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Health Catalyst (NASDAQ:HCAT) Q2: Beats On Revenue, Guides For Strong Sales Next Quarter


Kayode Omotosho /
2021/08/05 4:18 pm EDT
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Healthcare software provider Health Catalyst (NASDAQ:HCAT) reported Q2 FY2021 results beating Wall St's expectations, with revenue up 37.8% year on year to $59.6 million. Health Catalyst made a GAAP loss of $35.8 million, down on its loss of $27.1 million, in the same quarter last year.

Is now the time to buy Health Catalyst? Access our full analysis of the earnings results here, it's free.

Health Catalyst (HCAT) Q2 FY2021 Highlights:

  • Revenue: $59.6 million vs analyst estimates of $56.7 million (5.09% beat)
  • EPS (non-GAAP): $0 vs analyst estimates of -$0.14 ($0.14 beat)
  • Revenue guidance for Q3 2021 is $60.9 million at the midpoint, above analyst estimates of $58.7 million
  • The company lifted revenue guidance for the full year, from $229.6 million to $238.2 million at the midpoint, a 3.74% increase
  • Free cash flow was negative -$8.13 million, compared to negative free cash flow of -$9.92 million in previous quarter
  • Gross Margin (GAAP): 49.5%, down from 51% previous quarter

“In the second quarter of 2021, I am pleased to share that we achieved strong performance across our business, including exceeding the mid-point of our quarterly guidance for both revenue and Adjusted EBITDA. Our second quarter 2021 Adjusted EBITDA performance of $1.7 million represents the first time since the company’s incorporation that we have achieved positive quarterly Adjusted EBITDA,” said Dan Burton, CEO of Health Catalyst.

Founded by healthcare professionals Tom Burton and Steve Barlow in 2008, Health Catalyst (NASDAQ:HCAT) provides data and analytics technology to healthcare organizations, enabling them to improve care and lower costs.

The U.S. spends trillions every year on health care, but compared to other wealthy nations, the efficiency of the money spent often seems to be less than optimal. There is a growing pressure on lowering the costs while providing better care and utilizing healthcare data is positioned to play a key role in it.

Sales Growth

As you can see below, Health Catalyst's revenue growth has been strong over the last year, growing from quarterly revenue of $43.2 million, to $59.6 million.

Health Catalyst Total Revenue

This was a standout quarter for Health Catalyst, with the quarterly revenue up an absolutely stunning 37.8% year on year, which is above average for the company. On top of that, revenue increased $3.78 million quarter on quarter, a very strong improvement on the $2.56 million increase in Q1 2021, and a sign of acceleration of growth.

Analysts covering the company are expecting the revenues to grow 18.6% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

There are others doing even better. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Health Catalyst's gross profit margin, an important metric measuring how much money there is left after paying for servers, licences, technical support and other necessary running expenses was at 49.5% in Q2.

Health Catalyst Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.49 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and it has dropped significantly from the previous quarter, which is probably the opposite of what shareholders would like it to do.

Key Takeaways from Health Catalyst's Q2 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Health Catalyst’s balance sheet, but we note that with market capitalisation of $2.49 billion and more than $262.7 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We enjoyed the positive outlook Health Catalyst provided for the next quarter’s revenue. And we were also excited to see it that it outperformed Wall St’s revenue expectations. On the other hand, it was less good to see the deterioration in gross margin. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 3.78% on the results and currently trades at $58.9 per share.

Should you invest in Health Catalyst right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our full report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.