Health Catalyst Inc.
03/12/2026 | Press release | Distributed by Public on 03/12/2026 14:59
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements, the accompanying notes, and other financial information included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results could differ materially from those forward-looking statements below. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the sections titled "Risk Factors" and "Special Note Regarding Forward-Looking Statements" included elsewhere in this Annual Report on Form 10-K.
A discussion regarding our financial condition and results of operations for the year ended December 31, 2025compared to the year ended December 31, 2024 is presented below. A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year endedDecember 31, 2023 is included under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our prior year Form 10-K filed on February 26, 2025.
Overview
We are a leading provider of data and analytics technology and services to healthcare organizations. Our Solution comprises our cloud-based data platform, applications, and expertise. Our clients, which are primarily healthcare providers, use our Solution to manage their data, derive analytical insights to operate their organization, and produce measurable clinical, financial, and operational improvements. We envision a future where all healthcare decisions are data-informed.
Health Catalyst was founded in 2008 by healthcare analytics industry pioneers. Our founders and team developed the initial version of our Solution, consisting of an early version of our data platform, select analytics accelerators, and professional services expertise. From the beginning, our Solution has been focused on enabling our mission: to be the catalyst for massive, measurable, data-informed healthcare improvement. As of December 31, 2025, we employ more than 1,200 team members.
Highlights from the years ended December 31, 2025, 2024, and 2023 include:
•For the years ended December 31, 2025, 2024, and 2023, our total revenue was $311.1 million, $306.6 million, and $295.9 million, respectively. The growth in revenue was primarily due to revenue from new clients, including acquired relationships.
•For the years ended December 31, 2025, 2024, and 2023, we incurred net losses of $178.0 million, $69.5 million, and $118.1 million, respectively. The increased net loss in 2025 compared to 2024 is largely driven by $105.4 million of goodwill impairment, which is primarily due to overall declines in our stock price and market capitalization.
•For the years ended December 31, 2025, 2024, and 2023, our Adjusted EBITDA was $41.4 million, $26.1 million, and $11.0 million, respectively. See the section titled "Financial Measures and Key Business Metrics-Reconciliation of Non-GAAP Financial Measures" below for more information about Adjusted EBITDA, including the limitations of such measure and a reconciliation to net loss, the most directly comparable measure calculated in accordance with GAAP.
See the section titled "Key Factors Affecting Our Performance" for more information about important opportunities and challenges related to our business.
Macroeconomic Environment and Strategic Operating Plan
Recent macroeconomic challenges (including high levels of inflation, high interest rates, uncertainty with tariffs, cuts in Medicaid and research funding, and regional or global conflicts (including the conflicts in the Middle East)) and the tight labor market continue to adversely affect workforces, organizations, governments, clients, economies, and financial markets globally. These factors have disrupted the normal operations of many businesses, including our business. These factors have also placed the national healthcare system under significant operational and budgetary strain. The extent and duration of the impacts from these factors is uncertain, and we expect that continued impacts will continue to have a negative effect upon our clients, business and results of operations, and financial condition.
The health system end market, in particular, has experienced meaningful financial strain over the last few years. We were encouraged that, in general, the operating margins of our health system end market improved in 2024 and 2025 relative to 2022 and 2023. However, the implications of many policy developments around Medicaid and research funding reductions, as well as implications of the evolving tariff landscape have had and continue to have a negative impact on our business.
On July 4, 2025, President Trump signed the OBBBA into law, which is projected to reduce federal Medicaid spending by nearly $1 trillion over 10 years and will create additional financial strain for many of our clients and prospective clients. As a result, certain sales cycles have elongated and some opportunities, such as opportunities in Life Sciences, have pushed, which negatively impacted our 2025 bookings achievement and our expectations for revenue in 2026.
We continue to anticipate that a higher proportion of our gross bookings will come from our existing client base as compared to historical levels, inclusive of upsells to both our Platform Client base, as well as upsells to our over 1,000 App Clients. This expectation is driven by our belief that many existing clients that have already realized a strong financial return on investment (ROI), and are aligned on a long-term partnership framework, will be more receptive to expansion conversations, as compared to discussions with prospective clients. We have collected data internally that shows we are more than twice as effective at selling into organizations where we have an existing relationship compared to those where there is no prior relationship, which gives us additional confidence in our ability to drive cross-selling within our broad client base.
We benefit from a highly recurring revenue model, in which greater than 90% of our revenue is recurring in nature, and a high level of technology revenue predictability, especially within our Platform Clients whose contracts, when sold as a bundle with our analytics applications, often have built-in, contractual technology revenue escalators and are often locked in for three to five years.
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 churn related to the migration from DOS to Ignite. We have observed that clients have a few options as part of this migration. These options include expanding their relationship and spend by purchasing additional applications and services; experiencing immediate savings while maintaining similar functionality through a price reduction as part of the migration; maintaining existing spend and realizing improvement in operations and functionality from the enhanced capabilities of Ignite; or exercising flexibility to stay on DOS or parts of DOS in the near-to-medium term. Over the course of the next few years, we anticipate our clients will continue to fall along the spectrum of these options; however, in recent months and in the near-term, an increasing number of clients are opting for, and we anticipate many will opt for, a price reduction as part of the migration to Ignite resulting in lower overall spend.
We have been notified of approximately $12.5 million in DOS-related ARR down-sell and churn that will negatively impact our 2026 and 2027 technology revenue. In addition, we currently estimate up to approximately $52 million in DOS-related ARR that may be subject to negotiation in 2026 and 2027 as part of the DOS to Ignite migration; of which, up to approximately $35 million is estimated to be data platform infrastructure ARR. Data platform infrastructure, or the data warehouse and related infrastructure, is where we are seeing the highest degree of pressure. While we expect further churn of this ARR beyond the $12.5 million, we are putting plans in place that are designed to retain a portion of the estimated $52 million of DOS-related ARR. After 2027, we expect to generally be through the data platform infrastructure migration headwind. We have maintained strong application relationships with our clients, even when data platform infrastructure down-selling occurs, and we expect this success to continue.
We are responding to the challenging macroeconomic environment with a strategic operating plan that proactively tailors our solutions to align with and support the urgent needs for cost efficiency, clinical improvement, and consumer experience. We are helping clients achieve tangible savings and enhanced operational efficiency, positioning our organization as a valuable partner during this critical period. We believe this focus will enable us to move forward in a position of continued competitive and financial strength.
We will 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. We have invested in migration personnel and contractors and have added investments in India as we continue to scale our development team. While these investments may create near-term pressure on our Adjusted EBITDA, we believe they position the business for improved consistency and stronger financial performance in the second half of 2026 and beyond.
Our priorities going forward will include strengthening and simplifying our commercial engine to drive technology ARR bookings, improving 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 allow us to solve healthcare's most pressing problems.
We will continue to refine this strategic operating plan and are continuing to make investments in research and development, including the continued enhancement of the capabilities within Health Catalyst Ignite, in order to maintain our position as a provider of a market-leading data platform and applications over the long term.
Our Business Model
We offer our Solution to a variety of healthcare organizations, primarily in the United States, including academic medical centers, integrated delivery networks, community hospitals, large physician practices, ACOs, health information exchanges, health insurers, and other risk-bearing entities among others. We categorize our client count into two primary categories: Platform Clients and App Clients. As discussed further in "Key Business Metrics and Non-GAAP Financial Measures" below, as of January 1, 2025, we shifted from what we formerly called DOS Subscription Clients to Platform Clients, and what we formerly referred to as other clients to App Clients, which include all other clients that are not Platform Clients. Platform Clients are defined as: (i) all Platform Clients as of December 31, 2024 under our historical definition (formerly referred to as DOS Subscription Clients, which we also referred to as Platform Subscription Clients), and (ii) as of January 1, 2025, any technology client that signs contracts with at least $100,000 of incremental total ARR and non-recurring revenue in a given calendar year, inclusive of clients that come through acquisition if we first begin recognizing revenue for the client post-acquisition and that total ARR and non-recurring revenue exceeds $100,000 in that calendar year, so long as such client maintains an active subscription as of the end of the period. See "Key Business Metrics and Non-GAAP Financial Measures" below for more information about our Platform Clients. App Clients generally include technology clients and other clients from historical acquisitions and typically operate under subscription contracts. As of December 31, 2025, 2024, and 2023, we had 162, 130, and 109 Platform Clients, respectively. As of December 31, 2025, we served over 1,000 App Clients compared to over 900 other clients as of December 31, 2024. The increase in other clients from December 31, 2024 to App Clients as of December 31, 2025 was primarily due to the 2025 Upfront acquisition.
We derive substantially all of our revenue through subscriptions for use of our technology and professional services on a recurring basis. In 2025, greater than 90% of our total revenue was recurring in nature. Clients pay for our technology primarily on a subscription basis for our entire technology suite or for pieces of our technology (e.g., Platform-only or modular portions of the Platform). We generally provide access to our technology and deliver professional services to clients on a recurring basis, with our technology invoiced upfront annually or quarterly and our professional services invoiced monthly. As we increase the use cases we address at a given client, we have the opportunity to upsell incremental technology and services. We have demonstrated an ability to upsell technology and services to our client base over time. We updated our definition of Dollar-based Retention Rate in early 2025, and, under an updated Dollar-based Retention Rate described in more detail in the section titled "Financial Measures and Key Business Metrics," the rate was 93% and 102% for the years ended December 31, 2025 and 2024, respectively. Based on our legacy definition, we saw a Dollar-based Retention Rate of 100% for each of the years ended December 31, 2024 and 2023, respectively.
The primary costs incurred to deliver our technology are hosting fees and headcount-related costs associated with our cloud services and support teams. Hosting fees are related to providing our technology through a cloud-based environment hosted primarily by Microsoft Azure. We have experienced and expect to continue to experience operational inefficiencies associated with managing multiple hosting providers, resulting in a headwind against Adjusted Technology Gross Margin. Additionally, we are in the process of migrating our DOS clients base to Health Catalyst Ignite. We expect that these investments in our Platform will provide additional capabilities for our clients as well as improve our ability to drive cost efficiencies in our hosting and support costs per client over time. However, in the near-to-medium-term, we will incur some migration costs associated with deploying the updated architecture across our DOS clients, resulting in a headwind for our Technology Gross Margin. The primary costs incurred to deliver our professional services are the salaries, benefits, and other headcount-related costs of our team members.
We delineate our sales organization by new client acquisition and existing client retention and expansion. Selling efforts to new clients vary. Many of our new clients engage with us broadly for multiple use cases, requiring buy-in during the sales cycle across the C-suite. Alternatively, in some instances, we engage with a client in a single-use case. After we demonstrate measurable improvements, we work with our clients to expand the utilization of our Solution to other use cases or enterprise-wide. The average sales cycle for a new platform client is estimated to be approximately one year, but that timeline can vary materially. Because of our vertical focus on the healthcare industry, we believe our sales and marketing resources can be deployed more efficiently than at horizontally-focused companies that provide technology and services to multiple industries.
Additionally, with our increased focus on driving expansion within our existing client base, we believe that our sales and marketing infrastructure is positioned well to generate meaningful leverage and growth within our services offerings without the need for the same level of incremental investment as in prior years. This operating leverage primarily stems from the fact that we already have an existing relationship with the client, inclusive of having invested in client success initiatives since the beginning of our contractual relationship. Over the past few years, we have invested in growth infrastructure and our sales operations and marketing teams are built to help us scale over the long term.
We have demonstrated a consistent track record of innovation through research and development over time as evidenced by our new product features and new product offerings. This innovation is driven by feedback we glean from our clients, professional services teams, and the market generally. Our investments in product development have been focused on increasing the capabilities of our Solution and expanding the number of use cases we address for our clients.
Financial Measures and Key Business Metrics
We regularly review a number of metrics, including the following key financial measures, to manage our business and evaluate our operating performance compared to that of other companies in our industry:
| Year Ended December 31, 2025 | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
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GAAP Financial Measures:
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(in thousands, except percentages)
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Total revenue
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$ | 311,136 | $ | 306,584 | $ | 295,938 | |||||||||||
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Gross profit
|
$ | 120,356 | $ | 114,503 | $ | 104,002 | |||||||||||
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Gross margin
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39 | % | 37 | % | 35 | % | |||||||||||
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Net loss
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$ | (177,974) | $ | (69,502) | $ | (118,147) | |||||||||||
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Non-GAAP Financial Measures:
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Adjusted Gross Profit
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$ | 159,107 | $ | 149,533 | $ | 144,060 | |||||||||||
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Adjusted Gross Margin
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51 | % | 49 | % | 49 | % | |||||||||||
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Adjusted EBITDA
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$ | 41,408 | $ | 26,105 | $ | 11,021 | |||||||||||
We monitor the key financial measures set forth in the preceding table to help us evaluate trends, establish budgets, measure the effectiveness and efficiency of our operations, and determine team member incentives. We discuss Adjusted Gross Profit, Adjusted Gross Margin, and Adjusted EBITDA in more detail below.
Adjusted gross profit and adjusted gross margin
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, as well as certain other non-recurring operating expenses.
We present both of these measures for our technology and professional services business. We believe these non-GAAP measures are useful in evaluating our operating performance compared to that of other companies in our industry, as these metrics generally eliminate the effects of certain items that may vary from company to company for reasons unrelated to overall profitability. See "Reconciliation of Non-GAAP Financial Measures" below for information regarding the limitations of using our Adjusted Gross Profit and Adjusted Gross Margin as financial measures and for a reconciliation of revenue to our Adjusted Gross Profit, the most directly comparable financial measure calculated in accordance with GAAP.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted for (i) interest and other (income) expense, net, (ii) income tax provision (benefit), (iii) depreciation and amortization, (iv) stock-based compensation, (v) acquisition-related costs, net, (vi) litigation costs, (vii) restructuring costs, (viii) impairment of goodwill and intangible assets, and (ix) non-recurring lease-related charges, as applicable. We view acquisition-related expenses when applicable, such as transaction costs and changes in the fair value of contingent consideration liabilities that are directly related to business combinations, as costs that are unpredictable, dependent upon factors outside of our control, and are not necessarily reflective of operational performance during a period.
We believe that excluding restructuring costs, litigation 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.
See "Reconciliation of Non-GAAP Financial Measures" below for information regarding the limitations of using our Adjusted EBITDA as a financial measure and for a reconciliation of our net loss to Adjusted EBITDA, the most directly comparable financial measure calculated in accordance with GAAP.
Other Key Metrics
We also regularly monitor and review the number of Platform Clients and Dollar-based Retention Rate as shown in the following tables. We anticipate sunsetting our reporting of these metrics for 2026 and future years, and we anticipate providing new 2026 growth metrics in lieu of these former metrics in the future.
Platform Clients
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As of December 31,
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| 2025 | 2024 | 2023 | |||||||||||||||
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Platform Clients(1)
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162 | 130 | 109 | ||||||||||||||
__________________
(1) Beginning in January 1, 2025, we have updated the name and definition of this key metric to Platform Clients from DOS Subscription Clients to better reflect the deep, long-standing, multi-faceted relationships we strive to build with the entities we serve.
Since 2016, our primary contracting model is a subscription-based contract for our platform, analytics applications, and professional services. Given how fundamental our platform is to our Solution and because the vast majority of our total revenue is derived from Platform Clients, we believe our Platform Client count is a strong indicator of our market penetration and the growth of our business. Beginning January 1, 2025, we updated the name and definition of this key metric to Platform Clients. In the past, we referred to this metric as DOS Subscription Clients and Platform Subscription Clients.
Platform Clients have historically been defined as clients who directly or indirectly access our platform via a technology subscription contract. Direct access to our platform has included access to our DOS platform, Ignite platform, or Ninja Universe. Indirect access to our platform has included platform module components such as Ignite connectors, Healthcare.AI, Pop Analyzer, IDEA, and other platform components. Given the modularity of our Ignite platform, we anticipate Ignite infrastructure will be included in all of our technology Solutions in the near future and many of our Solutions already include Ignite components. Accordingly, as of January 1, 2025, we defined Platform Clients as: (i) all Platform Clients as of December 31, 2024 under our historical definition (i.e., these clients will be included in our Platform Client count going forward until they cease to have an active subscription as of the end of the period), and (ii) as of January 1, 2025, any technology client that signs contracts with at least $100,000 of incremental total ARR and non-recurring revenue in a given calendar year, inclusive of clients that come through acquisition if we first begin recognizing revenue for the client post-acquisition and that total ARR and non-recurring revenue exceeds $100,000 in that calendar year, so long as such client maintains an active subscription as of the end of the period. Once a client is designated as a Platform Client, it will continue to be a Platform Client unless it is no longer a client with an active subscription as of the end of the period. There are some clients that became Platform Clients before 2025 with total ARR and non-recurring revenue of less than $100,000.
Given the variety of ways to access our platform and the mix of specific technology Solutions included in a subscription contract, average total ARR and non-recurring revenue for net new Platform Clients can greatly vary, particularly with our recently updated definition of this metric. In a given calendar year, our net new Platform Clients have included clients with (i) total ARR and non-recurring revenue in the expected average range for such year or significantly above the expected average range, driven by the size of the client organization and the bundle of technology and services included in their subscription, and (ii) total ARR and non-recurring revenue meaningfully below the low-end of the expected range for such year, driven primarily by sales of applications bundled with platform module components or with lower starting price points. We expect this trend will continue. For example, in 2024, the highest incremental total ARR and non-recurring revenue from a net new Platform Client was approximately $2 million and some Platform Clients were below our new threshold of $100,000 total ARR and non-recurring revenue. As previously shared, we sometimes pursue lower total ARR and non-recurring revenue contracts as a pilot and/or with the strategy that we can later expand our relationship with these Platform Clients, including through cross-selling efforts.
For 2025, we shared an expected aggregated average total ARR and non-recurring revenue for all net new Platform Clients (2025 Platform Clients) to range between $300,000 and $700,000. Our actual aggregated average total ARR and non-recurring revenue from 2025 Platform Clients was near the midpoint of the expected range. Our total 2025 Platform Clients was 32, which is higher than recent years. We believe the higher number of net new Platform Clients was driven by an improved end market, an improved and more modular platform product in Ignite and its platform components, which can be sold on a standalone basis or easily bundled with applications, and a lower average starting price point, which removes barriers to entry for many health systems.
Dollar-based Retention Rate - New Definition
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Year Ended December 31,
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| 2025 | 2024 | ||||||||||
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Dollar-based Retention Rate (Tech + TEMS)
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93 | % | 102 | % | |||||||
We calculate our Dollar-based Retention Rate as of a period end by starting with the sum of the technology and Tech-Enabled Managed Services (TEMS) ARR from our Platform Clients as of the date 12 months prior to such period end (prior period ARR ). This calculation excludes professional services ARR and non-recurring revenue. We then calculate the sum of the ARR from these same clients as of the current period end (Current period ARR). Current period ARR includes any upsells and also reflects contraction or attrition over the trailing twelve months but excludes ARR from new Platform Clients added in the current period who were not clients at the beginning of such period. This Current period ARR may include acquired ARR from clients (i.e., through acquisition of a company) that overlap with the Platform Clients in a given calendar year. We then divide the Current period ARR by the prior period ARR to arrive at our Dollar-Based Retention Rate for Technology and TEMS. We calculate applicable ARR for each Platform Client as the expected monthly recurring revenue of our clients as of the last day of a period multiplied by 12. Because our primary business model is to contract for our Platform, analytics applications, and TEMS, our Dollar-Based Retention Rate calculated above only includes our Platform Clients. App Clients that do not meet the definition of a Platform Client, which are primarily legacy Medicity, Able Health, Healthfinch, Vitalware, Twistle, KPI Ninja, ARMUS, ERS, Carevive, Lumeon, Intraprise, and Upfront clients, are not included in the Dollar-Based Retention Rate metrics. As it relates to TEMS, we define this cohort of clients as Platform Clients who subscribe to a Tech-Enabled Managed Services contract with the exception of our pilot ambulatory TEMS offering related to specific ambulatory services agreements, which we sunset in 2025 and which is excluded from Dollar-Based Retention Rate calculations in prior, current and future periods. This cohort of technology and TEMS ARR from our Platform Clients represented the majority of our ARR as of December 31, 2025 and 2024.
As noted, our Dollar-based Retention Rate Key Metric excludes App Clients who are not Platform Clients, including clients added through acquisition, as the go-forward technology revenue growth profiles of these businesses may vary from our core Platform Clients. For example, Medicity clients have generated a lower Dollar-based Retention Rate than Platform Clients and we expect flat to declining revenue from Medicity clients in the foreseeable future.
Dollar-based Retention Rate - Legacy Definition
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Year Ended December 31,
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| 2024 | 2023 | ||||||||||
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Dollar-based Retention Rate (legacy)
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100 | % | 100 | % | |||||||
Historically we have calculated our legacy Dollar-based Retention Rate as of a period end by starting with the sum of the technology and professional services ARR from our Platform Clients as of the date 12 months prior to such period end (prior period ARR). We then calculated the sum of the ARR from these same clients as of the current period end (Current period ARR).
As shown above, under the updated Dollar-based Retention Rate definition, the result was 102% in 2024. This improvement compared to the legacy definition is primarily due to isolating the technology and TEMS portions of our business which are more recurring in nature compared to our non-TEMS professional services contracts.
We determined it was appropriate to make this change as a result of changing trends in the structure of our professional services contracts. For example, in 2024, we saw a dynamic where some of our clients were moving their spend from recurring FTE based subscriptions to project-based work that is more non-recurring in nature. This shift had a negative impact on non-TEMS professional services Dollar-based Retention Rate. We anticipate clients will, in many cases, continue to opt for more non-recurring project-based work rather than FTE subscription contracts, however we anticipate that many clients will opt to continue to engage in these types of non-recurring work over time. These non-recurring, project-based fees are less predictable than our recurring services and can drive fluctuations in quarterly professional services revenues and in our prior definition of the Dollar-based Retention Rate metric as well as in prior period comparisons.
Reconciliation of Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. For example, we exclude stock-based compensation expense because it is non-cash in nature and excluding this expense provides meaningful supplemental information regarding our operational performance and allows investors the ability to make more meaningful comparisons between our operating results and those of other companies. We use the following non-GAAP financial information to evaluate our ongoing operations, as a component in determining employee bonus compensation, and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Adjusted gross profit and adjusted gross margin
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. We present both of these measures for our technology and professional services business. We believe these non-GAAP financial measures are useful in evaluating our operating performance compared to that of other companies in our industry, as these metrics generally eliminate the effects of certain items that may vary from company to company for reasons unrelated to overall profitability.
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 years ended December 31, 2025, 2024, and 2023:
| Year Ended December 31, 2025 | |||||||||||||||||
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(in thousands, except percentages)
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Technology
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Professional
Services
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Total
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| Revenue | $ | 208,277 | $ | 102,859 | $ | 311,136 | |||||||||||
| Cost of revenue, excluding depreciation and amortization | (69,741) | (89,720) | (159,461) | ||||||||||||||
| Amortization of intangible assets, cost of revenue | (18,588) | - | (18,588) | ||||||||||||||
| Depreciation of property and equipment, cost of revenue | (12,731) | - | (12,731) | ||||||||||||||
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Gross profit
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107,217 | 13,139 | 120,356 | ||||||||||||||
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Gross margin
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51 | % | 13 | % | 39 | % | |||||||||||
| Add: | |||||||||||||||||
| Amortization of intangible assets, cost of revenue | 18,588 | - | 18,588 | ||||||||||||||
| Depreciation of property and equipment, cost of revenue | 12,731 | - | 12,731 | ||||||||||||||
| Stock-based compensation | 822 | 3,653 | 4,475 | ||||||||||||||
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Acquisition-related costs, net(1)
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120 | 208 | 328 | ||||||||||||||
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Restructuring costs(2)
|
837 | 1,792 | 2,629 | ||||||||||||||
| Adjusted Gross Profit | $ | 140,315 | $ | 18,792 | $ | 159,107 | |||||||||||
| Adjusted Gross Margin | 67 | % | 18 | % | 51 | % | |||||||||||
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(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, 2, and 7 in our consolidated financial statements.
(2) Restructuring costs include severance and other team member costs from workforce reductions and restructuring. For additional details refer to Note 11 in our consolidated financial statements.
| Year Ended December 31, 2024 | |||||||||||||||||
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(in thousands, except percentages)
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Technology
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Professional
Services
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Total
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| Revenue | $ | 194,852 | $ | 111,732 | $ | 306,584 | |||||||||||
| Cost of revenue, excluding depreciation and amortization | (67,812) | (97,993) | (165,805) | ||||||||||||||
| Amortization of intangible assets, cost of revenue | (16,150) | - | (16,150) | ||||||||||||||
| Depreciation of property and equipment, cost of revenue | (10,126) | - | (10,126) | ||||||||||||||
|
Gross profit
|
100,764 | 13,739 | 114,503 | ||||||||||||||
|
Gross margin
|
52 | % | 12 | % | 37 | % | |||||||||||
| Add: | |||||||||||||||||
| Amortization of intangible assets, cost of revenue | 16,150 | - | 16,150 | ||||||||||||||
| Depreciation of property and equipment, cost of revenue | 10,126 | - | 10,126 | ||||||||||||||
| Stock-based compensation | 1,700 | 6,041 | 7,741 | ||||||||||||||
|
Acquisition-related costs, net(1)
|
320 | 433 | 753 | ||||||||||||||
|
Restructuring costs(2)
|
79 | 181 | 260 | ||||||||||||||
| Adjusted Gross Profit | $ | 129,139 | $ | 20,394 | $ | 149,533 | |||||||||||
| Adjusted Gross Margin | 66 | % | 18 | % | 49 | % | |||||||||||
__________________
(1) Acquisition-related costs, net include deferred retention expenses attributable to the Lumeon, Carevive, ARMUS, and KPI Ninja acquisitions. For additional details refer to Notes 1, 2, and 7 in our consolidated financial statements.
(2) Restructuring costs include severance and other team member costs from workforce reductions and restructuring. For additional details refer to Note 11 in our consolidated financial statements.
| Year Ended December 31, 2023 | |||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||
|
Technology
|
Professional
Services
|
Total
|
|||||||||||||||
| Revenue | $ | 187,583 | $ | 108,355 | $ | 295,938 | |||||||||||
| Cost of revenue, excluding depreciation and amortization | (62,474) | (101,631) | (164,105) | ||||||||||||||
| Amortization of intangible assets, cost of revenue | (18,742) | - | (18,742) | ||||||||||||||
| Depreciation of property and equipment, cost of revenue | (9,089) | - | (9,089) | ||||||||||||||
| Gross profit | 97,278 | 6,724 | 104,002 | ||||||||||||||
| Gross margin | 52 | % | 6 | % | 35 | % | |||||||||||
| Add: | |||||||||||||||||
| Amortization of intangible assets, cost of revenue | 18,742 | - | 18,742 | ||||||||||||||
| Depreciation of property and equipment, cost of revenue | 9,089 | - | 9,089 | ||||||||||||||
| Stock-based compensation | 1,866 | 7,369 | 9,235 | ||||||||||||||
|
Acquisition-related costs, net(1)
|
273 | 391 | 664 | ||||||||||||||
|
Restructuring costs(2)
|
496 | 1,832 | 2,328 | ||||||||||||||
| Adjusted Gross Profit | $ | 127,744 | $ | 16,316 | $ | 144,060 | |||||||||||
| Adjusted Gross Margin | 68 | % | 15 | % | 49 | % | |||||||||||
__________________
(1) Acquisition-related costs, net include deferred retention expenses attributable to the ARMUS, KPI Ninja, and Twistle acquisitions. For additional details refer to Notes 1, 2, and 7 in our consolidated financial statements.
(2) Restructuring costs include severance and other team member costs from workforce reductions and restructuring. For additional details refer to Note 11 in our consolidated financial statements.
Technology gross margin decreased from 52% for the year ended December 31, 2024 to 51% for the year ended December 31, 2025. Adjusted Technology Gross Margin increased from 66% for the year ended December 31, 2024 to 67% for the year ended December 31, 2025. This technology gross margin and Adjusted Technology Gross Margin year-over-year changes were mainly driven by existing clients paying higher technology access fees from contractual, built-in escalators, without a corresponding increase in hosting costs, new or acquired revenue from higher margin application deals, and savings from our recent reductions in force, partially offset by costs associated with migrating a subset of DOS clients to Health Catalyst Ignite and Ninja Universe deployment costs incurred prior to the commencement of revenue recognition.
The technology gross margin year-over-year change was also negatively impacted by increased intangible amortization from recent acquisitions and increased depreciation of capitalized internal use software costs.
We expect technology gross margin and Adjusted Technology Gross Margin to fluctuate and potentially decline in the near term, primarily due to additional costs associated with the ongoing transition of DOS clients to Health Catalyst Ignite and Ninja Universe deployment costs incurred prior to the commencement of revenue recognition, which typically begins six months or more following contract signing.
Professional services gross margin increased from 12% for the year ended December 31, 2024 to 13% for the year ended December 31, 2025. Adjusted Professional Services Gross Margin remained constant at 18% for the years ended December 31, 2024 and 2025. 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.
Total gross margin increased from 37% for the year ended December 31, 2024, to 39% for the year ended December 31, 2025. Total Adjusted Gross Margin increased from 49% for the year ended December 31, 2024 to 51% for the year ended December 31, 2025. We expect total gross margin and total Adjusted Gross Margin to fluctuate in the near term, but improve over the long term, primarily due to a mix shift to a greater proportion of technology revenue as well as anticipated improvement in technology and professional services gross margins over the long-term.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted for (i) interest and other (income) expense, net, (ii) income tax provision (benefit), (iii) depreciation and amortization, (iv) stock-based compensation, (v) acquisition-related costs, net, including the change in fair value of contingent consideration liabilities for potential earn-out payments, (vi) litigation costs, (vii) restructuring costs, (viii) impairment of goodwill and intangible assets, and (ix) non-recurring lease-related charges, as applicable. We view acquisition-related expenses when applicable, such as transaction costs and changes in the fair value of contingent consideration liabilities that are directly related to business combinations, as costs that are unpredictable, dependent upon factors outside of our control, and are not necessarily reflective of operational performance during a period. We believe that excluding litigation costs, 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.
Our Adjusted EBITDA improved year-over-year as a result of our revenue growth and cost reduction initiatives as well as the timing of some non-headcount expenses. We generally expect annual Adjusted EBITDA to continue to improve going forward, although the near-term growth will likely be slower compared to the growth rates experienced in the last few years and our Adjusted EBITDA may fluctuate from quarter to quarter as a result of the timing of non-recurring revenue and the seasonality of certain operating costs.
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 years ended December 31, 2025, 2024, and 2023:
|
Year Ended December 31,
|
|||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
|
(in thousands)
|
|||||||||||||||||
| Net loss | $ | (177,974) | $ | (69,502) | $ | (118,147) | |||||||||||
| Add: | |||||||||||||||||
|
Interest and other expense (income), net
|
16,404 | (637) | (9,106) | ||||||||||||||
|
Income tax provision
|
716 | 333 | 356 | ||||||||||||||
| Depreciation and amortization | 50,500 | 41,431 | 42,223 | ||||||||||||||
| Stock-based compensation | 27,012 | 40,128 | 55,756 | ||||||||||||||
|
Acquisition-related costs, net(1)
|
(2,086) | 10,064 | 5,757 | ||||||||||||||
|
Litigation costs(2)
|
- | - | 21,279 | ||||||||||||||
|
Restructuring costs(3)
|
9,713 | 2,088 | 8,822 | ||||||||||||||
|
Impairment of goodwill and intangible assets(4)
|
110,223 | - | - | ||||||||||||||
|
Non-recurring lease-related charges(5)
|
6,900 | 2,200 | 4,081 | ||||||||||||||
| Adjusted EBITDA | $ | 41,408 | $ | 26,105 | $ | 11,021 | |||||||||||
__________________
(1)Acquisition-related costs, net include third-party fees associated with due diligence, deferred retention expenses, post-acquisition restructuring costs incurred as part of business combinations, and changes in fair value of contingent consideration liabilities for potential earn-out payments. For additional details refer to Notes 1, 2, and 7 in our consolidated financial statements.
(2)Litigation costs include costs related to litigation that are outside the ordinary course of our business. For additional details, refer to Note 16 in our consolidated financial statements.
(3)Restructuring costs include severance and other team member costs from workforce reductions and restructuring, impairment of discontinued capitalized software projects, and other miscellaneous charges. For additional details, refer to Note 11 in our consolidated financial statements.
(4)Impairment of goodwill and intangible assets was recognized as a result of impairment indicators and quantitative tests indicating the fair values of the Technology and the Professional Services reporting units were below their respective carrying values as of June 30, 2025 and December 31, 2025. For additional details, refer to Note 4 in our consolidated financial statements.
(5)Non-recurring lease-related charges include lease-related impairment charges for the subleased portion of our office space. For additional details refer to Note 9 in our consolidated financial statements.
Key Factors Affecting Our Performance
We believe that our future growth, success, and performance are dependent on many factors, including those set forth below. While these factors present significant opportunities for us, they also represent the challenges that we must successfully address in order to grow our business and improve our results of operations.
•Impact of challenging macroeconomic environment, including high inflation, high interest rates, uncertainty with tariffs, cuts in Medicaid and research funding, regional or global conflicts (including the conflicts in the Middle East), the tight labor market or the market volatility and measures taken in response thereto. Recent macroeconomic challenges (including the high levels of inflation, high interest rates, uncertainty with tariffs, cuts in Medicaid and research funding, regional or global conflicts (including conflicts in the Middle East), or market volatility and measures taken in response thereto) and the tight labor market continue to adversely affect workforces, organizations, governments, clients, economies, and financial markets globally, leading to an economic downturn and increased market volatility. These challenges have also disrupted the normal operations of many businesses, including ours. Our health system end market recently experienced meaningful financial strain from significant inflation. In particular, the health system end market experienced increases in labor and supply costs without a commensurate increase in revenue, leading to significant margin pressure. We are also continuing to monitor the implications of any policy developments around Medicaid and research funding reductions, including the OBBBA, which has and could continue to negatively impact our end market, as well as implications of the evolving tariff landscape. These uncertainties in our end market have caused and could cause further potential delays in client decisions, which has and could continue to negatively affect our business and results of operations.
•Add new clients. We believe our ability to increase our client base will enable us to drive growth. Our potential client base is generally in the early stages of data and analytics adoption and maturity. We expect to further penetrate the market over time as potential clients invest in commercial data and analytics solutions. As one of the first data platform and analytics vendors focused specifically on healthcare organizations, we have an early-mover advantage and strong brand awareness. Our clients are large, complex organizations who typically have long procurement cycles, which, as a result, may lead to challenges with adding new Platform Clients.
•Leverage recent product and services offerings to drive expansion. We believe that our ability to expand within our client base will enable us to drive growth. Over the last few years, we have developed and deployed several new analytics applications, including PowerCosting (formerly known as CORUS), PowerLabor, Touchstone, Patient Safety Monitor, Pop Analyzer (formerly known as Population Builder), Value Optimizer, and others. Because we are in the early stages of certain of our applications' lifecycles and maturity, we do not have enough information to know the impact on revenue growth by upselling these applications and associated services to current and new clients.
•Impact of acquisitions. We have acquired multiple companies over the last few years, including Medicity in June 2018, Able Health in February 2020, Healthfinch in July 2020, Vitalware in September 2020, Twistle in July 2021, KPI Ninja in February 2022, ARMUS in April 2022, ERS in October 2023, Carevive in May 2024, Lumeon in August 2024, Intraprise in November 2024, and Upfront in January 2025. The historical and go-forward revenue growth profiles of these businesses may vary from our core Platform Clients, which can positively or negatively impact our overall growth rate. For example, Medicity clients have generally generated a lower dollar-based retention rate than Platform Clients and we expect declining revenue from Medicity clients in the foreseeable future. As we integrate the teams acquired via our more recent acquisitions, we have also incurred integration-related costs and duplicative costs that could impact our operating cost profile in the near term.
•Changing revenue mix. Our technology and professional services offerings have materially different gross margin profiles. While our professional services offerings help our clients achieve measurable improvements and make them stickier, they have lower gross margins than our technology revenue. In 2025, our technology revenue and professional services revenue represented 67% and 33% 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.
•Migration to Health Catalyst Ignite. We are in the process of migrating our DOS clients to Ignite. These migrations have and will continue to result in higher cost of technology revenue, which will negatively impact Adjusted Technology Gross Margin. Over time we anticipate that the migration to Ignite will benefit Adjusted Technology Gross Margin. We experienced Dollar-Based Retention Rate pressure in 2025 due to the ongoing migration efforts, and we expect to face similar pressure through 2026. An Ignite migration can take a variety of forms, including a client's migration from our DOS platform to the Ignite platform, the incorporation of Ignite componentry into a specific Solution that is deployed to all clients using that Solution, or our deeming a Solution using our latest technology to be part of Ignite (our latest technology) because we do not plan to devote additional professional service or R&D resources to adding Ignite componentry to the Solution. Some client migrations require us to devote resources (including R&D and/or professional services) to enable the migration. For example, long-standing clients' migration from the DOS platform to the Ignite platform is generally more resource intensive and more complex. These complex relationships generally include higher revenue. We expect those complex migrations will generally take more time to complete and may be some of the last migrations we complete. Approximately two-thirds of DOS client migrations were complete by the end of 2025, including the vast majority of modular DOS migrations. Some migrations may require re-contracting to enable a client's migration to Ignite, including due to different consumption-based pricing models. Other Solutions require very little to no company resources to enable the migration, including Solutions that we deem to be part of Ignite because the Solution is using our latest technology and we do not have current plans to devote resources to add Ignite componentry to the Solution. We consider an Ignite migration to be complete for a given client if (i) we do not anticipate any additional professional services or R&D resources required to enable the Ignite migration for the client, and (ii) we have no plans to re-contract with the client for the purpose of enabling its Ignite migration. There may be instances in which we expect the client to remain on our legacy technology for the foreseeable future. In those instances, we would exclude the client from the denominator and numerator when calculating the percentage of completed Ignite migrations. While we anticipate making meaningful progress on the Ignite migrations by the end of the first half of 2026, as communicated in 2025, we have adjusted our timeline and approach to be more client-centric, recognizing that some organizations prefer to remain on DOS for the near-to-medium term. We are committed to providing more flexibility and meeting clients where they are and we expect this approach will improve client experience and our Dollar-Based Retention Rate.
Recent Acquisitions
Upfront Healthcare, Inc.
On January 22, 2025, we acquired Upfront Healthcare Services, Inc. (Upfront), a next-generation patient engagement platform provider. We accounted for the acquisition of Upfront as a business combination. The acquisition consideration transferred was$80.0 million and was comprised of net cash consideration of $41.1 million, shares of our common stock with an aggregate acquisition-date fair value of $31.6 million, and contingent consideration based on certain earn-out performance targets for Upfront during an earn-out period ending on December 31, 2026, with an acquisition-date fair value of $7.3 million, that, if achieved, would be paid 62.5% in common stock and 37.5% in cash. Certain Upfrontshareholders also received shares of our common stock subject to revesting that are accounted for as post-acquisition stock-based compensation. The purchase resulted in Health Catalyst acquiring 100% ownership in Upfront.
Intraprise Health, LLC.
On November 8, 2024, we acquired Intraprise Health, LLC. (Intraprise), a leading provider of data and analytics technology and services to healthcare organizations. We accounted for the acquisition of Intraprise as a business combination. The acquisition consideration transferred was $44.9 millionand was comprised ofnet cash consideration of $25.4 million and shares of our common stock with an aggregate acquisition date fair value of $19.5 million. The purchase resulted in Health Catalyst acquiring 100% ownership in Intraprise.
Lumeon Ltd.
On August 1, 2024, we acquired Lumeon Ltd. (Lumeon), a digital health company dedicated to helping provider organizations mend broken care coordination processes through automated care orchestration. We accounted for the acquisition of Lumeon as a business combination. The acquisition consideration transferred was $39.8 millionand was comprised ofnet cash consideration of $36.2 million, shares of our common stock with an aggregate acquisition date fair value of $2.9 million, and contingent consideration based on certain earn-out performance targets for Lumeon during an earn-out period that ended on June 30, 2025, with an acquisition-date fair value of $0.7 million. The purchase resulted in Health Catalyst acquiring 100% ownership in Lumeon.
Carevive Systems, Inc.
On May 24, 2024, we acquired Carevive Systems, Inc. (Carevive), a leading oncology-focused health technology company centered on understanding and improving the experience of patients with cancer. We accounted for the acquisition of Carevive as a business combination. The acquisition consideration transferred was $22.1 millionand was comprised ofnet cash consideration of $18.6 million, shares of our common stock with an aggregate acquisition date fair value of $2.6 million, and contingent consideration based on certain earn-out performance targets for Carevive during an earn-out period that ended on June 30, 2025, with an acquisition-date fair value of $0.9 million. The purchase resulted in Health Catalyst acquiring 100% ownership in Carevive.
Electronic Registry Systems, Inc.
On October 2, 2023, we acquired Electronic Registry Systems, Inc. (ERS), a cloud-based provider of clinical registry development and data management software focused on oncology with advanced data analytics expertise. We accounted for the acquisition of ERS as a business combination. The acquisition consideration transferred was comprised of net cash consideration of $11.4 million. The ERS shareholders also received Health Catalyst common shares subject to revesting that are accounted for as post-acquisition stock-based compensation. The purchase resulted in Health Catalyst acquiring 100% ownership in ERS.
Components of Our Results of Operations
Revenue
We derive our revenue from sales of technology and professional services. For the years ended December 31, 2025, 2024, and 2023, technology revenue represented 67%, 64%, and 63% of total revenue, respectively, and professional services revenue represented 33%, 36%, and 37% of total revenue, respectively.
We expect our near-term revenue growth to be negatively impacted by policy developments around Medicaid and research funding reductions, which will likely create additional financial strain for many of our clients and prospective clients. We also expect near-term headwinds to revenue, including a reduction in TEMS revenue due to down-selling and our exit from certain lower-margin TEMS arrangements, a reduction in technology revenue related to migrating DOS clients to Health Catalyst Ignite, and the timing of non-recurring revenue driven by the timing of project completions.
Technology revenue. Technology revenue primarily consists of subscription fees charged to clients for access to use our Platform and analytics applications. We provide clients access to our technology through either an all-access or limited-access, modular subscription. Most of our subscription contracts are cloud-based and generally have a three- or five-year term, of which many are terminable after one year upon 90 days' notice. The vast majority of our Platform Client subscription contracts have built-in annual escalators for technology access fees. Also included in technology revenue is the maintenance and support we provide, which generally includes updates and support services.
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.
Deferred revenue
Deferred revenue consists of client billings in advance of revenue being recognized from our technology and professional services arrangements. We primarily invoice our clients for technology arrangements annually or quarterly in advance. Amounts anticipated to be recognized within one year of the balance sheet date are recorded as deferred revenue and the remaining portion is recorded as deferred revenue, net of current portion on our consolidated balance sheets.
Cost of revenue, excluding depreciation and amortization
Cost of technology revenue. Cost of technology revenue primarily consists of costs associated with hosting and supporting our technology, including third-party cloud computing and hosting costs, license and revenue share fees, contractor costs, and salary and related personnel costs for our cloud services and support teams.
We anticipate cost of technology revenue as a percentage of technology revenue will generally decrease over the long term.However, we expect cost of technology revenue as a percentage of technology revenue to fluctuate and potentially increase in the near term, primarily due to additional costs associated with migrating DOS clients to Health Catalyst Ignite.
Cost of professional services revenue. Cost of professional services revenue consists primarily of costs related to delivering our team's expertise in analytics, strategic advisory, improvement, and implementation services. These costs primarily include salary and related personnel costs, travel-related costs, and outside contractor costs. The 2023 Restructuring Plan, the January 2025 Restructuring Plan, and the August 2025 Restructuring Plan have reduced our ongoing cost of professional services revenue. Our cost of professional services revenue may fluctuate as a percentage of our revenue from period to period due to the timing and extent of non-recurring professional services arrangements.
Operating expense
Sales and marketing. Sales and marketing expenses primarily include salary and related personnel costs for our sales, marketing, and account management teams, lead generation, marketing events, including our Healthcare Analytics Summit, marketing programs, and outside contractor costs associated with the sale and marketing of our offerings. We plan to continue to invest in sales and marketing to grow our client base, expand in new markets, and increase our brand awareness. The trend and timing of sales and marketing expenses will depend in part on the timing of our expansion into new markets and marketing campaigns. Our sales and marketing expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
Research and development. Research and development expenses primarily include salary and related personnel costs for our data platform and analytics applications teams, subscriptions, and outside contractor costs associated with the development of products. We have developed an open, flexible, and scalable data platform. We plan to continue to invest in research and development to develop new solutions and enhance our applications library. The 2023 Restructuring Plan, the January 2025 Restructuring Plan, and the August 2025 Restructuring Plan increased our research and development expenses in the first quarter of 2024, the first quarter of 2025, and third quarter of 2025, respectively, due to severance costs, but we expect that the reduction in headcount will reduce future, ongoing research and development expenses.
Our research and development expenses may fluctuate as a percentage of our revenue from period to period due to the nature, timing, and extent of these expenses.
General and administrative. General and administrative expenses primarily include salary and related personnel costs for our legal, finance, people operations, IT, and other administrative teams, including certain executives. General and administrative expenses also include facilities, subscriptions, corporate insurance, outside legal, accounting, directors' fees, and the change in fair value of contingent consideration liabilities. Our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses, including due to restructuring initiatives.
Depreciation and amortization.Depreciation and amortization expenses are primarily attributable to our capital investment and consist of fixed asset depreciation, amortization of intangibles considered to have definite lives, and amortization of capitalized internal-use software costs.
Impairment of goodwill and intangible assets.Goodwill is assessed for impairment annually on October 31 or more frequently if indicators of impairment are present or circumstances suggest that impairment may exist. If the carrying amount of the reporting unit exceeds its fair value, we recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. Long-lived assets, including intangible assets, are also tested for recoverability as indicators of impairment arise, and if the carrying amount of an asset group is deemed not recoverable, we recognize a long-lived asset impairment charge based on the the asset group's fair value compared to its carrying amount.
Interest and other (expense) income, net
Interest and other (expense) income, net primarily consists of interest expense from our debt arrangements offset by income from our investment holdings. Interest expense is primarily attributable to the Convertible Senior Notes and Credit Agreement and also includes the amortization of deferred financing costs related to our debt arrangements.
Income tax provision
Income tax provision consists of U.S. federal, state, and foreign income taxes. Because of the uncertainty of the realization of the deferred tax assets, we have a full valuation allowance for our net deferred tax assets, including net operating loss carryforwards (NOLs) and tax credits related primarily to research and development.
As of December 31, 2025, we had federal and state NOLs of $787.8 million and $647.7 million, respectively, which will begin to expire for federal and state tax purposes in 2032 and 2026, respectively. Our existing NOLs may be subject to limitations arising from ownership changes and, if we undergo an ownership change in the future, our ability to utilize our NOLs and tax credits could be further limited by Sections 382 and 383 of the Code. Future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code. Our NOLs and tax credits may also be limited under similar provisions of state law.
On July 4, 2025, President Trump signed the OBBBA into law. The OBBBA includes numerous changes to existing tax law including extending or making permanent certain business and international tax measures initially established under the 2017 Tax Cuts and Jobs Act, which were set to expire. The OBBBA includes provisions providing current deductibility of certain property additions, limitations on interest deductions based on a tax EBITDA framework, and current deductibility of domestic research and development costs. These provisions are generally effective beginning in 2025, and we anticipate they will partially defer our income tax payments in future years and will not have a material impact on our effective tax rate in the near-term.
Results of Operations
The following tables set forth our consolidated results of operations data and such data as a percentage of total revenue for each of the periods indicated:
__________________
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
|
(in thousands)
|
|||||||||||||||||
|
Revenue:
|
|||||||||||||||||
|
Technology
|
$ | 208,277 | $ | 194,852 | $ | 187,583 | |||||||||||
|
Professional services
|
102,859 | 111,732 | 108,355 | ||||||||||||||
|
Total revenue
|
311,136 | 306,584 | 295,938 | ||||||||||||||
|
Cost of revenue, excluding depreciation and amortization shown below:
|
|||||||||||||||||
|
Technology(1)(2)(3)
|
69,741 | 67,812 | 62,474 | ||||||||||||||
|
Professional services(1)(2)(3)
|
89,720 | 97,993 | 101,631 | ||||||||||||||
|
Total cost of revenue, excluding depreciation and amortization
|
159,461 | 165,805 | 164,105 | ||||||||||||||
|
Operating expenses:
|
|||||||||||||||||
|
Sales and marketing(1)(2)(3)
|
52,477 | 54,387 | 67,321 | ||||||||||||||
|
Research and development(1)(2)(3)
|
49,770 | 57,950 | 72,627 | ||||||||||||||
|
General and administrative(1)(2)(3)(4)(5)
|
49,559 | 56,817 | 76,559 | ||||||||||||||
|
Depreciation and amortization
|
50,500 | 41,431 | 42,223 | ||||||||||||||
|
Impairment of goodwill and intangible assets
|
110,223 | - | - | ||||||||||||||
|
Total operating expenses
|
312,529 | 210,585 | 258,730 | ||||||||||||||
|
Loss from operations
|
(160,854) | (69,806) | (126,897) | ||||||||||||||
|
Interest and other (expense) income, net
|
(16,404) | 637 | 9,106 | ||||||||||||||
|
Loss before income taxes
|
(177,258) | (69,169) | (117,791) | ||||||||||||||
|
Income tax provision
|
716 | 333 | 356 | ||||||||||||||
|
Net loss
|
$ | (177,974) | $ | (69,502) | $ | (118,147) | |||||||||||
(1)Includes stock-based compensation expense, as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Stock-Based Compensation Expense: | (in thousands) | ||||||||||||||||
| Cost of revenue, excluding depreciation and amortization: | |||||||||||||||||
| Technology | $ | 822 | $ | 1,700 | $ | 1,866 | |||||||||||
| Professional services | 3,653 | 6,041 | 7,369 | ||||||||||||||
| Sales and marketing | 7,866 | 12,120 | 20,982 | ||||||||||||||
| Research and development | 3,743 | 7,696 | 11,213 | ||||||||||||||
| General and administrative | 10,928 | 12,571 | 14,326 | ||||||||||||||
| Total | $ | 27,012 | $ | 40,128 | $ | 55,756 | |||||||||||
(2)Includes acquisition-related costs, net, as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Acquisition-related costs, net: | (in thousands) | ||||||||||||||||
|
Cost of revenue, excluding depreciation and amortization:
|
|||||||||||||||||
| Technology | $ | 120 | $ | 320 | $ | 273 | |||||||||||
| Professional services | 208 | 433 | 391 | ||||||||||||||
| Sales and marketing | 421 | 791 | 697 | ||||||||||||||
| Research and development | 366 | 703 | 787 | ||||||||||||||
| General and administrative | (3,201) | 7,817 | (2,316) | ||||||||||||||
| Total | $ | (2,086) | $ | 10,064 | $ | (168) | |||||||||||
(3)Includes restructuring costs, as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Restructuring costs: | (in thousands) | ||||||||||||||||
|
Cost of revenue, excluding depreciation and amortization:
|
|||||||||||||||||
| Technology | $ | 837 | $ | 79 | $ | 496 | |||||||||||
| Professional services | 1,792 | 181 | 1,832 | ||||||||||||||
| Sales and marketing | 2,505 | 449 | 2,415 | ||||||||||||||
| Research and development | 3,317 | 443 | 3,337 | ||||||||||||||
| General and administrative | 1,262 | 936 | 742 | ||||||||||||||
| Total | $ | 9,713 | $ | 2,088 | $ | 8,822 | |||||||||||
(4)Includes litigation costs, as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Litigation costs: | (in thousands) | ||||||||||||||||
| General and administrative | $ | - | $ | - | $ | 21,279 | |||||||||||
(5)Includes non-recurring lease-related charges, as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Non-recurring lease-related charges: | (in thousands) | ||||||||||||||||
| General and administrative | $ | 6,900 | $ | 2,200 | $ | 4,081 | |||||||||||
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
|
Revenue:
|
|||||||||||||||||
|
Technology
|
67 | % | 64 | % | 63 | % | |||||||||||
|
Professional services
|
33 | 36 | 37 | ||||||||||||||
|
Total revenue
|
100 | 100 | 100 | ||||||||||||||
|
Cost of revenue, excluding depreciation and amortization shown below:
|
|||||||||||||||||
|
Technology
|
22 | 22 | 21 | ||||||||||||||
|
Professional services
|
29 | 32 | 34 | ||||||||||||||
|
Total cost of revenue, excluding depreciation and amortization
|
51 | 54 | 55 | ||||||||||||||
|
Operating expenses:
|
|||||||||||||||||
|
Sales and marketing
|
17 | 18 | 23 | ||||||||||||||
|
Research and development
|
16 | 19 | 25 | ||||||||||||||
|
General and administrative
|
16 | 19 | 26 | ||||||||||||||
|
Depreciation and amortization
|
17 | 14 | 15 | ||||||||||||||
|
Impairment of goodwill and intangible assets
|
35 | - | - | ||||||||||||||
|
Total operating expenses
|
101 | 70 | 89 | ||||||||||||||
|
Loss from operations
|
(52) | (24) | (44) | ||||||||||||||
|
Interest and other (expense) income, net
|
(5) | 1 | 3 | ||||||||||||||
|
Loss before income taxes
|
(57) | (23) | (41) | ||||||||||||||
|
Income tax provision
|
- | - | - | ||||||||||||||
|
Net loss
|
(57) | % | (23) | % | (41) | % | |||||||||||
Discussion of the Years Ended December 31, 2025 and 2024
Revenue
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 |
$ Change
|
% Change
|
||||||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||
|
Revenue:
|
|||||||||||||||||||||||
|
Technology
|
$ | 208,277 | $ | 194,852 | $ | 13,425 | 7 | % | |||||||||||||||
|
Professional services
|
102,859 | 111,732 | (8,873) | (8) | % | ||||||||||||||||||
|
Total revenue
|
$ | 311,136 | $ | 306,584 | $ | 4,552 | 1 | % | |||||||||||||||
|
Percentage of revenue:
|
|||||||||||||||||||||||
|
Technology
|
67 | % | 64 | % | |||||||||||||||||||
|
Professional services
|
33 | % | 36 | % | |||||||||||||||||||
|
Total
|
100 | % | 100 | % | |||||||||||||||||||
Total revenue was $311.1 million for the year ended December 31, 2025, compared to $306.6 million for the year ended December 31, 2024, an increase of $4.6 million, or 1%.
Technology revenue was $208.3 million, or 67% of total revenue, for the year ended December 31, 2025, compared to $194.9 million, or 64% of total revenue, for the year ended December 31, 2024. The technology revenue increase was primarily related to growth from new and acquired clients, revenue from existing clients paying higher technology access fees from contractual, annual escalators, and new offerings of expanded support services, partially offset by elevated churn levels primarily from the migration of DOS clients to Ignite.
Professional services revenue was $102.9 million, or 33% of total revenue, for the year ended December 31, 2025, compared to $111.7 million, or 36% of total revenue, for the year ended December 31, 2024. The professional services revenue decrease was primarily due to lower utilization rates in our professional services organization, our exit of unprofitable pilot ambulatory operations TEMS, and churn of some FTE-based arrangements.
Cost of revenue, excluding depreciation and amortization
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 |
$ Change
|
% Change
|
||||||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||
|
Cost of revenue, excluding depreciation and amortization:
|
|||||||||||||||||||||||
|
Technology
|
$ | 69,741 | $ | 67,812 | $ | 1,929 | 3 | % | |||||||||||||||
|
Professional services
|
89,720 | 97,993 | (8,273) | (8) | % | ||||||||||||||||||
|
Total cost of revenue, excluding depreciation and amortization
|
$ | 159,461 | $ | 165,805 | $ | (6,344) | (4) | % | |||||||||||||||
|
Percentage of total revenue
|
51 | % | 54 | % | |||||||||||||||||||
Cost of technology revenue, excluding depreciation and amortization, was $69.7 million for the year ended December 31, 2025, compared to $67.8 million for the year ended December 31, 2024, an increase of $1.9 million, or 3%. The increase was primarily due to a $3.1 million increase in cloud computing and hosting costs largely from the expanded use of Microsoft Azure to serve existing and new clients, a $1.3 million increase in dues and subscriptions with various vendors, a $0.8 million increase in severance costs related to the January 2025 Restructuring Plan and the August 2025 Restructuring Plan, partially offset by a $2.6 million decrease in recurring salary and related personnel costs related to our restructuring activities and a $0.9 million decrease in stock-based compensation expense.
Cost of professional services revenue was $89.7 million for the year ended December 31, 2025, compared to $98.0 million for the year ended December 31, 2024, a decrease of $8.3 million, or 8%. The decrease was primarily due to a $7.4 million decrease in recurring salary and related personnel costs related to our restructuring activities and a $2.4 million decrease in stock-based compensation, partially offset by a $1.6 million increase in severance costs related to the January 2025 Restructuring Plan and the August 2025 Restructuring Plan.
Operating Expenses
Sales and marketing
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 |
$ Change
|
% Change
|
||||||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||
|
Sales and marketing
|
$ | 52,477 | $ | 54,387 | $ | (1,910) | (4) | % | |||||||||||||||
|
Percentage of total revenue
|
17 | % | 18 | % | |||||||||||||||||||
Sales and marketing expenses were $52.5 million for the year ended December 31, 2025, compared to $54.4 million for the year ended December 31, 2024, a decrease of $1.9 million, or 4%. The decrease was primarily due to a $4.3 million decrease in stock-based compensation, and a $1.2 million decrease in contractor costs. These decreases were partially offset by a $2.1 million increase in severance costs related to the January 2025 Restructuring Plan and the August 2025 Restructuring Plan and a $1.1 million increase in recurring salary and related personnel costs.
Sales and marketing expense as a percentage of total revenue decreased from 18% in the year ended December 31, 2024 to 17% in the year ended December 31, 2025.
Research and development
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 |
$ Change
|
% Change
|
||||||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||
|
Research and development
|
$ | 49,770 | $ | 57,950 | $ | (8,180) | (14) | % | |||||||||||||||
|
Percentage of total revenue
|
16 | % | 19 | % | |||||||||||||||||||
Research and development expenses were $49.8 million for the year ended December 31, 2025, compared to $58.0 million for the year ended December 31, 2024, a decrease of $8.2 million, or 14%. The decrease was primarily due to a $6.1 million decrease in recurring salary and related personnel costs related to our restructuring activities and a $4.0 million decrease in stock-based compensation, partially offset by a $2.9 million increase in severance costs related to the January 2025 Restructuring Plan and the August 2025 Restructuring Plan.
Research and development expense as a percentage of revenue decreased from 19% in the year ended December 31, 2024 to 16% in the year ended December 31, 2025.
General and administrative
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 |
$ Change
|
% Change
|
||||||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||
|
General and administrative
|
$ | 49,559 | $ | 56,817 | $ | (7,258) | (13) | % | |||||||||||||||
|
Percentage of total revenue
|
16 | % | 19 | % | |||||||||||||||||||
General and administrative expenses were $49.6 million for the year ended December 31, 2025, compared to $56.8 million for the year ended December 31, 2024, a decrease of $7.3 million, or 13%. The decrease was primarily due to a $11.0 million decrease in acquisition-related costs, net and a $2.1 million decrease in stock-based compensation. These decreases were partially offset by a $4.7 million increase in lease-related impairment charges and a $0.7 million increase in dues and subscription costs with various vendors.
General and administrative expense as a percentage of revenue decreased from 19% in the year ended December 31, 2024 to 16% in the year ended December 31, 2025.
Depreciation and amortization
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 |
$ Change
|
% Change
|
||||||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||
|
Depreciation and amortization
|
$ | 50,500 | $ | 41,431 | $ | 9,069 | 22 | % | |||||||||||||||
|
Percentage of total revenue
|
17 | % | 14 | % | |||||||||||||||||||
Depreciation and amortization expenses were $50.5 million for the year ended December 31, 2025, compared to $41.4 million for the year ended December 31, 2024, an increase of $9.1 million, or 22%. This increase was primarily due to an increase in intangible assets related to our business combinations.
Depreciation and amortization expense as a percentage of revenue increased from 14% for the year ended December 31, 2024 to 17% for the year ended December 31, 2025.
Impairment of goodwill and intangible assets
During the year ended December 31, 2025, we observed overall declines in our stock price and market capitalization, which led to our conclusion that an impairment triggering event had occurred and therefore we performed quantitative long-lived asset and goodwill impairment tests that resulted in total non-cash intangible asset impairment and goodwill impairment charges of $4.8 million and $105.4 million, respectively.
Interest and other (expense) income, net
_______________________________
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 |
$ Change
|
% Change
|
||||||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||
|
Interest income
|
$ | 7,535 | $ | 17,982 | $ | (10,447) | (58) | % | |||||||||||||||
|
Interest expense
|
(24,254) | (17,086) | (7,168) | (42) | % | ||||||||||||||||||
|
Other income (expense)
|
315 | (259) | 574 |
n/m(1)
|
|||||||||||||||||||
|
Total interest and other (expense) income, net
|
$ | (16,404) | $ | 637 | $ | (17,041) |
n/m(1)
|
||||||||||||||||
(1)Not meaningful
Interest and other (expense) income, net decreased $17.0 million, for the year ended December 31, 2025 compared to the year ended December 31, 2024. This change is primarily due to a $7.1 million increase in interest expense related to our credit agreement with Silver Point Finance, LLC and a $10.4 million decrease in interest income on our short-term investments and cash equivalents.
Income tax provision
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 |
$ Change
|
% Change
|
||||||||||||||||||||
|
(in thousands, except percentages)
|
|||||||||||||||||||||||
|
Income tax provision
|
$ | 716 | $ | 333 | $ | 383 | 115 | % | |||||||||||||||
Our income tax provision consists of current and deferred taxes for U.S. federal, state, and foreign income taxes. As we have a full valuation allowance on our net deferred tax assets, our income tax provision typically consists primarily of minimal state and foreign income taxes, which is the case for the years ended December 31, 2025 and 2024. Our income tax provision increased $0.4 million, for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to increased foreign research and development activities in India.
Liquidity and Capital Resources
As of December 31, 2025, we had cash, cash equivalents, and short-term investments of $95.7 million, which were held for working capital and other general corporate purposes, which may include, among other things, strategic transactions, such as share repurchases and debt reduction. Our cash equivalents and short-term investments are comprised primarily of money market funds, U.S. treasury notes, commercial paper, corporate bonds, and U.S. agency securities.
Since inception, we have financed our operations primarily from the proceeds we received through private sales of equity securities, payments received from clients under technology and professional services arrangements, borrowings under our loan and security agreements (including our Credit Agreement described below), our IPO, the Note Offering, and the Secondary Public Equity Offering. Our future capital requirements will depend on many factors, including our pace of new client growth and expanded client relationships, technology and professional services renewal activity, and the timing and extent of spend to support the expansion of sales, marketing, development, share repurchases, and acquisition-related activities. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be adversely affected.
We believe our existing cash, cash equivalents and marketable securities will be sufficient to meet our working capital and capital expenditure needs over at least the next 12 months, though we may require additional capital resources in the future.
Credit Agreement
On July 16, 2024 (the Closing Date), we entered into a credit agreement with Silver Point Finance, LLC as administrative agent and collateral agent, and the lenders from time to time party thereto (Credit Agreement). The Credit Agreement provides a five-year term loan facility in an aggregate principal amount of up to $225 million, consisting of an initial term loan in the aggregate principal amount of $125 million, which was funded on the Closing Date, and a delayed draw term loan facility in the aggregate principal amount of $100 million, which was undrawn on the Closing Date.
We had the option to draw up to $40.0 million under the delayed draw facility within six months after the Closing Date and on October 29, 2024, we drew an additional principal amount of $37.7 million. We also had the option to draw up to an additional $60.0 million under the delayed draw facility within eighteen months after the Closing Date, but did not utilize this to draw down any additional debt. Borrowings under the Credit Agreement bear interest at a rate per annum equal to the secured overnight financing rate (SOFR) plus 6.5%. Commencing with the quarter ended December 31, 2024, we are required to make quarterly principal payments in an amount equal to 0.25% of the aggregate original principal amount. The final maturity date of the term loans is July 16, 2029.
We used a portion of the net proceeds from the initial term loan together with cash on hand to repay in full the outstanding principal and accrued interest on our 2.50% Convertible Senior Notes due 2025 at maturity on April 14, 2025 and we expect to use the remaining net proceeds from the initial term loan for working capital and general corporate purposes. We used proceeds from the delayed draw term loan facility to fund our inorganic growth strategy through permitted acquisitions (including deferred purchase price or similar arrangements related thereto) and to pay fees, costs, and expenses in connection therewith.
Refer to "Note 10-Debt" of our consolidated financial statements for additional details regarding the Credit Agreement.
Share repurchase plan
In August 2022, our board of directors authorized a share repurchase program to repurchase up to $40.0 million of our outstanding shares of common stock (Share Repurchase Plan). During the year ended December 31, 2025, we repurchased and retired 1,103,601 shares of our common stock for $5.0 million at an average purchase price of $4.51 per share. The total remaining authorization for future shares of common stock repurchases under our Share Repurchase Plan is $24.8 million as of December 31, 2025.
Convertible senior notes
On April 14, 2020, we issued $230.0 million in aggregate principal amount of 2.50% Convertible Senior Notes due 2025 (the Notes), pursuant to an Indenture dated April 14, 2020, with U.S. Bank National Association, as trustee, in a private offering to qualified institutional buyers. We received net proceeds from the sale of the Notes of $222.5 million, after deducting the initial purchasers' discounts and offering expenses payable by us. The Notes were senior, unsecured obligations and accrued interest payable semiannually in arrears on April 15 and October 15 of each year, beginning on October 15, 2020, at a rate of 2.50% per year. The Notes were fully repaid in cash at maturity on April 14, 2025. Refer to Note 10-Debt to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional details regarding maturity of the Notes.
Cash flows
The following table summarizes our cash flows for the years ended December 31, 2025, 2024, and 2023:
|
Year Ended December 31,
|
|||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
|
(in thousands)
|
|||||||||||||||||
|
Net cash provided by (used in) operating activities
|
$ | 731 | $ | 14,559 | $ | (33,080) | |||||||||||
| Net cash provided by (used in) investing activities | 36,193 | (22,902) | 20,293 | ||||||||||||||
| Net cash (used in) provided by financing activities | (235,782) | 151,746 | 2,730 | ||||||||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
27 | (34) | 21 | ||||||||||||||
| Net (decrease) increase in cash and cash equivalents | $ | (198,831) | $ | 143,369 | $ | (10,036) | |||||||||||
Operating activities
Our largest source of operating cash flows is cash collections from our clients for technology and professional services arrangements. Our primary uses of cash from operating activities are for employee-related expenses, marketing expenses, and technology costs.
For the year ended December 31, 2025, net cash provided by operating activities was $0.7 million, which included a net loss of $178.0 million. Non-cash charges primarily consisted of $110.2 million in impairment of goodwill and intangible assets, $50.5 million in depreciation and amortization, $27.0 million in stock-based compensation, $3.7 million related to the amortization of debt discount, issuance costs, and deferred financing costs, and $6.9 million in impairment of long-lived assets, reduced by the $7.1 million decrease in fair value of the contingent consideration liability and $1.6 million of investment discount accretion.
For the year ended December 31, 2024, net cash provided by operating activities was $14.6 million, which included a net loss of $69.5 million. Non-cash charges primarily consisted of $41.4 million in depreciation and amortization, $40.1 million in stock-based compensation, $3.3 million related to the amortization of debt discount, issuance costs, and deferred financing costs, and $2.2 million in impairment of long-lived assets, reduced by $4.8 million of investment discount accretion.
For the year ended December 31, 2023, net cash used in operating activities was $33.1 million, which included a net loss of $118.1 million. Non-cash charges primarily consisted of $55.8 million in stock-based compensation, $42.2 million in depreciation and amortization, and $4.1 million in impairment of long-lived assets, reduced by $9.7 million of investment discount accretion.
Investing activities
Net cash provided by investing activities for the year ended December 31, 2025 of $36.2 million was primarily due to the sale and maturity of short-term investments of $163.9 million, offset by purchases of short-term investments of $65.1 million. The net investing cash inflows provided by our short-term investment activity were partially offset by investing cash outflows of $41.1 million in the acquisition of Upfront, $19.8 million of capitalized internal-use software development costs, and $1.8 million in purchases of property, equipment, and intangible assets.
Net cash used in investing activities for the year ended December 31, 2024 of $22.9 million was primarily due to the purchases of short-term investments of $168.3 million, offset by the sale and maturity of short-term investments of $242.1 million. The net investing cash inflows provided by our short-term investment activity were offset by investing cash outflows of $80.3 million in the acquisition of businesses, $14.3 million of capitalized internal-use software development costs, and $2.1 million in purchases of property, equipment, and intangible assets.
Net cash provided by investing activities for the year ended December 31, 2023 of $20.3 million was primarily due to the sale and maturity of short-term investments of $336.8 million, reduced by the purchases of short-term investments of $290.8 million. The net investing cash inflows provided by our short-term investment activity was partially offset by investing cash outflows of $11.4 million used to acquire ERS, $12.0 million of capitalized internal-use software development costs, and $2.4 million in purchases of property, equipment, and intangible assets.
Financing activities
Net cash used in financing activities for the year ended December 31, 2025 of $235.8 million was primarily the result of $232.3 million in debt repayments and $5.0 million in repurchases of common stock, partially offset by $1.5 million in proceeds from our ESPP.
Net cash provided by financing activities for the year ended December 31, 2024 of $151.7 million was primarily the result of $152.3 million of proceeds related to our Credit Agreement and drawing on the delayed draw facility, net of issuance costs, $2.4 million in proceeds from our ESPP and $0.2 million in stock option exercise proceeds, reduced by $2.2 million for the payment of deferred financing costs and $1.0 million in debt repayments.
Net cash provided by financing activities for the year ended December 31, 2023 of $2.7 million was primarily the result of $3.6 million in proceeds from our ESPP and $1.0 million in stock option exercise proceeds, partially offset by $1.8 million in repurchases of common stock.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires management to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the applicable periods. We base our estimates, assumptions, and judgments on our knowledge and experience about past and current events and on various other factors that we believe to be reasonable under the circumstances. Different assumptions and judgments would change the estimates used in the preparation of our consolidated financial statements, which, in turn, could change the results from those reported. We evaluate our estimates, assumptions, and judgments on an ongoing basis.
The critical accounting estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.
Revenue recognition
We derive our revenues primarily from technology subscriptions and professional services. We determine revenue recognition by applying the following steps:
•Identification of the contract, or contracts, with a client;
•Identification of the performance obligations in the contract;
•Determination of the transaction price;
•Allocation of the transaction price to the performance obligations in the contract; and
•Recognition of revenue when, or as, we satisfy the performance obligation.
We recognize revenue net of any taxes collected from clients and subsequently remitted to governmental authorities.
Technology revenue
Technology revenue primarily consists of subscription fees charged to clients for access to use our technology. We provide clients access to our technology through either an all-access or limited-access, modular subscription.
The majority of our subscription arrangements are cloud-based and do not provide clients the right to take possession of the technology or contain a significant penalty if the client were to take possession of the technology. Revenue from cloud-based subscriptions is recognized ratably over the contract term beginning on the date that the service is made available to the client. Our subscription contracts generally have a three or five-year term, of which many are terminable after one year upon 90 days' notice. Subscriptions that allow the client to take software on-premise without significant penalty are treated as time-based licenses. These arrangements generally include access to technology, access to unspecified future products, and maintenance and support. Revenue for upfront access to our technology library is recognized at a point in time when the technology is made available to the client. Revenue for access to unspecified future products included in time-based license subscriptions is recognized ratably over the contract term beginning on the date that the access is made available to the client.
Professional services revenue
Professional services revenue primarily includes data and analytics services, domain expertise services, TEMS, and implementation services. Professional services arrangements typically include a fee for making full-time equivalent (FTE) services available to our clients on a monthly basis. 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. Professional services are typically considered distinct from the technology offerings and revenue is generally recognized as the service is provided using the "right to invoice" practical expedient.
Contracts with multiple performance obligations
Many of our contracts include multiple performance obligations. We account for performance obligations separately if they are capable of being distinct within the context of the contract. In these circumstances, the transaction price is allocated to separate performance obligations on a relative standalone selling price basis. We determine standalone selling prices based on the observable price a good or service is sold for separately when available. In cases where standalone selling prices are not directly observable, based on information available, we utilize the expected cost plus a margin, adjusted market assessment, or residual estimation method. We consider all information available including our overall pricing objectives, market conditions, and other factors, which may include client demographics and the types of users. Standalone selling prices are not directly observable for our all-access and limited-access technology arrangements, which are composed of cloud-based subscriptions, time-based licenses, and perpetual licenses. For these technology arrangements, we generally use the residual estimation method due to a limited number of standalone transactions and/or prices that are highly variable.
Variable consideration
We have also entered into at-risk and shared savings arrangements with certain clients whereby we receive variable consideration based on the achievement of measurable improvements which may include cost savings or performance against metrics. For these arrangements, we estimate revenue using the most likely amount that we will receive. Estimates are based on our historical experience and best judgment at the time to the extent it is probable that a significant reversal of revenue recognized will not occur. Due to the nature of our arrangements, certain estimates may be constrained until the uncertainty is further resolved.
Business combinations
The results of businesses acquired in a business combination are included in our consolidated financial statements from the date of the acquisition. Purchase accounting results in assets and liabilities of an acquired business generally being recorded at their estimated fair value on the acquisition date. Any excess consideration over the fair value of the identifiable assets acquired and liabilities assumed is recognized as goodwill.
We perform valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination in order to record the tangible and intangible assets acquired and liabilities assumed based on our best estimate of fair value. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and selection of comparable companies. Significant estimation is required in determining the fair value of the client-related intangible assets and technology-related intangible assets. The significant estimation is primarily due to the judgmental nature of the inputs to the valuation models used to measure the fair value of these intangible assets, as well as the sensitivity of the respective fair values to the underlying significant assumptions. We typically use the income approach or cost approach to measure the fair value of intangible assets. The significant assumptions used to form the basis of the estimates included the number of engineer hours required to develop technology, expected revenue including revenue growth rates, rate and timing of obsolescence, royalty rates and earnings before interest, taxes, depreciation and amortization (EBITDA) margin used in the estimate for client relationships, and backlog.
Many of these significant assumptions are forward-looking and could be affected by future economic and market conditions. We engage the assistance of valuation specialists in concluding on fair value measurements in connection with determining fair values of material assets acquired and liabilities assumed in a business combination. Transaction costs associated with business combinations are expensed as incurred and are included in general and administrative expense in our consolidated statements of operations and comprehensive loss.
Contingent consideration liabilities
Our acquisition consideration in business combinations may include an estimate for contingent consideration that will be paid if certain earn-out performance targets are met. The resulting contingent consideration liabilities are categorized as a Level 3 fair value measurement because we estimate projections during the earn-out period utilizing unobservable inputs, including various potential pay-out scenarios based on billings and revenue-related earn-out targets. Changes to the unobservable inputs could have a material impact on our consolidated financial statements.
We generally value the expected contingent consideration and the corresponding liabilities using a probability model such as the Monte Carlo method or Black-Scholes Model based on estimates of potential payment scenarios. Probabilities are applied to each potential scenario and the resulting values are discounted using a rate that considers weighted average cost of capital as well as a specific risk premium associated with the riskiness of the earn-out itself, the related projections, projected payment dates, and volatility in the fair value of our common stock. The fair value of the contingent consideration is remeasured each reporting period. As applicable, the portion of the contingent consideration liabilities that will be settled in shares of our common stock is classified as a component of non-current liabilities in our consolidated balance sheets, while the portion to be paid in cash is classified as a component of current liabilities. Changes to the contingent consideration liabilities are reflected as part of general and administrative expense in our consolidated statements of operations.
Goodwill
We operate our business in two operating segments that also represent our reporting units. Our reporting units are organized based on our technology and professional services. We record goodwill as the difference between the aggregate consideration paid for a business combination and the fair value of the identifiable net tangible and intangible assets acquired. Goodwill includes the know-how of the assembled workforce, the ability of the workforce to further improve technology and product offerings, client relationships, and the expected cash flows resulting from these efforts. Goodwill may also include expected synergies resulting from the complementary strategic fit these businesses bring to existing operations. Goodwill is assessed for impairment annually on October 31 or more frequently if indicators of impairment are present or circumstances suggest that impairment may exist.
Our first step in the goodwill impairment test is a qualitative analysis of factors that could be indicators of potential impairment. Judgment in the assessment of qualitative factors of impairment may include changes in business climate, market conditions, or other events impacting the reporting unit. Next, if a quantitative analysis is necessary, we compare the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not considered impaired. Performing a quantitative goodwill impairment test includes the determination of the fair value of a reporting unit, which requires management to use significant judgment and estimation. The significant estimation is primarily due to the judgmental nature of the inputs to the valuation models used to measure the fair value of the reporting units, as well as the sensitivity of the respective fair values to the underlying significant assumptions. Typical methods to derive the fair value of reporting units include using the income or market approaches.
The significant assumptions used to form the basis of the estimates include, among others, the selection of valuation methodologies, estimates of expected revenue, including revenue growth rates, and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, and the selection of appropriate market comparable companies. Many of these significant assumptions are forward-looking and could be affected by future economic and market conditions. If a quantitative analysis is necessary, we typically engage the assistance of a valuation specialist in concluding on fair value measurements in connection with determining the fair values of our reporting units. If the carrying amount of the reporting unit exceeds its fair value, we would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value.
Stock-based compensation
Stock-based awards, including stock options, restricted stock units (RSUs), performance-based restricted stock units (PRSUs), and restricted shares are measured and recognized in the consolidated financial statements based on the fair value of the award on the grant date or, when applicable, the modification date. The grant date fair value of our stock-based awards is typically determined using the market closing price of our common stock on the date of grant; however, we also consider whether any adjustments are required when the market closing price does not reflect certain material non-public information that we know but is unavailable to marketplace participants on the date of grant. The expense is recognized straight-line over the vesting period for awards with a service condition. The accelerated attribution method is used for PRSUs. We record forfeitures of stock-based awards as the actual forfeitures occur.
For awards subject to performance conditions, we record expense when the performance condition becomes probable. Each reporting period, we evaluate the probability of achieving the performance criteria, estimate the number of shares that are expected to vest, and adjust the related compensation expense accordingly. For awards subject to market conditions, we estimate the fair value as of the grant date using a Monte Carlo simulation valuation model which requires the use of various assumptions, including historic stock price volatility and risk-free interest rates as of the valuation date corresponding to the length of time remaining in the performance period. Stock-based compensation expense for awards with market conditions is recognized over the requisite service period using the accelerated attribution method and is not reversed if the market condition is not met.
Stock-based compensation expense related to purchase rights issued under the 2019 Health Catalyst Employee Stock Purchase Plan (ESPP) is based on the Black-Scholes option-pricing model fair value of the estimated number of awards as of the beginning of the offering period. Stock-based compensation expense is recognized using the straight-line method over the offering period. We will continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis. As we continue to accumulate additional data related to our common stock, we may have refinements to our estimates, which could materially impact our future stock-based compensation expense.
Recent Accounting Pronouncements
See "Description of Business and Summary of Significant Accounting Policies" in Note 1 to our audited consolidated financial statements included within Item 8 in this Annual Report on Form 10-K for more information.
Health Catalyst Inc. published this content on March 12, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 12, 2026 at 21:00 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]