Health Catalyst Inc
For the period ended Sep 30, 2024. Filed Nov 7, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 7, 2024
HCAT$1.46-2.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001636422-24-000120
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0001636422-24-000152
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 179 previous paragraphs and 177 current paragraphs.
103 unchanged; 63 reworded; 10 added; 10 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 30 previous and 30 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
On August 1, 2024, we acquired Lumeon Ltd. (Lumeon), a digital health company dedicated to helping provider organizations mend broken care coordination processes through automated care orchestration. We accounted for the acquisition of Lumeon as a business combination. The acquisition consideration transferred was$39.8 million and was comprised of estimated net cash consideration of $36.2 million, Health Catalyst common shares with a fair value of $2.9 million, and contingent consideration based on certain earn-out performance targets for Lumeon during an earn-out period ending on June 30, 2025, with an acquisition-date fair value of $0.7 million. The purchase resulted in Health Catalyst acquiring 100% ownership in Lumeon.
Current report
Total revenue was $76.4 million for the three months ended September 30, 2024, compared to $73.8 million for the three months ended September 30, 2023, an increase of $2.6 million, or 3%.
Current report
Professional services revenue was essentially flat for the three months ended September 30, 2024 and 2023, and represented 36% and 38% of total revenue, respectively.
Current report
Cost of professional services revenue was $24.7 million for the three months ended September 30, 2024, compared to $26.6 million for the three months ended September 30, 2023, a decrease of $1.9 million, or 7%. This decrease was primarily due to a $1.2 million decrease in salary and related personnel cost related to the 2023 Restructuring Plan, a $0.3 million decrease in contractor and outside service provider fees and a $0.3 million decrease in stock-based compensation.
Current report
Research and development expenses were $14.2 million for the three months ended September 30, 2024, compared to $17.7 million for the three months ended September 30, 2023, a decrease of $3.5 million, or 20%. The decrease was primarily due to a $2.7 million decrease in salary and related personnel costs, a $1.1 million decrease in stock-based compensation, partially offset by a $0.4 million increase contractor and outside service provider fees.
Current report
General and administrative expenses were $12.2 million for the three months ended September 30, 2024, compared to $13.6 million for the three months ended September 30, 2023, a decrease of $1.4 million, or 10%. The decrease was primarily due to a $1.6 million decrease in the fair value of contingent consideration liabilities and a $0.7 million decrease in stock-based compensation. These decreases were partially offset by a $0.8 million increase in salary and related personnel costs and a $0.2 million increase in contractor and outside service provider fees.
Current report
Depreciation and amortization expenses were consistent year over year with $10.0 million for the three months ended September 30, 2024, compared to $10.2 million for the three months ended September 30, 2023.
Current report
Discussion of the Nine Months Ended September 30, 2024 and 2023
Current report
Total revenue was $227.0 million for the nine months ended September 30, 2024, compared to $220.9 million for the nine months ended September 30, 2023, an increase of $6.1 million, or 3%.
Current report
Refer to “Note 10—Debt” to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional details regarding the Credit Agreement.
Removed paragraphs (10)
Previous report
On August 1, 2024, we acquired Lumeon Ltd. (Lumeon), a digital health company dedicated to helping provider organizations mend broken care coordination processes through automated care orchestration, for preliminary consideration of approximately $37.5 million in cash and $2.5 million of our common stock, plus a potential recurring revenue-based earn-out of up to $25 million that, if achieved, would be paid solely in cash. Given the recent timing of the closing of this business combination, we are in the process of identifying and measuring the value of the assets acquired and liabilities assumed. We plan to disclose the preliminary purchase price allocation estimates and other related information in our Quarterly Report on Form 10-Q for the quarter ending September 30, 2024.
Previous report
Income tax provision (benefit)
Previous report
Total revenue was $75.9 million for the three months ended June 30, 2024, compared to $73.2 million for the three months ended June 30, 2023, an increase of $2.7 million, or 4%.
Previous report
Cost of professional services revenue was $24.0 million for the three months ended June 30, 2024, compared to $23.6 million for the three months ended June 30, 2023, an increase of $0.4 million, or 2%. This increase was primarily due to a $1.8 million increase in salary and related personnel cost, partially offset by a $0.7 million decrease in contractor and outside service provider fees and a $0.6 million decrease in stock-based compensation.
Previous report
Depreciation and amortization expenses were essentially flat, and were $10.7 million for the three months ended June 30, 2024, compared to $10.7 million for the three months ended June 30, 2023.
Previous report
Income tax provision
Previous report
Discussion of the Six Months Ended June 30, 2024 and 2023
Previous report
Total revenue was $150.6 million for the six months ended June 30, 2024, compared to $147.1 million for the six months ended June 30, 2023, an increase of $3.5 million, or 2%.
Previous report
Research and development expenses were $28.8 million for the six months ended June 30, 2024, compared to $34.7 million for the six months ended June 30, 2023, a decrease of $5.9 million, or 17%. The decrease was primarily due to a $2.2 million decrease in stock-based compensation, a $2.1 million decrease in contractor and outside service provider fees, and a $1.5 million decrease in salary and related personnel costs.
Previous report
Income tax provision
Reworded paragraphs (63)
Previous wording
Highlights from the three and six months ended June 30, 2024 included:
Current wording
Highlights from the three and nine months ended September 30, 2024 included:
Previous wording
•We recognized total revenue of $75.9 million and $73.2 million for the three months ended June 30, 2024 and 2023, respectively, and $150.6 million and $147.1 million for the six months ended June 30, 2024, and 2023, respectively. The growth in revenue was primarily due to revenue from new clients and revenue expansion from existing clients, generally in Tech-enabled Managed Services.
Current wording
•We recognized total revenue of $76.4 million and $73.8 million for the three months ended September 30, 2024 and 2023, respectively, and $227.0 million and $220.9 million for the nine months ended September 30, 2024, and 2023, respectively. The growth in revenue was primarily due to revenue from new clients and revenue expansion from existing clients.
Previous wording
•We incurred net losses of $13.5 million and $32.6 million for the three months ended June 30, 2024 and 2023, respectively, and $34.1 million and $65.8 million for the six months ended June 30, 2024, and 2023, respectively.
Current wording
•We incurred net losses of $14.7 million and $22.0 million for the three months ended September 30, 2024 and 2023, respectively, and $48.8 million and $87.8 million for the nine months ended September 30, 2024, and 2023, respectively.
Previous wording
•Our Adjusted EBITDA was $7.5 million and $3.5 million for the three months ended June 30, 2024 and 2023, respectively, and $10.9 million and $7.7 million for the six months ended June 30, 2024, and 2023, respectively. See the section titled “Key Financial Metrics—Reconciliation of Non-GAAP Financial Measures” below for more information about Adjusted EBITDA, including the limitations of such measure and a reconciliation to net loss, the most directly comparable measure calculated in accordance with GAAP.
Current wording
•Our Adjusted EBITDA was $7.3 million and $2.0 million for the three months ended September 30, 2024 and 2023, respectively, and $18.2 million and $9.7 million for the nine months ended September 30, 2024, and 2023, respectively. See the section titled “Key Financial Metrics—Reconciliation of Non-GAAP Financial Measures” below for more information about Adjusted EBITDA, including the limitations of such measure and a reconciliation to net loss, the most directly comparable measure calculated in accordance with GAAP.
Previous wording
In recent quarters, we have been encouraged to have seen incremental improvements, including in the six month period ending June 30, 2024, and we are encouraged to see steadily improving and stabilizing operating margins for clients and prospective clients in our health system end market. With respect to other near-term implications of the macroeconomic environment, we anticipate improvement in our 2024 bookings metrics relative to 2022 and 2023 for both net new DOS Subscription Client additions and Dollar-based Retention Rate. As it relates to Dollar-based Retention Rate, execution on Tech-enabled Managed Services bookings in the second half of 2024 will have a meaningful impact on our Dollar-based Retention Rate for the 2024 year. We also anticipate that a higher proportion of our net bookings will occur in the second half of 2024 as compared to our historical average, largely due to the anticipated timing of our larger pipeline opportunities.
Current wording
In recent quarters, we have been encouraged to have seen incremental improvements, including in the nine month period ending September 30, 2024, and we are encouraged to see improving and stabilizing operating margins for clients and prospective clients in our health system end market. With respect to other near-term implications of the macroeconomic environment, we anticipate improvement in our 2024 bookings metrics relative to 2022 and 2023 for both net new DOS Subscription Client additions and Dollar-based Retention Rate. As it relates to Dollar-based Retention Rate, we expect execution on bookings in the fourth quarter of 2024, including Tech-enabled Managed Services (TEMS) bookings, to have a meaningful impact on our Dollar-based Retention Rate for the 2024 year. We also anticipate that a higher proportion of our net bookings will occur in the fourth quarter of 2024 as compared to our historical average.
Previous wording
Through June 30, 2024, our year to date net new DOS Subscription Client additions had a lower average starting annual recurring revenue (ARR) as compared to historical levels. We currently expect our average subscription revenue and non-recurring revenue for net new DOS Subscription Clients signed in the year ended December 31, 2024 (new 2024 DOS Subscription Clients) to be between an average range of $400,000 to $1,000,000, driven primarily by momentum in modular additions from Health Catalyst Ignite, such as Healthcare.AI and KPI Ninja’s Ninja Universe, Health Catalyst Ignite’s interoperability platform, which resulted in subscription revenue that is significantly lower than subscription revenue derived from a contract that includes access to all of the DOS platform components and analytic applications. Our modular pricing, which can be lower than our historical averages, has enabled a higher volume of opportunities. This average dollar range is comprised of new 2024 DOS Subscription Clients with (i) average revenue in the expected average range or significantly above the expected average range noted above, driven by the size of the client organization and the bundle of technology and services included in their subscription and (ii) average revenue meaningfully below the low-end of the expected range noted above, driven by sales of stand-alone Health Catalyst Ignite module components, which provided greater deal certainty in a more challenging macroeconomic environment, and which we believe will provide an opportunity to expand our relationship with these DOS Subscription Clients in the future, including through cross-selling efforts.
Current wording
Through September 30, 2024, our year-to-date net new DOS Subscription Client additions had a lower average starting annual recurring revenue (ARR) as compared to historical levels. We currently expect our aggregated average subscription revenue and non-recurring revenue for all net new DOS Subscription Clients signed in the year ended December 31, 2024 (net new 2024 DOS Subscription Clients) will be between $400,000 and $1,000,000, driven primarily by momentum in modular additions from Health Catalyst Ignite, such as Healthcare.AI and Ninja Universe, Health Catalyst Ignite’s interoperability platform, which has resulted in subscription revenue that is significantly lower than subscription revenue derived from a contract that includes access to all of the DOS platform components and analytic applications. Our modular pricing, which can be lower than our historical averages, has enabled a higher volume of opportunities. This average dollar range is comprised of net new 2024 DOS Subscription Clients with (i) average revenue in the expected average range or significantly above the expected average range noted above, driven by the size of the client organization and the bundle of technology and services included in their subscription and (ii) average revenue meaningfully below the low-end of the expected range noted above, driven by sales of stand-alone Health Catalyst Ignite module components, which provided greater deal certainty in a more challenging macroeconomic environment, and which we believe will provide an opportunity to expand our relationship with these DOS Subscription Clients in the future, including through cross-selling efforts.
Previous wording
We have introduced Health Catalyst Ignite, our next-generation data and analytics platform, which benefits from significant scalability and modularity. We expect to migrate existing DOS Subscription Clients to this new platform over the next two to three years. Over the medium-term, we expect the migration to Health Catalyst Ignite to result in a technology gross margin tailwind; however, we expect a near-term headwind as clients are being migrated. We anticipate new DOS Subscription Clients in 2024 will be deployed directly onto Health Catalyst Ignite. Furthermore, given the modularity of Health Catalyst Ignite and migrations to its platform, we now primarily refer to DOS Subscription Clients as Platform Subscription Clients.
Current wording
We have introduced Health Catalyst Ignite, our next-generation data and analytics platform, which benefits from significant scalability and modularity. We expect to migrate existing DOS Subscription Clients to this new platform over the next approximately two years. Over the medium-term, we expect the migration to Health Catalyst Ignite to result in a technology gross margin tailwind; however, we expect a near-term headwind as clients are being migrated. We anticipate new DOS Subscription Clients in 2024 and beyond will be deployed directly onto Health Catalyst Ignite. Furthermore, given the modularity of Health Catalyst Ignite and migrations to its platform, we now primarily refer to DOS Subscription Clients as Platform Subscription Clients. Our Health Catalyst Ignite platform provides advantages related to elastic compute and modularity and allows us to offer a flexible menu of options for clients to benefit from these improved efficiencies. These options include expanding their relationship and spend by purchasing additional applications and features; immediate savings while maintaining the same functionality through a price reduction as part of the migration; or maintaining existing spend and realizing improvement in operations and functionality from the enhanced capabilities of Health Catalyst Ignite.
Previous wording
We benefit from a highly recurring revenue model, in which greater than 90% of our revenue is recurring in nature, and a high level of technology revenue predictability, especially within our Platform Subscription Clients whose contracts, when sold as a bundle with our analytics applications, often have built-in, contractual technology revenue escalators.
Current wording
We benefit from a highly recurring revenue model, in which greater than 90% of our revenue is recurring in nature, and a high level of technology revenue predictability, especially within our Platform Subscription Clients whose contracts, when sold as a bundle with our analytics applications, often have annual built-in, contractual technology revenue escalators. As previously described, within our professional services segment, a subset of clients have reduced their spend, while in the technology segment, a subset of modular clients and smaller platform clients have reduced their application and analytics spend. However, we anticipate our aggregate churn levels in 2024 to improve compared to 2023.
Previous wording
Technology gross margin remained constant at 51% for the three months ended June 30, 2023 and 2024. Adjusted Technology Gross Margin decreased from 68% for the three months ended June 30, 2023 to 67% for the three months ended June 30, 2024. This year-over-year result was mainly driven by continued costs associated with transitioning a portion of our client base to Azure-hosted environments as well as from costs associated with migrating a subset of Platform Subscription Clients to Health Catalyst Ignite, partially offset by existing clients paying higher technology access fees from contractual, built-in escalators, without a corresponding increase in hosting costs.
Current wording
Technology gross margin decreased from 53% for the three months ended September 30, 2023 to 51% for the three months ended September 30, 2024. Adjusted Technology Gross Margin decreased from 68% for the three months ended September 30, 2023 to 65% for the three months ended September 30, 2024. This year-over-year result was mainly driven by continued costs associated with transitioning a portion of our client base to Azure-hosted environments as well as from costs associated with migrating a subset of Platform Subscription Clients to Health Catalyst Ignite, partially offset by existing clients paying higher technology access fees from contractual, built-in escalators, without a corresponding increase in hosting costs.
Previous wording
We expect Adjusted Technology Gross Margin to fluctuate and potentially decline in the near term, primarily due to additional costs associated with the ongoing transition of a small number of clients from our managed data centers or on-premise to third-party hosted data centers with Microsoft Azure as well as the migration of a subset of clients to Health Catalyst Ignite. The potential decline is also attributable to a small subset of modular clients reducing their subscriptions to our software analytic applications, which tend to be higher margin offerings.
Current wording
We expect Adjusted Technology Gross Margin to fluctuate and potentially decline in the near term, primarily due to additional costs associated with the migration of clients to Health Catalyst Ignite and Ninja Universe deployment costs incurred prior to the commencement of revenue recognition. The potential decline is also attributable to a small subset of modular clients reducing their subscriptions to our software analytic applications, which tend to be higher margin offerings.
Previous wording
Professional services gross margin increased from 9% for the three months ended June 30, 2023 to 15% for the three months ended June 30, 2024. Adjusted Professional Services Gross Margin increased from 17% for the three months ended June 30, 2023 to 20% for the three months ended June 30, 2024, primarily due to higher utilization rates and cost management efforts, driven in large part by the reduction in force that primarily occurred late in the fourth quarter of 2023 and early 2024. Our professional services are comprised of data and analytics services, domain expertise services, TEMS, and implementation services. The majority of our professional services revenue is generated from data and analytic services and domain expertise services, which are the highest gross margin professional services we provide. The delivery mix among all of our services in a given period can lead to fluctuations in our Adjusted Professional Services Gross Margin.
Current wording
Professional services gross margin increased from 4% for the three months ended September 30, 2023 to 11% for the three months ended September 30, 2024. Adjusted Professional Services Gross Margin increased from 12% for the three months ended September 30, 2023 to 17% for the three months ended September 30, 2024, primarily due to higher utilization rates and cost management efforts, driven in large part by the reduction in force that primarily occurred late in the fourth quarter of 2023 and early 2024. Our professional services are comprised of data and analytics services, domain expertise services, TEMS, and implementation services. The majority of our professional services revenue is generated from data and analytic services and domain expertise services, which are the highest gross margin professional services we provide. The delivery mix among all of our services in a given period can lead to fluctuations in our Adjusted Professional Services Gross Margin.
Previous wording
Total gross margin increased slightly from 37% for the six months ended June 30, 2023 to 39% for the six months ended June 30, 2024. Total Adjusted Gross Margin remained consistent at 51% for the six months ended June 30, 2024 and 2023. We expect total Adjusted Gross Margin to fluctuate and decline in the near term, primarily due to anticipated growth in professional services, including TEMS.
Current wording
Total gross margin increased from 34% for the three months ended September 30, 2023 to 36% for the three months ended September 30, 2024. Total Adjusted Gross Margin increased from 47% for the three months ended September 30, 2023 to 48% for the three months ended September 30, 2024. We expect total Adjusted Gross Margin to fluctuate and decline in the near term, primarily due to anticipated growth in professional services, including TEMS.
Previous wording
The following is a calculation of our gross profit and gross margin and a reconciliation of gross profit and gross margin to our Adjusted Gross Profit and Adjusted Gross Margin in total and for technology and professional services for the six months ended June 30, 2024 and 2023.
Current wording
The following is a calculation of our gross profit and gross margin and a reconciliation of gross profit and gross margin to our Adjusted Gross Profit and Adjusted Gross Margin in total and for technology and professional services for the nine months ended September 30, 2024 and 2023.
Previous wording
Technology gross margin remained consistent at 52% for each of the six months ended June 30, 2024 and 2023. Adjusted Technology Gross Margin decreased from 69% for the six months ended June 30, 2023 to 68% for the six months ended June 30, 2024. This year-over-year result was mainly driven by continued costs associated with transitioning a portion of our client base to Azure-hosted environments as well as from costs associated with migrating a subset of Platform Subscription Clients to Health Catalyst Ignite, partially offset by existing clients paying higher technology access fees from contractual, built-in escalators, without a corresponding increase in hosting costs.
Current wording
Technology gross margin remained consistent at 52% for each of the nine months ended September 30, 2024 and 2023. Adjusted Technology Gross Margin decreased from 69% for the nine months ended September 30, 2023 to 67% for the nine months ended September 30, 2024. This year-over-year result was mainly driven by continued costs associated with transitioning a portion of our client base to Azure-hosted environments as well as from costs associated with migrating a subset of Platform Subscription Clients to Health Catalyst Ignite, partially offset by existing clients paying higher technology access fees from contractual, built-in escalators, without a corresponding increase in hosting costs.
Previous wording
We expect Adjusted Technology Gross Margin to fluctuate and potentially decline in the near term, primarily due to additional costs associated with the ongoing transition of a small number of clients from our managed data centers or on-premise to third-party hosted data centers with Microsoft Azure as well as the migration of a subset of clients to Health Catalyst Ignite. The potential decline is also attributable to a small subset of modular clients reducing their subscriptions to our software analytic applications, which tend to be higher margin offerings.
Current wording
We expect Adjusted Technology Gross Margin to fluctuate and potentially decline in the near term, primarily due to additional costs associated with the migration of clients to Health Catalyst Ignite, also due to costs associated with Ninja Universe deployments prior to revenue recognition. The potential decline is also attributable to a small subset of modular clients reducing their subscriptions to our software analytic applications, which tend to be higher margin offerings.
Previous wording
Professional services gross margin increased from 10% for the six months ended June 30, 2023 to 16% for the six months ended June 30, 2024. Adjusted Professional Services Gross Margin increased from 19% for the six months ended June 30, 2023 to 21% for the six months ended June 30, 2024, primarily due to higher utilization rates and cost management efforts, driven in large part by the reduction in force that primarily occurred late in the fourth quarter of 2023 and early 2024. Our professional services are comprised of data and analytics services, domain expertise services, TEMS, and implementation services. The majority of our professional services revenue is generated from data and analytic services and domain expertise services, which are the highest gross margin professional services we provide. The delivery mix among all of our services in a given period can lead to fluctuations in our Adjusted Professional Services Gross Margin.
Current wording
Professional services gross margin increased from 8% for the nine months ended September 30, 2023 to 14% for the nine months ended September 30, 2024. Adjusted Professional Services Gross Margin increased from 16% for the nine months ended September 30, 2023 to 20% for the nine months ended September 30, 2024, primarily due to higher utilization rates and cost management efforts, driven in large part by the reduction in force that primarily occurred late in the fourth quarter of 2023 and early 2024. Our professional services are comprised of data and analytics services, domain expertise services, TEMS, and implementation services. The majority of our professional services revenue is generated from data and analytic services and domain expertise services, which are the highest gross margin professional services we provide. The delivery mix among all of our services in a given period can lead to fluctuations in our Adjusted Professional Services Gross Margin.
Previous wording
In the fourth quarter of 2023, our board of directors approved workforce reductions as part of a restructuring plan intended to optimize our cost structure and focus our investment of resources in key priority areas to align with strategic changes (2023 Restructuring Plan). These reductions enabled significant improvement in our Adjusted Professional Services Gross Margin in the first two quarters of 2024 compared to the fourth quarter of 2023. However we still expect Adjusted Professional Services Gross Margin to fluctuate on a quarterly basis due to changes in the mix of services we provide, the amount of operational overhead required to deliver our services, and clients delaying or reducing services due to a potentially uncertain and challenging macroeconomic environment.
Current wording
In the fourth quarter of 2023, our board of directors approved workforce reductions as part of a restructuring plan intended to optimize our cost structure and focus our investment of resources in key priority areas to align with strategic changes (2023 Restructuring Plan). These reductions enabled significant improvement in our Adjusted Professional Services Gross Margin in the first three quarters of 2024 compared to the fourth quarter of 2023. However we still expect Adjusted Professional Services Gross Margin to fluctuate on a quarterly basis due to changes in the mix of services we provide, the amount of operational overhead required to deliver our services, and clients delaying or reducing services due to a potentially uncertain and challenging macroeconomic environment.
Previous wording
Total gross margin increased slightly from 36% for the three months ended June 30, 2023 to 38% for the three months ended June 30, 2024. Total Adjusted Gross Margin remained consistent at 50% for the three months ended June 30, 2024 and 2023. We expect total Adjusted Gross Margin to fluctuate and decline in the near term, primarily due to anticipated growth in professional services, including TEMS.
Current wording
Total gross margin increased from 36% for the nine months ended September 30, 2023 to 38% for the nine months ended September 30, 2024. Total Adjusted Gross Margin remained constant at 50% for the nine months ended September 30, 2023 and 2024. We expect total Adjusted Gross Margin to fluctuate and decline in the near term, primarily due to anticipated growth in professional services, including TEMS.
Previous wording
Our Adjusted EBITDA improved year-over-year as a result of our revenue growth and cost reduction initiatives as well as the timing of some non-headcount expenses, including the change in timing of our Healthcare Analytics Summit (HAS) event. We generally expect annual Adjusted EBITDA to continue to improve going forward, although it may fluctuate from quarter to quarter as a result of the timing of non-recurring revenue and the seasonality of certain operating costs.
Current wording
Our Adjusted EBITDA improved year-over-year as a result of our revenue growth and cost reduction initiatives as well as the timing of some non-headcount expenses. We generally expect annual Adjusted EBITDA to continue to improve going forward, although it may fluctuate from quarter to quarter as a result of the timing of non-recurring revenue and the seasonality of certain operating costs.
Previous wording
The following is a reconciliation of our Adjusted EBITDA to net loss, the most directly comparable financial measure calculated in accordance with GAAP, for the three and six months ended June 30, 2024 and 2023.
Current wording
The following is a reconciliation of our Adjusted EBITDA to net loss, the most directly comparable financial measure calculated in accordance with GAAP, for the three and nine months ended September 30, 2024 and 2023.
Previous wording
(1)Acquisition-related costs, net include third-party fees associated with due diligence and deferred retention expenses, and post-acquisition restructuring costs incurred as part of business combinations.
Current wording
(1)Acquisition-related costs, net include third-party fees associated with due diligence and deferred retention expenses, post-acquisition restructuring costs incurred as part of business combinations, and changes in fair value of contingent consideration liabilities for potential earn-out payments.
Previous wording
•Changing revenue mix. Our technology and professional services offerings have materially different gross margin profiles. While our professional services offerings help our clients achieve measurable improvements and make them stickier, they have lower gross margins than our technology revenue. For the six months ended June 30, 2024, our technology revenue and professional services revenue represented 63% and 37% of total revenue, respectively. Changes in our percentage of revenue attributable to Technology and Professional Services would impact future gross margin and Adjusted Gross Margin.
Current wording
•Changing revenue mix. Our technology and professional services offerings have materially different gross margin profiles. While our professional services offerings help our clients achieve measurable improvements and make them stickier, they have lower gross margins than our technology revenue. For the nine months ended September 30, 2024, our technology revenue and professional services revenue represented 63% and 37% of total revenue, respectively. Changes in our percentage of revenue attributable to Technology and Professional Services would impact future gross margin and Adjusted Gross Margin.
Previous wording
On May 24, 2024, we acquired Carevive Systems, Inc. (Carevive), a leading oncology-focused health technology company centered on understanding and improving the experience of patients with cancer. We accounted for the acquisition of Carevive as a business combination. Oncology providers and life science researchers use Carevive’s flagship platform and/or Carevive data in routine clinical practice for treatment care planning, clinical trial screening, care coordination, remote patient monitoring, and/or post-treatment care. The acquisition consideration transferred was$22.1 million and was comprised of net cash consideration of $18.6 million, shares of our common stock with a fair value of $2.6 million, and contingent consideration based on certain earn-out performance targets for Carevive during an earn-out period ending on June 30, 2025, with an initial fair value of $0.9 million. The purchase resulted in us acquiring 100% ownership in Carevive.
Current wording
On May 24, 2024, we acquired Carevive Systems, Inc. (Carevive), a leading oncology-focused health technology company centered on understanding and improving the experience of patients with cancer. We accounted for the acquisition of Carevive as a business combination. Oncology providers and life science researchers use Carevive’s flagship platform and/or Carevive data in routine clinical practice for treatment care planning, clinical trial screening, care coordination, remote patient monitoring, and/or post-treatment care. The acquisition consideration transferred was$22.1 million and was comprised of net cash consideration of $18.6 million, shares of our common stock with a fair value of $2.6 million, and contingent consideration based on certain earn-out performance targets for Carevive during an earn-out period ending on June 30, 2025, with an acquisition-date fair value of $0.9 million. The purchase resulted in us acquiring 100% ownership in Carevive.
Previous wording
We derive our revenue from sales of technology and professional services. For the three months ended June 30, 2024 and 2023, technology revenue represented 63% and 65% of total revenue, respectively, and professional services represented 37% and 35% of total revenue, respectively. For the six months ended June 30, 2024 and 2023, technology revenue represented 63% and 64% of total revenue, respectively, and professional services represented 37% and 36% of total revenue, respectively.
Current wording
We derive our revenue from sales of technology and professional services. For the three months ended September 30, 2024 and 2023, technology revenue represented 64% and 62% of total revenue, respectively, and professional services represented 36% and 38% of total revenue, respectively. For the nine months ended September 30, 2024 and 2023, technology revenue represented 63% and 64% of total revenue, respectively, and professional services represented 37% and 36% of total revenue, respectively.
Previous wording
Sales and marketing. Sales and marketing expenses primarily include salary and related personnel costs for our sales, marketing, and account management teams, lead generation, marketing events, including our HAS, marketing programs, and outside contractor costs associated with the sale and marketing of our offerings. We plan to continue to invest in sales and marketing to grow our client base, expand in new markets, and increase our brand awareness. The trend and timing of sales and marketing expenses will depend in part on the timing of our expansion into new markets and marketing campaigns. Our sales and marketing expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
Current wording
Sales and marketing. Sales and marketing expenses primarily include salary and related personnel costs for our sales, marketing, and account management teams, lead generation, marketing events, including our Healthcare Analytics Summit, marketing programs, and outside contractor costs associated with the sale and marketing of our offerings. We plan to continue to invest in sales and marketing to grow our client base, expand in new markets, and increase our brand awareness. The trend and timing of sales and marketing expenses will depend in part on the timing of our expansion into new markets and marketing campaigns. Our sales and marketing expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
Previous wording
Technology revenue was $47.6 million, or 63% of total revenue, for the three months ended June 30, 2024, compared to $47.3 million, or 65% of total revenue, for the three months ended June 30, 2023. The slight technology revenue increase was primarily from growth from new Platform Subscription Clients, revenue from existing clients paying higher technology access fees from contractual, annual escalators, and new offerings of expanded support services, partially offset by elevated churn levels.
Current wording
Technology revenue was $48.7 million, or 64% of total revenue, for the three months ended September 30, 2024, compared to $46.0 million, or 62% of total revenue, for the three months ended September 30, 2023. The technology revenue increase was primarily from growth from new Platform Subscription Clients, revenue from existing clients paying higher technology access fees from contractual, annual escalators, and new offerings of expanded support services, partially offset by elevated churn levels.
Previous wording
Cost of technology revenue, excluding depreciation and amortization, was $31.4 million for the six months ended June 30, 2024, compared to $30.6 million for the six months ended June 30, 2023, an increase of $0.8 million, or 3%. The increase was primarily due to a $2.1 million increase in cloud computing and hosting costs largely from the expanded use of Microsoft Azure to serve existing and new clients, partially offset by a $0.6 million decrease in license and revenue share fees, a $0.3 million decrease in contractor and outside service provider fees, and a $0.4 million decrease in salary and related personnel costs, including stock-based compensation.
Current wording
Cost of technology revenue, excluding depreciation and amortization, was $17.6 million for the three months ended September 30, 2024, compared to $15.2 million for the three months ended September 30, 2023, an increase of $2.4 million, or 16%. The increase was primarily due to a $1.6 million increase in cloud computing and hosting costs largely from the expanded use of Microsoft Azure to serve existing and new clients, a $0.4 million increase in license and revenue share fees, and a $0.2 million increase in salary and related personnel costs, including stock-based compensation.
Previous wording
Sales and marketing expenses were $12.7 million for the three months ended June 30, 2024, compared to $16.4 million for the three months ended June 30, 2023, a decrease of $3.7 million, or 22%. The decrease was primarily due to a $3.0 million decrease in stock-based compensation, a $0.6 million decrease in salary and related personnel costs, and a $0.2 million decrease in decrease in contractor and outside service provider fees. These decreases were partially offset by a $1.0 million increase in our provision for expected credit losses compared to the prior period.
Current wording
Sales and marketing expenses were $11.3 million for the three months ended September 30, 2024, compared to $15.1 million for the three months ended September 30, 2023, a decrease of $3.7 million, or 25%. The decrease was primarily due to a $2.6 million decrease in stock-based compensation, a $0.8 million decrease in salary and related personnel costs, and a $0.2 million decrease in decrease in contractor and outside service provider fees.
Previous wording
Sales and marketing expense as a percentage of total revenue decreased from 22% in the three months ended June 30, 2023 to 17% in the three months ended June 30, 2024.
Current wording
Sales and marketing expense as a percentage of total revenue decreased from 20% in the three months ended September 30, 2023 to 15% in the three months ended September 30, 2024.
Previous wording
Research and development expense as a percentage of revenue decreased from 24% in the three months ended June 30, 2023 to 18% in the three months ended June 30, 2024.
Current wording
Research and development expense as a percentage of revenue decreased from 24% in the three months ended September 30, 2023 to 19% in the three months ended September 30, 2024.
Previous wording
General and administrative expense as a percentage of revenue decreased from 32% in the three months ended June 30, 2023 to 19% in the three months ended June 30, 2024.
Current wording
General and administrative expense as a percentage of revenue decreased from 18% in the three months ended September 30, 2023 to 16% in the three months ended September 30, 2024.
Previous wording
Depreciation and amortization expense as a percentage of revenue decreased from 15% in the three months ended June 30, 2023 to 14% in the three months ended June 30, 2024.
Current wording
Depreciation and amortization expense as a percentage of revenue decreased from 14% in the three months ended September 30, 2023 to 13% in the three months ended September 30, 2024.
Previous wording
Interest and other income (expense), net increased $0.8 million, or 21%, for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. This change is primarily due to an increase in interest income on our short-term investments of $0.9 million, primarily due to higher market interest rates, without a commensurate increase in interest expense on our Notes.
Current wording
Interest and other income (expense), net decreased $4.1 million, or 158%, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. This change is primarily due to a $4.3 million increase in interest expense related to our new credit agreement with Silver Point Finance.
Previous wording
Our income tax provision consists of current and deferred taxes for U.S. federal, state, and foreign income taxes. As we have a full valuation allowance on our net deferred tax assets, our income tax provision typically consists primarily of minimal state and foreign income taxes, which is the case for the six months ended June 30, 2024 and 2023.
Current wording
Our income tax provision consists of current and deferred taxes for U.S. federal, state, and foreign income taxes. As we have a full valuation allowance on our net deferred tax assets, our income tax provision typically consists primarily of minimal state and foreign income taxes, which is the case for the three months ended September 30, 2023. The income tax benefit for the three months ended September 30, 2024 is primarily due to a foreign deferred income tax benefit offset by minimal current state and foreign income taxes.
Previous wording
Technology revenue was $94.6 million, or 63% of total revenue, for the six months ended June 30, 2024, compared to $94.5 million, or 64% of total revenue, for the six months ended June 30, 2023. The slight technology revenue increase was primarily from growth from new Platform Subscription Clients, revenue from existing clients paying higher technology access fees from contractual, annual escalators, and new offerings of expanded support services, partially offset by elevated churn levels.
Current wording
Technology revenue was $143.3 million, or 63% of total revenue, for the nine months ended September 30, 2024, compared to $140.5 million, or 64% of total revenue, for the nine months ended September 30, 2023. The technology revenue increase was primarily due to growth from new Platform Subscription Clients, revenue from existing clients paying higher technology access fees from contractual, annual escalators, and new offerings of expanded support services, partially offset by elevated churn levels.
Previous wording
Professional services revenue was $56.0 million, or 37% of total revenue, for the six months ended June 30, 2024, compared to $52.6 million, or 36% of total revenue, for the six months ended June 30, 2023. The professional services revenue growth is primarily due to implementation, analytics, and other improvement services being provided to Platform Subscription Clients, which includes Tech-enabled Managed Services.
Current wording
Professional services revenue was $83.7 million, or 37% of total revenue, for the nine months ended September 30, 2024, compared to $80.4 million, or 36% of total revenue, for the nine months ended September 30, 2023. The professional services revenue growth is primarily due to implementation, analytics, and other improvement services being provided to Platform Subscription Clients, which includes Tech-enabled Managed Services.
Previous wording
Cost of technology revenue, excluding depreciation and amortization, was $16.1 million for the three months ended June 30, 2024, compared to $15.9 million for the three months ended June 30, 2023, an increase of $0.2 million, or 1%. The increase was primarily due to a $1.0 million increase in cloud computing and hosting costs largely from the expanded use of Microsoft Azure to serve existing and new clients, partially offset by a $0.6 million decrease in license and revenue share fees and a $0.2 million decrease in salary and related personnel costs, including stock-based compensation.
Current wording
Cost of technology revenue, excluding depreciation and amortization, was $49.0 million for the nine months ended September 30, 2024, compared to $45.8 million for the nine months ended September 30, 2023, an increase of $3.2 million, or 7%. The increase was primarily due to a $3.7 million increase in cloud computing and hosting costs largely from the expanded use of Microsoft Azure to serve existing and new clients, partially offset by a $0.3 million decrease in salary and related personnel costs, including stock-based compensation, and a $0.2 million decrease in license and revenue share fees.
Previous wording
Cost of professional services revenue was essentially flat at $47.2 million for each of the six months ended June 30, 2024 and 2023. Notable changes in the cost of professional services revenue for the period include a $2.3 million increase in salary and related personnel cost, almost entirely offset by a $1.1 million decrease in stock-based compensation, a $0.9 million decrease in contractor and outside service provider fees, and a $0.3 million decrease in restructuring charges.
Current wording
Cost of professional services revenue was $71.9 million for the nine months ended September 30, 2024, compared to $73.8 million for the nine months ended September 30, 2023, an decrease of $1.9 million, or 3%. Notable changes in the cost of professional services revenue for the period include a $1.4 million decrease in stock-based compensation, a $1.3 million decrease in contractor and outside service provider fees, and a $0.3 million decrease in restructuring charges, partially offset by a $1.1 million increase in in salary and related personnel cost.
Previous wording
Sales and marketing expenses were $31.8 million for the six months ended June 30, 2024, compared to $35.0 million for the six months ended June 30, 2023, a decrease of $3.2 million, or 9%. The decrease was primarily due to a $4.5 million decrease in stock-based compensation, a $2.1 million decrease in salary and related personnel costs, and a $0.2 million decrease in restructuring charges. These decreases were partially offset by a $1.9 million increase in our provision for expected credit losses and a $1.6 million increase in contractor and outside service provider fees.
Current wording
Sales and marketing expenses were $43.1 million for the nine months ended September 30, 2024, compared to $50.1 million for the nine months ended September 30, 2023, a decrease of $6.9 million, or 14%. The decrease was primarily due to a $7.1 million decrease in stock-based compensation, a $3.0 million decrease in salary and related personnel costs, and a $0.3 million decrease in restructuring charges. These decreases were partially offset by a $1.8 million increase in our provision for expected credit losses and a $1.5 million increase in contractor and outside service provider fees.
Previous wording
Sales and marketing expense as a percentage of total revenue decreased from 24% in the six months ended June 30, 2023 to 21% in the six months ended June 30, 2024.
Current wording
Sales and marketing expense as a percentage of total revenue decreased from 23% in the nine months ended September 30, 2023 to 19% in the nine months ended September 30, 2024.
Showing the first 40 of 63 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Critical accounting policies and estimates are those that we consider critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
As previously described, within our professional services segment, a subset of clients have reduced their spend, while in the technology segment, a subset of modular clients and smaller platform clients have reduced their application and analytics spend. However, we anticipate our aggregate churn levels in 2024 to improve compared to 2023.
Previous report — wording carried elsewhere
Professional services revenue was $28.3 million, or 37% of total revenue, for the three months ended June 30, 2024, compared to $25.9 million, or 35% of total revenue, for the three months ended June 30, 2023. The professional services revenue growth is primarily due to implementation, analytics, and other improvement services being provided to Platform Subscription Clients, which includes Tech-enabled Managed Services.
Previous report — wording carried elsewhere
General and administrative expenses were $14.4 million for the three months ended June 30, 2024, compared to $23.7 million for the three months ended June 30, 2023, a decrease of $9.3 million, or 39%. The decrease was primarily due to a $9.6 million decrease in litigation costs compared to those that occurred in the prior-year period and are out of the ordinary course of business, a $2.6 million decrease in lease-related impairment charges that occurred in the prior-year period, and a $0.5 million decrease in stock-based compensation. These decreases were partially offset by a $2.2 million increase in acquisition-related costs and a $0.9 increase in salary and related personnel costs.