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       .
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
________________
(Mark One)
   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
Or
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 001-38993
HEALTH CATALYST, INC.
(Exact name of registrant as specified in its charter)
________________
Delaware45-3337483
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
3165 Millrock Drive #400
Salt Lake City, UT 84121
(Address of principal executive offices, including zip code)

(801) 708-6800
(Registrant’s telephone number, including area code)
________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, par value $0.001 per shareHCATThe Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated FilerEmerging growth company
Non-accelerated FilerSmaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of July 31, 2020, the Registrant had 39,711,745 shares of common stock outstanding.




HEALTH CATALYST, INC.

Table of Contents

Page

Special Note Regarding Forward-looking Statements
As used in this Quarterly Report on Form 10-Q, unless expressly indicated or the context otherwise requires, references to “Health Catalyst,” “we,” “us,” “our,” “the Company,” and similar references refer to Health Catalyst, Inc. and its consolidated subsidiaries. This Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the “Securities Act”, and the Securities Exchange Act of 1934, as amended, or the “Exchange Act”. These forward-looking statements, which are subject to a number of risks, uncertainties, and assumptions, generally relate to future events or our future financial or operating performance. In some cases, you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would,” “target,” “project,” “contemplate,” or the negative version of these words and other comparable terminology that concern our expectations, strategy, plans, intentions, or projections. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about our: 
ability to attract new customers and retain and expand our relationships with existing customers;
ability to expand our service offerings and develop new platform features;
future financial performance, including trends in revenue, costs of revenue, gross margin, and operating expenses;
ability to compete successfully in competitive markets;

1


ability to respond to rapid technological changes;
expectations and management of future growth;
ability to enter new markets and manage our expansion efforts, particularly internationally;
ability to attract and retain key employees, whom we refer to as team members;
ability to effectively and efficiently protect our brand;
ability to timely scale and adapt our infrastructure;
ability to maintain, protect, and enhance our intellectual property and not infringe upon others’ intellectual property;
ability to successfully identify, acquire, and integrate companies and assets; and
expectations regarding the impact of any natural disasters or public health emergencies, such as the COVID-19 pandemic on our business and results of operations.
These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q and as well as other documents that may be filed by us from time to time with the Securities and Exchange Commission (the SEC). Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements and you should not place undue reliance on our forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.
You should read this Quarterly Report on Form 10-Q in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2019, included in our Annual Report on Form 10-K.

2


Part I. Financial Information

Item 1.  Financial Statements

HEALTH CATALYST, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
As of
June 30,
As of
December 31,
20202019
(unaudited)
Assets
Current assets:
Cash and cash equivalents$104,185  $18,032  
Short-term investments248,932  210,245  
Accounts receivable, net(1)
34,426  27,570  
Deferred costs455  937  
Prepaid expenses and other assets8,955  7,455  
Total current assets396,953  264,239  
Property and equipment, net3,835  4,295  
Intangible assets, net29,435  25,535  
Operating lease right-of-use assets15,417  3,787  
Goodwill18,419  3,694  
Other assets2,337  810  
Total assets$466,396  $302,360  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$2,398  $3,622  
Accrued liabilities7,487  8,944  
Acquisition-related consideration payable(1)
3,164  2,192  
Deferred revenue(1)
35,173  30,653  
Operating lease liabilities1,963  2,806  
Total current liabilities50,185  48,217  
Long-term debt163,480  48,200  
Acquisition-related consideration payable, net of current portion(1)
  1,860  
Deferred revenue, net of current portion2,176  1,459  
Operating lease liabilities, net of current portion13,913  1,654  
Contingent consideration liability1,457    
Other liabilities1,223  326  
Total liabilities232,434  101,716  
Commitments and contingencies (Note 14)

3


Stockholders’ equity:
Preferred stock, $0.001 par value per share; 25,000,000 shares authorized as of June 30, 2020 and December 31, 2019; no shares issued and outstanding as of June 30, 2020 and December 31, 2019
    
Common stock, $0.001 par value per share; 500,000,000 shares authorized as of June 30, 2020 and December 31, 2019; 38,729,662 and 36,678,854 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
39  37  
Additional paid-in capital889,054  811,049  
Accumulated deficit(655,306) (610,514) 
Accumulated other comprehensive income175  72  
Total stockholders’ equity233,962  200,644  
Total liabilities and stockholders’ equity
$466,396  $302,360  
____________________
(1)Includes amounts attributable to related party transactions. See Note 16 for further details.
The accompanying notes are an integral part of these condensed consolidated financial statements

4


HEALTH CATALYST, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Revenue(1):
Technology$25,487  $20,085  $50,186  $40,233  
Professional services17,772  16,719  38,189  31,784  
Total revenue43,259  36,804  88,375  72,017  
Cost of revenue, excluding depreciation and amortization:
Technology8,197  7,044  16,103  13,796  
Professional services14,932  10,666  31,094  21,240  
Total cost of revenue, excluding depreciation and amortization
23,129  17,710  47,197  35,036  
Operating expenses:
Sales and marketing12,502  10,385  25,989  20,858  
Research and development12,061  9,710  25,149  19,732  
General and administrative8,113  6,146  17,814  12,320  
Depreciation and amortization3,094  2,216  5,971  4,528  
Total operating expenses35,770  28,457  74,923  57,438  
Loss from operations(15,640) (9,363) (33,745) (20,457) 
Loss on extinguishment of debt(8,514)   (8,514) (1,670) 
Interest and other expense, net(3,025) (1,320) (3,646) (2,265) 
Loss before income taxes(27,179) (10,683) (45,905) (24,392) 
Income tax (benefit) provision4  11  (1,232) 22  
Net loss$(27,183) $(10,694) $(44,673) $(24,414) 
Less: accretion of redeemable convertible preferred stock
  98,641    162,656  
Net loss attributable to common stockholders$(27,183) $(109,335) $(44,673) $(187,070) 
Net loss per share attributable to common stockholders, basic and diluted
$(0.71) $(21.98) $(1.19) $(38.29) 
Weighted-average shares outstanding used in calculating net loss per share attributable to common stockholders, basic and diluted
38,131  4,975  37,620  4,885  
__________________
(1)Includes amounts attributable to related party transactions. See Note 16 for further details.
The accompanying notes are an integral part of these condensed consolidated financial statements

5


HEALTH CATALYST, INC.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)

Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Net Loss$(27,183) $(10,694) $(44,673) $(24,414) 
Other comprehensive income (loss):
Change in unrealized gain on investments113  7  110  10  
Change in foreign currency translation adjustment23    (7) 
Comprehensive loss$(27,047) $(10,687) $(44,570) $(24,404) 

The accompanying notes are an integral part of these condensed consolidated financial statements

6


HEALTH CATALYST, INC.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except share data)
(unaudited)

Three Months Ended June 30, 2020
Preferred StockCommon StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance as of March 31, 2020  $  37,838,276  $38  $832,167  $(628,123) $39  $204,121  
Equity component of convertible senior notes, net of issuance costs
—  —  —  —  61,213  —  —  61,213  
Purchase of Capped Calls related to issuance of convertible senior notes
—  —  —  —  (21,743) —  —  (21,743) 
Issuance of common stock under employee stock purchase plan
—  —  97,113  —  2,408  —  —  2,408  
Vesting of restricted stock units—  —  74,692  —  —  —  —  —  
Exercise of stock options—  —  719,581  1  5,963  —  —  5,964  
Stock-based compensation—  —  —  —  9,046  —  —  9,046  
Net loss—  —  —  —  —  (27,183) —  (27,183) 
Other comprehensive income—  —  —  —  —  —  136  136  
Balance as of June 30, 2020  $  38,729,662  $39  $889,054  $(655,306) $175  $233,962  

Three Months Ended June 30, 2019
Redeemable Convertible Preferred StockCommon StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal Stockholders’ Deficit
SharesAmountSharesAmount
Balance as of March 31, 201923,151,481  $485,933  4,873,914  $5  $  $(450,043) $2  $(450,036) 
Exercise of stock options—  —  128,512  —  817  —  —  817  
Stock-based compensation—  —  —  —  1,398  —  —  1,398  
Net loss—  —  —  —  —  (10,694) —  (10,694) 
Other comprehensive income—  —  —  —  —  —  7  7  
Accretion of redeemable convertible preferred stock—  98,641  —  —  (2,215) (96,426) —  (98,641) 
Balance as of June 30, 201923,151,481  $584,574  5,002,426  $5  $  $(557,163) $9  $(557,149) 

The accompanying notes are an integral part of these condensed consolidated financial statements


7


HEALTH CATALYST, INC.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except share data)
(unaudited)
Six Months Ended June 30, 2020
Preferred StockCommon StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance as of December 31, 2019  $  36,678,854  $37  $811,049  $(610,514) $72  $200,644  
Impact of adopting the current expected credit loss standard
—  —  —  —  —  (119) —  (119) 
Issuance of common stock for acquisition consideration
—  —  110,662  —  3,332  —  —  3,332  
Equity component of convertible senior notes, net of issuance costs
—  —  —  —  61,213  —  —  61,213  
Purchase of Capped Calls related to issuance of convertible senior notes
—  —  —  —  (21,743) —  —  (21,743) 
Issuance of common stock under employee stock purchase plan
—  —  97,113  —  2,408  —  —  2,408  
Vesting of restricted stock units
—  —  74,692  —  —  —  —  —  
Exercise of stock options
—  —  1,768,341  2  15,008  —  —  15,010  
Stock-based compensation
—  —  —  —  17,787  —  —  17,787  
Net loss—  —  —  —  —  (44,673) —  (44,673) 
Other comprehensive income—  —  —  —  —  —  103  103  
Balance as of June 30, 2020  $  38,729,662  $39  $889,054  $(655,306) $175  $233,962  

Six Months Ended June 30, 2019
Redeemable Convertible Preferred StockCommon StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive (Loss) IncomeTotal Stockholders’ Deficit
SharesAmountSharesAmount
Balance as of December 31, 201822,713,694  $409,845  4,779,356  $5  $  $(374,772) $(1) $(374,768) 
Issuance of Series F redeemable convertible preferred stock, net of issuance costs of $115
437,787  12,073  —  —  —  —  —  —  
Exercise of stock options—  —  223,070  —  1,625  —  —  1,625  
Stock-based compensation—  —  —  —  3,054  —  —  3,054  
Net loss—  —  —  —  —  (24,414) —  (24,414) 
Other comprehensive income—  —  —  —  —  —  10  10  
Accretion of redeemable convertible preferred stock—  162,656  —  —  (4,679) (157,977) —  (162,656) 
Balance as of June 30, 201923,151,481  $584,574  5,002,426  $5  $  $(557,163) $9  $(557,149) 

The accompanying notes are an integral part of these condensed consolidated financial statements

8


HEALTH CATALYST, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended
June 30,
20202019
Cash flows from operating activities
Net loss$(44,673) $(24,414) 
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization5,971  4,528  
Loss on extinguishment of debt8,514  1,670  
Amortization of debt discount and issuance costs2,540  516  
Non-cash operating lease expense1,569  1,913  
Investment discount and premium amortization267  (274) 
Provision for expected credit losses836    
Stock-based compensation expense17,787  3,054  
Deferred tax benefit(