HCAT - Earnings call transcript Q2 2019

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Operator

Good day ladies and gentlemen, and welcome to the Health Catalyst Incorporated Second Quarter 2019 Earnings Conference Call. And at this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. [Operator Instructions]

I would now like to introduce your host for today’s conference, Mr. President Relations Vice Health Senior Brown, of for Investor Catalyst. Adam may begin. you Sir,

Adam Brown

Catalyst’s Good Patrick earnings Health Dan June Chief Health the to of call I afternoon, welcome and is Vice Senior Catalyst’s Nelli, with name Adam of Officer Chief President Executive me which am the the My Relations Financial second XXXX, Catalyst’s conference and ended Officer. Burton, XXXX. on for Health Health XX, Investor is and Brown. Catalyst quarter for call on

of complete ir.healthcatalyst.com. in the X-K on of A our well can our both press our available at Form disclosure results as Investor be Relations release furnished related as SEC, are found to section the issued of today, which website in our

being reminder, a the call and following available a replay of be today’s the conclusion is recorded call. will As

Actual statements we business. on regarding the Private Litigation Reform forward-looking During Act of management’s anticipated the of Harbor make and the XXXX any pursuant are materially. call, current based provisions forward-looking statements of strategies, disclaim statements should upon performance relied any Securities to be of will Safe days. views today to any representing as These trends, the our obligation update views not as as outlook. We differ and or of and results expectations may subsequent forward-looking

and Form refer be Please recent most filed to the risk XX-Qs to XX-K the our SX and factors Form in with SEC.

provided measures our non-GAAP provide non-GAAP investors. certain will information financial GAAP reconciliation to to press also in to refer is We of A additional release. measures to

one-time updates our may insights incremental business. provide in we may provide of or into dynamics we the in call, During and may greater offer to future. nature the These details maybe not the metrics

year prepared your the will turn full as for over for remarks, Dan Patrick Dan? me well provide will his and prepared questions. let QX then Dan provide and as take remarks XXXX. outlook Patrick and then the that, to With call

Dan Burton

who everyone discuss thank XXXX you, second you quarter Thank has to performance. our to joined and Adam us

public company. are our We to hold excited call as a first earnings

that with during our I For your the in appreciation of let and for opportunity you interest had those Patrick our IPO show, express company. me road to visit

For on welcome. Health new are Catalyst, who to this those call

is make this I’d introductory Health a Catalyst. comments first as public that company, quarterly like Given call some our to about

We and technology are services healthcare leading a provider of analytics data and organizations. to

a comprised and solution Our cloud-based professional platform, of software is services analytics data expertise.

their organizations Our founded by Health improvements. operate Catalyst are measurable manage operational data healthcare pioneers XXXX data, and providers and the to solution financial who customers in was analytical and use within their industry. primarily insights our to produce divide clinical, analytics healthcare

delivering enabling components From by applications measurable Solution and has mission services the the drives focused customers on massive with customers. for beginning, the data-informed each our healthcare the mission which platform, of Health of Catalyst expertise, improvements catalyst our improvement. be our solutions, We our been for our accomplish together the to three data measurable, on analytics

improvements. produce improve leadership as for our our cared an realize foundational and to, of the and respected feel to the do When are and enables connected collectively level, process Health flywheel our listened team is Team member extraordinary to engagement measurably Health as highest of to flywheel. customers members. of our this everything our center Catalyst describe team the mission At We team. priority is it’s they at work, engagement members Catalyst customers the outstanding measurable we at which

customer sustainable, potential financial to expand us referral increases expansion Health in and renew at performance. predictable customers. trust renewal they decision-makers scalable shared our to key and referring with choose relationship engagement and while The also produces their their and Health builds other Catalyst This work and Catalyst

ranges result gross range. relative the EBITDA of that results. total second end in revenue quarter adjusted unaudited our our and high we and range came our shared SX, I to of in am end pleased the report to to the high profit the adjusted our financial exceeded financial Transitioning total preliminary the at

million, year-over-year without $XX.X the of and increase an represents revenue organic QX our represents of basis, of year-over-year. an XX% which on increase impact acquisition Medicity achieved XX% We an from

adjusted of in margin was million, quarter Total prior the the second adjusted of year. gross the $X.X a a last in which compares to year second which the improvement quarter quarter from XX% was $X.X second favorably XX%, million loss in loss in and shows EBITDA

of primary Catalyst those second with with recall of we’ll growth you’ll For our in in objective our you and that categories improvement, scale familiar Health and results each measure these strategic three story, the discuss performance the categories. we company quarter

ability improvement for category, evaluating our improvements and while first engagement. massive, our to sustaining is focused industry-leading measurable on enable satisfaction customers The

Let within a performance our improvement the few some of me we reviewing use the and criteria spend that moments to evaluate metrics category.

flywheel. As satisfaction earlier, quarter In the percentile. overall achieved to I second the is relative gallop Catalyst XXth member pleased the level were we of score is a nearly team mentioned member of companies. company team This U.S. XXXX, satisfaction Health to have the center engagement in at XXX

by satisfaction across of our solutions driven customer the data, expertise. quality Our analytics is and

recognized We have leader been industry external from organizations. industry an numerous as

received we market During positive half additional validation. the first of XXXX,

Analytics report and two grades recognized in A of to and As Health titled for product an market its vendors Delivery the only Solutions Straight Tools receive example, execution. one Catalyst Chilmark both as and Healthcare Provider capabilities

data you platform, think customers our expertise, operational about and and That relationship solution, improvement. applications, increases builds financial realize our as matures. sense This process trust a gives we analytics and a how customer engagement services improvements. combines of which clinical, the measurable Through

flywheel report Catalyst Health accelerating. XXXX measurability achieved I with XXXX. improvements documented view, XXXX this in number a performance of the in customer half we first of evidence we to In improvements of of more strong standpoint, achieved improvements of in that our first all am pleased a the half from verified documented But than record totaling is the

to was in documented the in in a In initiative This outbound Case increase number an predictive and strategy. calls. support Allina one successfully to a the improvement improvement of year create published just paid could Health model overall that recently the a propensity collections of our million in XX.X% from $X a Study, resulted used solution

In efforts Health example recognized documented the a often published siloed and Community were organization. improvement improvement its from widespread Network the study, recently of case another not across

reduction solution customer please cost our visit of to studies. system-wide case use saving improvement sepsis million to to a and $XX resulting for our in prior We’d $X XXX than you new, website a more admission mortality They develop million encourage savings lives. patients in in documented with to including of hundreds sepsis savings XX% view strategy

which growth, is while define we adding category in we measure customer The also as existing results our next deepening relationships. which customers, new

and the of performance Now let few a evaluate within spend category. growth our criteria reviewing to use moments we me the some metrics

while terms moves healthcare In capabilities of more that of organizations underpenetration robust of and early we industries, overall innings the of most growth. with our market, are sustainable other continue us believe will in adoption healthcare adoption that analytics we slowly the to than feel we the industry long-term and technology provide

Health helping our growth than is is As basis show, revenue the anticipate demand see problem solution that for strong on is greater long-term. to the we We annual intensifying. we solve only Catalyst during and road the shared an market our over XX%

environment. increasingly that essential challenging are data, analytics We recognizing and to making investments are expertise in encouraged organizations to in healthcare are see this success that

are Additionally, multiple which made of these the we mission-critical our by organizations. investment decisions including believe C-suite healthcare indicative increasingly nature the in being to of constituents is CFO, the solution

offering business are market we which QX where in of and our our the assessment, XXXX, in as strengths company-wide adjacencies our we to market, conducted is semi-annual underpenetrated. Likewise, well our our the in solution currently but core fit leadership team and criticality natural as highlighted

we driving of growth, strategic think terms five long-term about In levers.

our applications growth third, second, addition overall customer adjacencies; First, of growth existing our within acquisitions. mergers through the markets customer our and and and expansion fifth, addressable new and services; the of of partnerships base; base; fourth,

We well discussed the started to our and the deliver that half positioned with performance show. growth strong first on road are XXXX we IPO we on of sales

our in core second market In terms we quarter. the continued success saw of highlights, in

to As XXXX analytics Catalyst as INTEGRIS after partner. selected and multiple fuel improvements largest INTEGRIS to platform, extensive analytics system than with our and with Oklahoma’s along vendors, data more review analytics solution their one physicians applications value will to an health XXXX comprehensive expertise a that data with its Health drive our and deliver services not-for-profit that for leverage their their providers beds equip communities. and sought will example, of Health, licensed patients

healthcare to core is our solution these landscape, many across these market, to of extremely sustainable receptivity of and our data come. applicability belief solutions the our enable including many, internationally there of outside life that sciences evidence in growth signing early for areas, our early in the broad years are while contracts market we which reinforce saw should points also We

the our the Lastly, growth of introduction our opportunities supports growth, of year. our half the potential applications. pipeline of recently Also to of second for generally highlight like under category we’d analytics available one guidance of the

on As platform. our suite of our analytics of our solution software second is are of which a reminder, top the part applications, built data

during next analytics allow remainder an for in our these prospective have becoming are analytics developed measurable year opportunity generally meaningful a our of the proposition for attractive and analytics applications customers been so. improvements customers. last available years across the These Five entire enterprise. with or their growth few applications represent to and applications These customers value the pinpoint for opportunities existing available generally

of In continue healthcare an value-based existing succeed to the financial who enhancement health comprehensive insights share Foundation cross views delivering assuming are of while grow healthcare risk populations that the organizations care. important June, to cost within increasingly is health organizations Population to company’s support introduced to our the all need healthcare the This we greater to Solution Health technology meaningfully. continuum the for population a

of Population with cost imperatives approach targets. wealth performance to analytics and and sources, financial a help tools contract data The meet intelligent patient dual identify to domain the Foundation high operations populations analytics and quality Solutions containment. and require analytic Risk stratify care tools clinical ensure draws data adaptable Health of and on arrangements to first bearing knowledge, align

optimization The delivers improvements. a risk a in population application greater to take to number and on analytics technology and of drive formed grow a capabilities design as the of these organizations they health experienced knowledgeable, with partner with foundations

released Solution. In Analytics the first our Response also of half Rapid we XXXX,

fundamental three organizations. addresses Analytics Our to Solution needs Rapid the Response healthcare

efficiency scientists skillset. of First, and the data at the dramatically so of data analysts operate productivity they can increasing top their and

organization. ownership analytic data data reducing of the and their enterprise that and And Health Informal only time data healthcare Catalyst curating XX% analytics spend and of third, total that consistency and on reveals of time analysts moving, improving Second, XX% data scientists cost of their XX% to their for data they survey platforms to and governance. warehouses. organizing data XX% benefit

staff Solutions Curated in the Analytics early reduction to Response relying consists tool called explore customer build XX DOS coding. the translate Builder, customized physician efficiency any Population The Marts on cohorts can their time insights, required of Rapid up new IT elements. need powerful x two data for deployment multiplier The and analytic sites user to in which nurse, results at patients confirmed lets type and develop data into of XX% a analytics. without primary by hitting or of a executive kits to self-service quickly modular developing that frontline from

We market we a market. be and within are will new value early powerful this solution this proposition to with pleased our receptivity believe

a Health September to Annual carefully our customers are Healthcare efforts, to the Sixth Catalyst needs. while context conference healthcare leadership and expected healthcare industry’s continue the hosting professionals to to and more our Analytics This in within with we provide meaningful to the attend. thought mention I’ll that industry, analytics for listening Also looking of in our growth opportunity represents Summit data forward broader XXXX

of call review a Patrick quarter performance category I providing financial of second the turn Now will results. view the scale over our our will in including who Patrick? to detailed

Patrick Nelli

Thank you, Dan.

of I objective As in Dan will scale. be strategic our mentioned, the company’s performance discussing category

scaling by Our scale organization. category performance sustainably is our mission to greater our focused contribution enabling on

and across with our second Dan’s seeing and financial our that quarter quarter I want I momentum results am business. into diving are we the second our pleased say echo to results, Before sentiment

this of results to public some and provide first key explanatory that to highlight given the our to the am Additionally, drivers operating is trends. earnings providing release, in detailed order remarks our some for numbers I significant our income prior going of quarter statement for components

on and domain a In analytics Professional is majority and recurring access recurring our our provided Technology we typically revenue subscription in Technology applications. fees and reporting revenue and nature terms related data of services, expertise revenue, revenue. vast to FTE platform primarily to of Professional by the segment services Services analytics includes consists basis.

drive be our services Professional run, Services improvements. such over critical customers to to because meaningful long enabling data-informed of the expect a our continue in are professional We to portion revenue to

In DOS through experts to grow terms two, services escalators, built-in new result annual professional customers under of customers, technology primarily expansion contractual choose three, of revenue recurring subscription FTE growth, as model. the one, we a of revenue as access a addition revenue additional services expansion and

we XXXX revenue immaterial $XX customers flat growth annual as it revenue impact for revenue, organic negative approximately consideration. Medicity have Lastly, declining we represent historical relates at to to our million in QX, starting compared will overall on Current thus Medicity to and revenue June acquired of a growth.

DOS customer XX opportunity our Medicity long we providing have the to possibility more additional subscription than the long-term run, customers we believe with the growth. to over Importantly, us cross-sell solution of

total XX%. year-over-year revenue, a For in QX representing $XX.X we million of XXXX, increase generated

basis, contribution of ago. acquisition Technology $XX.X million, technology XX% from organic our organic On was $XX.X revenue services revenue Medicity, an year-over-year. year-over-year. growth the year compared XX%. to increased was On an million, increase XX% of increased Professional an and of basis, saw revenue excluding a we XX% revenue

professional basis, XX% revenue year-over-year. organic increased services an On

access As primarily with and customer new was technology existing mentioned services from by revenue relationship fees growth us. expanding additions from customers and customers escalators total recurring their organic built-in existing from from driven contractual above, higher

our on background technology and are at our we gross also and data DOS deploy all services. professional We margin, our this out As by subscription because platform customers adjusted break applications grow cost our with data typically a to customer. little that we technology gross customer deployed Catalyst, Health technology our incremental platform as at of revenue margin our top with expands on

Since technology gross built-in matures contracts predictable subscription annual we margin as technology the DOS us. our has typically contractual customer escalators, expansion with have

Our of relative fact from benefited size professional as services to the we overhead grown. that total business gross our has decreased margin the have the has

customers overall remain our the continued to and with Microsoft expect gross managed datacenter flat transition margins from we our near-term due to to of Importantly, associated cost roughly increased Azure. on-premise

technology However, increase from the over the we expect scalability margins gross our due primarily of benefits to to run, offering. long platform

the with expect professional we margin gross margin adjusted adjusted the to our high the Specifically, our in long-term in mid-XXs technology gross long-term gross mid-XXs. services in our adjusted be total and XXs margin long-term

For XXX QX adjusted achieved basis of margin XX%, over a gross XXXX, points year-over-year. of we total an improvement

management’s third-party our cost with was gross overall side, with adjusted technology was grew, customers was On XXX margin our XX%, primarily datacenters our profit year-over-year, with the technology basis which down associated margin adjusted line gross gross Microsoft to in pressured expectations Azure. hosted while points to due transitioning

from on services customer continued and This increase utilization represents XX%, services And was XXX gross of primarily efficiencies organization. our professional in was points the an side, year-over-year. in which adjusted margin new pricing strides increase basis professional driving contract our

However, it to slower was also partially hiring than attributed anticipated.

quarters as professional adjusted decline the So up near-term expectations. with we anticipate services margin hiring in slightly to catches

administrative and marketing, cost. expenses and development, adjusted research and general operating include, and Our sales

exclude amortization fluctuate a as operating certain tender marketing as and payments on expense figures offer Adjusted stock-based such basis, given Summit. and expenses adjusted These a quarter in can we Healthcare and our especially compensation deemed compensation. quarterly events depreciation Analytics sales expense,

total percentage expenses QX XXXX to a of XX%, As in which compares were XX% revenue, operating in QX favorably XXXX.

that as I our have expenses can on operating quarterly adjusted fluctuations background, just a some quarterly generally in our EBITDA of result basis, a As variability mentioned.

on XXXX communicated our on runrate we we an show, begin basis. road anticipate we EBITDA As adjusted breakeven will

improvement in more mentioned Adjusted compares efficient of quarter our well deployment the of loss $X QX XXXX. gross to million, adjusted previously, as the Adjusted favorably operating higher second XXXX of as expenses. of margins driven was by EBITDA the in loss $X.X EBITDA was an a EBITDA million which

previously, As end Dan of of range. and results we to came we adjusted high-end relative profit total that SX, to gross preliminary pleased our the revenue our in unaudited report financial the high mentioned are the at the total EBITDA adjusted our ranges shared and in range exceeded

Lastly, including $X.XX. forma our for share count IPO the to per shares a adjusted share loss pro was adjustment net

compared the million of $XX.X year balance $XX.X short-term million second to investments end cash to at quarter we and the Turning sheet, ended with XXXX.

a July of on which million we offering total cost. initial closed underwriter XX, deducting proceeds discounts our cash Additionally, estimated public $XXX.X in net deducting commissions and and resulted offering after before XXXX,

from IPO Pro net QX of forma cash investments end would our short-term the for totaled at cash have the of proceeds and XXXX $XXX.X million.

cash end of to increase our As long-term XX, balance we and QX that of a increase subsequent million QX in debt XXXX, had June long-term XXXX took event million over The in the $XX.X result and place an $XX of debt financing in of our are the XXXX. IPO and XXXX.

to our midpoint IPO XXXX, revenue management’s of our and quarter we process. million expectations $XX.X The expect relates is it $X.X million road losses for EBITDA guidance and adjusted between million. As above million third used this the between of $XX.X guidance $XX.X financial total show and modeled during

of our will material QX that to XXXX that In marketing want sales Summit occurs Analytics for Annual impact QX guidance, Healthcare quarter. in performance the EBITDA that and our reiterate results in adjusted I terms our expense

first is quarter. QX in we not our the the And XXXX out closed the for overall Additionally, growth quarter June impact will Medicity rate acquisition is since as to break inorganic expected it thus, XXXX. revenue

and million. total are full adjusted losses guidance we follows: $XX.X as year EBITDA and $XXX.X the providing and million revenue million XXXX, $XXX.X between For between million, $XX.X

revenue performance We this used certain management’s that arrangements achieved where and the note of our quarter. in process. in included of road would year also half revenue performance-based IPO full expectations during measured midpoint second above guidance was the is modeled The that show XXXX

our have half of XXXX revenue portion become impact arrangements on overall we thus forward, revenue results. of an and smaller second less Moving expect performance-based our to a base

we throughout progress XXXX our keeping year. look represents you to on a the promising updated the second Our continuation forward quarter remainder of and to

That Dan? his my of turn remarks. results our call to for review the I’d back and like Dan concludes financial now closing to

Dan Burton

summary, with successful commitment are to could not the have Catalyst and improvement without of dedication success. pleased made progress who this realize hard of enable all our IPO work members day Thanks, In our we our work, to performance execution the Patrick. and customers each including company. We the Health team the of

We forward updated our keeping are you looking progress. on to

open let’s that, up with for And questions. it

Operator

from And Instructions] comes question our Sachs. first Jones Goldman [Operator with Robert

Your line now open. is

Jack Rogoff

taking DOS the Bob. months the can view better net is Jack guys a Generally, for worse since for subscription adds customer on like or Thanks new chance year you versus are this of Hi, Any things on question. update your you for do spoke? ago? us last few you feel

Dan Burton

Yes, Jack. happy that, to address

new are going clients net annual to of number be an on We DOS disclosing the subscription basis.

research We basis. regards not that share our are discussions had a that the quarterly be with would for guidance providing to I track with What the we’ve on feel will we to we analysts update with comfortable year. on is, regards and

Jack Rogoff

That’s helpful. Thanks the queue. in I’ll guys. hop back

Dan Burton

Jack. Thanks,

Operator

Morgan. And next Samuel you. comes Anne question from our Thank with J.P.

Your line now is open.

Anne Samuel

Hi Thanks And pipeline? the far? speak opportunity? opportunity? conversion What’s How so question. Medicity for how your for the guys. we many Thanks. then you in is DOS longer-term convert about be thinking of taking Could the the should

Dan Burton

address Anne. that to Happy

system we As bull's the we right that thought health systems the consider the an to we one be of Medicity, when benefits the with health acquiring XX we of that would where benefits cross-sell have strategic Medicity had opportunity as eye target existing that the we about of kind previously a discussed, on client relationship was in customer. focused primary

XXXX. decision half So in forward an of acquisition of the was move part the with Medicity of the that first important to

go space position cross-sell operational we HIE take to that a months in a that then operational product same could have those be would address getting stable six there we items addressed significant that which in focused we need core and we them in discussion. and to be it to a then to the that customers to for on first stability knew nine order us would time, with recognized to to to At those that bridge commitment items the we demonstrated

average As prior in cycle IPO is road around sales year. show, discussed one our in we’ve also and the meetings

would it us So we see develop to take also our that for cross-sell for that through pipeline message and actual results. time to knew

of results expect we’ve just in discussions months earnest as cross-sell the result, and that cross-sell within of we particular. the to would in in to show a As second really a more XX quarter next process up significant begun result, XX the

first customer. a signed Medicity deal have year our cross-sell this We earlier with

pipeline do cycle. we We we sales about time. how that are we that given will over good of excited that in it see momentum the feel the and will time about meaningful pipeline we amount the a take feel materialize believe But

Anne Samuel

of helpful. Patrick, in Thanks. pieces for then services. just And quarters You’ve the very expansion moving in margin? can you of professional That’s us two now had some one maybe speak substantial gross the pretty

longer-term, level in the back about So, should at? that half should just, how dynamics and we think where out the then

Patrick Nelli

Yes, it technology so, between will we of and professional services. break course, up

increase mentioned drops plug mature, revenue prepared technology bottom-line remarks, are of On expand fees gross the with to means fees those as run, increased technology as technology the technology we of scalably as our mid-XXs. the into that and long because the that we matures margins would customer with side, the our in and all DOS in customer DOS, applications they expect very as at most we get us, access access to customers, on the subscription DOS deploy top

datacenter over sell and we the private flat the to next Azure few to remain need gross of the customers expect cloud environment remaining we we margins thus However, that move to roughly Microsoft years. couple and on-premise technology

that really increase So years out. couple of starts a

services On long-term be side, gross professional the mid-XXs. expect services our professional the we in margins to would

and some past it some out, to on to hiring revenue. professional fluctuated has over pointed one-time services it you we the and fluctuate continue would based patterns expect As

the two you long-term get we gross professional it margins XX% margin long-term, would the those expect into take XXs. getting that we to to next high to over mid-XXs quarters, close When expect gross target. be services over would several combined, But overall the or

Dan Burton

the are just on professional as margin, the the making are gross also, organization of we comment, we and shared, we would focused Patrick the Can sustainability on of note of agree I to want track. such, that utilization professional with balanced are services delivery everything in metrics pace we I the one we ensure sure our concerned services that make I and

the little ourselves our We got that time. work in of earlier a as that they longer ahead members QX Patrick do team So of can over sustain that, that periods mentioned hiring projected, our what longer our team we took that a bit members would bit sustainable. what had to a little which we beyond view means as than needed little existing stretch

So, we are expectation and one we working the that want the sure make clear to that out is get that of to are balanced about we that why that’s reasons long-term mid-XXs. in

Anne Samuel

helpful. Very Thank you.

Operator

Thank you. Blair. with question next from Ryan our Daniels William And comes

Your open. line is now

Ryan Daniels

beyond taking I can highlighted the Yes, for pharmaceutical with about something inaugural gentlemen, you I a speak growth five thank mean market both road the to avenues novel you more and the little over in the show manufacture bit $X know you organization start addressable three of want the what sales, the billion you could to core years? market. for international out to question. addressable those on next laid

Dan Burton

Happy to that, Ryan. address Yes.

very data be IPO show, addressable approach and in until market includes have to we we an forecast on forecasting take discussed we to data-informed disciplined points be to try way the our enough As total the which we data-informed. that road to we waiting be

have we $X already demonstrated. addressable a be the U.S.-based markets That’s why where significant chose on market we traction market and the to core focused billion

result, life and As we we excluded sciences. a international excluded

addressable our been as the few have too that as both in total early and see to our well forward are we might perspective from momentum sciences first contracts some change project being internationally, early to we life market. how certainly the excited space, while And signed

few before we a some would TAM adjacencies a or feel there. as see differentiation informed areas having We invest where need we the hypothesis updating But there momentum quite see specific that we perspective is and calculation to at we those that pursue. an in excited points continuing are to data early to more are

Ryan Daniels

you you nice noticed hop engagement the really another XX% and organization Dan, I’ll point and a seeing is helpful then, I status in about the for eminence of utmost and curious data your for off. importance Okay, you color. a am since company offering? IPO if know the successful gallop all and the And given I pool. very are one the of the Thanks. culture provided kind you But as press any changes since public

Dan Burton

I all as from Ryan. focus the many Which a as companies years make area been Thank aware transition particular appreciate process of from you company, aware gone materially it. a culture change no of doubt, private focus for you, are been our and public has a the as for of for do number company of to company an transitioning have question, many, our through we we’ve private they perspective public of that and to this. from company a

that our that important team place on our the mission-centered the our would of primary first the company flywheel, happened and members focused engagement counterbalances has in And to at as mission-focused, reassure center felt continue to we that’s was flywheel. execution it to the team of management which to in such, be strategy try We of member team the has be good learners, we what past. good students put

few with discussions areas team to level those with skip level of personal having beyond team have discussion I that XXX a will we’ve members doubled and commitment to example try So members taken the of to XXXX a members. that in actions team one-on-one per goal We of XXX goal continue. reinforce the skip for this year. One had is, past,

making share them and of that practice the all with a where owners every practices the like for in of also having practice weeks treating of period two and continuing information our detailed like owner continued held company. team team long have We mates we’ve every time we the member team and member meetings

engagement make is that we team consistently and we can of of focus it my part member it’s reinforce priority as believe moving one trying sure forward. long-term the are So, that number we company to differentiation on the

Ryan Daniels

I really Thank Dan. that color, appreciate you.

Operator

our Piper with question next comes from Sean And Wieland Jaffray. you. Thank

now is open. line Your

Sean Wieland

Hi, thanks guys.

been prospects have you your and different question. little to on your effects – build it to a in clients with Ryan’s what the particular IPO How as discussions continue So, twist as the of relates the has pipeline?

Dan Burton

Sean. good Yes, question,

we’ve thoughtful clients prospects company in decision So, tried an about is, discussions and would our what I customers. with is our to to to independent share beneficial also be remain Health why Catalyst’s

the of tried being company. private Catalyst demonstration surrounding public is to a stay the a frame company to a And that part a the of this from that to earning is, independent we all the being move of as company way Health right activities

And do that of the all focused mission improve. do we measurably independence flywheel center and to we that our that at allows flywheel at center us on enabling everything to is keep keep to everything the the clients of the that

to in the has enabled commitments then and been a us which the independence make customers those maintain also to this even that is now to and clients So that like authority message is keep commitments is to us case as scenarios and other members our keep our the have leaders to becomes and acquired. when company enables team our as prospects and past the has the

and then means receptivity So, value we clients make the as our pleased maintaining commitments. the independence are Catalyst keep continuing Health of of of with understanding to a to its

Patrick Nelli

or times customers either would prospects is, curious our situation. The other fairly have item current are often financial I we, about and add large

That had we our flywheel calls and the read couple has seen the have I’ve prospect last added actually weeks transparency principles in mission-focused. and I that noticed in who added are and So transparency helpful. potential CFOs least been we core CFOs as with actually at SX the recently and

Sean Wieland

great. That’s much. Thanks so

Operator

next from our question Muken Thank you. with Evercore. comes Ross And

Your now line is open.

Susy Tibaldi

quarter for Susy and if that’s is much on This I’ve for a questions. okay. guys. couple Ross. Congrats the the got Hey, on very thanks

customers, DOS much how then, expansion of new contractual is is apps? side how think And when about about we tech coming forward, the of from the subscription on rate? escalators growth versus should So, the think we churn modeling

Dan Burton

questions, Susy. good Yes,

So, I’ll of you add, Patrick if anything and feel address a to couple then components have free. please

that dollar-based won’t at of basis we of a the end update one will be the net but retention the disclosing on will on metrics quarterly an year. this So is be basis, disclosing We we annual rate. other that

from have we show company rate we retention XXXX our net been tracking how kind retention we that which historically net dollar-based churn. and dollar-based we was as against As relative retention well are XXX%, rate the But of where comfortable a was tracking We our disclosed we think in XXX%. to is performance IPO feel process. dollar-based about net road that XXXX of a rate, are

way produced it adjacent in thinking core about within of of would be add, the a organic you expansion Patrick? that clients markets. And good and the our are our other is Anything to of perspective existing from the an would growth addition a new plans. markets aspects think way Then about reasonable both our

Patrick Nelli

are built-in that’s items of customers our Susy course, additional as mature I’d and greater applications adopting annual so where they of analytics XX% on the and are technology expansion couple Yes, is, the to from is side, escalators add your access question, customers all under only that that new than most of with the because and model us.

to other the contractual those to annual them the item regards that we the is, about for way way churn services. escalators. are another But is Then good think business through add I’d in charge

technology in both that dollar-based retention that includes XXXX, services. as rate So our mentioned well as had XXX% they

And up as services well more have can as some downs.

So have can customer, meaningful also with we side. the more but potential expansion services the churn we can on potential have

Dan Burton

simple which as the straightforward like FTEs down the an make choose and number access. simple it customers contractual would that services on perspective to And or make easy contract up point, with we a and straightforward also the from subscription well and they includes to us that tried straightforward, of we interact last just and both is as a simple clients for is to contract that is technology which contract to note for it and the FTE-based our dial

dial We easy what assistance that still level to choose drives that’s for for choose those of clients to that more see And dial they choose up down. right it make But the we them. do fluctuations. FTE than to them

Susy Tibaldi

helpful. on to Got it. the That’s extremely I’d a TAM. And like dig then, bit little more

assumptions assuming the an you fully platform, terms also for life, price behind assumed type different You’ve are there customer penetrated assume million in lines. customer? of penetrated customer TAM contract? the a the For per product fully data your talked about What in for about of Can platform. and you example, X.X for contract you the talk billion $X data

Dan Burton

good questions. Yes,

Patrick, additional and feel some then I’ll couple a free thoughts offer So, offer to thoughts.

in that So, be about first way and think mention, data-informed other and try the to we I careful forecasting. TAM we all would

tech of fully $XXX from that million think at data we maybe of total began is penetrated million, a a about relationship couple points a $XXX begins a their As typically inclusive services which they customer a relationship customer and use, basis. revenue recurring of when year Health with both Catalyst, their

spends standing that client more us. cohort twice longest amount than with Our

could could works And how And cohort – of understand to a we client the number of roughly more with perspective much us correlated you a like standing progression client over those that so, years. clients. longest that’s mature penetrated fully think

standing example our Importantly, Health. client, is longest Allina for

in all a client just Likewise, relationship. are few XX% to of never the Patrick ago, that year that for choose extension eleven recently technology year and technology the relationship model, subscription an minutes lost of access they a We our five as mentioned signed subscription access client. that we’ve all

it So, duration us. the are certainly that duration we the clients that think obviously, choose you’d modeling, the clients do less the forever spend forever. see hope also choosing about about with that a most is than to But when when have those – have the and of think that that with longest we relationship, to us you been number we are

Patrick Nelli

is the last relatively go of and the are were TAM there those couple regards in analytics the over generally a the application newer Most to or add years We particular, analytics stack years few more is I’d generally available of that only of there. so applications available. other a still to started them ago. layer item just building noting in And few at we

applications still services the into the in were business those applications ago are are their just still earlier years services analytics five we on that associated maturity. side. analytics there got relatively side, are around and with we early services that especially So coupled And the actually on

Susy Tibaldi

there? squeeze just are But a or is I’ll sound relatively so you landscape surface And in what Okay. much call one on some the market look in so more similar. similar can call you like? look the when think the much apps it in there. think have competitors you competitive our apps know that competitors out out few about we What layer. I I could that market, new are

Dan Burton

good Yes, question, Susy.

So, now. it really depends on are the specific application you category talking that

layer form across keep a analytical watch application the So some in that apps over and categories. has operational we clinical, a cuts financial very overall, that and are the of thousand companies there close

that you will of meaningful opportunity highly in fragmented your examples example, a we a the couple believe good M&A space represent space But to think could question, a as future. in for us example. And for of benchmarking Truven the

reporting Another for example, Clinton be performance product and would example. physician the

companies many this And important along over actually opportunities will thousand others are a space, there by space carefully many, believe do is for and we to partly those because, with want to said, Like moving future. there are We do I forward well. some M&A customer a believe because acquired the specialty as be we the and there us It has track services satisfaction. industry-leading of Health in be company will Catalyst place the work. many best

Susy Tibaldi

and helpful. Okay. That’s Thank you congrats. very

Dan Burton

Thank you.

Patrick Nelli

Thank you.

Operator

question next SVB Our Instructions] [Operator Daniel comes from Grosslight with you. Leerink. Thank

open. Your line now is

Daniel Grosslight

and selling on health a some more little great Hi, flash IPO into they’ve margin one provider your exceeding powerful. Obviously, It’s guys. heard your trouble of hitting numbers. congrats makes solutions the question see. pressure. system of the the Thanks from your We’ve because that this had for market taking to top-end and competitors

you to a But C-suite couple convince to solutions. your million also bucks trying invest a in are

that how So, conversation sense you to convince with to better get them how that a you? of feast with wonder C-suite? you I have just And of initial take leap

Dan Burton

question, good Yes, Daniel.

years providers across for the the many, look with often you So many chain. years operating when and have themselves thin time been that’s been a value dynamic for at squeezed delivery being ecosystem, margins strategically healthcare of across where economics many the provider space many, the

help discussions is different from so, our not topic for I would past, discussed what experiencing And a this in savings. many the many, discussions the years. current providers characterize we have. of of we’ve our better, we’ve not actually we very as nor cost been Part worst, with that is, as that The benefit kinds it’s solution of similar. you with out pointed the

value because the built understand the are measurable improvements CFO the often position great as And return the operational including and financial ground help we the to company we up in improvements, to particular investment. a in from on measurable and are a enable to

the layer data home platform cheaper data platform is layer. that alternative competitor we the our the own the far commercial-grade One our that near-term fact than element that’s and analysis platform most internal of that helps is us as well, at data at faster common better grown by the face really

grown Our internal x x to our perspective savings commercial-grade a that X from solution. by estimates about to come transitioning ROI cost X a to home from solution

that to good us the and CIOs about CFOs, really the then domain So about It regards that over initial projects with the investment. ROI other financial helps spinning often C-suite feel relationship feel across measurable the operational improvement to and flywheel with renewing areas also time good executives provides clinical, and to get us help the clients initial expanding continue our time.

for we side we engagement of important to categories operational, the of medical clinical I the functional three clinical, it’s those on maintain quality thing motivated to to very to maintain financial balance is, areas nursing those achieve last share categories, because, be would us C-suite do The achieve improve. officers, want to try to however each between to and officer, achieve officer continue and

improvement And found being balance we organization feel about relationship that And with course our entire those as great balance over that advocate really a the and we our projects every clients year. clinical the so, mission-driven between well operational focused. and financial helps projects, as of

Daniel Grosslight

having on the pushed seeing services out Got you or on Are any it. one pressure folks. the any you quarter. for are market professional any a hiring these side? recruiting And competitive just trouble you a was very services wage are more – it’s that Obviously, seeing

Dan Burton

market, is a absolutely. labor tight It

on average, focus on significant Catalyst, Health based our of our members engagement One at team typically that place estimates. is and enabling and member there work to on internal of on a the team focus best to benefits to is work demand come work a at our

to offers with position, Health about position offer and Over join of even When XX% we companies. other time offer post they extend XX the accept team average an per a applicants we to to a member when we other relative that Catalyst.

we to friends refer the members team Health very who often engagement very high their also their greatly from levels colleagues So, talented benefit do are and that fact and our Catalyst. are

the and That side, up labor keep said, a level for services forecasting to at And the make with a experience when which they access tight perspective, clients is it FTEs. we we especially as to up it earlier, to easy our that dial is down, market do on it want significant and growth. challenging still growth, discussed from we

going for Clients is, but a lot love dial us challenging of elements understanding the we one of clients when time up. are have to that, lead that don’t always in

And a so, quick process in environment we pretty the hiring and to situation. do manage turn have

a that it’s bit are focused about So, little we something we are, where and we feel constantly behind good get but on in did I QX.

Patrick Nelli

with is help a to doing been bench. we’ve thing bigger building other the dynamic operationally, And that

we flexible that needs. can So be with client

Daniel Grosslight

Got it. Thanks again guys.

Dan Burton

you. Thank

Operator

Thank question you. with from comes And Sandy SunTrust. Draper next our

is Your now open. line

Sandy Draper

questions of very been much. you my asked. Most have Thank

one Medicity to the probably project Maybe for on side, time. is Patrick. I’ll cheap So just on limit

switchover make flat cross-sell no to to revenue, right. when sure to any declining that Medicity up they it I that is lose tie you revenue. The got Medicity as you there Medicity sign necessarily Just – customers

to is, it’s better Dan, now. that that Should that it you feel then, think talked guess into follow-up you about, declining but read Medicity you revenue about I think And product the been the Thanks. stabilize like you base? I we seems can the

Dan Burton

and questions, Good first you for go first the take question then question. me the Let will Patrick second Sandy. to

are having product product. are it customers perspective, HIE satisfied are that to that core we As it feel that we is do and working good the from the to with about our a we with how core relates ensure that feel delighted they experience Medicity and stable

relates market, as it declining. environment, it’s to to think slightly I that HIE as it relates more than the general core macroeconomic flat to is market the

market do to market to And as and trends offering. we stable to the within broader conditions expect core base. that do want those keep that client so relates it striving the But recognize continue. we operating We we HIE are are

to an to customers that the asking that’s organizations understand what about strategically exciting from been how data all really can want many potential However, place decisions that, better was means one the analytics. they passed regards for more those improve. make help and can of they of with to acquisition are same one another those tell of was They the to and elements, us

believe And company. what for And company. the that will solution meaningful that’s do of as opportunity at a we core growth that to continue we the complementary with adjacent generate a

Patrick Nelli

build to we Medicity result that, financial provide we then customers on to Yes, value when cannibalization the providing to in analytics, incremental since, from cross-sell. just to a by to perspective, them aiming we incremental as expect that are revenue opposed

Sandy Draper

quarter. congrats helpful. Thanks really on That’s great. the and Okay,

Dan Burton

Sandy. Thanks,

Patrick Nelli

Thanks, Sandy.

Operator

over our back would like Burton to you. I to question-and-answer for concludes now the any Dan turn call remarks. and Thank gentlemen, this Ladies closing session.

Dan Burton

all continuing interest Catalyst. look to our and ahead. Thank your months We appreciate update opportunity thank performance Health years the in and you you for to as forward care. provide you, to this in to you an we Take the of Daniel, discussion and

Operator

participating in and you day. thank may today’s conference. you This have all gentlemen, today’s Everyone, conclude for wonderful does Ladies and program disconnect. a

Health Catalyst (HCAT) 22 Aug 192019 Q2 Earnings call transcript