Health Catalyst, Inc.

Previous wording

Highlights from the three and six months ended June 30, 2025 and 2024 included:

Current wording

Highlights from the three and nine months ended September 30, 2025 and 2024 included:

Previous wording

•We recognized total revenue of $80.7 million and $75.9 million for the three months ended June 30, 2025 and 2024, respectively, and $160.1 million and $150.6 million for the six months ended June 30, 2025 and 2024, respectively. The growth in revenue was primarily due to revenue from new clients, including acquired relationships, and revenue expansion from existing clients.

Current wording

•We recognized total revenue of $76.3 million and $76.4 million for the three months ended September 30, 2025 and 2024, respectively, and $236.5 million and $227.0 million for the nine months ended September 30, 2025 and 2024, respectively. The year-to-date growth in revenue in 2025 compared to 2024 was primarily due to revenue from new clients, including acquired relationships, and revenue expansion from existing clients.

Previous wording

•We incurred net losses of $41.0 million and $13.5 million for the three months ended June 30, 2025 and 2024, respectively, and $64.7 million and $34.1 million for the six months ended June 30, 2025 and 2024, respectively. The increased net losses in 2025 compared to 2024 are largely driven by $28.8 million in goodwill impairment.

Current wording

•We incurred net losses of $22.2 million and $14.7 million for the three months ended September 30, 2025 and 2024, respectively, and $86.9 million and $48.8 million for the nine months ended September 30, 2025 and 2024, respectively. The increased year-to-date net loss in 2025 compared to 2024 is largely driven by $28.8 million of goodwill impairment recognized in the second quarter of 2025, while the year-over-year increase in the quarterly net loss is primarily due to $6.9 million of lease-related impairment charges and $4.8 million of restructuring costs that we do not expect to recur.

Previous wording

•Our Adjusted EBITDA was $9.3 million and $7.5 million for the three months ended June 30, 2025 and 2024, respectively, and $15.6 million and $10.9 million for the six months ended June 30, 2025 and 2024, 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 $12.0 million and $7.3 million for the three months ended September 30, 2025 and 2024, respectively, and $27.6 million and $18.2 million for the nine months ended September 30, 2025 and 2024, 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

Recent macroeconomic challenges (including high levels of inflation, high interest rates, uncertainty with tariffs, and cuts in Medicaid and research funding) and the tight labor market continue to adversely affect workforces, organizations, governments, clients, economies, and financial markets globally. These factors have disrupted the normal operations of many businesses, including our business. These factors have also placed the national healthcare system under significant operational and budgetary strain. The extent and duration of the impacts from these factors is uncertain, and we expect that continued impacts would have a negative effect upon our clients, business and results of operations, and financial condition.

Current wording

Recent macroeconomic challenges (including high levels of inflation, high interest rates, uncertainty with tariffs, and cuts in Medicaid and research funding) and the tight labor market continue to adversely affect workforces, organizations, governments, clients, economies, and financial markets globally. These factors have disrupted the normal operations of many businesses, including our business. These factors have also placed the national healthcare system under significant operational and budgetary strain. The extent and duration of the impacts from these factors is uncertain, and we expect that continued impacts will continue to have a negative effect upon our clients, business and results of operations, and financial condition.

Previous wording

The health system end market, in particular, has experienced meaningful financial strain over the last few years. We were encouraged that, in general, the operating margins of our health system end market improved in 2024 and the first half of 2025 relative to 2022 and 2023. However, the implications of any policy developments around Medicaid and research funding reductions, as well as implications of the evolving tariff landscape have had a negative impact on our business.

Current wording

The health system end market, in particular, has experienced meaningful financial strain over the last few years. We were encouraged that, in general, the operating margins of our health system end market improved in 2024 and year-to-date 2025 relative to 2022 and 2023. However, the implications of any policy developments around Medicaid and research funding reductions, as well as implications of the evolving tariff landscape have had and continue to have a negative impact on our business.

Previous wording

On July 4, 2025, President Trump signed the OBBBA into law, which is projected to reduce federal Medicaid spending by nearly $1 trillion over 10 years and will create additional financial strain for many of our clients and prospective clients. As a result, certain sales cycles have elongated and some opportunities, such as opportunities in Life Sciences, have pushed, which has negatively impacted our year-to-date bookings achievement and our expectations for revenue in the second half of 2025. We have also seen that the aggregated average total ARR and non-recurring revenue for net new Platform Clients trended lower in the second quarter of 2025 compared to the first quarter of 2025 and was below the midpoint of the $300,000 to $700,000 aggregated average total ARR and non-recurring revenue range. We anticipate this trend may continue in the near term, primarily driven by the funding cuts previously mentioned.

Current wording

On July 4, 2025, President Trump signed the OBBBA into law, which is projected to reduce federal Medicaid spending by nearly $1 trillion over 10 years and will create additional financial strain for many of our clients and prospective clients. As a result, certain sales cycles have elongated and some opportunities, such as opportunities in Life Sciences, have pushed, which has negatively impacted our year-to-date bookings achievement and our expectations for revenue in the fourth quarter of 2025. We have also seen that the aggregated average total ARR and non-recurring revenue for net new Platform Clients trended towards the lower end of the $300,000 to $700,000 aggregated average total ARR and non-recurring revenue range. We anticipate this trend may continue in the near term.

Previous wording

With respect to other near-term implications of the challenging macroeconomic environment, we continue to anticipate that a higher proportion of our gross bookings will come from our existing client base as compared to historical levels, inclusive of upsells to both our Platform Client base, as well as upsells to our over 900 App Clients. This expectation is driven by our belief that many existing clients that have already realized a strong financial return on investment (ROI), and are aligned on a long-term partnership framework, will be more receptive to expansion conversations, as compared to discussions with prospective clients. We have collected data internally that shows we are more than twice as effective at selling into organizations where we have an existing relationship compared to those where there is no prior relationship, which gives us additional confidence in our ability to drive cross-selling within our broad client base.

Current wording

We continue to anticipate that a higher proportion of our gross bookings will come from our existing client base as compared to historical levels, inclusive of upsells to both our Platform Client base, as well as upsells to our over 900 App Clients. This expectation is driven by our belief that many existing clients that have already realized a strong financial return on investment (ROI), and are aligned on a long-term partnership framework, will be more receptive to expansion conversations, as compared to discussions with prospective clients. We have collected data internally that shows we are more than twice as effective at selling into organizations where we have an existing relationship compared to those where there is no prior relationship, which gives us additional confidence in our ability to drive cross-selling within our broad client base.

Previous wording

As previously described, within our professional services segment, a subset of clients have reduced the number of FTEs engaged in their initiatives, while in the technology segment, a subset of modular clients and smaller Platform Clients have lowered their application and analytics spend. We will continue to monitor migrations from DOS to Ignite, and we continue to make progress on the migration efforts. We have observed that clients have a few options as part of this migration. These options include expanding their relationship and spend by purchasing additional applications and services; experiencing 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 Ignite. Over the course of the next few years, we anticipate our clients will continue to fall along the spectrum of these three options; however, in recent months and in the near-term due to the overall macroeconomic challenges and uncertainty, including the funding reductions primarily related to Medicaid and research funding, an increasing number of clients are opting for, and we anticipate many will opt for, a price reduction as part of the migration to Ignite resulting in lower overall spend.

Current wording

As previously described, within our professional services segment, a subset of clients have reduced the number of FTEs engaged in their initiatives, while in the technology segment, we have experienced churn related to the migration from DOS to Ignite. We have observed that clients have a few options as part of this migration. These options include expanding their relationship and spend by purchasing additional applications and services; experiencing immediate savings while maintaining similar functionality through a price reduction as part of the migration; maintaining existing spend and realizing improvement in operations and functionality from the enhanced capabilities of Ignite; or exercising flexibility to stay on DOS or parts of DOS in the near-to-medium term. Over the course of the next few years, we anticipate our clients will continue to fall along the spectrum of these options; however, in recent months and in the near-term, an increasing number of clients are opting for, and we anticipate many will opt for, a price reduction as part of the migration to Ignite resulting in lower overall spend.

Previous wording

We continue to proactively respond to the challenging macroeconomic environment with a strategic operating plan that emphasizes our offerings and go-to-market approach in the areas where we have the most competitive differentiation and where clients are most likely to achieve measurable financial and operational ROI both in the near term and over time. We believe this focus will enable us to move forward in a position of continued competitive and financial strength. We will continue to refine this strategic operating plan and are continuing to make investments in research and development, primarily in enhancing the capabilities within Health Catalyst Ignite, in order to maintain our position as a provider of a market-leading data platform and applications over the long term.

Current wording

We are responding to the challenging macroeconomic environment with a strategic operating plan that proactively tailors our solutions to align with and support the urgent needs for cost management and operational improvement. We are helping clients achieve tangible savings and enhanced operational efficiency, positioning our organization as a valuable partner during this critical period. We believe this focus will enable us to move forward in a position of continued competitive and financial strength. We will continue to refine this strategic operating plan and are continuing to make investments in research and development, including the continued enhancement of the capabilities within Health Catalyst Ignite, in order to maintain our position as a provider of a market-leading data platform and applications over the long term.

Previous wording

(1)Acquisition-related costs, net include deferred retention expenses attributable to the Upfront, Intraprise, ARMUS, and KPI Ninja acquisitions.

Current wording

(1)Acquisition-related costs, net include deferred retention expenses attributable to the Upfront, Intraprise, and KPI Ninja acquisitions.

Previous wording

Technology gross margin decreased from 51% for the three months ended June 30, 2024 to 50% for the three months ended June 30, 2025. Adjusted Technology Gross Margin decreased from 67% for the three months ended June 30, 2024 to 66% for the three months ended June 30, 2025. This year-over-year result was mainly driven by continued costs associated with transitioning a portion of our client base to Azure-hosted environments, costs associated with migrating a subset of Platform Clients to Health Catalyst Ignite, and Ninja Universe deployment costs incurred prior to the commencement of revenue recognition, 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 increased from 51% for the three months ended September 30, 2024 to 52% for the three months ended September 30, 2025. Adjusted Technology Gross Margin increased from 65% for the three months ended September 30, 2024 to 68% for the three months ended September 30, 2025. This year-over-year result was mainly driven by existing clients paying higher technology access fees from contractual, built-in escalators, without a corresponding increase in hosting costs, new or acquired revenue from higher margin application deals, and savings from our recent reductions in force, which were partially offset by costs associated with migrating a subset of DOS clients to Health Catalyst Ignite, and Ninja Universe deployment costs incurred prior to the commencement of revenue recognition.

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 Platform Clients to Health Catalyst Ignite and Ninja Universe deployment costs incurred prior to the commencement of revenue recognition, which typically begins six months or more following contract signing. The potential decline is also attributable to a small subset of our clients reducing their software analytics application costs, 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 ongoing transition of DOS clients to Health Catalyst Ignite and Ninja Universe deployment costs incurred prior to the commencement of revenue recognition, which typically begins six months or more following contract signing.

Previous wording

Professional services gross margin decreased from 16% for the six months ended June 30, 2024 to 11% for the six months ended June 30, 2025. Adjusted Professional Services Gross Margin remained flat at 21% for the six months ended June 30, 2024 as compared to the six months ended June 30, 2025, primarily due to lower utilization rates in our professional services organization, timing of certain one-time revenue items that we anticipate will occur later in 2025, and increased costs related to pilot ambulatory operations TEMS, which we are planning to exit. 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 11% for the three months ended September 30, 2024 to 12% for the three months ended September 30, 2025. Adjusted Professional Services Gross Margin increased from 17% for the three months ended September 30, 2024 to 19% for the three months ended September 30, 2025, primarily due to higher utilization rates and cost management efforts, driven in large part by our recent reductions in force. Our professional services are comprised of data and analytics services, domain expertise services, Tech-enabled Managed Services (TEMS), and implementation services. The delivery mix among all of our professional services in a given period can lead to fluctuations in our Adjusted Professional Services Gross Margin.

Previous wording

Total gross margin decreased from 39% for the six months ended June 30, 2024 to 37% for the six months ended June 30, 2025. Total Adjusted Gross Margin decreased from 51% for the six months ended June 30, 2024 and 2024 to 49% for the six months ended June 30, 2025. We expect total Adjusted Gross Margin to fluctuate in the near term, but improve over the long term, primarily due to a mix shift to a greater proportion of technology revenue as well as anticipated improvement in technology and professional services gross margins over time.

Current wording

Total gross margin increased from 36% for the three months ended September 30, 2024 to 39% for the three months ended September 30, 2025. Total Adjusted Gross Margin also increased from 48% for the three months ended September 30, 2024 to 53% for the three months ended September 30, 2025. We expect total Adjusted Gross Margin to fluctuate in the near term, but improve over the long term, primarily due to a mix shift to a greater proportion of technology revenue, as well as anticipated improvement in technology and professional services gross margins in the mid to long-term.

Previous wording

The following is a calculation of our gross profit and gross margin and a reconciliation of gross profit and gross margin, the most directly comparable financial measures calculated in accordance with GAAP, to our Adjusted Gross Profit and Adjusted Gross Margin in total and for technology and professional services for the six months ended June 30, 2025 and 2024.

Current wording

The following is a calculation of our gross profit and gross margin and a reconciliation of gross profit and gross margin, the most directly comparable financial measures calculated in accordance with GAAP, to our Adjusted Gross Profit and Adjusted Gross Margin in total and for technology and professional services for the nine months ended September 30, 2025 and 2024.

Previous wording

Technology gross margin decreased from 52% for the six months ended June 30, 2024 to 51% for the six months ended June 30, 2025. Adjusted Technology Gross Margin decreased from 68% for the six months ended June 30, 2024 to 67% for the six months ended June 30, 2025. 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 Clients to Health Catalyst Ignite, and Ninja Universe deployment costs incurred prior to the commencement of revenue recognition, 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 52% for the nine months ended September 30, 2024 to 51% for the nine months ended September 30, 2025. Adjusted Technology Gross Margin remained constant at 67% for the nine months ended September 30, 2024 and 2025. This year-over-year result was mainly driven by costs associated with migrating a subset of DOS clients to Health Catalyst Ignite and Ninja Universe deployment costs incurred prior to the commencement of revenue recognition, partially offset by existing clients paying higher technology access fees from contractual, built-in escalators, without a corresponding increase in hosting costs, new or acquired revenue from higher margin application deals, and savings from our recent reductions in force.

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 Platform Clients to Health Catalyst Ignite and Ninja Universe deployment costs incurred prior to the commencement of revenue recognition, which typically begins six months or more following contract signing. The potential decline is also attributable to a small subset of App Clients reducing their software analytics application costs, 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 ongoing transition of DOS clients to Health Catalyst Ignite and Ninja Universe deployment costs incurred prior to the commencement of revenue recognition, which typically begins six months or more following contract signing.

Previous wording

Professional services gross margin decreased from 15% for the three months ended June 30, 2024 to 13% for the three months ended June 30, 2025. Adjusted Professional Services Gross Margin decreased from 20% for the three months ended June 30, 2024 to 18% for the three months ended June 30, 2025, primarily due to lower utilization rates in our professional services organization, timing of certain one-time revenue items that we anticipate will occur later in 2025, and increased costs related to pilot ambulatory operations TEMS, which we are planning to exit. Our professional services are comprised of data and analytics services, domain expertise services, Tech-enabled Managed 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 professional services in a given period can lead to fluctuations in our Adjusted Professional Services Gross Margin.

Current wording

Professional services gross margin decreased from 14% for the nine months ended September 30, 2024 to 11% for the nine months ended September 30, 2025. Adjusted Professional Services Gross Margin decreased from 20% for the nine months ended September 30, 2024 to 18% for the nine months ended September 30, 2025, primarily due to lower utilization rates in our professional services organization, timing of certain project-based, non-recurring revenue items pushing beyond the third quarter of 2025, increased costs related to pilot ambulatory operations TEMS, which we have now exited, and certain churn of FTE-based service arrangements. Our professional services are comprised of data and analytics services, domain expertise services, TEMS, and implementation services. 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 remained constant at 38% for the three months ended June 30, 2025 and 2024. Total Adjusted Gross Margin also remained constant at 50% for the three months ended June 30, 2025 and 2024. We expect total Adjusted Gross Margin to fluctuate in the near term, but improve over the long term, primarily due to a mix shift to a greater proportion of technology revenue, as well as anticipated improvement in technology and professional services gross margins over time.

Current wording

We expect total Adjusted Gross Margin to fluctuate in the near term, but improve over the long term, primarily due to a mix shift to a greater proportion of technology revenue as well as anticipated improvement in technology and professional services gross margins over the long-term.

Previous wording

Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted for (i) interest and other (income) expense, net, (ii) income tax provision, (iii) depreciation and amortization, (iv) stock-based compensation, (v) acquisition-related costs, net, (vi) restructuring costs, (vii) goodwill impairment, and (viii) non-recurring lease-related charges. We view acquisition-related expenses when applicable, such as transaction costs and changes in the fair value of contingent consideration liabilities that are directly related to business combinations, as costs that are unpredictable, dependent upon factors outside of our control, and are not necessarily reflective of operational performance during a period. We believe that excluding restructuring costs, and non-recurring lease-related charges allows for more meaningful comparisons between operating results from period to period as these are separate from the core activities that arise in the ordinary course of our business and are not part of our ongoing operations. We believe Adjusted EBITDA provides investors with useful information on period-to-period performance as evaluated by management and a comparison with our past financial performance, and is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.

Current wording

Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted for (i) interest and other (income) expense, net, (ii) income tax provision, (iii) depreciation and amortization, (iv) stock-based compensation, (v) acquisition-related costs, net, (vi) restructuring costs, (vii) goodwill impairment, and (viii) non-recurring lease-related charges, as applicable. We view acquisition-related expenses when applicable, such as transaction costs and changes in the fair value of contingent consideration liabilities that are directly related to business combinations, as costs that are unpredictable, dependent upon factors outside of our control, and are not necessarily reflective of operational performance during a period. We believe that excluding restructuring costs and non-recurring lease-related charges, as applicable, allows for more meaningful comparisons between operating results from period to period as these are separate from the core activities that arise in the ordinary course of our business and are not part of our ongoing operations. We believe Adjusted EBITDA provides investors with useful information on period-to-period performance as evaluated by management and a comparison with our past financial performance, and is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.

Previous wording

The following is a reconciliation of our net loss, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA for the three and six months ended June 30, 2025 and 2024.

Current wording

The following is a reconciliation of our net loss, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024.

Previous wording

(4)Non-recurring lease-related charges include the lease-related impairment charge related to our corporate office space designated for subleasing. For additional details, refer to Note 9 in our condensed consolidated financial statements.

Current wording

(4)Non-recurring lease-related charges include the lease-related impairment charges related to our corporate office space designated for subleasing. For additional details, refer to Note 9 in our condensed consolidated financial statements.

Previous wording

•Impact of challenging macroeconomic environment, including high inflation, high interest rates, uncertainty with tariffs, cuts in Medicaid and research funding, the tight labor market or the market volatility and measures taken in response thereto. Recent macroeconomic challenges (including the high levels of inflation, high interest rates, uncertainty with tariffs, cuts in Medicaid and research funding, or market volatility and measures taken in response thereto) and the tight labor market continue to adversely affect workforces, organizations, governments, clients, economies, and financial markets globally, leading to an economic downturn and increased market volatility. These challenges have also disrupted the normal operations of many businesses, including ours. Our health system end market recently experienced meaningful financial strain from significant inflation. In particular, the health system end market experienced increases in labor and supply costs without a commensurate increase in revenue, leading to significant margin pressure. We are also continuing to monitor the implications of any policy developments around Medicaid and research funding reductions, including the recently passed OBBBA, which are negatively impacting our end market, as well as implications of the evolving tariff landscape. These uncertainties in our end market could cause potential delays in client decisions, which could negatively affect our business and results of operations.

Current wording

•Impact of challenging macroeconomic environment, including high inflation, high interest rates, uncertainty with tariffs, cuts in Medicaid and research funding, the tight labor market or the market volatility and measures taken in response thereto. Recent macroeconomic challenges (including the high levels of inflation, high interest rates, uncertainty with tariffs, cuts in Medicaid and research funding, or market volatility and measures taken in response thereto) and the tight labor market continue to adversely affect workforces, organizations, governments, clients, economies, and financial markets globally, leading to an economic downturn and increased market volatility. These challenges have also disrupted the normal operations of many businesses, including ours. Our health system end market recently experienced meaningful financial strain from significant inflation. In particular, the health system end market experienced increases in labor and supply costs without a commensurate increase in revenue, leading to significant margin pressure. We are also continuing to monitor the implications of any policy developments around Medicaid and research funding reductions, including the recently passed OBBBA, which has and could continue to negatively impact our end market, as well as implications of the evolving tariff landscape. These uncertainties in our end market have caused and could cause further potential delays in client decisions, which has and could continue to negatively affect our business and results of operations.

Previous wording

•Impact of acquisitions. We have acquired multiple companies over the last few years, including Medicity in June 2018, Able Health in February 2020, Healthfinch in July 2020, Vitalware in September 2020, Twistle in July 2021, KPI Ninja in February 2022, ARMUS in April 2022, ERS in October 2023, Carevive in May 2024, Lumeon in August 2024, Intraprise in November 2024, and Upfront in January 2025. The historical and go-forward revenue growth profiles of these businesses may vary from our core Platform Clients, which can positively or negatively impact our overall growth rate. For example, Medicity clients have generated a lower dollar-based retention rate than Platform Clients and we expect declining revenue from Medicity clients in the foreseeable future. As we integrate the teams acquired via our recent acquisitions, we have also incurred integration-related costs and duplicative costs that could impact our operating cost profile in the near term.

Current wording

•Impact of acquisitions. We have acquired multiple companies over the last few years, including Medicity in June 2018, Able Health in February 2020, Healthfinch in July 2020, Vitalware in September 2020, Twistle in July 2021, KPI Ninja in February 2022, ARMUS in April 2022, ERS in October 2023, Carevive in May 2024, Lumeon in August 2024, Intraprise in November 2024, and Upfront in January 2025. The historical and go-forward revenue growth profiles of these businesses may vary from our core Platform Clients, which can positively or negatively impact our overall growth rate. For example, Medicity clients have generally generated a lower dollar-based retention rate than Platform Clients and we expect declining revenue from Medicity clients in the foreseeable future. As we integrate the teams acquired via our more recent acquisitions, we have also incurred integration-related costs and duplicative costs that could impact our operating cost profile in the near term.

Previous wording

For the six months ended June 30, 2025, our technology revenue and professional services revenue represented 65% and 35% 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. Furthermore, changes within the types of professional services we offer over time can have a material impact on our Adjusted Professional Services Gross Margin, impacting our future gross margin and Total Adjusted Gross Margin. See “Reconciliation of Non-GAAP Financial Measures” above for more information.

Current wording

For the nine months ended September 30, 2025, our technology revenue and professional services revenue represented 66% and 34% 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. Furthermore, changes within the types of professional services we offer over time can have a material impact on our Adjusted Professional Services Gross Margin, impacting our future gross margin and Total Adjusted Gross Margin. See “Reconciliation of Non-GAAP Financial Measures” above for more information.

Previous wording

•Migration to Health Catalyst Ignite. We are in the process of migrating our Platform Clients to Ignite. These migrations have and will continue to result in higher cost of technology revenue, which will negatively impact Adjusted Technology Gross Margin. As we move through the bulk of these migrations by mid-2026, we expect the relative Adjusted Technology Gross Margin headwind to diminish. Over time we anticipate that the migration to Ignite will benefit Adjusted Technology Gross Margin. An Ignite migration can take a variety of forms, including a client's migration from our DOS platform to the Ignite platform, the incorporation of Ignite componentry into a specific Solution that is deployed to all clients using that Solution, or our deeming a Solution using our latest technology to be part of Ignite (our latest technology) because we do not plan to devote additional professional service or R&D resources to adding Ignite componentry to the Solution. Some client migrations require us to devote resources (including R&D and/or professional services) to enable the migration. For example, long-standing clients' migration from the DOS platform to the Ignite platform is generally more resource intensive and more complex. We expect those complex migrations will generally take more time to complete and may be some of the last migrations we complete. Some migrations may also require re-contracting to enable a client's migration to Ignite, including due to different consumption-based pricing models. Other Solutions require very little to no company resources to enable the migration, including Solutions that we deem to be part of Ignite because the Solution is using our latest technology and we do not have current plans to devote resources to add Ignite componentry to the Solution. We consider an Ignite migration to be complete for a given client if (i) we do not anticipate any additional professional services or R&D resources required to enable the Ignite migration for the client, and (ii) we have no plans to re-contract with the client for the purpose of enabling its Ignite migration. There may be unique instances in which we and a client prefer for the client to remain on our legacy technology for the foreseeable future. In those limited instances, we would exclude the client from the denominator and numerator when calculating the percentage of completed Ignite migrations.

Current wording

•Migration to Health Catalyst Ignite. We are in the process of migrating our DOS clients to Ignite. These migrations have and will continue to result in higher cost of technology revenue, which will negatively impact Adjusted Technology Gross Margin. Over time we anticipate that the migration to Ignite will benefit Adjusted Technology Gross Margin. We are experiencing Dollar-Based Retention pressure in 2025 due to the ongoing migration efforts. We expect to go into 2026 with similar pressure. An Ignite migration can take a variety of forms, including a client's migration from our DOS platform to the Ignite platform, the incorporation of Ignite componentry into a specific Solution that is deployed to all clients using that Solution, or our deeming a Solution using our latest technology to be part of Ignite (our latest technology) because we do not plan to devote additional professional service or R&D resources to adding Ignite componentry to the Solution. Some client migrations require us to devote resources (including R&D and/or professional services) to enable the migration. For example, long-standing clients' migration from the DOS platform to the Ignite platform is generally more resource intensive and more complex. These complex relationships generally include higher revenue. We expect those complex migrations will generally take more time to complete and may be some of the last migrations we complete. We expect two-thirds of DOS client migrations will be complete by the end of 2025, including the vast majority of modular DOS migrations. Some migrations may require re-contracting to enable a client's migration to Ignite, including due to different consumption-based pricing models. Other Solutions require very little to no company resources to enable the migration, including Solutions that we deem to be part of Ignite because the Solution is using our latest technology and we do not have current plans to devote resources to add Ignite componentry to the Solution. We consider an Ignite migration to be complete for a given client if (i) we do not anticipate any additional professional services or R&D resources required to enable the Ignite migration for the client, and (ii) we have no plans to re-contract with the client for the purpose of enabling its Ignite migration. There may be instances in which we expect the client to remain on our legacy technology for the foreseeable future. In those instances, we would exclude the client from the denominator and numerator when calculating the percentage of completed Ignite migrations. While we anticipate making meaningful progress on the Ignite migrations by the end of the first half of 2026, we have adjusted our timeline and approach to be more client-centric, recognizing that some organizations prefer to remain on DOS for the near-to-medium term. We are committed to providing more flexibility and meeting clients where they are and we expect this approach will improve client experience and Dollar-Base…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We derive our revenue from sales of technology and professional services. For the three months ended June 30, 2025 and 2024, technology revenue represented 66% and 63% of total revenue, respectively, and professional services revenue represented 34% and 37% of total revenue, respectively. For the six months ended June 30, 2025 and 2024, technology revenue represented 65% and 63% of total revenue, respectively, and professional services revenue represented 35% and 37% of total revenue, respectively. We expect our near-term revenue growth to be negatively impacted by policy developments around Medicaid and research funding reductions, which will likely create additional financial strain for many of our clients and prospective clients.

Current wording

We derive our revenue from sales of technology and professional services. For the three months ended September 30, 2025 and 2024, technology revenue represented 68% and 64% of total revenue, respectively, and professional services revenue represented 32% and 36% of total revenue, respectively. For the nine months ended September 30, 2025 and 2024, technology revenue represented 66% and 63% of total revenue, respectively, and professional services revenue represented 34% and 37% of total revenue, respectively. We expect our near-term revenue growth to be negatively impacted by policy developments around Medicaid and research funding reductions, which will likely create additional financial strain for many of our clients and prospective clients.

Previous wording

Professional services revenue. Professional services revenue primarily includes analytics services, domain expertise services, TEMS, and implementation services. Professional services arrangements typically include a fee for making FTE services available to our clients on a monthly basis. FTE services generally consist of a blend of analytic engineers, analysts, and data scientists based on the domain expertise needed to best serve our clients.

Current wording

Professional services revenue. Professional services revenue primarily includes analytics services, domain expertise services, TEMS, and implementation services. Professional services arrangements typically include a fee for making FTE services available to our clients on a monthly basis or a fixed fee for a scope of work. FTE services generally consist of a blend of analytic engineers, analysts, and data scientists based on the domain expertise needed to best serve our clients.

Previous wording

We anticipate cost of technology revenue as a percentage of technology revenue will generally decrease over the long term. However, we expect cost of technology revenue as a percentage of technology revenue to fluctuate and potentially increase in the near term, primarily due to additional costs associated with transitioning a small number of clients from on-premise deployments to Microsoft Azure-hosted environments and migrating clients to Health Catalyst Ignite.

Current wording

We anticipate cost of technology revenue as a percentage of technology revenue will generally decrease over the long term. However, we expect cost of technology revenue as a percentage of technology revenue to fluctuate and potentially increase in the near term, primarily due to additional costs associated with migrating DOS clients to Health Catalyst Ignite.

Previous wording

Cost of professional services revenue. Cost of professional services revenue consists primarily of costs related to delivering our team’s expertise in analytics, strategic advisory, improvement, and implementation services. These costs primarily include salary and related personnel costs, travel-related costs, and outside contractor costs. The 2023 Restructuring Plan and the January 2025 Restructuring Plan have reduced our ongoing cost of professional services revenue. Our cost of professional services revenue may fluctuate as a percentage of our revenue from period to period due to the timing and extent of non-recurring professional services arrangements.

Current wording

Cost of professional services revenue. Cost of professional services revenue consists primarily of costs related to delivering our team’s expertise in analytics, strategic advisory, improvement, and implementation services. These costs primarily include salary and related personnel costs, travel-related costs, and outside contractor costs. The 2023 Restructuring Plan, the January 2025 Restructuring Plan, and the August 2025 Restructuring Plan have reduced our ongoing cost of professional services revenue. Our cost of professional services revenue may fluctuate as a percentage of our revenue from period to period due to the timing and extent of non-recurring professional services arrangements.

Previous wording

Research and development. Research and development expenses primarily include salary and related personnel costs for our data platform and analytics applications teams, subscriptions, and outside contractor costs associated with the development of products. We have developed an open, flexible, and scalable data platform. We plan to continue to invest in research and development to develop new solutions and enhance our applications library. The 2023 Restructuring Plan and January 2025 Restructuring Plan increased our research and development expenses in the first quarter of 2024 and first quarter 2025, respectively, due to severance costs, but we expect that the reduction in headcount will reduce future, ongoing research and development expenses. Our research and development expenses may fluctuate as a percentage of our revenue from period to period due to the nature, timing, and extent of these expenses.

Current wording

Research and development. Research and development expenses primarily include salary and related personnel costs for our data platform and analytics applications teams, subscriptions, and outside contractor costs associated with the development of products. We have developed an open, flexible, and scalable data platform. We plan to continue to invest in research and development to develop new solutions and enhance our applications library. The 2023 Restructuring Plan, the January 2025 Restructuring Plan, and the August 2025 Restructuring Plan increased our research and development expenses in the first quarter of 2024, the first quarter of 2025, and third quarter of 2025, respectively, due to severance costs, but we expect that the reduction in headcount will reduce future, ongoing research and development expenses. Our research and development expenses may fluctuate as a percentage of our revenue from period to period due to the nature, timing, and extent of these expenses.

Previous wording

On July 4, 2025, President Trump signed the OBBBA into law. The OBBBA includes numerous changes to existing tax law including extending or making permanent certain business and international tax measures initially established under the 2017 Tax Cuts and Jobs Act, which were set to expire. The OBBBA includes provisions providing current deductibility of certain property additions, limitations on interest deductions based on a tax EBITDA framework, and current deductibility of domestic research and development costs. These provisions are generally effective beginning in 2025, and we currently anticipate they will partially defer our income tax payments in future years and will not have a material impact on our effective tax rate. We will continue to review the OBBBA tax provisions to assess impacts to our condensed consolidated financial statements and will reflect any impact in the period of enactment.

Current wording

On July 4, 2025, President Trump signed the OBBBA into law. The OBBBA includes numerous changes to existing tax law including extending or making permanent certain business and international tax measures initially established under the 2017 Tax Cuts and Jobs Act, which were set to expire. The OBBBA includes provisions providing current deductibility of certain property additions, limitations on interest deductions based on a tax EBITDA framework, and current deductibility of domestic research and development costs. These provisions are generally effective beginning in 2025, and we currently anticipate they will partially defer our income tax payments in future years and will not have a material impact on our effective tax rate.

Previous wording

The technology revenue increase was primarily related to growth from new and acquired 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

The technology revenue increase was primarily related to growth from new and acquired clients, revenue from existing clients paying higher technology access fees from contractual, annual escalators, new offerings of expanded support services, and non-recurring technology revenue that is not anticipated to continue during the fourth quarter of 2025, partially offset by elevated churn levels.

Previous wording

Professional services revenue was $55.8 million, or 35% of total revenue, for the six months ended June 30, 2025, which was a slight decrease compared to $56.0 million, or 37% of total revenue, for the six months ended June 30, 2024. The professional services revenue decrease was primarily due to lower utilization rates in our professional services organization and the timing of certain one-time revenue items that we anticipate will occur later in 2025.

Current wording

Professional services revenue was $24.3 million, or 32% of total revenue, for the three months ended September 30, 2025, which was a decrease compared to $27.7 million, or 36% of total revenue, for the three months ended September 30, 2024. The professional services revenue decrease was primarily due to our exit of pilot ambulatory operations TEMS and churn of some FTE-based service arrangements, partially offset by non-recurring professional services revenue that is not anticipated to continue during the fourth quarter of 2025.

Previous wording

Cost of technology revenue, excluding depreciation and amortization, was $35.9 million for the six months ended June 30, 2025, compared to $31.4 million for the six months ended June 30, 2024, an increase of $4.5 million, or 14%. The increase was primarily due to a $2.4 million increase in cloud computing and hosting costs largely from the expanded use of Microsoft Azure to serve existing and new clients, a $0.7 million increase in dues and subscriptions, a $0.5 million increase in salary and related personnel costs, including stock-based compensation related to new hires from our recent acquisitions, a $0.4 million increase in license and revenue share fees, a $0.3 million increase in severance costs related to the January 2025 Restructuring Plan, and a $0.2 million increase in contractor and outside service provider fees.

Current wording

Cost of technology revenue, excluding depreciation and amortization, was $17.2 million for the three months ended September 30, 2025, compared to $17.6 million for the three months ended September 30, 2024, a decrease of $0.4 million, or 2%. The decrease was primarily due to a $1.1 million decrease in recurring salary and related personnel costs related to our recent restructuring activities and a $0.3 million decrease in stock-based compensation, partially offset by $0.4 million in severance costs related to the August 2025 Restructuring Plan and a $0.4 million increase in cloud computing and hosting costs, largely from the expanded use of Microsoft Azure to serve existing and new clients.

Previous wording

Sales and marketing expenses were $13.2 million for the three months ended June 30, 2025, compared to $12.7 million for the three months ended June 30, 2024, an increase of $0.5 million, or 4%. The increase was primarily due to a $0.6 million increase in salary and related personnel costs, including stock-based compensation, a $0.5 million increase in contractor and outside service provider fees, subscriptions, and other advertising and marketing costs, partially offset by a $0.7 million decrease in our provision for expected credit losses compared to the three months ended June 30, 2024.

Current wording

Sales and marketing expenses were $14.4 million for the three months ended September 30, 2025, compared to $11.3 million for the three months ended September 30, 2024, an increase of $3.0 million, or 27%. The increase was primarily due to $1.9 million in severance costs related to the August 2025 Restructuring Plan, a $0.3 million increase in our provision for expected credit losses, and a $0.6 million increase in contractor and outside service provider fees and other advertising and marketing costs primarily related to the timing of our Health Catalyst Analytics Summit (HAS) conference.

Previous wording

Sales and marketing expense as a percentage of total revenue decreased from 17% in the three months ended June 30, 2024 to 16% in the three months ended June 30, 2025.

Current wording

Sales and marketing expense as a percentage of total revenue increased from 15% in the three months ended September 30, 2024 to 19% in the three months ended September 30, 2025.

Previous wording

Research and development expense as a percentage of revenue decreased from 18% in the three months ended June 30, 2024 to 15% in the three months ended June 30, 2025.

Current wording

Research and development expense as a percentage of revenue decreased from 19% in the three months ended September 30, 2024 to 16% in the three months ended September 30, 2025.

Previous wording

General and administrative expense as a percentage of revenue decreased from 19% in the three months ended June 30, 2024 to 10% in the three months ended June 30, 2025.

Current wording

General and administrative expense as a percentage of revenue increased from 16% in the three months ended September 30, 2024 to 21% in the three months ended September 30, 2025.