Sign in

You're signed outSign in or to get full access.

HC

Health Catalyst, Inc. (HCAT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 Revenue $79.4M (+6% YoY) and Adjusted EBITDA $6.3M (+86% YoY) both exceeded quarterly guidance; Technology revenue grew 10% YoY to $51.5M, with 10 net new Platform Clients added and average ARR+NRR per add near the $300k–$700k midpoint .
  • Guidance maintained: Q2 2025 revenue ~$80.5M and Adj. EBITDA ~$8M; FY 2025 revenue ~$335M, Technology revenue ~$220M, Adj. EBITDA ~$41M (unchanged from February; FY Adj. EBITDA was raised by $2M then) .
  • Management flagged implementation delays in Health Information Exchange and late-stage Life Sciences bookings tied to Medicaid and research funding uncertainty, pushing some revenue to 2H 2025; Technology gross margin expected to lift in 2H 2025 as Ignite migration and HIE implementations progress .
  • Potential stock catalysts: beat vs guidance, accelerated platform client adds/sales-cycle shortening with Ignite, debt reduction (convertible notes repaid April 14, 2025), and ongoing AI/marketplace partnerships (Microsoft, Databricks) and $5M buyback .

What Went Well and What Went Wrong

What Went Well

  • Above-guide quarter: Revenue $79.4M vs prior guide ~$79M; Adj. EBITDA $6.3M vs prior guide ~$4M (8% margin) .
  • Strong Technology performance and Ignite traction: Tech revenue $51.5M (+10% YoY); 10 net new Platform Clients, roughly two-thirds from cross-selling app clients, with average ARR+NRR near the $300k–$700k midpoint .
  • Strategic clarity and leverage: Guidance reaffirmed for Q2 and FY; management expects Tech margins to improve in 2H 2025 as Ignite migrations and HIE implementations mature; operating leverage expected in 2026, with stock-based comp targeted to mid-to-high single digits by 2026 (two years ahead of prior plan) .

What Went Wrong

  • Gross margin and Services pressure: Total gross margin fell to 36% (from 39%), and adjusted Professional Services gross margin declined YoY to 16%, driven partly by Q1 reduction-in-force costs; adjusted Technology gross margin was 67%, down ~120bps YoY .
  • Implementation and bookings timing: HIE implementations increasing in scope and complexity delayed revenue ramp; late-stage Life Sciences and HIE bookings slipped amid Medicaid/research funding uncertainty, pushing some revenue into 2H 2025 .
  • GAAP profitability: Net loss widened to $(23.7)M (vs $(20.6)M), GAAP EPS $(0.35); interest expense and restructuring costs remained headwinds despite Adj. EBITDA progress .

Financial Results

Quarterly comparison vs prior periods

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$76.4 $79.6 $79.4
GAAP Net Loss ($USD Millions)$(14.7) $(20.7) $(23.7)
GAAP EPS ($USD)$(0.24) $(0.33) $(0.35)
Gross Margin %36% 36% 36%
Adjusted EBITDA ($USD Millions)$7.3 $7.9 $6.3
Technology Revenue ($USD Millions)$48.7 $51.6 $51.5
Professional Services Revenue ($USD Millions)$27.7 $28.0 $27.9

Segment breakdown (Q1 2025 vs prior year)

Segment MetricQ1 2024Q1 2025
Technology Revenue ($USD Millions)$47.0 $51.5
Professional Services Revenue ($USD Millions)$27.8 $27.9
Technology Gross Margin % (GAAP)53% 51%
Prof. Services Gross Margin % (GAAP)16% 8%
Adjusted Technology Gross Margin %68% 67%
Adjusted Prof. Services Gross Margin %22% 16%

KPIs and balance sheet notes

KPI / Balance Sheet2024 YEQ1 2025
Platform Clients (end of year)130 —
Net New Platform Clients (adds)—10
Avg ARR + NRR per net new Platform Client—~$0.5M midpoint in $300k–$700k
Dollar-Based Retention (Tech + TEMS, 2025 target)102% (2024) ~103% (target)
Cash & Cash Equivalents ($USD Millions)$249.6 $342.0
Repurchase of Common Stock—~$5.0M (≈1.1M shares)
Convertible Notes ($230M)Due Apr-2025 Repaid Apr 14, 2025

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueQ2 2025—~$80.5M New
Adjusted EBITDAQ2 2025—~$8M New
Total RevenueFY 2025~$335M ~$335M Maintained
Technology RevenueFY 2025~$220M ~$220M Maintained
Adjusted EBITDAFY 2025~$41M (raised by $2M in Feb) ~$41M Maintained
Tech BU Adjusted EBITDAFY 2025~$40M ~$40M Maintained

Earnings Call Themes & Trends

TopicQ3 2024 (prior-2)Q4 2024 (prior-1)Q1 2025 (current)Trend
Ignite migration & pricingOutlined shift to Ignite; noted cheaper, modular approach and migration benefits Reiterated migrations; updated definitions for Platform Clients/DBR; exit ambulatory TEMS pilots 2/3 migrations by YE25; majority by mid-2026; some down-pricing offset via app cross-sell Positive long-term, near-term retention headwind
HIE implementationsSigned Ninja Universe HIE wins; longer ramp HIE ramp delays impacting near-term margins Scope/complexity delaying go-lives; revenue ramp pushed to 2H25 Longer implementations; 2H lift
AI/marketplace partnershipsStrategic direction; tech-led solutions Elevated AI leadership; org updates Azure Marketplace (Healthcare.AI), Databricks partnership; Spark mid-market traction Expanding channels and TAM
Bookings cadence & sales cycleQ4 key; pipeline robust Shorter cycles via Ignite; expect 40 net new Platform Clients in 2025 Q1 delivered 10 adds despite quieter season; cross-sell benefits shorten cycles Accelerating adds
Macro/policy (Medicaid, research, tariffs)Operating margins stabilizing; monitoring macro Noted policy monitoring; EBITDA cadence seasonality Funding uncertainty caused specific delays; tracking tariff/Medi­caid/research risks Mixed; manageable with Ignite
Cost actions & offshoring—R&D/PS headcount reduction; India footprint growth India-first in R&D; exploring SG&A offshoring; expect more leverage in 2026 Margin accretive over time
Capital allocation—Raised FY25 Adj. EBITDA by $2M $5M buyback in March; reduced leverage via notes payoff; cautious on near-term M&A Shareholder-friendly, balance sheet strength

Management Commentary

  • “We are pleased with our first quarter 2025 financial results, including total revenue of $79.4 million and adjusted EBITDA of $6.3 million... Encouraged that we added 10 net new Platform Clients in Q1” — CEO Dan Burton .
  • “Ignite is a more profitable platform than DOS, with approximately 70% gross margins versus ~60% for DOS; net new Ignite adds generally have ~80/20 tech/services revenue mix” — CEO .
  • “We anticipate completing the large majority of Ignite migrations by mid-2026, ~2/3 by year-end 2025” — COO Dan LeSueur .
  • “We paid off the $230M convertible notes in full on April 14, 2025; we do not anticipate drawing on the delayed draw feature of our term loan” — CFO Jason Alger .
  • “Q2: Tech revenue up sequentially and >10% YoY; Professional Services slightly down due to HIE implementation delays... Some late-stage bookings delayed amid funding uncertainty” — CFO .

Q&A Highlights

  • Ignite’s modularity lowers price points and approval layers, shortening sales cycles; cross-sell from app clients drives ~2–3x conversion advantage vs cold prospects .
  • Migration pricing dynamics: some DOS→Ignite conversions reduce spend; offset via app additions; targeted DBR ~103% for 2025 with ~couple hundred bps headwind “primarily in 2025” .
  • Professional Services cadence: sequential softness in Q2 on HIE delays; ramp in 2H as bookings convert and implementations go-live; nonrecurring services complement tech contracts .
  • Upfront acquisition: slight EBITDA headwind in Q1; expected to turn to tailwind in 2H 2025 via synergies and bookings .
  • Tech margins: expecting uplift in 2H 2025 as migrations complete and HIE revenues ramp .

Estimates Context

  • Q1 2025 actual vs consensus: Revenue $79.413M vs $79.162M*; Primary EPS $0.01 vs $0.0023* — both beats. Company also beat its own guidance (Rev ~$79M, Adj. EBITDA ~$4M) .
  • Q2 2025: Revenue guidance ~$80.5M vs consensus $80.585M*; EPS guidance not provided (consensus $0.0365*) .
  • With shorter sales cycles and 10 net new Platform Clients in Q1, Street may modestly raise outer-quarter Tech revenue and margin forecasts as Ignite ramps and HIE projects move to revenue in 2H 2025 .

Note: *Values retrieved from S&P Global.

Actual vs Estimates and Guidance

MetricQ1 2025 ActualQ1 2025 Consensus*Q2 2025 GuidanceQ2 2025 Consensus*
Revenue ($USD Millions)$79.413 $79.162*~$80.5 $80.585*
Primary EPS ($USD)$0.01 (Adj. Net Income per share) $0.0023*n/a$0.0365*

Key Takeaways for Investors

  • Execution: Revenue and Adj. EBITDA beats vs guidance, plus 10 net new Platform Clients in a seasonally quieter quarter, underscore Ignite’s commercial traction and cross-sell efficacy .
  • Margin path: Near-term gross margin headwinds (HIE implementations, migration costs) should abate; management expects Technology margin uplift in 2H 2025 as go-lives and migrations progress .
  • Balance sheet strength: $342M cash at Q1 and repayment of $230M notes on Apr 14, 2025 reduce leverage; $5M buyback signals capital discipline .
  • Guidance confidence: Q2 and FY 2025 guidance maintained; Tech BU ‘Rule of 30’ profile and FY Adj. EBITDA target reaffirmed .
  • Strategic positioning: AI-enabled Ignite, Azure marketplace distribution, and Databricks partnership expand channels and use-cases, supporting durable tech-led growth .
  • Watch items: HIE implementation complexity and macro funding uncertainty can delay revenue recognition; management expects impacts to be timing-related with 2H ramp .
  • Trading implications: Near-term upside on beats and debt paydown; medium-term thesis hinges on traction in Ignite migrations/cross-sell, margin expansion, and conversion of delayed bookings to revenue in 2H 2025 .

Additional Data and Reconciliations

  • Non-GAAP Adjusted EBITDA reconciliation (Q1 2025): Net loss $(23.7)M; add interest/other $3.4M, taxes $0.2M, D&A $12.3M, stock comp $7.5M, acquisition-related costs $3.0M, restructuring $3.6M → Adj. EBITDA $6.3M .
  • Adjusted Net Income per share (Q1 2025): Adj. Net Income $0.3M; Adj. diluted shares ~68.78M → $0.01 per share .
  • Cash flow (Q1 2025): Net cash from ops ~$0.3M; investing provided ~$96.8M (incl. maturities of ST investments and $(41.1)M acquisition spend); financing used $(4.7)M (incl. $5M buyback) .

Press release and filings: . Earnings call transcript: . Partnerships and buyback PRs: .