Health Catalyst Inc
For the period ended Dec 31, 2024. Filed Feb 26, 2025.
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FY2024 · Filed Feb 26, 2025
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Reports of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Health Catalyst, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Health Catalyst, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 26, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| Revenue Recognition – identification of and accounting for performance obligations | |
| Description of the Matter | As described in Note 1 and Note 3 to the consolidated financial statements, the Company primarily derives its revenues from recurring technology and professional services subscriptions. When the Company’s contracts contain multiple performance obligations that are determined to be distinct, the performance obligations are accounted for separately. In such cases, the transaction price is allocated to the distinct performance obligations on a standalone selling price basis and the timing of revenue recognition is determined separately for each performance obligation.Auditing the Company's determination of distinct performance obligations, the allocation of the transaction price based on a standalone selling price and the timing of revenue recognition can be challenging. Judgment is involved to determine the distinct performance obligations, standalone selling price, and the timing of revenue recognition. For example, there may be nonstandard terms and conditions or changes in management’s business practices that can have a material effect on the distinct performance obligations, the appropriate standalone selling price and the timing of revenue recognition. |
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| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company's process to determine the distinct performance obligations and standalone selling prices for each performance obligation, allocate the transaction price to the performance obligations and determine the appropriate timing of revenue recognition for each distinct performance obligation. Our audit procedures included, among others, testing a sample of contracts. For each contract selection, we read the executed contract to assess management’s evaluation of significant nonstandard terms and conditions and tested the appropriateness of the determination of distinct performance obligations. We also tested the allocation of the transaction price and management’s determination of standalone selling price for performance obligations by assessing the appropriateness of the methodology applied, testing the calculations for mathematical accuracy and testing selections to corroborate the data underlying the Company’s calculations. To test the timing of revenue recognition and the appropriateness of the methodology employed for each distinct performance obligation, we tested the amounts recognized as revenue or recorded as deferred revenue. Additionally, we performed an analytical procedure to verify the appropriateness of the timing of revenue recognition and tested the completeness and accuracy of relevant underlying data utilized in the analytical procedure. |
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| Business Combinations | |
| Description of the Matter | As discussed in Note 2 to the consolidated financial statements, during 2024, the Company completed the acquisitions of Carevive Systems, Inc., Lumeon Ltd. and Intraprise Health, LLC. for net consideration of $22 million, $40 million and $45 million, respectively. These transactions were accounted for as business combinations.Auditing the Company’s accounting for these acquisitions was complex when considered in aggregate due to the significant estimation inherent in determining the fair values of the developed technologies and customer relationships intangible assets, which totaled $20 million and $19 million in aggregate, respectively. The significant estimation was primarily due to the sensitivity of the aggregated fair values to the underlying revenue growth rate assumption utilized in the valuation of the developed technologies and customer relationships intangible assets for the period after the initial acquisition year and prior to the application of a long-term growth rate (“discrete revenue growth rates”). As the discrete revenue growth rates are forward-looking, this assumption could be impacted by the future performance of the acquired businesses and affected by future economic and market conditions. |
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| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls that address the risk of material misstatement related to the Company’s accounting for these acquisitions, in particular the determination of the discrete revenue growth rates utilized in the estimation of the fair value of developed technologies and customer relationships intangible assets. Specifically, we tested controls over the development of and management’s review of the forecasted discrete revenue growth rates utilized in the valuation of the developed technologies and customer relationships intangible assets of each acquisition. To test the estimated fair value of the developed technologies and customer relationships intangible assets, we performed audit procedures that included, among others, evaluating the valuation methodology and testing the reasonableness of the discrete revenue growth rates used by the Company's valuation specialist, and evaluating the completeness and accuracy of the underlying data supporting the estimated fair values. We involved our valuation specialists to assist with our assessment of the appropriateness of the valuation methodology applied by the Company. |
We also tested the reasonableness of the discrete revenue growth rates included in the fair value estimates. For example, we compared the discrete revenue growth rates to current industry, market and economic trends, revenue growth rates used to value similar assets in other acquisitions, historical results of the acquired businesses, and the Company’s budgets and forecasts. In addition, we performed sensitivity analyses over these growth rates. Additionally, we performed a benchmarking analysis to determine that the acquired intangible assets as a percentage of total purchase consideration were within a reasonable range in relation to other recent industry business combinations.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2012.
Salt Lake City, Utah
February 26, 2025
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Health Catalyst, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Health Catalyst, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Health Catalyst, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our report dated February 26, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying management’s report on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/Ernst & Young LLP
Salt Lake City, Utah
February 26, 2025
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