, 2019, we closed our initial public offering (our IPO) in which we issued and sold 8,050,000 shares (inclusive of the underwriters’ option to purchase an additional 1,050,000 shares, which was exercised on July 25, 2019) of common stock at $26.00 per share. We received net proceeds of $194.6 million after deducting underwriting discounts and commissions and before deducting estimated offering costs of $4.4 million. Upon the closing of our IPO, all shares of our outstanding redeemable convertible preferred stock converted into 23,151,481 shares of common stock on a one-for-one basis. As a result of our IPO closing after June 30, 2019, we have prepared the below adjusted condensed consolidated statement of operations data in order to present pro forma adjusted net loss per share amounts that will be comparable to future periods.  The following calculation gives effect to the following pro forma adjustments:

  1. The automatic conversion of all outstanding shares of our redeemable convertible preferred stock (using the if-converted method) into common stock as though the conversion had occurred as of the beginning of the period or the original date of issuance, if later.
  2. The issuance of 8,050,000 shares of common stock as part of the IPO, assuming the shares of common stock were issued and sold as of the beginning of each period.

The table below presents our calculation of pro forma adjusted net loss per share, basic and diluted, including a reconciliation of Adjusted Net Loss and the pro forma as adjusted weighted-average shares used in calculating pro forma adjusted net loss per share, basic and diluted, to the most directly comparable financial measures calculated in accordance with GAAP:

  Three Months Ended June 30, 2019   Six Months Ended June 30, 2019
Numerator: (in thousands, except share and per share amounts)
Net loss attributable to common stockholders $ (109,335 )   $ (187,070 )
Add:      
Accretion of redeemable convertible preferred stock 98,641     162,656  
Stock-based compensation 1,398     3,054  
Amortization of acquired intangibles 1,547     3,047  
Loss on extinguishment of debt     1,670  
Adjusted Net Loss $ (7,749 )   $ (16,643 )
Denominator:      
Weighted-average number of shares used in calculating net loss per share attributable to common stockholders, basic and diluted 4,974,515     4,885,350  
Pro forma adjustments:      
Pro forma weighted-average adjustment to reflect assumed conversion of redeemable convertible preferred stock to common stock 23,151,481     23,061,989  
Pro forma adjustment to reflect issuance of shares of common stock as part of IPO, assuming the issuance took place at the beginning of each period 8,050,000     8,050,000  
Pro forma as adjusted weighted-average number of shares used in calculating Adjusted Net Loss per share, basic and diluted 36,175,996     35,997,339  
Pro forma adjusted net loss per share, basic and diluted $ (0.21 )   $ (0.46 )


Health Catalyst Investor Relations Contact:

Adam Brown
Senior Vice President, Investor Relations
+1 (855)-309-6800
ir@healthcatalyst.com 

Health Catalyst Media Contact:
Kristen Berry
Vice President, Public Relations
+1 (617) 234-4123
+1 (774) 573-0455 (m)
kberry@we-worldwide.com 

Source: Health Catalyst, Inc.