UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________
FORM 8-K
__________________________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 8, 2023
__________________________________________________________
(Exact name of registrant as specified in its charter)
________________________________________________________________
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
(Address of principal executive offices, including zip code)
(801 ) 708-6800
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
______________________________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
______________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||||||||||||
________________________________________________________
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 ((§240.12b-2 of this chapter).
Emerging growth 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. ☐
Item 2.02. Results of Operations and Financial Condition.
On August 8, 2023 , Health Catalyst, Inc. (the Company) issued a press release relating to its financial results for the quarter ended June 30, 2023. A copy of the press release and the Q2 2023 earnings release summary are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and are each incorporated herein by reference.
The foregoing information (including the exhibits set forth in Item 9.01 hereto) is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | |||||||
| 104 | Cover page Interactive Data File (embedded within the Inline XBRL document) | |||||||
* Furnished herewith.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HEALTH CATALYST, INC. | ||||||||
Date: | By: | /s/ Bryan Hunt | ||||||
| Bryan Hunt | ||||||||
| Chief Financial Officer | ||||||||
Exhibit 99.1
Health Catalyst Reports Second Quarter 2023 Results
SALT LAKE CITY, UT, August 8, 2023 — 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 Change | ||||||||||||||||
| 2023 | 2022 | ||||||||||||||||
| 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
© Health Catalyst. Confidential and Proprietary. 5-year, ~$50M contract with long-standing regional health system client: • Includes All-Access Technology and TEMS in new offering area (ambulatory operations) • Contract roughly quintuples the size of the client relationship • Annual spend represents ~5% of the client’s net patient revenue • Includes opportunity to earn annual shared success bonuses (incremental to the ~$50M) • Our operating environment continues to align with what we shared in prior quarters, with slight improvement in recent months • This translated to a strong 1H 2023 bookings performance that was consistent with our expectations • Entering 2H 2023, our pipeline continues to grow and our anticipated 2H 2023 bookings are also in line with our previously shared expectations • From 7/1/22 through 6/30/23, our Tech-Enabled Managed Services (TEMS) ARR grew by >80% and now represents nearly 50% of total Professional Services ARR • Long-term TEMS partnerships include multi-year contracts that average >$8M of total ARR per client, ~4x larger than the average ARR per DOS subscription client • We continue to feel confident in long-term revenue growth target of 20%+ and long-term Adjusted EBITDA margin target of 20%+ Health Catalyst Q2 2023 Financial Highlights & Key Themes • Total Revenue: $73.2M; actual results exceeded guidance midpoint (range of $70.3M to $74.3M) • Adjusted EBITDA: $3.5M; actual results exceeded guidance midpoint (range of $0.75M to $4.75M) • Adjusted EBITDA margin increased to ~5%, which represents an improvement of ~200 basis points compared to Q2 2022 Q2 2023 Revenue and Profitability 2023 Guidance and Bookings Expectations Key Themes • We are raising guidance ranges for both FY 2023 Revenue and Adjusted EBITDA • 2023 Total Revenue range updated to $290.5M to $295.5M (up $0.5M compared to midpoint of prior guidance of $290M to $295M) • 2023 Adjusted EBITDA range updated to $10.0M to $12.0M (up $1M compared to midpoint of prior guidance of $9.0M to $11.0M) • We reiterate our FY 2023 bookings expectations, inclusive of net new DOS subscription client additions in the low double digits & dollar-based retention rate of 102% to 110% Two Recent Tech- Enabled Managed Services (TEMS) Wins 5-year, ~$60M contract with long-standing health system client: • Includes All-Access Technology and TEMS in chart abstraction and analytics focused on clinical improvement and health equity • Contract roughly doubles the size of the client relationship, to ~$12M of ARR, becoming one of Health Catalyst’s five largest clients