• Health Catalyst Reports Second Quarter 2022 Results

    Source: Nasdaq GlobeNewswire / 04 Aug 2022 16:03:01   America/New_York

    SALT LAKE CITY, Aug. 04, 2022 (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, 2022.

    “I am pleased to share that Q2 2022 marked another quarter of strong financial performance, including exceeding the mid-point of our quarterly guidance for both revenue and Adjusted EBITDA,” said Dan Burton, CEO of Health Catalyst. “I am also happy to report that in the most recent team member engagement survey, independently administered by the Gallup organization, team member engagement scores at Health Catalyst measured in the 97th percentile. This latest engagement level continues a pattern that has been in place for many years, of industry-leading engagement, consistently ranked between the 95th and 99th percentile in overall team member engagement scores. We as a leadership team continue to maintain a primary, prioritized focus on team member engagement – the center of our strategic flywheel – because we recognize the central and foundational contributions that our team members make in building the software and providing the services expertise that enable our customers to achieve massive, measurable improvement.”

    “While we are pleased with these Q2 2022 results, we are disappointed that we are revising down our revenue and Adjusted EBITDA outlook for the full year. We are witnessing a challenging end market environment that has materially impacted our year-to-date bookings performance relative to our plan at the beginning of the year. Importantly, however, as we navigate this challenging macro-environment, we are committed to operating with financial discipline. As such, while our near-term growth is impacted by the macro-economic pressure on our end market, we are confident in our ability to drive meaningful, positive Adjusted EBITDA leverage in 2023 and beyond.”

    Financial Highlights for the Three Months Ended June 30, 2022

    Key Financial Metrics

     Three Months Ended June 30, Year over Year
    Change
      2022   2021  
               
     (in thousands, except percentages, unaudited)
    Technology revenue$45,397  $35,529  28%
    Professional services revenue$25,236  $24,098  5%
    Total revenue$70,633  $59,627  18%
    Loss from operations$(33,192) $(32,319) 3%
    Net loss$(33,428) $(35,834) (7)%
    Other Non-GAAP Financial Data:(1)     
    Adjusted Technology Gross Profit$31,968  $24,256  32%
    Adjusted Technology Gross Margin 70%  68%  
    Adjusted Professional Services Gross Profit$6,696  $8,174  (18)%
    Adjusted Professional Services Gross Margin 27%  34%  
    Total Adjusted Gross Profit$38,664  $32,430  19%
    Total Adjusted Gross Margin 55%  54%  
    Adjusted EBITDA$1,999  $1,661  20%
               
    ________________________
    (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 2022, we expect:

    • Total revenue between $65.3 million and $68.3 million, and
    • Adjusted EBITDA between $(6.0) million and $(4.0) million

    For the full year of 2022, we expect:

    • Total revenue between $271.5 million and $275.5 million, and
    • Adjusted EBITDA between $(6.0) million and $(4.0) 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, Thursday, August 4, 2022, at 5:00 p.m. E.T. Participants can pre-register for the conference call at  https://register.vevent.com/register/BI819cb5d2860c4bd5a9054759c47b3898.

    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 customers 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

    Health Catalyst intends to use its Investor Relations website as a means of disclosing material non-public information and for complying with its 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 2022. 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 customers or partners; (v) the impact of COVID-19 and inflation 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, 2022 expected to be filed with the SEC on or about August 4, 2022 and the Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022. 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,
      2022   2021 
     (unaudited)  
    Assets   
    Current assets:   
    Cash and cash equivalents$176,983  $193,227 
    Short-term investments 226,365   251,754 
    Accounts receivable, net 47,752   48,801 
    Prepaid expenses and other assets 14,270   14,609 
    Total current assets 465,370   508,391 
    Property and equipment, net 26,527   23,316 
    Intangible assets, net 109,508   104,788 
    Operating lease right-of-use assets 20,228   21,133 
    Goodwill 185,982   169,972 
    Other assets 3,724   4,496 
    Total assets$811,339  $832,096 
    Liabilities and stockholders’ equity   
    Current liabilities:   
    Accounts payable$5,691  $4,693 
    Accrued liabilities 18,612   23,725 
    Deferred revenue 60,883   56,632 
    Operating lease liabilities 3,498   3,425 
    Contingent consideration liabilities 1,625   4,576 
    Total current liabilities 90,309   93,051 
    Convertible senior notes 225,772   180,942 
    Deferred revenue, net of current portion 553   929 
    Operating lease liabilities, net of current portion 19,142   20,244 
    Contingent consideration liabilities, net of current portion 6,390   14,719 
    Other liabilities 118   113 
    Total liabilities 342,284   309,998 
    Commitments and contingencies   
        
    Stockholders’ equity:   
    Preferred stock, $0.001 par value per share; 25,000,000 shares authorized as of    
    June 30, 2022 and December 31, 2021; no shares issued and outstanding as of
    June 30, 2022 and December 31, 2021    		 —   — 
    Common stock, $0.001 par value per share; 500,000,000 shares authorized as of        
    June 30, 2022 and December 31, 2021; 54,053,379 and 52,622,080 shares
    issued and outstanding as of June 30, 2022 and December 31, 2021, respectively    		 54   53 
    Additional paid-in capital 1,386,946   1,400,972 
    Accumulated deficit (917,506)  (878,860)
    Accumulated other comprehensive loss (439)  (67)
    Total stockholders’ equity 469,055   522,098 
    Total liabilities and stockholders’ equity$811,339  $832,096 
            


    Condensed Consolidated Statements of Operations
    (in thousands, except per share data, unaudited)
     
     Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
      2022   2021   2022   2021 
    Revenue:       
    Technology$45,397  $35,529  $87,627  $69,368 
    Professional services 25,236   24,098   51,093   46,105 
    Total revenue 70,633   59,627   138,720   115,473 
    Cost of revenue, excluding depreciation and       
    amortization:       
    Technology(1)(2) 13,996   11,847   27,323   22,672 
    Professional services(1)(2) 20,611   18,206   41,280   34,719 
    Total cost of revenue, excluding depreciation and               
    amortization 34,607   30,053   68,603   57,391 
    Operating expenses:       
    Sales and marketing(1)(2) 20,922   16,705   41,740   32,356 
    Research and development(1)(2) 18,148   14,524   35,296   28,869 
    General and administrative(1)(2) 17,536   22,525   26,359   37,540 
    Depreciation and amortization 12,612   8,139   24,261   15,953 
    Total operating expenses 69,218   61,893   127,656   114,718 
    Loss from operations (33,192)  (32,319)  (57,539)  (56,636)
    Interest and other expense, net (1,180)  (3,707)  (2,842)  (7,659)
    Loss before income taxes (34,372)  (36,026)  (60,381)  (64,295)
    Income tax provision (benefit)(2) (944)  (192)  (4,495)  (91)
    Net loss$(33,428) $(35,834) $(55,886) $(64,204)
    Net loss per share, basic$(0.62) $(0.80) $(1.05) $(1.45)
    Net loss per share, diluted$(0.62) $(0.80) $(1.15) $(1.45)
    Weighted-average shares outstanding used in               
    calculating net loss per share, basic 53,675   44,886   53,343   44,381 
    Weighted-average shares outstanding used in               
    calculating net loss per share, diluted 53,675   44,886   53,804   44,381 
    Adjusted net loss (1,431)  (1)  (4,398)  (2,754)
    Adjusted net loss per share, basic and diluted(3)$(0.03) $(0.00) $(0.08) $(0.06)
            

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

     Three Months Ended June 30, Six Months Ended June 30,
      2022  2021  2022  2021
                
    Stock-Based Compensation Expense:(in thousands) (in thousands)
    Cost of revenue, excluding depreciation and amortization:       
    Technology$480 $574 $1,069 $948
    Professional services 1,924  2,282  4,091  3,717
    Sales and marketing 6,875  5,932  13,888  10,750
    Research and development 3,163  2,676  6,253  4,933
    General and administrative 5,490  6,263  10,751  10,889
    Total$17,932 $17,727 $36,052 $31,237
                

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

     Three Months Ended June 30, Six Months Ended June 30,
      2022   2021  2022   2021
             
    Acquisition-related costs (benefit), net:(in thousands) (in thousands)
    Cost of revenue, excluding depreciation and amortization:       
    Technology$87  $— $193  $—
    Professional services 147   —  366   —
    Sales and marketing 793   —  1,190   —
    Research and development 1,107   —  1,665   —
    General and administrative 2,513   8,114  (3,518)  10,270
    Income tax provision (benefit)$(933) $— $(4,533) $—
    Total$3,714  $8,114 $(4,637) $10,270
                  

    (3)   Includes non-GAAP adjustments to net loss. Refer to the "Non-GAAP Financial Measures—Adjusted Net Loss Per Share" section below for further details.


    Condensed Consolidated Statements of Cash Flows
    (in thousands, unaudited)
     
     Six Months Ended
    June 30,
      2022   2021 
    Cash flows from operating activities   
    Net loss$(55,886) $(64,204)
    Adjustments to reconcile net loss to net cash used in operating activities:   
    Stock-based compensation expense 36,052   31,237 
    Depreciation and amortization 24,261   15,953 
    Non-cash operating lease expense 1,660   1,926 
    Amortization of debt discount and issuance costs 749   5,817 
    Investment discount and premium amortization 403   569 
    Provision for expected credit losses 400   398 
    Deferred tax provision (benefit) (4,529)  4 
    Change in fair value of contingent consideration liabilities (7,303)  9,064 
    Other (78)  (25)
    Change in operating assets and liabilities:   
    Accounts receivable, net 1,294   927 
    Prepaid expenses and other assets 1,584   (1,548)
    Accounts payable, accrued liabilities, and other liabilities (4,886)  (2,439)
    Deferred revenue 374   7,465 
    Contingent consideration liabilities (741)  (11,025)
    Operating lease liabilities (1,772)  (2,107)
    Net cash used in operating activities (8,418)  (7,988)
        
    Cash flows from investing activities   
    Proceeds from the sale and maturity of short-term investments 185,171   174,293 
    Purchase of short-term investments (160,548)  (53,686)
    Acquisition of business, net of cash acquired (27,846)  — 
    Capitalization of internal-use software (7,026)  (1,912)
    Purchase of intangible assets (1,298)  (770)
    Purchases of property and equipment (558)  (8,138)
    Proceeds from the sale of property and equipment 10   12 
    Net cash (used in) provided by investing activities (12,095)  109,799 
        
    Cash flows from financing activities   
    Proceeds from exercise of stock options 3,688   14,076 
    Proceeds from employee stock purchase plan 1,531   2,619 
    Payments of acquisition-related consideration (930)  (5,360)
    Net cash provided by financing activities 4,289   11,335 
    Effect of exchange rate changes on cash and cash equivalents (20)  (5)
    Net (decrease) increase in cash and cash equivalents (16,244)  113,141 
        
    Cash and cash equivalents at beginning of period 193,227   91,954 
    Cash and cash equivalents at end of period$176,983  $205,095 
            

    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. 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, 2022 and 2021:

     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 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%


     Three Months Ended June 30, 2021
     (in thousands, except percentages)
     Technology Professional
    Services    		 Total
    Revenue$35,529  $24,098  $59,627 
    Cost of revenue, excluding depreciation and amortization (11,847)  (18,206)  (30,053)
    Gross profit, excluding depreciation and amortization 23,682   5,892   29,574 
    Add:     
    Stock-based compensation 574   2,282   2,856 
    Adjusted Gross Profit$24,256  $8,174  $32,430 
    Gross margin, excluding depreciation and amortization 67%  24%  50%
    Adjusted Gross Margin 68%  34%  54%
                

    Adjusted EBITDA

    Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted for (i) interest and other expense, net, (ii) income tax (benefit) provision, (iii) depreciation and amortization, (iv) stock-based compensation, and (v) acquisition-related costs, net, including the change in fair value of contingent consideration liabilities. 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 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, 2022 and 2021:

     Three Months Ended June 30,
      2022   2021 
            
            
     (in thousands)
    Net loss$(33,428) $(35,834)
    Add:   
    Interest and other expense, net 1,180   3,707 
    Income tax (benefit) provision (944)  (192)
    Depreciation and amortization 12,612   8,139 
    Stock-based compensation 17,932   17,727 
    Acquisition-related costs, net(1) 4,647   8,114 
    Adjusted EBITDA$1,999  $1,661 

    _______________
    (1) Acquisition-related costs, net includes 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.

    Adjusted Net Loss and Adjusted Net Loss Per Share

    Adjusted Net 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 (benefit), net, including the change in fair value of contingent consideration liabilities and the deferred tax valuation allowance release from the acquisitions of ARMUS and KPI Ninja, and (iv) non-cash interest expense related to our convertible senior notes. We believe Adjusted Net 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,    		 Six Months Ended
    June 30,
      2022   2021   2022   2021 
                    
    Numerator:(in thousands, except share and per share amounts)
    Net loss$(33,428) $(35,834) $(55,886) $(64,204)
    Add:       
    Stock-based compensation 17,932   17,727   36,052   31,237 
    Amortization of acquired intangibles 9,976   7,045   19,324   14,126 
    Acquisition-related costs (benefit), net(1) 3,714   8,114   (4,637)  10,270 
    Non-cash interest expense related to               
      convertible senior notes 375   2,947   749   5,817 
    Adjusted Net Loss$(1,431) $(1) $(4,398) $(2,754)
    Denominator:       
    Weighted-average number of shares used in               
    calculating net loss per share, basic 53,675,377   44,886,489   53,342,887   44,381,196 
    Weighted-average number of shares used in               
    calculating net loss per share, diluted 53,675,377   44,886,489   53,804,441   44,381,196 
            
    Adjusted Net Loss per share, basic and diluted$(0.03) $(0.00) $(0.08) $(0.06)

    ______________
    (1) Acquisition-related costs (benefit), net includes third-party fees associated with due diligence, deferred retention expenses, post-acquisition restructuring costs incurred as part of business combinations, changes in fair value of contingent consideration liabilities for potential earn-out payments, and the deferred tax valuation allowance release from the acquisitions of ARMUS and KPI Ninja. For additional details refer to Note 2 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 Brand and Communications Officer
    media@healthcatalyst.com 


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