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Health Catalyst Reports Third Quarter 2019 Results

72 Days ago

SALT LAKE CITY, Nov. 12, 2019 (GLOBE NEWSWIRE) -- Health Catalyst, Inc. (Nasdaq: HCAT), a leading provider of data and analytics technology and services to healthcare organizations, today reported financial results for the third quarter ended September 30, 2019.

“In the third quarter of 2019, I am pleased that we achieved strong performance across all areas of our business and exceeded the guidance we provided for the quarter,” said Dan Burton, CEO of Health Catalyst. “In addition to this financial and operational execution, we held our sixth annual Healthcare Analytics Summit conference in September, where over 1,600 attendees joined us in Salt Lake City. This year’s Summit was an important opportunity for Health Catalyst to continue to provide thought leadership within the healthcare data and analytics industry, while carefully listening to our customers and the broader industry’s needs. Overall, a positive third quarter positions us well to deliver strong results for the full year 2019 and beyond.”

Financial Highlights for the Three Months Ended September 30, 2019

Key Financial Metrics

  Three Months Ended
September 30,
  Year over
Year Change
  2019   2018  
                     
GAAP Financial Data: (in thousands, except percentages)
Technology revenue $ 21,160     $ 18,283     16 %
Professional services revenue $ 18,263     $ 14,585     25 %
Total revenue $ 39,423     $ 32,868     20 %
Loss from operations $ (20,736 )   $ (16,495 )   26 %
Net loss $ (21,416 )   $ (16,876 )   27 %
Other Non-GAAP Financial Data:(1)                    
Adjusted Technology Gross Profit $ 14,484     $ 12,169     19 %
Adjusted Technology Gross Margin 68 %   67 %    
Adjusted Professional Services Gross Profit $ 6,677     $ 4,172     60 %
Adjusted Professional Services Gross Margin 37 %   29 %    
Total Adjusted Gross Profit $ 21,161     $ 16,341     29 %
Total Adjusted Gross Margin 54 %   50 %    
Adjusted EBITDA $ (8,446 )   $ (11,333 )   25 %

________________________
(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 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 fourth-quarter of 2019, we expect:

  • Total revenue between $40.0 million and $43.0 million, and
  • Adjusted EBITDA between $(9.2) million and $(7.2) million

For the full-year of 2019, we expect:

  • Total revenue between $151.4 million and $154.4 million, and
  • Adjusted EBITDA between $(30.1) million and $(28.1) 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 predicted.

Quarterly Conference Call

The third quarter 2019 earnings conference call and webcast will be held Tuesday, November 12, 2019 at 5:00 p.m. EST. The conference call can be accessed by dialing 1-877-295-1104 for U.S. participants, or 1-470-495-9486 for international participants, and referencing participant code 6569426. 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 Q4 and full year 2019. 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; and (v) 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, 2019 that was filed with the SEC on August 23, 2019.  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
  September 30, December 31,
  2019   2018
Assets      
Current assets:      
Cash and cash equivalents $ 52,059     $ 28,431  
Short-term investments 189,360     4,761  
Accounts receivable, net 31,019     27,696  
Deferred costs 978     649  
Prepaid expenses and other assets 6,403     5,321  
Total current assets 279,819     66,858  
Property and equipment, net 4,228     4,676  
Intangible assets, net 26,684     28,304  
Operating lease right-of-use assets 4,494     6,344  
Other assets 1,050     1,099  
Goodwill 3,694     3,694  
Total assets $ 319,969     $ 110,975  
Liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit)      
Current liabilities:      
Accounts payable $ 5,179     $ 1,812  
Accrued liabilities 9,544     9,203  
Acquisition-related consideration payable 3,403     2,172  
Deferred revenue 32,131     24,755  
Operating lease liabilities 2,790     2,577  
Current portion of long-term debt     1,287  
Total current liabilities 53,047     41,806  
Long-term debt, net of current portion 47,916     18,814  
Acquisition-related consideration payable, net of current portion 1,826     3,770  
Deferred revenue, net of current portion 7,505     7,280  
Operating lease liabilities, net of current portion 2,435     4,228  
Other liabilities 687      
Total liabilities 113,416     75,898  
Commitments and contingencies      
Redeemable convertible preferred stock, $0.001 par value; no shares and 22,713,694           
shares issued and outstanding as of September 30, 2019 and December 31, 2018,
respectively
    409,845  
Stockholders’ equity (deficit):      
Common stock, $0.001 par value; 36,472,223 and 4,779,356 shares issued and           
outstanding as of September 30, 2019 and December 31, 2018, respectively 36     5  
Additional paid-in capital 802,777      
Accumulated deficit (596,248 )   (374,772 )
Accumulated other comprehensive loss (12 )   (1 )
Total stockholders’ equity (deficit) 206,553     (374,768 )
Total liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit) $ 319,969     $ 110,975  
               
               

 

Condensed Consolidated Statements of Operations
(in thousands, except per share data, unaudited)

  Three Months Ended   Nine Months Ended
  September 30, September 30,
  2019   2018   2019   2018
Revenue:              
Technology $ 21,160     $ 18,283     $ 61,393     $ 38,459  
Professional services 18,263     14,585     50,047     38,031  
Total revenue 39,423     32,868     111,440     76,490  
Cost of revenue, excluding depreciation and amortization:              
Technology(1)(2) 6,740     6,132     20,536     12,782  
Professional services(1)(2)(3) 11,892     10,865     33,132     28,343  
Total cost of revenue, excluding depreciation and amortization 18,632     16,997     53,668     41,125  
Operating expenses:              
Sales and marketing(1)(2)(3) 14,721     13,771     35,579     32,496  
Research and development(1)(2)(3) 13,477     10,839     33,209     28,031  
General and administrative(1)(2)(3) 11,013     5,605     23,333     16,748  
Depreciation and amortization 2,316     2,151     6,844     5,252  
Total operating expenses 41,527     32,366     98,965     82,527  
Loss from operations (20,736 )   (16,495 )   (41,193 )   (47,162 )
Loss on extinguishment of debt         (1,670 )    
Interest and other expense, net (659 )   (374 )   (2,924 )   (1,389 )
Loss before income taxes (21,395 )   (16,869 )   (45,787 )   (48,551 )
Income tax provision (benefit) 21     7     43     (142 )
Net loss $ (21,416 )   $ (16,876 )   $ (45,830 )   $ (48,409 )
Less: accretion (reversal of accretion) of redeemable convertible preferred stock 18,170     514     180,826     (12,045 )
Net loss attributable to common stockholders $ (39,586 )   $ (17,390 )   $ (226,656 )   $ (36,364 )
Net loss per share attributable to common stockholders, basic and diluted $ (1.40 )   $ (3.71 )   $ (17.78 )   $ (7.56 )
Weighted-average shares outstanding used in calculating net loss per share attributable to common stockholders, basic and diluted 28,223     4,686     12,750     4,813  
                           
Pro forma adjusted net loss per share, basic and diluted(4) $ (0.27 )           $ (0.72 )        
Pro forma as adjusted weighted-average number of
shares outstanding used in calculating Adjusted
Net Loss per share, basic and diluted(4)
36,373               36,183          

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

       
  Three Months Ended
September 30,

  Nine Months Ended
September 30,

  2019   2018   2019   2018
                               
  (in thousands)
Stock-Based Compensation Expense:                              
Cost of revenue, excluding depreciation and amortization:                              
Technology $ 64     $ 18     $ 129     $ 49  
Professional services 306     120     593     325  
Sales and marketing 1,358     298     2,639     1,023  
Research and development 3,067     179     3,502     532  
General and administrative 5,179     318     6,165     958  
Total $ 9,974     $ 933     $ 13,028     $ 2,887  

(2)   Includes tender offer payments deemed compensation expense as follows:

  Three Months Ended
September 30,

  Nine Months Ended
September 30,
    2019     2018
  2019   2018
                               
Tender Offer Payments Deemed Compensation Expense: (in thousands)
Cost of revenue, excluding depreciation and amortization:                              
Technology $     $     $     $ 28  
Professional services             284  
Sales and marketing             3,967  
Research and development             906  
General and administrative             3,133  
Total $     $     $     $ 8,318  

(3)   Includes post-acquisition restructuring costs as follows:

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2019       2018       2019       2018  
                               
Post-Acquisition Restructuring Costs: (in thousands)
Cost of revenue, excluding depreciation and amortization:                              
Technology $     $     $     $  
Professional services      332     108     332  
Sales and marketing     749     306     749  
Research and development     484     32     484  
General and administrative      513         513  
Total $     $ 2,078     $ 446     $ 2,078  

(4)   Includes pro forma adjustments to net loss attributable to common stockholders and the weighted average number of common shares outstanding directly attributable to the closing of our initial public offering on July 29, 2019 as well as certain other non-GAAP adjustments. Refer to the "Non-GAAP Financial Measures—Pro Forma Adjusted Net Loss Per Share" section below for further details.

 
 
Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
 
  Nine Months Ended
September 30,
    2019       2018  
Cash flows from operating activities              
Net loss  $ (45,830 )   $ (48,409 )
Adjustments to reconcile net loss to net cash used in operating activities:      
Depreciation and amortization 6,844     5,252  
Loss on extinguishment of debt  1,670      
Amortization of debt discount and issuance costs 797     393  
Investment discount and premium amortization (443 )   (120 )
Change in fair value of warrant liability     (37 )
Gain on sale of property and equipment (36 )   (21 )
Stock-based compensation expense 13,028     2,887  
Change in operating assets and liabilities:      
Accounts receivable, net (3,323 )   (1,206 )
Deferred costs (329 )   191  
Prepaid expenses and other assets (1,033 )   (650 )
Operating lease right-of-use assets 1,850     (3,957 )
Accounts payable, accrued liabilities, and other liabilities  1,661     7,518  
Deferred revenue 7,601     7,415  
Operating lease liabilities (1,580 )   3,434  
Net cash used in operating activities  (19,123 )   (27,310 )
       
Cash flows from investing activities      
Purchases of property and equipment (1,658 )   (760 )
Proceeds from the sale of property and equipment 40     21  
Purchase of short-term investments (221,444 )   (9,234 )
Proceeds from the sale and maturity of short-term investments 37,277     26,700  
Purchase of intangible assets  (1,747 )   (18 )
Net cash (used in) provided by investing activities (187,532 )   16,709  
       
Cash flows from financing activities      
Proceeds from initial public offering, net of underwriters' discounts and commissions 194,649      
Proceeds from the issuance of redeemable convertible preferred stock, net of issuance costs 12,073     33,987  
Proceeds from exercise of stock options 2,177     2,800  
Proceeds from employee stock purchase plan  1,216      
Repurchase of common stock     (8,712 )
Payment of SVB line of credit and mezzanine loan (21,821 )    
Proceeds from credit facilities, net of debt issuance costs 47,169      
Payments of acquisition-related consideration (773 )   (12,348 )
Payments of deferred offering costs (4,407 )    
Net cash provided by financing activities 230,283     15,727  
Net increase in cash and cash equivalents 23,628     5,126  
       
Cash and cash equivalents at beginning of period 28,431     22,978  
Cash and cash equivalents at end of period $ 52,059     $ 28,104  
               

Non-GAAP Financial Measures

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States, or 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. 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 and excluding (i) stock-based compensation and (ii) post-acquisition restructuring costs. 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 September 30, 2019 and 2018:

  Three Months Ended September 30, 2019
  (in thousands, except percentages)
  Technology   Professional
Services
  Total
Revenue  $ 21,160     $ 18,263     $ 39,423  
Cost of revenue, excluding depreciation and amortization (6,740 )   (11,892 )   (18,632 )
Gross profit, excluding depreciation and amortization 14,420     6,371     20,791  
Add:          
Stock-based compensation 64     306     370  
Adjusted Gross Profit $ 14,484     $ 6,677     $ 21,161  
Gross margin, excluding depreciation and amortization  68 %   35 %   53 %
Adjusted Gross Margin 68 %   37 %   54 %
                 

 

  Three Months Ended September 30, 2018
  (in thousands, except percentages)
  Technology   Professional
Services
  Total
Revenue $ 18,283     $ 14,585     $ 32,868  
Cost of revenue, excluding depreciation and amortization (6,132 )   (10,865 )   (16,997 )
Gross profit, excluding depreciation and amortization  12,151     3,720     15,871  
Add:          
Stock-based compensation 18     120     138  
Post-acquisition restructuring costs     332     332  
Adjusted Gross Profit $ 12,169     $ 4,172     $ 16,341  
Gross margin, excluding depreciation and amortization  66 %   26 %   48 %
Adjusted Gross Margin  67 %   29 %   50 %

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 provision, (iii) depreciation and amortization, (iv) stock-based compensation, and (v) post-acquisition restructuring costs. We believe Adjusted EBITDA 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. The following is a reconciliation of our net loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA, for the three months ended September 30, 2019 and 2018:

  Three Months Ended September 30,
    2019       2018  
                               
  (in thousands)
Net loss $ (21,416 )   $ (16,876 )
Add:      
Interest and other expense, net 659     374  
Income tax provision 21     7  
Depreciation and amortization  2,316     2,151  
Stock-based compensation  9,974     933  
Post-acquisition restructuring costs      2,078  
Adjusted EBITDA  $ (8,446 )   $ (11,333 )
               

Pro Forma Adjusted Net Loss Per Share

Adjusted Net Loss is a non-GAAP financial measure that we define as net loss attributable to common stockholders adjusted for (i) accretion of redeemable convertible preferred stock, (ii) stock-based compensation, (iii) post-acquisition restructuring costs, (iv) amortization of acquired intangibles, and (v) loss on debt extinguishment. 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.

On July 29, 2019, we closed our initial public offering (our IPO) in which we issued and sold 8,050,000 shares (inclusive of the underwriters’ option to purchase an additional 1,050,000 shares, which was exercised on July 25, 2019) of common stock at $26.00 per share. We received net proceeds of $194.6 million after deducting underwriting discounts and commissions and before deducting offering costs of $4.6 million. Upon the closing of our IPO, all shares of our outstanding redeemable convertible preferred stock converted into 23,151,481 shares of common stock on a one-for-one basis. As a result of our IPO closing during the three and nine months ended September 30, 2019, we have prepared the below adjusted condensed consolidated statement of operations data in order to present pro forma adjusted net loss per share amounts that will be comparable to future periods.  The following calculation gives effect to the following pro forma adjustments:

  1. The automatic conversion of all outstanding shares of our redeemable convertible preferred stock (using the if-converted method) into common stock as though the conversion had occurred as of the beginning of each period.
  2. The issuance of 8,050,000 shares of common stock as part of the IPO, assuming the shares of common stock were issued and sold as of the beginning of each period.

The table below presents our calculation of pro forma adjusted net loss per share, basic and diluted, including a reconciliation of Adjusted Net Loss and the pro forma as adjusted weighted-average shares used in calculating pro forma adjusted net loss per share, basic and diluted, to the most directly comparable financial measures calculated in accordance with GAAP:

  Three Months
Ended
September 30,
2019
  Nine Months
Ended
September 30,
2019
       
  (in thousands, except share and per share amounts)
Numerator:      
Net loss attributable to common stockholders   $ (39,586 )    $ (226,656 )
Add:              
Accretion of redeemable convertible preferred stock 18,170     180,826  
Stock-based compensation 9,974     13,028  
Post-acquisition restructuring costs     446  
Amortization of acquired intangibles 1,625     4,672  
Loss on extinguishment of debt     1,670  
Adjusted Net Loss $ (9,817 )   $ (26,014 )
Denominator:      
Weighted-average number of shares used in calculating net loss per share attributable to
common stockholders, basic and diluted 
28,222,555     12,749,903  
Pro forma adjustments:       
Pro forma adjustment to reflect conversion of redeemable convertible preferred stock to
common stock, assuming the conversion took place at the beginning of each period 
6,039,517     17,384,812  
Pro forma adjustment to reflect issuance of shares of common stock as part of IPO,
assuming the issuance took place at the beginning of each period 
2,111,413     6,048,718  
Pro forma as adjusted weighted-average number of shares used in calculating Adjusted Net
Loss per share, basic and diluted 
36,373,485     36,183,433  
Pro forma adjusted net loss per share, basic and diluted  $ (0.27 )   $ (0.72 )
               

Health Catalyst Investor Relations Contact:
Adam Brown
Senior Vice President, Investor Relations
+1 (855)-309-6800
ir@healthcatalyst.com

Health Catalyst Media Contact:
Kristen Berry
Vice President, Public Relations
+1 (617) 234-4123
+1 (774) 573-0455 (m)
kberry@we-worldwide.com

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