Health Catalyst, Inc.

Previous wording

Highlights from the three and six months ended June 30, 2026 and 2025 included:

Current wording

Highlights from the three and nine months ended September 30, 2026 and 2025 included:

Previous wording

•We recognized total revenue of $70.5 million and $80.7 million for the three months ended June 30, 2026 and 2025, respectively, and $141.2 million and $160.1 million for the six months ended June 30, 2026 and 2025, respectively. The decrease in revenue was primarily due to our exit of certain lower margin TEMS arrangements and churn related to the migration from DOS to Ignite.

Current wording

•We recognized total revenue of $56.3 million and $76.3 million for the three months ended September 30, 2026 and 2025, respectively, and $197.5 million and $236.5 million for the nine months ended September 30, 2026 and 2025, respectively. The decrease in revenue was primarily due to the Vitalware divestiture, our exit of certain lower margin TEMS arrangements, and churn related to the migration from DOS to Ignite.

Previous wording

•We incurred net losses of $40.5 million and $41.0 million for the three months ended June 30, 2026 and 2025, respectively, and $151.6 million and $64.7 million for the six months ended June 30, 2026 and 2025, respectively. The increased net losses in the six months ended June 30, 2026 compared to the six months ended June 30, 2025 are largely driven by $122.5 million in goodwill impairment in 2026, which was primarily due to overall declines in our stock price and market capitalization, as well as the Vitalware held for sale accounting, which required an impairment analysis of the goodwill allocated to the retained technology reporting unit.

Current wording

•We generated net income of $40.5 million and incurred net losses of $22.2 million for the three months ended September 30, 2026 and 2025, respectively, and incurred net losses of $111.1 million and $86.9 million for the nine months ended September 30, 2026 and 2025, respectively. The net income generated during the three months ended September 30, 2026 was largely driven by a $65.9 million gain on sale of the Vitalware Business. The increased net loss incurred during the nine months ended September 30, 2026 compared to 2025 was primarily due to goodwill impairment as a general result of overall declines in our stock price and market capitalization, as well as the Vitalware held for sale accounting, which required an impairment analysis of the goodwill allocated to the retained technology reporting unit.

Previous wording

•Our Adjusted EBITDA was $9.9 million and $9.3 million for the three months ended June 30, 2026 and 2025, respectively, and $19.1 million and $15.6 million for the six months ended June 30, 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.

Current wording

•Our Adjusted EBITDA was $0.8 million and $12.0 million for the three months ended September 30, 2026 and 2025, respectively, and $19.8 million and $27.6 million for the nine months ended September 30, 2026 and 2025, respectively. The decrease in Adjusted EBITDA was primarily due to the Vitalware divestiture. 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

The health system end market, in particular, has experienced meaningful financial strain over the past several years. 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 One Big Beautiful Bill Act (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.

Current wording

The health system end market, in particular, has experienced meaningful financial strain over the past several years. 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 One Big Beautiful Bill Act (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 and 2026 bookings achievement and our expectations for revenue in 2026 and 2027.

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, we have experienced down-sell and churn particularly related to the migration from DOS to Ignite. As of May 11, 2026, we had been notified of $12.5 million of DOS-to-Ignite migration downsell and churn, and estimated approximately $52 million of potentially at risk ARR across 2026 and 2027. We are focused on trying to retain this at risk ARR though dedicated account plans tailored to each client’s needs. Even among clients who have given notice on the infrastructure layer, we expect a number of clients will continue to use our application solutions going forward even after transitioning to their own infrastructure. As we referenced in the past, we expect to be generally through churn pressure associated with the DOS to Ignite migration by the end of 2027.

Current wording

As previously described, within our professional services segment, a subset of clients have reduced the number of FTEs engaged in their initiatives including lower margin TEMS arrangements, while in the technology segment, we have experienced down-sell and churn particularly related to the migration from DOS to Ignite. As of May 11, 2026, we had been notified of $12.5 million of DOS-to-Ignite migration downsell and churn, and estimated approximately $52 million of potentially at risk ARR across 2026 and 2027. There has been no material change to this framework previously disclosed, and we do not plan to provide updates in the same format moving forward. We are working to retain at-risk ARR and we are focused on the outcomes clients need rather than the infrastructure decisions they have to make. Even among clients who have given notice on the infrastructure layer, we expect a number of clients will continue to use our application solutions going forward. As we referenced in the past, we expect to be generally through churn pressure associated with the DOS to Ignite migration by the end of 2027.

Previous wording

We believe healthcare is at an inflection point, due to financial pressure on health systems, including eroding margins, shifting payor mix, and rising labor costs. In this environment, we believe healthcare providers are seeking a partner who can help them reduce costs, improve clinical quality, and grow consumer relationships, while delivering meaningful outcomes. Healthcare data infrastructure has increasingly commoditized. We believe durable advantage lives in the intelligence built on top of it, and that our advantage rests on our improvement data and content, as well as our expertise, including healthcare-specific and change management expertise.

Current wording

We believe healthcare is at an inflection point, due to financial pressure on health systems, including eroding margins, shifting payor mix, and rising labor costs. In this environment, we believe healthcare providers are seeking a partner who can help them reduce costs, improve clinical quality, and grow consumer relationships, while delivering meaningful outcomes. We believe our advantage rests on our improvement data and content, as well as our expertise, including healthcare-specific and change management expertise, which we combine with technology that turns data into insights clients can act on.

Previous wording

We aim to continue to manage the business with a focus on operating efficiency, while balancing targeted investments to support disciplined growth and retention initiatives that we expect will benefit future results. Moving forward our focus is building a technology business that wins in the market, operating with efficiency and discipline, and investing in our AI-enabled intelligence that differentiates our solutions. In April 2026, we announced Project Nexus, a strategic initiative designed to fundamentally transform our operating model and advance each of these priorities. The Vitalware Transaction (as defined below), which is part of Project Nexus, provided us with the ability to fully repay all obligations under our Credit Agreement and we believe gives us flexibility to make targeted investments in our core business. While these investments have created near-term pressure on our net loss and Adjusted EBITDA, we believe they better position the business.

Current wording

We aim to continue to manage the business with a focus on operating efficiency, while balancing targeted investments to support disciplined growth and retention initiatives that we expect will benefit future results. Moving forward our focus is building a technology business that wins in the market, operating with efficiency and discipline, and investing in our AI-enabled intelligence that differentiates our solutions. In April 2026, we announced Project Nexus, a strategic initiative designed to fundamentally transform our operating model and advance each of these priorities. The Vitalware Transaction (as defined below), which is part of Project Nexus, provided us with the ability to fully repay all obligations under our Credit Agreement and terminate our Credit Agreement. We believe this extinguishment of our term loan debt provides us with increased flexibility to make targeted investments in our core business and move decisively on our priorities. While these investments and the divestiture of the high-margin Vitalware business have created pressure on our net income (loss) and Adjusted EBITDA, we believe they better position the business.

Previous wording

We are focused on margin expansion as part of our transformation to streamline operations and optimize our cost structure, including engaging an advisor to help us assess revenue and cost optimization opportunities. Our priorities going forward will include strengthening and simplifying our commercial engine to drive technology ARR bookings, working to improve retention through more predictable migrations and clearer client value realization, and increasing efficiency and reducing time to value by eliminating operational complexity and scaling work through automation and global resources. We also plan to better leverage our intellectual property, combining our data foundation with the expertise, content, and AI-enabled solutions that differentiates our solutions to allow us to solve healthcare's most pressing problems. We will continue to refine this strategic operating plan.

Current wording

We are focused on margin expansion as part of our transformation to streamline operations and optimize our cost structure, including engaging external advisors to help us assess revenue and cost optimization opportunities. Our priorities going forward will include strengthening and simplifying our commercial engine to drive technology ARR bookings, working to improve retention through clearer client value realization and technology innovation designed around how clients operate regardless of the infrastructure, and increasing efficiency and reducing time to value by eliminating operational complexity and scaling work through automation and global resources. We also plan to better leverage our intellectual property, combining our data foundation with the expertise, content, and AI-enabled solutions that differentiates our solutions to allow us to solve healthcare's most pressing problems. We will continue to refine this strategic operating plan.

Previous wording

On July 31, 2026 (the Vitalware Closing Date), we completed the previously announced disposition of all of the equity interests of Vitalware, LLC, through which we conducted our Vitalware business (the Vitalware Business), to Med-Metrix, LLC (Med-Metrix) (the Vitalware Transaction). On the Vitalware Closing Date, we received from Med-Metrix the payment of an aggregate base purchase price of $147 million, subject to customary adjustments for cash, indebtedness, net working capital and transaction expenses. Concurrently with the closing of the Vitalware Transaction, on the Vitalware Closing Date, we used the net cash proceeds received from the Vitalware Transaction, together with cash on hand, to voluntarily repay in full all outstanding obligations under a Credit Agreement, dated as of July 16, 2024, among Health Catalyst, as the borrower, the several lenders party thereto, and Silver Point Finance, LLC, as administrative agent for the lenders (as modified, amended, restated, amended and restated, or supplemented from time to time prior to the Vitalware Closing Date, the Credit Agreement), which resulted in the termination of the Credit Agreement and the simultaneous release in full of all liens thereunder.

Current wording

On July 31, 2026 (the Vitalware Closing Date), we completed the previously announced disposition of all of the equity interests of Vitalware, LLC, through which we conducted our Vitalware business (the Vitalware Business), to Med-Metrix, LLC (Med-Metrix) (the Vitalware Transaction). On the Vitalware Closing Date, we received from Med-Metrix the payment of an aggregate base purchase price of $147 million, subject to customary adjustments for cash, indebtedness, net working capital and transaction expenses. Total consideration was $146.3 million, net of transaction expenses and estimated net working capital adjustments, of which we received net initial cash proceeds of $144.5 million on the Vitalware Closing Date. Additional consideration of approximately $1.8 million, including escrow receivables, is expected to be received within the next year. Concurrently with the closing of the Vitalware Transaction, on the Vitalware Closing Date, we used the net cash proceeds received from the Vitalware Transaction, together with cash on hand, to voluntarily repay in full all outstanding obligations under a Credit Agreement, dated as of July 16, 2024, among Health Catalyst, as the borrower, the several lenders party thereto, and Silver Point Finance, LLC, as administrative agent for the lenders (as modified, amended, restated, amended and restated, or supplemented from time to time prior to the Vitalware Closing Date, the Credit Agreement), which resulted in the termination of the Credit Agreement and the simultaneous release in full of all liens thereunder.

Previous wording

Gross profit is a GAAP financial measure that is calculated as revenue less cost of revenue, including depreciation and amortization of capitalized software development costs and acquired technology. We calculate gross margin as gross profit divided by our revenue. Adjusted Gross Profit is a non-GAAP financial measure that we define as gross profit, adjusted for (i) depreciation and amortization, (ii) stock-based compensation, (iii) acquisition-related costs, net, and (iv) restructuring costs, as applicable. We define Adjusted Gross Margin as our Adjusted Gross Profit divided by our revenue. We believe Adjusted Gross Profit and Adjusted Gross Margin are useful to investors as they eliminate the impact of certain non-cash expenses and allow a direct comparison of these measures between periods without the impact of non-cash expenses and certain other non-recurring operating expenses.

Current wording

Gross profit is a GAAP financial measure that is calculated as revenue less cost of revenue, including depreciation and amortization of capitalized software development costs and acquired technology. We calculate gross margin as gross profit divided by our revenue. Adjusted Gross Profit is a non-GAAP financial measure that we define as gross profit, adjusted for (i) depreciation and amortization, (ii) stock-based compensation, (iii) acquisition-related costs, net, and (iv) restructuring and other related costs, as applicable. We define Adjusted Gross Margin as our Adjusted Gross Profit divided by our revenue. We believe Adjusted Gross Profit and Adjusted Gross Margin are useful to investors as they eliminate the impact of certain non-cash expenses and allow a direct comparison of these measures between periods without the impact of non-cash expenses and certain other non-recurring operating expenses.

Previous 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 3 in our condensed consolidated financial statements.

Current wording

(1)Acquisition-related costs, net include deferred retention expenses attributable to the Upfront, Intraprise, and KPI Ninja acquisitions. For additional details refer to notes 1 and 3 in our condensed consolidated financial statements.

Previous wording

Technology gross margin decreased from 50% for the three months ended June 30, 2025 to 48% for the three months ended June 30, 2026. Adjusted Technology Gross Margin decreased from 66% for the three months ended June 30, 2025 to 63% for the three months ended June 30, 2026. These 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.

Current wording

Technology gross margin decreased from 52% for the three months ended September 30, 2025 to 44% for the three months ended September 30, 2026. Adjusted Technology Gross Margin decreased from 68% for the three months ended September 30, 2025 to 61% for the three months ended September 30, 2026. These technology gross margin and Adjusted Technology Gross Margin year-over-year decreases were mainly driven by the disposition of the Vitalware Business in connection with the Vitalware Transaction, costs associated with migrating a subset of DOS clients to Health Catalyst Ignite, and Ninja Universe technology costs incurred prior to the commencement of revenue recognition.

Previous wording

We expect technology gross margin and Adjusted Technology Gross Margin to decline in the near term, primarily due to the Vitalware Transaction and additional costs associated with the ongoing migrations to Health Catalyst Ignite and Ninja Universe.

Current wording

We expect technology gross margin and Adjusted Technology Gross Margin to decline in the near term, primarily due to the disposition of the Vitalware Business in connection with the Vitalware Transaction and additional costs associated with the ongoing migrations to Health Catalyst Ignite and Ninja Universe.

Previous wording

Professional services gross margin increased from 13% for the three months ended June 30, 2025 to 20% for the three months ended June 30, 2026. Adjusted Professional Services Gross Margin increased from 18% for the three months ended June 30, 2025 to 22% for the three months ended June 30, 2026. These professional services gross margin and Adjusted Professional Services Gross Margin year-over-year increases were primarily driven by lower utilization rates in our professional services organization in the prior period and due to our exit of certain lower margin Tech-Enabled Managed Services (TEMS) 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 professional services gross margin and Adjusted Professional Services Gross Margin.

Current wording

Professional services gross margin decreased from 12% for the three months ended September 30, 2025 to negative 3% for the three months ended September 30, 2026. Adjusted Professional Services Gross Margin decreased from 19% for the three months ended September 30, 2025 to 2% for the three months ended September 30, 2026. These professional services gross margin and Adjusted Professional Services Gross Margin year-over-year decreases were primarily driven by services revenue declining faster than our delivery costs. We have begun aligning those delivery costs with our current contracts, and we expect professional services gross margin to improve over time as we get fully aligned. 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 38% for the three months ended June 30, 2025 to 40% for the three months ended June 30, 2026. Total Adjusted Gross Margin also increased from 50% for the three months ended June 30, 2025 to 51% for the three months ended June 30, 2026. We expect total Adjusted Gross Margin to decline in the near term primarily due to the Vitalware Transaction and additional costs associated with the ongoing migrations to Health Catalyst Ignite and Ninja Universe.

Current wording

Total gross margin decreased from 39% for the three months ended September 30, 2025 to 31% for the three months ended September 30, 2026. Total Adjusted Gross Margin also decreased from 53% for the three months ended September 30, 2025 to 44% for the three months ended September 30, 2026. We expect total Adjusted Gross Margin to decline in the near term primarily due to the Vitalware Transaction and additional costs associated with the ongoing migrations to Health Catalyst Ignite and Ninja Universe.

Previous 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 six months ended June 30, 2026 and 2025.

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 nine months ended September 30, 2026 and 2025.

Previous wording

Technology gross margin decreased from 51% for the six months ended June 30, 2025 to 49% for the six months ended June 30, 2026. Adjusted Technology Gross Margin decreased from 67% for the six months ended June 30, 2025 to 64% for the six months ended June 30, 2026. These technology gross margin and Adjusted Technology Gross Margin year-over-year decreases were primarily driven by continued 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 51% for the nine months ended September 30, 2025 to 47% for the nine months ended September 30, 2026. Adjusted Technology Gross Margin decreased from 67% for the nine months ended September 30, 2025 to 63% for the nine months ended September 30, 2026. These technology gross margin and Adjusted Technology Gross Margin year-over-year decreases were primarily driven by the disposition of the Vitalware Business in connection with the Vitalware Transaction, continued costs associated with migrating a subset of Platform Clients to Health Catalyst Ignite, and Ninja Universe technology 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.

Previous wording

We expect technology gross margin and Adjusted Technology Gross Margin to decline in the near term, primarily due to the Vitalware Transaction and additional costs associated with the ongoing migrations to Health Catalyst Ignite and Ninja Universe.

Current wording

We expect technology gross margin and Adjusted Technology Gross Margin to decline in the near term, primarily due to the disposition of the Vitalware Business in connection with the Vitalware Transaction and additional costs associated with the ongoing migrations to Health Catalyst Ignite and Ninja Universe.

Previous wording

Professional services gross margin increased from 11% for the six months ended June 30, 2025 to 18% for the six months ended June 30, 2026. Adjusted Professional Services Gross Margin increased from 17% for the six months ended June 30, 2025 to 21% for the six months ended June 30, 2026. These professional services gross margin and Adjusted Professional Services Gross Margin year-over-year increases were primarily driven by lower utilization rates in our professional services organization in the prior period and our exit of certain lower margin TEMS arrangements. 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 nine months ended September 30, 2025 to 12% for the nine months ended September 30, 2026. Adjusted Professional Services Gross Margin decreased from 18% for the nine months ended September 30, 2025 to 16% for the nine months ended September 30, 2026. 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 decrease in Adjusted Professional Services Gross Margin was primarily driven by services revenue declining faster than our delivery costs. We have begun aligning those delivery costs with our current contracts, and we expect professional services gross margin to improve over time as we get fully aligned. 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 37% for the six months ended June 30, 2025 to 39% for the six months ended June 30, 2026. Total Adjusted Gross Margin increased from 49% for the six months ended June 30, 2025 to 51% for the six months ended June 30, 2026. We expect total Adjusted Gross Margin to decline in the near term primarily due to the Vitalware Transaction and additional costs associated with the ongoing migrations to Health Catalyst Ignite and Ninja Universe.

Current wording

Total gross margin decreased from 38% for the nine months ended September 30, 2025 to 37% for the nine months ended September 30, 2026. Total Adjusted Gross Margin decreased from 50% for the nine months ended September 30, 2025 to 49% for the nine months ended September 30, 2026. We expect total Adjusted Gross Margin to decline in the near term primarily due to the disposition of the Vitalware Business in connection with the Vitalware Transaction and additional costs associated with the ongoing migrations to Health Catalyst Ignite and Ninja Universe.

Previous 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, (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) goodwill impairment, 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.

Current wording

Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) adjusted for (i) interest and other expense, net, (ii) income tax benefit (provision), (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 and other related costs, (vii) goodwill impairment, (viii) non-recurring lease-related charges, (ix) loss on extinguishment of debt, and (x) gain on sale of business, 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 and other related costs, impairment of goodwill and intangible assets, non-recurring lease-related charges, loss on extinguishment of debt, and gain on sale of business, 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 expect Adjusted EBITDA to be negatively impacted by the Vitalware Transaction 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. Excluding the impact of the Vitalware Transaction, we expect annual Adjusted EBITDA to continue to improve in the long-term.

Current wording

Our Adjusted EBITDA decreased year-over-year as a result of the divestiture of the profitable Vitalware Business, partially offset by our cost reduction initiatives as well as the timing of some non-headcount expenses. We expect Adjusted EBITDA to be negatively impacted by the Vitalware Transaction 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. Excluding the impact of the disposition of the Vitalware Business in connection with the Vitalware Transaction, we expect annual Adjusted EBITDA to improve in the long-term.

Previous wording

The following is a reconciliation of our Adjusted EBITDA to net loss, the most directly comparable financial measure calculated in accordance with GAAP for the three and six months ended June 30, 2026 and 2025.

Current wording

The following is a reconciliation of our Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated in accordance with GAAP for the three and nine months ended September 30, 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. During the three and six months ended June 30, 2025, the fair value of the contingent consideration related to the Upfront acquisition earnout decreased, resulting in a net reduction in expense. For additional details refer to Notes 1, 3, and 8 in our condensed consolidated financial statements.

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. During the three and nine months ended September 30, 2025, the fair value of the contingent consideration related to the Upfront acquisition earnout decreased, resulting in a net reduction in expense. For additional details refer to Notes 1, 3, and 8 in our condensed consolidated financial statements.

Previous wording

(2)Restructuring costs include severance and other team member costs from workforce reductions, as well as legal and advisory fees related to shareholder activism defense costs regarding our former CEO’s retirement and transition in the first quarter of 2026 and significant board of director refreshment that are non-recurring and outside the ordinary course of our business. For additional details, refer to Notes 1 and 20 in our condensed consolidated financial statements.

Current wording

(2)Restructuring and other related costs include severance, restructuring and retention program costs, and other team member costs from our restructuring plans, as well as legal and advisory fees related to Project Nexus and shareholder activism defense costs regarding our former CEO’s retirement and multiple CEO transitions in 2026 and significant board of director refreshment that are non-recurring and outside the ordinary course of our business. For additional details, refer to Notes 1 and 20 in our condensed consolidated financial statements.

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 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 accumulated substantial healthcare data and client experience through approximately 18 years of operations and approximately $2.8 billion in documented outcomes achieved by our clients. 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 (which we divested in connection with the Vitalware Transaction on July 31, 2026), 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.

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 (which we divested in connection with the Vitalware Transaction on July 31, 2026), 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. 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

For the six months ended June 30, 2026, our technology revenue and professional services revenue represented 70% and 30% 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, 2026, our technology revenue and professional services revenue represented 70% and 30% 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 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. We experienced retention pressure in 2025 and the first half of 2026 due to the ongoing migration efforts, and we expect to face similar pressure through the remainder of 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 generally be through the churn pressure associated with 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.

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. We experienced retention pressure in 2025 and the nine months of 2026 ended September 30, 2026 due to the ongoing migration efforts, and we expect to face similar pressure through the remainder of 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 expect to be generally through the DOS platform to Ignite platform migration-related churn headwinds 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

On the Vitalware Closing Date, we completed the previously announced Vitalware Transaction pursuant to which we received from Med-Metrix an aggregate base purchase price of $147 million in cash, subject to customary adjustments for cash, indebtedness, net working capital and transaction expenses. Concurrently with the closing of the Vitalware Transaction, on the Vitalware Closing Date, we used the net cash proceeds received from the Vitalware Transaction, together with cash on hand, to voluntarily repay in full all outstanding obligations under the Credit Agreement, which resulted in the termination of the Credit Agreement and simultaneous release in full of all liens thereunder.

Current wording

On the Vitalware Closing Date, we completed the previously announced Vitalware Transaction pursuant to which we divested our Vitalware Business. The base purchase price for the Vitalware Business was $147 million, subject to customary adjustments for cash, indebtedness, net working capital and transaction expenses. Total consideration we received from Med-Metrix was $146.3 million, net of transaction expenses and estimated net working capital adjustments, of which we received net initial cash proceeds of $144.5 million on the Vitalware Closing Date. Additional consideration of approximately $1.8 million, including escrow receivables, is expected to be received within the next year. Concurrently with the closing of the Vitalware Transaction, on the Vitalware Closing Date, we used the net cash proceeds received from the Vitalware Transaction, together with cash on hand, to voluntarily repay in full all outstanding obligations under the Credit Agreement, which resulted in the termination of the Credit Agreement and simultaneous release in full of all liens thereunder.

Previous wording

We derive our revenue from sales of technology and professional services. For the three months ended June 30, 2026 and 2025, technology revenue represented 69% and 66% of total revenue, respectively, and professional services revenue represented 31% and 34% of total revenue, respectively. For the six months ended June 30, 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 has and will likely continue to create additional financial strain for many of our clients and prospective clients. We also expect near-term headwinds to revenue, including a reduction in technology revenue from the Vitalware Transaction, 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.

Current wording

We derive our revenue from sales of technology and professional services. For the three months ended September 30, 2026 and 2025, technology revenue represented 72% and 68% of total revenue, respectively, and professional services revenue represented 28% and 32% of total revenue, respectively. For the nine months ended September 30, 2026 and 2025, technology revenue represented 70% and 66% of total revenue, respectively, and professional services revenue represented 30% and 34% 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 has and will likely continue to create additional financial strain for many of our clients and prospective clients. We also expect near-term headwinds to revenue, including a reduction in technology revenue from the Vitalware Transaction, 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

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.

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 fixed scope or 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

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, the August 2025 Restructuring Plan (together with the January 2025 Restructuring Plan, the 2025 Restructuring Plans), and restructuring activities related to Project Nexus together have reduced our ongoing cost of professional services revenue. Project Nexus has also increased 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.

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, the August 2025 Restructuring Plan (together with the January 2025 Restructuring Plan, the 2025 Restructuring Plans), and restructuring activities related to Project Nexus together have reduced our ongoing cost of professional services revenue. Project Nexus has also increased cost of professional services revenue in the second and third quarters of 2026 due to severance and related team member 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 January 2025 Restructuring Plan, the August 2025 Restructuring Plan, and restructuring activities related to Project Nexus increased our research and development expenses in the first quarter of 2025, third quarter of 2025, and second quarter of 2026 respectively, 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.

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

Previous 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 Credit Agreement and also includes the amortization of deferred financing costs related to our debt arrangements. We expect our future interest expense to decrease significantly due to the closing of the Vitalware Transaction, which allowed us to eliminate our outstanding term loan arrangements under the Credit Agreement.

Current wording

Interest and other expense, net primarily consists of interest expense from our debt arrangements offset by income from our investment holdings and income from our transition services agreement entered into in connection with the Vitalware Transaction. Interest expense is primarily attributable to the Credit Agreement and also includes the amortization of deferred financing costs related to our debt arrangements. We expect our future interest expense to decrease significantly due to the elimination of our outstanding term loan arrangements under the Credit Agreement, which occurred concurrently with the closing of the Vitalware Transaction.

Previous wording

(3)Includes restructuring costs, as follows:

Current wording

(3)Includes restructuring and other related costs, as follows:

Previous wording

The technology revenue decrease was primarily related to elevated churn levels and down-sell related to DOS to Ignite migrations, partially offset by growth from new clients.

Current wording

The technology revenue decrease was primarily related to the disposition of the Vitalware Business in connection with the Vitalware Transaction as well as elevated churn levels and down-sell related to DOS to Ignite migrations, partially offset by growth from new and existing clients.

Previous wording

Professional services revenue was $21.7 million, or 31% of total revenue, for the three months ended June 30, 2026, a decrease compared to $27.8 million, or 34% of total revenue, for the three months ended June 30, 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.

Current wording

Professional services revenue was $15.6 million, or 28% of total revenue, for the three months ended September 30, 2026, a decrease compared to $24.3 million, or 32% of total revenue, for the three months ended September 30, 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 $18.2 million for the three months ended June 30, 2026, compared to $18.4 million for the three months ended June 30, 2025, a decrease of $0.2 million, or 1%. The decrease was primarily due to a $1.9 million decrease in salary and related personnel costs primarily due to restructuring activities related to Project Nexus and the 2025 Restructuring Plans, including stock-based compensation, partially offset by a $1.4 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 $16.2 million for the three months ended September 30, 2026, compared to $17.2 million for the three months ended September 30, 2025, a decrease of $1.0 million, or 6%. The decrease was primarily due to a $0.7 million decrease in salary and related personnel costs primarily due to restructuring and other related costs related to Project Nexus and the 2025 Restructuring Plans, including stock-based compensation, a $0.6 million decrease in dues and subscriptions, and a $0.5 million decrease in restructuring and other related costs, partially offset by a $0.9 million increase in cloud computing and hosting costs largely from the expanded use of Microsoft Azure to serve existing and new clients.