Health Catalyst, Inc. - Form 8-K Summary
Business Context and Reporting Period
Health Catalyst, Inc. (HCAT) filed this Current Report on Form 8-K on July 16, 2024, to disclose the entry into a material definitive agreement. The company is a Delaware corporation with its principal executive offices in South Jordan, Utah.
Key Financial Metrics and Debt Structure
The filing details a new five-year term loan facility with an aggregate principal amount of up to $225 million, structured as follows:
- Initial Term Loan: $125 million funded in full on the closing date.
- Delayed Draw Facility: $100 million undrawn as of the closing date, available in two tranches ($40 million within six months and $60 million within eighteen months).
- Maturity Date: July 16, 2029.
- Interest Rates:
- Base Rate Loans: ABR (floor 2.00%) + 5.50% margin.
- SOFR Loans: Term SOFR (floor 1.00%) + 6.50% margin.
- Default Rate: Additional 2.00% per annum on overdue amounts.
- Amortization: Quarterly installments of 0.25% of the original principal amount, commencing December 31, 2024.
- Commitment Fees: 1.50% per annum on unused Delayed Draw A Commitments; 1.50% per annum on unused Delayed Draw B Commitments for the first year, increasing to 2.50% thereafter.
Material Changes and Use of Proceeds
The company has entered into a significant new debt obligation. The net proceeds from the Initial Term Loan will be used to:
- Repurchase, repay, or pay amounts due upon conversion of existing convertible notes due 2025.
- Fund working capital and general corporate purposes.
Proceeds from the Delayed Draw Loans, if drawn, are designated to fund inorganic growth strategies through permitted acquisitions and related fees.
Guidance, Risks, and Covenants
The Credit Agreement imposes several financial and operational covenants and risks:
- Financial Covenants:
- Minimum liquidity threshold tested daily.
- Maximum recurring revenue-based leverage ratio (tested quarterly from Q3 2024 through Q2 2026).
- Maximum EBITDA-based net leverage ratio (tested quarterly from Q3 2026 through maturity).
- Prepayment Premiums: Voluntary or mandatory prepayments are subject to premiums ranging from 3.00% (plus make-whole) if paid before July 16, 2025, down to 1.00% if paid before July 16, 2028. No premium applies after July 16, 2028.
- Collateral and Guarantees: Obligations are secured by a first-priority lien on substantially all present and future assets of the company and its subsidiaries, which also provide guarantees.
- Events of Default: Include non-payment, covenant violations, cross-defaults, bankruptcy, and change of control.
This filing does not provide specific revenue, profit, or cash flow figures for the current period; it focuses solely on the terms of the new credit facility.
Investor Verification Checklist
- Verify the outstanding balance and terms of the existing convertible notes due 2025 to assess the immediate impact of the repayment plan.
- Review the company's current liquidity position to ensure compliance with the daily minimum liquidity threshold covenant.
- Monitor the company's recurring revenue and EBITDA metrics to evaluate compliance with the leverage ratios starting in Q3 2024.
- Assess the potential impact of the new interest expense (ABR + 5.50% or SOFR + 6.50%) on future profitability.
- Check for any subsequent filings regarding the drawdown of the $100 million Delayed Draw Facility for acquisitions.