Company: HCTI
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001213900-25-109581
Chunk: 44

Company: Healthcare Triangle, Inc.
Filing Date: 2025-11-13
Form: 10-Q
Item: Part I, Item 1
Chunk 44
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. Certain software services revenues are billed on a fixed fee basis and revenues
are typically recognized over time as the services are delivered based on time incurred and customer acceptance. We recognize revenue
when we have the right to invoice the customer using the allowable practical expedient under ASC 606-10-55-18 since the right to invoice
the customer corresponds with the performance obligations completed.

Managed Services and Support 

Managed Services and Support include post implementation
support and cloud hosting. Managed Services and Support are a distinct performance obligation. Revenue for Managed Services and Support
is recognized ratably over the life of the contract.

Cost of Revenue

Cost of revenue consists primarily of employee-related
costs associated with the rendering of our services, including salaries, benefits and stock-based compensation expense, the cost of subcontractors,
travel costs, cloud hosting charges and allocated overhead the cost of providing professional services is significantly higher as a percentage
of the related revenues than for our subscription services due to the direct labor costs and costs of subcontractors. Our business and
operational models are designed to be highly scalable and leverage variable costs to support revenue-generating activities. 

While we may grow our headcount overtime to capitalize
on our market opportunities, we believe our increased investment in automation, electronic health record integration capabilities, and
economies of scale in our operating model, will position us to grow our platform solutions revenue at a greater rate than our cost of
revenue.

Gross Margin

In the current period, the gross margin generated
by the Company has been reduced to 18% and 13% in the 3 months and 9 months ended September 30, 2025, as compared to 30% and 27% in the
3 months and 9 months ended September 30, 2024, respectively. This is due to the acquisition and onboarding of the SecureKloud contracts,
which had been negotiated at lower margins prior to the acquisition. Going forward, all new contracts are being negotiated at higher
margins and as a result we expect future profit margins to increase materially over the next few quarters.

Operating Expenses

Research and Development

Research and development expense (majorly our
investment in innovation) consists primarily of employee-related expenses, including salaries, benefits, incentives, employment taxes,
severance, and equity compensation costs for our software developers, engineers, analysts, project managers, and other employees engaged
in the development and enhancement of our cloud-based platform applications. Research and development expenses also include