Health Catalyst(US:HCAT)2025-05-09 20:45Part I. Financial Information Financial Statements 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 consideration99 - 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 severance206208 - 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 million213 Management's Discussion and Analysis of Financial Condition and Results of Operations 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 clients268269 - 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 losses273 - 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 months283285 - 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 recorded304306 Quantitative and Qualitative Disclosures about Market Risk 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 date313315 - 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 internationally317318 - 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 costs319320 Controls and Procedures 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, 2025322 - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting323 Part II. Other Information Legal Proceedings 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 company326 Risk Factors 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 share328329 - 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 solutions334 - The company's business is vulnerable to information technology system failures and cyberattacks. A security breach could lead to litigation, reputational damage, and regulatory fines401403404 - 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 liability409410 - 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 business436441449 - 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 flexibility472 Unregistered Sales of Equity Securities and Use of Proceeds 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 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 stock509 Exhibits 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 CFO511