Health Care Select Sector

Russell 2000

The Cash Burner

Comparable Companies - HCAT

The data shows 11 discretionary insider sales totaling $529,707.62 with no purchases. Short interest as of 2025-12-31 was 5,050,847 shares, representing 8.1% of float with 9.0 days to cover. Significant institutional filers include First Light Asset Management (18.86% stake), Whetstone Capital Advisors (5.3% stake), and Stoney Lonesome HF LP (5.3% stake).

GENERAL COUNSEL

DIRECTOR

CHIEF OPERATING OFFICER

CHIEF PEOPLE OFFICER

Acquired for investment purposes. Intends to evaluate investments and options on an ongoing basis. May acquire additional shares or dispose of any or all shares. Mathew P. Arens became a Director of the Company as of December 1, 2025. The Reporting Persons may engage in discussions with the Company's Board regarding business, operations, capital structure, governance, management, strategy, potential business combinations, and strategic alternatives.

Acquired for investment purposes. Not acquired for the purpose of or with the effect of changing or influencing the control of the issuer.

Chief Executive Officer & Director

Chief Financial Officer

Chief Commercial Officer

General Counsel & Secretary of the Board

Chief People Officer

Chair of the Board

Director

Chief Operating Officer

Senior Vice President, Strategy & Corporate Development

Senior Vice President, Product

Daniel D. Burton

Jason Alger

Kevin Freeman

Benjamin Landry

Linda Llewelyn

Dan LeSueur

John A. Kane

Duncan Gallagher

Julie Larson-Green

Matthew Kolb

S. Dawn Smith

Jill Hoggard Green

Daniel D. Burton, as CEO and founder, has been instrumental in Health Catalyst's journey from its inception to its public offering. His extensive tenure and leadership have shaped the company's strategic direction and operational framework. His educational background in business administration provides a solid foundation for his executive responsibilities.

Jason Alger's career progression within Health Catalyst, from Controller to CFO, demonstrates a deep understanding of the company's financial operations. His experience at PricewaterhouseCoopers LLP provides a strong foundation in accounting principles. His CPA certification and B.S. in Accounting from the University of Utah underscore his financial expertise.

Kevin Freeman's extensive experience in commercial roles, including his tenure at Health Catalyst and prior positions at Qualtrics and Oracle, suggests a strong background in driving business growth and market penetration. His B.S. from Brigham Young University complements his practical experience in the technology sector.

Benjamin Landry's role as General Counsel and Secretary of the Board highlights his expertise in corporate governance and legal affairs. His experience at Wilson Sonsini Goodrich & Rosati, a prominent law firm, likely provided him with a strong foundation in securities law and corporate transactions. His legal education from Northeastern University School of Law and undergraduate degree from Boston College further support his qualifications.

Linda Llewelyn's long-standing tenure in Human Resources at Health Catalyst, culminating in her role as Chief People Officer, indicates a deep understanding of the company's human capital management. Her B.S. from the University of Utah provides a foundational education for her leadership in people operations.

John A. Kane's extensive experience as President and CEO of Morneau Shepell Inc. and his current directorships position him as a seasoned leader in corporate governance. His financial acumen, evidenced by his B.S. and M.Acc. from Brigham Young University, is further complemented by his role as Chair of the Board, where he oversees strategic direction and board effectiveness.

Duncan Gallagher brings a wealth of financial and operational expertise to the board, particularly from his tenure as CFO and CAO at Allina Health. His current role as President of Donegal Advisory Services, LLC, further enhances his advisory capabilities. His M.B.A. from the University of Minnesota and B.S. from the University of South Dakota provide a strong academic foundation for his extensive industry experience.

Julie Larson-Green's extensive background in technology leadership, including her roles at Microsoft, Qualtrics, and Magic Leap, brings significant technological and product development expertise to the board. Her Master's degree in Computer Software Engineering from Seattle University and B.A. from Western Washington University underscore her technical foundation, while her experience as Chief Experience Officer at Qualtrics highlights her focus on user-centric strategies.

Matthew Kolb's extensive experience in healthcare operations, particularly his current role as EVP and COO at Carle Health and prior positions at Allina Health, provides valuable operational insights to the board. His dual background in healthcare administration (M.H.A.) and law (J.D.) from the University of Missouri-Columbia, along with his B.A. from the University of Illinois, equips him with a comprehensive understanding of the complexities within the healthcare industry.

S. Dawn Smith's diverse background, encompassing executive leadership at Cologix, Inc., and extensive legal experience at prominent firms like Wilson Sonsini Goodrich & Rosati and Morrison & Foerster LLP, brings a unique blend of operational and legal expertise to the board. Her service as President and COO of Cologix highlights her capabilities in managing complex technology infrastructure businesses. Her academic credentials, including a J.D. from Stanford Law School and an M.B.A. from Providence College, further solidify her qualifications.

Jill Hoggard Green's recent appointment to the board in December 2024, coupled with her implied doctoral expertise, suggests a strong academic and potentially research-oriented background that can contribute to the board's strategic discussions. Her directorship signifies a commitment to governance and oversight within the company.

Dan LeSueur's extensive experience within Health Catalyst, progressing from various roles since 2011 to his current position as Chief Operating Officer, demonstrates a deep operational understanding of the company. His leadership in managing the Tech-Enabled Managed Services and Professional Services Business Unit prior to his COO role highlights his ability to drive performance in key service areas. His dual master's degrees from Arizona State University and B.A. in Economics from Brigham Young University provide a strong analytical and business foundation.

Benjamin Albert's role as Senior Vice President of Strategy & Corporate Development is critical for Health Catalyst's future growth and strategic positioning. His focus on these areas suggests a key contributor to the company's long-term vision and expansion initiatives.

Justin Spencer's position as Senior Vice President of Product indicates a central role in shaping Health Catalyst's product offerings and innovation pipeline. His leadership in product development is essential for maintaining the company's competitive edge and meeting market demands.

Provides core IT infrastructure and data platforms for hospitals, competing directly with Health Catalyst's data warehouse and analytics offerings.

Healthcare technology peer offering practice management and data solutions, sharing the same customer base as HCAT.

Sector adjacent in data integration and analytics, focused on general enterprise data rather than healthcare specifically. Proxy for the 'data platform' business model.

Technology infrastructure peer focusing on cloud delivery and security, serving large enterprise clients as a B2B technology platform.

The company's principal executive offices are located at 10897 South River Front Parkway, South Jordan, Utah. The company leases office space for its operations.

Health Catalyst's management team presents a mixed picture. The board is strong and appropriately structured for the Early-Stage Hypergrowth archetype, with independent oversight and relevant expertise. However, the executive team's capital allocation has been destructive, characterized by massive equity dilution ($290M issued vs. $11.4M buybacks) and negative ROIC (-41.3%). While the CEO is a founder with long tenure, the financial outcomes under his leadership show a company burning cash and destroying per-share value. Incentives are misaligned with the archetype, focusing on financial metrics rather than growth milestones. The team is currently executing a pivot to profitability, but the track record of value creation is poor.

No material regulations, compliance costs, or environmental legal proceedings were disclosed in the Business or Risk Factors sections.

The company disclosed a full-time employee count of approximately 1,500 as of the report date. The company identified a median employee for compensation ratio purposes. Specific turnover rates, geography, or gender breakdowns were not disclosed.

The company tracks client satisfaction and team member engagement scores as non-financial metrics for leadership. The company also tracks the percentage of select clients achieving measurable improvements and the percentage of projects completed on time. Specific product safety, quality management, responsible marketing, or data privacy disclosures were not discussed.

No specific disclosures regarding responsible sourcing, audits, or community engagement programs were found.

The company remains deeply unprofitable with a TTM net margin of -34.1% and negative tangible book value, despite recent cost restructuring and margin expansion initiatives.

Management's stated strategy is to focus on disciplined capital allocation, prioritizing returns on existing acquisition investments and not pursuing additional M&A in the near to medium term. R&D investment is focused on developing and enhancing the data and analytics platform, integrating AI, and expanding technology offerings. CapEx is primarily for infrastructure supporting the platform.

The company has a history of asset impairments, though none are explicitly quantified in the provided 10-K excerpts. The auditor did not identify asset impairment as a Critical Audit Matter (CAM). The significant intangible asset balance is primarily from acquisitions (e.g., Upfront Healthcare, Intraprise Health).

Management has stated a focus on harvesting returns from recent acquisitions rather than pursuing new M&A. The R&D investment is directed towards the Ignite platform and AI integration. However, the negative ROIC indicates that the capital invested (both equity and debt) is not generating positive returns.

First Light Asset Management, LLC

Whetstone Capital Advisors, LLC

EV/Sales

EV/EBITDA

Former CEO and board member of technology and healthcare companies; background in accounting and finance.

President of Donegal Advisory Services; former CFO and Chief Administrative Officer of Allina Health; healthcare services experience.

Chief Technology Officer of Magic Leap; former Chief Experience Officer at Qualtrics; extensive executive leadership at Microsoft in product development.

Executive Vice President and Chief Operating Officer of Carle Health; healthcare operations and legal background.

President and former COO of Cologix; former legal advisory roles; expertise in data centers, corporate governance, and securities law.

Director since December 2024; healthcare and technology experience.

Chief Executive Officer and Director; founder and executive leadership experience.

Blackrock, Inc.

The Vanguard Group

Daniel Burton

Bryan Hunt

All current directors and executive officers as a group (12 persons)

Benjamin Albert

Justin Spencer

Health Catalyst, Inc. is a provider of data and analytics technology and services to healthcare organizations. The company's core offering is its Health Catalyst Data Operating System (DOS), a flexible, cloud-based platform that integrates data from various sources to enable analytics and operational improvements. The company also offers a suite of analytics applications and Tech-Enabled Managed Services (TEMS) to help clients achieve measurable improvements in clinical, financial, and operational outcomes.

Held WACC 12.6% and Terminal Multiple 10.0x constant, solved for Operating Margin required to justify current $163M market cap.

Balance Sheet - Supplemental

Balance Sheet

Cash Flow Statement - Supplemental

Cash Flow Statement

Income Statement - Supplemental

Income Statement

Ratios

Valuation

Historical Ratios & Multiples - HCAT

The healthcare analytics industry is benefiting from secular tailwinds in AI adoption and value-based care, but these are currently offset by cyclical headwinds in hospital funding. While the broader market is growing, HCAT is underperforming its size benchmark (IWM) by 123% over the last three years, indicating company-specific execution issues rather than just macro pressure.

HCAT is relevant now because the stock is trading near all-time lows ($2.31) just as the activist shareholder has moved from the sidelines into the boardroom, creating a clear catalyst for strategic change.

Achievement of the $41 million Adjusted EBITDA target for FY 2025. This would validate management's cost-cutting narrative and prove the scalability of the Ignite platform.

Success here would likely trigger a massive short squeeze given the 8.1% short interest.

Announcement of a new CEO with a background in high-margin SaaS scaling. A high-quality external hire would signal a definitive break from the dilutive 'founder-led' era.

Execution failure in the Ignite platform migration. If existing clients pocket the 20% cost savings of Ignite without cross-buying new apps, dollar-based retention will fall below 100%, leading to revenue contraction.

Liquidity risk. With only $40.3 million in cash and a TTM free cash flow of -$32.8 million, the company has a limited runway to reach profitability before needing another dilutive capital raise.

Liquidation value analysis is not relevant for the company's archetype ('Early-Stage_Hypergrowth') and was not performed.

Cash & Equivalents

Accounts Receivable

Inventory

Short-Term Inv.

Other Current Assets

Net PP&E

Intangibles

Other Non-Current

Accounts Payable

Current Debt

Deferred Revenue

Other Current Liabilities

Non-Current Debt

Other Non-Current Liabilities

Matt Arens (CEO of largest shareholder First Light) joins Health Catalyst Board.

Health Catalyst reported Q3 2025 results with revenue of $76.3 million and Adjusted EBITDA of $12.0 million, exceeding guidance.

Health Catalyst price target lowered to $5 from $9 at Canaccord

HEALTH CATALYST ANNOUNCES WINNERS OF THE 2025 CATALYST AWARDS

Health Catalyst reported Q2 2025 results with revenue of $80.7 million and Adjusted EBITDA of $9.3 million, beating guidance.

HEALTH CATALYST ANNOUNCES CEO DAN BURTON TO STEP DOWN TO PURSUE SERVICE OPPORTUNITIES

First Light Asset Management, LLC and Mathew P. Arens report beneficial ownership in Health Catalyst.

Health Catalyst announced Q1 2025 results with $79.4 million revenue and $6.3 million Adjusted EBITDA profit.

BlackRock, Inc. filed an amended Schedule 13G/A reporting ownership of 6.3% in Health Catalyst, Inc.

Health Catalyst Announces ~$5 Million Stock Repurchase

Signature Healthcare To Enhance Analytics By Leveraging Health Catalyst Ignite™

Health Catalyst reported 2024 results with $307 million revenue and $26 million Adjusted EBITDA, while announcing governance updates.

Health Catalyst to acquire Upfront Healthcare Services.

Point72 Asset Management reports reduced ownership to 1.0%.

The Vanguard Group further reduces Health Catalyst ownership to 7.57%.

Wellington Management reports 3.20% ownership stake.

Health Catalyst reported Q3 2024 results with $76.4 million revenue and $7.3 million Adjusted EBITDA.

Health Catalyst announced Q2 2024 results with $75.9 million revenue and $7.5 million Adjusted EBITDA.

Health Catalyst secures $225 million credit facility with Silver Point Finance.

Health Catalyst reported Q4 2023 results and announced executive leadership changes.

Point72 Asset Management reports 7.2% ownership stake.

The Vanguard Group files amended ownership report showing decreased stake.

Health Catalyst reported preliminary Q4 and FY 2023 financial results exceeding guidance midpoints for revenue and Adjusted EBITDA.

2023 Annual Meeting voting results announced.

Health Catalyst reported Q1 2023 results exceeding guidance and expanded Allina Health partnership.

BlackRock, Inc. filed Schedule 13G reporting 8.8% ownership in Health Catalyst, Inc.

J. Patrick Nelli's separation agreement finalized after transition to Senior Advisor.

Health Catalyst reported Q3 2022 financial results with total revenue of $68.4 million and Adjusted EBITDA loss of $4.6 million.

Point72 entities collectively reported 5.1% ownership in Health Catalyst via Schedule 13G.

The Vanguard Group reports beneficial ownership of 10.14% of Health Catalyst common stock.

Health Catalyst reported Q2 2022 results with revenue beat but reduced full-year outlook.

2022 Annual Meeting voting results announced.

FMR LLC reports reduced ownership below 5% threshold.

BlackRock, Inc. filed an amended Schedule 13G/A reporting 9.0% ownership in Health Catalyst, Inc.

Tim Ferris resigns as Board Chair due to NHS appointment.

Health Catalyst price target lowered to $4 from $5 at KeyBanc

Health Catalyst is a micro-cap healthcare data player in a forced pivot from growth-at-all-costs to a profitability-first model. The market is currently pricing the company as a terminal failure due to a TTM net margin of -34.1% and a 23% price drop following a 2025 revenue guidance revision. However, our differentiated view is that the market is excessively discounting the stock due to near-term GAAP losses, failing to recognize that the underlying unit economics of the new Ignite platform (70% target gross margins) and the oversight of an 18.8% activist shareholder who recently joined the board provide a massive asymmetric upside as the company reaches an FCF inflection point.

Executive Summary

Health Catalyst is transforming its business model to capture high-margin recurring technology revenue while shedding unprofitable services. This transition is de-risked by aggressive cost-cutting, including a 9% workforce reduction, and direct activist involvement in the boardroom to ensure capital discipline.<ul><li>Driver: The primary value driver is the structural migration from the legacy Data Operating System (DOS) to the modular Ignite platform, which increases Technology segment gross margins from 60% to 70%.</li><li>Catalyst: The specific event unlocking value is the completion of the CEO transition by June 2026, overseen by activist board member Matt Arens, alongside the first quarter of sustained positive free cash flow.</li><li>Protection: Downside protection is provided by a $131.8 million net debt position that was recently improved by paying off $230 million in convertible notes, and a valuation floor supported by an 18.86% activist stake.</li></ul>Our variant perception is that the market is excessively discounting the stock due to near-term GAAP losses, failing to recognize that the underlying unit economics (LTV/CAC) are highly profitable and that the current cash burn is a discretionary investment in capturing a winner-take-all market for healthcare data orchestration. While the market sees a 3.6% revenue growth deceleration as a sign of failure, we view it as a healthy purging of unprofitable Tech-Enabled Managed Services (TEMS) contracts that will accelerate the path to a 10% Adjusted EBITDA margin by 2025.This is a high-risk, venture-style investment in a disruptive technology, where the bet is on the company achieving market leadership and future profitability at scale, justifying the current cash burn through a superior product moat.

Core Investment Rationale

Health Catalyst operates a cloud-based data and analytics platform specifically for healthcare providers. The business is shifting from a 50/50 mix of technology and professional services to an 80/20 split. Revenue is primarily subscription-based, with Technology revenue reaching $194.9 million in FY 2024, representing 10% YoY growth. The strategy centers on the Ignite platform, which uses a consumption-based pricing model to lower entry barriers for mid-market clients while maintaining high retention in the enterprise segment.The company's 'Flywheel' model relies on deep client engagement to drive measurable clinical and financial improvements, which in turn fuels cross-selling of its 900+ application layer solutions. Management is currently prioritizing 'harvesting' returns from recent acquisitions like Upfront Healthcare and Intraprise Health rather than pursuing new M&A.The core strategic asset is the Health Catalyst Ignite platform, a proprietary data orchestration layer that integrates disparate EHR data into a unified 'Late-Binding' architecture. This platform is a critical intangible asset that forms the company's moat, as it allows healthcare systems to run complex AI and data science models without replacing their core Systems of Record. Other key assets include a portfolio of over 148 quantified 'measurable improvements' approved by clients, which serves as a powerful sales tool and validation of the platform's ROI. The company also holds $375.1 million in intangible assets, primarily representing proprietary software and customer relationships from its acquisition-led growth phase.The landscape is dominated by massive incumbents like Oracle Health (Cerner), which holds a $27.9 billion market cap, and specialized data platforms like Informatica. Health Catalyst occupies a niche as a vendor-agnostic layer that sits on top of EHRs. While Cerner has an 82.5% gross margin, Health Catalyst's 46.5% margin reflects its smaller scale and higher services component. However, HCAT ranks 1st among its competitors in CEO Score and Customer Service according to external sentiment data, suggesting a superior 'soft' moat in a fragmented market where service and support are critical for complex data implementations.Health Catalyst's growth journey has been defined by rapid scaling and market capture since its 2019 IPO, but it has recently hit a wall of macroeconomic headwinds and investor impatience with GAAP losses. Revenue grew at a 15% 5-year average, but slowed to 4.6% TTM as Medicaid and research funding cuts impacted client budgets. The defining context for this investment is an active governance reset: CEO Daniel Burton announced his retirement effective June 2026, and the company's largest shareholder, First Light Asset Management (18.86% stake), has placed its CEO on the board. This follows a period of massive dilution where the share count grew at an 11.1% CAGR, a trend the activist is expected to halt. The company is currently in a 'Show-Me' phase, having recently paid off $230 million in convertible notes to de-risk the balance sheet while implementing a restructuring plan expected to save $40 million annually.

Business & Situation

<ul><li>Bull Case: The migration to the Ignite platform will drive Technology gross margins to 70%, leading to a 10% Adjusted EBITDA margin by 2025. Activist involvement from First Light (18.86% owner) ensures a floor on the valuation and a disciplined CEO succession process. The company is trading at 0.9x EV/Sales, a massive discount to the 4.6x peer median despite a robust 100% dollar-based retention rate.</li><li>Bear Case: Persistent GAAP losses and negative tangible book value (-$43.2M) create a risk of further equity dilution if FCF does not turn positive in 2026. Medicaid and research funding cuts could continue to pressure client budgets, leading to further revenue guidance downgrades. The company lacks a structural moat as a 'System of Record,' making it vulnerable to displacement by larger EHR vendors like Epic or Cerner.</li></ul>The consensus view is that Health Catalyst is a 'broken growth' story. Investors have fled the stock as revenue growth slowed from 28% in 2021 to 4.6% TTM, and the company remains deeply unprofitable with a -$107.6 million TTM net loss. The market believes the company's TAM is more penetrated than management admits and that the shift to the Ignite platform is a defensive move to lower prices and retain clients rather than an offensive growth driver.This bearishness is reflected in the technicals, with the stock trading 30% below its 200-day moving average and short interest sitting at 8.1% of the float.The healthcare analytics industry is benefiting from secular tailwinds in AI adoption and value-based care, but these are currently offset by cyclical headwinds in hospital funding. While the broader market is growing, HCAT is underperforming its size benchmark (IWM) by 123% over the last three years, indicating company-specific execution issues rather than just macro pressure.Our differentiated view is that the market is fixated on current cash burn while underestimating the long-term value of market leadership in a large TAM. The governance friction created by First Light's 18.86% stake is a critical positive; it prevents 'value drift' by forcing management to prioritize GAAP profitability over vanity growth metrics. The activist's presence on the board puts a floor on the valuation, as any further price decline would likely trigger a hostile bid or a forced strategic review. Furthermore, the market is ignoring the 'India-first' R&D strategy and offshoring of SG&A, which are structural margin levers that will persist long after the current macro headwinds subside.The debate between growth and profitability is being resolved in favor of the latter. With a $41 million Adjusted EBITDA target for 2025 and a de-risked balance sheet following the convertible note repayment, Health Catalyst is positioned for a significant valuation re-rating as it proves it can grow profitably. The current 0.9x EV/Sales multiple is inconsistent with a business that has 46.5% gross margins and a path to 10% EBITDA margins.Our analytical edge is a focus on underlying unit economics and customer cohort data, which indicates a clear path to profitability that is being obscured by the market's simplistic focus on current-period GAAP losses and the noise of the CEO transition.

Core Thesis

CEO Daniel Burton, a founder with 14 years of tenure, has a strong reputation for culture (98% approval) but a poor public market track record of capital allocation, characterized by 65% net dilution since 2020. A critical transition is underway: Burton will retire in June 2026. Crucially, the largest shareholder, First Light, supports this transition and has placed its CEO, Matt Arens, on the board to oversee the search for a successor who will prioritize shareholder returns over growth.Capital allocation has historically been weak, with $290 million in stock issuance dwarfing $11.4 million in buybacks. However, recent actions show a pivot to discipline, including the repayment of $230 million in debt and a pause on M&A to focus on organic FCF.Management maintains high credibility in meeting revenue guidance (80% hit rate) but has consistently missed EPS targets (0% hit rate), leading to the current 'Show-Me' status in the market.<ul><li>Board Independence: 85.7% (6 of 7 directors)</li><li>Chairman/CEO Roles: Separate</li><li>Chairman Tenure: 9 Years (John A. Kane)</li><li>Insider Ownership: 2.6% (Group) / 1.7% (CEO)</li><li>Shareholder Rights: Classified Board (Declassification Proposal Pending)</li></ul>The governance outcome tree is currently skewed toward a 'Reset' scenario. 1. Status Quo: Management executes the $41M EBITDA plan. 2. Compromise: Board seats already granted to First Light. 3. Reset: The activist-led board appoints a new CEO in 2026 focused on a sale or aggressive buybacks. Each of these paths likely leads to a higher stock price from current distressed levels.

Leadership & Governance

The valuation floor is set at $0.00, representing the Bear Case DCF Value. This serves as the ultimate backstop in a 'broken growth' scenario where the company fails to reach scale or achieve profitability before exhausting its $40.3 million cash reserve.The base case assumes 6.25% revenue growth and a pivot to a -13.5% operating margin by Year 3 as the Ignite platform achieves scale. This results in an implied value of $4.11 per share.Accelerated Ignite adoption drives Technology revenue to an 85% mix, achieving 70% gross margins ahead of plan and a 10% operating margin by Year 5. Blue-Sky Potential: $8.89 per share.The Bear Case is defined by a scenario of execution failure, such as failing to reach scale or achieve profitability, resulting in a $0.00 value per share as the company's negative tangible book value offers no asset protection.

Valuation Context

<ul><li>Achievement of the $41 million Adjusted EBITDA target for FY 2025. This would validate management's cost-cutting narrative and prove the scalability of the Ignite platform.

Success here would likely trigger a massive short squeeze given the 8.1% short interest.</li><li>Announcement of a new CEO with a background in high-margin SaaS scaling. A high-quality external hire would signal a definitive break from the dilutive 'founder-led' era.</li></ul>HCAT is relevant now because the stock is trading near all-time lows ($2.31) just as the activist shareholder has moved from the sidelines into the boardroom, creating a clear catalyst for strategic change.

Catalyst Path & Context

<ul><li>Execution failure in the Ignite platform migration. If existing clients pocket the 20% cost savings of Ignite without cross-buying new apps, dollar-based retention will fall below 100%, leading to revenue contraction. TTM dollar-based retention is already at 100%, down from historical levels, indicating zero net expansion.</li><li>Liquidity risk. With only $40.3 million in cash and a TTM free cash flow of -$32.8 million, the company has a limited runway to reach profitability before needing another dilutive capital raise. The company used $230 million of its cash to pay down debt, significantly reducing its liquidity cushion.</li></ul>

Primary Risks

<ul><li>Entry Target: Entry target set to current market price to capture immediate upside on a high-conviction thesis where the expected return exceeds 200%.</li><li>Stop Loss: Set a technical stop-loss at a 15% drawdown from entry, as a break below the $2.02 52-week low would signal a structural failure of the turnaround narrative.</li><li>Position Size: Base conviction is High due to the presence of an 18.8% activist and a clear platform pivot. However, the final size is strictly capped at 'Starter' due to the binary nature of the bet and high volatility inherent to the Early-Stage_Hypergrowth archetype.</li><li>Time Horizon: The 'Rule of 40' is currently low and cash burn is high; this is a 'Show-Me' story that requires 12-24 months to validate the $41M EBITDA target and CEO transition.</li></ul><ul><li>Quarterly Technology segment gross margin (Target: 70%)</li><li>Net new platform client additions (Target: 40 for 2025)</li><li>Free Cash Flow conversion rate</li></ul>Unexplained revenue deceleration. If growth slows significantly without a corresponding improvement in profitability, the hypergrowth premium evaporates and the thesis is dead.

Actionable Parameters & Monitoring

Health Catalyst is a classic 'babies and bathwater' situation where a legitimate technology platform is being discarded due to past capital allocation sins. With an 18.86% activist now in the boardroom and a high-margin platform migration underway, the risk/reward at 0.9x EV/Sales is heavily skewed to the upside. We recommend a Buy with a valuation target of 7.84, representing over 200% upside as the company inflects to profitability.

Final Conclusion

The primary value driver is the structural migration from the legacy Data Operating System (DOS) to the modular Ignite platform, which increases Technology segment gross margins from 60% to 70%.

Driver

The specific event unlocking value is the completion of the CEO transition by June 2026, overseen by activist board member Matt Arens, alongside the first quarter of sustained positive free cash flow.

Catalyst

Downside protection is provided by a $131.8 million net debt position that was recently improved by paying off $230 million in convertible notes, and a valuation floor supported by an 18.86% activist stake.

Protection

The migration to the Ignite platform will drive Technology gross margins to 70%, leading to a 10% Adjusted EBITDA margin by 2025. Activist involvement from First Light (18.86% owner) ensures a floor on the valuation and a disciplined CEO succession process. The company is trading at 0.9x EV/Sales, a massive discount to the 4.6x peer median despite a robust 100% dollar-based retention rate.

Bull Case

Persistent GAAP losses and negative tangible book value (-$43.2M) create a risk of further equity dilution if FCF does not turn positive in 2026. Medicaid and research funding cuts could continue to pressure client budgets, leading to further revenue guidance downgrades. The company lacks a structural moat as a 'System of Record,' making it vulnerable to displacement by larger EHR vendors like Epic or Cerner.

Bear Case

Health Catalyst is a micro-cap healthcare data player in a forced pivot from growth-at-all-costs to a profitability-first model. The market is currently pricing the company as a terminal failure due to a TTM net margin of -34.1% and a 23% price drop following a 2025 revenue guidance revision. However, our differentiated view is that the market is excessively discounting the stock due to near-term GAAP losses, failing to recognize that the underlying unit economics of the new Ignite platform (70% target gross margins) and the oversight of an 18.8% activist shareholder who recently joined the board provide a massive asymmetric upside as the company reaches an FCF inflection point.

The strategy has evolved from a balanced growth and M&A focus in 2023 to a disciplined pivot toward profitability and operational efficiency in 2024, culminating in a 'profitability-first' stance with no near-term M&A by 2025. The narrative shifted from 'growth at all costs' to 'harvesting returns' on existing assets.

Method	Implied Value	Weight	Weighted Value
DCF	$4.24	35%	$1.48
Comps	$10.52	60%	$6.31
Historicals	$0.96	5%	$0.05
Total Weighted			$7.84

HCAT

Price History

Key Metrics

Recent Activity

Valuation Table