GlobeNewswire Inc | Nov 10, 2020 04:05PM EST

November 10, 2020

SALT LAKE CITY, Nov. 10, 2020 (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 quarter ended September 30, 2020.

In the third quarter of 2020, I am pleased to share that we achieved strong performance across our business, including exceeding the mid-point of our quarterly guidance for both revenue and Adjusted EBITDA, said Dan Burton, CEO of Health Catalyst. In addition to this financial and operational execution, we are excited to announce the promotion of Patrick Nelli, our current Chief Financial Officer, to the role President of Health Catalyst, effective January 1, 2021. Patrick's responsibilities as President will include all the major growth functions of the company, including with existing customers, new customers, international expansion, sales operations, marketing and communications. Additionally, I am pleased to announce the promotion of Bryan Hunt, our current Senior Vice President of Financial Planning & Analysis to the role of Chief Financial Officer, effective January 1, 2021. Patrick and Bryan, in their newly appointed roles, have my full support and confidence and the unanimous support and confidence of our board of directors. Lastly, I would also like to share two additional promotions related to these changes. Jason Alger, our Senior Vice President of Finance, has been promoted to Chief Accounting Officer, and Adam Brown, our Senior Vice President of Investor Relations, has been promoted to Senior Vice President of Investor Relations and Finance Planning & Analysis.

Financial Highlights for the Three Months Ended September 30, 2020

Key Financial Metrics

Three Months Ended Year over September 30, Year Change 2020 2019 GAAP Financial Data: (in thousands, except percentages)Technology revenue $ 27,964 $ 21,160 32%Professional services $ 19,227 $ 18,263 5%revenueTotal revenue $ 47,191 $ 39,423 20%Loss from operations $ (23,458 ) $ (20,736 ) (13)%Net loss $ (27,326 ) $ (21,416 ) (28)%Other Non-GAAP Financial Data:^(1)Adjusted Technology Gross $ 19,115 $ 14,484 32%ProfitAdjusted Technology Gross 68 % 68 % MarginAdjusted Professional $ 4,823 $ 6,677 (28)%Services Gross ProfitAdjusted Professional 25 % 37 % Services Gross MarginTotal Adjusted Gross Profit $ 23,938 $ 21,161 13%Total Adjusted Gross Margin 51 % 54 % Adjusted EBITDA $ (6,434 ) $ (8,446 ) 24%

________________________(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 fourth quarter of 2020, we expect:

-- Total revenue between $50.5 million and $53.5 million, and -- Adjusted EBITDA between $(7.3) million and $(5.3) million

For the full year of 2020, we expect:

-- Total revenue between $186.1 million and $189.1 million, and -- Adjusted EBITDA between $(23.9) million and $(21.9) 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 Details

The company will host a conference call to review the results today, Tuesday, November 10, 2020 at 5:00 p.m. E.T. 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 7195951. 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 platformpowered by data from more than 100 million patient records and encompassing trillions of factsas 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 materialnon-publicinformation 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 fiscal year 2020. 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 on our business and results of operation; 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 Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 28, 2020 and the Quarterly Report on Form 10-Q for the fiscal quarter endedSeptember 30, 2020expected to be filed with the SEC on or about November 10, 2020. 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 December 30, 31, 2020 2019Assets Current assets: Cash and cash equivalents $ 111,239 $ 18,032 Short-term investments 163,898 210,245 Accounts receivable, net 36,339 27,570 Prepaid expenses and other assets 11,290 8,392 Total current assets 322,766 264,239 Property and equipment, net 5,319 4,295 Intangible assets, net 105,926 25,535 Operating lease right-of-use assets 25,833 3,787 Goodwill 107,822 3,694 Other assets 2,997 810 Total assets $ 570,663 $ 302,360 Liabilities and stockholders? equity Current liabilities: Accounts payable $ 5,189 $ 3,622 Accrued liabilities 14,061 8,944 Acquisition-related consideration payable 3,214 2,192 Deferred revenue 35,090 30,653 Operating lease liabilities 2,425 2,806 Contingent consideration liabilities 5,893 ? Total current liabilities 65,872 48,217 Long-term debt, net of current portion 166,200 48,200 Acquisition-related consideration payable, net of ? 1,860 current portionDeferred revenue, net of current portion 1,635 1,459 Operating lease liabilities, net of current portion 24,245 1,654 Contingent consideration liabilities, net of current 10,279 ? portionOther liabilities 2,817 326 Total liabilities 271,048 101,716 Commitments and contingencies Stockholders? equity: Common stock, $0.001 par value; 42,239,922 and36,678,854 shares issued and outstanding as 42 37 of September30, 2020 and December31, 2019,respectivelyAdditional paid-in capital 982,139 811,049 Accumulated deficit (682,632 ) (610,514 )Accumulated other comprehensive income 66 72 Total stockholders' equity 299,615 200,644 Total liabilities and stockholders? equity $ 570,663 $ 302,360

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

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Revenue: Technology $ 27,964 $ 21,160 $ 78,150 $ 61,393 Professional services 19,227 18,263 57,416 50,047 Total revenue 47,191 39,423 135,566 111,440 Cost of revenue,excluding depreciation and amortization:Technology^(1) 9,045 6,740 25,148 20,536 Professional services^ 15,307 11,892 46,401 33,132 (1)(3)Total cost of revenue,excluding depreciation 24,352 18,632 71,549 53,668 and amortizationOperating expenses: Sales and marketing^(1) 14,629 14,721 40,618 35,579 (3)Research and development 13,390 13,477 38,539 33,209 ^(1)(3)General andadministrative^(1)(2)(4) 13,297 11,013 31,111 23,333 (5)Depreciation and 4,981 2,316 10,952 6,844 amortizationTotal operating expenses 46,297 41,527 121,220 98,965 Loss from operations (23,458 ) (20,736 ) (57,203 ) (41,193 )Loss on extinguishment ? ? (8,514 ) (1,670 )of debtInterest and other (3,854 ) (659 ) (7,500 ) (2,924 )expense, netLoss before income taxes (27,312 ) (21,395 ) (73,217 ) (45,787 )Income tax provision 14 21 (1,218 ) 43 (benefit)Net loss $ (27,326 ) $ (21,416 ) $ (71,999 ) $ (45,830 )Less: accretion ofredeemable convertible ? 18,170 ? 180,826 preferred stockNet loss attributable to $ (27,326 ) $ (39,586 ) $ (71,999 ) $ (226,656 )common stockholdersNet loss per shareattributable to common $ (0.68 ) $ (1.40 ) $ (1.87 ) $ (17.78 )stockholders, basic anddilutedWeighted-average sharesoutstanding used incalculating netloss per share 40,292 28,223 38,517 12,750 attributable to commonstockholders, basic anddilutedAdjusted net loss^(6) $ (8,287 ) $ (9,817 ) $ (20,110 ) $ (26,014 )Pro forma adjusted netloss per share, basic $ (0.21 ) $ (0.27 ) $ (0.52 ) $ (0.72 )and diluted^(6)Pro forma as adjustedweighted-average numberof sharesoutstanding used in 40,292 36,373 38,517 36,183 calculating Adjusted NetLoss per share, basicand diluted^(6)

_______________

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

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Stock-Based Compensation Expense: (in thousands) (in thousands)Cost of revenue, excluding depreciation and amortization:Technology $ 196 $ 64 $ 575 $ 129Professional services 903 306 2,609 593Sales and marketing 3,233 1,358 9,724 2,639Research and development 2,025 3,067 5,987 3,502General and administrative 3,139 5,179 8,388 6,165Total $ 9,496 $ 9,974 $ 27,283 $ 13,028

(2) Includes acquisition transaction costs as follows:

Three Months Nine Months Ended Ended September 30, September 30, 2020 2019 2020 2019Acquisition transaction costs: (in thousands) (in thousands)General and administrative $ 1,399 $ ? $ 2,670 $ ?Total $ 1,399 $ ? $ 2,670 $ ?

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

Three Months Nine Months Ended Ended September 30, September 30, 2020 2019 2020 2019Post-Acquisition Restructuring Costs: (in thousands) (in thousands)Cost of revenue, excluding depreciation and amortization:Professional services $ ? $ ? $ ? $ 108Sales and marketing ? ? ? 306Research and development ? ? ? 32Total $ ? $ ? $ ? $ 446

(4) Includes the change in fair value of contingent consideration liabilities, as follows:

Three Months Nine Months Ended Ended September 30, September 30, 2020 2019 2020 2019Change in fair value of contingent (in thousands) (in thousands)consideration liabilities:General and administrative $ 564 $ ? $ (1,004 ) $ ?Total $ 564 $ ? $ (1,004 ) $ ?

(5) Includes duplicate headquarters rent expense, as follows:

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Duplicate Headquarters Rent Expense: (in thousands) (in thousands)General and administrative $ 584 $ ? $ 709 $ ?Total $ 584 $ ? $ 709 $ ?

(6) 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 MeasuresPro 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,Cash flows from operating activities 2020 2019Net loss $ (71,999 ) $ (45,830 )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization 10,952 6,844 Loss on extinguishment of debt 8,514 1,670 Amortization of debt discount and issuance costs 5,260 797 Non-cash operating lease expense 2,865 2,696 Investment discount and premium amortization 854 (443 )Provision for expected credit losses 822 ? Stock-based compensation expense 27,283 13,028 Deferred tax (benefit) provision (1,280 ) ? Change in fair value of contingent consideration (1,004 ) ? liabilitiesOther 85 (36 )Change in operating assets and liabilities: Accounts receivable, net (4,450 ) (3,323 )Prepaid expenses and other assets (2,937 ) (1,362 )Accounts payable, accrued liabilities, and other 6,567 1,661 liabilitiesDeferred revenue (838 ) 7,601 Operating lease liabilities (2,701 ) (2,426 )Net cash used in operating activities (22,007 ) (19,123 ) Cash flows from investing activities Purchase of short-term investments (163,346 ) (221,444 )Proceeds from the sale and maturity of short-term 208,467 37,277 investmentsAcquisition of businesses, net of cash acquired (102,471 ) ? Purchase of property and equipment (2,071 ) (1,658 )Purchase of intangible assets (1,249 ) (1,747 )Proceeds from sale of property and equipment 10 40 Net cash used in investing activities (60,660 ) (187,532 ) Cash flows from financing activities Proceeds from convertible note securities, net of 222,482 ? issuance costsPurchase of capped calls concurrent with issuance of (21,743 ) ? convertible senior notesProceeds from credit facilities, net of debt issuance ? 47,169 costsRepayment of credit facilities (57,043 ) (21,821 )Proceeds from exercise of stock options 29,393 2,177 Proceeds from employee stock purchase plan 3,528 1,216 Payments of acquisition-related consideration (748 ) (773 )Proceeds from initial public offering, net of ? 194,649 underwriters? discounts and commissionsProceeds from the issuance of redeemable convertible ? 12,073 preferred stock, net of issuance costsPayments of deferred offering costs ? (4,407 )Net cash provided by financing activities 175,869 230,283 Effect of exchange rate on cash and cash equivalents 5 ? Net increase in cash and cash equivalents 93,207 23,628 Cash and cash equivalents at beginning of period 18,032 28,431 Cash and cash equivalents at end of period $ 111,239 $ 52,059

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. 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.

AdjustedGross Profit andAdjustedGross Margin

AdjustedGross Profit is anon-GAAPfinancial 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 (none during periods presented). We defineAdjustedGross Margin as ourAdjustedGross Profit divided by our revenue. We believeAdjustedGross Profit andAdjustedGross Margin are useful to investors as they eliminate the impact of certainnon-cashexpenses and allow a direct comparison of these measures between periods without the impact ofnon-cashexpenses 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, 2020 and 2019:

Three Months Ended September 30, 2020 (in thousands, except percentages) Technology Professional Total ServicesRevenue $ 27,964 $ 19,227 $ 47,191 Cost of revenue, excludingdepreciation and (9,045 ) (15,307 ) (24,352 ) amortizationGross profit, excludingdepreciation and 18,919 3,920 22,839 amortizationAdd: Stock-based compensation 196 903 1,099 Adjusted Gross Profit $ 19,115 $ 4,823 $ 23,938 Gross margin, excludingdepreciation and 68 % 20 % 48 %amortizationAdjusted Gross Margin 68 % 25 % 51 %

Three Months Ended September 30, 2019 (in thousands, except percentages) Technology Professional Total ServicesRevenue $ 21,160 $ 18,263 $ 39,423 Cost of revenue, excludingdepreciation and (6,740 ) (11,892 ) (18,632 ) amortizationGross profit, excludingdepreciation and 14,420 6,371 20,791 amortizationAdd: Stock-based compensation 64 306 370 Adjusted Gross Profit $ 14,484 $ 6,677 $ 21,161 Gross margin, excludingdepreciation and 68 % 35 % 53 %amortizationAdjusted Gross Margin 68 % 37 % 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) loss on extinguishment of debt (none in periods presented), (iii) income tax (benefit) provision, (iv) depreciation and amortization, (v) stock-based compensation, (vi) acquisition transaction costs, (vii) change in fair value of contingent consideration liability, (viii) duplicate headquarters rent expense, and (ix) post-acquisition restructuring costs when they are incurred. 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, 2020 and 2019:

Three Months Ended September 30, 2020 2019 (in thousands)Net loss $ (27,326 ) $ (21,416 )Add: Interest and other expense, net 3,854 659 Income tax (benefit) provision 14 21 Depreciation and amortization 4,981 2,316 Stock-based compensation 9,496 9,974 Acquisition transaction costs 1,399 ? Change in fair value of contingent consideration 564 ? liabilityDuplicate headquarters rent expense 584 ? Adjusted EBITDA $ (6,434 ) $ (8,446 )

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) amortization of acquired intangibles, (iv) loss on debt extinguishment, (v) acquisition transaction costs, (vi) change in fair value of contingent consideration liability, (vii) non-cash interest expense related to our convertible senior notes, (viii) duplicate headquarters rent expense (see explanation above), and (ix) post-acquisition restructuring costs. Non-cash interest expense related to our convertible senior notes relates to the convertible senior notes that were issued in a private placement in April 2020. Under GAAP, we are required to separately account for liability (debt) and equity (conversion option) components of the convertible senior notes. Accordingly, for GAAP purposes we are required to recognize the effective interest expense on our convertible senior notes and amortize the issuance costs over the term of the notes. The difference between the effective interest expense and the contractual interest expense, and the amortization expense of issuance costs are excluded from managements assessment of our operating performance because management believes that these non-cash expenses are not indicative of ongoing operating performance.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 sold8,050,000shares (inclusive of the underwriters option to purchase an additional 1,050,000 shares) of common stock at$26.00per share. We received net proceeds of$194.6 millionafter 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 into23,151,481shares of common stock on aone-for-one basis. We have prepared the below adjusted condensed consolidated statement of operations data to present pro forma adjusted net loss per share amounts that will be comparable between the current and prior periods presented as if the conversion of all outstanding shares of redeemable convertible preferred stock and the issuance of the IPO shares had occurred as of the beginning of the prior year comparative periods.

Three Months Ended Nine Months Ended September September 30, 30, 2020 2019 2020 2019Numerator: (in thousands, except share and per share amounts)Net loss attributableto common $ (27,326 ) $ (39,586 ) $ (71,999 ) $ (226,656 )stockholdersAdd Accretion ofredeemable ? 18,170 ? 180,826 convertible preferredstockStock-based 9,496 9,974 27,283 13,028 compensationAmortization of 4,276 1,625 8,786 4,672 acquired intangiblesLoss onextinguishment of ? ? 8,514 1,670 debtAcquisition 1,399 ? 2,670 ? transaction costsChange in fair valueof contingent 564 ? (1,004 ) ? considerationliabilityNon-cash interestexpense related to 2,720 ? 4,931 ? convertible seniornotesDuplicateheadquarters rent 584 ? 709 ? expensePost-acquisition ? ? ? 446 restructuring costsAdjusted Net Loss $ (8,287 ) $ (9,817 ) $ (20,110 ) $ (26,014 )Denominator: Weighted-averagenumber of shares usedincalculating net loss 40,292,380 28,222,555 38,517,272 12,749,903 per shareattributable tocommon stockholders,basic and dilutedPro forma adjustments Pro forma adjustmentto reflect issuanceandconversion ofredeemableconvertiblepreferred stock to ? 6,039,517 ? 17,384,812 common stock,assumingthe conversion tookplace as ofthe beginning of the2019 periodPro forma adjustmentto reflect issuanceofshares of commonstock as part of IPO, ? 2,111,413 ? 6,048,718 assuming theissuance took placeas of thebeginning of the2019 periodPro forma as adjustedweighted-averagenumber of sharesused in calculating 40,292,380 36,373,485 38,517,272 36,183,433 Adjusted Net Lossper share, basic anddilutedPro forma adjustednet loss per share, $ (0.21 ) $ (0.27 ) $ (0.52 ) $ (0.72 )basic and diluted

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

Health Catalyst Media Contact:Amanda Hundtamanda.hundt@healthcatalyst.com+1 (575) 491-0974