Health Catalyst, Inc. Q4 FY2025 earnings call

Ben Albert stepped into the CEO role following Dan Burton's departure. He mentioned recent leadership transitions, including appointing general managers for interoperability and cybersecurity, transitioning the chief commercial officer role, and opening searches for COO and CMO. They are reviewing the cost structure, focusing on expanding technology bookings and margins, and driving cash flow generation. The core value proposition is strong, but they need to be more focused and consistent in execution. They will sharpen and simplify the commercial story, refocus on core strengths, and improve how they measure and communicate performance. Jason Alger walked through financial results, noting full-year 2025 revenue and adjusted EBITDA, fourth - quarter revenue breakdown, margin details, and operating expenses. He also discussed Q1 2026 guidance and migration - related impacts on revenue.

For the full year of 2025, total revenue was $311.1 million and adjusted EBITDA was $41.4 million. In the fourth quarter of 2025, total revenue was $74.7 million, with technology revenue at $51.9 million and professional services revenue at $22.8 million. Technology revenue increased 7% year-over-year to $208.3 million for the full year 2025, while professional services revenue declined 8%. Adjusted gross margin for the fourth quarter was 53.5%, and for the full year was 51.1%. Adjusted operating expenses for the fourth quarter of 2025 were $26.2 million (35% of revenue) and for the full year 2025 were $117.7 million (38% of revenue). Adjusted EBITDA for the fourth quarter of 2025 was $13.8 million, and for the full year 2025 was $41.4 million. For Q1 2026, total revenue is expected to be $68 million to $70 million and adjusted EBITDA is expected to be $7 million to $8 million.

Today, they shared first quarter revenue and adjusted EBITDA guidance only, with Q1 2026 expected total revenue of $68 million to $70 million and adjusted EBITDA of $7 million to $8 million. They plan to provide full year 2026 revenue and adjusted EBITDA guidance no later than the first quarter earnings call in May. They mentioned ongoing migration - related impacts on revenue in 2026 and 2027, with roughly $12.5 million in DOS - related ARR downsell and churn expected across 2026 and 2027, and an additional $52 million in DOS - related ARR subject to negotiation.

There are risks related to the migration of DOS clients to Ignite, including potential churn and downsell of data platform infrastructure ARR. Macroeconomic challenges, market conditions, and the impact of restructurings could also affect the business. There is also the risk that actual results may materially differ from forward - looking statements due to various factors mentioned in the risk factors in the most recent Form 10 - Q and Form 10 - K.

Q: Does the strategic review include the possibility of selling the company?

A: We are in an assessment mode, really focused on best positioning the company for long - term success and creating shareholder value, just in an assessment phase.

Q: Can you go over the transition impact with respect to the first quarter in terms of the $52 million data platform for the remainder of the year?

A: $52 million is DOS - related revenue encompassing integrated applications and data platform infrastructure, with data platform infrastructure seeing the highest pressure, and 35 million of data platform infrastructure ARR being worked on to retain with clients.

Q: What do you see as your right to win with the current portfolio when talking to clients?

A: The market is in need of better managing costs and driving clinical quality, and we have 15 years of experience, thousands of projects, and intellectual property to enable AI - guided change management.

Q: Can you give a split between customers rolling off completely and downselling?

A: Generally, we don't lose enterprise relationships, with pressure mainly on the data platform infrastructure side with downselling related to that.

Q: What are the specific Health Catalyst apps in cost and clinical quality categories and how to protect against data platform disintermediation diluting application value?

A: Apps include clinical cost intelligence, Power Labor, measures - related, ambulatory strategy - related, and consumer intelligence apps. We focus on meeting clients where they are and maintaining application relationships.

Q: How to think about the durability of margins if revenue stays under pressure for another few quarters?

A: There is pressure from DUS to Ignite migration on technology and professional services margins, but once through migration, costs may be removed, and they are still evaluating 2026 growth.

Q: How much of the $65 million at risk will impact 2026 and quarterly cadence? And what is the realistic success rate for negotiations on $52 million ARR?

A: About 75% of the $12.5 million DOS - related ARR at risk will impact 2026, more around mid - year and later half; details on $52 million ARR negotiations will be provided with full year 2026 guide.

Q: Can you talk about acquisitions and which fit into priorities?

A: Assessments are ongoing to figure out which acquisitions create the most value going forward, with applications aligning to the three priority areas of cost management, clinical quality, and consumer experience, and more clarity expected at the next earnings call.