Health Catalyst, Inc.

Previous wording

We are a leading provider of data and analytics technology and services to healthcare organizations. Our Solution comprises our cloud-based data platforms, software analytics applications, and professional services expertise. Our clients, which are primarily healthcare providers, use our Solution to manage their data, derive analytical insights to operate their organization, and produce measurable clinical, financial, and operational improvements. We envision a future where all healthcare decisions are data-informed.

Current wording

We are a leading provider of data and analytics technology and services to healthcare organizations. Our Solution comprises our cloud-based data platform, applications, and expertise. Our clients, which are primarily healthcare providers, use our Solution to manage their data, derive analytical insights to operate their organization, and produce measurable clinical, financial, and operational improvements. We envision a future where all healthcare decisions are data-informed.

Previous wording

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

Current wording

Highlights from the three months ended March 31, 2026 and 2025 included:

Previous 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.

Current wording

•Our Adjusted EBITDA was $9.1 million and $6.3 million for the three months ended March 31, 2026 and 2025, respectively. See the section titled “Key Financial Measures—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

Macroeconomic Environment and Strategic Operating Plan

Current wording

Macroeconomic Environment, Ignite Migration and Strategic Operating Plan

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 will continue to 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, cuts in Medicaid and research funding, and regional or global conflicts (including the conflicts in the Middle East)) 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

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.

Current wording

The health system end market, in particular, has experienced meaningful financial strain. We are encouraged that, in general, the operating margins of our health system end market improved in recent years. However, the implications of many 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. 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 negatively impacted our 2025 bookings achievement and our expectations for revenue in 2026.

Previous 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.

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. 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. 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. Client contracts often include built-in, contractual technology revenue escalators and often include locked in terms for three to five years.

Previous wording

We regularly review a number of metrics, including the following key financial metrics, to manage our business and evaluate our operating performance compared to that of other companies in our industry:

Current wording

We regularly review a number of measures, including the following key financial measures, to manage our business and evaluate our operating performance compared to that of other companies in our industry:

Previous wording

We monitor the key metrics set forth in the preceding table to help us evaluate trends, establish budgets, measure the effectiveness and efficiency of our operations, and determine team member incentives. We discuss Adjusted Gross Profit, Adjusted Gross Margin, and Adjusted EBITDA in more detail below.

Current wording

We monitor the key measures set forth in the preceding table to help us evaluate trends, establish budgets, measure the effectiveness and efficiency of our operations, and determine team member incentives. This year we will also begin annually reporting on total bookings as a new, simplified operating metric, which includes all new bookings for annual recurring revenue and non-recurring revenue. We discuss Adjusted Gross Profit, Adjusted Gross Margin, and Adjusted EBITDA in more detail below.

Previous wording

We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Current wording

In addition to our results determined in accordance with GAAP, we believe certain non-GAAP financial measures, including Adjusted Gross Profit, Adjusted Gross Margin, and Adjusted EBITDA, are useful in evaluating our operating performance. For example, we exclude stock-based compensation expense because it is non-cash in nature and excluding this expense provides meaningful supplemental information regarding our operational performance and allows investors the ability to make more meaningful comparisons between our operating results and those of other companies. We use this non-GAAP financial information to evaluate our ongoing operations, as a component in determining employee bonus compensation, and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

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 three months ended September 30, 2025 and 2024.

Current wording

The following is a reconciliation of our Adjusted Gross Profit and Adjusted Gross Margin, in total and for technology and professional services, to gross profit and gross margin, the most directly comparable financial measures calculated in accordance with GAAP for the three months ended March 31, 2026 and 2025.

Previous wording

(2)Restructuring costs include severance and other team member costs from workforce reductions and restructuring. For additional details, refer to Note 19 in our condensed consolidated financial statements.

Current wording

(2)Restructuring costs include severance and other team member costs from workforce reductions and restructuring. For additional details, refer to Note 19-Restructuring Costs in our condensed consolidated financial statements.

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, ARMUS and KPI Ninja acquisitions. For additional details refer to Notes 1 and 2 in our condensed consolidated financial statements.

Previous 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.

Current wording

Technology gross margin decreased from 51% for the three months ended March 31, 2025 to 49% for the three months ended March 31, 2026. Adjusted Technology Gross Margin decreased from 67% for the three months ended March 31, 2025 to 65% for the three months ended March 31, 2026. This technology gross margin and Adjusted Technology Gross Margin year-over-year decreases were 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. The technology gross margin year-over-year decrease was also negatively impacted by increased intangible amortization from recent acquisitions and increased depreciation of capitalized internal use software 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 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.

Current wording

We expect technology gross margin and Adjusted Technology Gross Margin to continue 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 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.

Current wording

Professional services gross margin increased from 8% for the three months ended March 31, 2025 to 15% for the three months ended March 31, 2026. Adjusted Professional Services Gross Margin increased from 16% for the three months ended March 31, 2025 to 19% for the three months ended March 31, 2026. 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 professional services gross margin and Adjusted Professional Services Gross Margin.

Previous 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.

Current wording

Total gross margin increased from 36% for the three months ended March 31, 2025 to 39% for the three months ended March 31, 2026. Total Adjusted Gross Margin increased from 49% for the three months ended March 31, 2025 to 51% for the three months ended March 31, 2026. We expect total gross margin and total Adjusted Gross Margin to continue to fluctuate and potentially decline 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.

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, 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.

Current wording

Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted for (i) interest and other expense, net, (ii) income tax provision (benefit), (iii) depreciation and amortization, (iv) stock-based compensation, (v) acquisition-related costs, net, including the change in fair value of contingent consideration liabilities for potential earn-out payments, (vi) restructuring costs, (vii) impairment of goodwill, and (viii) non-recurring lease-related charges, as applicable. We view acquisition-related expenses when applicable, such as transaction costs (including third-party fees associated with due diligence, deferred retention expenses, post-acquisition restructuring costs incurred as part of business combinations) and changes in the fair value of contingent consideration liabilities for potential earn-out payments 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, impairment of goodwill and intangible assets, 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

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.

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 the near-term growth will likely be slower compared to the growth rates experienced in the last few years and our Adjusted EBITDA 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 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.

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 months ended March 31, 2026 and 2025.

Previous wording

(1)Acquisition-related costs, net include third-party fees associated with due diligence, 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.

Current wording

(1)Acquisition-related costs, net include third-party fees associated with due diligence, 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. For additional details refer to Notes 1, 2, and 7 in our condensed consolidated financial statements.

Previous wording

(3)Goodwill impairment was recognized as a result of impairment indicators and a quantitative test indicating the fair values of the Technology and the Professional Services reporting units were below their respective carrying values as of June 30, 2025. For additional details, refer to Note 4 in our condensed consolidated financial statements.

Current wording

(3)Impairment of goodwill was recognized as a result of impairment indicators and quantitative tests indicating the fair value of the Technology reporting unit was below the carrying value as of March 31, 2026. For additional details, refer to Note 4 in our 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 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.

Current wording

•Impact of challenging macroeconomic environment, including high inflation, high interest rates, uncertainty with tariffs, cuts in Medicaid and research funding, regional or global conflicts (including the conflicts in the Middle East), 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, regional or global conflicts (including conflicts in the Middle East), 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 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

•Add new clients. We believe our ability to increase our client base will enable us to drive growth. Our potential client base is generally in the early stages of data and analytics adoption and maturity. We expect to further penetrate the market over time as potential clients invest in commercial data and analytics solutions. As one of the first data platform and analytics vendors focused specifically on healthcare organizations, we have an early-mover advantage and strong brand awareness. Our clients are large, complex organizations who typically have long procurement cycles, which, as a result, may lead to challenges with adding new Platform Clients.

Current wording

•Add new clients. We believe our ability to increase our client base will enable us to drive growth. Our potential client base is generally in the early stages of data and analytics adoption and maturity. We expect to further penetrate the market over time as potential clients invest in commercial data and analytics solutions. As one of the first data platform and analytics vendors focused specifically on healthcare organizations, we have an early-mover advantage and strong brand awareness. Our clients are large, complex organizations who typically have long procurement cycles, which, as a result, may lead to challenges with adding new clients.

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 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.

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 Solutions, which can positively or negatively impact our overall growth rate. For example, Medicity clients have generated a lower revenue retention rate and we have experienced and 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.

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.

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 three months ended March 31, 2026, our technology revenue and professional services revenue represented 70% and 30% of total revenue, respectively.

Previous 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.

Current wording

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 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.

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 has and will negatively impact Adjusted Technology Gross Margin. Over time we anticipate that the migration to Ignite will benefit Adjusted Technology Gross Margin. We experienced retention pressure in 2025 due to the ongoing migration efforts, and we expect to face similar pressure through 2026 and 2027. 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. There may be instances in which we expect the client to remain on our legacy technology for the foreseeable future. We anticipate making meaningful progress on the Ignite migrations in 2026 and to be generally through migrations by the end of 2027, with some clients choosing to remain on DOS. We are committed to providing more flexibility and meeting clients where they are with the goal of improving client experience and retention of at-risk annual recurring revenue.

Previous 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.

Current wording

We derive our revenue from sales of technology and professional services. For the three months ended March 31, 2026 and 2025, technology revenue represented 70% and 65% of total revenue, respectively, and professional services revenue represented 30% and 35% 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. We also expect near-term headwinds to revenue, including a reduction in TEMS revenue due to down-selling and our exit from certain lower-margin TEMS arrangements, a reduction in technology revenue related to migrating DOS clients to Health Catalyst Ignite, and the timing of non-recurring revenue driven by the timing of project completions.

Previous wording

Technology revenue. Technology revenue primarily consists of subscription fees charged to clients for access to use our Platform and analytics applications. We provide clients access to our technology through either an all-access or limited-access, modular subscription. Most of our subscription contracts are cloud-based and generally have a three- or five-year term, of which many are terminable after one year upon 90 days’ notice. The vast majority of our Platform Client subscription contracts have built-in annual escalators for technology access fees. Also included in technology revenue is the maintenance and support we provide, which generally includes updates and support services.

Current wording

Technology revenue. Technology revenue primarily consists of subscription fees charged to clients for access to use our Platform and analytics applications. We provide clients access to our technology through either an all-access or limited-access, modular subscription. Most of our subscription contracts are cloud-based and generally have a three- or five-year term, of which many are terminable after one year upon 90 days’ notice. The majority of our platform subscription contracts have built-in annual escalators for technology access fees. Also included in technology revenue is the maintenance and support we provide, which generally includes updates and support services.

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, 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.

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 January 2025 Restructuring Plan, and the August 2025 Restructuring Plan (together with the January 2025 Restructuring Plan, the 2025 Restructuring Plans) have reduced our ongoing cost of professional services revenue. We expect Project Nexus will increase cost of professional services revenue in the second quarter of 2026 due to severance costs, but, consistent with the impact of the 2025 Restructuring Plans, we expect the reduction in headcount will reduce future, 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, 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.

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 January 2025 Restructuring Plan and the August 2025 Restructuring Plan increased our research and development expenses in the first quarter of 2025 and third quarter of 2025, respectively, and we expect Project Nexus to similarly increase our research and development expenses in the second quarter of 2026, in each case due to severance costs. However, we expect that the reduction in headcount pursuant to these restructuring initiatives will reduce future, ongoing research and development expenses.

Previous wording

Goodwill impairment. Goodwill is assessed for impairment annually on October 31 or more frequently if indicators of impairment are present or circumstances suggest that impairment may exist. If the carrying amount of the reporting unit exceeds its fair value, we recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.

Current wording

Impairment of goodwill and intangible assets. Goodwill is assessed for impairment annually on October 31 or more frequently if indicators of impairment are present or circumstances suggest that impairment may exist. If the carrying amount of the reporting unit exceeds its fair value, we recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Long-lived assets, including intangible assets, are also tested for recoverability as indicators of impairment arise, and if the carrying amount of an asset group is deemed not recoverable, we recognize a long-lived asset impairment charge based on the asset group's fair value compared to its carrying amount.

Previous wording

Interest and other (expense) income, net primarily consists of interest expense from our debt arrangements offset by income from our investment holdings. Interest expense is primarily attributable to the Convertible Senior Notes and Credit Agreement and also includes the amortization of deferred financing costs related to our debt arrangements.

Current wording

Interest and other expense, net primarily consists of interest expense from our debt arrangements offset by income from our investment holdings. Interest expense is primarily attributable to the Convertible Senior Notes and Credit Agreement and also includes the amortization of deferred financing costs related to our debt arrangements.

Previous wording

As of December 31, 2024, we had federal and state NOLs of $680.7 million and $571.6 million, respectively, which will begin to expire for federal and state tax purposes in 2032 and 2025, respectively. Our existing NOLs may be subject to limitations arising from ownership changes and, if we undergo an ownership change in the future, our ability to utilize our NOLs and tax credits could be further limited by Sections 382 and 383 of the Code. Future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code. Our NOLs and tax credits may also be limited under similar provisions of state law.

Current wording

Income tax provision consists of U.S. federal, state, and foreign income taxes. Because of the uncertainty of the realization of the deferred tax assets, we have a full valuation allowance for our net deferred tax assets, including net operating loss carryforwards (NOLs) and tax credits related primarily to research and development. As of December 31, 2025, we had federal and state NOLs of $787.8 million and $647.7 million, respectively, which will begin to expire for federal and state tax purposes in 2032 and 2026, respectively. Our existing NOLs may be subject to limitations arising from ownership changes and, if we undergo an ownership change in the future, our ability to utilize our NOLs and tax credits could be further limited by Sections 382 and 383 of the Code. Future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code. Our NOLs and tax credits may also be limited under similar provisions of state law.

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.

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 anticipate they will partially defer our income tax payments in future years and will not have a material impact on our effective tax rate in the near-term.

Previous wording

Professional services revenue was $80.0 million, or 34% of total revenue, for the nine months ended September 30, 2025, compared to $83.7 million, or 37% of total revenue, for the nine months ended September 30, 2024. The professional services revenue decrease was primarily due to lower utilization rates in our professional services organization, our exit of pilot ambulatory operations TEMS, and churn of some FTE-based arrangements.

Current wording

Professional services revenue was $21.3 million, or 30% of total revenue, for the three months ended March 31, 2026 compared to $27.9 million, or 35% of total revenue, for the three months ended March 31, 2025. The professional services revenue decrease was primarily due to our exit of certain lower margin TEMS arrangements and churn of some FTE-based arrangements.

Previous 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.

Current wording

Cost of technology revenue, excluding depreciation and amortization, was $17.3 million for the three months ended March 31, 2026, compared to $17.6 million for the three months ended March 31, 2025, a decrease of $0.3 million, or 2%. The decrease was primarily due to a $2.1 million decrease in salary and personnel cost related to our restructuring activities, a $0.4 million decrease in severance costs related to our 2025 Restructuring Plans that occurred in 2025 and did not occur in 2026, partially offset by a $2.3 million increase in cloud computing and hosting costs.

Previous wording

Sales and marketing expenses were $42.3 million for the nine months ended September 30, 2025, compared to $43.1 million for the nine months ended September 30, 2024, a decrease of $0.8 million, or 2%. The decrease was primarily due to a $2.0 million decrease in our provision for expected credit losses compared to the nine months ended September 30, 2024 and a $0.4 million decrease in contractor, advertising, and marketing costs. These decreases were partially offset by a $1.9 million increase in severance costs related to the January 2025 Restructuring Plan and the August 2025 Restructuring Plan.

Current wording

Sales and marketing expenses were $10.6 million for the three months ended March 31, 2026, compared to $14.7 million for the three months ended March 31, 2025, a decrease of $4.2 million, or 28%. The decrease was primarily due to a $3.8 million decrease in salary and personnel cost, including stock-based compensation, related to our restructuring activities, and a $0.3 million decrease in our provision for expected credit losses compared to the three months ended March 31, 2025.

Previous 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.

Current wording

Sales and marketing expense as a percentage of total revenue decreased from 19% in the three months ended March 31, 2025 to 15% in the three months ended March 31, 2026.