HCAT - Earnings call transcript Q1 2021

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Operator

Thank you for standing by, and welcome to the Health Catalyst Earnings Conference Call for the First Quarter of 2021. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder today's conference call is being recorded. I would now like to turn the conference over to your host Mr. Brown. Adam begin. may you Sir

Adam Brown

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

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

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

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

Dan Burton

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

call share first along performance XXXX quarter our We quarter. with our commentary first on are we by the to with that financial from overall are XXXX today's the financial financial company's additional sharing with excited quarter I pleased will performance. highlights some begin results

XXXX QX of million exceeding and Our total each $X.X metric. million, quarterly with results guidance midpoint revenue was was our of loss our on these $XX.X EBITDA adjusted a the

total representing Additionally, our year-over-year. XXXX of XX.X%, $XX.X represents our increase revenue XX% growth QX million, gross QX was basis And XXX an margin XXXX which technology was adjusted year-over-year. points

me items additional let from the some quarter. highlight Now

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

our engagement. and realize improvement evaluating on to improvements team first enable client massive, category The ability member is maintaining to also focused our satisfaction while measurable and industry-leading clients

studies. share published me examples improvements a recently client few Let from of case

leveraging financial work the to improvement meaningful services highlight vignette with journey improvement latter from and clients two our operational first vignettes clients of our their their while of to COVID-XX and The technology highlights supporting our recovery work response. one outside COVID-XX, do

the and to DOS data including Healthcare.AI COVID-XX Health to advanced Carle platform employed our our apply solution their new analytics planning. data science First, software and capacity

facility, and supply supply and provided related acuity, community. to needs in anticipate the time Carle staffing human COVID-XX level bed, at required the colleagues the which real Carle's and our across demand ability resources of to enabled technology to at care census; patients for for and Our forecast patient meet

Next Health solution care delivery meaningfully employ to leveraged and improve approach achieve to data-informed a System our Thibodaux Regional reduced costs.

software for products. patients' the and undergoing pneumonia Thibodaux of addition enabled replacement length mortality incidence rates decreasing of in our stay significantly to stroke, of to and use patients sepsis Our reduce colleagues their surgery the at complications joint blood

As a of service health achieved result, Thibodaux financial across over for X.X also multiple in million while outcomes lines. thousands patients has improving improvements its

months, given the This pattern engagement, work pandemic, industry-leading to six member achieved software in every members analytics Hospital to our the team Gallup levels software overall as the clinical our data that clients' and from System our maintain necessitating technology" across On Sisters as member our percentile. that it a inclusion receive a note, utilize Health to multiple center during satisfaction prioritization team massive have external levels. ACO. achieve their years and member Hospital having addition new recent highlight DOS of its XXth improvement and claims were highlight our recognitions and analytics us and "best a list, acquisitions. as XXth recognized Gallup regulatory the Sisters These including members to utilized our scores. platform remote-only to building solution, are in and in data ACO to winners. the primarily software Science we to overall year team disparate best to engagement integrated engagement. the real System enabled the team global Finally, EMRs result and that and the is of quality fourth our continues nearly InHerSight's were heartening strategic leadership Health services improve quality pandemic Shatter company's and quality most to a technology came List measures third make recognition integrate our we engineer been This including a team confirmation time our performance Fortune's many our thrilled Moreover, recognize the Spectrum We has members' XXX,XXX throughout a where reporting closed across gained in recently would focus quality-reporting accuracy results, place Approximately work XXXX clients other information adapt million environment, well I latest "best a to utilizing focus. revenue. who Hospital black Sisters enhanced in central required And multiple two work Savings companies team our teammates, one satisfaction Tech work Women the to as and recent continue to high Also as organization achieved then and additional System fortunate the gaps prioritized we similar a level member a XXX that because were in the list. of enables We welcomed party care member through satisfaction primary related XX of significance, like we for results to vendor. particular Glassdoor contributions team Health Shared comes effectiveness. in with place on year, to member category, improvement. measures flywheel engagement coupled in consistently that in in foundational team ranking they we measurable been measures award team In that measure period to also eliminating an team a Council's savings, engagement, an of Trailblazer for" the Medicare I'd Program result within XXth single of cost of and engagement latest place score This between percentile

a information by in achieved Lastly, highlight portfolio controls. comprehensive like security certification our – accepted for I ensure would that HITRUST. the the in nationally improvement internationally leverages company category, to and security recent to of announcement, standards HITRUST

As the confidentiality, clients very trusted protecting standards this our as ongoing to success security of implementing our are for we and integrity our best and mission. and we data And to stewards seriously, that availability. highlights data, practice take recognize they central of announcement clients' data our information commitment privacy

growth, objective our and includes begin bookings result that strategic QX consistent earnings The XXXX shared operating both we is in we tailwinds growth beginning the such, new that headwinds expanding our on as call. also with expectations as on relationships earnings it Our our pandemic client to and commentary XXXX are next current reiterating shared to while relates existing environment XXXX QX call. To COVID-XX our we continues relationships. which is comment would that client I category

data by and And COVID continue significantly evidence analytics, In of operational provider and our it of the an some to that respond headwinds, supply that provider efficacy, with the rollout need strain chain prepared anticipate financial COVID-XX the to we in optimization. pandemic to surge, replace care be to ongoing analytics terms better vaccine will including end Likewise, in equipped rollout ecosystem believe alongside meaningful encouraged the overall and highlighting logistics, broader lastly, as see and to planning of logistics. months, and amount tailwind systems. And of operational under market the areas commercial-grade, we're the patchwork pandemic as continued solution coming health the will organizations over for data we continue vaccine tailwinds, as efforts. the serve capacity homegrown relates deal a to to care we treatment industry's pace the is the continue adoption health

acquisition available opportunities pipeline. have for cash have our with And We continue the consolidation layer certain themselves high-quality Lastly, investments short-term and has the on $XXX otherwise. quality sheet, the that we be share pace the a while that on driven set, greater to COVID-XX balance brought opportunity, acquisitions. of I we topic million our previous at the efforts believe opportunity believe not growth, we especially And commentary, of encouraged we of that portion forefront by consistent meaningful a of which the acquisition have of pandemic might would than of to stack. by presented a continue be always that to is will our currently applications meaningful solution

May of will who comments served Dr. of make Board Board our I Transformation. on XXXX resign as Service NHS' Dr. service couple Ferris its Ferris, chair appointment to concluded of required Directors. to a as has in with January connection Tim our most Finally, his effective our Director England's X National has since his XXXX. Health on of recently Board, National related and the from Board

We served effective in the XXXX. of Board Board on May as Audit than of years Jack Committee health our on has experience more a company including XX CFO our care and has Dr. are Ferris' Chair the future for the the as years NHS. many and benefited experience Jack Ferris' invitation are Kane place well exciting wish that have thrilled In extremely him with Dr. to to we accepted role of Directors to for Directors, Jack XXXX companies. technology wisdom has since of including we as Board grateful X, announce public years serves Chair. in his several from serve and currently opportunity of several

We Jack's let serve for chair are over health moving well of financial in his With forward. our He that technology. Bryan. as years as our me Bryan? mission experience dedication as qualified depth and grateful leadership the is to over turn call to in many to care uniquely

Bryan Hunt

you, Thank Dan.

I I am that Before will diving on into Dan's sentiment pleased with results. scale. comment quarter quarterly our echo objective XXXX now say of results, I want category financial our first and strategic to our

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

margin from outperformance QX of of driven the pandemic. $XX.X by is continued contractual gross contractual clients mainly lower professional performance points our This access for growth As our mentioned, costs, XXX XXXX increase commensurate XXXX paying clients QX technology to growth retention to in was approximately gross fees In headwinds increase an in dollar-based a cloud-hosted X% COVID access XXXX, transitioning basis new XXXX adjusted partially points our XXXX a This million, of segment, services, an services quarter client existing for XX.X%, to represents This hosting primarily the relative to and of driven increase DOS from relative XXXX performance, an an guidance points technology Vitalware to last year-over-year. XX% built-in was historical relative services performance was professional mainly points, from recurring year. XX representing adjusted a same relative for increase Azure. year-over-year. revenue to the year-over-year slightly year-over-year base $XX.X the by of of the technology the margin approximately customers, year-over-year. services result total increase provided basis due million, XXX in relative XX.X%, first due XXXX, offset and was approximately paying new QX to QX the were representing professional as costs, from approximately services our to Dan and existing an was represents an Total achieved result year-over-year segment, performance higher was growth XX% as offset data client fees escalators, adjusted the built-in with basis rate In period margin representing basis a was Technology same in increase mix third-party was and higher acquisition. centers some of midpoint shift revenue technology services by year. adjusted escalators subscription expenses result our of period to professional without XX.X%, by XXX gross Professional forecasted. revenue This associated Microsoft $XX the of portion of it partially utilization representing being delivered QX year-over-year of the million. additions, professional than In higher XXXX. operating last a our this primarily QX

As comparing margin to quarter was adjusted in This QX driven of strong EBITDA in of total midpoint gross previously. XX%, Adjusted of by a adjusted operating revenue, million, and mentioned compares loss and XXXX. was performance loss favorably exceeding of XX% guidance of first the XXXX QX expenses the adjusted were result percentage XXXX. favorably to the our $X.X $X EBITDA mainly which QX million an in revenue EBITDA a

be some anticipate quarters Additionally, in into pushed it count that subsequent will XXXX. by non-head we driven was partially expenses out

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

our let me the some statement, increase. GAAP of of an to income share as year-over-year relates on it update Lastly, areas

intangible would I to business our note increased resulting due expense, that XXXX assets, and XXXX our amortization First, QX acquired from year-over-year, combinations. million amortization $X.X depreciation primarily by of the

Next, increased you that QX year-over-year. see stock-based by compensation $X.X will our million expense XXXX

RSU result of and grants, grants In revesting incremental the from increase performance-based stock-based is expense. XXXX acquisitions as of RSU as this consideration shares and our Health associated this restricted with And Vitalware. addition part acquisition to expense also issued revested, and of classified is Able compensation

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

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

As it financial guidance. relates to our

second revenue $XX.X $X and we $XXX.X their $XX.X million represents million. At expect EBITDA million. full revenue we losses the expect provided total between to $X.X this and revenue full year increase respective an of $XXX.X midpoints, quarter. guidance total million compared million last XXXX, we $X.X the And between million for between the of million quarter XXXX, year adjusted and For and

We and of million represents we million. quarter. full million their $X.XX guidance also At this expect to last an adjusted EBITDA improvement year $XX the losses respective midpoints, compared between provided $XX

guidance XXXX Lastly, details few I a will related provide our additional and to forecast.

QX our be XXXX anticipate QX we professional flat revenue roughly services First, to XXXX. will

our that subset clients them through discounts As QX to services COVID-XX-related given financial the XXXX more growth, result services other reminder, helping a temporary XXXX, year-over-year we in of in a to XXXX, quarters offered favorable QX acute strain. relative comparison, in support professional will professional the a

XXs would year our continue I'll And and typically earnings like my services year, a mention investment in adjusted expenses and our to seasonality in prepared continued for we will I for integration growth non-head that the mix XXXX, our With the we described are driven services our our in that margin anticipate previous operating forecasted we to professional our Next, reminder, be Analytics driven anticipate by as QX well provide conclude and The the our would of research that Healthcare on the strategic experience utilization including that, do lastly, operating expense commentary. overall forecasted in remarks. consistent utilized rate. full our functions, of XXXX gross I with count percentage mainly as by expenses, that development we increase Summit, call, the Dan? remainder expenses. acquisition-related

Dan Burton

will thanking teammates operator I I'm these our Bryan. the for to grateful I commentary highly our the for engaged that, my conclude And central Thanks, to members. by call to contributions growth. and back questions. turn team their mission with will

Operator

from question Robert Goldman Instructions] Our Sachs. first [Operator with you. is Jones Thank

Your please. question

Jack Rogoff

Great. Thanks on question. Bob. for taking Jack This Rogoff my for is

describe it what the how about the expect you you specifically I impacts talk of quarter in correctly, of would you revert, heard to quarter? services able mix if So, some like the better in And in was so within professional you the mix professional services that to do be how what sounds transpired could you balance year?

Bryan Hunt

absolutely. Yes,

QX terms our services. that an of the uptick professional some of bit a in our we offered of in of mix higher are did of services services So see terms professional performance, margin

a expert QX. and margin a year; have an to or So lower higher is XXXX. outsourced nonrecurring And the visibility throughout would some also is And third services on is throughout as of then offer. and mix professional That you pipeline Data reminder did little related expect uptick we as utilization see those in offerings. that that's are bit have our in QX. the margin then components of in margin to line services, services uptick the of services more we our gross -- work additional professional looking that of those one, an services into actually see that and why services in our we And implementation well. that remainder QX the based One a three in services. professional in services. then that One slightly towards analytics with a ahead, of project-based of to lines rate we main now, utilization did our the services domain was bit do those along two and that our bit our normalize more our analytics we shift rate and consulting data offerings relative and

Jack Rogoff

Understood. Thanks much. so

Bryan Hunt

Jack. you Thank

Operator

Thank you.

Samuel comes next with Our from JPMorgan. Anne question

Anne Samuel

organic implies Hi. the professional second question. that Maybe actually Thanks flat with services the for nice taking quarter. so for second growth growth quarter, really for much some the the technology

anything just leading any there, might that optimism that? that incremental if or you're So, wondering in seeing maybe there's be to

Bryan Hunt

thank Annie Hey, you.

-- So your technology do in technology what as full which XXXX calls shared well, look growth expect for our year continued would point in call we to shared prior to on rate consistent you saw growth. the XX% what our similar with And we XXXX. robust QX that annual approximately was we've our directionally we earnings do growth XXXX,

do expect quarter-over-quarter like we based that so slightly of there And of on in-quarter factors your the and variation exact like. can percentage the timing to a basis a a a on on by sequential go-lives be bit continue little to to point, number few up few tick dates although and technology points, implementation

Anne Samuel

just about macro value-based hearing macro favorable care. Okay, been environment. a the the lot helpful. backdrop being Thank maybe you. more on And one then We've for

you're Thanks. for what around wondering Just seeing that? appetite

Dan Burton

Yes.

clients the a COVID-specific that we seeing it and XX been and are both having higher with dominated. generally really over they've population with the coming So Annie to we're relative where value-based new back relates where as activity discussions conversations of care to more speaking had proportion months existing last as health clients

in conversations. is we're as that something those is that well So uptick an seeing

Anne Samuel

Great. Thanks very much.

Dan Burton

you. Thank

Operator

Blair. with next from Daniels Ryan question comes Our William

Your question please.

Ryan Daniels

because do provided on large enter ACO the strong through reporting And taking or the value-based in something one taking one that more I an the savings. million-plus to year. practices physician Dan, on a follow-up or Yeah. to you front. think well the the them where Thinking medical I provider lives wanted that direct the with the health attributed groups it's improvement practices or Is start and as seeing to space large you payers focus quality care we're Thanks always Medicare and you drove is population wanted helpful. vignettes and to contracting. in whether or are for there a very the more advanced and on Advantage Congrats MA groups? questions. on transferable to worked even

that So opening market thoughts analytics curious solutions? up commercial-grade I'm what your for your are about

Dan Burton

the question for Thanks Yeah. Ryan.

those been financial We have operational it measures to really overall as directly relate on and of other important aspects performance relates our performance. specific organizations strengthening focused particular. measures proposition and many have And in value to often requirements

HFHS was able And well. would of this capability and sub-segments payer the our as in that space different is solution and see to space that produce the so [ph] applicable we in leverage payer

So solution potential that we are others excited benefits. yielding of about the utilizing and similar

Bryan Hunt

do do add I thing vast current segment our traditional base Ryan is those described along our and on majority is and think the would Dan but and of what some our ACOs as you platform of only verticals some applications that the risk-bearing customer customer you relevance health like, base entities, side, is the The our the have described provider of have there. know population we in spectrum and more portion that

Ryan Daniels

one about of broader over longer three that services analytics different term offering, that portions is increase we time margin Okay. look quick constantly you a that the at this over years skew? If as might of and to with to I'm data services Just could portion year, use Super and think thinking Thanks. again but the then And offering think should longer having your revenue maybe how a talking term how the five it introducing we in follow-up just nature. front cases? that on helpful. not fair new the next

Dan Burton

would what learn we learn observing I question like Ryan. take professional space. we're pandemic the we And that feel the we're mode And observe. this of services just rest trying and the to in COVID understand during want especially It's we're better think in to to a share good I where year

that doing. improvement different other perspective in to XX over would was atypical ramp-down some those the service of work components ramp-up to a all or share through of based signal to at that We've trying last have seen three we I the pandemic. And any it as occurred and quarter we months. parts the pay see our on given we're attention were noise changes think pre-COVID, get we not that

likely And step note. any making opportunity observing use we but probably as that will macro we've do before any each another those if share following of year. more if keep planning specific observations so we'll early cycle process then would back, consider to planning be And the seen next year changes the observe any, we

Bryan Hunt

in add long-term our Another margin I we've as would the in target. professional thing That Ryan, of just stated. terms services gross mid-XXs is

of a so are that. like reflect mix good that services and described analytics data those that that and portion margin other And I services and would essentially of consulting

Ryan Daniels

Okay, great. Thank you again.

Bryan Hunt

Thanks Ryan.

Operator

Sean question next comes Wieland from Piper with Sandler. Our

question Your please.

Sean Wieland

much. Hi. Thanks very

bit You what more in that a called quantify amount little greater and a was? out tell of the about maybe nonrecurring that Could services us you quarter.

Dan Burton

to Sean. Yes, add free comment make well. and as a I'll please Bryan, then, feel

changed recently, projects. pronouncements, would XXXX. That's characterize midst services that, kinds through has data, those about the the Bryan, seen Sean where that comment been of feel I anything Bryan let make a So that I'll clients pandemic, But of number And as in revenue-oriented one we're we have ready of is gather interested is we'll And shift. in it more the specifics, see something as add? elements more that there's if materially watching, feel yet would it we we relates of we a we've any non-recurring don't on progress what the you QX. those something to to term. or longer during longer-term as that increase

Bryan Hunt

Yeah.

it. Just on of add quantification, to the Sean

services given So, vast our it is recurring, are majority still small. of that fairly the

about currently. a can portion overall as, small think or non-recurring fairly services, additional million of $X it You of mix our so, but

Sean Wieland

kind progressing? the Okay. after And going clients. you are overall you. And how little that of I momentum know. on can bit, terms regain the to just a is new pipeline good maturity pandemic year? mean, to the a year, DOS That's Thank of you in of characterize this pipeline of

Dan Burton

we pre-pandemic it way have characterize levels. we've that headwinds like, and overall, described And So the that is continue the pipeline been, of that a previously. to in we result that tailwinds the lot would behaves

getting associated sense experience that That to to DOS those And health will a persist DOS, tailwinds. We through affects a those year. commercial-grade the believe new do and the cycles client. the platform as those look continue specifically then, client every infrastructure subscription and do anticipate we The We headwinds But, system that pandemic. tailwinds pipeline with well. long new of homegrown patchwork a still rather sales data needs, pandemic. one approximately like observe than we beyond forward

And of in take will longer-term XXXX, show-up time. beyond tailwind, will pipeline that that so the take results really performance. terms you of of to Much Anything Bryan, would add?

Bryan Hunt

No, that makes sense. Dan. Thanks,

Sean Wieland

clients, year? you you you add for number the DOS lines, want -- this Have target given just new me. a remind of DOS So us to

Dan Burton

a share expectation. did We mid-teens

Sean Wieland

track what that's we're on still so for. And

Dan Burton

right. That's

Sean Wieland

Super. Thanks so much.

Dan Burton

Thank you, Sean.

Operator

Our from Evercore. Anderson Elizabeth next comes with question

Your question please.

Elizabeth Anderson

people in interested environment? talk in looking Hi question. of in? or Can about the the guys. even your aspects Is for different demand Thanks new really or terms what they're difference there that are you a so for in, pipeline potentially the much prospects of service

Dan Burton

Yeah. Thank for Elizabeth. you the question,

response. a a minutes terms So in of before as lot we we more we mentioned as a few everything specific around a That health. COVID-XX to where focus there lot was months, pandemic and more and interest, questions, of what on focus, last value-based And to seeing discussion down, of the ago, slowed relates related that. XX it population of the are saw more during care

bit last few months. over We more, a pick-up are the topical area seeing little that

Elizabeth Anderson

it. Got

Okay.

Bryan Hunt

The would... only thing, I

Elizabeth Anderson

…sorry.

Bryan Hunt

I was add, just going to Elizabeth.

the environment like financial focus to mentioned, as efficiencies this. on as again that's Dan focus that flexible areas less like, patchwork on population compared solution robust on see an and to then, continue health We commercial-grade solution, cost optimization, continued in but a optimization

Elizabeth Anderson

Makes I sense, contribution numerically? I and missed if quarter you the Vitalware you apologize, did in Did -- this. size the

Bryan Hunt

Yeah.

that expected, are well for in contribute of in deferred write-down that have which will comment out that our XXXX, tick-up in out aware, prepared Vitalware as the a towards on an and the XX-Q our could did in revenue you the through of did Elizabeth remarks. And break to call, terms in revenue. not it QX, that year. you're impact million particular. color, million, filings or of then, year last that through we the I as And that $XX the was back we there's But acquisition. to point We the provided on in low half year low breaking XXXX the filings QX $XX in on We our not that

So helps bit you level. color hopefully that on that little a with of

Elizabeth Anderson

Got it.

contribution So, XXs clarify: like, XQ to four the you lap it's quarters three just purchase all sorry, sort of not right? -- as That the is quarters -- date for first just until low the

Dan Burton

Yeah, yes.

Bryan Hunt

the for or year four XXXX all XXXX quarters. Yes, -- all full

Elizabeth Anderson

Got it. Thank you.

Operator

Thank you.

Davis comes ahead. from question next Our Stephanie go SVB with Leerink. Please

Stephanie Davis

taking for congrats my the quarter. And question. on you Thank

Dan Burton

you. Thank

Stephanie Davis

pandemic, you do of broader-reaching pandemic? about, you recovery? had the to, bounce the solutions pause think with Thinking during as for back walk that to And to new immediately, a your could multi-year that near-term cost us be some more could clients of is pretty concerns the exit the reengage for wallet sales this process, we through opportunity or going

Dan Burton

Yeah.

about about regards sales we in of previously, a certainly growth client of One new have in early you the discussions relationship. clients. about of think back thank still we Stephanie. a the especially client the And categories. year, cycle half saw we've of discussions. pandemic in having company with, like stated new But, months the of year, two Starting you we We last that long questions, the one with a experience to we did occur. as about, new think for So reengagement broad pause, mentioned more in -- the is

that in are category second they the can Now we what of they'd on. vary streamlined is a clients. specifically existing growth to of, typically expansion focused based think lot of discussions. expand. what terms like with And And that's a on more set And

of latter well. the of more the of other to offerings forward see anticipate we pandemic. months you'd will last be part clients moving that, year in started especially As add COVID-XX the the Bryan? lot half discussions forward. on with that shared in that continuing the even starting this of aspects to And of case we back, response, of first the continue first previously, And year. coming six Anything, existing as portfolio see some a the focused We our of we

Bryan Hunt

Yeah.

Just end-market to in -- well, into that as Stephanie selling in the add that healthcare. we're

and So budget annual potentially then on terms as trends tend updated or basis. cycle. gets way an flowing set it shifts cycles lag. sent And into can budget of the our to have environment that tend in to be a cycles sales reflected in macroeconomic on --

Stephanie Davis

with immediate, On that for up boxed that more in is always factoring chance the be seems to note is side pickup as just you're in, service a spend, of there or not capital side world? sales professional the that same tech going any the that still of

Bryan Truman

it's It's monitor. question. we're Yes, great something to that continuing

did expected. had bit uptick that in I utilization a have little increased we that we beyond QX, what mentioned So that our rate

monitor over that the something on. quarters to couple continue assess are it's updates we'll next wanting trend and but that thinking to we're and and of through that provide We demand

Stephanie Davis

services Thank and guys. [ph]. skews the you, mind Don't

Bryan Truman

Stephanie. Thanks,

Operator

you. Thank

question comes Steve with ahead. Halper go Our Cantor from Please next Fitzgerald.

Steve Halper

Hi.

Just a question. quick housekeeping

a to about of I'm talked of stock that the compensation stock. acquisition-related subsequent revesting You doesn't repeat quarter in quarters. assuming due in the higher level

that is safe So a assumption?

Bryan Truman

RSU portion will we driven revesting comp the the that's but a the Steve. it little grants, essentially been as bit stock-based XXXX. based and of that Yes. team have somewhat through that, a of think performance-based will just separate But and be rolls through lag compensation to and do retention different continues grants, like. member acquisitions, from on about by Thanks, of that a some schedule those from XXXX, as Yes, defined that's your there point, that

Steve Halper

the subsequent Right, does the aggregate stock -- in that comp does quarters but the number decline?

Bryan Truman

the expect comp I stock described. up We'd that on grants slightly, tick number those just to based

I fair as few example, percentage So percentage stock-based comp next revenue about, tick XXXX. think through a the an quarters to of could by a think, in it's as few up points

Steve Halper

category, one spread or any into it go that is throughout? did revesting the then, And

Bryan Truman

in form broken It's restricted in out shares. the our of filings

So exactly. I'd at have look to it

single we separately. do a OpEx it's mostly break those think category, I out in but shares

Steve Halper

you. Thank

Operator

you. Thank

Our next Stifel. David question comes from with Grossman

question, Your please.

David Grossman

you. Thank

terms contexts, help the explain utilization the having, anything we or understand how kind of I -- think, are in up can, they has pandemic, there you but a question in may feel behavior patterns view is you're on opposed base based services you of, us this your through different just to or in you basis? and changes couple conversations real as issue the do attach get on it's in a rates once any timing a longer-term come

Dan Burton

you the for question, Thank Yes. David.

layer, designed tap both our the different services. as well that particular components as them. most as to we clients they're to the to data of importance our a at enable well platform our to applications measurable as our So the technology services majority vast-vast them massive our clients all layer, at And into of be improvements areas successful; in have of the enable realize about perspective to

enabling historically you've Bryan? a profile be with really services of the comfortable as a any comfortable focus clients our different Anything discussed the of quarter, of previously, of are. of different changing terms optimizing successful, in on offer measure that services why And variation services clients seen based of we one we see in components As because you'd those of to each on success with that, what of mix quarter. margin that. as first We're there. that those we're flexible some And as we're add, to and that clients with and in we've services. comfortable the And need needs reasons categories given that's result we're our are services the we our result three gross

Bryan Truman

Yes.

segment. -- I normalized of the rates, services attachment more to we're long-term about earlier to profile growth kind Just to long-term in think learn Dan's point, continuing the

dollar-based up some rate, the and retention from We potentially for on in pressure, have color terms have professional rate. provided retention meaningfully that be for XXXX, half expect of that XXXX the first of year in particular, at still we'd XXXX least although, the services to mid-XXs in our in

about XXXX in how we year that would flow that and color then hopefully, So into think this how it at provides least, terms some of revenue.

David Grossman

All right. year right, back No, guidance down your it in got the of it. quite Thanks that, for growth that. And the for sequentially assuming the year. is slows half my a revenue imply would bit math

is is more to something conservatism is or just math than the variability that because it services, right, there that of that? if in So

Dan Burton

Yes, as I'll free please comment Bryan, and feel then, well.

first as of those in it we quarter of that relates So observe in And come some relatively and Bryan that's activity earlier, the And our services did revenue because as offering increased is to terms services. and clients' mentioned they're services later nonrecurring an nature, year. a of the end its newer in in nonrecurring proportion to component in interest. nature project-based

the one to might understand more there any those how And And continuing watching to before, anything patterns the play specific As on the pandemic. I to offering rest and services data them the focused out might first observing during mentioned why, successful. helpful that ensuring pandemic in that even that example, really mostly as are don't nonrecurring we through enough clients we're trying have the that's and the are if pandemic enabling are versus the understand half, yet one of and and reasons year. are be beyond the feel as that last services, we're pandemic to -- we in we're of to we still

projections of Bryan? half be when so, do the And the think about year. we would add, try back data we informed you to for What

Bryan Truman

said. that Dan. I well you, No, was think Thank

David Grossman

Yes. Great. you. Thank All right.

Operator

Thank you.

comes with next question Daniel Our from Grosslight Citi.

Daniel Grosslight

to newly selling clients? cross-sales cross-selling Can both you this DOS quarter, and acquired the clients the provide an update solutions acquired DOS on platform

Dan Burton

Yes.

client the in our incremental lower DOS a at of in cross-selling in that have we offerings some early first into did success portfolio, selling QX. cross-sell that but in of apps still those We're layer sharing that category is acquired expanded our newly base, process So those -- applications, typically price point.

in bit cases. little a is cycle sales the those shorter so And

a have our moderate cross-sell do We we success. forecast assume some that see and did there data guidance more bit some at our we little and in layer. apps in yes So

second a platform. clients on a more apps price newly price that And companies that's It's The get lower selling example acquired And to layer started. a clients much category difficult to clients for tag of app-only larger are is much are the used DOS those point. cross-sell.

but continuing given category and where a is And see longer from there, longer expect next continue more And much perspective larger the a will year sales really take to focus that play we that into that we're to would beyond. play cycle the to So and out out. of P&L pipeline we movement. ticket

Daniel Grosslight

it. Got

Okay.

expect total those once adds this of be quarterly Okay. do level? would of DOS to you a kind still And normalize mentioned I but then again to of that mid-teens on expect to adds for new think the weighted, quarterly expectations adds, back is year, cadence pre-pandemic you cadence you the or the

Dan Burton

were typically see answer with that pre-pandemic of of that that our think more And activity. or with kind most year usually sales heavy budget year year in weighting a Bryan the second I is both did typically actually we each calendar of in fourth the annual yes the cycle a half of where quarter mentioned midyear schedule. the to an either aligns earlier the fiscal something aligns more and that back the have terms clients quarter of

weighted and do has that to we're curveballs continuing pandemic the QX expect case towards So watch and but continue just monitor. be and some the thrown to will we QX, that so

Bryan Hunt

Dan's those and time of thanks Once would the thing just bit be only can sign to point. add are Dan onboarded, a impact variation there I The just and is of then contracts a new between of post have months. and contract on a date go-live signing couple an or can date. timing an or impact couple in a months That the implementation three recognition that timing

Daniel Grosslight

Okay.

So XX a XX would good be kind assumption? if assume that a we quarterly XX cadence of XX

Dan Burton

Yes.

Daniel Grosslight

Thanks Okay. guys.

Dan Burton

Daniel. you, Thank

Operator

you. Thank

Iris Berenberg. comes Long Our next from with question

Iris Long

for Thanks taking guys. my Hey, question.

I deal you of are want wondering looking the I'm around looking Maybe elaborate that buy-versus-build also comment, kind of you I kind thoughts particularly if then question what can M&A pipeline decision? on So first can on about you and the have get And M&A. capabilities at. to size you're your Dan what at? on your talk

Dan Burton

Yes. Iris. you for those Thank questions,

long may have layer the technology a consolidator so. believe or whom companies, apps stack it as are that a our of long are XX our see start-ups And space active are primarily is the to number of months term independent one that position many over to fit three acquisition really that to this years the many at remarks, make last process continue within acquisitions as in we includes be struggle to for point high-quality may been acquisitive which a companies layer we go We but about we we a a the to the as will term why Iris, we we pipeline a good come. portfolio be we mentioned -- prepared the of of of That's well of in reasons with meaningful and build-partner-buy robust your focused in portfolio. offerings opportunities. rigorous of at analysis layer. our have and when We case And through believe applications that think that

believe offering. health opportunities for acquisitions may in where in to other used example and patient We continue like for a health like past of focus there the portfolio our world the investments specific be engagement areas like on offering offer And continue we example. research there to in think accelerating the as robust in more as differentiated. best well are way of always that to to where population development make and opportunities there example. And want both for to be acquisitions areas us pop our we we've for areas we in strengthen the as And we can

can other the We also and that on continue value in we there to want A CFO what for strengthen example the great offer revenue recent in the to areas other was the Vitalware. of We are tangible acquisitions where side strengthening we strengthen costs with to proposition both of And believe such, And us like to focus after to do be terms terms side CFOs. ROI. with opportunities in structure sheet through our as of in a today. framework. our they size capital strategic we to the as to and proposition of go balance always great position we being strong want want offering, fit present be able a in of value to strong very have terms themselves and opportunities

make of be with sheet. utilized to like in remarks, space in cash tuck-in we positioned that few can the $XXX sure well see to the the in-between. the we along spectrum in be million a mission. we acquisition have equivalents act to way hundred long and our million over we want with all up balance total we prepared sit end in opportunities cash a that to mentioned one be and can that believe always can Much we're on that and term As the the when on that that capability order pursuing acquisitions opportunity And so enterprise value; of strength everything small of Able balance we like we Health; in the should strategic to sheet be fulfill consolidator our equity

Bryan Hunt

the Yeah. Iris And to to to "build just that around Dan's add versus versus point buy framework. partner"

some AI. typically. is announce horizontal by. So Healthcare.AI we're build you we one in additional capability called capability did area learning, platform That's intelligence, layer a -- we additional augmented of bit that platform layer on to built that our terms little heavier we related saw tend our encouraged into a the machine opportunity lean to And

build there So just framing another versus on buy. we're where in focused of terms

Iris Long

that's solutions it and solution. market? did some you compare take Great. second build kind of to what's that you wondering then on of resources Healthcare.AI time highlight the much it Okay. about is guys how question Actually special other if if you to the kind solution. of I'm my the can follow-up And like maybe it on

Dan Burton

for Yes. Thank the you questions.

way support are what AI when have the much new utilizing allow where have inputs adoption replaced our data across this they AI marketplace. predictive be where on assumptions trust delivery So have the differentiate around and leveraging replacement determining to machine platform inputs? a and what a from make informed. decision-maker. they to investment the can in leaders to higher seat. for of been is the still the those how than at at R&D the behind of of adoption the the that our all be the factor becoming be of have And box to pleased they and They capabilities box a less owners models way the that adoption and provides the into the organized because Healthcare.AI layer is capability leaders really the clinical key those those They're domain our AI those take that who found the clients as in otherwise a data is leaders model? the learning adjust clinical an And And expertise distinguishing much don't that the focused they're the not understand models. and that and a AI be rather more industry. of because important come we've clients And layer can to black a build better differentiation and that that that ecosystem assumptions utilized relationship always mentioned, decision-making a those black out understand in the place solutions or way our have box. fundamentally leaders we example deal client seen data to other were. when we asked to content black the see hands believe content really the that to perspective, likely an data content results as they're haven't that sure clients in see What have information. investment AI of in as so with we And spectrum, offerings to healthcare data up; that question not now but predictive you access AI that's an offering purposefully go you high that great that. we predictive and of get capabilities data the of even our of And those assumptions good because that great layer, that our then patient. to is needs Healthcare.AI the the drillable using of with some We support utilize the was driver's goes What are make started that at work to weighting is AI that elements a does from or we're developing them a in able that operational We were And can't exactly want focus Bryan we a this decisions. in

Iris Long

Thank you. helpful. Very

Dan Burton

Thank you, Iris.

Operator

comes David question Larsen Our from with last BTIG.

Your question please.

David Larsen

talk Can sales of Some companies hospitals so as little reported traded still identify are below a through helpful? hospitals the product ER the of little inpatient of And actually where at was around some the I any pandemic? a they be baseline, maybe into volumes bit I we you a comments bit XX% baseline. have you guess hospital volumes in hospital about could well get publicly pace would the sales as and elective COVID-related that light well procedures. recover had know volumes helping cases.

Dan Burton

hear David. you, Good to voice. Yes. Thank your

can as impacts experiencing you with many of still So recent impact from across that have. as to our that shared doing they health some of system in some those still client either see are COVID-XX shared I characterize time their in That levels. there both yet conversations would remarks. our can some clients have but they've back level, manifest to many shifted over much base, other clients more are consistent in towards pre-pandemic pre-pandemic ways pre-pandemic Or a getting activity. what impact that that our volume, our we Others relates just I as some and vaccination there's delivering. where they're our prepared think terms we of And example And it not seeing focus a volumes. volumes. cases an logistics back of itself and of A shift manifest on care either in pandemic-specific focus they're prioritization still most our pre-pandemic is to approaching place gotten closer to it and that itself close in haven't for that second that are categories do in we those to closer quite clients gotten pre-pandemic are COVID-XX-specific but

David Larsen

Strata. I could RCM that? great. opportunity EPSi And somebody And that a any just on Allscripts for quick would I space there's it's great I to like really any is potentially think in think? yourselves, an then valuable obviously RCM thoughts chargemaster, other mean RCM up open the on that of sold follow-up: that but Okay comments lot in could general? a be areas other Vitalware

Dan Burton

Yes.

provides as a and you Vitalware were And beachhead would very where we a can subsegment to of chargemaster that our So technology that technology on was build is very space us. foothold a space. solution, focused small around with is activity-based enabling beachhead that capabilities, knowing foothold meaningful Vitalware and large opportunity been that acquisition a know foothold. a costing the a RCM that with CORUS That place We've Likewise, pleased regards another David. broad to enable that on be can continues important that important our proposition mentioned we for as very us, that area CFO. subsegments, specific potential measurable the space investments around activities that earlier we'll improvement technology focused in can where more that this and acquisition-related prioritized well most we be us a and feel the in an differentiated. enable build much R&D of we of to to in as in more what space as in that be continue is our CFO where value both focus to be And does

in subsegments you that we play that the to As our measurably around focus apps and space. go automate make many sources; we to improve. then and and broad there the on that technology data are many are We sure players layer specific after from that subsegments using analyzing the that data; strengths can that really RCM natural organizing know different want

think with as about we position that our So continue within space. that we'll lens broad

David Larsen

so much. you Thank

Dan Burton

you. Thank

Operator

right end pass the going no the and Burton to there I'm to in call Q&A queue for And is you. the Dan remarks. final Thank now questions

Dan Burton

in to touch you, company your months who look forward for Thank you thank staying this our dialed report. the Carmen. appreciate in in and all to those we ahead. have We in And interest

Operator

concludes your may you Thank call. conference today's and and you Thank now disconnect. This for you ladies gentlemen. participation

Health Catalyst (HCAT) 9 May 212021 Q1 Earnings call transcript