HCAT - Earnings call transcript Q3 2020

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Operator

Good afternoon, and welcome to the Health Catalyst Earnings Conference Call for the Third Quarter of 2020. My name is Jonathan and I will be your operator for this call. At the conclusion of today's call, the Health Catalyst management team will be available to take questions. With that, let me turn the call over to Adam Brown, Health Catalyst, Senior Vice President of Investor Relations to begin today's call.

Adam Brown

Good afternoon and welcome to Health Catalyst's earnings conference call for the third quarter of 2020, which ended on September 30, 2020. Brown. Adam is name My I'm the Catalyst. Relations Health of Vice President Investor for Senior And Dan Officer. call Executive the with on me is Patrick our Officer; Nelli, Burton, Chief Financial and Chief our be Web A of Relations on issued as both furnished as complete well the of site section X-K our our Form the our can Investor today related disclosure in at to press ir.healthcatalyst.com. found results which release our in of SEC, available are

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

the SEC And third for of XX-Q the will our the with call, that with upon subsequent the obligation date. Securities forward-looking During XXXX the on the to anticipated as XX, our Safe operations, forward-looking not materially SEC. XX-Q We and Act forward-looking quarter the of Reform our provisions rates; and be views will management's we for quarter factors results These business. regarding XXXX Private differ. make the today, the results of Form statements performance the strategies and filed pandemic of impact on pursuant XXXX to Form are our as expectations second pipeline of general risk based any statements on should and XXXX. Please statements may August trends, in of any update the any Harbor current refer to views disclaim COVID-XX representing Litigation relied be outlook. or our of and conversion of Actual of as business our filed

for that, your remarks. me over will provide will Patrick the and subsequently let to their Dan our A Dan prepared take questions. his of to Dan? additional prepared GAAP is most certain these refer non-GAAP in financial non-GAAP turn And will provide investors. to measures his remarks. Patrick reconciliation release. then provided call information comparable measures measures press to With then We to also

Dan Burton

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

with financial I will quarter begin We the are our along excited other to third from quarter highlights results. our third performance by the today's communicating call XXXX financial share quarter.

Vitalware let XXXX in QX share total recent I macro revenue the excluding to the of backdrop. To our am million, across XX.X contribution our our QX to pleased with First, of midpoint performance am especially light me total This board, our acquisition, I relative happy XXXX for was that one-month represents an from guidance. XX.X economic revenue for the million. outperformance report that start, was the our

technology for XXXX XX recent one-month Our XXXX year. QX X.X adjusted for relative midpoint was to approximately total total revenue represents XXXX XXX improvement million QX an loss QX technology our And to quarter the in our period the was prior for and margin relative XXXX. in gross our acquisition, a year. third of the adjusted outperformance period also basis which an representing of guidance million of a revenue the points XX% XX% Total growth compared to from XX.X was the contribution million X.X the increase XXXX. million, the same was excluding last of of an second loss shows EBITDA Vitalware from our quarter same

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

in results earnings these improvement, quarterly our previous And we'll growth You three categories. measure of categories scale. strategic that you our in and calls, performance from recall will we objective each primary our with company's of discuss

customer first newly of our focused studies. satisfaction is improvement improvements ability recently share examples engagement. published to improvements from our enable The on massive for documented first measurable and industry-leading customers, will while evaluating category sustaining I two case

to yet, than customers financial our journey of worked from their supporting COVID-XX. one improvement with recovery highlights are first and The operational

of number outside their back a that do their focus of leveraging and work to technology COVID-XX demonstrates customers latter meaningful to and improvement the are have services responses. our widened While

leveraged and Health integrated Banner of the allowed through and recovery our to platform, clinical, services plan Banner resolving our surgeries develop on a canceled data cases, recapturing than and revenue. resume backlog application our and financial in including more operational safely data the First XX% revenue surgery analytics. and data visualize This solution, impact XXXX impact of to COVID-XX perioperative millions analysis informed elective

of a the and a address XX data in platform, leveraged reduction system solution Next, length customer System challenges. COVID-XX. at improvement Multicare These day of their leading savings, work recent X.X in highlight informed data let Health a and wide across wisely application our length their improvement to including realm me improvement approach develop from our Multicare system of outside hospital stay methodology outcome million in documented resulted stay wide of of Multicare. standard to efforts the analytics

category how growth category, on growth, performance customer also a measurement which we new In relationships. share state environment. about normal the with the our is I'll temporary backdrop, as COVID-XX broader detailed new company, healthcare has Our delivery with operating ecosystem the adding some next a to deepening existing of customers, define update perspectives the as while along adjusted

indicates coming shared I continued our meaningful environment healthcare earnings call. system likely current the I First, start, and on that would share be would operating the detail that that our months. national perspectives the are QX largely with our we The consistent on country surge strain over will the COVID-XX current underscore XXXX under

witness respond to that successfully is and better power to unprecedented prepared they That its operational meaningful treatment be this logistics, equipped the to our to to planning support continue capacity ensure chain in health do everything efficacy, supply to said, evidence ecosystem as we the provider continue including ongoing pandemic, broader We and customers time. optimization. manage care through our encouraged, we

medium a to we progress, scientific on treatment and pandemic. reasons term, Lastly, progress COVID-XX optimism the as containing improved anticipate additional efficacy we over see including for vaccine more related the

operating means current what commentary let for the our near-term. the on in environment Now, me business some provide

than revenue relatively year-to-date is greater revenue muted, which recurring a First, that nature. our is we performance. the as of COVID-XX evidenced highly on XX% in impact model model to our This XXXX by strong near-term in top-line of our means recurring are revenue fortunate have

relates to customer relationships. it our As existing

all Let data me of onset of applications, on usage additional first continues our note the analytics to response increase COVID-XX components A pandemic, platform on technology our our technology. customers has Since crucial been overall the of detail particular our our some share foundational higher. resulting COVID-XX which XX% are that and never level contractual also have would of in built customers a in to have our subscription pandemic. from significant high usage, the increase we our that revenue revenue predictability, seen escalators. of a increase onset roughly technology technology benefit since I the a in highlight access especially

a procedures, Additionally, share our and planning analytics and number cycle. elective in I have COVID-XX as products those preparedness of specific revenue of cases, from on usage shift meaningfully such to those financial COVID-XX we areas that in ambulatory focused would focused recovery seen on care

Given we performance, would year levels. retention similar all historical these factors, anticipate technology to strong full dollar-based

services, based we a XXXX focusing of work. financial a services Moving of which That by remain meaningfully our we to COVID-XX historically. continue we engagement with said, high achieved as last what levels retention discussed customers, recovery general and based we of imposed both full more as to on team well engaged operational to on year lower clinical, dollar professional COVID-XX year-to-date work, see have led expect retention, on has improvement financial have our our and to a professional lower, on consistent strain on earnings number dollar services call, would the member than professional base,

commentary some providing to transition subscription additions on me let customer XXXX. in Now, new DOS

is provide would we details share we provided call. with I First, that additional will our XXXX consistent QX context on the earnings the

pleased half COVID-XX, XXXX. customer as the sign new additions number of result lower we year. of anticipated multiple a As in entering a reminder, the we were first was than But to the originally of customers new

have of been commercial to entered adjusting data COVID-XX, we've healthcare operating to robust significantly analytics need new pleased more the organizations the the for and second solution. well a As with grade see half environment, we normal highlighting XXXX,

in making near-term systems On create near-term their COVID-XX the uncertainty, decisions. purchasing hand, to other financial health more continues some cautious some

factors, we DOS our the expectations competing high single earnings digit previous of confident customers on have conversion half we similar and XXXX. second for full to continued the second to subscription our feel rates progress, new net we shared call half about Thus, XXXX. these Given see pipeline of year

me annual was record meaningful listen hosted in carefully COVID-XX, analytics and a as attendee the the year's believe thought success analytics it share meaningful some summit in customers XXXX virtual. we tailwind relationships. in Moving would event summit year's longer-term mention meaningful of we that the grade industry's We has more data of system registration data impact leadership health highlighting that COVID-XX. This September opportunity I data format scores. this patchwork level, our that conference and solution of also was cultivate as thus, viewed highest a as with of the think further at the is of our Health we to And our that within provide growth replace for the efforts, and to COVID-XX data a commercial seventh And need healthcare any let and on adoption in awareness and Also serve a continue Catalyst seeing healthcare while galvanized analytics analytics systems. we to And to we ecosystem. more of to significant and satisfaction homegrown than attendees are will the cannot recent history for those importance prospects deepen of our evidence analytics. context the and than

acquisitions. me on let commentary share our Next, some recent brief

some More market are prospective about the as at Vitalware following in expectations. breadth promotions integration broadly, offering a are are progressing for sales we seeing our from offering. are the and expansion. heard integrated response to share pleased are connected existing of the with perspective. February in of that last While summit to technology with process acquisition product the integration including technical team the efforts both the happy member, our our planning analytics times with well Healthfinch is our and our transactions to largely we I'm growth and with countless receptivity early early also from of and are months, increased and these share the line company's our leadership are acquisitions. customers annual Health Able And healthcare and Likewise, still enthusiastic pleased we we closing in we continued consolidated process, couple in new

We responsibility all the of Health the company, the scale report role of functions are and introduction will clients, role growth This new marketing directly to clients, existing will international with the sales, communications. of the operations, President including major Catalyst, and at in growth and pleased as anticipate CEO to announce have ahead. for years with the expansion, under President to has of role our to and the for consideration high we we years for of a as anticipated responsibility have come. growth many and continued introduction overseeing grow year, been over expansion The for sustained

with with this During year's role. and we after year this process, the right discussions that our planning this time leaders, determined introduce other senior would to multiple be board

of Catalyst's we Patrick are Catalyst As Members, Health banking a Chief involves that team pleased result Patrick and current investment of having promotion XXXX. to of effective interview to human Catalyst, Board at internal the In to functions. McColl XXXX. named Chief of Catalysts role company's XXXX, numerous the filled leadership Nelli, roles group, an the X, resources healthcare in Financial promoted joined Partners, Catalyst, analytics After process the Relations, Patrick Health and estate Investor Officer real President Health January Officer announce private Health Patrick was built At equity GTCR. line and accounting, company's then the finance Financial Touchdown. first in responsible product for built IT benchmarking and Health and at

leadership and with with new customer a including on sponsor and supporting concentration XXXX. acting Chief degree he central as growth University. a committees, customers biophysics as Wake executive an Patrick in serving in of and also for initiatives Health Officer, from company's IPO number biochemistry in governance a Catalyst's July a physics Financial of number been tenure has the executive Forest involved the Patrick's relationships. customers, for role largest a years, has played company's During in Patrick in existing

Patrick's with years I past a has strategic earned demonstrate Chief years, to many work company's President a support during Analysis of to followed company. next with role closely tremendous XXXX. and effective with as our character worked which I come. seven operational to mission, very worked I interview cultural Board of announce selection trust, Chief issues. he as intellectual Health the six closely years, of attributes. to of have with and our current in the full having to its and and team, continues to Patrick the and the capability. on to me, Patrick During and the with We followed the boundless Financial confidence including deep these we Officer. with selection our Bryan forward of promotion process multiple necessitated unanimous prowess, the and to other variety Catalyst, his has of commitment capacity, process leadership appreciate operating selection President, my pleased Chief confidence extend unanimous been Hunt, Board, the next Vice for with full Through interactions, to Health and interviewing role Financial Patrick's look support the Financial across Financial reviewing of I'm candidates, my President the energy, have accepted. Catalyst and continuing of coming principles the and an Bryan respect his January support receiving his Planning and company he wide recommendation, over leaders Officer, to I've Patrick's offer forming similar of Senior has strategic in been to also Patrick for Patrick and X, a come has our Directors. promotion Officer

promotions accounting Planning Young have Catalyst, analytics he serving a these and leadership Catalyst full Accounting During of been a & years, at at level. of Planning Brigham to developed to President closely President Financial understands Finance and ability Relations Vice and has been ahead. of and XXXX. leading including President I'm capabilities Brown, forward roles with degree joined have our Director Board years pleased with two Bryan's I as Bryan extraordinary as working changes. And than support in our sections from receive QX leader, Bryan, the responsibility. this hundreds Officer of Bryan of company call, Adam and holds Jason with look will has in earnings Vice Health our Bryan and confidence his early been Analysis. the multifaceted banker financial and Moelis be to Prior experience organization, Corporate Adam in Bryan have call Health each business with Vice in Deloitte more Senior their served and calls, with benefit today's Catalyst the Financial additional promoted respect the has course an gained and Relations, tenure Bryan and promoted demonstrated and to internal years. function. Directors interactions, earnings my the investment related a announced of Alger, has from for to Health Vice with University. bachelor's that earnings significant Bryan with future Investor of deep announce steward, joining five our of beginning had their in XXXX, and I Jason in during along and also the Investor have analysis, as Company. Finance also in of tenure. a each Senior in finance Chief to confidence interactions of along our who additional And to for during these I many Senior financial has with our President

contribute promotions these dedication X, teammates We respected to our are grow their organization. to expertise, and scale colleagues. and an benefit XXXX Each fortunate ability will to continue leadership to January effective of and and as as from continued be will

I Dixon heartfelt take share past his years Mike's gratitude am of to service where for we I XXXX, turn impactful are Board completing many the not like want more company organized December that are Lastly, when original an has than company Directors of today. I XX. share over its early this on over of years, service be the and effective Board it's to And two opportunity Mike Mike Patrick, to serve Members Patrick? stages. to our decade. of we be nine from starting before to of in to our the the it my I Mike. over Directors, that on Mike the Without call will I would alongside our fall Board. very contributions would first been honor countless the Board and certain

Patrick Nelli

Thank Dan. you,

our into like sentiments quarterly backdrop would light I I'm echo financial pandemic. with that and results, pleased diving our results, Dan's macro-economic third Before especially in to the say and COVID-XX quarter of

Now let me measurement comment performance on category of scale. our

contribution excluding generated revenue, from one-month recent quarter million the XX.X XXXX. For of we our acquisition the XX.X Revenue total third Vitalware, of was total million. in

the QX our acquisition, contribution XX.X excluding relative relative the was our the an year. quarter access services historical was recurring lower XXXX existing being same technology period and deployment this paying mentioned, adjusted revenue million year-over-year. Total one-month Technology higher XX escalators. approximately professional to represents growth from excluding gross XXX by before from an growth from relative for compared provided services for to DOS to recent The some quarter spillover XX% retention same year-to-date experienced Dan additions partially relative discounts to one-month of growth XXXX and last increase Professional decrease guidance, XX.X%, Vitalware XXXX of is subscription services As XXXX near-term XX% from performance was margin the to growth strain primarily revenue it built-in an of a to dollar-based X% XX.X contractual period achieved of primarily and million and contribution both from existing to a midpoint and points, services by the representing customer in growth was Vitalware financial of customers result our revenue second the total recent professional basis new That our outperformance last QX representing basis points to represents revenue our the This technology to acquisition year-over-year. support approximately million fees year. due driven through customers. of as with after represents QX customers our of XXX services third year-over-year was to COVID-XX expanded the this temporary COVID-XX. related was due provided increase customers new have they offset for

of higher to On customers performance existing with without contractual by points offset year-over-year gross This increase flat And was of impact increase was in of our fees due retention. loss our adjusted compares This a In adjusted the X.X EBITDA to an and as as million, adjusted year-over-year data in XX%, XX.X headwinds million margin million, from basis Adjusted previously Azure, of year-over-year. compares relative X.X side, of on customer centers The to adjusted costs was expenses percentage margin which of technology favorably the on roughly a mix total the our of base to approximately of a revenue, totaled basis paying year-over-year loss access by due QX technology to quarter continued an associated as the in XX.X%, COVID-XX favorably XXXX. hosted services mainly was XXXX decrease operating XXXX. was the hosting driven built-in third expenses portion mainly spillover roughly XXXX which EBITDA XXXX. Microsoft XXX in side, our professional in QX previously QX XX% operating third-party cloud were mentioned temporary costs. QX of corresponding services this professional services XXXX. services escalators a well shifts professional the the the mentioned decrease adjusted result discounts COVID-XX in represents gross delivered. dollar-based some to professional XX.X% points transitioning

the we well be mainly management As that pushed adjusted that as mentioned the midpoint are expenses into anticipate by the some Dan outperformed fourth performance XXXX. expense efforts, outperformance mentioned This our we to revenue report non-headcount driven as previously, of of earlier, EBITDA quarter was we out guidance. pleased will

shares. adjusted shares in loss $X.XX, weighted per used of calculating million net in XXXX, QX adjusted share average Our net approximately loss the was per share XX.X was number

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

issued of the a loan. and a principal extinguish outstanding deducting the portion reminder, of private proceeds XXXX, the million related million. the placement an of to in notes a an As million, as million of XX, component discount net feature XXX convertible XXX debt used with term notes liability is amount XX of April amount X we conversion carrying convertible unamortized we of a to the unamortized After of issuance the of cost September XXXX,

fourth between total million million. it X.X financial our losses adjusted to million XXXX, and million of XX.X X.X XX.X the for relates EBITDA and and As revenue expect we between guidance, quarter

remaining little terms accounting Breaking robust. growth in expectations, a technology our growth In million anticipate revenue to revenue, purchase Vitalware continue X write contribute guidance, of of a QX revenue be over deferred to we year-over-year down. XXXX revenue inclusive we down expect will very related the

between This total respective revenue full an year at full represents This XXX.X we our provided shared of the to we mentioned, million lower of be improvement XX.X quarter. raise Adjusted to in to QX last be represents XXXX professional their million While, previously guidance is X.X XXs services respective additions us XXXX the dollar-based rate due at year less will full last services new and anticipate negative. million to negative leads to to quarter. their anticipated of as million retention, The year slightly X.X result revenue as midpoints. XXXX million follows; we we implementation growth mid increase the low year revenue year-over-year a in year-over-year the growth the lower impact revenue due XXXX first professional of guidance full compared services which between anticipate million XXX.X This customer to COVID-XX. as guidance losses half the well professional XX.X an and midpoints. EBITDA compared guidance

XXXX a revenue of growth current would impact a contribution challenging revenue impact XXXX fluidity today. shared XXXX as like XXXX our where precisely percent. understanding clear share ensure our total estimates, our to acknowledge to revenue sit it expected like normal Under to we the XX have XXXX we environment including forecast, that would on we while circumstances, previously bookings estimated from as rate, makes Vitalware to We Vitalware. to plus of the resulting would well be growth preliminary we Lastly, from related from few revenue the COVID-XX observations annual

recurring bookings, revenue total Given to we our including with are Mathematically, we business grow approximately GAAP expect XXXX impact earnings XXXX, following means the both well that impact on our retention, Vitalware this subscription at as of QX slower however, in-year dollar-based model. COVID-XX, our metrics, consistent and on pace as a we year's because bookings a in will XX%, what our revenue shared both these new metrics additions XXXX call, customer metrics, the revenue our forward-looking at revenue.

recurring first negatively our growth Thus, rate. core new recognized signing half new date. retention client performance business we a revenue contracts year course dollar-based their over of XXXX lower year anticipate adds, the that Given impact and will XXXX XXXX ratably are from our services on professional that revenue full

on ago largest professional impact our revenue given not year be We quarter comparing a expect XXXX this is QX impacted the services COVID-XX COVID-XX. was rate, revenue materially to quarter where XXXX by on will growth year-over-year revenue

will Therefore, given believe revenue we of remarks. intact. growth remain that, of COVID-XX percent. plus on XXXX the my target our we prepared recurring long-term the has revenue I conclude revenue While impact effect inherent revenue long-term our With are Dan? of reiterating the nature growth our an XXXX bookings model, growth, fundamentals our XX

Dan Burton

members. a by associated to been teammates, teammates committed be with I'll last relevant that, is customers and team with And of work operator colleagues now Patrick. have questions. engaged to the over never to the health the important ever. our COVID-XX. response These worked call that as conclude months together back company's and fulfill and mission, I've the we highly to commentary more turn in And for several Thanks, system these thanking in heroic than more proud support tirelessly our mission we'll my

Operator

And Jones from Sachs. line [Operator Certainly. our Robert from first Goldman question the of Instructions] comes

Robert Jones

elevated at I there. Adam roles. Yes, end and Bryan the guess, Patrick, to just Congrats Patrick, for the

the I if sounds prepared pipeline correctly, back made the You the and and I in DOS comments thoughts remarks that XXXX. it high you around like heard year XXXX. last half I of expecting behaving And some in preliminary still Dan, If half for digit single of was this said, you you're adds heard the it year, back like that correctly. did thought

we just about shouldn't how are potential trying or comments the for guess XXXX, the I we those that new thinking to two you the put XXXX? into a DOS are is about together, we thinking Is question normal it environment as adds So mid-teens the thinking I more target about be to used normal we being to know be the message year year? just more a next year COVID similar opportunity get adds, year. in given that the assumption next tonight to we're really prolonged

Dan Burton

I appreciated. feel couple additional question, Yes, Patrick, to thoughts, for thoughts. will share the and and of much then thanks free Bob, please for congratulations, share the

and first half out. second lower the now, a right the performance reinforce we observe we a And fluid out feel I prepared want what pipeline, to where play our importantly, recurring And reinforced you will this observing preliminary continue, XXXX, pre-COVID. we as we So But we this Patrick, in is to GAAP But we to that what observations, revenue performance a like anticipate relative it very half the the in much to had is continues would some play as we will would XXXX that we we did revenue from pre-COVID. as does well, this impact where what comments that from do that observed a experience be would how result XXXX in have directly sharing perspective, what pipeline that would continue that model. are is try anticipated, XXXX. And stand second on from environment, transparent we what now, like and to shared happens sales of in of second pipeline as half what half of performing we that much we a perspective COVID. P&L but experienced are right sit and highly add? what monitor very note from a with we exactly did the you

Patrick Nelli

plus income highlight approximately It's XXXX, in in flow Yes. on dollar-based shared DOS a net they our year Vitalware professional are XXXX, remarks prepared only two statement difference adds XXXX, new we XX item the just first subscription of in given primarily between retention that in is growth did The the services, XX% percent included COVID fewer the I would full half not lower but growth that a include to year in factors. and in and how XXXX.

Robert Jones

Okay, fluidity situation. guess great. your quarter, President focus, take back East believe appreciate role of given of Middle new role. to it's -- and the a that of I know you that I focus sounds the role bigger announced expanded like being I the just step international I into customer. then, maybe a a the first

may growth a a bigger should bit this outlook of here, out little forward? the piece Just a we further, going little the be be look opportunity, international will as we on what expect

Dan Burton

Yes.

We for relationship you that to German excited thank contractual East additional Saudi in Middle the question. that were So Hospital. sign with

have market those with would in I investments And regards fruit. what modest some expansion. bear really that modest. that we to shared reiterate adjacent in we investments the they've for takes But our our been that made have past to We international time investments realized

part statement. still more these so time would our I before a income become suggest would investments And of that there's material

Operator

comes JPMorgan. Samuel of question the from line from next Our Anne

Anne Samuel

any the or well? think at we Congrats the the tailwinds year, my Are aware first wondering, margins is, you question next outlined was about should of mix-shift and think Even we moving there on some margins? the growth, the be about promotion. but should as pieces should that puts headwinds we revenue takes of, impact the how of to Patrick as

Patrick Nelli

Yes. Happy for thank that to the And one. take Anne, you congratulations.

before. So we've flat as dynamics gross those gross far years couple a for our the XXs, the in on were high tech given as moved expect to the go would as that roughly up several gross margins next from ago. They've quarters, our stay side, previous tech you've over margin to margins a the perspective mid-XXs discussed we tech seen,

for expect be gross technology services services gross revenue in obviously means margins been services professional a side, mix to to our of this our in higher several expect than year, perspective, continue XXs margins. have services that And We faster the professional gross next and margins we'd professional grow would the helps the our the mix professional On quarters. to overall from revenue tech revenue. a XXs

up So the we would be next to expect to our over slightly gross overall quarters. margins several flat

Anne Samuel

and historical looking That's that much next XX% housekeeping, acquisition is fair very income kind what's how to And total of on saw, is rate XXX wondering it year, related and that one the was one-month, the just fourth contribution of think that I the a to helpful. point to it in delta embedded then, quarter you was acquisitions? Thanks. between basis

Patrick Nelli

million XX approximately given the it's year, shared approximately happy acquisitions. impact XXXk. impact, revenue look about impact just down, yes, It's we that roughly as revenue on was that to X in talk in the -- acquisition QX to SaaS it a And always perspective, write acquisition with next deferred guidance. million was revenue from occurs Vitalware's we GAAP approximately QX And

Operator

you. Thank

the of next comes from Ryan line Daniels from Our William question Blair.

Your question, please.

Ryan Daniels

the team operating I'll there one, follow East Two the third-party congratulations your as consultancy, partners to in interesting the kind it's platform. Middle and my be got over the with to And regards add working number here, you've going of to their on a ups relationship promotions.

set forward So help entities you in solution ensure if healthcare one, And also I'm for do that how your the two, opportunity to curious, regard, number get quality East? kind in the that Middle that's to of to them of number an kind other going the use value the more of analytics care that it's outcomes you. managing platform results? and front a DOS of clients maximum from third-party services the and on given improve now financial the Thank sell the

Dan Burton

thank Thank two Ryan, congratulations, you, for the questions. for those you

of delivery component Middle So it drive in relationship we relates of in there and part presence measurable that of to get announced relationship in East. use though level that Middle and is as associated technology, we services we're improvements. the very moving this have modest implementation the forward, our related with the implementation that the why of partnering much East, with to be technology a items in to top even a a the where of of And the then to men comfort going could was reason

to organization successful continues to region at there, measurable realize us do where of that our a first, heart of have anticipate in ensure try as partnership leveraging Hospital. with the massive, our that German those to the future. located is we're clients so, company. extra improvements there's each delivery we of a the question, partner going an Saudi But leveraging to And and are that the And a understands can partnership to in this strategy relationship with your also time invest

we we're this time this deal of massive, on focus So confirming felt And time a engagements, improvements. about that we and partnership. good partnership, that and result keep clients future researching good in potential realize investing a that measurable those as ensuring in spent extra we'll

Ryan Daniels

Patrick. Thank appreciate front, in one and and And sales look for which offers few if maybe growing to COVID-related sales interesting, on had that. more the even revenue, the last the you've cycle have you M&A cross activity curious which we rapidly, least at and you services analytics impact It's both for the can of done, and however, forward, given level. importance. normalize might marketplace, upselling the over hopefully opportunity reaccelerate pipeline the Greta. completely you some selling, follow-up this you think not the for on things particularly if I'm years, the I

growth XXXX/XXXX. analytics, what any importance into So the on arguably and more goal, could normally be might of like it case thoughts beyond above see Would and acceleration an seems with with on you you in have that? the shots

Patrick Nelli

Ryan. you, Thank Yes.

be we highlights believe some time potential to want too point, made recent we've your potentially your performance. out more in data need we years. acquisitions analytics, to also any to communicating recent speaking for we certainly said, that when this for And about so our much event forward That So cross-sell from excited the we'd expectations about other we pandemic data point. than informed about to think and like the also more do go by history. are And before

Operator

line the from next from of Piper question Tassan Jessica Sandler. comes Our

Jessica Tassan

congratulations the on And everyone. to promotion

to think DOS that performing what introduced was And all? how just interested light you DOS versus speak in cycle could of the were think if if that's the And the access, observed know, solution, you've at changed it sales to and comprised year-to-date we how I maybe it's light I percent of relatively is market. just all so, recently the pipeline

Dan Burton

did provide in we question, is planned. I the meaningful that the DOS. little of But be What that included the earlier wanted to a had responsive we was COVID-XX could. it response for share you the a and Thank we solution introduce And was that than would of solution version pandemic. service Jessica. light concept to That originally every we

same the So that that in we as process. pipeline a the light has DOS see we we at particular, past. to the cadence version. the But And we've right in are that have half our early is performing about continue seen developing in in developed it to at relates and that pipeline, second

out. differences quarters several the that. of And understanding should cycle to how will are or next about more so But data relates as the over we're conversion, early there pipeline process we sales in have really any it the play still the if

Jessica Tassan

distribution? pretty or respect modify Okay, capacity you -- help guys talk quickly, bit planning just eventually a to could solution being the to your awesome. to be working one distribution, about would or you're when on role you vaccine think any with it's able anticipate to role And little potential with then, just that pivoted I follow-up and COVID in available. vaccine

Dan Burton

of planning distribution in vaccine in support and that and be additional in that of providing ways platform response the question. system health support Yes, we each the one pending to meaningful obviously data to And news customized infrastructure thank encouraged you the layer an approvals. already have by anticipate process clients. towards it have apps and potential the as with at We end. other at recent regards our the that relates pandemic, We're do some analytics for for specific layer, can place to modified and development as we

an So we from will perspective. we do analytics support anticipate a that meaningful play role

Operator

you. Thank

Truist of line the to comes question Sandy Draper Securities. from next Our

Sandy Draper

I'll echo congrats around all everyone. to

to Some great really, promotions. Dan, mobility the also see would within upward And people company. would think the all to seeing internal the boost I'd spirit nice I say

outperformance in So to late third The Patrick's if some not into the nice environment. sort from just think I'm a sure the get you to but But outperformance didn't $X in just there that acquisition I trying I outperformance understand, about pick What understand up. same on of quarter. number of about I'm talking if I but relative caused sales. there. to not better not was comments. shot trying sales to bridge little and million the just, expectations better caught said quarter, sales to did I Thanks. comments trying tail the sales the the wasn't

Patrick Nelli

words. Yes, the course, again thank you for and kind of Sandy,

years. base the outperforming drivers. one largest strong driver retention performing plus to two over closing that within very use reasons software is time our I onset this are performing is largest net of valuable of expanding or the a our the And up is past the short XX new the because expected client business And than performance quarter is dollar-based would earlier from robustly. So this a think earlier It typically it us say when technology our of and than period, percent we about similar during is expected extremely And pandemic. pandemic. analytics since data is usage that prior this of the those

Dan Burton

an that for within strategy. And member certainly to is company. every is for is, opportunities of feel on just incredible out announced Sandy, and from also focus your long-term career comment path. individuals meaningful I have that we the thank you to calling what be part want And team we have our future to members team might bright like a our a add first promoted they

circumstances. excited qualified position And It our existing are case that do team isn't that have a to default members that so in for we we're is occurs excited position. and when But default promotions. the every we see

calling that out. So thanks for

Operator

Thank you.

from from comes Elizabeth Our of Evercore. question line next Anderson the

Elizabeth Anderson

situation? quarter. the you in balance some that that terms is terms promotion. I just thinking in opportunities? obviously what are both And terms potential the the was about of but present, contributing ongoing current wondering question cash might of on guys also acquisition the opportunities My on how cash, of COVID Congratulations in in

Patrick Nelli

For sure. Thanks, Elizabeth.

adjusted So we not there have of for operational needs. and EBITDA equivalents. ongoing cash of begin needed expect significant to cash million amount your XXXX point, basis. breakeven to continue cash run a to on is And rate we XXX a approximately Since

as shared have opportunity the front. So be excited the we believe given vast M&A be that to purposes, we're on we've we we cash disciplined, that the and be significant previously, will on can active M&A to for front, cash to leveraged but have majority of continue

Elizabeth Anderson

That prior perfect. operating sounds like no your from change philosophy. Okay,

on Eagle So would is, was be about the second that's, on in that's helpful the That quarter very from and talking could Vitalware, and line? but to you of you. revenues of, hear. sort And Health, question just I terms revenue the clear thinking, then, Healthfinch my you comment helpful. the revenue from in if were impact in terms contribution Thank of

Patrick Nelli

Happy to.

time. So were health year for acquisitions, enablement and various this Healthfinch everyone, technology points as smaller a earlier prices acquisitions. much Vitalware and purchase Those Able thesis primarily around for for at reminder M&A and we in those closed than other two a

revenue their kind So we continue on enablement. focused had a is deal contribution smaller. in shared Their more smaller that product that of information on GAAP our they given and And share of to much at bit time would and impact revenue XXXX. good immaterial

Dan Burton

we play I the additional do out. will with encouraged early opportunity take customers Elizabeth, would expect of of by to to the these time, cross-sell that But that add, of regards number quarters at the same we from solutions. are signals our a some

Operator

Thank you.

Leerink. comes SVP of line Stephanie the from Our Davis next from question

Stephanie Davis

it you this through your Could on much guidance, let note more dire us in me headwinds team at in any spoke, expected. for of viewpoint in walk kind to was made second that environment. pretty services. than But Last comfortable with maybe what the a again, better add we the congratulations, Patrick. or you XQ of came change sort professional get founding the half changed uptick And the looking

Patrick Nelli

we To that XXs. the prepared shared color last mid we that additional share to months, for expect would to historical remarks, low we in happy services XXXX. lower shared the it be than there. course, be dollar-based your our professional the Of levels point it to net several retention, In to in we expect have

we wanted that investors. So quantify little a more for to bit

months I say where expectations a few been our few relative of So ago as than to quite performing been is we a consistent would it's well. the expectations for line. compared performance months, would last better at our have I least say technology And revenue

pandemic, the usages past Our dollar-based been never to we'd just impacted been given the our minimally of this to of has from technology be years, has expect onset net it retention roughly higher. software similar

on So the technology side. outperformance the primarily is

Stephanie Davis

newly role? through Could then, Understood? And your priorities hours then, announced that presidency, been And us goals the for year? created for I I guess walk now for are had about officially two what first guess you for, it's your you've now. the seat your

Patrick Nelli

happy thoughts. to share Yes, some

Stephanie Davis

a it. think of is hours time long to Two

Patrick Nelli

ecosystem, help I'm We healthcare personally and help are analytics, accelerate want to help early for healthcare and the the adopting adoption ultimately mission excited all that very get informed. in fulfill data to -- faster. data and One, continue that a of decisions our are with us us I to future very stages to adoption I help And think there where accelerate.

that sense informed of find lot our across We business. customers And gives we a potential strategic of a from also the in insights customers insights data. expansion to in their value help at us data very help sit types in all generate that more Health Catalyst position, can

we for of shared am through very analytics. believe the impact that tailwind, that for it excited to highlights that, a have and to COVID long-term we the need data medium I we think XXXX, as personally So is

that ahead So we invest getting we of ready to tailwind be and creates. ahead want of that COVID believe

Dan Burton

my point And the we've remarks, that, And year I role considering Stephanie, the timing the President we last of reinforce of a well full think, just as a to that decision introduction the in term this I XXXX, heading and tailwind would now. definitely effects mentioned the may with of the discussions Board of forward we're sense position. a some Patrick's our prepared over there, in where I medium into year for informing Board as those to start been was our to feel move with

that in So in and tailwind see we're and adoption that greater best And the place that possible to analytics. to enable data of excited out. we're accelerate play

Stephanie Davis

a just of more Patrick process? magnitude this that underneath to adds to something thought more little the bit the structure think you is or does hire need Given him, do opportunity, folks that

Patrick Nelli

provide Yes. some I'm to there. happy thoughts

high we these product sales be made in significant the that sell infrastructure a investments marketing We and organizations. before robust able building out to shared have to a to fairly C-suite dollar large have at

be So leveraged investments sales given next we we over made feel like marketing, in of the number several large and significant those years. have investments can a

Operator

Thank you.

comes question from from next of line John Ransom Our Raymond James. the

John Ransom

So just me. for a couple questions of

about anything the As we growth there of the and path change or positive long-term think mix future? negative is business, EBITDA positive your in in your to

Dan Burton

No.

to plan continue EBITDA We to we've that towards what adjusted about that run time we shared begin hitting on continuing XXXX a same very horizon. rate good, John, feel breakeven to we're and previously, plan basis

that from revenue, And to that margin that picks a skew earlier, mentioned services keep the various are and we of with and would over As growth our a puts and few perspective. profile neutral starting expect little gross expect towards may we quarters, slightly less positive. more next the takes see our bit observe technology a we to little Patrick

John Ransom

you Thank be might that R&D. Where product And next that years, you or about should you investing either two over think think about or than the question in your where you. the past. different we you would second might same And R&D holes have. invested as about you three any think be M&A the have or

Dan Burton

in we're I two is in following that the primary same we've model the focused past would areas. that and discussed reinforce

that whether is So operational an to with continue the our really clinical, understanding of categories clients measurable of first app benefit from for improvement. we greatest and the layer, at categories, they're where interactions lots in financial, the our inform apps will which well technology yield or we clients help, both consistently investment opportunities for as And our first asking major M&A R&D that our as and the our decisions, gaps identify decisions, we offering as identify areas would are be category. that

adjacent as of major international. we areas. focused in previously, And life of and market been would performance have the discussed sciences those to presence as and category M&A, in our we be discussed accelerate The areas past, two our that second we've on

of very just before good So answer that significant. we And disciplined something and for it's we to that continue by moving part our ensuring and forward. that process in framework understand integration this will is we reemphasizing that, M&A I very opportunities Patrick to we'll so remain would also us conclude as is, try pursue. evaluating which to be mentioned, feel important the for forward what disciplined remain We feel move and we

Operator

you. Thank

line of Grossman from comes from Our next question the David Stifel.

David Grossman

just You not only year. how kind of business guys impact trends fourth job quarter, articulating, next the a did may great but of and the current that of the

reflect services that this the growth professional assume ease? be but to logical to that probably quarter more to heavily off Well, it then is improve and described, revenue bookings one half, quarter as would 'XX just experience? the comps would similar the to year, weighted little next you've first look in tech what on the based So probably first half modestly fourth a

Patrick Nelli

services robust growth, estimate. revenue expect Yes, XXXX we revenue that note, And David, robust below trend the On on XXXX it but be growth, side, an XX% would would thinking generally annual revenue correctly. could technology are overall expect we've just overall XXXX technology professional like we the about you seen growth.

David Grossman

a growth into for good So tech the kind bring XXXX. XQ, of you momentum kind is of proxy implied the

Patrick Nelli

Yes.

another And professional revenue expect technology we'd revenue XXXX annual year-over-year, side, services so share the would to revenue into growth, more we think, too expect specifically we of I XXXX XXXX, quarter annual XXXX overall wait revenue. similar providing roughly XXXX But revenue XXXX to the we growth. professional exact overall growth. services, or growth makeup As similar technologies would annual or similar before much want about to that on to detail be services professional

David Grossman

then, Very the of a be second do the to would forbid, for business Okay, have helpful. you they if that. think compared had? disruption really or have god you it. base shock? into on your were Thank I that business thought some wave second wave on the is your first, wave. a Thanks. impact would first a do insight we than that adjusted the type kind what probably to And got your you mean, have of And there client not

Dan Burton

summertime. we've wave those meaningful the than Yes. they feel with in Great activities of involved second therapeutics preparedness question, between experienced prepared were. better improvement clients in and David. national infrastructure some and experienced Likewise, was that the of and been have directly we our been touchstone our various scientific we that the therapeutics do with significant the we're now, a we've certainly, encouraged organizations. that even the are that two the the past advancements that in waves very We in Really first effective. And see to saw associated place research wave through in use

overall further progress helps I us and component that the to think that that's by vaccines. then certainly So with another helped regards

our is of clients much our with with almost every this we clients. In next handle so months. And feel in that while fluid very closely this staying recognize case, we're each prepared few communication situation, a to we better

Operator

Thank you.

Our next comes from Glen of Securities. from Santeangelo the Guggenheim line question

Glen Santeangelo

made dollar to respect want prepared you up follow just I on to the some remarks your with of base retension. Dan, that

think And with you to retention I against the XXX% on comments maybe acquisition help the on contribution. the that services rate, to reconcile heard I'm technology side, compare if be XXX% or revenue retention that to that Patrick's the can that about wonder x retention if normal seem XXXX growth you you trying would I to correctly, the over had dollar-based And to and particularly years. think suggest prior three I side. us the respect professional you below the

Thank [ph] you. of sort or [poll] you clarification can on us any give So that?

DanBurton

for question, you Thank Yes. the Glen.

from earlier That is side a transparent a and prior retention. as be to not comments, XXXX, what what services a case and our prior helpful rewound have to see observed we the a we ahead dollar-based we're it and technology, dollar-based relative what projected, has comments I any Patrick degradation retention expect didn't in little reinforce retention, years. forward. in and that, performing general dollar-based moving differences we XXXX technology we're observing that difference we that has relates meaningful wanted between dollar-based will share meaningful we've that significant in and is would that might to prior the of prior and were really were what roughly a about our to also retention, overall a past our difference quarters net year, seen what had between XXXX, on the not shared have few observation clock tech experienced we Patrick's tech and the and services. we and we the strong I minutes and also observations thought in mentioned, by we percentages in performance services So prior consistent seeing the years, as have if tech would versus projected ago, made what observe quantifying services to that to been which years the in been And we supported the prepared robust with our as and we've you performance, similar this remarks,

we we numbers As will revenue would services similar. because much to revenue they've model year, a Patrick for tech prior different, mentioned the observing a and few are very expect that revenue growth rates the out expect in for retention for years, next XXXX whereas services, more been XXXX, those dollar-based to revenue, recurring into play technology this which year, in might that that similar in growth and are happens minutes look you we're ago XXXX rates that to we play business so and

Operator

Thank you.

question next comes Capital Dodge line RBC from Sean of from Our the Markets.

Sean Dodge

then Maybe recurring; some next back into to to mentioned quarter. should are expect the on Can just you going items, magnitude? the year? non-headcount of just what some they examples a are, we carry expense those And around the fourth are things into bookends some you ones, being Patrick, us couple thoughts the pushed maybe these give

Patrick Nelli

happy color. I'm some to provide Yes.

of headcount majority our and are member benefits related. team expenses significant the So salary related,

in and However, or Those referring few the up we way any management are be sales associated just marketing be one goes, quarter is our do of with a to the have on minority third-party business, swing are type portion was These a third-party can an expenses. the material I to. given expense but million, contractors, expenses manage that we that the basis. can annual as as expenses, far non-headcount typically

we differences can in to move enable managers expense non-headcount one to versus expectations, slight in any And expenses quarter. actuals quarters. between So that in lead non-headcount

Sean Dodge

Got it.

Azure. you quick clients to been disruption hosted your then, on those there of maybe progress in be transition update pandemic? you give from the to any then, quick Is a there? And helpful. a that's when complete? the And reminder, Okay, just Are expect us track? Can that that migrations on

Dan Burton

Sean. happy to Yes,

So a back did half the the to this migration pandemic of in seeing second But we're more of that normal us slow cadence year. down the being little bit. a

so, that anticipate migration here pace Azure environment to half. what a So two over the at years the complete But that experiencing similar second do will will to really migration. the next still we to we're in or take continue that

Operator

you. Thank

question comes from Brian line Genuity. next from Hoffman of Our Canaccord the

Brian Hoffman

that that have not Any you. couple would talked just the over levels? for the same on better to Thank that renewing you wanted us related can related Close. up dollar-based to curious is And provide about pricing more And/or into if maybe services. be contracts drill a on in last lower due down you to I'm following Hoffman Hey, professional you Brian bit the is of the mentioned that understand Richard Ryan's to I at to helpful. their retention this discounts help quarters COVID? customers that's question, color

Patrick Nelli

QX, we spillover Yes, mostly It bit professional there was to services happy pricing QX. of little in provided discounts but revenue to. not short-term is related the to impacted that GAAP in Those our customers. a

retention net lower dollar-based the few factors. services from professional a So

analytics majority to vast are financial and number to opportunities at So we're year compared select a this choosing be That there services use we've first, that the pandemic, are the the And analytics that year are fewer team meant improvements to with initiatives a had customers continued helping ago, has for services uncertainty with year resources facilitate. expansion onset year share they this of I of said other would helping and compared that fewer year. them deployed health previous than of professional customers did associated ago. of members to a COVID systems a causing also, to number our this

professional those this dollar-based So primary year. are of lower drivers retention the services net

Operator

Thank you.

from Cantor comes from line the question of Steve Fitzgerald. next Halper Our

Steve Halper

Vitalware, talked for growth, sure correct? to the includes revenue that XX% just I want about, number you make that is XXXX that So

Dan Burton

That is correct, Steve.

Operator

question-and-answer today's Dan Burton to program like the remarks. of to session back program. for concludes the This I'd any hand further

Dan Burton

All in earnings call. in today's for ahead. the right. in to touch Catalyst again, your Thank you months for in Health Take your interest We look staying participation care. forward

Operator

Thank and today's you, ladies in does the This gentlemen, conclude your conference. program. participation for

day. disconnect. now Good may You

Health Catalyst (HCAT) 10 Nov 202020 Q3 Earnings call transcript