Executive Summary

Q3 revenue of $76.3M beat S&P Global consensus ($75.1M) and company guidance (~~$75.0M), while adjusted EPS of $0.06 came in slightly below consensus $0.066; adjusted EBITDA of $12.0M exceeded guidance (~~$10.5M) and rose 64% y/y . S&P Global values marked with * below.
Mix continues to improve: Technology revenue grew 7% y/y to $52.1M, professional services fell 12% y/y as HCAT exits less-profitable TEMS contracts; adjusted gross margin expanded ~510 bps y/y to 53% on cost actions and mix shift .
Guidance: FY25 reaffirmed (revenue ~~$310M, adj. EBITDA ~~$41M); Q4 guide implies sequential revenue step-down (~~$73.5M) on Q3 one-timers, with higher EBITDA (~~$13.4M) as cost measures flow through .
2026 early view: revenue expected “a few points lower” versus 2025 on Ignite migration headwinds and services pruning; adjusted EBITDA expected to improve on restructuring, India scale and broader AI leverage—key narrative for stock reaction is profitability up while growth pauses near-term .

What Went Well and What Went Wrong

What Went Well
- Beat on revenue and adjusted EBITDA; “pleased by our financial results…beating our quarterly guidance on each measure” and reaffirmed full-year guide .
- Technology strength: Tech revenue +7% y/y to $52.1M; adjusted technology gross margin reached 68%, with total adjusted gross margin up to 53% (+510 bps y/y; +310 bps q/q) .
- Clear ROI use cases resonating in a cost-constrained market; “solutions are delivering measurable improvements where health systems need them the most – cost control and operational efficiency” (e.g., $7.5M savings at Temple, $30M at Integris) .
What Went Wrong
- GAAP net loss widened y/y to $(22.2)M due to $6.9M non-recurring lease impairment and $4.8M restructuring costs; professional services revenue declined 12% y/y as HCAT exited less-profitable contracts .
- Q4 outlook implies sequential revenue downtick on Q3 non-recurring items; management also guided slight q/q easing in adjusted tech GM due to duplicate Ignite hosting and vendor timing .
- 2026 top-line caution: management now anticipates revenue “a few points lower” vs. 2025 on lower DBR (low-90s), smaller net-new, Ignite migration downsell/churn, and additional TEMS restructuring .

Financial Results

Headline metrics and consensus

Metric	Q1 2025	Q2 2025	Q3 2025 (Actual)	Q3 2025 (Consensus)*
Revenue ($M)	$79.413	$80.721	$76.323	$75.077*
Adjusted Gross Margin (%)	49%	50%	53%	—
Adjusted EBITDA ($M)	$6.279	$9.344	$12.000	—
Adjusted EPS ($)	$0.01	$0.04	$0.06	$0.0656*
GAAP Gross Margin (%)	36%	38%	39%	—
Net Income (Loss) ($M)	$(23.742)	$(40.978)	$(22.229)	—

Notes:

Q3 revenue beat and adjusted EBITDA outperformance vs company guidance; adjusted EPS slightly below consensus. S&P Global values marked with * [Values retrieved from S&P Global].
YoY revenue flat (—%); adjusted EBITDA +64% y/y; adjusted gross margin +510 bps y/y .

Segment revenue

Metric	Q1 2025	Q2 2025	Q3 2025
Technology Revenue ($M)	$51.482	$52.876	$52.051
Professional Services Revenue ($M)	$27.931	$27.845	$24.272
Total Revenue ($M)	$79.413	$80.721	$76.323

KPIs and margins

KPI	Q1 2025	Q2 2025	Q3 2025
Adjusted Technology Gross Margin (%)	67%	66%	68%
Adjusted Professional Services Gross Margin (%)	16%	18%	19%
Dollar-Based Retention (FY25)	Low-90s	Low-90s	Low-90s
Net New Platform Clients (FY25)	Target ~40 (as of Q1 PR)	~30 (updated)	~30 (maintained)

Non-GAAP adjustments of note (Q3): $6.9M non-recurring lease impairment; $4.8M restructuring costs .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue	Q4 2025	N/A	~$73.5M	New
Adjusted EBITDA	Q4 2025	N/A	~$13.4M	New
Total Revenue	FY 2025	~$310M (Aug-7)	~$310M	Maintained
Adjusted EBITDA	FY 2025	~$41M (Aug-7)	~$41M	Maintained
Dollar-Based Retention	FY 2025	Low-90s	Low-90s	Maintained
Net New Platform Clients	FY 2025	~30	~30	Maintained

Management also flagged Q4 mix shift toward Technology and slight q/q decline in adjusted tech GM due to duplicate Ignite hosting and vendor timing; adjusted OpEx expected down ~$2–$3M q/q .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 and Q1)	Current Period (Q3)	Trend
Ignite migration & client flexibility	Clients “pocketing” 20%+ lower platform cost upon migrating; migrations a headwind through mid-2026 .	Still targeting ~2/3 DOS migrations by YE25; adding flexibility to allow some clients to remain on DOS; expect retention to benefit .	More flexible; headwind persists but moderated approach
Macro/Medicaid & research cuts	Cuts drove FY25 revenue reduction (four factors); multiyear headwind; reduced net new to ~30 .	2026 revenue expected a few points lower vs 2025; pipeline robust but deal sizes smaller and cycles less predictable .	Growth caution maintained
Profitability focus & restructuring	Workforce reduction (~9%), services contract restructuring to lift margins; FY25 adj. EBITDA ~$41M; Q4 run-rate ~$60M .	Adj. EBITDA beat in Q3; Q4 guide up; 2026 EBITDA to improve via OpEx discipline, India scale, pervasive AI .	Profitability improving
Applications momentum (ROI)	Apps grew >20% LTM; focus on tech-first cross-sell; M&A pause .	Cost and ambulatory performance apps highlighted; exploring ROI-based commercial models; Microsoft/Databricks broaden reach .	Positive; expanding routes to market
Services (TEMS) pruning	Exited ambulatory ops pilots on 6/30; expect services revenue slightly down, margins up .	More services pruning/restructuring contemplated; professional services revenue down 12% y/y; margins improved .	Mix shift continues
Security/compliance	—	HITRUST r2 certifications (Twistle, Lumeon, Upfront) bolster assurance and trust .	Strengthened compliance posture

Management Commentary

“Total revenue of $76.3 million and adjusted EBITDA of $12 million, exceeding our guidance on each metric… We are reaffirming our previous full-year guidance for revenue of $310 million and for adjusted EBITDA of $41 million.” — Dan Burton, CEO .
“Our solutions are delivering measurable improvements where health systems need them the most – cost control and operational efficiency.” — Ben Albert, President & COO .
“We anticipate revenue performance to be a few points lower in 2026 relative to 2025… At the same time, we expect to see improvement in adjusted EBITDA.” — Dan Burton .
“Q3 adjusted technology gross margin was 68%… adjusted professional services gross margin was 19%… mainly driven by reduction in force and project-based revenue.” — Jason Alger, CFO .
“We’ve adjusted our timeline and approach to be more client-centric, recognizing that some organizations prefer to remain on DOS… we expect this approach will improve… Dollar-Based Retention.” — Ben Albert .

Q&A Highlights

Ignite migration pacing and client choice: Clients facing competing priorities may stay on DOS near-to-medium term; HCAT expects majority migrated by 1H26; flexibility aims to bolster retention even as tech gross margin progress slows slightly near term .
Revenue mix dynamics: Tech growth at apps layer offset by platform downsell/churn from Ignite migrations; Q3 included ~$0.5–$1.0M tech one-timers not expected in Q4 .
2026 outlook: Revenue down a few points, driven by DBR in low-90s, lower net new platform client adds, migration headwinds, and services pruning; EBITDA to improve on cost actions and operating leverage (India, AI) .
Commercial models and partnerships: Open to ROI-based risk-sharing on apps; early channel progress with Microsoft and Databricks, particularly for mid-market offerings .
Margins & cost: Slight q/q decline expected in adjusted tech GM in Q4 due to duplicate hosting and vendor timing; adjusted OpEx down $2–$3M q/q .

Estimates Context

Q3 performance vs S&P Global consensus: Revenue $76.3M vs $75.1M consensus (beat); adjusted/“Primary” EPS $0.06 vs $0.0656 consensus (slight miss). Adjusted EBITDA also exceeded company guidance (~$10.5M) with $12.0M delivered .
Q4 consensus indicates revenue ~$73.97M and EPS ~$0.104; company guided ~$73.5M revenue and ~$13.4M adjusted EBITDA, implying revenue near consensus and stronger EBITDA than Q3 actual [GetEstimates; Values retrieved from S&P Global] .

Key Takeaways for Investors

Profitability-led execution is working: mix shift to high-margin technology and apps plus cost actions pushed adjusted GM to 53% and adjusted EBITDA to $12.0M; FY25 EBITDA guide intact despite macro headwinds .
Near-term growth pause: Q4 revenue guide steps down on Q3 one-timers, and 2026 revenue is now telegraphed “a few points lower” as migration and services pruning remain headwinds .
Migration strategy pivots to flexibility: allowing DOS carryover should stabilize client relationships and DBR while HCAT advances Ignite; expect modest near-term tech GM pressure from duplicate hosting .
Applications-led cross-sell remains the growth engine: proven cost and ambulatory solutions with potential ROI-based pricing, plus Microsoft/Databricks channels, support medium-term reacceleration once migration headwind fades post mid-2026 .
Watch Q4 prints for margin sustainability: management guided adjusted OpEx down and tech GM slightly lower q/q; confirms cost discipline and informs 2026 EBITDA trajectory .
Compliance & trust posture strengthened: multiple HITRUST r2 certifications enhance commercial positioning with risk-sensitive providers .
Setup: Expect estimate revisions skewed toward flat-to-down 2026 revenue and higher EBITDA; stock narrative hinges on durable margin expansion and FCF improvement against a cautious top-line backdrop .

S&P Global consensus data marked with * in tables above. Values retrieved from S&P Global.

Health Catalyst, Inc. (HCAT)·Q3 2025 Earnings Summary