Health Catalyst's (NASDAQ:HCAT) Q4 Sales Top Estimates But Growth To Slow Down Next Year

Adam Hejl /
2022/03/01 4:16 pm EST
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Healthcare software provider Health Catalyst (NASDAQ:HCAT) reported Q4 FY2021 results beating Wall St's expectations, with revenue up 21.4% year on year to $64.7 million. However, guidance for the next quarter was less impressive, coming in at $65.5 million at the midpoint, being 3.68% below analyst estimates. Health Catalyst made a GAAP loss of $48.9 million, down on its loss of $43 million, in the same quarter last year.

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Health Catalyst (HCAT) Q4 FY2021 Highlights:

  • Revenue: $64.7 million vs analyst estimates of $63.1 million (2.45% beat)
  • EPS (non-GAAP): -$0.19 vs analyst estimates of -$0.21
  • Revenue guidance for Q1 2022 is $65.5 million at the midpoint, below analyst estimates of $68 million
  • Management's revenue guidance for upcoming financial year 2022 is $290.3 million at the midpoint, missing analyst estimates by 0.22% and predicting 19.9% growth (vs 28.4% in FY2021)
  • Free cash flow was negative $13.4 million, compared to negative free cash flow of $8.77 million in previous quarter
  • Gross Margin (GAAP): 47.6%, down from 50.2% same quarter last year

“In the fourth 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,” 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.

Organizations generate a lot of data that is stored in silos, often in incompatible formats, making it slow and costly to extract actionable insights, which in turn drives demand for modern cloud-based data analysis platforms that can efficiently analyze the silo-ed data.

Sales Growth

As you can see below, Health Catalyst's revenue growth has been strong over the last year, growing from quarterly revenue of $53.2 million, to $64.7 million.

Health Catalyst Total Revenue

This quarter, Health Catalyst's quarterly revenue was once again up a very solid 21.4% year on year. On top of that, revenue increased $2.97 million quarter on quarter, a very strong improvement on the $2.11 million increase in Q3 2021, which shows acceleration of growth, and is great to see.

Guidance for the next quarter indicates Health Catalyst is expecting revenue to grow 17.2% year on year to $65.5 million, slowing down from the 23.7% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $290.3 million at the midpoint, growing 19.9% compared to 28.4% increase in FY2021.

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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, licenses, technical support and other necessary running expenses was at 47.6% in Q4.

Health Catalyst Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.47 left to spend on developing new products, marketing & sales and the general administrative overhead. While it improved significantly from the previous quarter this would still be considered a low gross margin for a SaaS company and we would like to see the improvements continue.

Key Takeaways from Health Catalyst's Q4 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 a market capitalization of $1.41 billion and more than $444.9 million in cash, the company has the capacity to continue to prioritise growth over profitability.

It was good to see Health Catalyst improve their gross margin this quarter. And we were also excited to see that it outperformed analysts' revenue expectations this quarter. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations and the revenue guidance for next year indicated a slowdown. Overall, it seems to us that this was a complicated quarter for Health Catalyst. The company is flat on the results and currently trades at $26.45 per share.

Health Catalyst may have had a tough quarter, but does that actually create an opportunity to invest 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 actionable report which you can read here, it's free.

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