News Release

Health Catalyst Reports Third Quarter 2020 Results

News Release

Health Catalyst Reports Third Quarter 2020 Results

November 10, 2020 at 4:05 PM EST

SALT LAKE CITY, Nov. 10, 2020 (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 quarter ended September 30, 2020.

“In the third quarter of 2020, I am pleased to share that we achieved strong performance across our business, including exceeding the mid-point of our quarterly guidance for both revenue and Adjusted EBITDA,” said Dan Burton, CEO of Health Catalyst. “In addition to this financial and operational execution, we are excited to announce the promotion of Patrick Nelli, our current Chief Financial Officer, to the role President of Health Catalyst, effective January 1, 2021. Patrick's responsibilities as President will include all the major growth functions of the company, including with existing customers, new customers, international expansion, sales operations, marketing and communications. Additionally, I am pleased to announce the promotion of Bryan Hunt, our current Senior Vice President of Financial Planning & Analysis to the role of Chief Financial Officer, effective January 1, 2021. Patrick and Bryan, in their newly appointed roles, have my full support and confidence and the unanimous support and confidence of our board of directors. Lastly, I would also like to share two additional promotions related to these changes. Jason Alger, our Senior Vice President of Finance, has been promoted to Chief Accounting Officer, and Adam Brown, our Senior Vice President of Investor Relations, has been promoted to Senior Vice President of Investor Relations and Finance Planning & Analysis.”

Financial Highlights for the Three Months Ended September 30, 2020 

Key Financial Metrics

  Three Months Ended
September 30,
  Year over Year Change
  2020   2019  
GAAP Financial Data: (in thousands, except percentages)
Technology revenue $ 27,964       $ 21,160       32%
Professional services revenue $ 19,227       $ 18,263       5%
Total revenue $ 47,191       $ 39,423       20%
Loss from operations $ (23,458 )     $ (20,736 )     (13)%
Net loss $ (27,326 )     $ (21,416 )     (28)%
Other Non-GAAP Financial Data:(1)          
Adjusted Technology Gross Profit $ 19,115       $ 14,484       32%
Adjusted Technology Gross Margin 68   %   68   %    
Adjusted Professional Services Gross Profit $ 4,823       $ 6,677       (28)%
Adjusted Professional Services Gross Margin 25   %   37   %    
Total Adjusted Gross Profit $ 23,938       $ 21,161       13%
Total Adjusted Gross Margin 51   %   54   %    
Adjusted EBITDA $ (6,434 )     $ (8,446 )     24%

________________________
(1)  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 below 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 fourth quarter of 2020, we expect:

  • Total revenue between $50.5 million and $53.5 million, and
  • Adjusted EBITDA between $(7.3) million and $(5.3) million

For the full year of 2020, we expect:

  • Total revenue between $186.1 million and $189.1 million, and
  • Adjusted EBITDA between $(23.9) million and $(21.9) 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, including stock-based compensation, that are not within our control or cannot be reasonably predicted.

Quarterly Conference Call Details

The company will host a conference call to review the results today, Tuesday, November 10, 2020 at 5:00 p.m. E.T. 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 7195951. A live audio webcast will be available online at https://ir.healthcatalyst.com/. 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.

Available Information

Health Catalyst intends to use its Investor Relations website as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

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 Q4 and fiscal year 2020. 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; (v) the impact of COVID-19 on our business and results of operation; and (vi) 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 Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 28, 2020 and the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2020 expected to be filed with the SEC on or about November 10, 2020.  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
September 30,
  As of
December 31,
  2020   2019
Assets      
Current assets:      
Cash and cash equivalents $ 111,239     $ 18,032  
Short-term investments 163,898     210,245  
Accounts receivable, net 36,339     27,570  
Prepaid expenses and other assets 11,290     8,392  
Total current assets 322,766     264,239  
Property and equipment, net 5,319     4,295  
Intangible assets, net 105,926     25,535  
Operating lease right-of-use assets 25,833     3,787  
Goodwill 107,822     3,694  
Other assets 2,997     810  
Total assets $ 570,663     $ 302,360  
Liabilities and stockholders’ equity      
Current liabilities:      
Accounts payable $ 5,189     $ 3,622  
Accrued liabilities 14,061     8,944  
Acquisition-related consideration payable 3,214     2,192  
Deferred revenue 35,090     30,653  
Operating lease liabilities 2,425     2,806  
Contingent consideration liabilities 5,893      
Total current liabilities 65,872     48,217  
Long-term debt, net of current portion 166,200     48,200  
Acquisition-related consideration payable, net of current portion     1,860  
Deferred revenue, net of current portion 1,635     1,459  
Operating lease liabilities, net of current portion 24,245     1,654  
Contingent consideration liabilities, net of current portion 10,279      
Other liabilities 2,817     326  
Total liabilities 271,048     101,716  
Commitments and contingencies      
Stockholders’ equity:      
Common stock, $0.001 par value; 42,239,922 and 36,678,854 shares issued and outstanding as
 of September 30, 2020 and December 31, 2019, respectively
42     37  
Additional paid-in capital 982,139     811,049  
Accumulated deficit (682,632 )   (610,514 )
Accumulated other comprehensive income 66     72  
Total stockholders' equity 299,615     200,644  
Total liabilities and stockholders’ equity $ 570,663     $ 302,360  
               



 
Condensed Consolidated Statements of Operations
(in thousands, except per share data, unaudited)
 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2020   2019   2020   2019
Revenue:              
Technology $ 27,964     $ 21,160     $ 78,150     $ 61,393  
Professional services 19,227     18,263     57,416     50,047  
Total revenue 47,191     39,423     135,566     111,440  
Cost of revenue, excluding depreciation and amortization:              
Technology(1) 9,045     6,740     25,148     20,536  
Professional services(1)(3) 15,307     11,892     46,401     33,132  
Total cost of revenue, excluding depreciation and amortization 24,352     18,632     71,549     53,668  
Operating expenses:              
Sales and marketing(1)(3) 14,629     14,721     40,618     35,579  
Research and development(1)(3) 13,390     13,477     38,539     33,209  
General and administrative(1)(2)(4)(5) 13,297     11,013     31,111     23,333  
Depreciation and amortization 4,981     2,316     10,952     6,844  
Total operating expenses 46,297     41,527     121,220     98,965  
Loss from operations (23,458 )   (20,736 )   (57,203 )   (41,193 )
Loss on extinguishment of debt         (8,514 )   (1,670 )
Interest and other expense, net (3,854 )   (659 )   (7,500 )   (2,924 )
Loss before income taxes (27,312 )   (21,395 )   (73,217 )   (45,787 )
Income tax provision (benefit) 14     21     (1,218 )   43  
Net loss $ (27,326 )   $ (21,416 )   $ (71,999 )   $ (45,830 )
Less: accretion of redeemable convertible preferred stock     18,170         180,826  
Net loss attributable to common stockholders $ (27,326 )   $ (39,586 )   $ (71,999 )   $ (226,656 )
Net loss per share attributable to common stockholders, basic and diluted $ (0.68 )   $ (1.40 )   $ (1.87 )   $ (17.78 )
Weighted-average shares outstanding used in calculating net
 loss per share attributable to common stockholders, basic and diluted
40,292     28,223     38,517     12,750  
Adjusted net loss(6) $ (8,287 )   $ (9,817 )   $ (20,110 )   $ (26,014 )
Pro forma adjusted net loss per share, basic and diluted(6) $ (0.21 )   $ (0.27 )   $ (0.52 )   $ (0.72 )
Pro forma as adjusted weighted-average number of shares
 outstanding used in calculating Adjusted Net Loss per share, basic and diluted(6)
40,292     36,373     38,517     36,183  

_______________

(1)  Includes stock-based compensation expense as follows:

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2020   2019   2020   2019
Stock-Based Compensation Expense: (in thousands)   (in thousands)
Cost of revenue, excluding depreciation and amortization:              
Technology $ 196   $ 64   $ 575   $ 129
Professional services 903   306   2,609   593
Sales and marketing 3,233   1,358   9,724   2,639
Research and development 2,025   3,067   5,987   3,502
General and administrative 3,139   5,179   8,388   6,165
Total $ 9,496   $ 9,974   $ 27,283   $ 13,028

(2)   Includes acquisition transaction costs as follows:

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2020   2019   2020   2019
Acquisition transaction costs: (in thousands)   (in thousands)
General and administrative $ 1,399   $   $ 2,670   $
Total $ 1,399   $   $ 2,670   $

(3)   Includes post-acquisition restructuring costs as follows:

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2020   2019   2020   2019
Post-Acquisition Restructuring Costs: (in thousands)   (in thousands)
Cost of revenue, excluding depreciation and amortization:              
Professional services $   $   $   $ 108
Sales and marketing       306
Research and development       32
Total $   $   $   $ 446

(4)   Includes the change in fair value of contingent consideration liabilities, as follows:

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2020   2019   2020   2019
Change in fair value of contingent consideration liabilities: (in thousands)   (in thousands)
General and administrative $ 564   $   $ (1,004 )   $
Total $ 564   $   $ (1,004 )   $

(5)   Includes duplicate headquarters rent expense, as follows:

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2020   2019   2020   2019
Duplicate Headquarters Rent Expense: (in thousands)   (in thousands)
General and administrative $ 584   $   $ 709   $
Total $ 584   $   $ 709   $

(6)   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)
 
  Nine Months Ended
September 30,
Cash flows from operating activities 2020   2019
Net loss $ (71,999 )   $ (45,830 )
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization 10,952     6,844  
Loss on extinguishment of debt 8,514     1,670  
Amortization of debt discount and issuance costs 5,260     797  
Non-cash operating lease expense 2,865     2,696  
Investment discount and premium amortization 854     (443 )
Provision for expected credit losses 822      
Stock-based compensation expense 27,283     13,028  
Deferred tax (benefit) provision (1,280 )    
Change in fair value of contingent consideration liabilities (1,004 )    
Other 85     (36 )
Change in operating assets and liabilities:      
Accounts receivable, net (4,450 )   (3,323 )
Prepaid expenses and other assets (2,937 )   (1,362 )
Accounts payable, accrued liabilities, and other liabilities 6,567     1,661  
Deferred revenue (838 )   7,601  
Operating lease liabilities (2,701 )   (2,426 )
Net cash used in operating activities (22,007 )   (19,123 )
       
Cash flows from investing activities      
Purchase of short-term investments (163,346 )   (221,444 )
Proceeds from the sale and maturity of short-term investments 208,467     37,277  
Acquisition of businesses, net of cash acquired (102,471 )    
Purchase of property and equipment (2,071 )   (1,658 )
Purchase of intangible assets (1,249 )   (1,747 )
Proceeds from sale of property and equipment 10     40  
Net cash used in investing activities (60,660 )   (187,532 )
       
Cash flows from financing activities      
Proceeds from convertible note securities, net of issuance costs 222,482      
Purchase of capped calls concurrent with issuance of convertible senior notes (21,743 )    
Proceeds from credit facilities, net of debt issuance costs     47,169  
Repayment of credit facilities (57,043 )   (21,821 )
Proceeds from exercise of stock options 29,393     2,177  
Proceeds from employee stock purchase plan 3,528     1,216  
Payments of acquisition-related consideration (748 )   (773 )
Proceeds from initial public offering, net of underwriters’ discounts and commissions     194,649  
Proceeds from the issuance of redeemable convertible preferred stock, net of issuance costs     12,073  
Payments of deferred offering costs     (4,407 )
Net cash provided by financing activities 175,869     230,283  
Effect of exchange rate on cash and cash equivalents 5      
Net increase in cash and cash equivalents 93,207     23,628  
       
Cash and cash equivalents at beginning of period 18,032     28,431  
Cash and cash equivalents at end of period $ 111,239     $ 52,059  
               

Non-GAAP Financial Measures

To supplement our financial information presented in accordance with 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 (i) stock-based compensation and (ii) post-acquisition restructuring costs (none during periods presented). 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 September 30, 2020 and 2019:

  Three Months Ended September 30, 2020
  (in thousands, except percentages)
  Technology   Professional Services   Total
Revenue $ 27,964       $ 19,227       $ 47,191    
Cost of revenue, excluding depreciation and amortization (9,045 )     (15,307 )     (24,352 )  
Gross profit, excluding depreciation and amortization 18,919       3,920       22,839    
Add:          
Stock-based compensation 196       903       1,099    
Adjusted Gross Profit $ 19,115       $ 4,823       $ 23,938    
Gross margin, excluding depreciation and amortization 68   %   20   %   48   %
Adjusted Gross Margin 68   %   25   %   51   %


  Three Months Ended September 30, 2019
  (in thousands, except percentages)
  Technology   Professional Services   Total
Revenue $ 21,160       $ 18,263       $ 39,423    
Cost of revenue, excluding depreciation and amortization (6,740 )     (11,892 )     (18,632 )  
Gross profit, excluding depreciation and amortization 14,420       6,371       20,791    
Add:          
Stock-based compensation 64       306       370    
Adjusted Gross Profit $ 14,484       $ 6,677       $ 21,161    
Gross margin, excluding depreciation and amortization 68   %   35   %   53   %
Adjusted Gross Margin 68   %   37   %   54   %
                       

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted for (i) interest and other expense, net, (ii) loss on extinguishment of debt (none in periods presented), (iii) income tax (benefit) provision, (iv) depreciation and amortization, (v) stock-based compensation, (vi) acquisition transaction costs, (vii) change in fair value of contingent consideration liability, (viii) duplicate headquarters rent expense, and (ix) post-acquisition restructuring costs when they are incurred. 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 September 30, 2020 and 2019:

  Three Months Ended
September 30,
  2020   2019
  (in thousands)
Net loss $ (27,326 )   $ (21,416 )
Add:      
Interest and other expense, net 3,854     659  
Income tax (benefit) provision 14     21  
Depreciation and amortization 4,981     2,316  
Stock-based compensation 9,496     9,974  
Acquisition transaction costs 1,399      
Change in fair value of contingent consideration liability 564      
Duplicate headquarters rent expense 584      
Adjusted EBITDA $ (6,434 )   $ (8,446 )
               

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 (i) accretion of redeemable convertible preferred stock, (ii) stock-based compensation, (iii) amortization of acquired intangibles, (iv) loss on debt extinguishment, (v) acquisition transaction costs, (vi) change in fair value of contingent consideration liability, (vii) non-cash interest expense related to our convertible senior notes, (viii) duplicate headquarters rent expense (see explanation above), and (ix) post-acquisition restructuring costs. Non-cash interest expense related to our convertible senior notes relates to the convertible senior notes that were issued in a private placement in April 2020. Under GAAP, we are required to separately account for liability (debt) and equity (conversion option) components of the convertible senior notes. Accordingly, for GAAP purposes we are required to recognize the effective interest expense on our convertible senior notes and amortize the issuance costs over the term of the notes. The difference between the effective interest expense and the contractual interest expense, and the amortization expense of issuance costs are excluded from management’s assessment of our operating performance because management believes that these non-cash expenses are not indicative of ongoing operating performance.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) 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 offering costs of $4.6 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. We have prepared the below adjusted condensed consolidated statement of operations data to present pro forma adjusted net loss per share amounts that will be comparable between the current and prior periods presented as if the conversion of all outstanding shares of redeemable convertible preferred stock and the issuance of the IPO shares had occurred as of the beginning of the prior year comparative periods.

  Three Months Ended September 30,   Nine Months Ended September 30,
  2020   2019   2020   2019
Numerator: (in thousands, except share and per share amounts)
Net loss attributable to common stockholders $ (27,326 )   $ (39,586 )   $ (71,999 )   $ (226,656 )
Add              
Accretion of redeemable convertible preferred stock     18,170         180,826  
Stock-based compensation 9,496     9,974     27,283     13,028  
Amortization of acquired intangibles 4,276     1,625     8,786     4,672  
Loss on extinguishment of debt         8,514     1,670  
Acquisition transaction costs 1,399         2,670      
Change in fair value of contingent consideration liability 564         (1,004 )    
Non-cash interest expense related to convertible senior notes 2,720         4,931      
Duplicate headquarters rent expense 584         709      
Post-acquisition restructuring costs             446  
Adjusted Net Loss $ (8,287 )   $ (9,817 )   $ (20,110 )   $ (26,014 )
Denominator:              
Weighted-average number of shares used in
 calculating net loss per share attributable to
 common stockholders, basic and diluted
40,292,380     28,222,555     38,517,272     12,749,903  
Pro forma adjustments              
Pro forma adjustment to reflect issuance and
 conversion of redeemable convertible
 preferred stock to common stock, assuming
 the conversion took place as of
 the beginning of the 2019 period
    6,039,517         17,384,812  
Pro forma adjustment to reflect issuance of
 shares of common stock as part of IPO,
 assuming the issuance took place as of the
 beginning of the 2019 period
    2,111,413         6,048,718  
Pro forma as adjusted weighted-average
 number of shares used in calculating
 Adjusted Net Loss per share, basic and diluted
40,292,380     36,373,485     38,517,272     36,183,433  
Pro forma adjusted net loss per share, basic and diluted $ (0.21 )   $ (0.27 )   $ (0.52 )   $ (0.72 )


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

Health Catalyst Media Contact:
Amanda Hundt
amanda.hundt@healthcatalyst.com
+1 (575) 491-0974


Health Catalyst.jpg

Source: Health Catalyst, Inc.