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Business Combinations | 3 Months Ended
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Mar. 31, 2021
Business Combinations [Abstract] |
Business Combinations | Business Combinations The business acquisitions discussed below are included in our results of operations from their respective dates of acquisition. Able Health, Inc. On February 21, 2020, we acquired Able Health, Inc. (Able Health), a leading software-as-a-service provider of quality and regulatory measurement tracking and reporting to healthcare providers and risk-bearing entities, in a transaction accounted for as a business combination. The acquisition consideration transferred was $21.5 million and was comprised of net cash consideration of $15.2 million, Health Catalyst common shares with a fair value of $3.3 million, and contingent consideration based on achievement of Able Health specified incremental customer billings for the year ending December 31, 2020, with an initial fair value of $3.0 million. The acquisition consideration is subject to certain working capital escrow adjustments. The purchase resulted in Health Catalyst acquiring 100% ownership in Able Health. An additional 179,392 shares of our common stock subject to restriction agreements, or restricted shares, were issued pursuant to the terms of the acquisition agreement and 60,000 restricted stock units were issued in connection with the acquisition agreement. The value of these restricted shares and restricted stock units is recognized as post-combination stock-based compensation expense over their respective vesting terms. The vesting of the restricted shares was subject to one year of continuous service by the applicable team members and fully vested on the one-year anniversary of the acquisition closing date. T he service-based condition for the restricted stock units issued pursuant to the terms of the acquisition agreement is satisfied over two years with a 50% cliff vesting period of one year and ratable quarterly vesting thereafter. Refer to Note 12 for additional details related to our stock-based compensation. The following table summarizes the acquisition-date fair value of consideration transferred and the identifiable assets purchased and liabilities assumed as part of our acquisition of Able Health (in thousands):
Assets acquired: |
Accounts receivable | $ | 633 |
Prepaid expenses and other assets | 57 |
Developed technologies | 7,500 |
Customer relationships | 600 |
Trademarks | 100 |
Total assets acquired | 8,890 |
Less liabilities assumed: |
Accounts payable and other current liabilities | 91 |
Deferred revenue | 762 |
Net deferred tax liabilities | 1,280 |
Total liabilities assumed | 2,133 |
Total assets acquired, net | 6,757 |
Goodwill | 14,725 |
Total consideration transferred, net of cash acquired | $ | 21,482 |
The acquired intangible assets were valued utilizing either an income approach or a cost approach as deemed most applicable, and include customer relationships, developed technology, and trademarks that will be amortized on a straight-line basis over their estimated useful lives of six years, three years, and two years, respectively. The resulting goodwill from the Able Health acquisition was fully allocated to the technology reporting unit and is not deductible for income tax purposes. Healthfinch, Inc. On July 31, 2020, we acquired Healthfinch, Inc. (Healthfinch), which provides a workflow integration engine delivering insights and analytics into electronic medical record (EMR) workflows to automate physicians’ ability to close patient care gaps in real-time, in a transaction accounted for as a business combination. We believe this acquisition will strengthen our existing population health capabilities. The acquisition consideration transferred was $50.5 million and was comprised of net cash consideration of $16.9 million, Health Catalyst common shares with a fair value of $27.8 million, and contingent consideration based on certain earn-out performance targets for Healthfinch during an earn-out period that ends on July 31, 2021, with an initial fair value of $5.8 million. The purchase resulted in Health Catalyst acquiring 100% ownership in Healthfinch. The following table summarizes the acquisition-date fair value of consideration transferred and the identifiable assets purchased and liabilities assumed as part of our acquisition of Healthfinch (in thousands):
Assets acquired: |
Accounts receivable | $ | 1,408 |
Prepaid expenses and other assets | 347 |
Developed technologies | 8,100 |
Customer relationships and contract backlog | 10,000 |
Trademarks | 200 |
Total assets acquired | 20,055 |
Less liabilities assumed: |
Accounts payable and other current liabilities | 408 |
Deferred revenue | 2,100 |
Total liabilities assumed | 2,508 |
Total assets acquired, net | 17,547 |
Goodwill | 32,960 |
Total consideration transferred, net of cash acquired | $ | 50,507 |
The acquired intangible assets were valued utilizing either an income approach or a cost approach as deemed most applicable, and include customer relationships and contract backlog, developed technology, and trademarks that will be amortized on a straight-line basis over their estimated useful lives of seven years, three years, and two years, respectively. The resulting goodwill from the Healthfinch acquisition was fully allocated to the technology reporting unit and is not deductible for income tax purposes. Vitalware, LLC On September 1, 2020, we acquired Vitalware, LLC (Vitalware), a provider of revenue workflow optimization and analytics SaaS technology solutions to healthcare organizations, in a transaction accounted for as a business combination. Vitalware’s flagship offering is a chargemaster management solution that delivers results for the complex regulatory and compliance functions needed by healthcare provider systems. Additionally, Vitalware brings to bear newer product suites to help health systems capture lost revenue and to support compliance with expanding pricing transparency regulation. The acquisition consideration transferred was $119.2 million and was comprised of net cash consideration of $69.6 million, Health Catalyst common shares with a fair value of $41.3 million, and contingent consideration based on certain earn-out performance targets for Vitalware during an earn-out period that ended on March 31, 2021, with an initial fair value of $8.3 million. The purchase resulted in Health Catalyst acquiring 100% ownership in Vitalware. An additional 203,997 shares of our common stock subject to a restriction agreement, or restricted shares, were issued pursuant to the terms of the acquisition agreement. The value of these restricted shares is recognized as post-combination stock-based compensation expense on a straight-line basis over the 12-month vesting term. 75% of these restricted shares will vest on a monthly basis over a term of approximately one year with the remaining 25% vesting on the one year anniversary of the acquisition closing date. Refer to Note 12 for additional details related to our stock-based compensation. The following table summarizes the acquisition-date fair value of consideration transferred and the identifiable assets purchased and liabilities assumed as part of our acquisition of Vitalware (in thousands):
Assets acquired: |
Accounts receivable | $ | 3,220 |
Prepaid expenses and other assets | 469 |
Developed technologies | 18,000 |
Customer relationships and contract backlog | 43,000 |
Trademarks | 1,400 |
Total assets acquired | 66,089 |
Less liabilities assumed: |
Accounts payable and other current liabilities | 766 |
Deferred revenue | 2,589 |
Total liabilities assumed | 3,355 |
Total assets acquired, net | 62,734 |
Goodwill | 56,443 |
Total consideration transferred, net of cash acquired | $ | 119,177 |
The acquired intangible assets were valued utilizing an income approach, and include customer relationships, contract backlog, developed technology, and trademarks that will be amortized on a straight-line basis over their estimated useful lives of seven years, two years, four years, and for trademarks two to five years, respectively. The resulting goodwill from the Vitalware acquisition was fully allocated to the technology reporting unit and is deductible for income tax purposes. Unaudited Pro Forma Financial Information The following table reflects our unaudited pro forma combined results of operations for the years ended December 31, 2020 and 2019 as if the acquisitions of Able Health, Healthfinch, and Vitalware had taken place on January 1, 2019:
| Year Ended December 31,
| 2020 |  | 2019
| (unaudited)
Total pro forma revenues | $ | 209,409 |  |  | $ | 173,973 |
Pro forma net loss | (124,485) |  |  | (90,850) |
The unaudited pro forma information is not intended to present actual results that would have been attained had the acquisitions been completed as of January 1, 2019 or to project potential results as of any future date or for any future periods. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. The nature and amount of material, nonrecurring pro forma adjustments directly attributable to these acquisitions which are included in the pro forma revenues or net loss, as applicable, are attributable to fair value adjustments to deferred revenues, amortization of acquired intangible assets, acquisition-related income tax considerations, and acquisition transaction costs that had a net impact on the pro forma combined net loss of $9.5 million and $30.8 million for the years ended December 31, 2020 and 2019, respectively.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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