Health Catalyst NASDAQ: HCAT reported first-quarter 2026 results that topped its own expectations, while management outlined a broad restructuring plan aimed at simplifying the company’s operating model, reducing costs and shifting the business further toward technology-led growth.
Chief Executive Officer Ben Albert said the company is moving with urgency after a review of its cost structure, product portfolio, go-to-market model, organizational design and client delivery approach. He said the review reinforced the strength of Health Catalyst’s assets but also showed that the company’s prior operating structure had become “fragmented and cumbersome.”
“We are pleased to report a strong first quarter with solid bookings and results that exceeded expectations on both revenue and adjusted EBITDA,” Albert said. He added that Health Catalyst ended the quarter in a strong cash position and is making progress toward “durable and efficient growth.”
First-Quarter Revenue and EBITDA Beat Guidance
Chief Financial Officer Jason Alger said total revenue for the first quarter ended March 31 was $70.8 million, above the company’s guided range of $68 million to $70 million. Technology revenue was $49.5 million, while professional services revenue was $21.3 million.
Alger said the revenue trajectory is beginning to reflect pressure tied to the company’s prior migration strategy, though that was partially offset by milestone delivery-based revenue and new client revenue. Professional services revenue continued to decline as expected as Health Catalyst shifts toward a more technology-led model.
Adjusted gross margin was 51.5%, compared with 49.2% in the prior-year period. Adjusted technology gross margin was 65.3%, while adjusted professional services gross margin was 19.4%. Alger said technology margins were affected by duplicate hosting costs tied to client migrations to Ignite and heavy data-loading costs associated with health information exchange client deployments before revenue recognition.
Adjusted operating expenses were $27.3 million, or 39% of revenue, down from $32.8 million, or 41% of revenue, in the first quarter of 2025. Adjusted EBITDA was $9.1 million, exceeding the high end of the company’s $7 million to $8 million guidance range and up from $6.3 million a year earlier. Adjusted net income per share was $0.02, based on a weighted average share count of 72.6 million.
The company ended the quarter with $108.8 million in cash equivalents and short-term investments, up $13.1 million from Dec. 31, 2025. Alger said Health Catalyst does not expect that level of cash generation every quarter but is managing liquidity carefully.
Project Nexus Targets $30 Million in Annualized Savings
Albert said Health Catalyst recently launched a comprehensive restructuring initiative called Project Nexus, intended to transform its operating model, improve its cost structure and consolidate the business around one commercial approach, one client-facing team and one set of standards.
The initiative is expected to generate approximately $30 million in annualized run-rate cost savings. Alger said that includes about $22 million in direct savings from a 9% reduction in headcount and reductions in non-headcount spending, including infrastructure, subscriptions and contractors. An additional $8 million is expected from closing open roles and canceling previously planned expenses.
Health Catalyst expects approximately $4 million in second-quarter restructuring charges, with the majority incurred in the quarter and the restructuring substantially complete by year-end. Alger said quarterly adjusted operating expenses are expected to decline by $3 million to $4 million compared with the first quarter, while quarterly adjusted cost of revenue is expected to decrease by $1 million to $2 million as the year progresses.
Albert also said the company piloted a new engineering development model using smaller development pods and proprietary AI development agents. In initial pilots, he said development teams increased story points delivered by as much as 100% per developer.
DOS-to-Ignite Migration Remains a Key Revenue Pressure
Management repeatedly pointed to the company’s prior DOS-to-Ignite migration strategy as a major source of current and expected revenue pressure. Albert said a rigid migration timeline over the past two years created a churn dynamic that is heavily impacting 2026.
Health Catalyst has stopped managing the migration as a one-size-fits-all program, Albert said, and has completed a client-by-client review of remaining customers. The company is now developing tailored plans, including options for some clients to remain on DOS for an extended period.
On the prior earnings call, the company had identified $12.5 million of ARR in notified downsell churn and about $52 million of potentially at-risk ARR. Alger said that after the client-by-client review, Health Catalyst expects to retain at least $22 million of the previously identified $52 million. That leaves approximately $30 million of at-risk ARR.
Alger said the expected impact is approximately $20 million in 2026 and $10 million in 2027. He added that the migration impact is temporary and that Health Catalyst expects to be generally through the “strains” of the migration by the end of 2027, though not every migration will necessarily be complete.
During the question-and-answer session, Albert said DOS continues to provide value to clients and that many have invested heavily in the platform. “Taking on that transition to a new platform, whether it be Ignite or other, is just a lot of work,” he said.
Company Issues 2026 Guidance and New Bookings Metric
Health Catalyst provided full-year 2026 guidance for total revenue of $260 million to $265 million and adjusted EBITDA of $30 million to $33 million. For the second quarter, the company expects total revenue of $68 million to $70 million and adjusted EBITDA of $9 million to $10 million.
Alger said full-year revenue guidance reflects short-term pressure from the prior migration strategy, reductions related to TAMS and professional services revenue, and the company’s broader business assessment.
The company also introduced total bookings as a new operating metric. Albert said Health Catalyst considered investor feedback and views bookings as one of the clearest indicators of whether its commercial engine is working. Alger said Health Catalyst expects $22 million to $26 million in new bookings during 2026, including ARR and non-recurring revenue. He said bookings typically convert into revenue within three to six months, depending on the project or technology being deployed.
AI Strategy Centers on Proprietary Improvement Data
Albert said Health Catalyst’s long-term strategy is increasingly focused on the “intelligence” layer above healthcare data infrastructure, which he described as having become more commoditized. He said the company’s advantage is based on 18 years of proprietary healthcare improvement data tied to interventions, costs and measured outcomes.
The company is building agentic AI models across cost management, clinical quality, consumer experience and ambulatory growth, embedded within domain-specific applications. Albert said the goal is to turn work that previously required months of consulting and manual effort into technology solutions that can recalculate daily as conditions change.
In response to an analyst question about customer feedback on Ignite Intelligence, Albert said early feedback has been positive, particularly around cost management, though he described the rollout as still in the “very early innings.”
Albert closed the call by saying Health Catalyst is focused on execution and transparency as it works through the transition. “We recognize that our performance hasn’t been where we want it,” he said, adding that the company expects to be judged by the performance it delivers going forward.
About Health Catalyst NASDAQ: HCAT
Health Catalyst NASDAQ: HCAT is a healthcare data and analytics technology company founded in 2008 and headquartered in Salt Lake City, Utah. The company went public in 2019 and has since focused on delivering a unified data platform that helps healthcare organizations aggregate and analyze clinical, financial and operational information.
The core of Health Catalyst's offering is the Data Operating System (DOS), a modular data management platform that integrates disparate data sources—from electronic health records to claims and patient-generated data—into a single analytics environment.
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