Summary
Health Catalyst reported third quarter 2024 revenue of $76.4 million, up 3.5% from $73.8 million in the prior-year quarter. Year-to-date revenue was $227.0 million, up 2.8% from $220.9 million. Technology made up 64% of quarterly revenue and professional services 36%. Management attributed the increase to new Platform Subscription Clients, contractual annual escalators on technology access fees, and expanded support services, partly offset by elevated churn. Professional services revenue was essentially flat year over year.
The company remains unprofitable on a GAAP basis, but the losses narrowed. Operating loss was $13.7 million for the quarter, an improvement of 44.3% from a $24.6 million operating loss a year earlier. Operating margin improved to -17.9% from -33.3%. Net loss was $14.7 million, or $0.24 per diluted share, compared with a net loss of $22.0 million, or $0.39 per diluted share, in the prior-year quarter. For the first nine months of 2024, net loss narrowed to $48.8 million from $87.8 million, and diluted loss per share improved to $0.82 from $1.57.
Cost cuts did much of the work. Sales and marketing expense fell 25% to $11.3 million, research and development dropped 20% to $14.2 million, and general and administrative expense declined 10% to $12.2 million. Stock-based compensation fell to $9.5 million from $14.2 million. Adjusted EBITDA, a non-GAAP measure, was $7.3 million, up from $2.0 million. Management tied the improvement to revenue growth, the 2023 restructuring plan, and the timing of some non-headcount expenses.
Cash generation improved sharply. Operating cash flow was $6.2 million for the quarter, up from $3.1 million a year earlier, and $18.1 million for the first nine months versus negative $14.0 million in the prior-year period. Capital expenditures were $0.7 million in the quarter, up from $0.15 million. The company ended September with $387.3 million in cash, cash equivalents, and short-term investments. In July it closed a $225 million term loan facility with Silver Point Finance and drew $125 million, which pushed interest expense up $4.3 million year over year. The $230 million of 2.50% convertible notes mature in April 2025.
Backlog metrics point in different directions. Remaining performance obligations were $290.5 million, up 48.2% from $196.0 million a year earlier, while deferred revenue slipped 1.7% to $52.5 million from $53.4 million. For the fourth quarter of 2024, guidance is Adjusted EBITDA of $6.8 million to $8.8 million. For the full year 2024, guidance is Adjusted EBITDA of $25 million to $27 million, with the range raised by $1 million at both ends. The company also issued total revenue guidance for both periods, but it did not reconcile Adjusted EBITDA to net loss because items such as stock-based compensation are outside its control or cannot be reasonably forecasted. Management reiterated bookings expectations of low 20s net new Platform Subscription Clients and a dollar-based retention rate of 100% to 106%, and it still expects a return to double-digit topline growth in 2025.
Risks remain. Health system clients are still working through margin pressure from inflation and labor costs, and management flagged elevated churn in offerings that lack near-term financial return, along with a heavier-than-usual share of net bookings landing in the fourth quarter. Migration of clients to Microsoft Azure and to the Health Catalyst Ignite platform is expected to weigh on technology gross margin near term, and adjusted technology gross margin already fell to 65% from 68%. Growth in Tech-enabled Managed Services should pressure total adjusted gross margin. The company also signed a definitive agreement to buy Intraprise Health, a cybersecurity provider, for $43 million in cash and equity, expected to close by the end of 2024 with immaterial near-term financial impact. Earlier in 2024 it paid $39.8 million for Lumeon and $22.1 million for Carevive.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $76.4M | $75.9M | +0.6% | $73.8M | +3.5% |
| Research & development | $14.2M | $13.9M | +2.2% | $17.7M | -19.7% |
| Sales & marketing | $11.3M | $12.7M | -11.0% | $15.1M | -24.8% |
| General & administrative | $12.2M | $14.4M | -15.0% | $13.6M | -10.4% |
| Total operating expenses | $47.7M | $51.6M | -7.6% | $56.6M | -15.6% |
| Operating income (loss) | -$13.7M | -$15.8M | +13.4% | -$24.6M | +44.3% |
| Operating margin | -17.9% | -20.8% | +2.9 pp | -33.3% | +15.4 pp |
| Net income (loss) | -$14.7M | -$13.5M | -9.0% | -$22.0M | +33.2% |
| Net margin | -19.3% | -17.8% | -1.5 pp | -29.9% | +10.6 pp |
| Diluted EPS | -$0.24 | -$0.23 | -$0.01 | -$0.39 | +$0.15 |
Risks
Health system clients face labor and supply cost inflation without commensurate revenue, pressuring budgets and demand. MD&A notes 2023 pipeline demand decreased and elevated down-sell and churn for offerings without near-term ROI, though recent quarters show incremental improvement.
The sales cycle for a new Platform Subscription Client is estimated at about one year and has exceeded two years, and it lengthened in 2022 and 2023. MD&A expects a higher proportion of net bookings in Q4 2024 than historical average, making Q4 execution including TEMS critical to 2024 Dollar-based Retention Rate.
Migration of existing Platform Subscription Clients to Health Catalyst Ignite may disrupt clients, cause dissatisfaction, and lead to non-renewals. MD&A expects the migration to create a near-term technology gross margin headwind and higher cost of technology revenue.
The new Silver Point credit agreement bears interest at SOFR plus 6.5% and requires quarterly principal payments starting December 31, 2024. Interest expense increased $4.3 million, or 236%, for the three months ended September 30, 2024 compared to 2023, and convertible notes mature April 15, 2025.
Most clients have no obligation to renew after the initial term, and contracts may be terminated for convenience or dissatisfaction, including with the Health Catalyst Ignite migration. MD&A notes elevated churn levels in technology revenue, especially from modular clients and smaller platform clients reducing application and analytics spend, though aggregate 2024 churn is expected to improve versus 2023.
The healthcare analytics market is intensely competitive, with competitors including Epic Systems, Cerner, Optum Analytics, IBM, point solution vendors, and health systems performing their own analytics. Increased competition is likely to result in pricing pressures that could harm sales, profitability, or market share.
Year-to-date net new Platform Subscription Client additions had lower average starting ARR than historical levels. MD&A expects average subscription and non-recurring revenue for net new 2024 clients of $400,000 to $1,000,000, driven by modular additions such as Healthcare.AI and Ninja Universe that are significantly lower than full-platform contracts.
A higher proportion of bookings from TEMS is expected to lower professional services gross margin and Total Adjusted Gross Margin in future years. MD&A expects total Adjusted Gross Margin to fluctuate and decline in the near term due to anticipated growth in professional services, including TEMS.
Transitioning clients to Microsoft Azure-hosted environments is more costly per client than on-premise deployments. Adjusted Technology Gross Margin decreased from 68% to 65% for the three months ended September 30, 2024 compared to 2023, and MD&A expects it to fluctuate and potentially decline in the near term.
The company acquired Carevive in May 2024 and Lumeon in August 2024, following ERS in October 2023, and may face integration difficulties, cross-selling challenges, and duplicative costs. MD&A states integration-related and duplicative costs could impact the operating cost profile in the near term.
The three largest clients during 2023 comprised 5.5%, 3.6%, and 3.5% of revenue, or 12.6% in the aggregate. Loss, termination, or renegotiation of any large client contract could adversely affect results.
The 2023 Restructuring Plan reduced the global workforce by approximately 10% in Q4 2023 and Q1 2024 and may cause attrition beyond the intended reduction or loss of institutional knowledge. Competition for senior sales executives and software engineers is intense.
Several senior leaders are active members of the Church of Jesus Christ of Latter-Day Saints, and one or more could receive a call to serve full-time, which already occurred when former COO Paul Horstmeier stepped down effective March 31, 2023. The loss of key executives could disrupt the business.
The Solution is used to support clinical decision-making and care delivery, so faulty clinical decisions, incomplete data, or errors could lead to product liability, medical malpractice, or other claims. Contractual liability limits and insurance may not fully protect the company.
SaaS KPIs
All quarters →Recurring revenue
Summary, forecast, risks and KPIs are extracted from Health Catalyst, Inc.'s SEC filings for Q3 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.