Health Catalyst, Inc. Q1 FY2026 earnings

Health Catalyst reported first quarter fiscal 2026 revenue of $70.8 million, down 10.9% from $79.4 million in the prior-year quarter. Both segments shrank. Technology revenue was 70% of the total and professional services was 30%, a mix shift toward technology from 65% and 35% a year earlier. Management tied the decline to the exit from certain lower-margin TEMS arrangements, churn of FTE-based professional services work, and elevated churn and down-sell from the DOS to Ignite migration, partly offset by growth from new clients. More than 90% of revenue is recurring, and most technology contracts carry built-in escalators with three- to five-year terms.

The loss widened dramatically. Net loss was $111.0 million for the quarter, compared with $23.7 million a year earlier, and diluted loss per share was $1.53 against $0.35. Operating loss was $106.5 million versus $20.2 million, and operating margin was negative 150.5%, down from negative 25.4%. The main driver was a $95.5 million non-cash goodwill impairment, recorded after declines in the stock price and market capitalization pushed the fair value of the Technology reporting unit below its carrying value. Restructuring costs of $1.8 million and acquisition-related costs of $2.4 million also weighed on the quarter. Strip those items out and the picture changes: Adjusted EBITDA was $9.1 million, up 46% from $6.3 million, and Adjusted Gross Margin was 51% versus 49%.

Cash flow was the bright spot. Operating cash flow was $18.5 million for the quarter, up from $0.3 million a year earlier, helped by the non-cash impairment charge and favorable working capital. Capital expenditures were $0.3 million, down from $0.7 million. Backlog metrics moved the wrong way. Deferred revenue was $70.0 million, down 2.6% from $71.9 million, and remaining performance obligations were $244.2 million, down 11.8% from $276.9 million. Cash, cash equivalents and short-term investments totaled $108.8 million as of March 31, 2026. The company repurchased no shares during the quarter, and $24.8 million remained authorized under its share repurchase plan.

Guidance for the second quarter of 2026 includes Adjusted EBITDA of $9 million to $10 million. For the full year 2026, the company guided to Adjusted EBITDA of $30 million to $33 million. Total revenue guidance was also provided for both periods. No net loss guidance was given, and the company did not reconcile Adjusted EBITDA guidance to net loss because of items such as stock-based compensation that it cannot reasonably forecast.

Retention is the biggest risk. Health Catalyst has been notified of $12.5 million of annual recurring revenue down-sell and churn and estimates $52.0 million of at-risk ARR tied to the DOS to Ignite migration. Management expects to be generally through that migration by the end of 2027, with some clients choosing to stay on DOS. Project Nexus, the strategic reset of the operating model, will raise costs in the second quarter of 2026 through severance but should lower ongoing expenses. Chief Executive Officer Ben Albert framed the quarter as the first decisive step in transforming the operating model and called it a strategic reset rather than a short-term cost exercise. Other pressures include Medicaid and research funding reductions under the OBBBA, tariff uncertainty, elongated sales cycles, and the loss of key clients. The company also warned that technology gross margin could decline in the near term as migration and deployment costs land before revenue recognition begins.