Health Catalyst Inc. (HCAT) PT Lowered to $8 at Piper Sandler amid 'Top-Line Drama'

Piper Sandler analyst Jessica Tassan lowered the price target on Health Catalyst Inc. (NASDAQ: HCAT) to $8.00 (from $12.00) while maintaining an Overweight rating.

The analyst commented: "What The HCAT Happened? We Dig Into CY25 Rev Guide-Down & Bridge To Updated #s; We disaggregate the components of HCAT's CY25 revenue guide down to gain visibility into the updated outlook. Despite the top-line drama, we think HCAT can deliver $39.0M of adjusted EBITDA in CY25. OW, PT to $8.00 (prior $12.00) based on an unchanged 15x multiple of lower CY25E adjusted EBITDA; with reduced PF net cash and higher s/o.

Revised CY25 revenue guidance falls short of prior. On 2/22/24, HCAT issued CY24 guidance calling for $308.0M of revenue at the midpoint. On 2/22/24, HCAT projected that CY25 revenue would grow 10.0% to 15.0% y/y to $346.6M at the midpoint; up $38.6M y/y.

We disaggregate the CY25 revenue guide down into its component parts. We attribute the ($19.9M) like-for-like reduction in CY25E revenue growth to softer than anticipated CY24 revenue retention and bookings.

Despite the top-line drama, HCAT still expects to deliver $39.0M of adjusted EBITDA in CY25. Ambulatory TEMS may be a drag on adjusted EBITDA in 1H25. When the pilots end, the drag relents. We estimate that dollar based revenue retention and launch price degradation will impose a ($19.9M) combined CY25 revenue headwind vs prior guide. We assume that the ($19.9M) of forgone revenue would have been marginally profitable; but we believe that Upfront and incremental opex efficiencies can fill the void and enable HCAT to deliver $39.0M of adjusted EBITDA in CY25."

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