Financial Data and Key Metrics Changes - The company reported Q2 2025 revenue of $80.7 million, representing a 6% year-over-year increase and exceeding guidance [31] - Adjusted EBITDA for Q2 2025 was $9.3 million, the highest in the company's history, and also above guidance [34] - The company revised its full-year 2025 revenue guidance to $310 million due to significant impacts from Medicaid and research funding cuts [6][7] - Adjusted gross margin for Q2 2025 was 50%, a decrease of approximately 30 basis points year-over-year [32] Business Line Data and Key Metrics Changes - Technology segment revenue for Q2 2025 was $52.9 million, reflecting an 11% year-over-year growth driven by recurring revenue from new and acquired clients [32] - Professional services revenue for Q2 2025 was $27.8 million, a 1% decline compared to Q2 2024 [32] - Adjusted technology gross margin was 66%, down approximately 140 basis points year-over-year, while adjusted professional services gross margin was 18%, down approximately 190 basis points year-over-year [32][34] Market Data and Key Metrics Changes - The company anticipates that the impacts of Medicaid and research funding cuts will be a headwind not only in 2025 but likely over the next few years [13] - The company has seen delays in signing new platform client contracts due to macroeconomic uncertainty and funding cuts [9][12] Company Strategy and Development Direction - The company is focused on improving profitability and has removed its previously shared 2028 revenue target of $500 million, emphasizing near-term profitability improvements [14] - The strategic focus is on expanding applications revenue, which has been growing at over 20% year-over-year, and leveraging the Ignite platform for cross-selling opportunities [16][17] - The company plans to complete the migration of platform clients to Ignite by mid-2026, which is expected to alleviate some revenue headwinds [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term strategy despite current macroeconomic challenges, including inflation and funding cuts [6][14] - The company expects to maintain adjusted EBITDA guidance of $41 million for 2025, despite the revenue reduction [21] - Management acknowledged the need for clients to adjust to new funding realities, which may take time [52] Other Important Information - The company announced a restructuring plan that will impact approximately 9% of its workforce, aimed at improving profitability by over $40 million annually [20] - A new director, Justin Spencer, will join the board effective September 1, bringing relevant experience from the healthcare technology sector [29] - The CEO announced plans to retire effective June 30, 2026, after 15 years in the role [30] Q&A Session Summary Question: How is the Life Science business performing and what level of investment is needed for growth? - Management noted delays in late-stage opportunities in the CareVive business due to research funding cuts but remains confident in the differentiated offering [41][42] Question: Can you explain the market reaction to the recent Medicaid cuts? - Management highlighted a conservative approach among not-for-profit clients, which has led to delays in project initiation as they adjust to funding cuts [50][51] Question: What is the expected EBITDA for 2026? - Management indicated a run rate of approximately $60 million of adjusted EBITDA going into 2026, with potential for additional operating leverage [52][54] Question: What is the contribution of app layer client wins versus external client wins for new platform clients? - Approximately two-thirds of new platform clients have come from existing clients, reflecting strong cross-sell momentum [58][59] Question: How should investors think about growth rates for 2026 and beyond? - Management suggested that growth may be in the low single digits for 2026 due to ongoing macro headwinds, but expects a return to growth as the Ignite migration is completed [66][71]

Core Points - Health Catalyst CEO Dan Burton will retire on June 30, 2026, to pursue volunteer service opportunities aligned with his faith [1][2] - Burton has led Health Catalyst for nearly 15 years, contributing to significant company growth, including an IPO in 2019 and expanding the client base to 1,100 healthcare clients [3] - The company has achieved over $2.2 billion in client-approved measurable improvements during Burton's tenure [3] - Health Catalyst has maintained high employee engagement levels, ranking between the 94th and 99th percentile over the past decade, and has received over 125 Best Workplace Awards since 2013 [4] - The company supports its team members' volunteer service contributions to the community [7] Leadership Transition - Burton will assist the Board in the search for a new CEO while continuing to serve on the Board [2] - The Board expressed gratitude for Burton's service and is committed to finding a world-class CEO for the next chapter of Health Catalyst [6] Company Overview - Health Catalyst is a leading provider of data and analytics technology and services aimed at improving healthcare outcomes [8] - The company serves over 1,000 organizations globally, utilizing its cloud-based technology ecosystem and AI-enabled solutions [9] - Health Catalyst has a proven track record of delivering billions of dollars in measurable results, driving data-informed healthcare improvement [9]

Core Insights - Health Catalyst, Inc. will release its second quarter 2025 operating results on August 7, 2025, after market close [1] - A conference call to discuss the results will take place at 5:00 pm ET on the same day [1] Company Overview - Health Catalyst is a leading provider of data and analytics technology and services aimed at improving healthcare outcomes [3] - The company serves over 1,000 organizations globally, utilizing its cloud-based technology ecosystem, Health Catalyst Ignite™, and AI-enabled solutions [3] - Health Catalyst has a proven track record of delivering billions of dollars in measurable results, focusing on transforming complex healthcare data into actionable insights [3]

Core Insights - Health Catalyst, Inc. has announced the listing of 10 AI-integrated data toolkits on Databricks Marketplace, aimed at addressing significant challenges in healthcare organizations [1][2] - The toolkits are designed to provide actionable resources at no cost, enabling healthcare organizations to trial use cases and experience the value of Health Catalyst's expertise [2][4] - This initiative is part of a broader partnership with Databricks to enhance healthcare data sharing and analytics [3][7] Group 1: Product Offering - The data toolkits include advanced machine learning models and large language model capabilities to help health systems improve outcomes in various areas [4][6] - Key functionalities of the toolkits include predicting hospital readmissions, reducing avoidable emergency department visits, and optimizing surgical outcomes [6][7] - The toolkits are designed to remove barriers to measurable improvement by providing a ready-to-run framework for healthcare organizations [4][5] Group 2: Strategic Importance - The release of these toolkits reflects Health Catalyst's commitment to making data-driven improvements more accessible across the healthcare community [7] - The initiative follows the launch of Health Catalyst Ignite Spark™, which aims to provide tailored analytics solutions for smaller healthcare organizations [7][8] - By democratizing access to sophisticated analytics, Health Catalyst enables healthcare organizations of all sizes to leverage AI for better patient outcomes [5][8]

Core Viewpoint - Health Catalyst (HCAT) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system emphasizes the correlation between changes in earnings estimates and stock price movements, driven by institutional investors who adjust their valuations based on these estimates [4][6]. - Rising earnings estimates for Health Catalyst suggest an improvement in the company's underlying business, which could lead to an increase in stock price as investors respond positively [5][10]. Recent Performance and Projections - Health Catalyst is projected to earn $0.25 per share for the fiscal year ending December 2025, with no year-over-year change expected [8]. - Over the past three months, the Zacks Consensus Estimate for Health Catalyst has increased by 32.4%, reflecting a positive trend in earnings estimates [8]. Zacks Rating System Overview - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with only the top 20% receiving a "Strong Buy" or "Buy" rating, indicating superior earnings estimate revisions [9][10]. - The Zacks Rank 2 upgrade for Health Catalyst places it in the top 20% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].

Financial Performance & Targets - Health Catalyst's Q1 2025 total revenue reached $79.4 million, a 6% increase year-over-year, exceeding the guidance of approximately $79 million[48] - The company's Q1 2025 Adjusted EBITDA was $6.3 million, representing an 8% margin and an 86% increase, surpassing the guidance of around $4 million[48] - Health Catalyst anticipates a 2025 Adjusted EBITDA of approximately $41 million, a 57% increase, resulting in a 12% margin[15, 48] - The company targets approximately $500 million in revenue and $100 million in Adjusted EBITDA by 2028[15] Client Base & Retention - Health Catalyst has over 1,000 platform and app clients, including academic medical centers, integrated delivery networks, and health insurers[17] - The company added 10 net new platform clients in Q1 2025, with an aggregated average total ARR plus non-recurring revenue of approximately $500,000[48] - Health Catalyst aims to add approximately 40 net new platform clients in 2025, with an average ARR plus non-recurring revenue ranging from $300,000 to $700,000[48] - The dollar-based retention rate for Tech + TEMS is targeted at approximately 103% for 2025[48] Solutions & Improvements - Health Catalyst solutions focus on five core areas: Clinical Improvement, Revenue & Cost Improvement, Ambulatory Operations, Measures & Registries, and Data & Analytics[20, 21] - The company highlights examples of client improvements, such as $22 million in cost savings and $1.9 million in new revenue through improved patient flow[23] - Health Catalyst emphasizes its comprehensive solution, including a data platform, applications, and expertise, to drive measurable clinical, financial, and operational improvements for healthcare organizations[10, 15]

Group 1 - The recommendation for Health Catalyst (NASDAQ: HCAT) is a buy rating, indicating a positive outlook for the company's future performance [1] - The new Ignite platform is identified as a major growth catalyst that is expected to drive growth for the foreseeable future [1] - The investment approach focuses on long-term investments while also incorporating short-term strategies to uncover alpha opportunities, emphasizing a bottom-up analysis of individual companies [1] Group 2 - The investment duration is medium to long-term, aiming to identify companies with solid fundamentals, sustainable competitive advantages, and growth potential [1]

[Part I. Financial Information](index=6&type=section&id=Part%20I.%20Financial%20Information) [Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents Health Catalyst, Inc.'s unaudited condensed consolidated financial statements for Q1 2025, including balance sheets, statements of operations, and cash flows, with notes on key events like the Upfront Healthcare acquisition and a new restructuring plan Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $341,968 | $249,645 | +$92,323 | | Goodwill | $313,380 | $259,759 | +$53,621 | | Total assets | $891,542 | $858,929 | +$32,613 | | Deferred revenue (Current) | $71,497 | $53,281 | +$18,216 | | Total liabilities | $514,731 | $493,722 | +$21,009 | | Total stockholders' equity | $376,811 | $365,207 | +$11,604 | Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended Mar 31, 2025 (in thousands) | Three Months Ended Mar 31, 2024 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Total revenue | $79,413 | $74,723 | +6.3% | | Technology Revenue | $51,482 | $46,966 | +9.6% | | Professional Services Revenue | $27,931 | $27,757 | +0.6% | | Loss from operations | $(20,171) | $(22,812) | +11.6% | | Net loss | $(23,742) | $(20,587) | -15.3% | | Net loss per share, basic and diluted | $(0.35) | $(0.35) | 0.0% | Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Three Months Ended Mar 31, 2025 (in thousands) | Three Months Ended Mar 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $280 | $10,266 | | Net cash provided by investing activities | $96,762 | $83,984 | | Net cash (used in) provided by financing activities | $(4,712) | $863 | | Net increase in cash and cash equivalents | $92,323 | $95,094 | - On January 22, 2025, the company acquired Upfront Healthcare Services, Inc. for a total consideration of **$80.0 million**, consisting of **$41.1 million** in net cash, **$31.6 million** in common stock, and **$7.3 million** in contingent consideration[99](index=99&type=chunk) - In Q1 2025, the company initiated a new restructuring plan to optimize its cost structure, reducing its global workforce and incurring **$3.6 million** in related costs, primarily for severance[206](index=206&type=chunk)[208](index=208&type=chunk) - On April 14, 2025, the company fully repaid the outstanding principal and accrued interest on its 2.50% Convertible Senior Notes due 2025, which had an aggregate principal amount of **$230.0 million**[213](index=213&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 financial results, noting a 6% revenue increase, widened net loss, improved Adjusted EBITDA, and strong liquidity, alongside strategic initiatives and macroeconomic impacts Key Financial Metrics Comparison (Unaudited) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Total revenue | $79,413 thousand | $74,723 thousand | | Gross margin | 36% | 39% | | Net loss | $(23,742) thousand | $(20,587) thousand | | Adjusted Gross Margin | 49% | 51% | | Adjusted EBITDA | $6,279 thousand | $3,377 thousand | - Total revenue increased by **6% YoY** to **$79.4 million** in Q1 2025, primarily driven by a **10% increase** in Technology revenue from new and acquired clients and contractual escalators with existing clients[268](index=268&type=chunk)[269](index=269&type=chunk) - Sales and marketing expenses decreased by **23% YoY** to **$14.7 million**, mainly due to lower stock-based compensation, a change in the timing of the annual HAS event, and a reduced provision for expected credit losses[273](index=273&type=chunk) - The company's liquidity position as of March 31, 2025, included **$342.0 million** in cash, cash equivalents, and short-term investments. The company believes this is sufficient to meet its needs for at least the next 12 months[283](index=283&type=chunk)[285](index=285&type=chunk) - The company performed a quantitative goodwill impairment test during Q1 2025 due to a decline in its stock price. The test concluded that the fair values of both the Technology and Professional Services reporting units exceeded their carrying values by approximately **10%** and **13%**, respectively, so no impairment was recorded[304](index=304&type=chunk)[306](index=306&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=69&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks include interest rate risk from its variable-rate Credit Agreement, limited foreign currency risk, and ongoing inflation risk impacting client spending and operating costs - The company is exposed to interest rate risk from its Credit Agreement, which bears interest at a floating rate of SOFR plus **6.5%**. A hypothetical **100 basis point** change in interest rates is not expected to have a material impact on the fair value of the outstanding debt as of the filing date[313](index=313&type=chunk)[315](index=315&type=chunk) - Foreign currency exchange risk is currently not material due to the small size of international operations, with most international sales contracts denominated in U.S. dollars. The company may consider hedging programs as it expands internationally[317](index=317&type=chunk)[318](index=318&type=chunk) - The company acknowledges that the recent high inflationary environment has put financial strain on its health system end market. While client operating margins improved in early 2025, ongoing inflation could negatively impact client spending and the company's own costs[319](index=319&type=chunk)[320](index=320&type=chunk) [Controls and Procedures](index=70&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[322](index=322&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[323](index=323&type=chunk) [Part II. Other Information](index=72&type=section&id=Part%20II.%20Other%20Information) [Legal Proceedings](index=72&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial condition - As of the report date, Health Catalyst is not involved in any legal proceedings that management believes would have a material adverse effect on the company[326](index=326&type=chunk) [Risk Factors](index=72&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks including intense competition, macroeconomic impacts, operational challenges with third-party reliance and platform migration, regulatory compliance, and financial risks related to indebtedness and profitability - The company faces intense competition from large, well-financed entities like Epic Systems and Oracle Health, as well as niche vendors, which could lead to pricing pressures and impact market share[328](index=328&type=chunk)[329](index=329&type=chunk) - Macroeconomic challenges, including high inflation and interest rates, continue to strain the healthcare industry, which could lead to delays in client purchasing decisions and negatively affect demand for the company's solutions[334](index=334&type=chunk) - The company's business is vulnerable to information technology system failures and cyberattacks. A security breach could lead to litigation, reputational damage, and regulatory fines[401](index=401&type=chunk)[403](index=403&type=chunk)[404](index=404&type=chunk) - The business relies on third-party providers, particularly Microsoft Azure, for its computing infrastructure. Any disruption from these providers could adversely affect service delivery and lead to liability[409](index=409&type=chunk)[410](index=410&type=chunk) - The company is subject to numerous complex healthcare and data privacy laws, including HIPAA, the federal Anti-Kickback Statute, GDPR, and CCPA. Failure to comply could result in significant penalties and harm the business[436](index=436&type=chunk)[441](index=441&type=chunk)[449](index=449&type=chunk) - The Credit Agreement contains restrictive covenants that could limit the company's ability to incur debt, make investments, or pay dividends, potentially restricting operational and financial flexibility[472](index=472&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=111&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activities, including the repurchase of **1,103,601 shares** for **$5.0 million** in Q1 2025, with **$24.8 million** remaining for future repurchases Share Repurchases in Q1 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares Remaining for Purchase | | :--- | :--- | :--- | :--- | | Jan 1 - Jan 31, 2025 | — | $— | $29.8 million | | Feb 1 - Feb 28, 2025 | — | $— | $29.8 million | | Mar 1 - Mar 31, 2025 | 1,103,601 | $4.51 | $24.8 million | | **Total** | **1,103,601** | **$4.51** | **$24.8 million** | [Other Information](index=111&type=section&id=Item%205.%20Other%20Information) This section discloses that CEO Daniel Burton and General Counsel Benjamin Landry adopted Rule 10b5-1 trading arrangements in Q1 2025, while two other officers terminated theirs - During Q1 2025, CEO Daniel Burton and General Counsel Benjamin Landry adopted Rule 10b5-1 trading arrangements to permit future sales of their company stock[509](index=509&type=chunk) [Exhibits](index=113&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including the Upfront Healthcare merger agreement, corporate governance documents, and officer certifications - The exhibits filed with this report include the Agreement and Plan of Merger for the Upfront Healthcare acquisition, the company's Amended and Restated Certificate of Incorporation and Bylaws, and certifications by the CEO and CFO[511](index=511&type=chunk)

Company Performance - Health Catalyst reported quarterly earnings of $0.01 per share, matching the Zacks Consensus Estimate, but down from $0.05 per share a year ago [1] - The company posted revenues of $79.41 million for the quarter ended March 2025, exceeding the Zacks Consensus Estimate by 0.21% and up from $74.72 million year-over-year [2] - Over the last four quarters, Health Catalyst has surpassed consensus revenue estimates three times [2] Stock Movement and Outlook - Health Catalyst shares have declined approximately 42.4% since the beginning of the year, compared to a 4.7% decline in the S&P 500 [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the earnings outlook [4][6] - The current consensus EPS estimate for the upcoming quarter is $0.10 on revenues of $82.87 million, and for the current fiscal year, it is $0.29 on revenues of $334.67 million [7] Industry Context - The Medical Info Systems industry, to which Health Catalyst belongs, is currently ranked in the top 27% of over 250 Zacks industries, indicating a favorable outlook compared to lower-ranked industries [8] - Another company in the same industry, Nyxoah SA, is expected to report a quarterly loss of $0.49 per share, with revenues projected to be $1.59 million, reflecting a 19.7% increase year-over-year [9]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $79.4 million, representing a 6% year-over-year increase [25][26] - Adjusted EBITDA for Q1 2025 was $6.3 million, exceeding guidance of approximately $4 million [26][30] - Technology revenue was $51.5 million, reflecting a 10% year-over-year growth [26][30] - Professional services revenue was $27.9 million, a 1% increase compared to Q1 2024 [26] - Total adjusted gross margin was 49%, a decrease of approximately 210 basis points year-over-year [26] - Adjusted technology gross margin was 67%, down approximately 120 basis points year-over-year [26] - Adjusted professional services gross margin was 16%, down approximately 630 basis points year-over-year [26] Business Line Data and Key Metrics Changes - The technology segment showed strong performance with a 10% revenue growth year-over-year [26] - Professional services revenue growth was modest at 1% year-over-year [26] - The shift to the Ignite platform is expected to enhance profitability, with Ignite clients showing an 80/20 revenue mix favoring technology over services [9][51] Market Data and Key Metrics Changes - The company added 10 net new platform clients in Q1 2025, with two-thirds coming from existing app clients [7][22] - The average total ARR and non-recurring revenue per net new platform client was around the midpoint of $300,000 to $700,000 [7][22] - The company anticipates achieving approximately 40 net new platform clients for the full year 2025 [22][30] Company Strategy and Development Direction - The strategic shift to the Ignite platform is aimed at providing a more flexible, lower-cost solution compared to the legacy DOS model [8][9] - Ignite's modularity allows for quicker sales cycles and a more streamlined decision-making process for clients [41] - The company is focusing on cross-selling additional applications to existing clients to offset any reductions in total client spend [12][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the strong operating margins in health systems, despite potential uncertainties in Medicaid and research funding [18][20] - The company expects Ignite to be more resilient than the legacy DOS model in uncertain economic conditions [20] - Management anticipates that the majority of Ignite migrations will be completed by mid-2026, which should positively impact gross margins [11][81] Other Important Information - The company executed a $5 million share repurchase in March 2025, representing approximately 1.1 million shares [23] - Cash, cash equivalents, and short-term investments at the end of Q1 2025 were $342 million, down from $392 million at year-end 2024 [29] Q&A Session Summary Question: Can you provide more color on the decision-making process with the modular strategy? - Management noted that the lower price point of Ignite reduces the number of approvals needed, leading to shorter sales cycles and increased net new platform client additions [37][41] Question: Should we expect a different cadence in adding new customers? - Management indicated that while budget alignment still matters, the flexibility of Ignite may lead to a smoother cadence throughout the year [42] Question: What is driving the higher weighting of tech versus services with Ignite? - The modular and flexible nature of Ignite allows for easier implementation and a focus on specific use cases, resulting in a higher tech revenue mix [49][51] Question: How is the average starting ARR accounted for? - The $300,000 to $700,000 average applies to new net new platform clients, with existing clients migrating to Ignite potentially impacting dollar-based retention metrics [56][58] Question: What is the expected timing for tech adjusted gross profit margin uplift? - Management expects to see improvements in tech adjusted gross profit margins in the second half of 2025 as Ignite migrations progress [80][81] Question: How will professional services revenue ramp in the second half of the year? - Delays in health information exchange deals and late-stage opportunities are expected to push some revenue into the second half of 2025 [86][89]