Health Catalyst ((HCAT)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Health Catalyst showcased a blend of optimism and caution. The company reported financial results that exceeded expectations and highlighted strategic operational successes. However, these positive outcomes were balanced by challenges in professional services revenue, retention pressures, and migration-related headwinds.
Exceeded Financial Guidance in Q3 2025
Health Catalyst reported total revenue of $76.3 million and an adjusted EBITDA of $12 million for the third quarter of 2025, both surpassing the company’s guidance. This performance indicates strong financial management and operational efficiency.
Technology Revenue Growth
The technology segment of Health Catalyst experienced a 7% year-over-year increase in revenue, reaching $52.1 million. This growth underscores the company’s successful focus on enhancing its technology offerings and expanding its market presence.
Operational Cost Savings
Significant cost savings were achieved by Temple University Health System and Entegris Health, utilizing Health Catalyst’s solutions. These institutions saved $7.5 million and $30 million, respectively, highlighting the effectiveness of the company’s solutions in driving operational efficiencies.
Adjusted Gross Margin Improvement
Health Catalyst reported an improvement in its total adjusted gross margin, which increased by approximately 50 basis points year-over-year to 53%. This improvement reflects the company’s focus on optimizing its cost structure and enhancing profitability.
Strong EBITDA Growth
The adjusted EBITDA for Q3 2025 was $12 million, marking a substantial 64% increase compared to Q3 2024. This growth demonstrates the company’s ability to enhance its earnings power and operational leverage.
Professional Services Revenue Decline
Despite the overall positive financial performance, Health Catalyst experienced a 12% decline in professional services revenue compared to Q3 2024. This decline was attributed to the strategic decision to exit less profitable contracts.
Dollar-Based Retention Pressure
The company faced ongoing pressure on dollar-based retention due to Ignite migration efforts. This challenge is expected to persist into 2026, impacting retention rates and potentially affecting future revenue streams.
Migration-Related Revenue Headwinds
Health Catalyst anticipates a revenue decline in Q4 2025 due to migration-related down-sell and churn. This forecast highlights the challenges associated with transitioning clients to new platforms and the potential impact on short-term revenue.
Cash and Cash Equivalents Decline
The company’s cash, cash equivalents, and short-term investments decreased significantly from $392 million at the end of 2024 to $92 million by the end of Q3 2025. This decline raises concerns about liquidity and financial flexibility.
Forward-Looking Guidance
Looking ahead, Health Catalyst reaffirmed its full-year 2025 revenue guidance of $310 million and an adjusted EBITDA of $41 million. The company aims to add approximately 30 net new platform clients by the end of 2025, with an average booking size at the lower end of the $300,000 to $700,000 range. While revenue performance is expected to slightly decline in 2026 due to retention challenges and migration issues, the company anticipates improved adjusted EBITDA through strategic focus and cost management.
In summary, Health Catalyst’s earnings call reflected a positive financial performance with revenue and EBITDA exceeding expectations. However, challenges remain, particularly in professional services revenue and retention pressures. The company is focused on strategic growth and operational efficiency to navigate these challenges and drive future success.