News Release

Health Catalyst Reports Third 2022 Results

News Release

Health Catalyst Reports Third Quarter 2022 Results

November 8, 2022 at 4:03 PM EST

SALT LAKE CITY, Nov. 08, 2022 (GLOBE NEWSWIRE) -- Health Catalyst, Inc. ("Health Catalyst," 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, 2022.

“In the third quarter of 2022, 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, and, based on an expanding pipeline and ahead-of-schedule cost reduction efforts, we are also pleased to raise our full year 2022 revenue and Adjusted EBITDA guidance. In addition, we now expect our 2022 dollar-based retention achievement level to be between 97% and 101%, an increase relative to the range we shared last quarter. This incremental confidence is driven by growth in our existing client expansion pipeline relative to prior expectations and a modest reduction in forecasted churn for 2022.” said Dan Burton, CEO of Health Catalyst. “In addition to this financial and operational execution, we held our ninth annual Healthcare Analytics Summit conference in Salt Lake City in September. We viewed this year’s in-person event as highly successful, hosting over a thousand attendees, representing more than 175 existing client and prospective client organizations, and included over 70 representatives from existing client organizations presenting their improvement case studies realized in partnership with Health Catalyst. This year’s Summit was an important opportunity for Health Catalyst to continue to provide thought leadership within the healthcare data and analytics ecosystem, while further cultivating and deepening our relationships with clients and prospects.”

Financial Highlights for the Three Months Ended September 30, 2022

Key Financial Metrics

 Three Months Ended September 30, Year over Year Change

  2022   2021  
GAAP Financial Data:(in thousands, except percentages, unaudited)
Technology revenue$43,997  $38,262  15%
Professional services revenue$24,357  $23,475  4%
Total revenue$68,354  $61,737  11%
Loss from operations$(45,721) $(42,249) (8)%
Net loss$(45,735) $(40,014) (14)%
Other Non-GAAP Financial Data:(1)     
Adjusted Technology Gross Profit$29,993  $26,731  12%
Adjusted Technology Gross Margin 68%  70%  
Adjusted Professional Services Gross Profit$4,970  $4,696  6%
Adjusted Professional Services Gross Margin 20%  20%  
Total Adjusted Gross Profit$34,963  $31,427  11%
Total Adjusted Gross Margin 51%  51%  
Adjusted EBITDA$(4,554) $(5,794) 21%

________________________

(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 2022, we expect:

  • Total revenue between $66.9 million and $68.9 million, and
  • Adjusted EBITDA between $(2.1) million and $(0.1) million

For the full year of 2022, we expect:

  • Total revenue between $274.0 million and $276.0 million, and
  • Adjusted EBITDA between $(4.0) million and $(2.0) 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 forecasted.

Quarterly Conference Call Details

The company will host a conference call to review the results today, Tuesday, November 8, 2022, at 5:00 p.m. E.T. The conference call can be accessed by dialing (800) 225-9448 for U.S. participants, or (203) 518-9708 for international participants, and referencing conference ID “HCAT Q322.” 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 2022. 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 and inflation on our business and results of operations; 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 Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2022 expected to be filed with the SEC on or about November 8, 2022 and the Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022. 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,
  2022   2021 
 (unaudited)  
Assets   
Current assets:   
Cash and cash equivalents$124,224  $193,227 
Short-term investments 255,918   251,754 
Accounts receivable, net 49,544   48,801 
Prepaid expenses and other assets 13,764   14,609 
Total current assets 443,450   508,391 
Property and equipment, net 25,042   23,316 
Intangible assets, net 100,653   104,788 
Operating lease right-of-use assets 17,254   21,133 
Goodwill 185,982   169,972 
Other assets 3,819   4,496 
Total assets$776,200  $832,096 
Liabilities and stockholders’ equity   
Current liabilities:   
Accounts payable$6,816  $4,693 
Accrued liabilities 24,405   23,725 
Deferred revenue 56,381   56,632 
Operating lease liabilities 3,464   3,425 
Contingent consideration liabilities    4,576 
Total current liabilities 91,066   93,051 
Convertible senior notes 226,147   180,942 
Deferred revenue, net of current portion 315   929 
Operating lease liabilities, net of current portion 18,586   20,244 
Contingent consideration liabilities, net of current portion    14,719 
Other liabilities 120   113 
Total liabilities 336,234   309,998 
Commitments and contingencies   
    
Stockholders’ equity:   
Preferred stock, $0.001 par value per share; 25,000,000 shares authorized as of September 30, 2022 and December 31, 2021; no shares issued and outstanding as of September 30, 2022 and December 31, 2021     
Common stock, $0.001 par value per share; 500,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 54,213,795 and 52,622,080 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively 54   53 
Additional paid-in capital 1,404,032   1,400,972 
Accumulated deficit (963,241)  (878,860)
Accumulated other comprehensive loss (879)  (67)
Total stockholders’ equity 439,966   522,098 
Total liabilities and stockholders’ equity$776,200  $832,096 


Condensed Consolidated Statements of Operations
(in thousands, except per share data, unaudited)

 Three Months Ended
September 30,
 Nine Months Ended
September 30,
  2022   2021   2022   2021 
Revenue:       
Technology$43,997  $38,262  $131,624  $107,630 
Professional services 24,357   23,475   75,450   69,580 
Total revenue 68,354   61,737   207,074   177,210 
Cost of revenue, excluding depreciation and amortization shown below:       
Technology(1)(2) 14,572   12,094   41,895   34,766 
Professional services(1)(2)(3) 21,768   20,992   63,048   55,711 
Total cost of revenue, excluding depreciation and amortization 36,340   33,086   104,943   90,477 
Operating expenses:       
Sales and marketing(1)(2)(3) 25,401   20,808   67,141   53,164 
Research and development(1)(2)(3) 20,770   16,385   56,066   45,254 
General and administrative(1)(2)(3)(4) 19,192   23,056   45,551   60,596 
Depreciation and amortization 12,372   10,651   36,633   26,604 
Total operating expenses 77,735   70,900   205,391   185,618 
Loss from operations (45,721)  (42,249)  (103,260)  (98,885)
Interest and other income (expense), net 142   (4,423)  (2,700)  (12,082)
Loss before income taxes (45,579)  (46,672)  (105,960)  (110,967)
Income tax provision (benefit)(2) 156   (6,658)  (4,339)  (6,749)
Net loss$(45,735) $(40,014) $(101,621) $(104,218)
Net loss per share, basic$(0.84) $(0.82) $(1.89) $(2.27)
Net loss per share, diluted$(0.84) $(0.82) $(1.97) $(2.27)
Weighted-average shares outstanding used in calculating net loss per share, basic 54,304   48,999   53,667   45,937 
Weighted-average shares outstanding used in calculating net loss per share, diluted 54,304   48,999   54,025   45,937 

_______________

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

 Three Months Ended September 30, Nine Months Ended September 30,
  2022  2021  2022  2021
Stock-Based Compensation Expense:(in thousands) (in thousands)
Cost of revenue, excluding depreciation and amortization:       
Technology        $494 $533 $1,563 $1,481
Professional services         1,991  2,149  6,082  5,866
Sales and marketing         7,037  6,098  20,925  16,848
Research and development         3,390  2,510  9,643  7,443
General and administrative         4,392  6,197  15,143  17,086
Total        $17,304 $17,487 $53,356 $48,724

(2) Includes acquisition-related costs (benefit), net, as follows:

 Three Months Ended September 30, Nine Months Ended September 30,
  2022  2021   2022   2021 
Acquisition-related costs (benefit), net:(in thousands) (in thousands)
Cost of revenue, excluding depreciation and amortization:       
Technology        $74 $30  $267  $30 
Professional services         143  64   509   64 
Sales and marketing         367  296   1,557   296 
Research and development         693  455   2,358   455 
General and administrative         2,015  5,672   (1,503)  15,942 
Income tax provision (benefit)        $ $(6,829) $(4,533) $(6,829)
Total        $3,292 $(312) $(1,345) $9,958 

(3) Includes restructuring costs, as follows:  

 Three Months Ended September 30, Nine Months Ended September 30,
  2022  2021  2022  2021
Restructuring costs:(in thousands) (in thousands)
Cost of revenue, excluding depreciation and amortization:       
Professional services        $247 $ $247 $
Sales and marketing         1,559    1,559  
Research and development         2,257    2,257  
General and administrative         436    436  
Total        $4,499 $ $4,499 $

(4) Includes non-recurring lease-related charges, as follows:

 Three Months Ended September 30, Nine Months Ended September 30,
 2022 2021 2022 2021
Non-recurring lease-related charges:(in thousands) (in thousands)
General and administrative        3,700 1,800 3,700 1,800

Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)

 Nine Months Ended
September 30,
  2022   2021 
Cash flows from operating activities   
Net loss        $        (101,621) $        (104,218)
Adjustments to reconcile net loss to net cash used in operating activities:   
Stock-based compensation expense         53,356   48,724 
Depreciation and amortization         36,633   26,604 
Impairment of long-lived assets         4,925   1,800 
Non-cash operating lease expense         2,458   3,165 
Amortization of debt discount and issuance costs         1,124   8,843 
Amortization of investment discount and premium         (608)  678 
Provision for expected credit losses         700   698 
Deferred tax benefit         (4,527)  (6,823)
Change in fair value of contingent consideration liabilities (4,668)  13,655 
Other (71)  (17)
Change in operating assets and liabilities:   
Accounts receivable, net         (800)  1,021 
Prepaid expenses and other assets         2,020   (2,131)
Accounts payable, accrued liabilities, and other liabilities         873   3,281 
Deferred revenue         (4,365)  6,540 
Contingent consideration liabilities         (3,234)  (11,766)
Operating lease liabilities         (2,644)  (3,402)
Net cash used in operating activities         (20,449)  (13,348)
    
Cash flows from investing activities   
Proceeds from the sale and maturity of short-term investments         270,171   186,893 
Purchase of short-term investments         (274,529)  (188,407)
Acquisition of business, net of cash acquired         (27,846)  (46,763)
Capitalization of internal-use software         (10,024)  (3,641)
Purchase of intangible assets         (1,317)  (1,269)
Purchases of property and equipment         (1,752)  (9,827)
Proceeds from the sale of property and equipment         20   19 
Net cash used in investing activities         (45,277)  (62,995)
    
Cash flows from financing activities   
Repurchase of common stock         (8,393)   
Proceeds from exercise of stock options         3,927   17,303 
Proceeds from employee stock purchase plan         2,558   3,975 
Payments of acquisition-related consideration         (1,342)  (6,290)
Proceeds from public offering, net of discounts, commissions, and offering costs            245,180 
Net cash (used in) provided by financing activities         (3,250)  260,168 
Effect of exchange rate changes on cash and cash equivalents         (27)  (14)
Net (decrease) increase in cash and cash equivalents (69,003)  183,811 
    
Cash and cash equivalents at beginning of period 193,227   91,954 
Cash and cash equivalents at end of period 124,224   275,765 

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. For example, we exclude stock-based compensation expense because it is non-cash in nature and excluding this expense provides meaningful supplemental information regarding our operational performance and allows investors the ability to make more meaningful comparisons between our operating results and those of other companies. 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, adding back stock-based compensation, acquisition-related costs, net, and restructuring costs as applicable. 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, 2022 and 2021:

 Three Months Ended September 30, 2022
 (in thousands, except percentages)
 Technology Professional Services Total
Revenue$43,997  $24,357  $68,354 
Cost of revenue, excluding depreciation and amortization (14,572)  (21,768)  (36,340)
Gross profit, excluding depreciation and amortization 29,425   2,589   32,014 
Add:     
Stock-based compensation 494   1,991   2,485 
Acquisition-related costs, net(1) 74   143   217 
Restructuring costs(2)    247   247 
Adjusted Gross Profit$29,993  $4,970  $34,963 
Gross margin, excluding depreciation and amortization 67%  11%  47%
Adjusted Gross Margin 68%  20%  51%

___________________
(1) Acquisition-related costs, net include deferred retention expenses following the ARMUS, KPI Ninja, and Twistle acquisitions.
(2) Restructuring costs include severance and other team member costs from workforce reductions.

 Three Months Ended September 30, 2021
 (in thousands, except percentages)
 Technology Professional Services Total
Revenue$38,262  $23,475  $61,737 
Cost of revenue, excluding depreciation and amortization (12,094)  (20,992)  (33,086)
Gross profit, excluding depreciation and amortization 26,168   2,483   28,651 
Add:     
Stock-based compensation 533   2,149   2,682 
Acquisition-related costs, net(1) 30   64   94 
Adjusted Gross Profit$26,731  $4,696  $31,427 
Gross margin, excluding depreciation and amortization 68%  11%  46%
Adjusted Gross Margin 70%  20%  51%

___________________
(1) Acquisition-related costs, net includes deferred retention expenses and post-acquisition restructuring costs incurred as part of business combinations.

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) income tax provision (benefit), (iii) depreciation and amortization, (iv) stock-based compensation, (v) acquisition-related costs, net, including the change in fair value of contingent consideration liabilities, (vi) restructuring costs, and (vii) non-recurring lease-related charges. We view acquisition-related expenses when applicable, such as transaction costs and changes in the fair value of contingent consideration liabilities that are directly related to business combinations as costs that are unpredictable, dependent upon factors outside of our control, and are not necessarily reflective of operational performance during a period. We believe Adjusted EBITDA provides investors with useful information on period-to-period performance as evaluated by management and a 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, 2022 and 2021:

 Three Months Ended September 30,
  2022   2021 
 (in thousands)
Net loss        $(45,735) $(40,014)
Add:   
Interest and other (income) expense, net         (142)  4,423 
Income tax provision (benefit)         156   (6,658)
Depreciation and amortization         12,372   10,651 
Stock-based compensation         17,304   17,487 
Acquisition-related costs, net(1)         3,292   6,517 
Restructuring cost(2)         4,499    
Non-recurring lease-related charges(3)         3,700   1,800 
Adjusted EBITDA        $(4,554) $(5,794)

_______________
(1) Acquisition-related costs, net includes third-party fees associated with due diligence, deferred retention expenses, post-acquisition restructuring costs incurred as part of business combinations, and changes in fair value of contingent consideration liabilities for potential earn-out payments. For additional details refer to Note 2 in our condensed consolidated financial statements.
(2) Restructuring costs include severance and other team member costs from workforce reductions, impairment of discontinued capitalized software projects, and other minor miscellaneous charges. For additional details refer to Note 18 in our condensed consolidated financial statements.
(3) Includes the lease-related impairment charge for the subleased portion of our corporate headquarters.

Adjusted Net Loss and Adjusted Net Loss Per Share

Adjusted Net Loss is a non-GAAP financial measure that we define as net loss adjusted for (i) stock-based compensation, (ii) amortization of acquired intangibles, (iii) acquisition-related costs (benefit), net, including the change in fair value of contingent consideration liabilities and the deferred tax valuation allowance release from acquisitions, (iv) restructuring costs, and (v) non-cash interest expense related to our convertible senior notes. 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.

 Three Months Ended
September 30,
 Nine Months Ended
September 30,
  2022   2021   2022   2021 
Numerator:(in thousands, except share and per share amounts)
Net loss$(45,735) $(40,014) $(101,621) $(104,218)
Add:       
Stock-based compensation 17,304   17,487   53,356   48,724 
Amortization of acquired intangibles 9,400   8,965   28,724   23,091 
Acquisition-related costs (benefit), net(1) 3,292   (312)  (1,345)  9,958 
Restructuring costs 4,499      4,499    
Non-recurring lease-related charges 3,700   1,800   3,700   1,800 
Non-cash interest expense related to convertible senior notes 375   3,026   1,124   8,843 
Adjusted Net Loss$(7,165) $(9,048) $(11,563) $(11,802)
Denominator:       
Weighted-average number of shares used in calculating net loss per share, basic 54,303,667   48,998,548   53,666,667   45,937,227 
Weighted-average number of shares used in calculating net loss per share, diluted 54,303,667   48,998,548   54,024,697   45,937,227 
        
Adjusted Net Loss per share, basic and diluted$(0.13) $(0.18) $(0.22) $(0.26)

______________
(1) Acquisition-related costs (benefit), net includes third-party fees associated with due diligence, deferred retention expenses, post-acquisition restructuring costs incurred as part of business combinations, changes in fair value of contingent consideration liabilities for potential earn-out payments, and the deferred tax valuation allowance release from acquisitions. For additional details refer to Note 2 in our condensed consolidated financial statements.

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

Health Catalyst Media Contact:
Tarah Neujahr Bryan
Chief Marketing Officer
media@healthcatalyst.com