Health Catalyst Reports Second Quarter 2023 Results

Health Catalyst, Inc.

Health Catalyst Q2 2023 Financial Highlights & Key Themes

August 8, 2023

SALT LAKE CITY, Aug. 08, 2023 (GLOBE NEWSWIRE) -- Health Catalyst, Inc. ("Health Catalyst," Nasdaq: HCAT), a leading provider of data and analytics technology and services to healthcare organizations, today reported financial results for the quarter ended June 30, 2023.

“For the second quarter of 2023, we are encouraged by our financial results, including total revenue of $73.2 million and Adjusted EBITDA of $3.5 million, with these results beating the mid-point of our quarterly guidance on each metric. Additionally, given that we are tracking slightly ahead of our previous full year revenue and Adjusted EBITDA guidance, we are raising our 2023 revenue and Adjusted EBITDA guidance. We are pleased with our strong first half bookings performance and continued pipeline growth. As a result, we are reiterating our full year 2023 bookings expectations, inclusive of dollar-based retention rate and net new DOS subscription client additions. We are also encouraged to have received multiple additional external recognitions related to our team member engagement once again this quarter,” said Dan Burton, CEO of Health Catalyst.

Financial Highlights for the Three Months Ended June 30, 2023

Key Financial Metrics

	Three Months Ended June 30,								Year over Year
		2023				2022			Change
GAAP Financial Data:	(in thousands, except percentages, unaudited)
Technology revenue	$	47,324			$	45,397			4	%
Professional services revenue	$	25,889			$	25,236			3	%
Total revenue	$	73,213			$	70,633			4	%
Loss from operations	$	(34,618	)		$	(33,192	)		(4	)%
Net loss	$	(32,613	)		$	(33,428	)		2	%
Other Non-GAAP Financial Data:(1)
Adjusted Technology Gross Profit	$	32,031			$	31,968			—	%
Adjusted Technology Gross Margin		68	%			70	%
Adjusted Professional Services Gross Profit	$	4,392			$	6,696			(34	)%
Adjusted Professional Services Gross Margin		17	%			27	%
Total Adjusted Gross Profit	$	36,423			$	38,664			(6	)%
Total Adjusted Gross Margin		50	%			55	%
Adjusted EBITDA	$	3,513			$	1,999			76	%

________________________

(1) These measures are not calculated in accordance with generally accepted accounting principles in the United States (GAAP). See the accompanying "Non-GAAP Financial Measures" section below for more information about these financial measures, including the limitations of such measures, and for a reconciliation of each measure to the most directly comparable measure calculated in accordance with GAAP.

Financial Outlook

Health Catalyst provides forward-looking guidance on total revenue, a GAAP measure, and Adjusted EBITDA, a non-GAAP measure.

For the third quarter of 2023, we expect:

• Total revenue between $70.2 million and $74.2 million, and

• Adjusted EBITDA between $0.0 million and $2.5 million

For the full year of 2023, we expect:

• Total revenue between $290.5 million and $295.5 million, and

• Adjusted EBITDA between $10.0 million and $12.0 million

We have not reconciled guidance for Adjusted EBITDA to net loss, the most directly comparable GAAP measure, and have not provided forward-looking guidance for net loss, because there are items that may impact net loss, including stock-based compensation, that are not within our control or cannot be reasonably forecasted.

Quarterly Conference Call Details

The company will host a conference call to review the results today, Tuesday, August 8, 2023, at 5:00 p.m. E.T. The conference call can be accessed by dialing (800)-225-9448 for U.S. participants, or 203-518-9708 for international participants, and referencing conference ID “HCAT Q223.” A live audio webcast will be available online at https://ir.healthcatalyst.com/. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call, at the same web link, and will remain available for approximately 90 days.

About Health Catalyst

Health Catalyst is a leading provider of data and analytics technology and services to healthcare organizations committed to being the catalyst for massive, measurable, data-informed healthcare improvement. Its clients leverage the cloud-based data platform — powered by data from more than 100 million patient records and encompassing trillions of facts—as well as its analytics software and professional services expertise to make data-informed decisions and realize measurable clinical, financial, and operational improvements. Health Catalyst envisions a future in which all healthcare decisions are data informed.

Available Information

Our investors and others should note that we announce material information to the public about our company, products and services, and other matters related to our company through a variety of means, including our website (https://www.healthcatalyst.com/), our investor relations website (https://ir.healthcatalyst.com/), press releases, SEC filings, public conference calls, and social media, including our and our CEO's social media accounts, in order to achieve broad, non-exclusionary distribution of information to the public and to comply with our disclosure obligations under Regulation FD.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements include statements regarding our future growth and our financial outlook for Q3 and fiscal year 2023. Forward-looking statements are subject to risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance.

Important risks and uncertainties that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: (i) changes in laws and regulations applicable to our business model; (ii) changes in market or industry conditions, regulatory environment, and receptivity to our technology and services; (iii) results of litigation or a security incident; (iv) the loss of one or more key clients or partners; (v) the impact of the challenging macroeconomic environment (including high inflationary and/or high interest rate environments) on our business and results of operations; and (vi) changes to our abilities to recruit and retain qualified team members. For a detailed discussion of the risk factors that could affect our actual results, please refer to the risk factors identified in our SEC reports, including, but not limited to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023 expected to be filed with the SEC on or about August 8, 2023 and the Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 28, 2023. All information provided in this release and in the attachments is as of the date hereof, and we undertake no duty to update or revise this information unless required by law.

Condensed Consolidated Balance Sheets (in thousands, except share and per share data, unaudited)
	As of June 30,				As of December 31,
		2023				2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	115,689			$	116,312
Short-term investments		228,140				247,178
Accounts receivable, net		52,378				47,970
Prepaid expenses and other assets		14,744				16,335
Total current assets		410,951				427,795
Property and equipment, net		26,121				25,928
Intangible assets, net		79,041				92,189
Operating lease right-of-use assets		15,725				16,658
Goodwill		185,982				185,982
Other assets		5,083				3,734
Total assets	$	722,903			$	752,286
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	7,974			$	4,424
Accrued liabilities		15,791				19,691
Deferred revenue		59,526				54,961
Operating lease liabilities		3,468				3,434
Total current liabilities		86,759				82,510
Convertible senior notes		227,277				226,523
Deferred revenue, net of current portion		94				105
Operating lease liabilities, net of current portion		18,781				18,017
Other liabilities		125				121
Total liabilities		333,036				327,276
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 25,000,000 shares authorized as of June 30, 2023 and December 31, 2022; no shares issued and outstanding as of June 30, 2023 and December 31, 2022		—				—
Common stock, $0.001 par value per share, and additional paid-in capital; 500,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 56,541,641 and 55,261,922 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		1,454,897				1,424,681
Accumulated deficit		(1,064,826	)			(999,023	)
Accumulated other comprehensive loss		(204	)			(648	)
Total stockholders’ equity		389,867				425,010
Total liabilities and stockholders’ equity	$	722,903			$	752,286

 

Condensed Consolidated Statements of Operations (in thousands, except per share data, unaudited)
	Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
	(in thousands)								(in thousands)
Revenue:
Technology	$	47,324			$	45,397			$	94,510			$	87,627
Professional services		25,889				25,236				52,571				51,093
Total revenue		73,213				70,633				147,081				138,720
Cost of revenue, excluding depreciation and amortization shown below:
Technology(1)(2)(3)		15,859				13,996				30,586				27,323
Professional services(1)(2)(3)		23,579				20,611				47,156				41,280
Total cost of revenue, excluding depreciation and amortization		39,438				34,607				77,742				68,603
Operating expenses:
Sales and marketing(1)(2)(3)		16,397				20,922				34,966				41,740
Research and development(1)(2)(3)		17,590				18,148				34,672				35,296
General and administrative(1)(2)(3)(4)(5)		23,671				17,536				47,504				26,359
Depreciation and amortization		10,735				12,612				21,729				24,261
Total operating expenses		68,393				69,218				138,871				127,656
Loss from operations		(34,618	)			(33,192	)			(69,532	)			(57,539	)
Interest and other income (expense), net		2,090				(1,180	)			3,883				(2,842	)
Loss before income taxes		(32,528	)			(34,372	)			(65,649	)			(60,381	)
Income tax provision (benefit)(2)		85				(944	)			154				(4,495	)
Net loss	$	(32,613	)		$	(33,428	)		$	(65,803	)		$	(55,886	)
Net loss per share, basic	$	(0.58	)		$	(0.62	)		$	(1.18	)		$	(1.05	)
Net loss per share, diluted	$	(0.58	)		$	(0.62	)		$	(1.18	)		$	(1.15	)
Weighted-average shares outstanding used in calculating net loss per share, basic		55,977				53,675				55,732				53,343
Weighted-average shares outstanding used in calculating net loss per share, diluted		55,977				53,675				55,732				53,804

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

	Three Months Ended June 30,						Six Months Ended June 30,
		2023			2022			2023			2022
Stock-Based Compensation Expense:	(in thousands)						(in thousands)
Cost of revenue, excluding depreciation and amortization:
Technology	$	495		$	480		$	911		$	1,069
Professional services		1,981			1,924			3,755			4,091
Sales and marketing		5,458			6,875			10,900			13,888
Research and development		3,077			3,163			5,750			6,253
General and administrative		3,618			5,490			7,197			10,751
Total	$	14,629		$	17,932		$	28,513		$	36,052

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

	Three Months Ended June 30,							Six Months Ended June 30,
		2023			2022				2023			2022
Acquisition-related costs (benefit), net:	(in thousands)							(in thousands)
Cost of revenue, excluding depreciation and amortization:
Technology	$	71		$	87			$	142		$	193
Professional services		101			147				202			366
Sales and marketing		101			793				202			1,190
Research and development		195			1,107				389			1,665
General and administrative		27			2,513				41			(3,518	)
Income tax provision (benefit)		—			(933	)			—			(4,533	)
Total	$	495		$	3,714			$	976		$	(4,637	)

(3)   Includes restructuring costs as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
		2023			2022			2023			2022
Restructuring costs:	(in thousands)						(in thousands)
Cost of revenue, excluding depreciation and amortization:
Technology	$	—		$	—		$	12		$	—
Professional services		—			—			434			—
Sales and marketing		—			—			1,205			—
Research and development		—			—			286			—
General and administrative		—			—			118			—
Total	$	—		$	—		$	2,055		$	—

(4)   Includes litigation costs as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
		2023			2022			2023			2022
Litigation costs:	(in thousands)						(in thousands)
General and administrative	$	9,591		$	—		$	21,255		$	—
Total	$	9,591		$	—		$	21,255		$	—

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

	Three Months Ended June 30,						Six Months Ended June 30,
		2023			2022			2023			2022
Non-recurring lease-related charges:	(in thousands)						(in thousands)
General and administrative	$	2,681		$	—		$	2,681		$	—
Total	$	2,681		$	—		$	2,681		$	—

 

Condensed Consolidated Statements of Cash Flows (in thousands, unaudited)
	Six Months Ended June 30,
		2023				2022
Cash flows from operating activities
Net loss	$	(65,803	)		$	(55,886	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		28,513				36,052
Depreciation and amortization		21,729				24,261
Impairment of long-lived assets		2,681				—
Non-cash operating lease expense		1,537				1,660
Amortization of debt discount and issuance costs		754				749
Amortization of investment (discount) premium		(3,999	)			403
Provision for expected credit losses		1,527				400
Deferred tax provision (benefit)		4				(4,529	)
Change in fair value of contingent consideration liabilities		—				(7,303	)
Other		31				(78	)
Change in operating assets and liabilities:
Accounts receivable, net		(5,936	)			1,294
Prepaid expenses and other assets		321				1,584
Accounts payable, accrued liabilities, and other liabilities		(1,295	)			(4,886	)
Deferred revenue		4,554				374
Contingent consideration liabilities		—				(741	)
Operating lease liabilities		(1,772	)			(1,772	)
Net cash used in operating activities		(17,154	)			(8,418	)
Cash flows from investing activities
Proceeds from the sale and maturity of short-term investments		188,600				185,171
Purchase of short-term investments		(165,188	)			(160,548	)
Capitalization of internal-use software		(6,389	)			(7,026	)
Purchase of intangible assets		(968	)			(1,298	)
Purchases of property and equipment		(832	)			(558	)
Proceeds from the sale of property and equipment		11				10
Acquisition of business, net of cash acquired		—				(27,846	)
Net cash provided by (used in) investing activities		15,234				(12,095	)
Cash flows from financing activities
Proceeds from exercise of stock options		897				3,688
Proceeds from employee stock purchase plan		2,206				1,531
Repurchase of common stock		(1,808	)			—
Payments of acquisition-related consideration		—				(930	)
Net cash provided by financing activities		1,295				4,289
Effect of exchange rate changes on cash and cash equivalents		2				(20	)
Net decrease in cash and cash equivalents		(623	)			(16,244	)
Cash and cash equivalents at beginning of period		116,312				193,227
Cash and cash equivalents at end of period	$	115,689			$	176,983

Non-GAAP Financial Measures

To supplement our financial information presented in accordance with GAAP, we believe certain non-GAAP measures, including Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA, Adjusted Net Loss, and Adjusted Net Loss per share, basic and diluted, are useful in evaluating our operating performance. For example, we exclude stock-based compensation expense because it is non-cash in nature and excluding this expense provides meaningful supplemental information regarding our operational performance and allows investors the ability to make more meaningful comparisons between our operating results and those of other companies. We use this non-GAAP financial information to evaluate our ongoing operations, as a component in determining employee bonus compensation, and for internal planning and forecasting purposes.

We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Adjusted Gross Profit and Adjusted Gross Margin

Adjusted Gross Profit is a non-GAAP financial measure that we define as revenue less cost of revenue, excluding depreciation and amortization, adding back stock-based compensation and acquisition-related costs, net as applicable. We define Adjusted Gross Margin as our Adjusted Gross Profit divided by our revenue. We believe Adjusted Gross Profit and Adjusted Gross Margin are useful to investors as they eliminate the impact of certain non-cash expenses and allow a direct comparison of these measures between periods without the impact of non-cash expenses and certain other non-recurring operating expenses. The following is a reconciliation of revenue, the most directly comparable GAAP financial measure, to Adjusted Gross Profit, for the three months ended June 30, 2023 and 2022:

	Three Months Ended June 30, 2023
	(in thousands, except percentages)
	Technology				Professional Services				Total
Revenue	$	47,324			$	25,889			$	73,213
Cost of revenue, excluding depreciation and amortization		(15,859	)			(23,579	)			(39,438	)
Gross profit, excluding depreciation and amortization		31,465				2,310				33,775
Add:
Stock-based compensation		495				1,981				2,476
Acquisition-related costs, net(1)		71				101				172
Adjusted Gross Profit	$	32,031			$	4,392			$	36,423
Gross margin, excluding depreciation and amortization		66	%			9	%			46	%
Adjusted Gross Margin		68	%			17	%			50	%

___________________
(1)   Acquisition-related costs, net include deferred retention expenses following the ARMUS and KPI Ninja acquisitions.

	Three Months Ended June 30, 2022
	(in thousands, except percentages)
	Technology				Professional Services				Total
Revenue	$	45,397			$	25,236			$	70,633
Cost of revenue, excluding depreciation and amortization		(13,996	)			(20,611	)			(34,607	)
Gross profit, excluding depreciation and amortization		31,401				4,625				36,026
Add:
Stock-based compensation		480				1,924				2,404
Acquisition-related costs, net(1)		87				147				234
Adjusted Gross Profit	$	31,968			$	6,696			$	38,664
Gross margin, excluding depreciation and amortization		69	%			18	%			51	%
Adjusted Gross Margin		70	%			27	%			55	%

___________________
(1)   Acquisition-related costs, net include deferred retention expenses following the ARMUS, KPI Ninja, and Twistle acquisitions.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted for (i) interest and other income (expense), net, (ii) income tax provision (benefit), (iii) depreciation and amortization, (iv) stock-based compensation, (v) acquisition-related costs, net, (vi) litigation costs, and (vii) non-recurring lease-related charges. We view acquisition-related expenses when applicable, such as transaction costs and changes in the fair value of contingent consideration liabilities that are directly related to business combinations, as costs that are unpredictable, dependent upon factors outside of our control, and are not necessarily reflective of operational performance during a period. We believe that excluding restructuring costs and litigation costs allows for more meaningful comparisons between operating results from period to period as these are separate from the core activities that arise in the ordinary course of our business and are not part of our ongoing operations. We believe Adjusted EBITDA provides investors with useful information on period-to-period performance as evaluated by management and a comparison with our past financial performance, and is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance. The following is a reconciliation of our net loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA, for the three months ended June 30, 2023 and 2022:

	Three Months Ended June 30,
		2023				2022
	(in thousands)
Net loss	$	(32,613	)		$	(33,428	)
Add:
Interest and other (income) expense, net		(2,090	)			1,180
Income tax provision (benefit)		85				(944	)
Depreciation and amortization		10,735				12,612
Stock-based compensation		14,629				17,932
Acquisition-related costs, net(1)		495				4,647
Litigation costs(2)		9,591				—
Non-recurring lease-related charges(3)		2,681				—
Adjusted EBITDA	$	3,513			$	1,999

__________________
(1) Current year acquisition-related costs, net includes deferred retention expenses, while the prior year acquisition-related costs, net include third-party fees associated with due diligence, deferred retention expenses, post-acquisition restructuring costs incurred as part of business combinations, and changes in fair value of contingent consideration liabilities for potential earn-out payments. For additional details, refer to Note 2 in our condensed consolidated financial statements.
(2) Litigation costs include costs related to litigation that are outside the ordinary course of our business. For additional details, refer to Note 14 in our condensed consolidated financial statements.
(3) Includes the lease-related impairment charge related to our corporate office space designated for subleasing.

Adjusted Net Loss and Adjusted Net Loss Per Share

Adjusted Net Income (Loss) is a non-GAAP financial measure that we define as net loss adjusted for (i) stock-based compensation, (ii) amortization of acquired intangibles, (iii) acquisition-related costs, net, including the change in fair value of contingent consideration liabilities and the deferred tax valuation allowance release from acquisitions, (iv) litigation costs, (v) non-recurring lease-related charges, and (vi) non-cash interest expense related to our convertible senior notes. We believe Adjusted Net Income (Loss) provides investors with useful information on period-to-period performance as evaluated by management and comparison with our past financial performance and is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.

	Three Months Ended June 30,
		2023				2022
Numerator:	(in thousands, except share and per share amounts)
Net loss	$	(32,613	)		$	(33,428	)
Add:
Stock-based compensation		14,629				17,932
Amortization of acquired intangibles		7,549				9,976
Acquisition-related costs (benefit), net(1)		495				3,714
Litigation costs(2)		9,591				—
Non-recurring lease-related charges(3)		2,681				—
Non-cash interest expense related to convertible senior notes		377				375
Adjusted Net Income (Loss)	$	2,709			$	(1,431	)
Denominator:
Weighted-average number of shares used in calculating net loss per share, basic		55,976,870				53,675,377
Non-GAAP weighted-average effect of dilutive securities		731,945				—
Non-GAAP weighted-average number of shares used in calculating Adjusted Net Income (Loss) per share, diluted		56,708,815				53,675,377
Adjusted Net Income (Loss) per share, basic	$	0.05			$	(0.03	)
Adjusted Net Income (Loss) per share, diluted	$	0.05			$	(0.03	)

______________
(1) Current year acquisition-related costs, net includes deferred retention expenses, while the prior year acquisition-related costs, net include third-party fees associated with due diligence, deferred retention expenses, post-acquisition restructuring costs incurred as part of business combinations, and changes in fair value of contingent consideration liabilities for potential earn-out payments. For additional details, refer to Note 2 in our condensed consolidated financial statements.
(2) Litigation costs include costs related to litigation that are outside the ordinary course of our business. For additional details, refer to Note 14 in our condensed consolidated financial statements.
(3) Includes the lease-related impairment charge related to our corporate office space designated for subleasing. For additional details, refer to Note 1 in our condensed consolidated financial statements.

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

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

HCAT_Earnings Release Slide

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