HCAT - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Health Catalyst Incorporated Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Adam Brown, please go ahead sir

Adam Brown

Good afternoon and welcome to Health Catalyst’s earnings conference call for the third quarter of 2019, which ended on September 30, 2019. Brown. Adam is name My Nelli, I am Health is Investor for and President Burton, Financial Senior and with Vice Patrick Officer Catalyst Executive call Catalyst’s of Catalyst’s me Chief Health Officer. Relations Chief the Health on Dan the

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

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

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

SEC Please our August the refer risk our the in recent XX, XX-Q be to SEC. for QX with filed XXXX factors Form and that for form QX with XX-Q most will the on filed

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

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

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

Dan Burton

everyone you, this joined you and thank us has Thank Adam who to afternoon.

highlights XXXX from to excited other performance the with share the We’re financial along quarter. our third quarter

revenue results; I’m XX% of million. across represents pleased start, was was to financial board. To third the margin our quarter happy our one QX, midpoint I’m gross an the the to Total QX, total to the adjusted in EBITDA last adjusted third improvement year $X.X guidance. performance and million $XX.X with outperformance quarter compares the prior the of at which First same for third midpoint our XXXX which our meaningful in relative a of loss that outperformance and This favorably guidance quarter represents XX% XXXX our relative our period from year. was million to in shows of loss the $XX.X report an

to some let from the Now me transition quarter. of the highlights

these three call of of You’ll And we’ll recall each measure strategic results company’s improvement, from with discuss our quarter categories; you last performance our in growth in and primary we third earning’s scale. that our objective categories.

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

customers that to pleased I’m of number our first report the quarters documented three improvements to with continues accelerate achieved XXXX. of through the

view our total doubled all the In verified is to than and improvements number the flywheel evident achieved of Catalyst improvements of strong throughout this more in have documents XXXX. base. customer accelerating performance our We customer Health

documented to like recently of case now would examples studies. improvements from three published I highlight

realization staff in months solution meetings our manage Pacific continuing to savings led XX in $X.X First, effectively more which forecast quality high outcomes. schedules Hawaii of Health leveraged to workforce while maintain the accurately its and million critical more to

use XX machine by hundreds be tool equivalent data first for to our Next, its provider the time had our care average bolstered of predictive admission quickly patients additional XXX into XXX which Christiana Medical the address to documented leveraged algorithm an Care resulting solution emergency understanding of case by We’d stay that at by to Christiana a of mangers and of X% Orlando original and seen previous to XX% its in until XX-day of members million patient of engage in to Regional need its $X.X Health features, Center and simplified just XX% in with emergency to output the higher over solution please length that model. set visit Care of distinct department. you System week. complexity each features overall reduced utilized the third, studies. revenue to predict data the customer value Orlando has department The determine of reduced website its contact learning level more encourage and our the reduced trust arrival view

and also next category, sixth is in adding this as deepening some measurement existing continue data X,XXX healthcare industry like annual greater carefully Within analytics highlights to new XX%. broader our which category September performance in while leadership to of thought the customers relationships. to year’s over customer I’d This customers Catalyst annual to Health defined summit hosted within from this for conference professionals to conference growth, than an Our and opportunity achieved that We listening Lake, rating share meaningful place provide satisfaction a analytics and view our industry. healthcare we while as City. took the healthcare overall Salt

from machine transformation healthcare presenters edge analyze data numerous and of in leading out are powering intelligence, this language year’s healthcare. advances transformation digital processing the note who We learning, wearable’s improve session including conference key artificial the on and to natural latest break for theme and heard digital The care. within was within

financial leaders speaking of on highlighting than and organizations, it clinical, healthcare meaningful organization facilitate industries respective in also the their an also and of transformation use analytics trusted that digital conference data the and help them of partner improvements. healthcare on within technology to experienced still operational talks industries and that transformed important healthcare’s embrace that analytics reminder and most the need was We most had slower focused to data industries achieve a while innovators is can and reflect power sharing the opportunity was how technology from other and

on is of organization the Based recognizing beginning as organizations in adoption But conference determining importance in and two-thirds attendees either to do analytics has characterized results what survey where stage early of the the whether to do of their the analytics stages it beginning areas. to and middle the and stage how are using organization a few started the or in of analytics. see in data select

every to year, it us and an is customers. was important for As the with Analytics Summit Healthcare speak our opportunity

a customers of with summit, we as and better Catalyst a listen customers’ in breadth our work carefully well These opportunities the to their individuals themes as As and to and for of understand our the customers consistent few our well customer some heard from to which, user attended with our group Health the our were part the for Hundreds of I showcase. of annual the most share. we attended of which feedback. history were services will products along held events chance summit us

market our have First, strong feedback continue that differentiated the a commitment we with to received partnership us. to our and highly the that solution customers is within

of the of stack Next, levels that innings we the at my value to consistent the greater heard who transformation, drive analytics that healthcare commentary the partner organization lower a digital efficiency with organization in an early adoption enabling especially can us most which healthcare transformation. are of continue with results as survey and administrative focused adoption struggle solution This with up another the majority with mature the customers infrastructure on breadth reinforces as revealed operational us. conference stack of data efficiency feedback our driving of the attendees overtime attendee most analytics is and organizations they

to can be attendees continue Catalyst that heard our work an the sales stage practices meetings from in services consistent feedback organizations towards to summit are with along them early partner to should guide currently adoption further Lastly, our presented of We within prescriptive of progress which partner for the offering year’s generating funnel. sales later stage an who of are understand Catalyst opportunity healthcare cycle who of held not to prospects industry. them facilitate eager is a helping dozens offering meaningful This move Health their from marketing important and hundreds to and hosted our we sales likewise, prospects healthcare organizations important Health our component customers. the as also our prospect conference as interest best these with

on to line our efforts, expectations was the Moving during with IPO used more our selling in management’s road third quarter performance modeled details onto process. show

market full call. share later We core continue our client new our feel comfortable and customers guidance within Patrick pipeline and expand We supports that to sales our our current this to-date within will year XXXX in base. existing add that sales the

nine to in I’d to will of Dawn in Board Directors an members we join Board two and the January Julie Lastly, new of like that XXXX Smith resulting of increase have from Larson-Green effective Directors our of number X, board appointed our XX. share

honored contribute leaders board way growth that currently Julie the we will to Chief meaningful Experience of XX Officer her are serves executive By and Larson-Green and Internet our anticipate variety Windows, and company. leadership product these add We time building serving at at Microsoft Qualtrics, maturation Prior as experienced roles spent and Explorer, of to development the background, they of our to of years Julie Surface. Office, to Qualtrics. in a Microsoft Xbox including

Chief offerings to Cologix she her decades as than and relevant two for Officer President, compliance currently Catalyst and solutions the Cologix, a months in capabilities serves Chief responsible legal, Operating as relations. Her be scale Dawn at world deeply and more in ahead. and at assistance expertise was Officer led its successfully technology VMware in brings incredible members global, to Compliance Chief digital team scaling government continue Dawn and Prior intelligence, where the Health Julie and Smith time technology to Senior an of building of team artificial applying Incorporated. Officer more Vice class at works scale. than President years XXX and served will collaboration Legal of as

capability will Officer Dawn of scale She with Executive experience and public to regulatory and and operational leadership and our Legal Dawn’s previously strengthen company effectiveness pleased to to coupled both contribute Julie at the settings financial and board. our our Chief in board. company’s also McAfee. Vice welcome will as her directly and I’m growth expertise served compliance President extremely

the over and turn results of of quarter our Patrick, I’ll third performance who in financial Now guidance Patrick? our providing category QX the to review the call our and including XXXX. for detailed year a will full view scale

Patrick Nelli

Thank you, Dan.

performance organization. strategic This scale. in our I’ll be focuses to contribution a As sustainably company’s scaling objective mentioned greater mission category by of category on our discussing enabling Dan our

and into seeing want sentiment to with third results results quarter quarter we’re and pleased I echo our our momentum across diving Before business. Dan’s say that the I’m financial third our

For generated in we the third total $XX.X million revenue. XXXX, quarter

period same the increase escalators fees higher outperformance increase by professional As our midpoint million contractual Total with Technology their of XX% to growth XX% increase an new Dan last $XX.X year-over-year. represents driven organic technology revenue customer additions was from revenue and from customers of relationships and of represents it built an in access million year an mentioned XX% was of primarily relative from compared and this the revenue an recurring existing services year-over-year. $XX.X from to guidance customers was expanding services us. paying existing

As a longer our million the in as legacy second a breakout XXXX XX%. legacy quarter our license rate of reminder, with QX, previously have our license shared our the impact of so the stream that XXXX additionally, this revenue faced in and share growth QX, what technology recur I’d revenue no the lapsed rate acquisition for our growth will on earning’s headwind Medicity the quarter. revenue revenue rate did in one-time last revenue release of a we not was that a in XXXX in however, line which due third third we XXXX. was in Medicity quarter XXXX third business what headwind revenue Normalizing of to we’ve In been that QX, $X.X reminder communicated technology recognized separately. technology year-over-year was growth would

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

to in corresponding by cloud existing gross offset escalators of customers base was paying increase built-in Azure. in basis customer our cost hosting party approximately the access a centers continued year-over-year. third margin higher an of increase cost associated Microsoft side, technology driven This XX%, from without with contractual data increase year-over-year by fees headwinds XXX due to partially mainly the points On hosted adjusted transitioning was the technology portion our

basis professional points the adjusted margin increase gross side, on XXX of an was XX% represents which And approximately services our year-over-year.

As services. comprised and a services services services, expertise services, outsourcing are analytics our professional domain and reminder, data of implementation

and buckets analytics While domain expertise services services two the follow the and services. majority of under first higher our margin data

adjusted given quarter compared our a gross communicated between margin professional XXs. to the services expectation lead point to The third the adjusted points margin mix adjusted higher. our we gross services be these led what can couple quarter percentage And in mid to delivery fluctuation margin our percentage long-term of mix in services as in gross our services a services professional in few quarterly a

we term, earnings shared longer professional services adjusted to with XXXX look we what call. to continue be technology As expect gross consistent QX, during our we margins and

$XX.X In QX, operating XXXX expenses as total to which expenses percentage in operating revenue a million XXXX. were XX% totaled favorably adjusted XX% QX, of compares adjusted

third summit reminder, increase. quarter-over-quarter expense a quarter analytics that the As is a quarterly our to causing held meaningful healthcare our operating we in expenses

in being of that expense a one-time had would $XXX,XXX QX, XXXX. but be end roughly incurred XXXX up was expense anticipated there worth in Additionally, we operating that QX, spend will

loss to which was adjusted EBITDA million of of $XX.X of EBITDA $X.X an third XXXX. QX, Adjusted quarter loss a million favorably XXXX compares in in

mentioned of I expense report to operating that the mentioned gross the we EBITDA midpoint Adjusted expenses from was our $XXX,XXX operational mentioned of QX shift spend deployment worth to our the of QX driven margins previously. higher more earlier, that and Dan efficiently of by roughly we’re guidance. performance outperformed pleased As previously,

Lastly, $X.XX. metric. take components adjusted to share our of calculation this net moment was pro of forma like the loss per discuss I’d our a to

post-acquisition acquired extinguishment and pro starts attributable amortization stock. restructuring applicable on share net Our our to of back of loss stock and stock any cost forma common holders loss adds debt, preferred redeemable, adjusted GAAP with loss convertible, accretion based of as compensation, net intangibles, per

a share $X.X Our adjusted was average XXXX QX was XX.X weighted the per net for in used as adjusted of shares shares. loss and pro calculating in million QX, net a forma million related number adjusted On method note, calculate loss million count average stock stock of order strike mention also treasury weighted we units under [ph] share outstanding. XXX,XXX I’d restricted at have $XX.XX as options in X.X our the that as price to outstanding well

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

As we QX, result end $XX.X balance debt increase of event cash in XX, the XXXX. QX, debt million XXXX. XXXX and of that financing million an place XXXX over The our the of in in September $XX.X increase had our of the total in IPO and took are

strength EBITDA related will few our share and additional I onto move I Before guidance, a thoughts to adjusted sheet balance [ph].

we mention run consistent anticipate breakeven what with XXXX on I’d adjusted that previously we’ll that stated First, an we’ve begin rate EBITDA basis.

position significantly coverage Next $XXX have given the size million, we of our current flow anticipate than enough over cash to of even. more cash reach we break

commentary for our quarter XXXX. fourth the conclude I’ll my full and guidance with year

between the our for million quarter For and $XX total XXXX, revenue is $XX million. fourth guidance

year $X.X and XXXX, updated At year full represents is our full the $XXX.X million. we midpoints, revenue guidance respected the $XXX.X guidance quarter. the total million increase for this an of For revenue last compared between shared to million

between based to million the revenue between adjusted and our of the that guidance million the XXXX of in year comment EBITDA improvement was included loss XXXX, and midpoints, I’d earning’s of year. for $XX.X At last our our and XXXX $X.X full respective on fourth full million. arrangement For call updated provided for certain A $XX.X their performance EBITDA last and guidance; our quarter for represents this in comments million performance is that reiterate achieved we year quarter $X.X a loss is this an where couple revenue measured from quarter. first, compared guidance adjusted the fourth million guidance $X.X

our portion QX, in Moving thus, million year-over-year arrangements XXXX base pose they a forward, revenue approximately to to of expect growth $X.X overall based revenue headwind our rate. revenue smaller and become we performance much

Dan’s sales pipelines comfortable I’d we sentiment that reiterate Next, guidance. that to-date XXXX this and our current sales year feel supports full

results. to promising for by Dan? closing to we continuation saying remarks. that XXXX to our look strong his my our in of finish I’ll back I’d call third concludes XXXX. financial finish Dan a a like represents quarter the and review to turn forward That

Dan Burton

without summary, hard not members enable the pleased realize of day to commitment Thanks this Catalyst could each with have our Health all to and improvements. progress who the work, performance of our we’re made work We Patrick. team the In customers company. dedication

forward updated open it that, up let’s looking for keeping our to We’re with on questions. and progress you

Operator

first with from question Morgan. Instructions] [Operator our comes JP Samuel Anne

open. now is line Your

Anne Samuel

just maybe Without through providing headwinds help guidance, hoping you walk could us and into how about tailwinds think looking to Thanks. XXXX?

Dan Burton

Annie. Absolutely, thanks.

then So a add this free to Patrick, is please comments. share additional few Dan and thoughts and I’ll feel

relates both continue core new we’ve it relates to we some business invested it the as in as markets. markets our tailwind, excited of making perspective the we’re as to about a of in, that So as investments be from to core that well some

with and signed in were additional some Sciences additional markets small to with we current We’re continue clients that clients excited and see of our comfortable contract we pipeline as Life addition we of to contract the to though international will the performance as quarter our progress from in just from an beyond, robustness our a fourth expansion the new well tailwinds we customer ago. pleased of mentioned new the time we’ve perspective provided with and Likewise relationships a small some another albeit Asia within like feel see the supports growth a long-term deals pleased few invest as this a of were previously. expansion guidance to relates of minutes the pipeline moving that existing likewise regard. as the were perspective, a deal Pacific an XXXX signed into and it where in We in that

much represents as excited business sales business as Medicity cross that installed grow. slightly continues core a anticipating sell continued base generally company beyond, continue opportunity of the of to that to manifesting declining of percentage sell component to As the the benefits the company diminish we the though as discussed will that in the revenue are that business and is we’ve core to speaking and to into cycle, is we’ve acquisition anticipate one-year being but that of one XXXX, a to a core relates as Medicity headwinds that the mentioned previously certainly total headwind we of flat though a cross opportunity and given moving XXXX acquisition of previously it as revenue headwind

anything. Patrick pause, if me Let you have

Patrick Nelli

as we’ve would since add since they I only us than our our mature greater majority factors going based XX% under for tailwind numbers fashion a into of dollar The because our greater that the XXX% retention with us current we’ve give revenue customers those of under with revenue us overtime, revenue both year will as recurring be and a expand current of from tailwind other clients. vast our contract a and than natural year

Anne Samuel

That’s Thanks very guys. helpful.

Operator

Thank you.

Our next question Goldman Robert comes Jones from with Sachs.

is line open. now Your

Q –Robert Jones

you I the guys about have guys the I’m the guess just least you for from a be visibility know where weigh similar XXXX expectations the like looks today, any sense next past just based helpful. full looks months on the little get on expected fairly experienced Patrick the given start of how and could year pipeline cycle. length would previous guidance the sales six sales maybe is you looks to it’s in maybe more you it on know sit recent relative bit can progressing given good XQ quarter. how give continue nature you I the following us a I at on just of to It talked will clearly in wondering the strength does if XXXX have question, cycle like of having the sales the

Dan Burton

that the of was will our growth and our good increase a QX do feel experienced can we pipeline existing sales you’ve we relates I recurring revenue today I share long-term share we’ve communicated how that do what than that relationships we visibility provided out that would given thoughts I’ll share few would is support guidance it said additional where our was any and including both previously. nature and business with have XX% such pipeline year we of that typically previously had the because and then into year. Likewise and reiterate, to to as a year continue have overtime we XXXX overall for visibility reiterate profile. the just of recurring which feel forecast that shared cycle just we we you also greater significant enter comfortable it the the for for you model, a as longer about are, would said in that as the updated the we Yes, what projections business benefit revenue thoughts. we that Patrick on given agree any an full feel from model that to stands the that sense I with previously we growth play comfortable average Patrick

Patrick Nelli

said, Well Dan.

Q –Robert Jones

I’m and and this sharing of one Curious on Dan, that past survey early front, like not as the surprisingly many to ones did curious some from on this platform innings I how that results had I are attendees? to in just sales from Great. technology leads sound how those the the from obviously to guess around in previous to does pointed you prepared you results analytics. been has not the perspective. versus It the it went relates to customers would one’s wondering you remarks summit mentioned just as details hear this out. you how historically then the you appreciating the a and a all the the this guys that characterize historical year’s question generating so, for like feedback it shared follow-up appreciate I what relative summit compared and year’s related perspective embracing you summit. the guess summit. of expected that having But in sounds

Dan Burton

Bob. for you question. great Yes, asking Thank

thoughts. So I’ll of couple offer a

as summit prior to relate I how this summit. to First, compared

to most prepared to the the overall well as our the attendees as the happens mentioned user attended attendees summit prior in pleased had as most both I to well in this group summit, most summit. we As we which the overall remarks, the were broader see so to

to feedback from widest terms for So it we’ve was receive listen the the ever summit’s of an had to opportunity in that us and history. audience

every a Now so attendee in we’ve pattern years. history, largest does same where that followed is most has group seen it the pattern the year that current the follow over

we feedback, survey relates one I feedback about, remarks it I the the share careful that I relates to, this are about and trying how prepared asked to analytics we is that as specific we you that it that stack model adoption the the would listeners clients of alluded to and to talk interesting responsive with or that think required of that analytics them to our the adoption analytics that lot to As analytics in levels patterns can piece one of example foundational most capabilities mature overtime to aggregating report. need the most of their for bodies and at they’re of maturity regulatory the foundational clients for reporting level that at was help the results clients including levels continued data, model the came significant our with, help lowest mature our back the of in at feedback a

have maturity and latest jump and often clients more tempting should our cutting ensure do those and helping trying most help even doing to foundational get scale going and for place, to the that everything excited that up our to about in at edge very, Those lower what to would direct and you’re and discipline and capability. artificial of we be like continue have a intelligence, lower good that that these it’s is gains to the shared levels them are clients lower very of be with feedback with in we’re needed significant of improvement, actually be of to elements to our maturity analytics and those us capabilities if potential partner more that very leverage levels efficiency a be areas clients for the the algorithms long-term they model to to of we model advanced activities lot us doing

year’s out that be, came significant one So this of of the elements summit. dramatically that think would most I

Q –Robert Jones

much. so thanks helpful, Very

Operator

Thank you.

Our question from Blair. with next Daniels Ryan comes William

now Your is line open.

Jared Haase

team appreciate I margin. the services. to of back talked some you any curios feeling from of quarter, if little for in in you second there jump of and saw front benefit wanted kind details we professional that bit hiring kind third leaner of respect saw kind benefit on mix the some to was back and I the just have in where gross maybe there had that services just during you on provided kind you updates of stretched recall quarter? you’re a of like from the about investments of stand just a any I need team If if kind the you the Patrick,

Dan Burton

Yes, great Thank question Jared. you.

averaged of also objective greater every than applicants against fact a very So we as with deliver members be – at the our that place pace, that about a for where have today, to acceptance we’ve professional our turnover the position saw we’ve we it to helps quarter and continue to continues in continue recognized desire with see Health sustainable we mission best offer that averaged rates and relates benefited we rate, and that Catalyst Health low we of every made we for feel Catalyst we more in actually up we’re to work, catching pattern we us voluntary shared than services to from posted clients. extended, XX which to good measurable catch last the that against are really and XX% ensure we the progress team up pleased the improvement as

prepared down a or a was the we relates margin it gross services mix gross services year XX% a driven more demand negative share be QX, in Mix towards itself organization. for type performance and the up also the in gross mentioned in for percentage of meet as something shifting long-term of to which meaningful this guidance shared view a and Patrick our being in difference in margin a overtime. relationships and to we earlier the just can remarks as services that space implementation is mix example, in outsourced client points cause very but an the not that could few would tied professional of by what from we’ve recorded mid-XXs. that the I the the margin the primarily as be to and his important as of skewing business or repeat services rather mix future component

Jared Haase

step curious helpful a expect customers of about quick pipeline’s that And at forward. from seen split very XX% sort access continues of a the of the where in follow-up. color. maybe XX% a we you’ve kind sort if shift kind of I to that’s wondering, that with subscription XX-XX given going or more versus today, just maybe it, proposition and consistent roughly Maybe to on being you of limited as past the talked technology then more resonate one sort subscription Got taking customers. all subscription. model back meaningful do guess of remain that value the all of I’m if any just access

Dan Burton

see what We with we previously. seen continuing question. Yes, communicated meaningful good it shift any it do from haven’t to resonate customers we and

Jared Haase

you. Thank great. Okay,

Operator

Thank you.

Sean Wieland comes Jaffray. with Piper question next Our from

is line open. now Your

Sean Wieland

summit. with of to I that June aligned that the Pop what product ask be wanted saying launch to pretty Health seemed well about in at folks your were the you announced

Pop believe think called their working. I that Health weren’t strategies you out XX%

So wondering there. you if could I highlight anecdotes any was

Dan Burton

Sean. question great Yes,

from generally receiving the that feedback well Population us the ago felt gave patients just of advance that analyze quickly in we general terms us to being Health that was Population some Pop I our that of true sources in with also and components accomplish generally, last populations of regards able general program to as identifying Pop we more foundational is for using minutes a to place as that care solution meaningful make well [ph] performance to data also recognition that with Pop to to foundation’s in a earnings not for were a call skip required feedback [ph] multiple using be foundational where of we it’s mentioned we Health that Analytics to So the need from the those Health to conference clients few what’s bundle the order from of about as foundational required in our in aggregated launch right the clients talked level feedback appreciation for specific management are aligned example. Rapid understand tool true like helped foundations to a that example progress be at Health get using really pre-requisites Response being that and programs included different elements Builder to those able the

So we in foundational consistent health and needing I thematically clients ahead those again to cases part, with before advanced were more examples. large validated skip our think

Patrick Nelli

continue in also item taking heard The they as our I right put of to are only successful they’re the in add, the stages the summit But fee-for-value. we is towards analytics and of want in to early customers lot a that move place to that to risk still other ensure would them fee-for-value. moving infrastructure

Sean Wieland

amount of perhaps Great, this year, thanks this revenue $X.X and for one that that Patrick, you. XXXX? out license QX, The in you this won’t of from not did say just recur the legacy year other or recur million license quarter call revenue XXXX could legacy

Patrick Nelli

was a of intents follow-up there through which of we exact vast of as number. were transition. kind for occurred million of purposes and revenue year-to-date in starting follow so can greater had was about been that relatively to majority the course was This license more and amount, [indiscernible], all subscription QX, a and color nature, XXXX. still model very one-time in an we XXXX Yes before a give I XXXX $X.X a revenue perpetual small we’ve from of this but to We small but than there a license with on with XX% small amount But up can in everyone that it’s approximately our specific in this. we amount some move year-to-date recurring mentioned

Sean Wieland

Okay and then what that out $X.X was in million called the QX headwind? you

Patrick Nelli

Yes, of course.

us in bonus model moved previously operational predictable financial, more more see had predictability, of the services and to time budget you on arrangements receive, we could customer a primarily customers actually would fit trust one working a customers as can performance what we recurring set based certain so and think overtime if our gained and side it with metrics, and and So performance a a of handful bonus would of from payments lot you based actually actually we essentially away these subscription we we metrics more that’s those had moved XXXX they with it recurring we us, a the away these $X.X with that approximately our if that that clinical one-time revenue numbers model. moved in of from we now, has QX completely of million performance of wanted payments payment to

Sean Wieland

Got it, that’s Thank helpful. you.

Operator

Thank you.

comes with Newshel from question Evercore. Michael next Our

now line open. Your is

Q –Michael Newshel

environment strategic your of or the buying Is for on characterize next out noises you’re just efforts impacts seeing any Election overall the uncertainty right with or [indiscernible] there? hospitals all all? any delaying decisions at you year policy headed into now, that sales Can

Dan Burton

Yes, Michael. good for question. you asking Thank

movement directly other the model some companies that’s from to more that a to fee-for-service So business like unlike have fee-for-value. tied move much

Our economic optimize we the that analyze on all significant helping the not is it any relates their to environment speed the complexity data any and have is as those direction in movement because and complex making model on there’s business have in political our not pipeline. specific with data more scenarios much to which then historically based our decision we about and deal leverage either with so, shifting environment, complexity impact data clients a it in of then so model seen and based seen

Q –Michael Newshel

want on Thanks for follow-up and I Medicity outlook XXXX. just revenue maybe could the comments I with one if more. just clarify your to for

or still out. out. get term enough is positive think customer as base in is make near required gross sells further shrinkage you in stream inflection that an pointed [ph] So XXXX revenue to obviously that cross the But for do the you’ll you to net

Dan Burton

we categories. so think about two Good question, separate in do

understand try category we to core So pattern the we have business. model to we the before first business modeled and and see we that and the forecast continue is, acquire the

did In and will we first fact, pattern the modeling slightly acquired little we’re Then of to core relative business of the also of continue same That’s our in we forecast business. beyond core believe in bit terms acquiring and business. business. modeled to back that performance that before before a XXXX just flat we the we category that of declining the the revenue in ahead

product realistic need forecast forecasting sell knew and to cross mentioned previously, first as a we’ve existing looked we be business to of were all to right message addressing nine base customer we the team we not members have within for want components when the months that would product take operationally we don’t size to that well, so this we make sure or the make supported. adequately that base hear team being stabilized expected at that and we would customers across had member as core is that we core the the sure What

first do So those time it to with and this really earlier typical only one-year clients as began two cross we and those needed year relates we things cycle, sell. the take knew, sales previously we to discussions given to

growth most long-term. and track cross So we that sell forecasted anticipated the comfortable to of of we we’re on trajectory overall to XXXX on that of benefit what in sell with that cross impact would the that be beyond regards our and had happen feel we

Q –Michael Newshel

you thank much. very right, All

Operator

Thank you.

Daniel from question Leerink. with Our comes Grosslight next SVB

Your line is open. now

Q –Daniel Grosslight

your on XXXX revenue one quick a outlook. Just

contracts coming year have and turn As from client renewal clients their seen an there DOS clients? have DOS your the at up any forward, contracts auto big Are know for historical term for of you near renewal least you each most deviation clients. your any look of I

Dan Burton

Yes, good you, Daniel. question. Thank

the a not or to the year, structured that As opportunity side they tech whether you in relationship the relationship mentioned expand renew to services choose essentially or all of way or their on renew our both such contract client relationship the that have relationship. and each in are

base that we who we’ve that clients up renewal this in consistently throughout we’ve and those had we’ve really XX% category as XXXX and a renewal has across the those the the at of are fact decision we tech of we’ve that a terms kind about that been clients anticipate that coming that XXX% in those previously way are subscription years in shared clients of be access performance base company’s same years of forward been our and lost good all so case the year, that clients on And in clients beyond. of who in multiple never for XXX% and dollar historically client and one with XXXX are had XXXX retention number of given to cycles performance thinking pleased net

Q –Daniel Grosslight

well was pricing by the like offset gross to Got substantially. on just some it our and the follow-up some I degradation it, transition a to expecting It margin. more thanks was escalators. estimates cloud. pretty outperformed tech due But seems that

to pushed due some being business. Going mid-XXs – kind there cost to you’re is forward, benefit do you structural is QX QX the Thanks. out think to should and see from that that return we of it guess I or getting

Dan Burton

When particular tech gross course. Yes we calls of in for margin, there our were components. our tech think two about revenue primary

or hosting The first, are our cloud calls.

cloud our of to calls this support through of and drive some our our both personnel past second, saw those to very quarter. We technology The worked you hard revenue come efficiencies essentially and in environment. efficiencies those

stay roughly customers data look on-prem we private do flat, years, move expect a have to Microsoft center, remaining next few continue couple we and As gross the environment. cloud to the need that fact we over margin overall for still due to out we to that the Azure

the the on calls we gross communicated look a of that than we earnings in gross XXs. more overall the expect long-term to couple out As margins high we continue years, margins QX

continue in Microsoft the drive we’re technology do So on margin line, have summary gross to move customers efficiencies working continuing environment. but certainly the of to Azure to every headwind the day we to few

Q –Daniel Grosslight

you. Got it, thank

Operator

Thank you. Stan And next question from [indiscernible] our SunTrust. comes with

line now Your open. is

Unidentified Participant

behalf Sandy on Actually of Draper.

own To competitive to extent do where your system. get a news, health from you offering? related an ascension to force wanted Just data what the that your [indiscernible] see thoughts Google on as

Dan Burton

Stan. you Thank that for question,

overall speaking long-term industry the years to one play with ago, to capabilities make contribution we the of the operate that broadly have will business of ecosystem number at dramatic and its onto decided that scalability and believe and have a perspective healthcare the believe but partner from advantages environment role long-term a Azure to and we that the we clients also cloud and efficiency a the built Microsoft benefit why our the a scale overtime level. advance companies offers the So environment, of all significant that cloud important to including significant of significant an will from at data analytics scale move cloud reasons

long-term companies expertise health that’s see a revenue XX% economic required industries the but very based the profile our that revenue partner will services the services layer, domain one an automated healthcare higher data historically platform in specific to healthcare low scalable fast model, companies stack, technology at our space healthcare stack much million layer, specific and invest focused technology those into way. choosing it’s content, of at algorithms, our healthcare because healthcare stack. platform with a healthcare data business our mapping platform stay and then a very what move the why, and more is model you company of specific What apps to right high have profile of of the we play cross capabilities on, in data an to why up made reasons a the we where cloud more the is sources a have that includes in typically we’ve so process role, our area cloud and we within business data gross margins, even a bringing domain expertise layer from the meaningful long-term and application specific technology is data different system ideal different significant [Indiscernible] specific business data the automating it’s healthcare portion clients a our around these in most end $XXX complement the and pronounced enjoyed to at stack found, those right we which is in to the as [ph] commitment the it’s the long-term sources, and lower up of be expect

Unidentified Participant

that’s it, Thank very Got you. helpful.

of End Q&A

Operator

back like showing remarks. Thank for Dan further any Burton to turn over you. questions any further at not time. would the I I’m this now call to

Dan Burton

Health discussions. Have forward share to Thank most a to to you quarter. relates you opportunity for Catalyst. your for interest We Thank great in day. look future it with you as recent the updates our

Operator

this call. for and today’s gentlemen, you concludes participating. Thank conference Ladies

You may now disconnect.

Health Catalyst (HCAT) 12 Nov 192019 Q3 Earnings call transcript