Health Catalyst (HCAT) Q4 2025 Earnings Transcript

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DATE
Thursday, March 12, 2026 at 5 p.m. ET
CALL PARTICIPANTS
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Chief Executive Officer — Ben Albert
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Chief Financial Officer — Jason Alger
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Senior Vice President of Finance and Head of Investor Relations — Matt Hopper
Full Conference Call Transcript
Matt Hopper: Which ended 12/31/2025. My name is Matt Hopper, Senior Vice President of Finance and Head of Investor Relations. With me on the call today are Ben Albert, our Chief Executive Officer, and Jason Alger, our Chief Financial Officer. A complete disclosure of our results can be found in our press release issued today as well as in our related Form 8-Ks furnished to the SEC, both of which are available on the Investor Relations section of our website at ir.healthcatalyst.com. As a reminder, today's call is being recorded, and a replay will be available following the conclusion of the call.
During today's call, we will be making forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our future growth, financial outlook for the first quarter and full year 2026, our ability to attract new clients and retain and expand our relationships with existing clients, market conditions, macroeconomic challenges, bookings, retention, operational priorities, strategic initiatives, growth strategies, the demand for, deployment, and development of our Ignite data and analytics platform and our applications, timing and status of Ignite migrations and associated churn and pressure from clients, the impact of restructurings, and the general anticipated performance of our business.
These forward-looking statements are based on management's current views and expectations as of today and should not be relied upon as representing our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. Actual results may materially differ. Please refer to the risk factors in our most recent Form 10-Q for 2025 filed with the SEC on 11/10/2025, and our Form 10-Ks for the full year 2025 that will be filed with the SEC. We will also refer to certain non-GAAP financial measures to provide additional information to investors.
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. A reconciliation of non-GAAP financial measures for the fourth quarter and full year 2025 and 2024 to their most comparable GAAP measures is provided in our press release. With that, I will turn the call over to Ben.
Ben Albert: Thank you, Matt. Thank you to everyone for joining us today. Before we discuss the quarter, I would like to briefly acknowledge the recent leadership transition at Health Catalyst, Inc. I stepped into the CEO role last month following Dan Burton's departure as CEO and from the Board of Directors. I want to thank Dan for his many years of service, mission-driven foundation he helped build, and his support during this transition. We are focused on the future and on positioning Health Catalyst, Inc. for long-term success. There are significant opportunities ahead, and I am confident in strengths that continue to differentiate this company.
Our mission, our people, and our core capabilities provide a solid foundation delivering meaningful value to our clients and shareholders. My priority is to build on these strengths, address our challenges with clarity and discipline, and move the company forward with a renewed sense of focus and execution. In my time as President and COO, I conducted a comprehensive review of the business. I have spent 25 years in this industry, and I bring the benefit of an outsider's perspective combined with an insider's understanding of our operations. That dual vantage point gives me clarity on where we are strong and where we need to change.
Not only do I see clear value creation opportunities ahead, I also see areas where we can operate with greater focus, rigor, and accountability. We have already moved quickly to tighten leadership focus and execution discipline, including appointing general managers to lead our interoperability and cybersecurity businesses and transitioning our Chief Commercial Officer role to a strong internal successor who is already driving sharper commercial alignment. We have also opened searches for both a Chief Operating Officer and a Chief Marketing Officer to strengthen operational rigor and to clarify and elevate our position within the market.
At the same time, we are reviewing our cost structure to ensure we are strategically allocating capital with increased discipline, and we are focused on expanding technology bookings and margins while driving cash flow generation as outcomes of this work. We are taking a fresh approach to how we execute, and I am confident that these actions will put the company on a stronger long-term trajectory. First, our core value proposition is strong. Our clients continue to rely on Health Catalyst, Inc. to manage costs, improve clinical quality, and drive consumer growth. We have a track record of delivering measurable outcomes, and when we are focused and aligned, we can create real value for our clients.
Second, the review made it clear that we need to be more focused and more consistent in how we execute. We have allowed too much complexity into our go-to-market motions, our packaging, and our implementation and migration work. This has at times created friction for our clients and slowed our ability to deliver value. We will address this by aligning the organization around a smaller set of priorities, improving clarity across teams, and holding ourselves accountable for predictable, measurable outcomes. Third, we have a clear opportunity to sharpen and simplify our commercial story. Our solutions resonate most when we articulate them through the lens of the problems clients are trying to solve.
We have not been consistent in how we describe the full value we can deliver across cost efficiency, clinical quality, and consumer experience. We will tighten our positioning, simplify how we package and present our offerings, and implement a more predictable and focused go-to-market motion that highlights what makes Health Catalyst, Inc. so compelling. We are refocusing on what we do best, a back-to-basics approach. At our core, we are built to deliver measurable outcomes across cost efficiency, clinical improvement, and consumer experience. While the market often thinks of us primarily as a data platform business, our data platform infrastructure has always been a means to an end.
The real value of Health Catalyst, Inc. is in the IP, deep healthcare expertise, and high-value applications we have built or acquired over 15 years, grounded in thousands of improvement projects and billions of dollars in validated impact. That is who we are, that is what we believe the market needs, and that is where we will focus our energy. Additionally, as AI continues to play a bigger role, we expect our valuable data assets and expertise will become an increasingly important driver of competitive differentiation. With these learnings as our foundation, our priorities going forward are clear. We will strengthen and simplify our commercial engines to drive technology ARR bookings.
We will improve retention through more predictable migrations and clear client value realization. We will increase efficiency and reduce time to value by eliminating operational complexity and scaling work through automation and global resources. And we will better leverage our IP, combining our data foundation with the expertise, content, and AI-enabled solutions that allow us to solve some of healthcare's most pressing problems. These actions begin now, and they will guide how we operate and execute throughout the year. We have also heard a consistent message from our investors. They want our business to be easier to understand with clearer indicators of performance and a more streamlined narrative about what we do and how we create value.
I agree with that feedback. As part of our renewed focus and discipline, we will simplify how we communicate our business model, our priorities, and our progress so that our direction is easier to track and evaluate. As part of this work, we are also evolving the way we measure and communicate performance. We will focus on providing a new set of bookings and retention metrics that are easier to understand, align directly with our execution, and clearly reflect how we operate the business. You will see us simplify our reporting, improve transparency, and reinforce accountability through clearer indicators of progress.
So while I have already executed an initial comprehensive review as President and COO, as CEO our review of opportunities ahead will not stop, and I will continue to evaluate all aspects of the business to ensure we are focusing on maximizing returns for our investors. This includes a detailed review of our product portfolio, our investment mix, and our cost structure. We are assessing where we can simplify and where we should concentrate our resources. This is a shift in how we have operated. We are changing, and we will be more focused and disciplined in how we allocate capital and build long-term value.
Given this work, and the significant impact some of it may have on our financial results going forward, we are not yet in position to provide annual guidance. Today, we are sharing first quarter revenue and adjusted EBITDA guidance only. We believe this is the prudent approach to ensure we are providing initial transparency, and as we continue our strategic and operational review, we plan to come back to the market with our full-year revenue and adjusted EBITDA guidance no later than our first quarter earnings call in May. With that, I will turn the call over to our Chief Financial Officer, Jason Alger, to walk through the financial results.
Jason Alger: Thanks, Ben. For the full year of 2025, we generated $311,100,000 in revenue and $41,400,000 of adjusted EBITDA. In the fourth quarter, we continued to demonstrate strong cost control and operating leverage even as we navigated a dynamic demand environment. From a growth standpoint, we finished the year with 32 net new logos, ahead of our target of 30 net new logos but below our initial expectation of 40 that we began the year with. These net new logos had an average ARR plus non-recurring revenue near the midpoint of the $300,000 to $700,000 range. Our TAC plus TEMS dollar-based retention closed the year at 90%.
For the fourth quarter of 2025, total revenue was $74,700,000 compared to $79,600,000 in the prior-year period. Technology revenue was $51,900,000 and professional services revenue was $22,800,000. The year-over-year decline primarily reflects lower professional services revenue from reductions in our FTE service offerings and our exit of unprofitable pilot ambulatory TEMS arrangements. For the full year of 2025, as I mentioned, total revenue was $311,100,000, which represented 1% year-over-year growth. Technology revenue increased 7% year over year to $208,300,000, while professional services revenue declined 8% as we continue to prioritize margin improvement and resource efficiency. Adjusted gross margin for the fourth quarter was 53.5% compared to 46.6% in the prior-year period.
For the full year of 2025, adjusted gross margin was 51.1%, driven by technology gross margin of 67.4% and professional services gross margin of 18.3%. These results reflect the benefit of restructuring actions implemented during the year, partially offset by migration-related cost headwinds. In the fourth quarter of 2025, adjusted operating expenses were $26,200,000, representing 35% of revenue, compared to $29,200,000, or 37% of revenue, in 2024. For the full year of 2025, adjusted operating expenses were $117,700,000, representing 38% of revenue, compared to $123,400,000, or 40% of revenue, for the full year of 2024. The year-over-year change reflects the continued impact of our restructuring actions, disciplined headcount management, and tighter control over discretionary spending.
On a sequential basis, adjusted operating expenses declined by $2,000,000 compared to the third quarter of 2025, driven primarily by the full-quarter benefit of actions we initiated earlier in the year, including workforce optimization, professional services contract restructuring, and operating efficiency initiatives across the organization. From a GAAP expense standpoint, we would note that we did incur impairment charges on goodwill and intangible assets of $110,200,000 during 2025. These charges were primarily due to the decrease in our consolidated market cap and revisions to our forecast, and not a write-down of any specific acquisition. These charges were also the main driver in the change in GAAP net loss from $69,500,000 in 2024 to $178,000,000 in 2025.
Adjusted EBITDA for the fourth quarter of 2025 was $13,800,000 compared to $7,900,000 in the prior year. For the full year of 2025, adjusted EBITDA was $41,400,000, representing 59% year-over-year growth. As we look ahead, we remain focused on driving operating leverage, aligning our cost structure with our revenue profile, and prioritizing investments that support future technology margin expansion and technology revenue growth. Our adjusted net income per share in the fourth quarter and full year of 2025 was $0.08 and $0.19, respectively. Weighted average number of shares used in calculating adjusted basic net income per share in the fourth quarter and full year of 2025 was approximately 71,000,000 and 69,900,000 shares, respectively.
Turning to the balance sheet, we ended the year with approximately $96,000,000 of cash, cash equivalents, and short-term investments, and $161,000,000 of term loan debt outstanding. For Q1 2026, we currently expect total revenue of $68,000,000 to $70,000,000 and adjusted EBITDA of $7,000,000 to $8,000,000. As we enter 2026, we continue to manage the business with a focus on operational efficiency while balancing targeted investments to support disciplined growth and retention initiatives that we expect will benefit results in the future. We have invested in migration-related personnel and contractors and are adding R&D investments in AI and India.
These investments may create near-term financial pressure; we believe they position the business for cost structure improvement in the second half of the year and beyond. Our Q1 2026 revenue is expected to decrease compared to Q4 2025 due to three primary drivers. First, we expect a reduction in TEMS-related revenue due to downselling and our further exit from certain lower-margin TEMS arrangements. This contributed approximately $2,000,000 of the decrease. Second, we continue to see pressure associated