Health Catalyst, Inc. (NASDAQ:HCAT) Q3 2025 Earnings Call Transcript

Health Catalyst, Inc. (NASDAQ:HCAT) Q3 2025 Earnings Call Transcript November 10, 2025

Health Catalyst, Inc. beats earnings expectations. Reported EPS is $0.06, expectations were $0.05.

Operator: To all locations on hold, we are still checking in participants for today’s program. Thank you for your patience and please continue to stand by. Please standby, your program is about to begin. If you need assistance on today’s program, welcome to the Health Catalyst Third Quarter 2025 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions following the presentation. To get to as many questions as time permits, we kindly ask that you limit yourself to one question. If you have any follow-up, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, I would now like to turn the call over to Matt Hopper, Senior Vice President of Finance and Head of Investor Relations.

Matt Hopper: Good afternoon, and welcome to Health Catalyst’s earnings 2025, which ended on 09/30/2025. My name is Matt Hopper, Senior Vice President of Finance and Head of Investor Relations. With me today are Dan Burton, our Chief Executive Officer, Ben Albert, our President and Chief Operating Officer, and Jason Alliger, our Chief Financial Officer. A complete disclosure of our results can be found in our press release issued today as well as in our related Form 8-Ks furnished to the SEC, both of which are available on the Investor Relations section of our website at ir.healthcatalyst.com. As a reminder, today’s call is being recorded, and a replay will be available following the conclusion of the call. During today’s call, we will make forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our future growth and our financial outlook for Q4 and fiscal year 2025.

Growth trends, targets, and expectations beyond 2025, our public market value, our CEO transition, our ability to attract new clients and retain and expand our relationships with existing clients, our growth strategies, the impact of macroeconomic challenges including the impact of inflation, tariff and the interest rate environment, changes to government funding and payment programs that have and could further negatively impact our end market and the business of our clients, bookings, our pipeline conversion rates, the demand for deployment and development of our Ignite data and analytics platform and our applications, timing and status of Ignite migrations, acquisition, integration and strategy, the impact of restructuring and the general anticipated performance of our business, including the ability to improve profitability.

These forward-looking statements are based on management’s current views and expectations as of today and should not be relied upon as representing our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. Actual results may materially differ. Please refer to the risk factors in our Form 10-Ks for the full year 2024 filed with the SEC on 02/26/2025, and our Form 10-Q for the third quarter 2025 that will be filed with the SEC. We will also refer to certain non-GAAP financial measures to provide additional information to investors. Non-GAAP financial information is presented for supplemental information purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.

A reconciliation of non-GAAP financial measures for the 2025 and 2024 to their most comparable GAAP measures is provided in our press release. With that, I will turn the call over to Dan Burton. Dan?

Dan Burton: Thank you, Matt. And thank you to everyone who has joined us this afternoon. We are pleased to share our Q3 2025 financial results, including total revenue of $76.3 million and adjusted EBITDA of $12 million, exceeding our guidance on each metric. Additionally, we are encouraged with the results of our Technology segment, which recorded revenue of $52.1 million, representing 7% year-over-year growth. Adjusted gross margin was 53%, an increase of approximately 50 basis points year-over-year. I will now share some perspectives on our anticipated 2025 bookings levels, which align with what we shared a few months ago. We continue to expect approximately 30 net new platform client additions for 2025. As a reminder, Q4 is often a very active quarter in terms of bookings and contract renewals.

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

Ben joined Health Catalyst through the acquisition of Upfront Healthcare Services earlier this year. With over 25 years of experience in building and leading healthcare organizations, Ben has consistently delivered compelling value propositions, successfully activating patients while enhancing clinical, financial, and operational outcomes. Since September 10, Ben has provided crucial day-to-day leadership at Health Catalyst, overseeing operations and product engineering, technology delivery and support, growth operations, finance, and corporate strategy. I have partnered closely with Ben over these last few months and have found his experience, insights, operational focus, commitment, and mission-driven leadership to be effective in energizing.

I look forward to our continued work together in support of Health Catalyst’s mission and strategy. Ben?

Ben Albert: Thank you, Dan. I appreciate the opportunity to share updates on several areas that are central to our strategy and operational progress. Over the past quarter, we have continued to strengthen our leadership team to support our long-term vision and improve performance. Recent appointments include Robbie Hughes as Chief Product Officer, Chris Tyne as Chief Engineering Officer, Brian Barry as Chief Client Services Officer, and Shonak Lahiri as SVP of Global Solutions. These changes reflect our commitment to building an agile, high-performing team that is well-positioned to execute on our 2026 strategy and deliver value to our clients and shareholders. Our solutions are delivering measurable results where health systems need the most: cost control and operational efficiency.

With ongoing financial and workforce pressures, our solutions help organizations streamline operations, reduce spend, and sustain performance. Temple University Health System used power costing and POP analyzer to achieve $7.5 million in savings through better charge capture, faster collections, and lower medications costs. Entegris Health leveraged our power labor offering to save $30 million in labor by reducing contingent staff, improving cost per discharge, all while maintaining high standards of care. These results highlight how we’re directly addressing the market’s most urgent needs and delivering real, quantifiable value. We’ve tailored our solutions to align with today’s environment, positioning us as a strong partner for clients navigating this period of change.

We’re making progress on our Ignite migration initiatives, remaining on track for approximately two-thirds of our DOS clients to migrate by the end of 2025. As Dan mentioned, we’re experiencing dollar-based retention pressure in 2025 due to the ongoing migration efforts. We expect to go into 2026 with similar pressure. While we anticipate making meaningful progress in our Ignite migrations by the end of 2026, we have adjusted our timeline and approach to be more client-centric, recognizing that some organizations prefer to remain on DOS for the near and medium term. We are committed to providing more flexibility and meeting clients where they are, and we expect this approach will improve client experience and dollar-based retention. Dan?

Dan Burton: Thank you for that update, Ben. I want to take a moment to reflect on our recent experience at the Health Catalyst Analytics Summit, which continues to be a valuable opportunity for us to engage with hundreds of attendees, including our clients, partners, investors, analysts, and thought leaders. The energy and insights from HAS reinforced our commitment to client-focused innovation and measurable improvement as we move forward. Turning to our outlook for 2026, we are currently in the early stages of our annual planning process, and we look forward to sharing more specific details and updated expectations during our next earnings call. Based on current trends, we anticipate revenue performance to be a few points lower in 2026 relative to 2025, driven by factors in 2025 such as dollar-based retention rate in the low 90s, a lower net new client count, Ignite migration headwinds, and exiting a restructuring of a few less profitable TEMS relationships.

At the same time, we expect to see improvement in adjusted EBITDA, reflecting our ongoing efforts to strategically focus the organization, manage costs, make targeted investments, and optimize our migrations. We will be balancing growth, revenue mix, and free cash flow progression. We are taking a measured approach to setting expectations, and we will continue to provide updates as we navigate the evolving market landscape. Next, as we continue to focus on disciplined capital allocation, we reiterate our commitment to realizing a strong return on our acquisition investments. We feel confident in our current differentiated applications portfolio, and we do not anticipate pursuing additional acquisitions in the near to medium term. Our priority is driving growth, profitability, and shareholder return from our existing capabilities and recently acquired assets.

With that, I’ll turn the call over to Jason to provide a detailed review of financial results and guidance. Jason?

Jason Alliger: Thank you, Dan. For 2025, we generated $76.3 million in total revenue. This total represents an outperformance relative to our quarterly guidance and represents flat results year over year. Technology revenue for 2025 was $52.1 million, representing a 7% increase year over year. This year-over-year growth was primarily driven by recurring revenue from new and acquired clients. Professional services revenue for Q3 2025 was $24.3 million, a 12% decline compared to Q3 2024, primarily driven by the exit of our less profitable pilot ambulatory operations, PEMS contracts. I’d also note that Q3 2025 Technology and Professional Services revenue did include nonrecurring items that are not anticipated in Q4 2025. For 2025, total adjusted gross margin was 53%, representing an increase of approximately 50 basis points year over year and up approximately 30 basis points compared to Q2 2025.

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

As a percentage of revenue, adjusted total operating expenses were 37% of revenue, which compares favorably to 38% in Q3 2024. Adjusted EBITDA for Q3 2025 was $12 million, exceeding our Q3 guidance of approximately $10.5 million and up 64% compared to Q3 2024. Our adjusted net income per share in Q3 2025 was $0.06. The weighted average number of shares used in calculating adjusted basic net income per share in Q3 was approximately 70.4 million shares. Turning to the balance sheet, we ended Q3 2025 with $92 million of cash, cash equivalents, and short-term investments, compared to $392 million as of year-end 2024. In terms of liabilities, the face value of our term loan is $161 million. As we shared on our May call, on 04/14/2025, we paid off the $230 million convertible notes in full at maturity with cash from the balance sheet.

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

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

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

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

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

Q&A Session

Operator: The floor is now open for questions. To one question and that you pick up your handset. Thank you. Our first question is coming from Jared Haas of William Blair. Your line is open. Please go ahead.

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

Dan Burton: Yes. Thank you, Jared. Great questions. And I would invite Ben to maybe share a few comments and then Jason and I might add some color commentary as well. Ben?

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

Dan Burton: Yes, totally agree. And Jared, to a couple of your specific questions, I think we still anticipate a large majority of our clients to be migrated by 2026. As Ben mentioned in our prepared remarks, there are a number who, as they’re facing lots of dynamics, lots of pressures from the big beautiful bill and other dynamics, have come to us. And appreciate Ben’s leadership in recognizing the value of meeting clients where they are. And there is a small subset that would prefer to get through some other items and stay on DOS for a period of time. And I think the introduction of more flexibility on our side is really designed to meet clients where they are. More flexibility as it relates to how clients want to migrate and even that timeline for those that do want to migrate just providing them more flexibility. We do believe will lead to some improvement in our dollar-based retention. The response so far from clients has been really positive.

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

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

Jessica Tassan: Hi, guys. Thanks for taking the question. I appreciate it. So we know that tech revenue was in line with your forecast, but how do we think about just the sequential decline in dollars of tech revenue as representing kind of the combination between your like low 90s dollar-based retention and then extensively the implementation of whatever portion of the new deals that you all booked during 2Q 2025? So I guess just if you could break out like the 3Q tech revenue between the dollar-based retention and then like the implementation of the new clients booked in 2025. Then just any comments on fourth-quarter tech revenue, and expectations for sequential growth in tech revenue as we look to 2026 would be really helpful just as we are trying to refine our models into the end of the year. Thanks so much.

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

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

Jason Alliger: I think that’s well said, Dan. The only thing I would add is, as mentioned in the prepared remarks, we did have a level of nonrecurring revenue in both the technology revenue line and professional services revenue lines. So that’s also contributing to that decline that we’re expecting in Q4.

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

Elizabeth Anderson: Hi, guys. Thank you so much for the question. Really appreciate it. Can you talk a little bit, maybe just to make sure that we’re all level set up, help us understand sort of more specifically the value of the one-timers that you are calling out? And then two, how do we think about like given some of the concerns that some of your end market customers are having as we’re going into 2026, how do you kind of see as far as you can tell right now on the pipeline and whatnot when the company sort of returns to positive rather than growth? Are we thinking sort of mid-2026 or you think maybe potentially a little for ’27? I just want to kind of get a better sense of that as we move through the opportunities and the challenges that your customers are facing? Thank you.

Dan Burton: Yes. Thanks, Elizabeth. Jason, do you want to take that first question then I’ll comment on the second question?

Jason Alliger: Yes. On that first question, the value of the one-timers, I mean, is becoming more common in our professional services revenue line to have one-time revenue, especially as we see the shift from FTE-based arrangements to more project-based arrangements. Less common on the technology side. In the technology, one-time revenue is roughly in the range of $500,000 to $1 million that we saw in that Q3 technology revenue line that we’re not expecting to reoccur in Q4.

Dan Burton: Jason. And as it relates to your questions about the pipeline and the reacceleration of our growth, our pipeline remains robust and we’re encouraged to see meaningful additions to our pipeline. I think there are some dynamics that we are watching and managing through. One of the dynamics that we’ve spoken to in recent discussions as well is that the deal sizes are a little bit smaller. I do think that is the result of some pressure from the big beautiful bill and some of the Medicaid cuts that our clients and our end market are absorbing. But that also has some positive impacts in that sometimes smaller deals move a little bit more quickly through the pipeline. At the same time, we’ve also seen some dynamics where it’s harder to predict exactly what the sales cycle might look like in terms of when deals will close just because of some of the uncertainty as folks are working through their budgeting process.

But fundamentally, as we think about the strategy of reacceleration of growth, we’re definitely focused on our core differentiation which has always been our deep healthcare expertise, and our passion for enabling clients to realize measurable improvement. I think as 2026’s strategy and plan is coming into focus, I really like where Ben and the leadership team are focusing. And Ben, maybe you could give some specific examples.

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

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

Elizabeth Anderson: Great. Thank you very much.

Dan Burton: Thanks, Elizabeth. Our next question is from Richard Close of Canaccord Genuity. Your line is open.

Richard Close: Yes. Thanks for the questions. Maybe just a follow-up on Jeff’s and Elizabeth’s questions. Just with respect to the ’26, I guess, I think you said likely a couple of points lower growth than ’25. I guess the 1% to 2% you’re looking at in ’25. So as we think about professional services and tech, is that the 26,000,000 mainly being driven by the tech? And or is there more professional services contracts that you’re pruning? And then I have a follow-up.

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

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

And of course, there’s always some in-year revenue growth as well.

Jason Alliger: Yes. The only thing I would add, Richard, is we will provide additional related to this as part of JPM and especially in our Q4 earnings call. But as we close out the year, we’ll have full visibility on deals that are signed in Q4. It’s a busy period for us. But one clarifier is that we did mention in the transcript that we’d be a few points lower in 2026 compared to 2025.

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

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

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

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

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

Richard Close: Okay. Thank you.

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

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

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

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

Daniel Grosslight: Makes sense. Thank you.

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

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

Dan Burton: Thanks, David. Great questions, and it was good to see you. At HAS as well. Thank you for your attendance. So as it relates to that first question, I think one of the important learnings that we wanted to highlight in this earnings call and a shift in our approach is really addressing that first item that you brought up that I think in the past, had been a little too inflexible as it relates to kind of requiring our client to move from DOS to Ignite. And requiring that to be the next step before we talk about other things. And there are some cases where certain apps are only built to work on top of Ignite. So there are some use cases. That can’t be done, but most use cases can be done on DOS. And I think the shift that I hope we’re conveying is that recognition that it’s really important to meet clients where they are.

It’s important to give them flexibility. And if they want to stay on DOS for a little bit longer, and that can open up conversations where we can grow with app layer, use case layer opportunities on top of DOS, we should pursue those. And in particular, as it relates to what we were talking about just a few minutes ago, that’s where the client gets the greatest ROI. That apps layer. And so we’re providing a lot more flexibility and we do expect that that will strengthen our growth within that part of our client base moving forward. And we expect that that should enable all of our clients to pursue growth opportunities, especially the Apps layer with us moving forward. Before we address the Tim’s question, anything Ben that you’d add on that migration dynamic?

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

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

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

Jason Alliger: Yes, I think you covered it well, Dan. Like Dan mentioned, David, like as we hit June, that’s when we will lap. The ambulatory temps exit. And so that’s when we will see that difference in growth rate related to those relationships, but we’ll continue to monitor any of those less profitable TAMs relationships that make sense for restructure.

David Larsen: Great. And just one more quick follow-up. Ben, from your perspective, one year from now, three years from now, five years from now, what would you like to see manifest? I mean, Dan and his team have built a fantastic asset with respect to technology over the past call it, five or ten years. What do you think needs to get done to unleash this value here from your perspective? Thanks, Ben.

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

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

David Larsen: Thanks very much.

Operator: We’ll take a question from Stan Berenstain of Wells Fargo. Your line is open.

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

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

Stan Berenstain: Got it. And then maybe a quick one on margins. So if we think about the puts and takes related to revenue, cost cuts, efficiencies, migration issues, how comfortable are you in the 4Q EBITDA acting as a glide path as we think about 2026? Thanks.

Dan Burton: Yes, it’s a great question, Stan. I’ll share a few thoughts and then Jason, add anything as well. So we are encouraged Stan to see meaningful progress as it relates to our EBITDA growth or adjusted EBITDA growth. We’re excited to have reaffirmed our full-year guidance of $41 million of EBITDA for 2025, which represents 57% year-over-year growth. As we shared in the prepared remarks, we do expect further growth in EBITDA. And in some ways, Q4 can be a very useful guide as it relates to what we might be looking like moving into 2026. In other ways, there are always puts and takes as well. So there are some one-time items that contribute to Q4 that are specific to one quarter and there are also some costs that will incur. In 2026. As we move into that process in that calendar year. And we are just in the early stages of the planning process right now. So we’ll have a lot more to share at the next earnings call. Jason, what would you add?

Jason Alliger: I think Dan covered it well.

Stan Berenstain: Great. Thank you.

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

Jeff Garro: Yes, good afternoon. Thanks for taking my question. I want to follow-up on EBITDA growth in 2026 and first, clearly a strong effort to manage costs over the last year. Then you had a call out of some areas of strategic focus and investments. So I wanted to see if there’s anything else you want to add there. And in particular, we heard the mention of potential targeted market expansion. So would love some more color on areas where you’re considering expanding. Thanks.

Dan Burton: Yes, I’ll share a thought or two and then Ben and Jason please add as well. So we are early in the planning process for 2026. But as Ben alluded to a couple of minutes ago, we see some specific use case areas where clients really need those solutions. And he mentioned a couple in the cost management space, power costing, power labor, rev cycle space with and some specific ambulatory offerings where we’re seeing a lot of client demand and a lot of opportunity to leverage new capabilities, new technologies, AI capabilities to accelerate the ROI that a client can achieve. So we want to make sure as we go through the planning process that we’re investing in those areas to maintain that differentiation and really strengthen and accelerate that ROI.

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

Anything Jason or Ben you would add?

Jason Alliger: Yes. The only thing I would add is we will provide additional precision related to those areas of investment as part of our Q4 earnings call in early 2026.

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

Gabrielle Alexa Ingoglia: Hi, everyone. This is Gabby on for Sarah. I wanted to double click again on the EBITDA growth for ’26. Last quarter, we had a discussion around $60 million being an appropriate run rate and the commentary today is up year over year. Can you talk about what new costs you’ve baked in to maybe change the tone on commentary? And then also if you could just highlight what apps products are the most sought after in your 4Q conversations, that would be very helpful. Thank you.

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

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

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

Operator: We have a follow-up from Richard Close of Canaccord Genuity. Your line is open.

Richard Close: Yes. Just two quick ones. The one-timers, the 500k to a million in tech, what specifically was that? And then the second question is, are you guys seeing any business come through the Microsoft relationship for those lower level I guess, $100,000 deals and any success there to point to?

Jason Alliger: Great. Jason, you want to take the first one?

Jason Alliger: Yes. On those one-timers, Richard, those can be either related to pharma, Dil, where it’s a quick delivery or it can occasionally be related to timing of like a renewal being signed where we’re providing the service over time, but need the contractual paper to be signed. So there’s a bit of a catch-up. In certain situations like that that can impact technology revenue. Regarding the Microsoft related revenue, I’d say we’re still early in that relationship. It’s something that we continue to monitor how those online sales go. Dan, anything you’d add?

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

Richard Close: Okay. Thanks.

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

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

Operator: This concludes today’s Health Catalyst third quarter 2025 earnings conference call. Please disconnect your line at this time. Have a wonderful day.