Earnings call transcript: Health Catalyst Q3 2025 sees steady revenue, stock stable

Health Catalyst Inc. (HCAT) reported its third-quarter 2025 earnings, showcasing stable financial performance with earnings per share (EPS) meeting forecasts at $0.06. The company’s revenue slightly surpassed expectations, reaching $76.3 million against a forecast of $75.9 million. In after-hours trading, Health Catalyst’s stock remained unchanged at $2.83, reflecting a steady investor response to the earnings report. According to InvestingPro data, analysts expect the company to be profitable this year with a forecasted EPS of $0.22 for fiscal 2025, a positive sign for the healthcare technology provider that wasn’t profitable over the last twelve months.

Key Takeaways

• Health Catalyst’s Q3 2025 revenue was $76.3 million, slightly above forecast.
• EPS was in line with expectations at $0.06.
• The company reported significant growth in adjusted EBITDA, up 64% year-over-year.
• Technology revenue increased by 7%, while professional services revenue declined by 12%.
• The stock price remained stable, indicating a neutral market reaction.

Company Performance

Health Catalyst demonstrated a stable financial performance in Q3 2025, with total revenue remaining flat year-over-year at $76.3 million. The company experienced a notable increase in its technology revenue, which grew by 7% to $52.1 million. However, this was offset by a 12% decline in professional services revenue, which fell to $24.3 million. Despite these mixed results, Health Catalyst improved its adjusted EBITDA by 64% compared to the same quarter last year, highlighting its focus on profitability and operational efficiency.

Financial Highlights

• Revenue: $76.3 million (flat year-over-year)
• EPS: $0.06 (met forecast)
• Adjusted gross margin: 53% (up by 510 basis points year-over-year)
• Adjusted EBITDA: $12 million (64% increase year-over-year)
• Cash and equivalents: $92 million

Earnings vs. Forecast

Health Catalyst’s Q3 2025 earnings met expectations, with an EPS of $0.06, matching the forecast. The company slightly exceeded revenue forecasts, reporting $76.3 million compared to the anticipated $75.9 million, resulting in a revenue surprise of 0.55%. This performance aligns with the company’s previous trends of meeting or slightly surpassing forecasts.

Market Reaction

Following the earnings announcement, Health Catalyst’s stock price remained unchanged in after-hours trading, closing at $2.83. This stability suggests a neutral reaction from investors, who may have anticipated the company’s performance. The stock is currently trading near its 52-week low of $2.52, reflecting broader challenges within the healthcare sector.

Outlook & Guidance

Looking ahead, Health Catalyst has projected full-year 2025 revenue of $310 million and adjusted EBITDA of $41 million. The company expects 2026 revenue to be slightly lower than 2025, with improvements in adjusted EBITDA. Strategic investments in cost management solutions, ambulatory performance, and AI-driven applications are anticipated to drive future growth, with a return to growth expected in 2026-2027.

Executive Commentary

CEO Dan Burton emphasized the company’s commitment to client-centric solutions, stating, "We want to meet clients where they are." President and COO Ben Albert highlighted the importance of execution, noting, "It’s largely about execution." Albert also expressed optimism about the company’s prospects, stating, "We see tremendous opportunity for this business."

Risks and Challenges

• Budget constraints in the healthcare sector could impact revenue growth.
• Declining professional services revenue may pose challenges to overall revenue.
• Economic pressures, such as Medicaid cuts, could affect market conditions.
• Execution risks associated with strategic investments and AI integration.
• Competitive pressures from other healthcare technology providers.

Q&A

During the earnings call, analysts inquired about the flexibility of the Ignite platform migration and potential revenue models based on ROI. Health Catalyst executives clarified that the company remains adaptable to client needs and is exploring new revenue opportunities. They also addressed one-time revenue sources and the importance of maintaining client flexibility.

Full transcript - Health Catalyst Inc (HCAT) Q3 2025:

Conference Call Operator: Welcome to the Health Catalyst Third Quarter 2025 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press Star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing Star 2. To get to as many questions as time permits, we kindly ask that you limit yourself to one question. If you have any follow-up, please re-enter the queue. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press Star 0.

I would now like to turn the call over to Matt Hopper, Senior Vice President of Finance and Head of Investor Relations.

Matt Hopper, Senior Vice President of Finance and Head of Investor Relations, Health Catalyst: Good afternoon and welcome to Health Catalyst’s earnings conference call for the third quarter of 2025, which ended on September 30, 2025. My name is Matt Hopper, Senior Vice President of Finance and Head of Investor Relations. With me today are Dan Burton, our Chief Executive Officer; Ben Albert, our President and Chief Operating Officer; and Jason Alger, our Chief Financial Officer. A complete disclosure of our results can be found in our press release issued today, as well as in our related Form 8-K furnished to the SEC, both of which are available on the Investor Relations section of our website at ir.healthcatalyst.com. As a reminder, today’s call is being recorded, and a replay will be available following the conclusion of the call.

During today’s call, we will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our future growth and our financial outlook for Q4 and fiscal year 2025, growth trends, targets, and expectations beyond 2025, our public market value, our CEO transition, our ability to attract new clients and retain and expand our relationships with existing clients, our growth strategies, the impact of macroeconomic challenges, including the impact of inflation, tariffs, and the interest rate environment, changes to government funding and payment programs that have and could further negatively impact our end market and the business of our clients, bookings, our pipeline conversion rates, the demand for, deployment, and development of our Ignite data and analytics platform and our applications, timing and status of Ignite migrations, acquisition integration and strategy, the impact of restructuring, and the general anticipated performance of our business, including the ability to improve profitability.

These forward-looking statements are based on management’s current view and should not be relied upon as representing our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. Actual results may materially differ. Please refer to the risk factors in our Form 10-K for the full year 2024 filed with the SEC on February 26th, 2025, and our Form 10-Q for the third quarter 2025 that will be filed with the SEC. We will also refer to certain non-GAAP financial measures to provide additional information to investors. Non-GAAP financial information is presented for supplemental information 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. A reconciliation of non-GAAP financial measures for the third quarter of 2025 and 2024 to their our press release.

With that, I will turn the call over to Dan Burton. Dan.

Dan Burton, Chief Executive Officer, Health Catalyst: Thank you, Matt, and thank you to everyone who has joined us this afternoon. We are pleased to share our Q3 2025 financial results, including total revenue of $76.3 million and adjusted EBITDA of $12 million, exceeding our guidance on each metric. Additionally, we are encouraged with the results of our technology segment, which recorded revenue of $52.1 million, representing 7% year-over-year growth. Adjusted gross margin was 53%, an increase of approximately 510 basis points year-over-year. I will now share some perspectives on our anticipated 2025 bookings levels, which aligns with what we shared a few months ago. We continue to expect approximately 30 net new platform client additions for 2025. As a reminder, Q4 is often a very active quarter in terms of bookings and contract renewals.

We also continue to expect our average booking size for net new platform clients in 2025 to be towards the lower end of the $300,000-$700,000 range previously provided. Also, as we communicated last quarter, we reaffirm our expectation that dollar-based retention for 2025 will be in the low 90%. We are also reaffirming our previous full-year guidance for revenue of $310 million and for adjusted EBITDA of $41 million. The market continues to be dynamic, but by focusing on solutions with proven ROI and by consistently meeting client needs, we have maintained a strong pipeline. We remain focused and disciplined in our operations and are committed to delivering meaningful results. Next, we’ll hear an operational update from Ben Albert, our recently appointed President and Chief Operating Officer. Ben joined Health Catalyst through the acquisition of Upfront Healthcare Services earlier this year.

With over 25 years of experience in building and leading healthcare organizations, Ben has consistently delivered compelling value propositions, successfully activating patients while enhancing clinical, financial, and operational outcomes. Since September 10th, Ben has provided crucial day-to-day leadership at Health Catalyst, overseeing operations in product engineering, technology delivery and support, growth, operations, finance, and corporate strategy. I have partnered closely with Ben over these last few months and have found his experience, insights, operational focus, commitment, and mission-driven leadership to be effective and energizing. I look forward to our continued work together in support of Health Catalyst’s mission and strategy. Ben?

Matt Hopper, Senior Vice President of Finance and Head of Investor Relations, Health Catalyst: Thank you, Dan. I appreciate the opportunity to share updates on several areas that are central to our strategy and operational progress. Over the past quarter, we have continued to strengthen our leadership team to support our long-term vision and improve performance. Recent appointments include Robbie Hughes as Chief Product Officer, Chris Tynne as Chief Engineering Officer, Ryan Berry as Chief Client Services Officer, and Shohnaq Lahiri as SVP of Global Solutions. These changes reflect our commitment to building an agile, high-performing organization that is well-positioned to execute on our 2026 strategy and deliver value to our clients and shareholders. Our solutions are delivering measurable results where health systems need the most: cost control and operational efficiency. With ongoing financial and workforce pressures, our solutions help organizations streamline operations, reduce spend, and sustain performance.

Temple University Health System used Power Costing and POP Analyzer to achieve $7.5 million in savings through better charge capture, faster collections, and lower medications costs. Integris Health leveraged our Power Labor offering to save $30 million in labor costs by reducing contingent staff and improving cost per discharge, all while maintaining high standards of care. These results highlight how we’re directly addressing the market’s most urgent needs and delivering real, quantifiable value. We’ve tailored our solutions to align with today’s environment, positioning us as a strong partner for clients navigating this period of change. We’re making progress on our Ignite migration initiatives, remaining on track for approximately two-thirds of our DOS clients to migrate by the end of 2025. As Dan mentioned, we’re experiencing dollar-based retention pressure in 2025 due to the ongoing migration efforts. We expect to go into 2026 with similar pressure.

While we anticipate making meaningful progress on our Ignite migrations by the end of the first half of 2026, we’ve adjusted our timeline and approach to be more client-centric, recognizing that some organizations prefer to remain on DOS for the near and 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-based retention. Dan?

Dan Burton, Chief Executive Officer, Health Catalyst: Thank you for that update, Ben. I want to take a moment to reflect on our recent experience at the Health Catalyst Analytics Summit, or HAS, which continues to be a valuable opportunity for us to engage with hundreds of attendees, including our clients, partners, investors, analysts, and thought leaders. The energy and insights from HAS reinforced our commitment to client-focused innovation and measurable improvement as we move forward. Turning to our outlook for 2026, we are currently in the early stages of our annual planning process, and we look forward to sharing more specific details and updated expectations during our next earnings call.

Based on current trends, we anticipate revenue performance to be a few points lower in 2026 relative to 2025, driven by factors in 2025, such as dollar-based retention rate in the low 90%, a lower net new client count, Ignite migration headwinds, and exiting a restructuring of few less profitable TEMS relationships. At the same time, we expect to see improvement in adjusted EBITDA, reflecting our ongoing efforts to strategically focus the organization, manage costs, make targeted investments, and optimize our migrations. We will be balancing growth, revenue mix, and free cash flow progression. We are taking a measured approach to setting expectations, and we will continue to provide updates as we navigate the evolving market landscape. Next, as we continue to focus on disciplined capital allocation, we reiterate our commitment to realizing a strong return on our acquisition investments.

We feel confident in our current differentiated applications portfolio, and we do not anticipate pursuing additional acquisitions in the near to medium term. Our priority is driving growth, profitability, and shareholder return from our existing capabilities and recently acquired assets. With that, I’ll turn the call over to Jason to provide a detailed review of our financial results and guidance. Jason?

Ben Albert, President and Chief Operating Officer, Health Catalyst: Thank you, Dan. For the third quarter of 2025, we generated $76.3 million in total revenue. This total represents an outperformance relative to our quarterly guidance and represents flat results year-over-year. Technology revenue for the third quarter of 2025 was $52.1 million, representing a 7% increase year-over-year. This year-over-year growth was primarily driven by recurring revenue from new and acquired clients. Professional services revenue for Q3 2025 was $24.3 million, a 12% decline compared to Q3 2024, primarily driven by the exit of our less profitable pilot ambulatory operations TEMS contracts. I’d also note that Q3 2025 technology and professional services revenue did include non-recurring items that are not anticipated in Q4 2025. For the third quarter of 2025, total adjusted gross margin was 53%, representing an increase of approximately 510 basis points year-over-year and up approximately 310 basis points compared to Q2 2025.

In the technology segment, our Q3 2025 adjusted technology gross margin was 68%, an increase of approximately 330 basis points compared to the same period last year and generally in line with previously shared expectations of one to two points of margin improvement quarter over quarter. In Q3 2025, adjusted professional services gross margin was 19%, representing an increase of approximately 210 basis points year-over-year and an increase of approximately 70 basis points relative to Q2 2025. This quarterly performance was ahead of previously shared expectations and was mainly driven by our reduction in force that occurred in mid-Q3 2025, as well as some project-based revenue that was recognized in Q3 2025. In Q3 2025, adjusted total operating expenses were $28.1 million. As a percentage of revenue, adjusted total operating expenses were 37% of revenue, which compares favorably to 38% in Q3 2024.

Adjusted EBITDA for Q3 2025 was $12 million, exceeding our Q3 guidance of approximately $10.5 million and up 64% compared to Q3 2024. Our adjusted net income per share in Q3 2025 was $0.06. The weighted average number of shares used in calculating adjusted basic net income per share in Q3 was approximately 70.4 million shares. Turning to the balance sheet, we ended Q3 2025 with $92 million of cash, cash equivalents, and short-term investments, compared to $392 million as of year-end 2024. In terms of liabilities, the face value of our term loan is $161 million. As we shared on our May call, on April 14th, 2025, we paid off the $230 million convertible notes in full at maturity with cash from the balance sheet.

As it relates to our financial guidance, we would highlight that the following outlook is based on current market conditions and expectations and what we know today. For the fourth quarter of 2025, we expect total revenue of approximately $73.5 million and adjusted EBITDA of approximately $13.4 million. For the full year 2025, we continue to expect total revenue of approximately $310 million, representing 1% year-over-year growth, adjusted EBITDA of approximately $41 million, representing 57% year-over-year growth. For Q4 2025, technology revenue is projected to slightly decline compared to Q3 2025, driven primarily due to migration-related downsell and churn partially offset by application-related growth. Q4 2025 professional services revenue is expected to be down compared to Q3 2025 due to project-based revenue in Q3 and reduced revenue due to our contractual restructuring.

Our Q4 2025 revenue mix is expected to shift further toward technology, reflecting the ongoing strength of our applications portfolio. Next, in terms of our adjusted gross margin, we expect positive revenue mix improvements along with our cost restructuring and our renegotiation of contracts to continue to manifest in favorable gross margins compared to 2024. Our overall adjusted gross margin is expected to slightly decline quarter over quarter, with adjusted professional services gross margin holding roughly constant and adjusted technology gross margin slightly declining due primarily to duplicate hosting charges associated with the migration to Ignite and timing of certain vendor charges. We anticipate that our adjusted operating expenses will be down approximately $2 million-$3 million in Q4 2025 relative to Q3 2025, as we continue to see the positive impact of the restructuring initiatives we discussed earlier.

Looking ahead to 2026, we are focused on our plan to strategically deploy resources in a way that continues to make progress on operating leverage. The actions we’re taking now, such as restructuring our professional services contracts, strategically leveraging our growing India operations, and integrating AI more broadly across our organization, are laying the groundwork for continued margin improvement. As we weigh our allocation of resources under our 2026 budget planning process, we are prioritizing areas that will both sustain our momentum in technology gross margin expansion and further enhance the efficiency of our R&D efforts. We expect to realize incremental operating leverage in 2026, which will be primarily driven by our previously announced August restructuring and our ongoing optimization initiatives.

We anticipate that this will provide us with greater flexibility to allocate capital towards high-impact opportunities, including further technology development and targeted market expansion for our existing offerings and new internally developed offerings. With that, I will conclude my prepared remarks. Dan?

Dan Burton, Chief Executive Officer, Health Catalyst: Thanks, Jason. In conclusion, I would like to recognize and thank our committed and mission-aligned clients and our highly engaged team members for their continued engagement, commitment, and dedication. With that, I will turn the call back to the operator for questions.

Conference Call Operator: The floor is now open for questions. At this time, if you have a question or comment, please press Star 1 on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing Star 2. Again, we kindly ask that you limit yourself to one question and that you pick up your handset when posing your question to provide optimal sound quality. Thank you. Our first question is coming from Jared Haase of William Blair. Your line is open. Please go ahead.

Jason Alger, Chief Financial Officer, Health Catalyst: Hey, guys. Good afternoon. Thanks for taking the questions. Just wanted to ask on the updated commentary around the Ignite migration. I guess I’m curious, number one, just what’s driving the longer timeline? Should we think of that as sort of a reflection of maybe some bandwidth issues within the client base? I’m also curious why some clients would maybe be okay sticking with the legacy solution, just given what seems like a pretty big upgrade in terms of the new technology capabilities with Ignite. I think you also said some clients may stay on DOS for the medium term. I’m curious what percentage of clients you’re thinking should convert over by the end of 2026. Thanks.

Dan Burton, Chief Executive Officer, Health Catalyst: Yeah, thank you, Jared. Great questions. I would invite Ben to maybe share a few comments, and then Jason and I might add some color commentary as well. Ben?

Ben Albert, President and Chief Operating Officer, Health Catalyst: Great. Thanks, Dan. Hi, Jared. As we’ve assessed and worked with our clients, we really see their desire to stay on DOS in some cases for a little bit longer and for us to meet them where they are and provide them that level of flexibility, given all the competing priorities and the fact that DOS is providing them with tremendous value today. As we continue to move towards Ignite, we’ll be there to support them as they’re ready to make that transition and we continue to enhance what Ignite provides. As we go forward, we see this as a huge opportunity for our business and also an opportunity for our clients.

Dan Burton, Chief Executive Officer, Health Catalyst: Yeah, totally agree. Jared, to a couple of your specific questions, I think we still anticipate a large majority of our clients to be migrated by that first half of 2026, as Ben mentioned in our prepared remarks. There are a number who, as they’re facing lots of dynamics, lots of pressures from the big, beautiful bill and other dynamics that have come to us. I appreciate Ben’s leadership in recognizing the value of meeting clients where they are. There is a small subset that would prefer to get through some other items and stay on DOS for a period of time. I think the introduction of more flexibility on our side is really designed to meet clients where they are.

More flexibility as it relates to how clients want to migrate and even that timeline for those that do want to migrate, just providing them more flexibility, we do believe will lead to some improvement in our dollar-based retention. The response so far from clients has been really positive.

Jason Alger, Chief Financial Officer, Health Catalyst: Yeah, and the only thing I would add, Jared, is we are still expecting to make progress on gross margin, even with this change to our migration approach. We are able to dial down our DOS infrastructure and support footprint as clients do migrate over to Ignite. We’d only expect really a slight slowing in our progress with this change of approach.

Conference Call Operator: We’ll take our next question from Jessica Tassan of Piper Sandler. Please go ahead. Your line is open.

Jessica Tassan, Analyst, Piper Sandler: Hi, guys. Thanks for taking the question. I appreciate it. We know that tech revenue was in line with your forecast, but how do we think about just the sequential decline in dollars of tech revenue as representing kind of the combination between your low 90% dollar-based retention and then essentially the implementation of whatever portion of the new deals that you all booked during Q2 2025? I guess just if you could break out the Q3 tech revenue between the dollar-based retention and then the implementation of the new clients booked in the first half of 2025. Any comments on fourth-quarter tech revenue and expectations for sequential growth in tech revenue as we look to 2026 would be really helpful just as we are trying to refine our models into the end of the year. Thanks so much.

Dan Burton, Chief Executive Officer, Health Catalyst: Yeah, absolutely. Thanks for the questions, Jess. I’ll share a few thoughts. Jason, please also add. I think as we have discussed in our last earnings call, within the tech segment, there are a couple of moving parts going in different directions. The platform part of our business is experiencing those DOS to Ignite headwinds that we’ve discussed previously, where Ignite is lower priced than DOS. As we work through that process, that’s a natural consequence. At the same time, at the apps layer, we’re grateful to continue to see growth in that segment. That manifests itself both as it relates to our existing clients growing their technology revenue in the apps space with those existing clients, as well as new client wins in the apps space, in addition to what you referenced to as it relates to adding new platform clients.

There is a mix of a few different moving parts. We’re encouraged to see those new client additions adding to the tech revenue. We see the negative impact of some of the headwinds related to the DOS to Ignite migration process with existing clients, but then another positive as it relates to app layer growth, both with existing and new clients. There are quite a few moving pieces that all kind of net out to the guidance that Jason provided.

Jason Alger, Chief Financial Officer, Health Catalyst: Yeah, I think that’s well said, Dan. The only thing I would add is, as mentioned in the prepared remarks, we did have a level of non-recurring revenue in both the technology revenue line and professional services revenue line. So that’s also contributing to that decline that we’re expecting in Q4.

Conference Call Operator: Thank you. We’ll take our next question from Elizabeth Anderson of Evercore ISI. Your line is open. Please go ahead.

Elizabeth Anderson, Analyst, Evercore ISI: Hi, guys. Thank you so much for the question. Really appreciate it. Can you talk a little bit, maybe just to make sure that we’re all level set? Help us understand sort of more specifically the value of the one-timers that you are calling out. And then two, how do we think about, given some of the concerns that some of your end market customers are having as we’re going into 2026, how do you kind of see, as far as you can tell right now on the pipeline and whatnot, when the company sort of returns to positive revenue growth? Are we thinking sort of mid-2026, or do you think maybe potentially a little for 2027? I just want to kind of get a better sense of that as we move through the opportunities and the challenges that your customers are facing. Thank you.

Dan Burton, Chief Executive Officer, Health Catalyst: Yeah, thanks, Elizabeth. Jason, do you want to take that first question, then I’ll comment on the second question?

Jason Alger, Chief Financial Officer, Health Catalyst: Yeah. Yeah, on that first question, value of the one-timers. I mean, it is becoming more common in our professional services revenue line to have one-time revenue, especially as we see the shift from FTE-based arrangements to more project-based arrangements. It’s less common on the technology side. I mean, the technology one-time revenue is roughly in the range of $500,000-$1 million that we saw in that Q3 technology revenue line that we’re not expecting to reoccur in Q4.

Dan Burton, Chief Executive Officer, Health Catalyst: Thanks, Jason. As it relates to your questions about the pipeline and the re-acceleration of our growth, our pipeline remains robust, and we’re encouraged to see meaningful additions to our pipeline. I think there are some dynamics that we are watching and managing through. One of the dynamics that we’ve spoken to in recent discussions as well is that the deal sizes are a little bit smaller. We do think that is the result of some pressure from the big, beautiful bill and some of the Medicaid cuts that our clients and our end market are absorbing. That also has some positive impacts in that sometimes smaller deals move a little bit more quickly through the pipeline.

At the same time, we’ve also seen some dynamics where it’s harder to predict exactly what the sales cycle might look like in terms of when deals will close just because of some of the uncertainty as folks are working through their budgeting process. Fundamentally, as we think about the strategy of re-acceleration of growth, we’re definitely focused on our core differentiation, which has always been our deep healthcare expertise and our passion for enabling clients to realize measurable improvement. I think as 2026’s strategy and plan is coming into focus, I really like where Ben and the leadership team are focusing. Ben, maybe you could give some specific examples.

Ben Albert, President and Chief Operating Officer, Health Catalyst: Sure, happy to. As we look towards next year, there is a big emphasis on our unique capabilities around helping health systems manage their costs through our cost management capabilities and solutions, as well as the need for ambulatory performance solutions as you think about where the market might be heading. We have proven ROI in those areas. We see growth opportunities in those areas, and we expect to spend more time focused in 2026 on that. What the yield will be, we are still working our way through as we look at 2026, but we have a lot of optimism towards those areas where we are seeing already pipeline indications of interest.

Dan Burton, Chief Executive Officer, Health Catalyst: Thanks, Ben. We expect, Elizabeth, to be in a position at the next earnings call to share more specifics as it relates to how we see bookings unfolding in 2026.

Jessica Tassan, Analyst, Piper Sandler: Great. Thank you very much.

Dan Burton, Chief Executive Officer, Health Catalyst: Thanks, Elizabeth.

Conference Call Operator: Our next question is from Richard Close of Canaccord Genuity. Your line is open.

Richard Close, Analyst, Canaccord Genuity: Yeah, thanks for the questions. Maybe just a follow-up on Jess and Elizabeth’s questions. Just with respect to the 2026, I guess, revenue, I think you said likely a couple points lower growth than 2025, I guess the 1%-2% you’re looking at in 2025. As we think about professional services and tech, is that 2026 mainly being driven by the tech, or is there more professional services contracts that you’re pruning? I have a follow-up.

Dan Burton, Chief Executive Officer, Health Catalyst: Yeah, great questions, Richard. So I’ll share a few thoughts, and then please others share as well. I think when we think about the dynamics that it will play into 2026, on the professional services side, we’ve mentioned and specifically highlighted that we made a decision to exit a couple of pilot ambulatory operations TEMS contracts. And you’re already seeing some of that result in the back half of 2025. That’ll, of course, be a full year of results in 2026. We’ve also looked at, and we mentioned in our prepared remarks, a few other less profitable TEMS relationships. And we are very focused on profitability. So in the services side, I do expect that we’ll see some trimming in some of those specific relationships that’ll have a slightly negative impact on revenue, but also a positive impact on margins.

That’s one of the contributors that led us to positive margins in Q3 that we think will be a general trend line moving forward. On the technology side, we do expect to see those headwinds that we’ve referenced and pressures as it relates to dollar-based retention as we work through the Ignite migration, partially offset by continued growth that we’ve been encouraged to see at the apps layer. There are always some other factors that lead to the 2026 kind of growth equation, the building blocks around new clients. We’ve shared some specific data there that can help, hopefully, with modeling. We’ve shared our dollar-based retention expectation for this year that helps model what next year’s revenue might look like. Of course, there’s always some in-year revenue growth as well.

Richard Close, Analyst, Canaccord Genuity: Okay. As a follow-up, go ahead.

Jason Alger, Chief Financial Officer, Health Catalyst: Yeah, the only thing I would add, Richard, is we’ll provide additional commentary related to this as part of JPM, and especially in our Q4 earnings call. As we close out the year, we’ll have full visibility on deals that are signed in Q4. It’s a busy period for us. One clarifier is that we did mention in the transcript that we’d be a few points lower in 2026 compared to 2025.

Richard Close, Analyst, Canaccord Genuity: Yeah, okay. And then just thinking about the pause or people on the migration, and just as we think about it, I’m curious whether you can comment on any competing priorities maybe for hospitals. It sort of relates to the one thing we hear a lot is that hospitals want to go ahead and move forward with AI, but you really need to make sure that your data is good and the garbage in, garbage out type of thing. I would think that Health Catalyst would be a high priority since you’re so focused on data and harmonizing and whatnot. Just thoughts there on competing priorities and maybe where you guys rank in that.

Dan Burton, Chief Executive Officer, Health Catalyst: Yeah, it’s an insightful question, Richard. I think one of the reasons that we as a leadership team have felt to give more clients flexibility, meet them where they are, is that reality that DOS does a good job of making sure that the data is clean and organized. For many of our clients, that’s what they need. They would prefer, in a budget-constrained environment, to leverage that existing capability and build some AI capabilities on top of that rather than taking investment dollars that would be required to manage a migration right now. Meeting them where they are, giving them that flexibility to decide what is most important for us to achieve in 2026, knowing that they can achieve some meaningful things, leveraging DOS, giving them that option, I think, has been something that has been warmly received.

Other clients want all of the capabilities, all of the modern capabilities of Ignite. They fit into more of an early adopter or an early mover as it relates to wanting both the infrastructure and the use case layer to be cutting edge. We want to meet them where they are. That’s where we’ve seen many of our clients already migrate to Ignite. We recognize different clients will have different priorities, different budget realities. Providing them with flexibility, recognizing that both DOS and Ignite do a really nice job at that fundamental data cleansing and organization layer, and as such, both can be utilized for AI use cases, is one of the reasons why we’re providing a little bit more flexibility and more options. Anything you’d add, Ben?

Ben Albert, President and Chief Operating Officer, Health Catalyst: Only that, Richard, you bring up a good point in that obviously there’s a lot of focus on AI, and we have been investing there in some pretty excellent solutions. We’ve got a couple of things in beta around costing intelligence and Ambulatory Intelligence off of the data that we amass. We’ve also enabled some of the advanced statistical methods that have been integrated into the core platform as well that are generally available today. You’re right in that there is a tremendous interest there, but it’s all about how do you drive the value from the AI? That’s where we’re leaning in as opposed to just providing data in order for AI use cases to be leveraged. Our expertise is differentiated, and we have the ability to not only create the data environment, but also to deliver the AI that drives value for our clients.

Dan Burton, Chief Executive Officer, Health Catalyst: To Ben’s point, Richard, most of the solutions that he just described, those AI-specific use case solutions, can be leveraged whether DOS is the infrastructure or Ignite is the infrastructure. We want to meet clients where they are. We want to enable them to prioritize their budget in the way that’s most useful for them.

Richard Close, Analyst, Canaccord Genuity: Okay, thank you.

Conference Call Operator: Our next question is from Daniel Grosslight of CITI. Your line is open. Please go ahead.

Daniel Grosslight, Analyst, CITI: Hi, guys. Thanks for taking the question. Ben, you mentioned that you guys have a strong pipeline for products or apps that help systems manage costs and ambulatory performance solutions. I’m curious, does your revenue model need to change at all on the tech side? That is, do you need to build in some specific ROI guarantees where you have some sort of skin in the game if your clients aren’t able to realize expected savings? Or do you think the current revenue model on the tech side just doesn’t need to change? Thanks.

Ben Albert, President and Chief Operating Officer, Health Catalyst: Thanks, Daniel. I think that’s on the table. We provide ROI, and we’ve got hundreds and hundreds of use cases where we deliver tangible ROI. If that’s what the market needs and we can deliver to that, assuming the data is there and we have the type of partnership that leads to that shared data and ROI, then we’re absolutely open to those conversations going forward. It’s a very astute question as it relates to where the market is going overall. Dan, did you want to add something?

Dan Burton, Chief Executive Officer, Health Catalyst: Yeah, I agree with that. Just to that point, Daniel, I think one of the dynamics that we like longer term as we shift away from DOS and towards Ignite is Ignite isn’t as expensive or heavy as DOS was. As you know, most of the ROI of our solutions exists above the platform layer, at the use case layer. As we have more to offer at the apps layer and clients are able to spend more of their wallet with us at the apps layer, there’s just more of an opportunity to demonstrate that tangible ROI. Frankly, more flexibility to do what Ben described, where because the apps layer is the highest gross margin segment of our business, we can take some risk. We can meet clients where they are, and we have a lot of confidence in the ability to drive those measurable improvements.

It is on the table.

Daniel Grosslight, Analyst, CITI: Makes sense. Thank you.

Conference Call Operator: We’ll take our next question from David Larsen of BTIG. Your line is open. Please go ahead.

David Larsen, Analyst, BTIG: Hi. Can you talk a little bit about the growth rate in Ignite customers versus DOS customers? I mean, at your summit, what I was hearing from hospital systems was, "Hey, if they’re on DOS, they got to do the conversion before they buy more stuff." I’m thinking to myself, maybe your Ignite base is perhaps growing a bit faster than DOS. Any thoughts on when we’re going to get past this TEMS ambulatory services hump? Thanks very much.

Dan Burton, Chief Executive Officer, Health Catalyst: Thanks, David. Great questions. It was good to see you at HAZ as well. Thank you for your attendance. As it relates to that first question, I think one of the important learnings that we wanted to highlight in this earnings call and a shift in our approach is really addressing that first item that you brought up. I think in the past, we had been a little too inflexible as it relates to kind of requiring our clients to move from DOS to Ignite and requiring that to be the next step before we talk about other things. There are some cases where certain apps are only built to work on top of Ignite. There are some use cases that cannot be done, but most use cases can be done on DOS.

I think the shift that I hope we’re conveying is that recognition that it’s really important to meet clients where they are. It’s important to give them flexibility. If they want to stay on DOS for a little bit longer, and that can open up conversations where we can grow with app layer, use case layer opportunities on top of DOS, we should pursue those. In particular, as it relates to what we were talking about just a few minutes ago, that’s where the client gets the greatest ROI, that apps layer. We are providing a lot more flexibility. We do expect that that will strengthen our growth within that part of our client base moving forward. We expect that that should enable all of our clients to pursue growth opportunities, especially the apps layer, with us moving forward.

Before we address the TEMS question, anything, Ben, that you’d add on that migration dynamic?

Ben Albert, President and Chief Operating Officer, Health Catalyst: I would only add that Ignite is, as we’ve said all along, a more efficient platform. We anticipate that to continue to be more of a catalyst for us. As we invest more on the applications that sit on top of that, the value proposition is just getting more and more compelling every day. We would anticipate that’s where most of the movement comes in the future.

Dan Burton, Chief Executive Officer, Health Catalyst: Yep. As it relates, David, to your question about what’s the timing of some of those TEMS transitions and dynamics, we’re through the change as it relates to our decision to exit the couple of ambulatory operations pilot TEMS contracts. That change occurred as of June 30. As we mentioned in the prior remarks, as well as in a couple of answers to questions, we’re looking across a few other TEMS contracts to make sure that we feel comfortable with the profitability progress and the profitability profile. Where we see some opportunities to trim or change, restructure, we are taking those opportunities as our first focus is on improving profitability. You’re starting to see some of the evidence of that as you see our gross profits and our EBITDA margins improving. We want to keep that trend going.

We will continue to be evaluating those through the end of this year. I think as we get into 2026, we should have a portfolio that we feel really good about and kind of get to the next chapter of growth on the TEMS and the services side as well. Anything, Jason, that you would add?

David Larsen, Analyst, BTIG: Yeah, I think you covered it well. Dan, like Dan mentioned, David, as we hit June of next year, that’s when we will lap the ambulatory TEMS exit. That’s when we will see that difference in growth rate related to those relationships. We’ll continue to monitor any of those less profitable TEMS relationships that make sense for restructure. Great. Just one more quick follow-up. Ben, from your perspective, one year from now, three years from now, five years from now, what would you like to see manifest? I mean, Dan and his team have built a fantastic asset with respect to technology over the past, call it, five or ten years. What do you think needs to get done to unleash this value here from your perspective? Thanks, Ben.

Ben Albert, President and Chief Operating Officer, Health Catalyst: Thank you. There is tremendous opportunity for this business as I look. I want to just echo the sentiment that what has been built here is an excellent foundation, the healthcare expertise that this company has, the technology underpinnings, the applications that are a very diverse set of applications that deliver tangible ROI. I think it’s largely about execution. How we bring these things together as efficiently and effectively to meet today’s market need is a critical element as we head into 2026. I don’t see why at some point in the future we can’t return to growth as an organization and actually go more on offense as we head through the strategic part of 2026 and we evaluate what we’re going to do next year.

We have to overcome some of the dollar-based retention issues that we’ve talked about, understanding a more flexible, meet your clients where you are in the market, and then enable ourselves to efficiently drive growth throughout the organization. I can’t see why in the next few years we don’t achieve that, given all that we have as assets today and how we bring it all together.

David Larsen, Analyst, BTIG: Thanks very much.

Conference Call Operator: Once again, if you do have a question, you may press star one on your telephone keypad at this time. One moment while we queue. We’ll take a question from Stan Berenstein of Wells Fargo. Your line is open.

David Larsen, Analyst, BTIG2: Yes, hi. Thanks for taking my questions. First, a quick clarification regarding the Ignite migration being a bit more drawn out than you expected initially. For the clients that are staying on DOS, are they also maintaining their contractual agreements, or are those being renegotiated even though they are staying on the DOS platform for now?

Dan Burton, Chief Executive Officer, Health Catalyst: Yeah. In the vast majority of cases, we’re just continuing the existing contractual relationship that we have with them and giving them the time that they would like to be able to just remain on DOS, continue to utilize DOS, really under the same terms. That’s the vast majority of cases is what clients are asking for and where we can meet them where they are with what they need.

David Larsen, Analyst, BTIG2: Got it. Maybe a quick one on margins. If we think about the puts and takes related to revenue, cost cuts, efficiencies, migration issues, how comfortable are you in the 4Q EBITDA acting as a glide path as we think about 2026? Thanks.

Dan Burton, Chief Executive Officer, Health Catalyst: Yeah, it’s a great question, Stan. I’ll share a few thoughts. Jason, please add anything as well. We are encouraged, Stan, to see meaningful progress as it relates to our EBITDA growth or adjusted EBITDA growth. We’re excited to have reaffirmed our full year guidance of $41 million of EBITDA for 2025, which represents 57% year-over-year growth. As we shared in the prepared remarks, we do expect further growth in EBITDA. In some ways, Q4 can be a very useful guide as it relates to what we might be looking like moving into 2026. In other ways, there are always puts and takes as well. There are some one-time items that contribute to Q4 that are specific to one quarter. There are also some costs that will incur in 2026 as we move into that process and that calendar year.

We are just in the early stages of the planning process right now. We will have a lot more to share at the next earnings call. Jason, what would you add?

Ben Albert, President and Chief Operating Officer, Health Catalyst: I think Dan covered it well. Thanks.

David Larsen, Analyst, BTIG2: Great. Thank you.

Conference Call Operator: Our next question is from Jeff Garro of Stevens. Your line is open. Please go ahead.

David Larsen, Analyst, BTIG0: Yeah. Good afternoon. Thanks for taking my question. I want to follow up on EBITDA growth in 2026. First, clearly, a strong effort to manage costs over the last year. You had a call out of some areas of strategic focus and investment. I want to see if there’s anything else you wanted to add there. In particular, we heard the mention of potential targeted market expansion. Would love some more color on areas where you’re considering expanding. Thanks.

Dan Burton, Chief Executive Officer, Health Catalyst: Yeah. I’ll share a thought or two. And then, Ben and Jason, please add as well. We are early in the planning process for 2026. As Ben alluded to a couple of minutes ago, we see some specific use case areas where clients really need those solutions. He mentioned a couple in the cost management space, Power Costing, Power Labor, the rev cycle space with VitalWare, and some specific ambulatory offerings where we’re seeing a lot of client demand and a lot of opportunity to leverage new capabilities, new technologies, AI capabilities to accelerate the ROI that a client can achieve. We want to make sure as we go through the planning process that we’re investing in those areas to maintain that differentiation and really strengthen and accelerate that ROI. At the same time, we continue to see leverage opportunities.

Jason mentioned a few of these in his prepared remarks where we see meaningful efficiencies coming through the increased adoption inside of Health Catalyst of AI, the increased utilization of our growing India operations, and a few other leverage opportunities that we believe will continue to manifest in 2026 that can allow us to do both, can allow us to make some targeted investments to help us be differentiated. As Ben described, that return to growth, I think that product leadership and differentiation is a core part of that, while also continuing a really positive trajectory as it relates to profitability. We know how important that is as it relates to providing a shareholder return. Anything, Jason or Ben, you would add?

Ben Albert, President and Chief Operating Officer, Health Catalyst: Yeah. The only thing I would add is we will provide additional precision related to those areas of investment as part of our Q4 earnings call in early 2026.

Conference Call Operator: Thank you. We’ll move next to Sarah James of Cantor Fitzgerald. Your line is open.

Gabby, Analyst Representative, Cantor Fitzgerald: Hi, everyone. This is Gabby on for Sarah. I wanted to double-click again on the EBITDA growth for 2026. Last quarter, we had a discussion around $60 million being an appropriate run rate. The commentary today is up year-over-year. Can you talk about what new costs you’ve baked in to maybe change the tone on commentary? If you could just highlight which app products are the most sought after in your 4Q conversations, that would be very helpful. Thank you.

Dan Burton, Chief Executive Officer, Health Catalyst: Thanks, Gabby. Yeah. I’ll share a few thoughts. Jason and Ben, please add. As it relates to the way we think about EBITDA growth, one of the updates from last quarter is our Q3 actual adjusted EBITDA came in well ahead of what we were projecting. There were some items that we were able to accelerate into Q3 that we thought might take till Q4 to really realize. We did maintain the same guidance that we had shared last quarter as it relates to the full year, but we did outperform in Q3 by $1.5 million. There is some rebalancing embedded in that Q4 guide that we shared. I think we are still confident and excited about the EBITDA progression that we believe is doable and possible in 2026. We also recognize we’re early in the planning process.

This is a dynamic environment. We see some real opportunity to invest and enable a reacceleration in growth. We want to go through a robust planning process. We are still absolutely committed to that meaningful goal of significant EBITDA progress. We are pleased to have been on that journey for some time now of really meaningful EBITDA progress every year for several years. We think that will continue. We just want the benefit of the planning process to really inform where we should make some targeted investments so that we can see a reacceleration of growth and then where we can realize further leverage and allow that to drop to the bottom line with regards to EBITDA progression. Anything you’d all would add?

Ben Albert, President and Chief Operating Officer, Health Catalyst: Just add that, as you mentioned, in terms of where we see opportunities within applications in the cost-constrained environment, I think, as we indicated earlier, that we have real Ambulatory Intelligence solutions. As organizations are looking for site-of-care optimization, they’re looking to figure out how to best leverage their assets that they have. We can really help them drive that where they’re looking to contain their costs. We have solutions to support cost management. We’ve got this great Ignite clinical intelligence solution that can drive real reduction in clinical variance. Lots of areas and pockets of value. Back to the earlier question, that’s where we just have to focus and prioritize our efforts in 2026, which we’ll be excited to come back once we’ve done that work to explain how we’re going to do that next year.

Gabby, Analyst Representative, Cantor Fitzgerald: Great. Thank you.

Conference Call Operator: Once again, if you’d like to ask a question, please press star one on your telephone keypad. One moment while we queue. We have a follow-up from Richard Close of Canaccord Genuity. Your line is open.

Richard Close, Analyst, Canaccord Genuity: Yeah. It’s just two quick ones. The one-timers, the $500,000 to $1 million in tech, what specifically was that? The second question is, are you guys seeing any business come through the Microsoft relationship for those lower-level, I guess, sub-$100,000 deals? Any success there to point to?

Dan Burton, Chief Executive Officer, Health Catalyst: Great. Jason, you want to take the first one?

Ben Albert, President and Chief Operating Officer, Health Catalyst: Yeah. Yeah. On those one-timers, Richard, those can be either related to pharma deals where it’s a quick delivery, or it can occasionally be related to timing of a renewal being signed where we’re providing the service over time but need the contractual paper to be signed. There is a bit of a catch-up in certain situations like that that can impact technology revenue. Regarding the Microsoft-related revenue, I’d say we’re still early in that relationship. It’s something that we continue to monitor how those online sales go. Dan, anything you’d add?

Dan Burton, Chief Executive Officer, Health Catalyst: Yeah. Just that we’re encouraged to have another venue, another opportunity through partnerships like the one with Microsoft. We also have a robust partnership with Databricks that enables us to reach different audiences at a different price point, to your point, Richard. Ben had mentioned some of the mid-market opportunities that we’re starting to see where we can meet clients where they need to be from a budget perspective. We can often do that through a partnership with Microsoft or a partnership with Databricks and Microsoft and provide real value to them at a price point that they can afford. We’re encouraged. To Jason’s point, we’re early there.

Richard Close, Analyst, Canaccord Genuity: Okay. Thanks.

Dan Burton, Chief Executive Officer, Health Catalyst: Thanks.

Conference Call Operator: There are no further questions at this time. I’d like to turn the call back over to Dan Burton for closing remarks.

Dan Burton, Chief Executive Officer, Health Catalyst: Thank you all for your continued interest in Health Catalyst, and we look forward to staying in touch.

Conference Call Operator: Thank you. This concludes today’s Health Catalyst third quarter 2025 earnings conference call. Please disconnect your line at this time and have a wonderful day.

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