^[1]

14,721

13,771

35,579

32,496

^[1]

13,477

10,839

33,209

28,031

^[1]

11,013

5,605

23,333

16,748

Loss on extinguishment of debt

^[1]

2,316

2,151

6,844

5,252

Total operating expenses

41,527

32,366

98,965

82,527

Loss from operations

(20,736)

(16,495)

(41,193)

(47,162)

(1,670)

Interest and other expense, net

(659)

(374)

(2,924)

(1,389)

Net loss before income taxes

(21,395)

(16,869)

(45,787)

(48,551)

Income tax provision (benefit)

(142)

Net loss

(21,416)

(16,876)

(45,830)

(48,409)

Less: accretion (reversal of accretion) of redeemable convertible preferred stock

18,170

514

180,826

(12,045)

Net loss attributable to common stockholders

$ (39,586)

$ (17,390)

$ (226,656)

$ (36,364)

Net loss per share attributable to common stockholders, basic and diluted (in USD per share)

$ (1.40)

$ (3.71)

$ (17.78)

$ (7.56)

Weighted-average number of shares used in calculating net loss per share attributable to common stockholders, basic and diluted

28,222,555

4,685,633

12,749,903

4,812,890

Technology

Revenue:

Revenue

^[1]

$ 21,160

$ 18,283

$ 61,393

$ 38,459

Cost of revenue, excluding depreciation and amortization:

Total cost of revenue, excluding depreciation and amortization

^[1]

6,740

6,132

20,536

12,782

Professional services

Revenue:

Revenue

^[1]

18,263

14,585

50,047

38,031

Cost of revenue, excluding depreciation and amortization:

Total cost of revenue, excluding depreciation and amortization

^[1]

$ 11,892

$ 10,865

$ 33,132

$ 28,343

[1]	Includes amounts attributable to related party transactions. See Note 17 for further details.

Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Statement of Comprehensive Income [Abstract]
Net loss	$ (21,416)	$ (16,876)	$ (45,830)	$ (48,409)
Other comprehensive loss:
Unrealized gain (loss) on investments	(21)	9	(11)	8
Comprehensive loss	$ (21,437)	$ (16,867)	$ (45,841)	$ (48,401)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)	IPO	IPO Common Stock	IPO Additional Paid-In Capital
Redeemable Convertible Preferred Stock, beginning balance (in shares) at Dec. 31, 2017	21,109,771
Redeemable Convertible Preferred Stock, beginning balance at Dec. 31, 2017	$ 321,569
Increase (Decrease) in Temporary Equity [Roll Forward]
Accretion of redeemable convertible preferred stock	$ 12,045
Issuance of redeemable convertible preferred stock, net of issuance costs (in shares)	1,603,923
Issuance of redeemable convertible preferred stock, net of issuance costs	$ 36,239
Accretion of redeemable convertible preferred stock	$ 12,045
Redeemable Convertible Preferred Stock, ending balance (in shares) at Sep. 30, 2018	22,713,694
Redeemable Convertible Preferred Stock, ending balance at Sep. 30, 2018	$ 345,763
Common Stock, beginning balance (in shares) at Dec. 31, 2017		4,853,841
Stockholders' equity (deficit), beginning balance at Dec. 31, 2017	(259,475)	$ 5	$ 0	$ (259,468)	$ (12)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options (in shares)		677,311
Exercise of stock options	2,800	$ 1	2,799
Repurchase of common stock (in shares)		(798,372)
Repurchase of common stock	(8,712)	$ (1)	(8,711)
Stock-based compensation	2,887		2,887
Net loss	(48,409)			(48,409)
Other comprehensive gain (loss)	8				8
Accretion of redeemable convertible preferred stock	12,045		12,045
Common Stock, ending balance (in shares) at Sep. 30, 2018		4,732,780
Stockholders' equity (deficit), ending balance at Sep. 30, 2018	$ (298,856)	$ 5	9,020	(307,877)	(4)
Redeemable Convertible Preferred Stock, beginning balance (in shares) at Jun. 30, 2018	22,713,694
Redeemable Convertible Preferred Stock, beginning balance at Jun. 30, 2018	$ 345,249
Increase (Decrease) in Temporary Equity [Roll Forward]
Accretion of redeemable convertible preferred stock	$ 514
Redeemable Convertible Preferred Stock, ending balance (in shares) at Sep. 30, 2018	22,713,694
Redeemable Convertible Preferred Stock, ending balance at Sep. 30, 2018	$ 345,763
Common Stock, beginning balance (in shares) at Jun. 30, 2018		4,671,405
Stockholders' equity (deficit), beginning balance at Jun. 30, 2018	(282,614)	$ 5	8,395	(291,001)	(13)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options (in shares)		61,375
Exercise of stock options	206	$ 0	206
Stock-based compensation	933		933
Net loss	(16,876)			(16,876)
Other comprehensive gain (loss)	9				9
Accretion of redeemable convertible preferred stock	514		514
Common Stock, ending balance (in shares) at Sep. 30, 2018		4,732,780
Stockholders' equity (deficit), ending balance at Sep. 30, 2018	$ (298,856)	$ 5	9,020	(307,877)	(4)
Redeemable Convertible Preferred Stock, beginning balance (in shares) at Dec. 31, 2018	22,713,694
Redeemable Convertible Preferred Stock, beginning balance at Dec. 31, 2018	$ 409,845
Increase (Decrease) in Temporary Equity [Roll Forward]
Accretion of redeemable convertible preferred stock	$ 180,826
Issuance of redeemable convertible preferred stock, net of issuance costs (in shares)	437,787
Issuance of redeemable convertible preferred stock, net of issuance costs	$ 12,073
Redeemable Convertible Preferred Stock, ending balance (in shares) at Sep. 30, 2019	0
Redeemable Convertible Preferred Stock, ending balance at Sep. 30, 2019	$ 0
Common Stock, beginning balance (in shares) at Dec. 31, 2018	4,832,134	4,779,356
Stockholders' equity (deficit), beginning balance at Dec. 31, 2018	$ (374,768)	$ 5	0	(374,772)	(1)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options (in shares)	301,427	301,427
Exercise of stock options	$ 2,177		2,177
Stock-based compensation	13,028		13,028
Accretion of redeemable convertible preferred stock	$ (180,826)		(5,180)	(175,646)
Conversion of redeemable convertible preferred stock (in shares)	23,151,481	23,151,481
Conversion of redeemable convertible preferred stock	$ 602,744	$ 23	602,721
Initial public offering, net of underwriters’ discounts and commissions and offering costs						$ 190,039	$ 8	$ 190,031
Exercise of common stock warrants (in shares)		189,959					8,050,000
Net loss	(45,830)			(45,830)
Other comprehensive gain (loss)	(11)				(11)
Common Stock, ending balance (in shares) at Sep. 30, 2019		36,472,223
Stockholders' equity (deficit), ending balance at Sep. 30, 2019	$ 206,553	$ 36	802,777	(596,248)	(12)
Redeemable Convertible Preferred Stock, beginning balance (in shares) at Jun. 30, 2019	23,151,481
Redeemable Convertible Preferred Stock, beginning balance at Jun. 30, 2019	$ 584,574
Increase (Decrease) in Temporary Equity [Roll Forward]
Accretion of redeemable convertible preferred stock	$ 18,170
Redeemable Convertible Preferred Stock, ending balance (in shares) at Sep. 30, 2019	0
Redeemable Convertible Preferred Stock, ending balance at Sep. 30, 2019	$ 0
Common Stock, beginning balance (in shares) at Jun. 30, 2019		5,002,426
Stockholders' equity (deficit), beginning balance at Jun. 30, 2019	(557,149)	$ 5	0	(557,163)	9
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options (in shares)		78,357
Exercise of stock options	552		552
Stock-based compensation	9,974		9,974
Accretion of redeemable convertible preferred stock	$ (18,170)		(501)	(17,669)
Conversion of redeemable convertible preferred stock (in shares)	23,151,481	23,151,481
Conversion of redeemable convertible preferred stock	$ 602,744	$ 23	602,721
Initial public offering, net of underwriters’ discounts and commissions and offering costs						$ 190,039	$ 8	$ 190,031
Exercise of common stock warrants (in shares)		189,959					8,050,000
Net loss	(21,416)			(21,416)
Other comprehensive gain (loss)	(21)				(21)
Common Stock, ending balance (in shares) at Sep. 30, 2019		36,472,223
Stockholders' equity (deficit), ending balance at Sep. 30, 2019	$ 206,553	$ 36	$ 802,777	$ (596,248)	$ (12)

Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands

9 Months Ended

Sep. 30, 2019

Sep. 30, 2018

Cash flows from operating activities

Net loss

$ (45,830)

$ (48,409)

Adjustments to reconcile net loss to net cash used in operating activities:

Loss on extinguishment of debt

^[1]

6,844

5,252

1,670

Amortization of debt discount and issuance costs

797

393

Investment discount and premium amortization

(443)

(120)

Change in fair value of warrant liability

(37)

Gain on sale of property and equipment

(36)

(21)

Stock-based compensation expense

13,028

2,887

Change in operating assets and liabilities:

Accounts receivable, net

(3,323)

(1,206)

Deferred costs

(329)

191

Prepaid expenses and other assets

(1,033)

(650)

Operating lease right-of-use assets

1,850

(3,957)

Accounts payable, accrued liabilities, and other liabilities

1,661

7,518

Deferred revenue

7,601

7,415

Operating lease liabilities

(1,580)

3,434

Net cash used in operating activities

(19,123)

(27,310)

Cash flows from investing activities

Purchases of property and equipment

(1,658)

(760)

Proceeds from the sale of property and equipment

Purchase of short-term investments

(221,444)

(9,234)

Proceeds from the sale and maturity of short-term investments

37,277

26,700

Purchase of intangible assets

(1,747)

(18)

Net cash (used in) provided by investing activities

(187,532)

16,709

Cash flows from financing activities

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

33,987

Proceeds from exercise of stock options

2,177

2,800

Proceeds from employee stock purchase plan

1,216

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)

(12,348)

Payments of deferred offering costs

(4,407)

Net cash provided by financing activities

230,283

15,727

Net increase in cash and cash equivalents

23,628

5,126

Cash and cash equivalents at beginning of period

28,431

22,978

Cash and cash equivalents at end of period

52,059

28,104

Supplemental disclosures of non-cash investing and financing information

Redeemable convertible preferred stock accretion (reversal of accretion)

180,826

Redeemable convertible preferred stock accretion (reversal of accretion)

(180,826)

(12,045)

Deferred offering costs included in accounts payable and accrued liabilities

203

Series E redeemable convertible preferred stock allocated to business combination

2,252

Purchase of intangible assets included in accounts payable and accrued liabilities

1,304

Purchase of property and equipment included in accounts payable and accrued liabilities

155

Supplemental disclosures of cash flow information related to leases

Cash paid for operating lease liabilities in operating cash flows

2,426

2,320

Operating lease right-of-use assets obtained in exchange for operating lease obligations

$ 581

$ 5,544

Stockholders’ Equity (Deficit)

Amendment and Restatement of Certificate of Incorporation

In connection with the IPO, the certificate of incorporation of Health Catalyst was amended and restated to, among other things, provide for the (i) authorization of 500,000,000 shares of common stock with a par value of $0.001 per share; (ii) authorization of 25,000,000 shares of undesignated preferred stock that may be issued from time to time; and (iii) establishment of a classified board of directors, divided into three classes, each of whose members will serve for staggered three-year terms.

Preferred Stock

Our board of directors has the authority, without further action by our stockholders, to issue up to 25,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, and privileges thereof, including voting rights. As of September 30, 2019 and December 31, 2018, no shares of this preferred stock were issued and outstanding.

Common stock

We had 500,000,000 and 72,565,312 shares of $0.001 par value common stock authorized, of which 36,525,001 and 4,832,134 shares were legally issued and outstanding as of September 30, 2019 and December 31, 2018, respectively. The shares legally issued and outstanding include 52,778 shares issued to former employees with notes determined to be substantively nonrecourse and, as such, for accounting purposes are not considered to be outstanding shares of common stock. Each share of common stock has the right to one vote on all matters submitted to a vote of stockholders. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No dividends have been declared or paid on our common stock through September 30, 2019.

During the nine months ended September 30, 2018, as part of a tender offer we repurchased 798,372 shares of common stock from team members, which shares were received by the exercise of stock options or contractual arrangements, for cash consideration of $16.9 million. The estimated fair value of the repurchased common stock of $8.6 million and offering costs of $0.1 million were recorded as a reduction to common stock and additional paid-in capital. The excess of the repurchase price over the estimated fair value of the common stock redeemed from team members of $8.3 million was accounted for as compensation expense on the condensed consolidated statement of operations.

The effects of the excess of the tender offer repurchase price over the estimated fair value of the common stock redeemed from team members on the statement of operations for the nine months ended September 30, 2018 are summarized in the following table (in thousands):



	Nine Months Ended September 30, 2018
Cost of revenue	$	312
Sales and marketing	3,967
Research and development	906
General and administrative	3,133
Total compensation expense from repurchase	$	8,318

Common stock warrants

In October 2017, we issued warrants in connection with the Mezzanine Loan and Security Agreement for up to 255,336 shares of common stock with a ten-year term at an exercise price of $10.66 per share. The fair value of the warrants on the date of grant was $1.6 million and recorded as deferred financing costs. The deferred financing costs are reclassified to a discount on debt in proportion to the advances made on the credit facility. The deferred financing costs and the debt discount are recognized as interest expense over the term of the credit facility.

The common stock warrants that are exercisable without contingency are classified as part of stockholders’ equity (deficit) on the condensed consolidated balance sheets. The common stock warrants subject to contingency were classified as a liability on the balance sheet with changes in fair value being recorded each reporting period through the changes in fair value of warrant liability account within interest and other expense, net on the condensed consolidated statements of operations. Once a contingency was resolved, the respective liability-classified warrants were marked to market and recorded in stockholders’ equity (deficit) on the condensed consolidated balance sheets. In October 2018, all remaining contingencies were resolved and the remaining common stock warrant liability balance was marked to market and recorded in stockholders’ equity (deficit).

During the three months ended September 30, 2019, all 255,336 outstanding warrants were exercised through a cashless exercise, resulting in the issuance of 189,959 shares of common stock.

[1]	Includes amounts attributable to related party transactions. See Note 17 for further details.

Description of Business and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Description of Business and Summary of Significant Accounting Policies

Nature of operations

Health Catalyst, Inc. (Health Catalyst) was incorporated under the laws of Delaware in September 2011. We are a leading provider of data and analytics technology and services to healthcare organizations. Our Solution comprises a cloud-based data platform, analytics software, and professional services expertise. Our customers, which are primarily healthcare providers, use our Solution to manage their data, derive analytical insights to operate their organization, and produce measurable clinical, financial, and operational improvements.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and the applicable regulations of the U.S. Securities and Exchange Commission (SEC) regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2018 included in the Prospectus.

Interim Unaudited Condensed Consolidated Financial Statements

The accompanying interim condensed consolidated balance sheet as of September 30, 2019, the interim condensed consolidated statements of operations for the three and nine months ended September 30, 2019 and 2018, the interim condensed consolidated statements of redeemable convertible preferred stock and stockholders' equity (deficit) for the three and nine months ended September 30, 2019, and the interim condensed consolidated statements of cash flows for the nine months ended September 30, 2019 and 2018 are unaudited. The condensed consolidated balance sheet as of December 31, 2018 was derived from audited financial statements, but does not include all disclosures required by GAAP. The interim unaudited condensed consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company's financial position, its operations and cash flows for the periods presented. The historical results are not necessarily indicative of future results, and the results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year or any other period.

Initial Public Offering

On July 29, 2019, we closed our initial public offering of common stock (IPO) in which we issued and sold 8,050,000 shares (inclusive of the underwriters’ over-allotment option to purchase 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 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.

Stock Split

On July 10, 2019, we effected a 1-for-2 reverse stock split of our capital stock. We have adjusted all references to share and per share amounts in the accompanying condensed consolidated financial statements and notes to reflect the reverse stock split.

Principles of consolidation

The condensed consolidated financial statements include the accounts of Health Catalyst and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, provisions for doubtful accounts, useful lives of property and equipment, capitalization and estimated useful life of internal-use software and other intangible assets, fair value of financial instruments, deferred tax assets, common stock warrants, redeemable convertible preferred stock accretion, stock-based compensation, and tax uncertainties. Actual results could differ from those estimates.

Segment reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is evaluated by the chief operating decision maker (the CODM) in assessing performance and making decisions regarding resource allocation. We operate our business in two operating segments that also represent our reportable segments. Our segments are (1) technology and (2) professional services. The CODM uses Adjusted Gross Profit (defined as revenue less cost of revenue that excludes depreciation, amortization, stock-based compensation expense, and certain other operating expenses) as the measure of our profit.

Net loss per share

Basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding. Net loss attributable to common stockholders is computed as net loss less accretion (reversal of accretion) of redeemable convertible preferred stock. Diluted net loss per share attributable to common stockholders is calculated by giving effect to all potentially dilutive common stock equivalents outstanding for the period. For purposes of this calculation, stock options, restricted stock units (RSUs), purchase rights committed under the employee stock purchase plan, and warrants to purchase common stock are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as the effect is antidilutive.

Prior to our IPO, we computed basic and diluted net loss per share in conformity with the two-class method required for participating securities. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to holders of common stock. Redeemable convertible preferred stock and common stock were considered participating securities for purposes of this calculation. However, the two-class method did not impact the net loss per common share attributable to common stockholders as we were in a loss position for each of the periods presented and the redeemable convertible preferred stockholders did not have a contractual obligation to participate in losses.

Revenue recognition

We recognize revenue in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606). We derive our revenues primarily from technology subscriptions and professional services. We determine revenue recognition by applying the following steps:


•	Identification of the contract, or contracts, with a customer;


•	Identification of the performance obligations in the contract;


•	Determination of the transaction price;


•	Allocation of the transaction price to the performance obligations in the contract; and


•	Recognition of revenue when, or as, we satisfy the performance obligation.

We recognize revenue net of any taxes collected from customers and subsequently remitted to governmental authorities.

Technology revenue

Technology revenue primarily consists of subscription fees charged to customers for access to use our technology. We provide customers access to our technology through either an all-access or limited-access, modular subscription. The majority of our subscription arrangements are cloud-based and do not provide customers the right to take possession of the technology or contain a significant penalty if the customer were to take possession of the technology. Revenue from cloud-based subscriptions is recognized ratably over the contract term beginning on the date that the service is made available to the customer. Most of our subscription contracts have up to a three-year term, of which the vast majority are terminable after one year upon 90 days’ notice.

Subscriptions that allow the customer to take software on-premise without significant penalty are treated as time-based licenses. These arrangements generally include access to technology, access to unspecified future products, and maintenance and support. Revenue for upfront access to our technology library is recognized at a point in time when the technology is made available to the customer. Revenue for access to unspecified future products included in time-based license subscriptions is recognized ratably over the contract term beginning on the date that the access is made available to the customer.

We also have certain perpetual license arrangements. Revenue from these arrangements is recognized at a point in time upon delivery of the software.

Technology revenue also includes maintenance and support revenue which generally includes bug fixes, updates, and support services. Revenue related to maintenance and support is recognized over the contract term beginning on the date that the service is made available to the customer.

Professional services revenue

Professional services revenue primarily includes data and analytics services, domain expertise services, outsourcing services, and implementation services. Professional services arrangements typically include a fee for making full-time equivalent (FTE) services available to our customers on a monthly basis. FTE services generally consist of a blend of analytic engineers, analysts, and data scientists based on the domain expertise needed to best serve our customer. Professional services are typically considered distinct from the technology offerings and revenue is generally recognized as the service is provided using the “right to invoice” practical expedient.

Contracts with multiple performance obligations

Many of our contracts include multiple performance obligations. We account for performance obligations separately if they are capable of being distinct within the context of the contract. In these circumstances, the transaction price is allocated to separate performance obligations on a relative standalone selling price basis.

We determine standalone selling prices based on the observable price a good or service is sold for separately when available. In cases where standalone selling prices are not directly observable, based on information available, we utilize the expected cost plus a margin, adjusted market assessment, or residual estimation method. We consider all information available including our overall pricing objectives, market conditions, and other factors, which may include customer demographics and the types of users.

Standalone selling prices are not directly observable for our all-access and limited-access technology arrangements, which are composed of cloud-based subscriptions, time-based licenses, and perpetual licenses. For these technology arrangements, we use the residual estimation method due to a limited number of standalone transactions and/or prices that are highly variable.

Variable consideration

We have also entered into at-risk and shared savings arrangements with certain customers whereby we receive variable consideration based on the achievement of measurable improvements which may include cost savings or performance against metrics. For these arrangements, we estimate revenue using the most likely amount that we will receive. Estimates are based on our historical experience and best judgment at the time to the extent it is probable that a significant reversal of revenue recognized will not occur. Due to the nature of our arrangements, certain estimates may be constrained until the uncertainty is further resolved.

Contract balances

Contract assets resulting from services performed prior to invoicing customers are recorded as unbilled accounts receivable and are presented on the condensed consolidated balance sheets in aggregate with accounts receivable. Unbilled accounts receivable generally become billable at contractually specified dates or upon the attainment of contractually defined milestones. As of September 30, 2019 and December 31, 2018, the unbilled accounts receivable included in accounts receivable on our condensed consolidated balance sheets was $3.5 million and $3.4 million, respectively.

We record contract liabilities as deferred revenue when cash payments are received or due in advance of performance. Deferred revenue primarily relates to the advance consideration received from the customer. As of September 30, 2019 and December 31, 2018, the total of current and non-current deferred revenue on our condensed consolidated balance sheets was $39.6 million and $32.0 million, respectively.

Cost of revenue, excluding depreciation and amortization

Cost of technology revenue primarily consists of costs associated with hosting and supporting our technology, including third-party cloud computing and hosting costs, contractor costs, and salary and related personnel costs for our cloud services and support teams. Cost of professional services revenue primarily consists of salary and related personnel costs, travel-related costs, and independent contractor costs. Cost of revenue excludes costs related to depreciation and amortization.

We defer certain costs to fulfill a contract when the costs are expected to be recovered, are directly related to in-process contracts and enhance resources that will be used in satisfying performance obligations in the future. These deferred fulfillment costs primarily consist of employee compensation incurred as part of the implementation of new contracts. As of September 30, 2019 and December 31, 2018, we had deferred contract fulfillment costs of $1.0 million and $0.6 million, respectively.

Cash and cash equivalents

We consider all highly liquid investments purchased with a remaining maturity of three months or less at the time of acquisition to be cash equivalents.

Short-term investments

Our investment policy limits investments to highly-rated instruments that mature in less than 12 months. We classify our short-term investments as available for sale.

Accounts receivable

Accounts receivable are non-interest bearing and are recorded at the original invoiced amount less an allowance for doubtful accounts based on the probability of future collections. When we become aware of circumstances that may decrease the likelihood of collections, we record a specific allowance against amounts due, which reduces the receivable amount to the amount reasonably believed to be collected. For all other customers, we determine and periodically adjust the allowance based on historical loss patterns and current receivables aging. As of September 30, 2019 and December 31, 2018, we had an allowance for doubtful accounts of $0.5 million and $0.5 million, respectively.

Property and equipment

Property and equipment are stated at historical cost less accumulated depreciation. Repairs and maintenance costs that do not extend the useful life or improve the related assets are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The estimated useful life of each asset category is as follows:



Computer equipment	2-3 years
Furniture and fixtures	3 years
Leasehold improvements	Lesser of lease term or estimated useful life
Computer software	2-3 years
Capitalized internal-use software costs	3 years

When there are indicators of potential impairment, we evaluate the recoverability of the carrying values by comparing the carrying amount of the applicable asset group to the estimated undiscounted future cash flows expected to be generated by the asset group over the remaining life of the primary long-lived asset in that group plus any residual value. If the carrying amount of the asset group exceeds its estimated undiscounted future net cash flows, an impairment charge is recognized based on the amount by which the carrying value of the long-lived assets exceeds the fair value of those assets. We did not incur any long-lived impairment charges for the three and nine months ended September 30, 2019 and 2018.

Intangible assets

Intangible assets include developed technologies, customer relationships, customer contracts, and trademarks that were acquired in business combinations and asset acquisitions. Intangible assets also include the purchase of third-party computer software. The intangible assets are amortized using the straight-line method over the assets’ estimated useful lives. The estimated useful life of each asset category is as follows:



Developed technologies	2-10 years
Customer relationships and contracts	6 years
Computer software licenses	2-5 years
Trademarks	2 years

Goodwill

We record goodwill as the difference between the aggregate consideration paid for a business combination and the fair value of the identifiable net tangible and intangible assets acquired. Goodwill is assessed for impairment annually or more frequently if indicators of impairment are present or circumstances suggest that impairment may exist. The first step of the goodwill impairment test compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not considered impaired. If the carrying amount of the reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the affected reporting unit’s goodwill with the carrying value of that goodwill. There was no impairment of goodwill for the three and nine months ended September 30, 2019 and 2018.

Deferred offering costs

Deferred offering costs, which consist of legal, consulting, banking, and accounting fees directly attributable to the IPO, were capitalized and then offset against proceeds upon the consummation of the IPO. As of December 31, 2018, our capitalized deferred offering costs were $0.1 million and included in other assets within the consolidated balance sheets. During the three months ended September 30, 2019, we reclassified $4.6 million of offering costs into stockholders’ equity as a reduction of the net proceeds received from the IPO.

Common stock warrants

We account for freestanding warrants to purchase shares of our common stock that are not considered indexed to our own stock as warrant liabilities on our condensed consolidated balance sheets until the point in time that they qualify for equity classification. We record liability-classified common stock warrants at their estimated fair value because they are free standing and the number of shares exercisable increases as we make advances on our credit facility.

At the end of each reporting period, we record the change in the estimated fair value of the warrants to purchase common stock as a change in fair value of warrant liability within interest and other expense, net in our condensed consolidated statements of operations. We reclassify the warrants from liability-classified to equity-classified as exercise contingencies related to the warrants become resolved.

Business combinations

We account for an acquisition as a business combination if we obtain control of a business. Assets and liabilities acquired in a business combination generally are recorded at fair value and any associated acquisition costs are expensed as incurred in general and administrative expenses.

Advertising costs

All advertising costs are expensed as incurred. We recorded advertising costs of $3.4 million and $3.5 million for the three months ended September 30, 2019 and 2018, respectively, and $4.5 million and $4.6 million for the nine months ended September 30, 2019 and 2018, respectively.

Development costs and internal-use software

For technology products that are developed to be sold externally, we determined that technological feasibility is reached shortly before the products are ready for general release. Any costs associated with software development between the time technological feasibility is reached and general release are inconsequential.

We capitalize certain development costs incurred in connection with our internal-use software. These capitalized costs are primarily related to the software platforms that are hosted by us and accessed by our customers on a subscription basis. Costs incurred in the preliminary stages of development are expensed as incurred as research and development costs. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use.

We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Capitalized costs are recorded as part of property and equipment. Maintenance and training costs are expensed as incurred. Internal-use software is amortized on a straight-line basis over its estimated useful life.

Stock-based compensation

Stock-based awards, including stock options and RSUs, are measured and recognized in the condensed consolidated financial statements based on the fair value of the award on the grant date. For awards subject to performance conditions, we record expense when the performance condition becomes probable. We record forfeitures of stock-based awards as the actual forfeitures occur.

We estimate the fair value of stock option awards on the grant date using the Black-Scholes option pricing model. We have issued two types of employee stock-based awards, standard and two-tier. Our standard stock-based awards vest solely on a service-based condition. For these awards, we recognize stock-based compensation expense on a straight-line basis over the vesting period. Two-tier employee stock-based awards, contain both a service-based condition and performance condition, defined as the earlier of (i) an acquisition or change in control of the company or (ii) upon the occurrence of an initial public offering by the Company. A change in control event and effective registration event are not deemed probable until consummated; accordingly, no expense is recorded related to two-tier stock-based awards until the performance condition becomes probable of occurring. Awards which contain both service-based and performance conditions are recognized using the accelerated attribution method once the performance condition is probable of occurring. The service-based condition is generally a service period of four years. Upon closing our IPO, we recorded cumulative share-based compensation expense of approximately $6.0 million using the accumulated attribution method for two-tier employee stock-based awards for which the service condition had been satisfied at that date.

Stock-based compensation expense related to purchase rights issued under the 2019 Health Catalyst Employee Stock Purchase Plan (ESPP) is based on the Black-Scholes option-pricing model fair value of the estimated number of awards as of the beginning of the offering period. Stock-based compensation expense is recognized using the straight-line method over the offering period.

Prior to the adoption of ASU No. 2018-07, Compensation — Stock Compensation (ASU 2018-17), which simplifies the accounting for non-employee share-based payment transactions and is discussed below under “Accounting pronouncements adopted,” the fair value measurement date for non-employee awards was the date the performance of services was completed. Upon adoption of ASU 2018-07 on January 1, 2019, the measurement date for non-employee awards is the date of grant. The compensation expense for non-employees is recognized, without changes in the fair value of the award, in the same period and in the same manner as though we had paid cash for the services, which is typically the vesting period of the respective award.

Income taxes

Deferred income tax balances are accounted for using the asset and liability method and reflect the effects of temporary differences between the financial reporting and tax bases of our assets and liabilities using enacted tax rates expected to apply when taxes are actually paid or recovered. In addition, deferred tax assets and liabilities are recorded for net operating loss (NOL) and credit carryforwards.

On December 22, 2017, the 2017 Tax Cuts and Jobs Act (Tax Act) was enacted into law and the new legislation contains several key tax provisions that affect us, including the reduction of the corporate income tax rate to 21%, effective January 1, 2018. We were required to recognize the effect of the tax law changes in the period of enactment. As such, we remeasured our consolidated deferred tax assets and liabilities as of December 31, 2017 to reflect the lower rate and also reassessed the net realizability of those deferred tax assets and liabilities.

A valuation allowance is provided against deferred tax assets unless it is more likely than not that they will be realized based on all available positive and negative evidence. Such evidence includes, but is not limited to, recent cumulative earnings or losses, expectations of future taxable income by taxing jurisdiction, and the carry-forward periods available for the utilization of deferred tax assets.

We use a two-step approach to recognize and measure uncertain income tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained upon audit. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement. We do not accrue interest and penalties related to unrecognized tax benefits within the provision for income taxes because we have NOLs. Significant judgment is required to evaluate uncertain tax positions.

Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different. We evaluate our uncertain tax positions on a regular basis and evaluations are based on a number of factors, including changes in facts and circumstances, changes in tax law, such as the Tax Act, correspondence with tax authorities during the course of an audit, and effective settlement of audit issues.

To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on our financial condition and results of operations.

Fair value of financial instruments

The carrying amounts reported in the condensed consolidated balance sheets for cash, receivables, accounts payable, and current accrued expenses approximate fair values because of the immediate or short-term maturity of these financial instruments. The carrying value of acquisition-related consideration payable, operating lease liabilities, and long-term debt approximate fair value based on interest rates available for debt with similar terms at September 30, 2019 and December 31, 2018. Money market funds and short-term investments are measured at fair value on a recurring basis.

Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:


•	Level 1- Quoted prices in active markets for identical assets or liabilities.


•	Level 2- Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.


•	Level 3- Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Leases

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (ROU) assets, operating lease liabilities, and operating lease liabilities, net of current portion in our condensed consolidated balance sheets. We have adopted the short-term lease recognition exemption policy. All of our leasing commitments are classified either as operating leases or otherwise qualify as short-term leases with lease terms of 12 months or less.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As our lease contracts do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease executory costs. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise the applicable option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We do not have lease agreements that contain non-lease components, which generally would be accounted for separately.

Accounting pronouncement adopted

In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting (ASU 2018-07). ASU 2018-07 simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The new standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those annual periods. We adopted ASU 2018-07 as of January 1, 2019 and applied the standard prospectively. The adoption of this standard did not have a material impact on the condensed consolidated financial statements.

Recent accounting pronouncements

In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), that changes how companies will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. For available-for-sale debt securities, we will be required to record allowances rather than reduce the carrying amount. We are required to adopt ASU 2016-13 for annual and interim reporting periods beginning after December 15, 2019. Based on our preliminary assessment, we do not anticipate that the adoption of this ASU will have a material impact on our condensed consolidated financial statements.

In January 2017, FASB issued ASU 2017-04, Intangibles-Goodwill and Other - Simplifying the Test for Goodwill Impairment (Topic 350), that simplifies how an entity is required to test goodwill for impairment by modifying the second step of the impairment test. The second step measures a goodwill impairment loss by comparing the fair value of a reporting unit to the carrying amount. If the carrying amount of the reporting unit exceeds its fair value, the carrying amount of goodwill is reduced by the excess reporting unit carrying amount up to the carrying amount of the goodwill. Public business entities must adopt ASU 2017-04 for annual or interim goodwill impairment tests in reporting periods beginning after December 15, 2019. The guidance will apply to our reporting requirements in performing goodwill impairment testing; however, we do not anticipate the adoption of this guidance will have a material impact on our condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information prospectively, including the ranges used to develop significant unobservable inputs for Level 3 fair value measurements, and modifies some disclosure requirements. The new guidance is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. An entity is permitted to early adopt either the entire standard or only the provisions that eliminate or modify requirements. We do not anticipate that the disclosure changes that result from this ASU will be material to our condensed consolidated financial statements.

Business Combinations

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Business Combinations

On June 29, 2018, we completed the purchase of Medicity LLC (Medicity) for consideration in the form of shares of Series E redeemable convertible preferred stock with an estimated fair value of $2.3 million from Aetna, Inc. The purchase of Medicity was consummated as part of an integrated transaction that included two components: (1) a $15 million Series E redeemable convertible preferred stock capital raise by us and (2) a business combination where we acquired 100% of the membership interests in Medicity. The acquisition was accounted for as a business combination as specified under ASC 805, Business Combinations. In the integrated transaction, the consideration transferred was allocated between the business combination and the capital raise based on relative values as of June 29, 2018 of the $15 million cash received in the capital raise and the fair value of net identifiable assets received in the business combination.

The fair values of Medicity’s assets and liabilities were determined based on estimates and assumptions that are judgmental in nature, including the timing and amount of projected future cash flows and market-participant discount rates reflecting risks inherent in the future cash flows.

The following table summarizes the acquisition-date fair value of consideration transferred and the assets received and liabilities assumed as part of our acquisition of Medicity (in thousands):



Assets acquired:
Accounts receivable	$	7,016
Prepaid expenses	2,735
Property and equipment	1,613
Computer software licenses	2,358
Developed technologies	800
Customer relationships and contracts	600
Trademarks	100
Total assets acquired	15,222
Less liabilities assumed:
Accounts payable and other current liabilities	1,970
Deferred revenue	11,000
Total liabilities assumed	12,970
Total assets acquired, net	$	2,252

The intangibles assets acquired were valued utilizing the income approach and include customer relationships, developed technology, and trademarks with estimated useful lives of six years, five years, and two years, respectively. The estimated useful life remaining on software licenses and property and equipment acquired is one to five years.

The following unaudited pro forma information presents our consolidated information as if the acquisition of Medicity had occurred on January 1, 2017 (in thousands, except per share amounts):



	Year Ended December 31,
	2017			2018
Total pro forma revenues	$	109,739		$	128,992
Pro forma net loss	(63,986		)	(72,931		)
Pro forma net loss per share attributable to common stockholders, basic and diluted	(13.20		)	(15.20		)

The unaudited pro forma information is not intended to present actual results that would have been attained had the acquisition been completed as of January 1, 2017 or to project potential results as of any future date or for any future periods. The nature and amount of material, nonrecurring pro forma adjustments directly attributable to our acquisition of Medicity which are included in the pro forma revenues or net loss, as applicable, are attributable to fair value adjustments to deferred revenues, amortization of acquired intangible assets and acquisition-related income tax considerations totaling $11.0 million and $0.5 million in 2017 and 2018, respectively.

The amount of revenue attributable to the acquired business of Medicity that has been included in the condensed consolidated statement of operations subsequent to the June 29, 2018 acquisition date through December 31, 2018 is $12.5 million. Loss information for Medicity after the acquisition date through December 31, 2018 is not presented as the Medicity business was integrated into our operations subsequent to the acquisition and is impracticable to quantify. The acquisition provides us with the opportunity to cross-sell to several top health systems and the ability to leverage the Medicity acquired technology to drive change via analytics at the point of care.

Short-term Investments

9 Months Ended

Sep. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Short-term Investments

Our investment policy limits investments to highly-rated instruments that mature in less than 12 months. We classify our short-term investments as available for sale. Available-for-sale securities are recorded on our condensed consolidated balance sheets at fair market value and any unrealized gains or losses are reported as part of other comprehensive loss on the condensed consolidated statements of comprehensive loss. We determine realized gains or losses on the sales of investments through the specific identification method and record such gains or losses as part of interest and other expense, net on the condensed consolidated statements of operations. We did not have realized gains or losses on investments during the three and nine months ended September 30, 2019 and 2018. We measure the fair value of investments on a recurring basis.

The following table summarizes, by major security type, our cash equivalents and short-term investments that are measured at fair value on a recurring basis (in thousands) as of September 30, 2019:



	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash equivalents		Short-term Investments
Money market funds	$	50,975	$	—	$	—		$	50,975	$	50,975	$	—
U.S. Treasury notes	50,832		—		(9		)	50,823		—		50,823
Commercial paper	51,364		—		—			51,364		—		51,364
Corporate bonds	53,617		—		(1		)	53,616		—		53,616
Asset-backed securities	33,559		—		(2		)	33,557		—		33,557
Total	$	240,347	$	—	$	(12	)	$	240,335	$	50,975	$	189,360

The following table summarizes, by major security type, our cash equivalents and short-term investments that are measured at fair value on a recurring basis (in thousands) as of December 31, 2018:



	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash equivalents		Short-term Investments
Money market funds	$	23,085	$	—	$	—		$	23,085	$	23,085	$	—
US treasury notes	4,175		—		(1		)	4,174		1,396		2,778
Commercial paper	3,976		—		—			3,976		1,993		1,983
Corporate bonds	998		—		—			998		998		—
Total	$	32,234	$	—	$	(1	)	$	32,233	$	27,472	$	4,761

As we do not intend to sell investments that are in an unrealized loss position and it is not likely that we will be required to sell any investments before recovery of their amortized cost basis, we do not consider the investments with an unrealized loss to be other-than-temporarily impaired as of September 30, 2019 and December 31, 2018.

Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Assets measured at fair value on a recurring basis as of September 30, 2019 were as follows (in thousands):



	September 30, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	50,975	$	—	$	—	$	50,975
U.S. Treasury notes	50,823		—		—		50,823
Commercial paper	—		51,364		—		51,364
Corporate bonds	—		53,616		—		53,616
Asset-backed securities	—		33,557		—		33,557
Total	$	101,798	$	138,537	$	—	$	240,335

Assets measured at fair value on a recurring basis as of December 31, 2018 were as follows (in thousands):



	December 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	23,085	$	—	$	—	$	23,085
U.S. Treasury notes	4,174		—		—		4,174
Commercial paper	—		3,976		—		3,976
Corporate bonds	—		998		—		998
Total	$	27,259	$	4,974	$	—	$	32,233

As of September 30, 2019 and December 31, 2018, there were no liabilities measured at fair value on a recurring basis. There were no transfers between Level 1 and Level 2 during the three and nine months ended September 30, 2019 and 2018.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Credit Facilities

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Credit Facilities

As of September 30, 2019, our term credit facilities consisted of the following, excluding debt discount and issue costs of $2.1 million (in thousands):



	Balance		Remaining Capacity		Interest Rate	Basis Rate
Term loan	$	50,000	$	25,000	10.00%	Higher of LIBOR plus 7.5% and 10.0%
Revolving line of credit	—		5,000		5.50%	Prime plus 0.50%
Total credit facilities	50,000		$	30,000
Less: Current portion of credit facilities	—
Credit facilities, less current portion	$	50,000

As of December 31, 2018, our term credit facilities consisted of the following, excluding debt discount and issue costs of $1.2 million (in thousands):



	Balance			Remaining Capacity		Interest Rate	Basis Rate
Term loan	$	20,000		$	—	11.75%	Prime plus 6.25%
Revolving line of credit	1,321			18,679		6.00%	Prime plus 0.50%
Total credit facilities	21,321			$	18,679
Less: Current portion of credit facilities	(1,321		)
Credit facilities, less current portion	$	20,000

In June 2016, we signed a Loan and Security Agreement with Silicon Valley Bank (SVB) which established a revolving line of credit based on a formula amount. The formula amount is calculated as 85% of eligible account balances, which includes certain accounts receivable amounts. The revolving line of credit’s capacity is up to $20.0 million, subject to the limitation set by the formula amount. The line may be increased by $5.0 million upon request and approval by the bank. In October 2017, we entered into the Amended and Restated Loan and Security Agreement, which amends the Loan and Security Agreement. As of December 31, 2018, the amended revolving line of credit was scheduled to mature in December 2019. We paid $0.1 million in fees related to the establishment of the revolving line of credit and secured $1.3 million in advances from the revolving line of credit.

Amounts borrowed under the SVB Loan and Security Agreement are secured by a first priority security interest in substantially all of our assets other than intellectual property. In the event of default, SVB may accelerate amounts outstanding, terminate the credit facility, and foreclose on the collateral. The agreement also includes a financial covenant requiring the achievement of minimum annual recurring revenue amounts. Failure to meet this financial covenant may constitute an event of default. We were in compliance with this covenant under the terms of the credit facility as of December 31, 2018.

In October 2017, we signed a Mezzanine Loan and Security Agreement with SVB which allows access to borrowings of up to $20.0 million and drew $10.0 million at closing. As of December 31, 2018, the maturity date of any borrowings under the agreement was April 2021. We paid $0.2 million in fees related to the establishment of the term loan and are required to pay an additional commitment fee each time we draw funds based on a formula and the amount of funds borrowed. In October 2018, we drew an additional $10.0 million under the Mezzanine Loan and Security Agreement.

Amounts borrowed under the SVB Mezzanine Loan and Security Agreement are secured by a first priority security interest in substantially all of our assets other than intellectual property. In the event of default, SVB may accelerate amounts outstanding, terminate the credit facility, and foreclose on the collateral. The agreement also includes a financial covenant requiring the achievement of minimum annual recurring revenue amounts in order to draw upon the remaining available credit. We were in compliance with this covenant under the terms of the credit facility as of December 31, 2018.

OrbiMed debt financing transaction

On February 6, 2019, we entered into a debt financing agreement with OrbiMed Royalty Opportunities II, LP (OrbiMed) where we obtained an $80.0 million senior term loan commitment, with $50.0 million available and up to an additional $30.0 million contingently available on or prior to March 31, 2020 (the Delayed Draw Commitment). We paid $2.4 million in fees related to the establishment of the OrbiMed term loan and incurred $0.3 million in debt issuance costs. The Delayed Draw Commitment is contingent upon our achievement of minimum levels of technology revenues ranging from technology revenues for the latest 12 months of at least $60.0 million to borrow up to $10.0 million, to a minimum of $80.0 million in technology revenues to borrow between $25.0 million and $30.0 million.

The contractual interest rate of the OrbiMed term loan is the higher of LIBOR plus 7.5% and 10.0%. Interest payments are required at the end of each month and monthly installment payments on principal begin in February 2023 and will be based on the then outstanding principal balance divided by 12. The maturity date of the OrbiMed term loan is February 6, 2024. Upon the payment of all or any portion of the principal amount on the OrbiMed term loan, we are required to pay an exit fee of 5% of the principal amount paid. This exit fee is being accreted as interest expense over the contractual term of the loan. If we elect to prepay portions of the principal balance prior to the 48-month anniversary of the closing date we would be required to pay a repayment premium ranging from 1% to 12% of the principal balance prepaid depending on the period in which the prepayment is made.

Amounts borrowed under the OrbiMed term loan are secured by a first priority security interest in substantially all of our assets other than intellectual property. In the event of default, OrbiMed may accelerate amounts outstanding, terminate the credit facility, and foreclose on the collateral. The agreement also includes a financial covenant requiring the achievement of minimum trailing twelve-month revenue amounts as well as certain other financial and non-financial covenants. We were in compliance with these covenants under the terms of the OrbiMed term loan as of September 30, 2019.

The use of proceeds from the senior term loan included an immediate repayment of our $20.0 million term loan from SVB that required a prepayment premium of $0.5 million and the write-off of deferred debt issuance costs of $1.2 million, resulting in a $1.7 million loss on extinguishment of debt. In addition, we repaid in full the outstanding balance of $1.3 million under the SVB revolving line of credit.

On February 6, 2019, we amended the Loan and Security Agreement with SVB which reduced the revolving line of credit to a current maximum of $5.0 million with an obligation to maintain a minimum of $5.0 million cash or cash equivalents on deposit with SVB to maintain the assurance of future credit availability. The line may be increased to $10.0 million upon request and approval by SVB. The maturity date of the revolving line of credit was amended to be February 6, 2021.

Redeemable Convertible Preferred Stock	9 Months Ended
Redeemable Convertible Preferred Stock	Sep. 30, 2019
Equity [Abstract]
Redeemable Convertible Preferred Stock	Redeemable Convertible Preferred Stock We had 45,427,441 shares of redeemable convertible preferred stock with a par value of $0.001 authorized, of which 22,713,694 shares were issued and outstanding, as of December 31, 2018. The issued and outstanding redeemable convertible preferred stock as of December 31, 2018 consisted of 3,587,499 shares designated as Series A redeemable convertible preferred stock, 4,986,827 shares designated as Series B redeemable convertible preferred stock, 4,794,007 shares designated as Series C redeemable convertible preferred stock, 3,314,612 shares designated as Series D redeemable convertible preferred stock, and 6,030,749 shares designated as Series E redeemable convertible preferred stock. During the nine months ended September 30, 2019, we authorized 1,077,587 shares of Series F redeemable convertible preferred stock and issued 437,787 shares of Series F redeemable convertible preferred stock for total cash consideration of $12.1 million, net of offering costs of $0.1 million. Upon the closing of our IPO, the 23,151,481 shares of redeemable convertible preferred stock, then outstanding, were converted on a one-for-one basis into 23,151,481 shares of common stock. Prior to the IPO, our shares of redeemable convertible preferred stock were redeemable at the option of the holder at an amount equal to the greater of the original issuance price or the redemption value. Accordingly, we recognized changes in the redemption value as they occurred and adjusted the carrying amount of the applicable class of redeemable convertible preferred stock as a deemed dividend (or a reversal of accretion to reflect a reduction in fair value of the redemption value) from additional paid-in-capital or an adjustment of the accumulated deficit to equal the redemption value at the end of each reporting period. This method viewed the end of the reporting period as if it were also the redemption date for the applicable class of redeemable convertible preferred stock. The shares of redeemable convertible preferred stock were accreted to the estimated fair value of $409.8 million as of December 31, 2018. Upon the closing of our IPO, the shares of redeemable convertible preferred stock were accreted to the IPO price of $26.00 per share, or $602.7 million. As the shares of redeemable convertible preferred stock were converted into shares of common stock, and are no longer redeemable at the option of the holder, we reclassified the carrying value of the shares of redeemable convertible preferred stock to stockholders’ equity (deficit) on the closing of our IPO.

Stock-Based Compensation

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock-based Compensation

Stock-Based Compensation

In 2011, our board of directors adopted the Health Catalyst, Inc. 2011 Stock Incentive Plan (2011 Plan), which provided for the direct award, sale of shares and granting of RSUs and options for our common stock to our directors, team members, or consultants. In connection with our IPO, our board of directors adopted the 2019 Stock Option and Incentive Plan (2019 Plan). The 2019 Plan provides flexibility to our compensation committee to use various equity-based incentive awards as compensation tools to motivate our workforce, including the grant of incentive and nonstatutory stock options, restricted and unrestricted stock, RSUs, and stock appreciation rights to our directors, team members, or consultants.

We have initially reserved 2,500,000 shares of our common stock plus approximately 256,607 shares of our common stock (the number of shares that were available for issuance under the 2011 Plan immediately prior to the IPO registration date) for the issuance of awards under the 2019 Plan. The 2019 Plan provides that the number of shares reserved available for issuance under the plan will automatically increase each January 1, beginning on January 1, 2020, by 5% of the outstanding number of shares of our common stock on the immediately preceding December 31, or such lesser number of shares as determined by our compensation committee.

As of September 30, 2019 and December 31, 2018, there were 11,272,878 and 8,772,878 shares authorized for grant, respectively, and 2,552,097 and 1,296,793 shares available for grant, respectively, under the 2019 Plan and 2011 Plan (collectively the ‘Stock Incentive Plan’).

All options were granted with an exercise price determined by the board of directors that was equal to the estimated fair value of our common stock at the date of grant, based on the information known on the date of grant. Options generally expire on the tenth anniversary of the applicable grant date.

We have issued two types of employee stock-based awards, standard and two-tier. Our standard stock-based awards vest solely on a service-based condition. For these awards, we recognize stock-based compensation based on the grant date fair value of the awards and recognize that cost using the straight-line method over the requisite service period of the award. Two-tier employee stock-based awards contain both a service-based condition and performance condition, defined as the earlier of (i) an acquisition or change in control of the company or (ii) upon the occurrence of our initial public offering. A change in control event and effective registration event are not deemed probable until consummated; accordingly, no expense is recorded related to two-tier stock-based awards until the performance condition becomes probable of occurring. Awards which contain both service-based and performance conditions are recognized using the accelerated attribution method once the performance condition is probable of occurring. The service-based condition is generally a service period of four years. Upon closing our IPO, we recorded cumulative share-based compensation expense using the accumulated attribution method for two-tier employee stock-based awards for which the service condition had been satisfied at that date.

The fair value of options, which vest in accordance with service schedules, is estimated on the date of grant using the Black-Scholes option pricing model. Prior to our IPO, the absence of an active market for our common stock required us to estimate the fair value of our common stock for purposes of granting stock-based awards, including stock options and RSUs, and for determining stock-based compensation expense for the periods presented. We obtained contemporaneous third-party valuations to assist in determining the estimated fair value of our common stock. These contemporaneous third-party valuations used the methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Expected volatilities are based on historical volatilities of comparable companies. The expected term of the options is based on the simplified method outlined in the SEC Staff accounting guidance, under which we estimate the term as the average of the option’s contractual term and the option’s weighted average vesting period. The risk-free rate represents the yield on U.S. Treasury bonds with maturity equal to the expected term of the granted option. We account for forfeitures as they occur. All standard stock-based awards outstanding at September 30, 2019 and December 31, 2018 are expected to vest according to their specific schedules.

Prior to the adoption of ASU 2018-17, the fair value measurement date for non-employee awards was the date the performance of services was completed. Upon adoption of ASU 2018-07 on January 1, 2019, the measurement date for non-employee awards is the date of grant. The compensation expense for non-employees is recognized, without changes in the fair value of the award, in the same period and in the same manner as though we had paid cash for the services, which is typically the vesting period of the respective award.

Total stock-based compensation expense recognized for service-based stock options and RSUs granted under our Stock Incentive Plan was $9.6 million and $0.9 million for the three months ended September 30, 2019 and 2018, respectively, and $12.3 million and $2.7 million for the nine months ended September 30, 2019 and 2018. These current year amounts include a $6.0 million cumulative catch-up of compensation expense related to the two-tier employee stock-based awards that was recorded upon satisfaction of the performance condition upon the closing date of our IPO.

The following table summarizes the condensed consolidated statements of operations effect of stock-based compensation expense (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Cost of revenue	$	370	$	138	$	722	$	374
Sales and marketing	1,358		298		2,639		1,023
Research and development	3,067		179		3,502		532
General and administrative	5,179		318		6,165		958
Total stock-based compensation	$	9,974	$	933	$	13,028	$	2,887

Stock Options

The fair value of our option grants is estimated at the grant date using the Black-Scholes option-pricing model based on the following weighted average assumptions:



	Three Months Ended September 30,		Nine Months Ended September 30,
	2019	2018	2019	2018
Expected volatility	—	45.6%-45.8%	43.8%-44.5%	45.6%-47.6%
Expected term (in years)	—	6.3	6.3	6.3
Risk-free interest rate	—	2.9%-3.0%	2.4%-2.5%	2.5%-3.0%
Expected dividends	—	—	—	—

A summary of the share option activity under the 2019 Plan for the nine months ended September 30, 2019, is as follows:



	Time-Based Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value
Outstanding at January 1, 2019	7,237,417		$	9.60
Options granted	1,198,121		16.00
Options exercised	(301,427	)	7.22
Options cancelled/forfeited	(210,674	)	10.51
Outstanding at September 30, 2019	7,923,437		$	10.64	7.6	$	166,431,525
Vested and expected to vest as of September 30, 2019	7,923,437		$	10.64	7.6	$	166,431,525
Vested and exercisable as of September 30, 2019	3,999,812		$	8.92	6.4	$	90,892,289

The weighted-average grant-date fair value for stock options granted during the nine months ended September 30, 2019 was $9.31 per option. The aggregate intrinsic value of stock options exercised was $4.6 million for the nine months ended September 30, 2019. The total grant-date fair value of stock options vested during the nine months ended September 30, 2019 was $6.4 million. As of September 30, 2019, approximately $19.1 million of unrecognized compensation expense related to our stock options is expected to be recognized over a weighted average period of 2.4 years.

The options outstanding include 52,778 of shares issued to former employees with notes determined to be substantively nonrecourse and, as such, for accounting purposes are not considered to be exercised stock options.

Restricted Stock Units

The service-based condition for RSUs is satisfied over four years with a cliff vesting period of one year and quarterly vesting thereafter. The following table sets forth the outstanding RSUs and related activity for the nine months ended September 30, 2019:



	Restricted Stock Units	Weighted Average Grant Date Fair Value
Unvested and outstanding at January 1, 2019	—	$	—
RSUs granted	257,278	40.95
Unvested and outstanding at September 30, 2019	257,278	$	40.95

As of September 30, 2019, we had $9.9 million of unrecognized stock-based compensation expense related to outstanding RSUs expected to be recognized over a weighted average period of 3.4 years.

Employee Stock Purchase Plan

In connection with our IPO in July 2019, our board of directors adopted the ESPP and a total of 750,000 shares of common stock were initially reserved for issuance under the ESPP. The number of shares of common stock available for issuance under the ESPP will be increased on the first day of each calendar year beginning January 1, 2020 and each year thereafter until the ESPP terminates. The number of shares of common stock reserved and available for issuance under the ESPP shall be cumulatively increased by the least of (i) 750,000 shares, (ii) one percent of the number of shares of common stock issued and outstanding on the immediately preceding December 31, and (iii) such lesser number of shares of common stock as determined by the ESPP Administrator.

The ESPP generally provides for six-month offering periods, the exception being the first offering period. The offering periods generally start on the first trading day after June 30 and December 31 of each year. The first offering period began on the IPO date and will end on December 31, 2019.

The ESPP permits participants to elect to purchase shares of common stock through fixed percentage contributions from eligible compensation during each offering period, not to exceed 15% of the eligible compensation a participant receives during an offering period or accrue at a rate which exceeds $25,000 of the fair value of the stock (determined on the option grant date(s)) for each calendar year. A participant may purchase the lowest of (a) a number of shares of common stock determined by dividing such participant’s accumulated payroll deductions on the exercise date by the option price, (b) 2,500 shares; or (c) such other lesser maximum number of shares as shall have been established by the Administrator in advance of the offering period. Amounts deducted and accumulated by the participant will be used to purchase shares of common stock at the end of each offering period. The purchase price of the shares will be 85% of the lower of the fair value of common stock on the first trading day of each offering period or on the purchase date, except for the first offering period, for which the purchase price will be 85% of the lower of (i) the IPO price or (ii) the fair value of common stock on the purchase date.

Participants may end their participation at any time during an offering period and will be paid their accumulated contributions that have not been used to purchase shares of common stock. Participation ends automatically upon termination of employment.

As of September 30, 2019, a total of 138,470 shares were issuable to employees based on ESPP contribution elections and unrecognized ESPP compensation cost was $0.6 million, which is expected to be recognized over the remaining three months of 2019.

The fair value of the purchase right for the ESPP option is estimated on the date of grant using the Black-Scholes model with the following assumptions for the initial offering period:



Expected volatility	44%
Expected term (in months)	5
Risk-free interest rate	2%
Expected dividends	—

Income Taxes	9 Months Ended
Income Taxes	Sep. 30, 2019
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes The tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, we update our estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, we make a cumulative adjustment in such period. The quarterly tax provision and the estimate of our annual effective tax rate are subject to variation due to several factors, including variability in our loss before income taxes, the mix of jurisdictions to which such income or loss relates, changes in how we conduct business, and tax law developments. For the three months ended September 30, 2019 and 2018, our estimated effective tax rate was (0.10)% and (0.04)%, respectively. For the nine months ended September 30, 2019 and 2018, our estimated effective tax rate was (0.09)% and 0.29%, respectively. The variations between our estimated effective tax rate and the U.S. statutory rate are primarily due to the impact of the Tax Act and our full valuation allowance. We consider all available evidence to evaluate the recovery of deferred tax assets, including historical levels of income, legislative developments, and risks associated with estimates of future taxable income. We have provided a full valuation allowance for our deferred tax assets as of September 30, 2019, and December 31, 2018, due to the uncertainty surrounding the future realization of such assets and the cumulative losses we have generated. Therefore, no benefit has been recognized in the financial statements for the NOLs and other deferred tax assets. On December 22, 2017, the Tax Act was enacted into law and the new legislation contains several key tax provisions that affect our condensed consolidated financial statements, including the reduction of the corporate income tax rate to 21%, effective January 1, 2018. We are required to recognize the effect of the tax law changes in the period of enactment. As such, we have remeasured our consolidated deferred tax assets and liabilities to reflect the lower rate and have also reassessed the realizability of those deferred tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. As of December 31, 2018, we consider the accounting of the deferred tax remeasurements and state tax conformity to be complete. We recognize tax benefits from uncertain tax positions when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. We believe that we have provided adequate reserves for income tax uncertainties in all open tax years. We do not anticipate material changes in the total amount of our unrecognized tax benefits within 12 months of the reporting date.

Segments

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Segments

We operate our business in two operating segments that also represent our reportable segments. Our business is organized based on our technology offerings and professional services. Accordingly, our segments are:


•	Technology - Our technology segment (Technology) includes our data platform, analytics applications and support services. Technology generates revenues primarily from contracts that are cloud-based subscription arrangements, time-based license arrangements, and maintenance and support fees; and


•	Professional Services - Our professional services segment (Professional Services) is generally the combination of data and analytics, domain expertise, outsourcing, and implementation services to deliver expertise to our customers to more fully configure and utilize the benefits of our Technology offerings.

Revenues and cost of revenues generally are directly attributed to our segments. All segment revenues are from our external customers. Asset and other balance sheet information at the segment level is not reported to our Chief Operating Decision Maker.

Segment revenue and Adjusted Gross Profit for the three and nine months ended September 30, 2019 and 2018 were as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Revenue
Technology	$	21,160	$	18,283	$	61,393	$	38,459
Professional Services	18,263		14,585		50,047		38,031
Total	$	39,423	$	32,868	$	111,440	$	76,490



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Adjusted Gross Profit
Technology	$	14,484		$	12,169		$	40,986		$	25,754
Professional Services	6,677			4,172			17,616			10,629
Total reportable segments Adjusted Gross Profit	21,161			16,341			58,602			36,383
Less Adjusted Gross Profit reconciling items:
Stock-based compensation	(370		)	(138		)	(722		)	(374		)
Tender offer payments deemed compensation⁽¹⁾	—			—			—			(312		)
Post-acquisition restructuring costs⁽²⁾	—			(332		)	(108		)	(332		)
Less other reconciling items:
Sales and marketing	(14,721		)	(13,771		)	(35,579		)	(32,496		)
Research and development	(13,477		)	(10,839		)	(33,209		)	(28,031		)
General and administrative	(11,013		)	(5,605		)	(23,333		)	(16,748		)
Depreciation and amortization	(2,316		)	(2,151		)	(6,844		)	(5,252		)
Debt extinguishment costs	—			—			(1,670		)	—
Interest and other expense, net	(659		)	(374		)	(2,924		)	(1,389		)
Net loss before income taxes	$	(21,395	)	$	(16,869	)	$	(45,787	)	$	(48,551	)

____________________


(1)	Tender offer payments deemed compensation included in the Adjusted Gross Profit reconciliation above relate to employee compensation from repurchases of common stock at a price in excess of its estimated fair value. For additional details refer to Note 11 in the condensed consolidated financial statements.

(2)

Post-acquisition restructuring costs included in the Adjusted Gross Profit reconciliation above relate to severance charges following the acquisition of Medicity. For additional details refer to Note 2 in the condensed consolidated financial statements.

Description of Business and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Basis of presentation

Principles of consolidation

The condensed consolidated financial statements include the accounts of Health Catalyst and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated.

Use of estimates

Segment reporting

Net loss per share

Cash and cash equivalents

We consider all highly liquid investments purchased with a remaining maturity of three months or less at the time of acquisition to be cash equivalents.

Short-term investments

Our investment policy limits investments to highly-rated instruments that mature in less than 12 months. We classify our short-term investments as available for sale.

Accounts receivable

Property and Equipment

Property and equipment



Computer equipment	2-3 years
Furniture and fixtures	3 years
Leasehold improvements	Lesser of lease term or estimated useful life
Computer software	2-3 years
Capitalized internal-use software costs	3 years

Intangible assets



Developed technologies	2-10 years
Customer relationships and contracts	6 years
Computer software licenses	2-5 years
Trademarks	2 years

Goodwill

Deferred offering costs

Common stock warrants

Business combinations

Advertising cost

Advertising costs

All advertising costs are expensed as incurred.

Development cost and internal-use software

Development costs and internal-use software

Stock-based compensation

Income taxes

Fair value of financial instruments


•	Level 1- Quoted prices in active markets for identical assets or liabilities.


•	Level 2- Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•

Level 3- Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Leases

We do not have lease agreements that contain non-lease components, which generally would be accounted for separately.

Accounting pronouncements

Accounting pronouncement adopted

Recent accounting pronouncements

Description of Business and Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Schedule of property and equipment, useful life

The estimated useful life of each asset category is as follows:



Computer equipment	2-3 years
Furniture and fixtures	3 years
Leasehold improvements	Lesser of lease term or estimated useful life
Computer software	2-3 years
Capitalized internal-use software costs	3 years

Property and equipment consisted of the following (in thousands):



	As of September 30,			As of December 31,
	2019			2018
Computer equipment	$	7,454		$	6,769
Leasehold improvements	2,234			1,704
Furniture and fixtures	1,553			1,406
Capitalized internal-use software costs	1,712			1,482
Computer software	972			972
Capital lease equipment	37			37
Total property and equipment	13,962			12,370
Less: accumulated depreciation	(9,734		)	(7,694		)
Property and equipment, net	$	4,228		$	4,676

Schedule of intangible asset, useful life

The estimated useful life of each asset category is as follows:



Developed technologies	2-10 years
Customer relationships and contracts	6 years
Computer software licenses	2-5 years
Trademarks	2 years

As of September 30, 2019, intangible assets consisted of the following (in thousands):



	Gross		Accumulated Amortization			Net
Developed technologies	$	36,129	$	(15,591	)	$	20,538
Customer relationships and contracts	4,164		(2,600		)	1,564
Computer software licenses	6,606		(2,061		)	4,545
Trademarks	100		(63		)	37
Total intangible assets	$	46,999	$	(20,315	)	$	26,684

As of December 31, 2018, intangible assets consisted of the following (in thousands):



	Gross		Accumulated Amortization			Net
Developed technologies	$	36,129	$	(12,720	)	$	23,409
Customer relationships and contracts	4,164		(2,080		)	2,084
Computer software licenses	3,554		(818		)	2,736
Trademarks	100		(25		)	75
Total intangible assets	$	43,947	$	(15,643	)	$	28,304

Business Combinations (Tables)

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Schedule of recognized identified assets acquired and liabilities assumed

The following table summarizes the acquisition-date fair value of consideration transferred and the assets received and liabilities assumed as part of our acquisition of Medicity (in thousands):



Assets acquired:
Accounts receivable	$	7,016
Prepaid expenses	2,735
Property and equipment	1,613
Computer software licenses	2,358
Developed technologies	800
Customer relationships and contracts	600
Trademarks	100
Total assets acquired	15,222
Less liabilities assumed:
Accounts payable and other current liabilities	1,970
Deferred revenue	11,000
Total liabilities assumed	12,970
Total assets acquired, net	$	2,252

Schedule of unaudited pro forma information as if the acquisition of medicity had occurred on January 1, 2017

The following unaudited pro forma information presents our consolidated information as if the acquisition of Medicity had occurred on January 1, 2017 (in thousands, except per share amounts):



	Year Ended December 31,
	2017			2018
Total pro forma revenues	$	109,739		$	128,992
Pro forma net loss	(63,986		)	(72,931		)
Pro forma net loss per share attributable to common stockholders, basic and diluted	(13.20		)	(15.20		)

Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill by Reporting Unit

Goodwill by reporting unit is as follows (in thousands):



	As of September 30,		As of December 31,
	2019		2018
Technology	$	2,912	$	2,912
Professional services	782		782
Total goodwill	$	3,694	$	3,694

Schedule of Intangible Assets

The estimated useful life of each asset category is as follows:



Developed technologies	2-10 years
Customer relationships and contracts	6 years
Computer software licenses	2-5 years
Trademarks	2 years

As of September 30, 2019, intangible assets consisted of the following (in thousands):



	Gross		Accumulated Amortization			Net
Developed technologies	$	36,129	$	(15,591	)	$	20,538
Customer relationships and contracts	4,164		(2,600		)	1,564
Computer software licenses	6,606		(2,061		)	4,545
Trademarks	100		(63		)	37
Total intangible assets	$	46,999	$	(20,315	)	$	26,684

As of December 31, 2018, intangible assets consisted of the following (in thousands):



	Gross		Accumulated Amortization			Net
Developed technologies	$	36,129	$	(12,720	)	$	23,409
Customer relationships and contracts	4,164		(2,080		)	2,084
Computer software licenses	3,554		(818		)	2,736
Trademarks	100		(25		)	75
Total intangible assets	$	43,947	$	(15,643	)	$	28,304

Net Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Schedule of the calculation of basic and diluted net loss per share attributable to common stockholders

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share amounts):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Numerator:
Net loss attributable to common stockholders	$	(39,586	)	$	(17,390	)	$	(226,656	)	$	(36,364	)
Denominator:
Weighted-average number of shares used in calculating net loss per share attributable to common stockholders, basic and diluted	28,222,555			4,685,633			12,749,903			4,812,890
Net loss per share attributable to common stockholders, basic and diluted	$	(1.40	)	$	(3.71	)	$	(17.78	)	$	(7.56	)

Schedule of share totals with a potentially dilutive impact

The following table contains share totals with a potentially dilutive impact:



	As of September 30,
	2019	2018
Redeemable convertible preferred stock	—	22,713,694
Common stock options	7,923,437	7,178,103
Restricted stock units	257,278	—
Employee stock purchase plan	138,470	—
Common stock warrants	—	255,336
Total potentially dilutive securities	8,319,185	30,147,133

Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Schedule of Stock-based Compensation Expense

The following table summarizes the condensed consolidated statements of operations effect of stock-based compensation expense (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Cost of revenue	$	370	$	138	$	722	$	374
Sales and marketing	1,358		298		2,639		1,023
Research and development	3,067		179		3,502		532
General and administrative	5,179		318		6,165		958
Total stock-based compensation	$	9,974	$	933	$	13,028	$	2,887

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The fair value of our option grants is estimated at the grant date using the Black-Scholes option-pricing model based on the following weighted average assumptions:



	Three Months Ended September 30,		Nine Months Ended September 30,
	2019	2018	2019	2018
Expected volatility	—	45.6%-45.8%	43.8%-44.5%	45.6%-47.6%
Expected term (in years)	—	6.3	6.3	6.3
Risk-free interest rate	—	2.9%-3.0%	2.4%-2.5%	2.5%-3.0%
Expected dividends	—	—	—	—

Schedule of Information Related to Stock Options

A summary of the share option activity under the 2019 Plan for the nine months ended September 30, 2019, is as follows:



	Time-Based Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value
Outstanding at January 1, 2019	7,237,417		$	9.60
Options granted	1,198,121		16.00
Options exercised	(301,427	)	7.22
Options cancelled/forfeited	(210,674	)	10.51
Outstanding at September 30, 2019	7,923,437		$	10.64	7.6	$	166,431,525
Vested and expected to vest as of September 30, 2019	7,923,437		$	10.64	7.6	$	166,431,525
Vested and exercisable as of September 30, 2019	3,999,812		$	8.92	6.4	$	90,892,289

Schedule of Outstanding RSUs and Related Activity

The following table sets forth the outstanding RSUs and related activity for the nine months ended September 30, 2019:



	Restricted Stock Units	Weighted Average Grant Date Fair Value
Unvested and outstanding at January 1, 2019	—	$	—
RSUs granted	257,278	40.95
Unvested and outstanding at September 30, 2019	257,278	$	40.95

Schedule of the Purchase Right for the ESPP Option Assumptions

The fair value of the purchase right for the ESPP option is estimated on the date of grant using the Black-Scholes model with the following assumptions for the initial offering period:



Expected volatility	44%
Expected term (in months)	5
Risk-free interest rate	2%
Expected dividends	—

Segments (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Schedule of segment revenue

Segment revenue and Adjusted Gross Profit for the three and nine months ended September 30, 2019 and 2018 were as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Revenue
Technology	$	21,160	$	18,283	$	61,393	$	38,459
Professional Services	18,263		14,585		50,047		38,031
Total	$	39,423	$	32,868	$	111,440	$	76,490

Schedule of segment adjusted gross profit



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Adjusted Gross Profit
Technology	$	14,484		$	12,169		$	40,986		$	25,754
Professional Services	6,677			4,172			17,616			10,629
Total reportable segments Adjusted Gross Profit	21,161			16,341			58,602			36,383
Less Adjusted Gross Profit reconciling items:
Stock-based compensation	(370		)	(138		)	(722		)	(374		)
Tender offer payments deemed compensation⁽¹⁾	—			—			—			(312		)
Post-acquisition restructuring costs⁽²⁾	—			(332		)	(108		)	(332		)
Less other reconciling items:
Sales and marketing	(14,721		)	(13,771		)	(35,579		)	(32,496		)
Research and development	(13,477		)	(10,839		)	(33,209		)	(28,031		)
General and administrative	(11,013		)	(5,605		)	(23,333		)	(16,748		)
Depreciation and amortization	(2,316		)	(2,151		)	(6,844		)	(5,252		)
Debt extinguishment costs	—			—			(1,670		)	—
Interest and other expense, net	(659		)	(374		)	(2,924		)	(1,389		)
Net loss before income taxes	$	(21,395	)	$	(16,869	)	$	(45,787	)	$	(48,551	)

____________________


(1)	Tender offer payments deemed compensation included in the Adjusted Gross Profit reconciliation above relate to employee compensation from repurchases of common stock at a price in excess of its estimated fair value. For additional details refer to Note 11 in the condensed consolidated financial statements.

(2)

Description of Business and Summary of Significant Accounting Policies (Details)			3 Months Ended		9 Months Ended
	Jul. 29, 2019 USD ($) $ / shares shares	Jul. 10, 2019	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) segment	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Subsidiary, Sale of Stock [Line Items]
Service period (in years)					4 years
Number of operating segments \| segment					2
Number of reportable segments \| segment					2
Stock split conversion ratio		0.5
Offering costs					$ 4,407,000	$ 0
Redeemable convertible preferred stock converted into shares of common stock on a one for one basis \| shares	23,151,481
Unbilled accounts receivable			$ 3,500,000		3,500,000		$ 3,400,000
Deferred Revenue			39,600,000		39,600,000		32,000,000.0
Deferred contract fulfillment costs			1,000,000.0		1,000,000.0		600,000
Allowance for doubtful accounts			500,000		500,000		500,000
Goodwill impairment			0	$ 0	0	0
Deferred offering costs							$ 100,000
Reclassification of offering costs			4,600,000
Advertising expense			$ 3,400,000	$ 3,500,000	$ 4,500,000	$ 4,600,000
IPO
Subsidiary, Sale of Stock [Line Items]
Common stock issued \| shares	8,050,000
Share price \| $ / shares	$ 26.00
Net proceeds after deducting underwriting discounts and commissions and before deducting estimated offering costs	$ 194,600,000
Offering costs	$ 4,600,000
Over-Allotment option
Subsidiary, Sale of Stock [Line Items]
Common stock issued \| shares	1,050,000
Stock Incentive Plan \| Performance Shares
Subsidiary, Sale of Stock [Line Items]
Service period (in years)					4 years
Cumulative catch-up of compensation expense					$ 6,000,000.0

Business Combinations - Narrative (Details) - Medicity LLC - USD ($) $ in Thousands		6 Months Ended	9 Months Ended	12 Months Ended
	Jun. 29, 2018	Dec. 31, 2018	Sep. 30, 2019	Dec. 31, 2018	Dec. 31, 2017
Business Acquisition [Line Items]
Series E redeemable convertible preferred stock capital raise	$ 15,000
Membership interest (in percentage)	100.00%
Pro forma net loss				$ (72,931)	$ (63,986)
Revenue attributable to the business of Medicity		$ 12,500
Series E redeemable convertible preferred stock
Business Acquisition [Line Items]
Fair value of equity issued for business combination	$ 2,300
Fair Value Adjustment To Deferred Revenues, Amortization Of Acquired Intangible Assets, And Acquisition-Related Costs [Member]
Business Acquisition [Line Items]
Pro forma net loss				$ 500	$ 11,000
Customer relationships
Business Acquisition [Line Items]
Estimated useful life			6 years
Developed technologies
Business Acquisition [Line Items]
Estimated useful life			5 years
Trademarks
Business Acquisition [Line Items]
Estimated useful life			2 years
Minimum
Business Acquisition [Line Items]
Property, plant and equipment, useful life			1 year
Minimum \| Computer software licenses
Business Acquisition [Line Items]
Estimated useful life			1 year
Maximum
Business Acquisition [Line Items]
Property, plant and equipment, useful life			5 years
Maximum \| Computer software licenses
Business Acquisition [Line Items]
Estimated useful life			5 years

Business Combinations - Schedule of Recognized Assets Acquired and Liabilities Assumed (Details) - Medicity LLC $ in Thousands	Jun. 29, 2018 USD ($)
Assets acquired:
Accounts receivable	$ 7,016
Prepaid expenses	2,735
Property and equipment	1,613
Total assets acquired	15,222
Less liabilities assumed:
Accounts payable and other current liabilities	1,970
Deferred revenue	11,000
Total liabilities assumed	12,970
Total assets acquired, net	2,252
Computer software licenses
Assets acquired:
Intangible assets	2,358
Developed technologies
Assets acquired:
Intangible assets	800
Customer relationships and contracts
Assets acquired:
Intangible assets	600
Trademarks
Assets acquired:
Intangible assets	$ 100

Business Combinations - Pro Forma Information (Details) - Medicity LLC - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items]
Total pro forma revenues	$ 128,992	$ 109,739
Pro forma net loss	$ (72,931)	$ (63,986)
Pro forma net loss per share attributable to common stockholders, basic and diluted	$ (15.20)	$ (13.20)

Goodwill and Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Finite-Lived Intangible Assets [Line Items]
Gross	$ 46,999	$ 43,947
Accumulated Amortization	(20,315)	(15,643)
Net	26,684	28,304
Developed technologies
Finite-Lived Intangible Assets [Line Items]
Gross	36,129	36,129
Accumulated Amortization	(15,591)	(12,720)
Net	20,538	23,409
Customer relationships and contracts
Finite-Lived Intangible Assets [Line Items]
Gross	4,164	4,164
Accumulated Amortization	(2,600)	(2,080)
Net	1,564	2,084
Computer software licenses
Finite-Lived Intangible Assets [Line Items]
Gross	6,606	3,554
Accumulated Amortization	(2,061)	(818)
Net	4,545	2,736
Trademarks
Finite-Lived Intangible Assets [Line Items]
Gross	100	100
Accumulated Amortization	(63)	(25)
Net	$ 37	$ 75

Property and Equipment - Components of Property and Equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Property and equipment	$ 13,962	$ 12,370
Less: accumulated depreciation	(9,734)	(7,694)
Property and equipment, net	4,228	4,676
Computer equipment
Property, Plant and Equipment [Line Items]
Property and equipment	7,454	6,769
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property and equipment	2,234	1,704
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property and equipment	1,553	1,406
Capitalized internal-use software costs
Property, Plant and Equipment [Line Items]
Property and equipment	1,712	1,482
Computer software
Property, Plant and Equipment [Line Items]
Property and equipment	972	972
Capital lease equipment
Property, Plant and Equipment [Line Items]
Property and equipment	$ 37	$ 37

Short-term Investments (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 240,347	$ 32,234
Unrealized Gains	0	0
Unrealized Losses	(12)	(1)
Fair Value	240,335	32,233
Money market funds
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	50,975	23,085
Unrealized Gains	0	0
Unrealized Losses	0	0
Fair Value	50,975	23,085
U.S. Treasury notes
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	50,832	4,175
Unrealized Gains	0	0
Unrealized Losses	(9)	(1)
Fair Value	50,823	4,174
Commercial paper
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	51,364	3,976
Unrealized Gains	0	0
Unrealized Losses	0	0
Fair Value	51,364	3,976
Corporate bonds
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	53,617	998
Unrealized Gains	0	0
Unrealized Losses	(1)	0
Fair Value	53,616	998
Asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	33,559
Unrealized Gains	0
Unrealized Losses	(2)
Fair Value	33,557
Cash equivalents
Debt Securities, Available-for-sale [Line Items]
Fair Value	50,975	27,472
Cash equivalents \| Money market funds
Debt Securities, Available-for-sale [Line Items]
Fair Value	50,975	23,085
Cash equivalents \| U.S. Treasury notes
Debt Securities, Available-for-sale [Line Items]
Fair Value	0	1,396
Cash equivalents \| Commercial paper
Debt Securities, Available-for-sale [Line Items]
Fair Value	0	1,993
Cash equivalents \| Corporate bonds
Debt Securities, Available-for-sale [Line Items]
Fair Value	0	998
Cash equivalents \| Asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Fair Value	0
Short-term Investments
Debt Securities, Available-for-sale [Line Items]
Fair Value	189,360	4,761
Short-term Investments \| Money market funds
Debt Securities, Available-for-sale [Line Items]
Fair Value	0	0
Short-term Investments \| U.S. Treasury notes
Debt Securities, Available-for-sale [Line Items]
Fair Value	50,823	2,778
Short-term Investments \| Commercial paper
Debt Securities, Available-for-sale [Line Items]
Fair Value	51,364	1,983
Short-term Investments \| Corporate bonds
Debt Securities, Available-for-sale [Line Items]
Fair Value	53,616	$ 0
Short-term Investments \| Asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Fair Value	$ 33,557

Fair Value of Financial Instruments (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	$ 240,335,000	$ 32,233,000
Liabilities measured at fair value on recurring basis	0	0
U.S. Treasury notes
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	50,823,000	4,174,000
Commercial paper
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	51,364,000	3,976,000
Corporate bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	53,616,000	998,000
Asset-backed securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	33,557,000
Fair value, recurring
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Money market funds	50,975,000	23,085,000
Total	240,335,000	32,233,000
Fair value, recurring \| Level 1
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Money market funds	50,975,000	23,085,000
Total	101,798,000	27,259,000
Fair value, recurring \| Level 2
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Money market funds	0	0
Total	138,537,000	4,974,000
Fair value, recurring \| Level 3
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Money market funds	0	0
Total	0	0
Fair value, recurring \| U.S. Treasury notes
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	50,823,000	4,174,000
Fair value, recurring \| U.S. Treasury notes \| Level 1
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	50,823,000	4,174,000
Fair value, recurring \| U.S. Treasury notes \| Level 2
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	0	0
Fair value, recurring \| U.S. Treasury notes \| Level 3
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	0	0
Fair value, recurring \| Commercial paper
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	51,364,000	3,976,000
Fair value, recurring \| Commercial paper \| Level 1
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	0	0
Fair value, recurring \| Commercial paper \| Level 2
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	51,364,000	3,976,000
Fair value, recurring \| Commercial paper \| Level 3
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	0	0
Fair value, recurring \| Corporate bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	53,616,000	998,000
Fair value, recurring \| Corporate bonds \| Level 1
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	0	0
Fair value, recurring \| Corporate bonds \| Level 2
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	53,616,000	998,000
Fair value, recurring \| Corporate bonds \| Level 3
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	0	$ 0
Fair value, recurring \| Asset-backed securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	33,557,000
Fair value, recurring \| Asset-backed securities \| Level 1
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	0
Fair value, recurring \| Asset-backed securities \| Level 2
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	33,557,000
Fair value, recurring \| Asset-backed securities \| Level 3
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value	$ 0

Credit Facilities - Narrative (Details) - USD ($)		1 Months Ended			3 Months Ended		9 Months Ended
Credit Facilities - Narrative (Details) - USD ($)	Feb. 06, 2019	Oct. 31, 2018	Oct. 31, 2017	Jun. 30, 2016	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Line of Credit Facility [Line Items]
Debt discount and issue costs					$ 2,100,000		$ 2,100,000		$ 1,200,000
Line of credit formula, percentage of eligible account balances				85.00%
Advances from line of credit							47,169,000	$ 0
Loss on extinguishment of debt					$ 0	$ 0	(1,670,000)	0
Repayments of lines of credit							21,821,000	$ 0
Silicon Valley Bank \| Term loan
Line of Credit Facility [Line Items]
Prepayment premium	$ 500,000
Write off of deferred debt issuance cost	1,200,000
Loss on extinguishment of debt	1,700,000
Repayments of lines of credit	20,000,000.0
Silicon Valley Bank \| Revolving line of credit
Line of Credit Facility [Line Items]
Repayments of lines of credit	1,300,000
Silicon Valley Bank \| Loan and Security Agreement
Line of Credit Facility [Line Items]
Maximum borrowing capacity				$ 20,000,000.0
Line of credit facility increase				5,000,000.0
Payments of financing costs				100,000
Advances from line of credit				$ 1,300,000
Current borrowing capacity	5,000,000.0
Cash or cash equivalents on deposits	5,000,000.0
Option to increase the maximum borrowing capacity	10,000,000.0
Silicon Valley Bank \| Mezzanine Loan and Security Agreement
Line of Credit Facility [Line Items]
Maximum borrowing capacity			$ 20,000,000.0
Payments of financing costs			200,000
Advances from line of credit		$ 10,000,000.0	$ 10,000,000.0
OrbiMed Royalty Opportunities II, LP \| Senior Term Loan
Line of Credit Facility [Line Items]
Payments of financing costs	2,400,000
Current borrowing capacity	50,000,000.0
Amount borrowed	80,000,000.0
Additional borrowing capacity available	30,000,000.0
Debt issuance costs	$ 300,000
Debt covenant on minimum requirement on technology revenue for 12 months to borrow 1							60,000,000.0
Debt covenant on minimum requirement on technology revenue for 12 months to borrow 2							$ 80,000,000.0
Exit fee	5.00%
Minimum \| Revolving line of credit
Line of Credit Facility [Line Items]
Basis Rate					10.00%		10.00%
Minimum \| OrbiMed Royalty Opportunities II, LP \| Senior Term Loan
Line of Credit Facility [Line Items]
Debt covenant borrowing capacity based on technology revenue					$ 25,000,000.0		$ 25,000,000.0
Basis Rate	10.00%
Repayment premium (in percentage)	1.00%
Maximum \| OrbiMed Royalty Opportunities II, LP \| Senior Term Loan
Line of Credit Facility [Line Items]
Debt covenant borrowing capacity based on technology revenue					10,000,000.0		10,000,000.0
Debt covenant borrowing capacity based on technology revenue					$ 30,000,000.0		$ 30,000,000.0
Repayment premium (in percentage)	12.00%
LIBOR \| Revolving line of credit
Line of Credit Facility [Line Items]
Basis Rate					7.50%		7.50%
LIBOR \| OrbiMed Royalty Opportunities II, LP \| Senior Term Loan
Line of Credit Facility [Line Items]
Contractual interest rate- basis spread on variable rate	7.50%

Credit Facilities - Schedule of Term Credit Facilities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Line of Credit Facility [Line Items]
Credit facilities	$ 50,000	$ 21,321
Less: Current portion of credit facilities	0	(1,321)
Credit facilities, less current portion	50,000	20,000
Remaining Capacity	30,000	18,679
Term loan
Line of Credit Facility [Line Items]
Credit facilities	50,000	20,000
Remaining Capacity	$ 25,000	$ 0
Interest Rate	10.00%	11.75%
Revolving line of credit
Line of Credit Facility [Line Items]
Credit facilities	$ 0	$ 1,321
Remaining Capacity	$ 5,000	$ 18,679
Interest Rate	5.50%	6.00%
LIBOR \| Revolving line of credit
Line of Credit Facility [Line Items]
Basis Rate	7.50%
Prime rate \| Term loan
Line of Credit Facility [Line Items]
Basis Rate		6.25%
Prime rate \| Revolving line of credit
Line of Credit Facility [Line Items]
Basis Rate	0.50%	0.50%
Minimum \| Revolving line of credit
Line of Credit Facility [Line Items]
Basis Rate	10.00%

Redeemable Convertible Preferred Stock (Details) - USD ($)		9 Months Ended
	Jul. 29, 2019	Sep. 30, 2019	Sep. 30, 2018	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Class of Stock [Line Items]
Redeemable convertible preferred stock, shares authorized (in shares)		0			45,427,441
Redeemable convertible preferred stock, par value (in USD per share)					$ 0.001
Redeemable convertible preferred stock shares issued	23,151,481	0			22,713,694
Issuance of redeemable convertible preferred stock, net of issuance costs (in shares)		437,787	1,603,923
Redeemable preferred stock issued during period		$ 12,073,000	$ 36,239,000
Issuance costs		4,407,000	0
Redeemable convertible preferred stock, $0.001 par value; no shares and 45,427,441 shares authorized as of September 30, 2019 and December 31, 2018, respectively; no shares and 22,713,694 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively; aggregated liquidation preference of $306,192 as of December 31, 2018	$ 602,700,000	$ 0	$ 345,763,000	$ 584,574,000	$ 409,845,000	$ 345,249,000	$ 321,569,000
Designated Series A redeemable convertible preferred stock
Class of Stock [Line Items]
Redeemable convertible preferred stock shares issued		3,587,499
Designated Series B redeemable convertible preferred stock
Class of Stock [Line Items]
Redeemable convertible preferred stock shares issued		4,986,827
Designated Series C redeemable convertible preferred stock
Class of Stock [Line Items]
Redeemable convertible preferred stock shares issued		4,794,007
Designated Series D redeemable convertible preferred stock
Class of Stock [Line Items]
Redeemable convertible preferred stock shares issued		3,314,612
Designated Series E redeemable convertible preferred stock
Class of Stock [Line Items]
Redeemable convertible preferred stock shares issued		6,030,749
Designated Series F redeemable convertible preferred stock
Class of Stock [Line Items]
Issuance of redeemable convertible preferred stock, net of issuance costs (in shares)		437,787
Redeemable convertible preferred stock, additional shares authorized (in shares)		1,077,587
Redeemable preferred stock issued during period		$ 12,100,000
Issuance costs		$ 100,000
IPO
Class of Stock [Line Items]
Issuance costs	$ 4,600,000
Share price	$ 26.00

Stockholders’ Equity (Deficit) - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019	Sep. 30, 2018	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017	Oct. 31, 2017
Class of Stock [Line Items]
Common stock, shares authorized (in shares)	500,000,000	500,000,000			72,565,312
Common stock, par value (in USD per share)	$ 0.001	$ 0.001			$ 0.001
Preferred stock, shares authorized (in shares)	25,000,000	25,000,000			0
Term of board of director member		3 years
Preferred stock, shares issued (in shares)	0	0			0
Preferred stock, shares outstanding (in shares)	0	0			0
Preferred stock, shares issued (in shares)	36,525,001	36,525,001			36,525,001
Shares outstanding (in shares)					4,832,134
Shares issued to former employees with notes determined to be nonrecourse (in shares)	52,778	52,778
Cash consideration of stocks repurchased		$ 0	$ 8,712
Fair value of stocks repurchased			8,712
Offering costs					$ 100
Repurchase price over the estimated fair value of the common stock redeemed from team members
Class of Stock [Line Items]
Total compensation expense from repurchase			$ 8,300
Common stock
Class of Stock [Line Items]
Shares outstanding (in shares)	36,472,223	36,472,223	4,732,780	5,002,426	4,779,356	4,671,405	4,853,841
Fair value of stocks repurchased			$ 1
Mezzanine loan and security agreement \| Common stock warrants
Class of Stock [Line Items]
Shares of common stock (in shares)								255,336
Warrants term								10 years
Exercise price of warrants (in USD per share)								$ 10.66
Deferred financing costs								$ 1,600
Warrants issued (in shares)	255,336
Mezzanine loan and security agreement \| Common stock
Class of Stock [Line Items]
Common stock, shares issued (in shares)	189,959
Team member
Class of Stock [Line Items]
Tender Offer (in shares)			798,372
Cash consideration of stocks repurchased			$ 16,900
Fair value of stocks repurchased			8,600
Offering costs			$ 100

Stockholders’ Equity (Deficit) - Schedule of the Effects of the Tender Offer Repurchase Price Over the Estimated Fair Value of the Common Stock Redeemed (Details) - USD ($)
$ in Thousands

3 Months Ended

9 Months Ended

Sep. 30, 2019

Sep. 30, 2018

Sep. 30, 2019

Sep. 30, 2018

Total Compensation Expense from Repurchase [Line Items]

^[1]

$ 14,721

$ 13,771

$ 35,579

$ 32,496

^[1]

13,477

10,839

33,209

28,031

Repurchase price over the estimated fair value of the common stock redeemed from team members

^[1]

$ 11,013

$ 5,605

$ 23,333

16,748

Total Compensation Expense from Repurchase [Line Items]

Cost of revenue

312

3,967

906

Total compensation expense from repurchase

3,133

$ 8,318

[1]	Includes amounts attributable to related party transactions. See Note 17 for further details.

Net Loss Per Share - Schedule of the Calculation of Basic and Diluted Net Loss Per Share Attributable to Common Stockholders (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Numerator:
Net loss attributable to common stockholders	$ (39,586)	$ (17,390)	$ (226,656)	$ (36,364)
Denominator:
Weighted-average number of shares used in calculating net loss per share attributable to common stockholders, basic and diluted	28,222,555	4,685,633	12,749,903	4,812,890
Net loss per share attributable to common stockholders, basic and diluted (in USD per share)	$ (1.40)	$ (3.71)	$ (17.78)	$ (7.56)

Net Loss Per Share - Schedule of Share Totals with a Potentially Dilutive Impact (Details) - shares	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares with a potentially dilutive impact	8,319,185	30,147,133
Redeemable convertible preferred stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares with a potentially dilutive impact	0	22,713,694
Common stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares with a potentially dilutive impact	7,923,437	7,178,103
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares with a potentially dilutive impact	257,278	0
Employee stock purchase plan
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares with a potentially dilutive impact	138,470	0
Common stock warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares with a potentially dilutive impact	0	255,336

Stock-Based Compensation - Narrative (Details) - USD ($)		1 Months Ended	3 Months Ended		9 Months Ended
	Jul. 23, 2019	Jul. 31, 2019	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Service period (in years)					4 years
Stock-based compensation expense			$ 9,974,000	$ 933,000	$ 13,028,000	$ 2,887,000
Weighted-average grant date fair value of option (in USD per share)					$ 9.31
Shares exercised in period (in shares)					$ 4,600,000
Total grant-date fair value of stock options vested					6,400,000
Nonvested award options, unrecognized compensation expense			$ 19,100,000		$ 19,100,000
Shares issued to former employees with notes determined to be nonrecourse (in shares)			52,778		52,778
Stock options outstanding
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Nonvested awards, period for recognition					2 years 4 months 24 days
Restricted stock units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Service period (in years)					4 years
Nonvested awards, period for recognition					3 years 4 months 24 days
Cliff vesting period					1 year
Unrecognized stock-based compensation expense related to RSUs			$ 9,900,000		$ 9,900,000
Employee stock purchase plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized (in shares)		750,000	138,470		138,470
Percentage increase of the number of common stock shares (in percentage)		1.00%
Unrecognized stock-based compensation expense related to RSUs			$ 600,000		$ 600,000
ESPP share increase in period			750,000
Maximum employee subscription rate			15.00%		15.00%
Maximum purchase value during offering period			$ 25,000,000
Denominator of lowest purchase of a participant (in shares)			2,500		2,500
Purchase price of common stock (in percentage)			85.00%
2011 Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized (in shares)	2,500,000
Number of additional shares authorized (in shares)	256,607
Percentage increase of the number of common stock shares (in percentage)	5.00%
Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized (in shares)			11,272,878		11,272,878		8,772,878
Shares available for grant (in shares)			2,552,097		2,552,097		1,296,793
Stock Incentive Plan \| Performance Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Service period (in years)					4 years
Stock-based compensation expense			$ 9,600,000	$ 900,000	$ 12,300,000	$ 2,700,000
Cumulative catch-up of compensation expense					$ 6,000,000.0

Stock-Based Compensation - Effect of Stock-based Compensation Expense on Statement of Operations (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 9,974	$ 933	$ 13,028	$ 2,887
Cost of revenue
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	370	138	722	374
Sales and marketing
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	1,358	298	2,639	1,023
Research and development
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	3,067	179	3,502	532
General and administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 5,179	$ 318	$ 6,165	$ 958

Stock-Based Compensation - Stock Option Assumptions (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	0.00%
Expected term (in years)	0 days	6 years 3 months 18 days	6 years 3 months 18 days	6 years 3 months 18 days
Risk-free interest rate	0.00%
Expected dividends	0.00%	0.00%	0.00%	0.00%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	0.00%	45.60%	43.80%	46.40%
Risk-free interest rate	0.00%	2.90%	2.40%	2.50%
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	0.00%	45.80%	44.50%	47.60%
Risk-free interest rate	0.00%	3.00%	2.50%	2.80%

Stock-Based Compensation - Stock Option Activity (Details) - USD ($)	9 Months Ended
	Sep. 30, 2019
Time-Based Option Shares
Outstanding at January 1, 2019 (in shares)	7,237,417
Options granted (in shares)	1,198,121
Options exercised (in shares)	(301,427)
Options cancelled/forfeited (in shares)	(210,674)
Outstanding at June 30, 2019 (in shares)	7,923,437
Vested and expected to vest as of September 30, 2019	7,923,437
Vested and exercisable as of September 30, 2019	3,999,812
Weighted Average Exercise Price
Options outstanding, beginning balance, weighted-average exercise price, beginning balance (in USD per share)	$ 9.60
Options granted, weighted-average exercise price (in USD per share)	16.00
Options exercised, weighted-average exercise price (in USD per share)	7.22
Options cancelled/forfeited, weighted-average exercise price, (in USD per share)	10.51
Options outstanding, ending balance, weighted-average exercise price, ending balance (in USD per share)	10.64
Vested and expected to vest (in USD per share)	10.64
Vested and exercisable (in USD per share)	$ 8.92
Option shares outstanding, weighted average remaining contractual life	7 years 7 months 6 days
Vested and expected to vest, weighted average remaining contractual life	7 years 7 months 6 days
Vested and exercisable, weighted average remaining contractual life	6 years 4 months 24 days
Option shares outstanding, aggregate intrinsic value	$ 166,431,525
Option shares vested and expected to vest, aggregate intrinsic value	166,431,525
Option shares vested and exercisable, aggregate intrinsic value	$ 90,892,289

Stock-Based Compensation - Restricted Stock Unit Activity (Details) - Restricted stock units	9 Months Ended
	Sep. 30, 2019 $ / shares shares
Restricted Stock Units
Unvested and outstanding, beginning balance (in shares) \| shares	0
RSUs granted (in shares) \| shares	257,278
Unvested and outstanding, ending balance (in shares) \| shares	257,278
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Unvested and outstanding, beginning balance, grant date fair value (in USD per share) \| $ / shares	$ 0
RSUs granted, grant date fair value, RSUs granted (in USD per share) \| $ / shares	40.95
Unvested and outstanding, ending balance, grant date fair value (in USD per share) \| $ / shares	$ 40.95

Stock-Based Compensation - Schedule of the Purchase Right for the ESPP Option Assumptions (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	0.00%
Expected term (in months)	0 days	6 years 3 months 18 days	6 years 3 months 18 days	6 years 3 months 18 days
Risk-free interest rate	0.00%
Employee stock purchase plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	44.00%
Expected term (in months)	5 months
Risk-free interest rate	2.00%
Expected dividends	$ 0

Deferred Revenue and Performance Obligations - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Product Information [Line Items]
Percentage of revenue recognized was included in deferred revenue (in percentage)	48.00%	36.00%	18.00%	13.00%
Revenue remaining performance obligation amount	$ 64.0		$ 64.0
Technology and professional services
Product Information [Line Items]
Service contract term			3 years
Allowed termination period			1 year
Notice required for termination			90 days

Related Parties (Details) - Board member - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Related Party Transaction [Line Items]
Revenue recognized from related party	$ 0.8	$ 1.2	$ 2.3	$ 3.1
Receivables from related party	1.1		1.1		$ 0.1
Acquisition-related consideration payable to related party	$ 2.4		$ 2.4		$ 3.3

Segments - Schedule of Segment Adjusted Gross Profit (Details) - USD ($)
$ in Thousands

3 Months Ended

9 Months Ended

Sep. 30, 2019

Sep. 30, 2018

Sep. 30, 2019

Sep. 30, 2018

Less Adjusted Gross Profit reconciling items:

Stock-based compensation

$ (9,974)

$ (933)

$ (13,028)

$ (2,887)

Less other reconciling items:

^[1]

(14,721)

(13,771)

(35,579)

(32,496)

^[1]

(13,477)

(10,839)

(33,209)

(28,031)

^[1]

(11,013)

(5,605)

(23,333)

(16,748)

Debt extinguishment costs

^[1]

(2,316)

(2,151)

(6,844)

(5,252)

(1,670)

Interest and other expense, net

(659)

(374)

(2,924)

(1,389)

Net loss before income taxes

(21,395)

(16,869)

(45,787)

(48,551)

Operating segments

Adjusted Gross Profit

Gross profit

21,161

16,341

58,602

36,383

Operating segments | Technology

Adjusted Gross Profit

Gross profit

14,484

12,169

40,986

25,754

Operating segments | Professional Services

Adjusted Gross Profit

Gross profit

6,677

4,172

17,616

10,629

Segment reconciling items

Less Adjusted Gross Profit reconciling items:

Stock-based compensation

(370)

(138)

(722)

(374)

Tender offer payments deemed compensation

(312)

Post-acquisition restructuring costs

(332)

(108)

(332)

Less other reconciling items:

(14,721)

(13,771)

(35,579)

(32,496)

(13,477)

(10,839)

(33,209)

(28,031)

(11,013)

(5,605)

(23,333)

(16,748)