Health Catalyst Reports Second Quarter 2019 Results
"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
Financial Highlights for the Three Months Ended
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 | % |
- 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 endedJune 30, 2018 . - 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
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
About
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
Condensed Consolidated Balance Sheets (in thousands, except share and per share data, unaudited) |
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As of June 30, |
As of December 31, |
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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 |
- Pro forma as adjusted cash, cash equivalents, and short-term investments totaled
$248.7 million as ofJune 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 onJuly 29, 2019 .
Condensed Consolidated Statements of Operations (in thousands, except per share data, unaudited) |
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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 |
- Includes stock-based compensation expense and tender offer payments deemed compensation expense.
Three Months Ended June 30, |
Six Months Ended June 30, |
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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, |
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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
Condensed Consolidated Statements of Cash Flows (in thousands, unaudited) |
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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
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
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
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
- 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.
- 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:
Senior Vice President, Investor Relations
+1 (855)-309-6800
ir@healthcatalyst.com
Health Catalyst Media Contact:
Vice President, Public Relations
+1 (617) 234-4123
+1 (774) 573-0455 (m)
kberry@we-worldwide.com
Source: Health Catalyst, Inc.