EQNX::TICKER_START (NASDAQ:HCAT), EQNX::TICKER_END 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: 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.
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:
For the full year of 2022, we expect:
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.
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.
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 As of June 30, 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 54 53 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively 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 Six Months Ended June 30, 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 13,996 11,847 27,323 22,672 Professional services 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 20,922 16,705 41,740 32,356 Research and development 18,148 14,524 35,296 28,869 General and administrative 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) (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 $ (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 Total Services 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 Total Services 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 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 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 Six Months Ended June 30, 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 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:
Senior Vice President, Investor Relations and FP&A
Health Catalyst Media Contact:
Tarah Neujahr Bryan
Chief Brand and Communications Officer