• Health Catalyst Reports Second Quarter 2023 Results

    Source: Nasdaq GlobeNewswire / 08 Aug 2023 15:03:00   America/Chicago

    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

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    Health Catalyst Q2 2023 Financial Highlights & Key Themes

    August 8, 2023
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