Welcome to the Health Catalyst fourth quarter and year-end 2025 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. To get to as many questions as time permits, we kindly ask that you limit yourself to one question. If you have any follow-up, please re-enter the queue. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to Matt Hopper, Senior Vice President of Finance and Investor Relations.

Good afternoon, and welcome to Health Catalyst's earnings conference call for the fourth quarter and full year 2025, which ended December 31st, 2025. My name is Matt Hopper, Senior Vice President of Finance and Head of Investor Relations. With me on the call today are Ben Albert, our Chief Executive Officer, and Jason Auger, 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 8K 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 be making forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our future growth, financial outlook for the first quarter and full year 2026, our ability to attract new clients and retain and expand our relationships with existing clients, market conditions, macroeconomic challenges, bookings, retention, operational priorities, strategic initiatives, growth strategies, the demand for deployment and development of our Ignite data and analytics platform and our applications, timing and status of Ignite migrations and associated churn and pressure from clients, the impact of restructurings, and the general anticipated performance of our business. 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 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 most recent Form 10-Q for the Third Core of 2025 filed with the SEC on November 10, 2025, and our Form 10-K for the full year 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 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. A reconciliation of non-GAAP financial measures for the fourth quarter and full year 2025 and 2024 to their most comparable GAAP measures is provided in our press release. With that, I'll turn the call over to Ben. Ben Hovlander Thank you, Matt,

and thank you to everyone for joining us today. Before we discuss the quarter, I'd like to briefly acknowledge the recent leadership transition at Health Catalyst. I stepped into the CEO role last month following Dan Burton's departure as CEO and from the Board of Directors. I want to thank Dan for his many years of service, the mission-driven foundation he helped build, and his support during this transition. We are focused on the future and on positioning Health Catalyst for long-term success. There are significant opportunities ahead and I am confident in the strengths that continue to differentiate this company. Our mission, our people, and our core capabilities provide a solid foundation for delivering meaningful value to our clients and shareholders. My priority is to build on these strengths, address our challenges with clarity and discipline, and move the company forward with a renewed sense of focus and execution. In my time as President and COO, I conducted a comprehensive review of the business. I've spent 25 years in this industry, and I bring the benefit of an outsider's perspective combined with an insider's understanding of our operations. That dual vantage point gives me clarity on where we are strong and where we need to change. Not only do I see clear value creation opportunities ahead, I also see areas where we can operate with greater focus, rigor, and accountability. We have already moved quickly to tighten leadership focus and execution discipline, including appointing general managers to lead our interoperability and cybersecurity businesses and transitioning our chief commercial officer role to a strong internal successor who is already driving sharper commercial alignment. We have also opened searches for both a chief operating officer and a chief marketing officer to strengthen operational rigor and to clarify and elevate our position within the market. At the same time, we are reviewing our cost structure to ensure we are strategically allocating capital with increased discipline and we are focused on expanding technology bookings and margins while driving cash flow generation you're taking a fresh approach to how we execute and I'm confident that these actions will put the company on a stronger long-term trajectory first our core value proposition is strong our clients continue to rely on health catalyst to manage costs improve clinical quality and drive consumer growth we have a track record of delivering measurable outcomes and when we are focused and aligned we can create real value for our clients second the review made it clear that we need to be more focused and more consistent on in how we execute we've allowed too much complexity into our go-to-market motions our packaging and our implementation and migration work this has at times created friction for our clients and slowed our ability to deliver value we will address this by aligning the organization around a smaller set of priorities improving clarity across teams and holding ourselves accountable for predictable measurable outcomes third we have a clear opportunity to sharpen and simplify our commercial story our solutions resonate most when we articulate them through the lens of the problems clients are trying to solve and we have not been consistent in how we describe the full value we can deliver across cost efficiency clinical quality and consumer experience we will tighten our positioning, simplify how we package and present our offerings, and implement a more predictable and focused go-to-market motion that highlights what makes health catalysts so compelling. We are refocusing on what we do best, a back-to-basics approach. At our core, we are built to deliver measurable outcomes across cost efficiency, clinical improvement, and consumer experience. While the market often thinks of us primarily as a data platform business, our data platform infrastructure has always been a means to an app. The real value of Health Catalyst is in the IP, deep healthcare expertise, and high-value applications we have built or acquired over 15 years, grounded in thousands of improvement projects and billions of dollars in validated impact. That is who we are, that is what we believe the market needs, and that is where we will focus our energy. Additionally, as AI continues to play a bigger role, we expect our valuable data assets and expertise will become an increasingly important driver of competitive differentiation. With these learnings as our foundation, our priorities going forward are clear. We will strengthen and simplify our commercial engines to drive technology ARR bookings. We will improve retention through more predictable migrations and clear client value realization. We will increase efficiency and reduce time to value by eliminating operational complexity and scaling work through automation and global resources. And we will better leverage our IP, combining our data foundation with the expertise, content, and AI-enabled solutions that allow us to solve some of healthcare's most pressing problems. These actions begin now, and they will guide how we operate and execute throughout the year. We have also heard a consistent message from our investors. They want our business to be easier to understand, with clearer indicators of performance and a more streamlined narrative about what we do and how we create value. I agree with that feedback. As part of our renewed focus and discipline, we will simplify how we communicate our business model, our priorities, and our progress, so that our direction is easier to track and evaluate. As part of this work, we are also evolving the way we measure and communicate performance. We will focus on providing a new set of bookings and retention metrics that are easier to understand, align directly with our execution, and clearly reflect how we operate the business. You will see how simplify our reporting, improve transparency, and reinforce accountability through clear indicators of progress. So, while I've already executed initial comprehensive review as President and COO, as CEO, a review of opportunities ahead will not stop and I will continue to evaluate all aspects of the business to ensure we are focusing on maximizing returns for our investors. This includes a detailed review of our product portfolio, our investment mix, and our cost We are assessing where we can simplify and where we should concentrate our resources. This is a shift in how we have operated. We are changing and we will be more focused and disciplined in how we allocate capital and build long-term value. Given this work and the significant impact some of it may have on our financial results going forward, we are not yet in position to provide annual guidance. Today we are sharing first quarter revenue and adjusted EBITDA guidance only. We believe this is the prudent approach to ensure we are providing initial transparency And as we continue our strategic and operational review, we plan to come back to the market with our full-year revenue and adjusted EBITDA guidance no later than our first quarter earnings call in May. With that, I will turn the call over to our Chief Financial Officer, Jason Alder, to walk through the financial results.

Thanks, Ben. for the full year of 2025, we generated $311.1 million in revenue and $41.4 million of adjusted EBITDA. In the fourth quarter, we continued to demonstrate strong cost control and operating leverage, even as we navigated a dynamic demand environment. From a growth standpoint, we finished the year with 32 net new logos, ahead of our target of 30 net new logos, but below our initial expectation of 40 that we began the year with. These net new logos had an average ARR plus non-recurring revenue near the midpoint of the $300K to $700K range. Our tech plus TEMS dollar-based retention closed the year at 93%. For the fourth quarter of 2025, total revenue was $74.7 million compared to $79.6 million in the prior year period. Technology revenue was $51.9 million, and professional services revenue was $22.8 million. The year-over-year decline primarily reflects lower professional services revenue from reductions in our FTE service offerings and our exit of unprofitable pilot ambulatory TEMS arrangements. For the full year of 2025, as I mentioned, total revenue was $311.1 million, which represented 1% year-over-year growth. Technology revenue increased 7% year-over-year to $208.3 million, while professional services revenue declined 8% as we continued to prioritize margin improvement and resource efficiency. Adjusted gross margin for the fourth quarter was 53.5%, compared to 46.6% in the prior year period. For the full year of 2025, adjusted gross margin was 51.1%, driven by a technology gross margin of 67.4%, and professional services gross margin of 18.3%. These results reflect the benefit of restructuring actions implemented during the year, partially offset by migration-related cost headwinds. In the fourth quarter of 2025, adjusted operating expenses were $26.2 million, representing 35% of revenue, compared to $29.2 million, or 37% of revenue, in the fourth quarter of 2024. For the full year of 2025, adjusted operating expenses were $117.7 million, representing 38% of revenue, compared to $123.4 million, or 40% of revenue, for the full year of 2024. The year-over-year change reflects the continued impact of our restructuring actions, disciplined headcount management, and tighter control over discretionary spending. On a sequential basis, adjusted operating expenses declined by approximately $2 million compared to the third quarter of 2025, driven primarily by the full quarter benefit of actions we initiated earlier in the year, including workforce optimization, professional services contract restructuring, and operating efficiency initiatives across the organization. From a gap expense standpoint, we would note that we did incur impairment charges on goodwill and intangible assets of $110.2 million during 2025. These charges were primarily due to the decrease in our consolidated market cap and revisions to our forecast, and not a write-down of any specific acquisition. These charges were also the main driver in the change in gap net loss from $69.5 million in 2024 to $178 million in 2025. Adjusted EBITDA for the fourth quarter of 2025 was $13.8 million, compared to $7.9 million in the prior year. For the full year of 2025, adjusted EBITDA was $41.4 million, representing 59% year-over-year growth. As we look ahead, we remain focused on driving operating leverage, aligning our cost structure with our revenue profile, and prioritizing investments that support future technology margin expansion and technology revenue growth. Our adjusted net income per share in the fourth quarter and full year of 2025 was $0.08 and $0.19, respectively. The weighted average number of shares used in calculating adjusted basic net income per share in the fourth quarter and full year of 2025 was approximately 71 and 69.9 million shares, respectively. Turning to the balance sheet, we ended the year with approximately $96 million of cash, cash equivalents, and short-term investments, and $161 million of term loan debt outstanding. For Q1-2026, we currently expect total revenue of $68 million to $70 million, and adjusted EBITDA of $7 million to $8 million. As we enter 2026, we continue to manage the business with a focus on operational efficiency while balancing targeted investments to support disciplined growth and retention initiatives that we expect will benefit results in the future. We have invested in migration-related personnel and contractors and are adding R&D investments in AI and India. While these investments may create near-term financial pressure, we believe they position the business for cost structure improvement in the second half of the year and beyond. Our Q1 2026 revenue is expected to decrease compared to Q4 2025 due to three primary drivers. First, we expect a reduction in Thames-related revenue due to downselling and our further exit from certain lower-margin Thames arrangements. This contributed approximately $2 million of the decrease. Second, we continue to see pressure associated with the DOS to ignite migration. We expect revenue to decline by about $1.5 million in Q1-2026 compared to Q4-2025 related to data platform pressure. Third, we expect an approximately $1.5 million decrease in non-recurring revenue in Q1-2026 compared to Q4-2025. This is primarily driven by timing of project completions or certain renewals. As a reminder, our project-based, non-recurring revenue can fluctuate quarter to quarter. We've made substantial progress in migrating our DOS clients to Ignite, but as discussed on previous earnings calls, we do still have work ahead. Across 2026 and 2027, we've been notified of roughly 12.5 million in DOS-related ARR downsell and churn. In addition, we currently estimate 52 million in DOS-related ARR that may be subject to negotiation in 2026 and 2027, up which 35 million is estimated to be data platform infrastructure ARR. Data platform infrastructure or the data warehouse and related infrastructure is where we're seeing the highest degree of pressure. While we do expect some level of further churn of this ARR, as Ben mentioned, we are putting plans in place that are designed to retain a large part of this balance. After 2027, we'd 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 downselling occurs, and don't generally lose enterprise relationships entirely. We expect our success in maintaining application relationships to continue in the future. As we approach 2026, although full-year guidance is not being provided, we anticipate that several prevailing trends will persist. These include a sustained emphasis on technology-led bookings through a sharper commercial approach and an ongoing focus on improving technology ARR retention through operational excellence and differentiated applications. With that, I'll turn the call back to Ben.

Thanks, Jason. In closing, I want to thank our clients for their continued partnership and our team members for their commitment during a year of meaningful progress and transition. We are focused, disciplined, and aligned around the areas that matter most, and we are committed to clear and understandable communication as we move forward. We look forward to updating you on our progress in the quarters ahead. Operator, we're now ready to take questions.

The floor is now open for questions. At this time, if you have a question or comment, please press star 1 on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing star 2. Again, we kindly ask that you limit yourself to one question and that you pick up your handset when posing your questions to provide optimal sound quality. Thank you. Our first question is coming from Stan Berenstein with Wells Fargo. Your line is now open.

Hi, thanks so much. I guess if it's one question, I'd like to maybe ask about the comments you made around the strategic review and the prepared remarks. Does that include the possibility of selling the company?

Thanks, Dan, for the question. Appreciate it. We are really focused on how we best position our company for long-term success. And so as we've done this strategic analysis, we're turning over every rock and looking at the company and looking at how we can best position company for shareholder value. We see tremendous opportunity ahead and some of the things that we do related to helping better manage costs for our clients as they're really in a challenging market right now helping drive that consumer experience and of course the foundation for health catalyst is the clinical quality work that we do and the ability to do that all together and one is a really huge differentiator for us as an organization so we are really doing this assessment to best position ourselves for success and the

line to create shareholder value so is that a yes or is that a no thank you appreciate the question

we're just in an assessment mode. I've been one month into the role and really just driving value

is what we're after. Thank you. We'll go next to Richard Close with Canaccord Genuity. Your line

is now open. Yeah, thanks for the question. Jason, maybe if you could go over the transition impact, I guess, with respect to the first quarter and that I think you said $52 million in terms of the data platform for the remainder of the year. It went by pretty quickly. So if you could just go over that again, and then maybe provide a little bit more details on exactly what is going

on there. Yeah, yeah, I'd be happy to. Appreciate the question, Richard. So yeah, definitely wanted to provide a bit more commentary related to the DOS to ignite migration that's taking place. I did mention the $52 million. That would be our DOS-related revenue, which would encompass both integrated applications as well as data platform infrastructure. Really, of the two components there, it's the data platform infrastructure where we're seeing the highest degree of pressure related to this migration. This would be the hosting side of the DOS platform, and that's where we have 35 million of data platform infrastructure, ARR, that we're working with our clients on plans to retain moving forward. And so that's where we do expect to see the pressure across 2026 and 2027.

And is it something where they're choosing another platform or competitor, or what exactly, I guess, are you negotiating with them there on that?

Hi, Richard, it's Ben. At the data platform infrastructure level, there are cross-industry technology solutions that come in and can enable them depending on their strategy. What they still need from us when they do that is the expertise and the IP and the applications that we provide on top of that. So it's all part of our strategy to meet them where they are, depending on what they're going to do from a data platform infrastructure approach.

Thank you.

Thank you. And we'll go next to Jeff Garrow with Stevens. Your line is now open.

Yeah, good afternoon. I want to hit on the demand environment and ask what you learned in Q4 around bookings and specifically booking size and scope, deal length, or sorry, on the sales cycle length of the sales cycle and app attach rates for deals that landed in Q4. And if you could help translate that into expectations for bookings or just demand generally in 2026, that'd be helpful as well. Thanks. Sure. Thanks. In Q4, we did a strategic assessment

to look at how our applications and solutions best resonate in the market. And it came back clear that the market is in great need of the ability to better manage their costs, to drive clinical quality, and to engage and attract new consumers to their organizations. That's because they're under more pressure than ever. I mean, profitability pockets are eroding for our provider clients. The payer mix is changing with more Medicare patients coming in. The commercial payments aren't rising at the rate, so they really have to be focused on how they're managing their labor costs and their clinical costs. They have to be focused on not eroding clinical quality when they're doing that, and they have to win in the consumer side. So we see activity in those areas, in particular on the cost and labor side and continually the clinical quality side. So that's where we see the greatest impact and opportunity, and that's representative in the

funnel as well thank you our next question comes from elizabeth anderson with evercore your line

is now open hey guys good afternoon and thank you so much for the question um i think you guys talk a little bit about your sharper commercial alignment going forward can you talk about when you're going out and you're talking to clients where do you see it as your sort of like right to win with the current portfolio that you have thanks i'll just expand on the prior question

because I think that is really where we're strong, is the market is in real need of better managing their costs and driving clinical quality. And when you are driving, you know, managing costs, you can't do that at the expense of your clinical quality in healthcare. And I think the market, this is really early for the market because the cost pressures they're under are growing and are very significant. And so as our right to win is we have 15 years in this industry. We've done thousands of projects. We have tremendous content and intellectual property to enable our AI to help guide our clients through change management to navigate these really rough waters. So the challenge for us is we have not done a good job of telling that story. We're bringing in a chief marketing officer. We've done the strategic assessment. We're turning over every rock. We're talking to our clients. We're talking to partners. We're talking to industry leaders, and the reality is this is a huge need, and it's something that's going to grow in, we believe, going forward. And so that's where we're leaning in, and that's where you're going to see our story evolve over time, so the market really understands what Health Catalyst is all about.

All right. Thank you very much. Thank you. We'll go next to David Larson with BTIG.

Your line is now open. Hi, this is Jenny Shen on for Dave. Thanks for taking my question. I think you highlighted how despite some of the retention declining to sub-100% levels, you generally maintain and retain most of your clients, especially your enterprise ones. Can you kind of just give us a split? Is it like 50-50 between customers actually rolling off completely or just downselling, just getting a dynamic between the difference between roll-offs and down-sells. Thank you.

Yeah, I appreciate the question, Jenny. It's definitely a much lower percentage than you mentioned. We don't generally lose enterprise relationships. So where we are seeing the pressure, like I mentioned in the prepared remarks, is on the data platform infrastructure side. And that's where we could see downselling related to that, but typically from an application relationship standpoint, including those integrated applications, we generally see that clients are electing to keep those applications for the future.

Great. Thank you.

Thanks.

Our next question comes from Jessica Tassan with Piper Sandler. Your line is now open.

Hi, guys. Thanks for taking the question, and nice to meet you, Ben. And I was hoping maybe, you know, appreciate the comments on cost and clinical quality as being sources of pipeline strength. But I guess what specifically are the names of the Health Catalyst apps that fit into those categories and what do they do? And then can you just talk about how the data platform disintermediation could potentially dilute the value of the applications or at least, you know, commoditize the applications layer and what you are doing to protect against that possibility?

Jessica, nice to meet you as well. As we break down our applications across those three categories that we talk about, we have applications that deal with clinical cost intelligence, which would really focus more on some of the clinical services and some of the supply chain stuff they're doing within the organization to operationalize and make them most efficient in terms of the procedures that they're doing and being as effective as possible. But when they're making the choices, making sure that clinical quality stays high or even grows. You're looking at the labor side. We have something called power labor that also fits within the labor, within the cost management side of the equation. And the ability to do both at once for an organization is incredibly powerful as well. As you look at the clinical side, there are applications around measures. There are applications that are supporting ambulatory strategy in today's world. If you don't have a great ambulatory strategy, it's going to be very challenging to execute and grow with your access. So that blends into the consumer side where we have a tremendous consumer intelligence applications as well. So we could spend a lot more time on each of those, and I'd be happy to talk about those at length. But there are applications that support each bucket going forward. And I want to just reiterate one thing, though. The benefit is, of course, we can go deep on any one of those applications. So this goes back to the meet you where you are. If someone has a challenge and they're using a lot of visiting nurse labor that can be incredibly expensive or not staffing their OR times effectively or efficiently, things like that, we can really help them become more efficient. But, again, all with that clinical foundation as an organization, how are you making these changes? How are you solving these problems? while not disrupting your clinical quality. In fact, you're improving your clinical quality. And that's just the core of Health Catalyst.

Thank you. And we'll take our next question from Sarah James with Cantor Fitzgerald. Your line is now open.

Thank you. How should we think about the durability of margins if revenue stays under pressure for another few quarters? And can you help us frame the orders of magnitude of the levers that are under your control for 2026?

Yeah, I appreciate the question. Yeah, as we think about gross margins moving forward, and there is pressure associated with the DOS to ignite migration from a technology margin standpoint. That would mostly be the duplicate hosting cost, the duplicate cost structure that we do put in place. We're working to optimize there and remove those costs as quickly as possible, but that does have an impact on Q1 2026. And then from a professional services adjusted gross margin standpoint, we do see pressure associated with the migration personnel that we're adding to assist with the migration. That is to move these migrations as quickly as possible as well. But that is a near-term impact that is impacting Q1 2026 as well. But once we're through the migration, we do expect these to be costs that would be removed. from our books moving forward, but we'll see the impact in 2026 and a bit of that impact as well as we move into 2027 and continue the migration initiative.

Got it. And just to take a step back on that, does that mean that 2026 would be your transition year returning to growth in 2027, or is there still a path to positive year-over-year growth for 2026?

Yes, still evaluating. We're not in a position to guide, and we'll be providing the 2026 guide on our next earnings call at the latest, but not in a position to comment on the 2027 growth expectation at this point.

Got it. Thank you.

Thanks.

Thank you. We'll go next to Daniel Grosleit with Citigroup. Your line is now open.

Hi, guys. Thanks for taking the question. Jason, I want to go back to the comments you made around the $12.5 million of DOS-related ARR churn impacting 26 to 27, and then that additional $52 million at risk. Can you kind of just break down for us how much of that combined $65 million that's at risk will impact 2026 and the quarterly cadence of those impacts? And then of the $52 million of ARR are subject to negotiation now. What is the realistic success rate you're targeting

for these negotiations? Yeah, I appreciate the question. Daniel, as we look at the 12.5 million, I guess starting there, that is DOS-related ARR, where we've been notified that the client is looking to downsell or churn related to that. We expect about 75% of that to impact 2026 at different points throughout 2026. More of that will come on probably around mid-year and going into the later half of 2026. Around the 52 million, that would be DOS-related ARR, which does include the integrated applications and the data infrastructure as well. And that's where the 35 million would just be the piece associated with the data infrastructure. And we're working with those clients on negotiation, on migrating those clients to Ignite. I mean, we do expect to continue to see pressure associated with the migration, and that's where we do expect to see some downselling related to the data platform infrastructure, but would expect to be able to retain those application relationships with the clients. So we're working on a plan with the individual clients. But we'll provide more on that, Daniel, as we provide our full year

2026 guide. Okay. Thank you. Thanks. Thank you. And we'll go next to Richard Close with

Canaccord Genuity. Your line is now open. Yeah, thanks for the follow-up. I'm just curious on any of the acquisitions that you've done since being a public company. You know, I know Vital has been a pretty strong contributor, but can you talk about, like, you know, any of the other acquisitions that you've really seen, you know, decent growth in, you know, in that app layer? You know, which ones, I guess this has been asked, but which ones really fit into these, you know, three priorities now? Thanks, Richard. This is all part of

the assessment in terms of how these applications align to the priorities as we head forward and where can we drive the most shareholder value, the most client value, and the most growth for the organization. Ultimately, we're all about driving measurable improvement, and that measurable improvement comes in those three areas that we talk about. So most of our applications align to those areas. And we see opportunities across. And so we just have to figure out through this assessment, which ones are going to create the most value for us going forward. And we're super excited to do that. And we'll be able to come back with much more clarity at our no later than our next earnings call when we provide guidance and with a little more thoughts on that assessment.

Thank you. Thank you. At this time, there are no further questions in queue. I will now turn the meeting back to Ben Albert for any

additional or closing remarks. Thank you everyone. We really appreciate you joining today. We look forward to the next call where we'll be able to provide guidance and more results from this assessment. Thank you. This concludes

today's Health Catalyst fourth quarter and year-end 2025 earnings conference Please disconnect your line at this time.