SEC Filing | Health Catalyst, Inc.

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hcat-20200630

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

☐ 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)

________________


Delaware						45-3337483
(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 class

Trading Symbol(s)

Name of exchange on which registered

Common Stock, par value $0.001 per share

HCAT

The 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 Filer

☐

Emerging growth company

☒

Non-accelerated Filer

☒

Smaller 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

Part I. Financial Information

Item 1.

Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2020 and 2019

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three and Six Months Ended June 30, 2020 and 2019

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019

Notes to the Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

Part II. Other Information

Unregistered Sales of Equity Securities and Use of Proceeds

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;

•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.

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,
	2020		2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	104,185	$	18,032
Short-term investments	248,932		210,245
Accounts receivable, net⁽¹⁾	34,426		27,570
Deferred costs	455		937
Prepaid expenses and other assets	8,955		7,455
Total current assets	396,953		264,239
Property and equipment, net	3,835		4,295
Intangible assets, net	29,435		25,535
Operating lease right-of-use assets	15,417		3,787
Goodwill	18,419		3,694
Other assets	2,337		810
Total assets	$	466,396	$	302,360
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,398	$	3,622
Accrued liabilities	7,487		8,944
Acquisition-related consideration payable⁽¹⁾	3,164		2,192
Deferred revenue⁽¹⁾	35,173		30,653
Operating lease liabilities	1,963		2,806
Total current liabilities	50,185		48,217
Long-term debt	163,480		48,200
Acquisition-related consideration payable, net of current portion⁽¹⁾	—		1,860
Deferred revenue, net of current portion	2,176		1,459
Operating lease liabilities, net of current portion	13,913		1,654
Contingent consideration liability	1,457		—
Other liabilities	1,223		326
Total liabilities	232,434		101,716

Commitments and contingencies (Note 14)


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 capital	889,054		811,049
Accumulated deficit	(655,306)		(610,514)
Accumulated other comprehensive income	175		72
Total stockholders’ equity	233,962		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

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,
	2020		2019		2020		2019
Revenue⁽¹⁾:
Technology	$	25,487	$	20,085	$	50,186	$	40,233
Professional services	17,772		16,719		38,189		31,784
Total revenue	43,259		36,804		88,375		72,017
Cost of revenue, excluding depreciation and amortization:
Technology	8,197		7,044		16,103		13,796
Professional services	14,932		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 marketing	12,502		10,385		25,989		20,858
Research and development	12,061		9,710		25,149		19,732
General and administrative	8,113		6,146		17,814		12,320
Depreciation and amortization	3,094		2,216		5,971		4,528
Total operating expenses	35,770		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) provision	4		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

HEALTH CATALYST, INC.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net Loss	$	(27,183)	$	(10,694)	$	(44,673)	$	(24,414)

Other comprehensive income (loss):
Change in unrealized gain on investments	113		7		110		10
Change in foreign currency translation adjustment	23		—		(7)
Comprehensive loss	$	(27,047)	$	(10,687)	$	(44,570)	$	(24,404)

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

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 Stock				Common Stock						Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income	Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
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 Stock				Common Stock						Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income	Total Stockholders’ Deficit
	Shares	Amount		Shares	Amount
Balance as of March 31, 2019	23,151,481	$	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, 2019	23,151,481	$	584,574	5,002,426	$	5	$	—	$	(557,163)	$	9	$	(557,149)

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

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 Stock				Common Stock						Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income	Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
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 Stock				Common Stock						Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income	Total Stockholders’ Deficit
	Shares	Amount		Shares	Amount
Balance as of December 31, 2018	22,713,694	$	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, 2019	23,151,481	$	584,574	5,002,426	$	5	$	—	$	(557,163)	$	9	$	(557,149)

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

HEALTH CATALYST, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2020		2019
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 amortization	5,971		4,528
Loss on extinguishment of debt