Health Catalyst (HCAT) risk factors, FY2024 10-K

Risks Related to Our Business and Industry

1. 01We operate in a highly competitive industry, and if we are not able to compete effectively, our business and results of operations will be harmed
2. 02Changes in the healthcare industry could affect the demand for our Solution, cause our existing contracts to be terminated, and negatively impact the process of negotiating future contracts
3. 03Macroeconomic challenges (including high inflationary and/or high interest rate environments, new tariffs, or market volatility and measures taken in response thereto), the tight labor market and any natural disasters or new public health crises could harm our business, results of operations, and financial condition
4. 04We may be unable to successfully execute on our growth initiatives, business strategies, or operating plans, as well as cost reduction and restructuring initiatives
5. 05If we fail to provide effective professional services and high-quality client support, our business and reputation would suffer
6. 06Our sales cycles can be long and unpredictable, and our sales efforts require a considerable investment of time and expense. If our sales cycle lengthens or we invest substantial resources pursuing unsuccessful sales opportunities, our results of operations and growth would be harmed
7. 07Our Solution may not operate properly, which could damage our reputation, give rise to claims against us, or divert application of our resources from other purposes, any of which could harm our business and results of operations
8. 08In most cases, we maintain liability insurance coverage, including coverage for errors and omissions. However, it is possible that claims could exceed the amount of our applicable insurance coverage or that this coverage may not continue to be available on acceptable terms or in sufficient amounts
9. 09If we are not able to maintain and enhance our reputation and brand recognition, our business and results of operations will be harmed
10. 10If we do not continue to innovate and provide services that are useful to clients and users, we may not remain competitive, and our revenue and results of operations could suffer
11. 11Our business could be adversely affected if our clients are not satisfied with our Solution
12. 12If our existing clients do not continue or renew their contracts with us, renew at lower fee levels, or decline to purchase additional technology and services from us, it could have a material adverse effect on our business, financial condition, and results of operations
13. 13Our results of operations are likely to fluctuate, and if we fail to meet or exceed the expectations of securities analysts or investors, the trading price of our common stock could decline. Moreover, our stock price may be based on expectations of our future performance that may be unrealistic or that may not be met
14. 14Our pricing may change over time and our ability to efficiently price our Solution will affect our results of operations and our ability to attract or retain clients
15. 15If our Solution fails to provide accurate and timely information, or if our content or any other element of our Solution is associated with faulty clinical decisions or treatment, we could have liability to clients, clinicians, patients, or others, which could adversely affect our results of operations
16. 16We use AI and generative AI, machine learning, and automated decision-making technologies, including proprietary AI and machine learning algorithms and models, (collectively, AI Technologies) throughout our business, and are making investments in this area
17. 17Future litigation against us could be costly and time-consuming to defend and could result in additional liabilities
18. 18We derive a significant portion of our revenue from our largest clients. The loss, termination, or renegotiation of any contract could negatively impact our results
19. 19Because we generally recognize technology and professional services revenue ratably over the term of the contract for our services, a significant downturn in our business may not be reflected immediately in our results of operations, which increases the difficulty of evaluating our future financial performance
20. 20If we are unable to implement and maintain effective internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be adversely affected
21. 21Because competition for our target employees is intense, we may not be able to attract and retain the highly skilled employees we need to support our continued growth
22. 22We depend on our senior management team, and the loss of one or more of our executive officers or key employees or an inability to attract and retain highly skilled employees could adversely affect our business
23. 23Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity, and teamwork fostered by our culture, which could harm our business
24. 24If we fail to effectively manage our growth and organizational change, our business and results of operations could be harmed
25. 25We may not grow at the rates we historically have achieved or at all, even if our key metrics may indicate growth
26. 26Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business may not grow at similar rates, or at all

Risks Related to Data and Intellectual Property

1. 27Failure by our clients to obtain proper permissions and waivers may result in claims against us or may limit or prevent our use of data, which could harm our business
2. 28Our business and operations may suffer in the event of information technology system failures, cyberattacks, or deficiencies in our cybersecurity
3. 29We rely on third-party providers, including Microsoft Azure, for computing infrastructure, network connectivity, and other technology-related services needed to deliver our Solution. Any disruption in the services provided by such third-party providers could adversely affect our business and subject us to liability
4. 30Our business could be adversely impacted by changes in laws and regulations related to the Internet or changes in access to the Internet generally
5. 31Our Solution utilizes open-source software, and any failure to comply with the terms of one or more of these open-source licenses could adversely affect our business
6. 32Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand
7. 33We may be sued by third parties for alleged infringement of their proprietary rights or misappropriation of intellectual property

Risks Related to Healthcare and Data Privacy and Security Regulation

1. 34Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations, and financial condition
2. 35Government regulation of healthcare creates risks and challenges with respect to our compliance efforts and our business strategies
3. 36If our arrangements with clinicians and other healthcare professionals are found to constitute the improper rendering of professional medical services or fee splitting under applicable state laws, our business, financial condition, and our ability to operate in those states could be adversely impacted
4. 37The FDA may modify its enforcement policies with respect to medical software products, and our software products may become subject to extensive regulatory requirements, which may increase the cost of conducting, or otherwise harm, our business
5. 38The healthcare regulatory and political framework is uncertain and evolving
6. 39Due to the particular nature of certain services we provide or the manner in which we provide them, we may be subject to additional government regulation and foreign government regulation

Risks Related to Tax Regulation

1. 40Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, value-added or similar transactional taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our results of operations
2. 41Unanticipated changes in our effective tax rate and additional tax liabilities, including as a result of our international operations or implementation of new tax rules, could harm our future results
3. 42Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations
4. 43Comprehensive tax reform legislation could adversely affect our business and financial condition

Risks Related to Our Indebtedness

1. 44Our indebtedness could adversely affect our financial condition and prevent us from fulfilling our existing or future debt obligations, and we may not generate sufficient cash flow from our business to pay our debt
2. 45Our Credit Agreement contains covenants and other provisions that restrict our ability to take certain actions and may limit our ability to operate or grow our business in the future
3. 46We are exposed to interest rate risks with regard to our Term Loan Facility and any future refinancing thereof
4. 47Our Capped Calls may affect the value of our common stock and subject us to counterparty risk

Risks Related to an Investment in Our Securities

1. 48We have a limited operating history in an evolving industry which makes it difficult to evaluate our current business future prospects and increases the risk of your investment
2. 49We have experienced significant net losses since inception, we expect to incur losses in the future, and we may not be able to generate sufficient revenue to achieve and maintain profitability
3. 50The market price of our common stock may be volatile and may decline regardless of our operating performance, and you may lose all or part of your investments
4. 51If securities or industry analysts do not continue to publish research, or publish inaccurate or unfavorable research, about our business, the price of our common stock and trading volume could decline
5. 52We cannot guarantee that the Share Repurchase Plan will be fully consummated or will enhance stockholder value, and share repurchases could affect the price of our common stock
6. 53Our management has broad discretion in the use of proceeds from our IPO, the Note Offering, and the Secondary Public Equity Offering and our use may not produce a positive rate of return
7. 54Our issuance of additional capital stock in connection with financings, acquisitions, investments, our stock incentive plans, or otherwise will dilute all other stockholders
8. 55The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members
9. 56We do not intend to pay dividends on our common stock and, consequently, the ability of common stockholders to achieve a return on investment will depend on appreciation, if any, in the price of our common stock
10. 57We could be subject to securities class action litigation

Risks Related to Our Charter and Bylaws

1. 58Provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current board of directors, and limit the market price of our common stock
2. 59Our amended and restated bylaws designate a state or federal court located within the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with us

General Risks

1. 60Changes in accounting principles may cause previously unanticipated fluctuations in our financial results, and the implementation of such changes may impact our ability to meet our financial reporting obligations
2. 61General worldwide economic conditions have experienced significant downturns during the last ten or more years, and market volatility and uncertainty remain widespread, making it potentially very difficult for our clients and us to accurately forecast and plan future business activities
3. 62There is an increasing focus from certain investors, employees, and other stakeholders concerning corporate responsibility, specifically related to environmental, social, and governance factors