HCAT - Earnings call transcript Q2 2021

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Operator

Welcome to the Health Catalyst, Inc. Q2 2021 Earnings Conference Call. My name is John, and I'll be operator for today's call. At this time, all participants are in a listen-only mode. [Operator Instructions] And I will now turn the call over to Adam Brown.

Adam Brown

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

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

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

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

Dan Burton

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

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

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

progress have continued positive to demonstrating in half company's second As the leverage of business. important the while we the achieved it EBITDA first negative EBITDA for adjusted second view in this an relates XXXX, time of EBITDA quarterly being we since adjusted our our milestone we the to excited the as in operating are performance, And adjusted quarter anticipate achievement incorporation. in

increase Additionally, gross I and $XX.X revenue representing was basis XX.X%, million, XXXX an representing was adjusted would total margin XXX year-over-year, to like highlight growth QX technology XXXX that our of year-over-year. QX points XX% approximately our

highlight items from me the additional let Now quarter. some

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

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

from share improvements a of few me case examples recently let customer studies. First, published

acquisitions. management population vignette the improvement vignettes our the our first synergies needs, of and with one our supporting highlights last The while customers care with of health work two technology our recent highlight their offering

to along allowed This to management outside and platform, better applications the unique than stay were reduced a of DOS including leveraged those XX% received emergency and serve costs, with Queen's response, department In program, data patient specific enabling our informed care population better instances, work data care $XX those analytics would department in Queen's length software, In many their robust Health this lower to a expense. improvement from needs of Queen's the management emergency result our develop patient population. targeted visits realize million emergency patients materially avoidance at of homelessness. have care at the department a suffering our of for First, nearly their System, readmissions. more navigation of care of utilization, from

System of operational effectively its by to a for Leveraging a program $X.X to within management highest care hospital Healthcare.AI in meaningfully its targeted risk technology therefore, predictive hospitalization interventions implementing strain experiencing data risk assign ChristianaCare, resulting savings saw and populations to pandemic This analytics and severe prioritize solution, COVID-XX. Health each and care imposed at unit illness was by the patients. or outreach DOS the our to newly patient platform, admissions intensive enhanced most accurately approach ChristianaCare patients million. from Next, reduce data-informed identify and COVID-XX work to our ChristianaCare risk allowed and score released

with revenue. our the at capture and Vitalware's million reduced and System reimbursement more application, our Integrity resolved Vital cycle in guidelines revenue platform $X just growth, leveraged and MultiCare software-enabled DOS to reimbursement, leading charge issues, processes improved revenue billing capture optimal more gross also MultiCare providing performance, changing and Health than optimize additional organization than to risk in intervene. access insights, retaining our and three along of not months, identified In MultiCare significant annual Lastly, actionable to obtaining experiencing payer identified charge losses. The timely solution, opportunity net million MultiCare XXX $XX.X including

earnings in And XXXX relates calls, previous it also categories existing are commentary two objective growth. begin, with largely such, calls. our our we which current expanding new relationships. shared grow the COVID-XX our To we our consistent continues that shared earnings while on both headwinds bookings we tailwinds includes on environment operating beginning reiterating result is relationships and to customer to pandemic customer that strategic as as the next expectations last Our

of the health as market headwinds, surge, provider rise vaccine our end care of with given financial be variant, organizations to the we deal under months COVID-XX terms amount anticipate some alongside logistics. coming rollout especially will continue the strain in the continued operational and In delta over

the replace As serve that of in provider to analytics and a meaningful pandemic data ongoing optimization. to logistics, planning need COVID the to we believe commercial-grade And efficacy, significantly the health industry's it homegrown analytics, data to better systems. tailwind see continue an that for adoption the respond and will relates is areas the evidence highlighting treatment as lastly, and including overall care capacity pandemic to broader tailwinds, continue much ecosystem supply chain patchwork solution we equipped to prepared operational in and

software areas demand well of terms for In and focal efforts as prospective to analytics. customers, health the revenue population enable current as and cost areas highest include optimization

see of are As such, encouraged and acquisition, next. to which I'll Twistle to released our the in suites, relevance and robustness we also our solution describe addition additions population health recently to recent financial improvement

opportunities improvement. recently Optimizer to an focused significant care analytics Foundations we our most our suite identifying is Optimizer existing application. Value enhancement Value on First, value-based the introduced Health performance analytics for Population application

with allows number population benchmarking health benchmarking a continually and quantified As of it provides product view for their into potential risk initiatives Value a methodologies. organizations on transparent Optimizer improvement refreshed health further data risk-based along comprehensive, opportunities, of greater and financial and care contracts, our focus and enter

of highest expense or our and next his eighth labor staff-to-patient our Leveraging largest of needs, forward of PowerLabor capitalize plan of like her growth optimize which in to allows cost the for our operating hospital our line health recent data will accounts to our anticipate on DOS ultimately are PowerLabor our enables to for within further staffing improvement software of Healthcare our We the introduction optimization platform, spend. that let demand Next, we internally of looking financial Also, nearly disparate for solution reduced that in I to on of of market. need in from PowerLabor, areas analytics labor care solidify the predict would sources, decision-makers Built ratios. item, improvement Annual XX% top resources, CFO's developed suite, September. Summit changes accurately solutions some ability introduction me these labor, within hosting optimization costs. mention is overall application new end and focused labor a context highlight Analytics a solution within operations our PowerLabor addressing efforts, on data

thought format leadership care be for country the within prospects the of while our to While year, provide and year's conference And we health that continue to meaningful deepen customers carefully the this theme relationships. cultivate of a fortunate to those believe and will further virtual to we analytics. represents be many the speakers. again analytics this feature keynote multi-domain to voices listening continue Health ecosystem and will data Catalyst this opportunity leading The in are we our as as conference

attracted year's of thousands registrants last XXX more a As reference, for the care across health organizations world. summit than

I acquisition to a officially to on closed July few we comments Twistle, on would XXXX. recent Lastly, X, announce of our make like are happy which

population well sciences and As many optimizing reprioritizing look software of will important health leading bolster patient clinical automates the clinical care health a solution. reminder, anticipate delivery quality in as channels rich is care The health health care organizations population pathways the technology Twistle virtual solution and teams a market. communication begin models suite communication transition care to to and Twistle organizations between Twistle that as We applicability our through life outside also This normalize engagement as care increasingly with leveraging analytics space settings. value-based and a improvement is in meaningfully content. in the patient clinical operations has established comprehensive as COVID-XX personalized for and application patients, particularly

teammates welcome quarters, me to care the to data-informed encouraged continue talented Bryan? turn Catalyst, We our few pipeline. let measurable, next acquisition the to over by catalyst enabling highly a are the mission improvement. for thrilled With be be massive, Likewise, our looking Twistle over high-quality out that, health further to call Bryan. to we Health

Bryan Hunt

Dan. you, Thank

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

was representing was generated amount earlier by Technology was the For year-over-year. representing the commensurate modest the an growth year-over-year. Professional basis costs, built-in lower September Professional access increase of from that Total year-over-year driven by points midpoint of in quarter COVID-XX from the second is XXX margin new our associated our a revenue a an portion hosting our the with amount primarily XX% year. adjusted million as revenue. growth the XXXX, same fees This acquisition Professional we escalators provided year-over-year in to paying margin decrease in by achieved Services approximately Professional to due to data increase This Vitalware a due the in offset with our DOS a for by was relative partially access from centers $XX.X COVID-XX-related and representing a closed existing temporary Professional customer was for customers of historical in Technology period than revenue primarily adjusted relative represents points basis QX XXXX retention not driven this built-in technology a along by existing gross signing margin Services subset last This our subscription new headwinds QX approximately adjusted which relative approximately to of gross In Professional guidance. This additions, higher in XX.X%, Professional total XX% offered was year-over-year XXXX $XX.X customers performance higher XXXX nonrecurring contracts million, basis and paying Services contractual was the Microsoft customers QX of recognized cloud-hosted credits from a approximately of unforecasted XXXX QX year. outperformance was that year-over-year XXXX of gross revenue for last second transitioning fees increase as to X,XXX dollar-based an growth non-recurring our of XXXX to quarter did continued pandemic. increases QX XXXX. recurring Services Services XXXX mainly forecasted, customers, base Technology without an escalators to quarter to offset of revenue of a of and result period This modest XX% costs performance basis points relative being technology was in hosting to to increase XX.X%, our result points our relative outperformance an XX.X%, XXXX, $XX.X In performance and the XX we the same million, mainly increase driven year-over-year contractual revenue. recur segment, XXX Services QX QX of X, Services XXXX. costs. of representing customer period. new segment, Azure, third-party

result to Services a operating customers in XXXX, higher in was utilization delivered, the revenue of Services Our rate QX a and temporary related the year-over-year COVID-XX performance we of mainly offered recognized forecasted, of modest XXXX. than shift In subset Professional million. mix XXXX $XX.X a some adjusted QX QX total non-recurring of our in were credits amount expenses Professional

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

Additionally, it of partially that in slower subsequent we by quarters than the slower hiring expense and will timing driven travel XXXX, than out anticipated. expenses forecasted moderately non-headcount pushed be some was into anticipate ramp

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

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

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

cash of carrying convertible component of resulting As which liability $XXX on the investments as million. is we equivalents the closed XXXX, X, short-term reminder, of included of million. purchase cash, Twistle forma $XXX.X June in amount the balance July for of the approximately and approximately pro net component acquisition a XX, a XXXX, of the million, cash price Also, $XX.X notes

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

full For year full the XXXX, we year our are outlook. raising

guidance compared provided We between revenue the expect this million an full-year to their represents At quarter. total $X.X last respective million. $XXX.X $XXX.X midpoints, and of revenue million increase we

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

second provide I our will a half guidance. Lastly, related few XXXX details additional to

financial loss relates revenue as a in Technology approximately EBITDA write-down, inclusive to purchase the approximately in of million, anticipate $X related with revenue we in deferred second First, million contribution of XXXX, segment, adjusted the it Twistle's impact $X contribution. half primarily along of accounting

Next, QX revenue. slightly our will Professional as anticipate non-recurring driven to it by Services be lower revenue, Services revenue relates Professional down we to QX XXXX, and relative forecasted QX

gross our services our the revenue we XXXX, of that mention in than be rates anticipate the for would second utilization first margin adjusted by driven will half anticipated XXXX. of I Additionally, forecasted lower half our the and nonrecurring mix percentage in mid-XXs Professional utilized Services

of represents excluding by our my factors, approximately as million, million Healthcare non-headcount remarks. $X adjusted Twistle updated our previously, that in expenses contribution mostly of we EBITDA million. expenses our guidance additional forecast in expenses, QX guidance Analytics by marketing margin one-time approximately call. to our XXXX mentioned the performance acquisition, sales multiple the will ramp integration XXXX Dan? and over to in some an previous described our of prepared and our note, meaningful including the additional half Lastly, driven acquisition-related that, from full-year participation higher guidance, driven conclude other adjusted HIMSS full-year gross lower forecasted half, previously, our expenses implied and Summit mentioned first Twistle EBITDA our EBITDA be the our seasonality adjusted quarterly Services by $X.X XXXX conference an and Professional With improvement a I of earnings the loss, And we second the in travel as QX, $X by meaningfully XXXX anticipate relative lower

Dan Burton

I highly And like contributions our to be Thanks, call this Bryan. as to thank Without questions. and engaged of to our operator for In with always that, mission their possible. conclusion, the team none growth, I consistent would would members. I'll the turn do, back

Operator

We'll Samuel from now begin the And Instructions] question-and-answer question. Anne our question is first from [Operator JPMorgan.

Anne Samuel

hearing maybe taking about speak utilization environment to that's We've incremental if the demand wondering Thanks question. improving you? was how hospital a the been this lot could and if driving And that's for quarter. for any you guys. I impacting conversations Hi,

Dan Burton

the for Anne. Thanks question, Absolutely.

in seeing that And category fits that that also as within are work to increasing contributed That community, within meaningful clients Bryan, broadly focus often anything on the add? pre-pandemic helping financial our a side systems health we on the utilization. the seen well progress suite We the have get do client many get we levels technology we directly that services hospital these And of experiencing. to of provide of improvement performance has application you'd back are financial there. utilization. as our really the towards

Bryan Hunt

add little rise in are the right, counts that, be of variant. that's the we And think cognizant bit market dynamic One of to are as and to do I monitoring case hospital system want of and just we increase is other that Anne. that our seeing well a in No, to delta Dan. COVID-related with

well more the the addition creating utilization. dynamic a of as that's bit market also in to a in little that's increase So that in uncertainty

to continue situation that as well. monitor we'll So,

Anne Samuel

Great. you. color. Thank Very helpful

Operator

Your next William question Daniels from Ryan is Blair. from

Ryan Daniels

Dan, quarter. maybe the on a one you. Yeah, big for guys. Congrats picture

value-based we the and that's saw of kind and government the seeing well value-based as in payer And care. as mentioned move natural your in you're pandemic I comments, an to to pressures care. more fee-for-service guess to prepared push acceleration You of given

So, that's activity how for I'm Thank with you. investments? Obviously, investment about sales philosophy your changing led longer-term And if maybe your approach you your curious or investment it's changing bit internal philosophy. recent clients. it's a some and bolster changing your to little could go-to-market M&A how talk M&A But offering. how to also, that's

Dan Burton

Ryan. Yeah. that Thanks question, for

our own conference are an that from as we mentioned as We perspective own areas. population an health earnings well last portfolio, R&D That the recent of good have think an uptick, our important we quarter's seeing engagement is population acquisition meaningful health patient informing way is in from in and population call The about of in the this, as make a perspective. to investments, both a M&A management industry-leading of is component to our Twistle suite. robust a had we such and solution example care where health component really wanted we sure

is conference in in it the active health one our in as also that the We last mentioned our relates our earnings population conversations category. to call most pipeline, of areas

And to It in open that announcement as this have investing so, well And as we're focus most of R&D well needed. an here. our that And Bryan, the as value invest anticipate perspective consistently perspective. both sense as perspective suite in M&A suite. shift optimizer meaningfully an recent does an application keep a anything is from evidenced our health application you'd add? attention eyes from continuing from to op within we we for paying there's in your make been to R&D what Ryan, been comments, meaningful

Bryan Hunt

Thanks, for to Yeah, to Ryan, question. the that. add

going such message the Dan so and that terms in messaging In will earlier phases going sales from solution the post integrating that to, a we're sales of of a integration one of standpoint and work kind as marketing and forward. mentioned, Twistle strategy, able of and forward comprehensive approach be conversations provide go-to-market the

second integration roll out the of that focused the terms half further little something more So an obviously, technology from then we're on in standpoint. the the And integration in of that bit year is a over time. will

Ryan Daniels

a of trying adjusted then delayed And into dig line. higher is of business repeat margin operating to kind the the breakeven, trying How performance, some travel bit a the is The congrats much our get in on and the right? the so quarter little models services on That's HIMSS, Okay. during revenue one to calibrate I'm can I just of just handle better won't helpful. we expenses regards for onetime to EBITDA unexpected hiring. sequential that the appreciate conference decline. hitting just

Bryan Hunt

Definitely. Yes.

that in Professional incremental think unanticipated you about more Services QX $X.X So, nonrecurring revenue. of could in approximately That's of nature. million

in to expect side we'll the have off but of half do year. still we for recurring So, that more some forward, Services the roll on growth going the back Professional

Ryan Daniels

Thank Perfect. so guys. Have great Okay. a much, day. you

Bryan Hunt

Thank you.

Operator

Wieland Our Piper next Sandler. from question from is Sean

Sean Wieland

so have you. $X.X million you much. $X.X non-recurring may I Did misheard say Thanks Services? just million or Hi. Professional

Bryan Hunt

Sorry. $X.X clarification. Yes, good million.

Sean Wieland

know. you. $X.X million. Thank Good to

of it on a nice Professional the you Ryan's client? something so, $X.X some with follow what's the leverage this extra across nature revenue. of line then it Services? operating And million question, had to up nonrecurring that of industry? Was And Is services single

So nonrecurring that we Professional higher why would margin? would Services carry a

Dan Burton

sure. Yes,

engaged and time, more a services imagine, a services specific finite as and clients teams better our bit have project-based it's a on revenue, we what more So, have up nonrecurring clients falling to making Services majority solution of it's a where are focus. see as forecast. the period project-based to services the effort. And And sometimes might that little that facing Those, a a specific that they're of we you model a relationship project-based try to Professional area into in is harder responsive engagement. seen we've be the that's problem a of focused of multiple nonrecurring we

add? that Professional And bench forecast. enough in But of more something place try needs. be is little a we you'd difficult that a Services so, Bryan, to to bit is to perspective have anything to a responsive those from

Bryan Hunt

the Sean, profile of of margin and point, kind your those. to on operating And leverage Yeah.

in mention first we bit in were quarter the did half. our and a the in we slower little that So, hiring

ideal. a the little higher means what Dan's on the bench is - be utilization to that our and rate would team of so bit members that than And was point, our

margin catch outperformance. points And able of year expect the of little front we the on and that be lower kind gross a in Services to of bit And to going so up Professional gross commentary driving margin back to that hiring the forward. the that's what's half some do around

Sean Wieland

That's year you. this you of any transparency, ago. you addressing one if whole about then that helpful. Are around customers more, your And bought price Vitalware seeing taking seriously? are they The are actually I looking opportunity Thank And could. a - at regulation?

Dan Burton

Thank that, for Sean. you Yes. asking

increase With in penalties, meaningful penalties as in ability as the a relates health to increase is of we're transparency, be in to recent we guidelines our all further system the clients the the view And we've quarters, price clarification, it compliant discussed taking that with prior all this need seriously. anxious. and

I out on. of be needed solutions updated coming another It to is entire is consequences that increasing is noncompliance. that hear so or understand focused demand like to the what compliant the CMS It guidelines is is solution. the anxious better certainly to week our are something increasing also think exactly the in we're industry for

difficult understanding that to be our is though in so, the issue it's the trying compliance to we're on we're to and guidelines very for with. end, make be sensitive also always are comply really to been complicated a manage. end to high difficult to the complex industry, But on to track implement, of goal front difficult clear really haven't And sure investing crystal

Sean Wieland

much. very you Thank great. That's

Dan Burton

Sean. Thanks,

Bryan Hunt

Sean. Thanks,

Operator

next Evercore. Our is from Anderson from question Elizabeth

Elizabeth Anderson

any that there you that of sort Hi, feel do want sort My of feel now? the like up on first Or offerings you bulk like population health. Are is additional for you need? Thank broad capability. areas broader you of there to the and perspective guys. taking you kind have question you the

Dan Burton

Yes. Thanks that for question.

a can elements has catalyst think health, well options breadth specific health area as patient that breadth of of the one I as that And of a out is recent value meaningfully of the that the have breadth of the of population real we're terms adding There other both our increasing optimizer. Catalyst are really offering. capabilities meaningful but Twistle to in pleased our M&A there that see release offering in differentiation engagement depth have offer. few number product one of of Health the

on And ecosystem. where that's that's and the that one broad so, we that the we to of solution can focused are, see our And that keep do we're we with differentiators. bring, portfolio broadening address but opportunities we can health pleased that, important set feel we population other given are that key

Elizabeth Anderson

the really you helpful. of the there first of the stock That's the And back comment pacing Okay. half? is half year comp about in anything could versus

Bryan Hunt

Yeah. Thanks, Elizabeth.

So, way we we we'll call, that QX roll on comp. stock-based our mentioned that and that prior expected consideration some earnings of that the flows to line about item, off Part is acquisition in in that through through to pretty see stock-based is look comp XXXX. what But half a related through XXXX similar QX. think good generally we'd it that you uptick is revested expect, back to excluding the for of

over continuing leverage in operating anticipate time. that do we item to expense term, long the drive Over

Elizabeth Anderson

it. Got

Okay. Thank you.

Bryan Hunt

you. Thank

Operator

from question Davis SVB. from Stephanie is next Our

Stephanie Davis

Hey, my as always. on taking guys. Thanks quarter, for and Congrats question the

Bryan Hunt

Stephanie. Hi,

Stephanie Davis

because remarks, universe? potential other other you of a you acquirers an model? a guys competitive about do heard to is your in the players. of lot you within other model, becoming your the in versus the how prepared And hear capacity dynamics But about have mentioned We've bigger the yourself hoping as annual M&A you just world acquirer do analytics side competitiveness the I where your the was the are integration of actually against part what on data differentiate analytics sort

Dan Burton

Yes. Great question, Stephanie.

are this We're year to than year. perspective. valuation want certainly M&A environment that very they higher I a multiples an seeing from first this acknowledge last competitive is were So,

competitive balance have so, and And of perspective. so we be that elements sure the always the we that a can sheet one right making a we financial capital strong focus on is structure from

always that's one attention paying be So certainly that we'll element to.

of often, is place over differentiation think recently, at these companies recognition of care team element is towards best that is the served long And Catalyst Health to from reason company another successful to the the that members highest hoping place given as that satisfaction has and we're the takes fact a customer fact the And successful. we another from work, also really competitive customers I is industry are Health being the the think us well perspective. why Health Catalyst tend I various work. times financial perspective, the that is has of a among including Catalyst XX as best

going that the relates members to in to pudding. team And so, and our keep always it the focus is as proof we're

members each question And integration sure member We where world-class shortcuts relates really positive. no listening from ceiling relates can that so and integration capacity. to to these are we team need we the integration. terms There ensuring us That them. these engagement. level it is to about a is team as We're that that acquisitions. includes know we're integration that do the And last member come there in at make your to team our of members. what We're a of taking care to team to

we're So, mindful of that.

publicly a experience for but nice able It's trying years. that companies. company, perform a most are four companies, of And independent gone it with startups a as we opportunities sustainable. of apps term see aren't that as at And make really last catalyst help that to to two pace to that of And years opportunities, in markets, ceiling company since ourselves catalyst we've the life been attention a in would of of to we to integration acquisitions layer has integration health it's example likely consolidator, sustainable. I to M&A differentiator all the get amount continue our long breadth world-class think us. to being public, in in want as really internationally over be whom not a portfolio And these us a a as trying tends the meaningful adjacent to term had good regard, we of of effectively. been traded are to construct sciences especially long work, But we've do within last including addition the think be that to perspective pace be from a and pay been balance two likewise, experience. hundreds meaningful meaningful

Stephanie Davis

either as what where to too in of So, time accelerate areas develop as much of with are of really might to your look reach cost would you a want mind, you strategy? that on or the at in-house acquirer you choice, M&A more kind

Dan Burton

Yes.

our apps we the middle to three area. of at section look of as the the most So, continue components the solution layer, promising

Stephanie Davis

That's base, right? in broad

Dan Burton

space, broad a It's yes.

we mentioned few help was a as important to see as minutes just specifically, area more our clients. ago, a so very population And

attention, paying question attention revenue in we're so, the be And the as the continuing per really so health to the analytics value CFO and continues to pay proposition, space utilization earlier. cost space. pop important Also

times pay international. And sciences then adjacent an before, area So that well that's is as life discussed that to. markets we've a us interesting second attention as for many area we those

Stephanie Davis

helpful. you. Super Thank

Dan Burton

Thank Stephanie. you,

Operator

Our next Canaccord question is from Richard Close Genuity. from

Richard Close

Great. commentary over Congratulations wondering margin I on go again. if the gross the was you quarter. could

think headwinds you're go you the details you process? you just And about a margin cloud. something that from in transition over the happens some said of when Can that? I with done associated And into are perspective? what where

Bryan Hunt

certainly. Yes,

into solution, expansion gross the kind the which what of where What over cohort over typically of So our with start we see does support a on nature our kind that then the as typically well. platform of as see technology through expect gross our side that technology a hosting increase. customer we and bulk technology a And not long-term as ties grows on needs and and the the per with base side, a mechanisms. technology customer data that the grow the margin data backdrop revenue kind from technology relationship basis, of is starts time, the with cost targets for commensurate long-term expansion we ingesting as of That's grows margin of the begin we for relationship. given on that, time,

you bit do to which in headwind, a we have cloud-based as of term, still we on-premise a have short to that offset who mentioned, However, from of were is handful deployments transitioning deployments. the a customers

offsets expansion increases And customers hosting and that kind margin time. so costs natural that those for gross our of over

continue a expect on through basis. technology then to margin natural on - more expect transition an at to And earnings expansion that gross that call shared to that see we So we prior annual XXXX. that we'd point, that did continue

Richard Close

Okay. Thank you.

Bryan Hunt

you. Thank

Operator

question Ransom next James. our And Raymond is John from

John Ransom

how revised growth Hi. look everything. get guidance, math we on in I we brought to you think the for at versus about - year will full just if XXXX wanted what organic have your your

Bryan Hunt

Yes.

the terms then of contribution of call, half revenue second in revenue that in the it revenue, we of low commentary the Vitalware of terms provided this mentioned some on relates And for organic XXXX, year. in $XX the the contribution the So contribution to for to revenue of and year was growth, the Twistle we earlier as in in million the of $X approximately year. million

in that our that hopefully, those helps, the of think compared as you So to business, core excluding items. two about components can terms John,

John Ransom

around not thinking wrapped year that anything last about? from there that Was we're

Bryan Hunt

think Yes, main be I the Twistle then items. and two contribution. those the would Vitalware

John Ransom

the when I looking the as you And built common that know, tech and a all ones backbone mean, tend together fail. are companies, to you cobbled on just - great are

go scenes solutions the So heavy out - backbone, it kind single sure the and your to and all behind make when into of you what's on runs buy engine? of you what's technology these the integrate point one the a lifting

Dan Burton

precisely Thank important John. it ourselves you focused of have platform Yes, for M&A layer, one is not the our that outlined for building we it's you architectural the reasons it's question. something bringing platform why data the prioritized at reasons an up, backbone, from that the actually is perspective. an that but And

that's the apps What feeding platform we between layer. common focused can security layer, agree the and you that And So the apps operate categories the different fairly to another. apps, And want But and up we at architectural elements is data feel there's perspective, a an is platform elsewhere. that at et other much to and We want make apps independently common cetera. integration layer lighter we more at M&A from why and our there. assessment. sure flexibility app good is at and not lift from with technology still look the one

John Ransom

clients sense. that you Are makes things fall earlier said any in their be I their year. getting in are early your spend US the capital for budgets improving you in for next And hospital that the out think all might XXXX? building That signals at

Dan Burton

Yes.

monitoring we're that So situation.

mentioned the those pre-pandemic to recent population. feel in are has we both are dynamics there as associated be a to example, percentage for partially vaccination. shared pipeline are relates protective more it in wave terms we're of and of in that still COVID-XX seems is that This are delta also out, calls were logistics, to behaviors still levels. to of the variant hard required is But seeing will pipeline as seeing prior tailwinds of well, is That our headwinds that the and as there vaccinated, does the to and of to was like and of As as to remarks, fully continue waves respond that result we've rates hospitalization the great even prepared other with that as We're it headwinds. prior far And where serious factors are and continuation set to related system health distraction how because carefully, are positive benefits predict individuals as there support of on are difficult Americans, focusing how out. we to COVID. for is the monitoring least I to not percentage play will But it vaccination note that as are thus the clients growing do been we many tailwinds prior as to total overwhelmingly still that the play also the persuading our data rollout and it deal continuing vaccinated example. some fully the meaningful a at delta relates predict variant a exactly possible is get want as some

the capital we're of tailwinds budgeting. delta, sense and predict. But seeing is analytics dynamic is variant data more the it as hard relates robust And for recognition so it to of in and bit planning delta to tailwinds a little a in environment opportunity the importance and the of normalcy

So we're it monitoring unfolds. as the situation

John Ransom

tell I - question and Is for not assessment for at is is you hospital little higher-end as far of as we of of like can great. the guess as systems make at you a there all-time this not-for-profit various to of records. high performance. public qualitative setting chains? their hospital bit in a be lagging answer, for may your they my well the chains, time an are real way all to sort new terms are clients, look with hard any but some EBITDA your are doing stocks they reasons, they're the profits just operating in doing public in Or

Dan Burton

you certainly, systems, hospitals health we year, our in well. not-for-profit a expect of We performance as meaningful for-profit of as terms the have seen would improvement to relative last some serve financial and

definitely have we so And improvement. seen

where the lower. hospitalization rate much there are it much country depends think the areas significant where rate, on vaccination hotspots more in a I the of is some area where There's other hotspots our hospital COVID. system utilization some rate, emerging. And on specifically are that specific an those clients the in areas focused is where of for issue in South health and

the certainly absolutely, continue. which delta that is predict out. And the exactly depends last on there But been improvement speaking, has generally and to since so how part it But year, hard country. could of variant it will play

John Ransom

All right. much. so Thanks

Dan Burton

you. Thank

Bryan Hunt

Thanks, John.

Operator

Grossman from from question David is Our Stifel. next

David Grossman

you us some to perhaps I number, bookings at Thank second important that right, the could And Dan, you. year. for your you least deals. reiterate And attach give is of given qualitative in saw the Hi. the if bookings? quarter XQ the bit achieving thought and I service that how target heard in same little context heard on you Good afternoon. I the on terms how rates trending newer what you they're of about breath, could some maybe a talk

Dan Burton

Yes, for absolutely, David. question. Thank the you

that meaningful we management confidence the the full the and to as half bookings QX year. that activity. we So encouraged reiterating And see for performance QX the in company pipeline of bookings financial in level been a team meaningful guidance feels first the continue the year has increased forward, that have by the activity, of in

business. being to and our difficulty important there being the and to also that is And fully some it's there seasonality that that here still However, factor COVID is a some to degree. predict still that's variant recognize view delta hard to forecast clouds our with associated

headwinds. some As are perspective, minutes optimism I some ago, meaningful do few from we but for experiencing also just a mentioned a causes we tailwinds see

right are made we comments towards elements a those - of that sense we of with feel year all as factoring being And in tracking in are and to now balance, so we've previously. those what guidance comfortable we on that know full where

Bryan Hunt

would of in of areas in that, that terms to some just half focus are David, first the areas the I add applicable remarks to mentioned in in point And the out of certainly year. the Dan

success a So terms some population on we're a point, to in little customers, slightly acquisitions, price relates of feel well cost shorter sales and bit DOS solutions. like as we of of including is to particular, apps our which optimization lower health it early those cycle. suited revenue recent And where for in seen cross-sell,

there contribution the expected So kind and at line commentary we encouraging where as with some of as the year, that from that amount in moderate of front did the signs we well beginning well. of foresee

David Grossman

more during in the sense for line newer with you service quarters. you've the on trending what and the of historically pieces saw sorry. years they're pandemic any with line rates on your attach in business how business or And pandemic or seen more I'm the what

Dan Burton

did I incrementally in feel as mentioned had Yes. prepared with like more than remarks, say as engagements note relates services the nonrecurring it see pre-pandemic forecasted. project-based more our that we one we we to experiences they would

one we dynamic had dynamic And so that little the And little to that predict, future. watching is was a we're stronger came that than harder forecasted. that what in bit a in but bit

David Grossman

Professional right, XQ you is Right. And there one if I be that are mind, driving right? Or going getting piece else going looks squeeze XQ. flattish understood something guidance Services I it more. your I in If just that? can revenues I and is Am the don't on? am, that And if like that's to

Bryan Hunt

Yes.

segment. sequential I'll the comment terms terms maybe in QX, for dynamic in of of the QX, So

basis, contribution, which we do including would quarterly technology excluding be QX, - QX. on expect a the Twistle So uptick in incremental to revenue

contribution. points, few the percentage You can at excluding sequentially think Twistle about technology growing a

QX you million Professional in $X.X side, modest of services. just with that off growth think nonrecurring On could underlying recurring by about that Services impacted terms being the the services some roll in the as of

it's think about and in sequential growth QX. So QX I fair think both to

David Grossman

Got much. Thanks so it. Great.

Bryan Hunt

David. Thanks,

Operator

Daniel Citi. from from is Our next question Grosslight

Daniel Grosslight

mentioned. the opportunity Hi, guys. you Thanks quarter add strong to I'll I'd here. the on my for stick congrats with taking that cross-sell the questions. just like

So an clients. acquired, an DOS it's that recently in results adopts you've the all-inclusive my upsell when charge applications that DOS for the understanding client even existing

the apps? those an of from inorganic retention strength help organic number health. purchased at and DOS acquired dollar-based RCM to should kind get we benefit and through you've you layer. the the app acquisitions this given you And of existing clients year think that dimensionalize tech the Can seen pop how So have that about in flowing both

Dan Burton

Bryan, a Yes. them please few and then share thoughts add Certainly, I'll as to well.

early of to So a are that we M&A. that clients we to some that came examples clients applications - encouraged through are as us few see signs of Bryan to have DOS mentioned, some subscription chosen adopt new

else, from opportunity revenue. technology isn't described can that default plays it always represent be revenue where have multiple does the position you incremental It a way I is way now perspective. it do have that We would - would that choose always would revenue do that that but that have out. to position something technology incremental the would happened. of the be an that default validate examples we And So has we the we -

through customer proposition acquired, a it's longer only who's value larger that price DOS through the the the So and a from other we've someone cross-sell - we're the take point, a a takes than use excited about client one that. And we've is company price you easier cross-sell, a a Bryan a app much it's adopting of mentioned, a lower new as app DOS point. that perspective little bit direction where

do working light in going see success out. we've us, longer we So encouraging a a versions to signs but as calls, our forecast. But typically longer. in described cross-sell play some to into prior takes forecast take XXXX did and amount - our that's modest We're of that we while on earnings of we pipeline,

retention cross-sell for contribution there results Bryan? What overall into we forecasting from you tech dollar-based are that XXXX. so add, assuming will And would that be and some that

Bryan Hunt

more, Yes. bit quantify And Daniel. that little to a just

to with about So XXXX, be XXX%. XXX% contribution the provided historical for shared that could there in that performance terms a included cross-sell to as that that robust of expected that so of the technology line point And dollar-based had we we metric. think you of retention in we rate or color

Daniel Grosslight

Okay.

dollar-based still thinking you're in retention of same historical tech range? that So

Bryan Hunt

were then And currently drive Yes. the upside, cross-selling, could year. expectations bookings but some right. that if line That's be in to we significant for with our

Daniel Grosslight

Okay. sciences made life on the you And front. a comment

what in sciences, wondering underappreciated I more was build the that's the for if dig getting opportunities in little and in opportunity. think a I can you're or guys. one buy life you interest on it's just if more most of you a specifically

Dan Burton

for you asking. Thank Yes.

So much view Daniel. we very still

a that life will in that to sciences very long-term health it is presence and catalyst, for opportunity years many play but Our is out. early this take

work it's out because first do over have build with registries clinically a we the have, given for objective company capabilities work provide in set. health data date, patients. organically been and the that very some a of hundreds there. often the building and ability rich improvement, and And we quality important our care probably seen So that around to core as we of million XXX And response systems out market investing clinical interest specific that use that's cases includes the to

specific build that populations for be areas for us. other positive. feel use like by registries where COVID, to opportunities term, of example, ability trial are were and understand case registries the we our long in out relevant in impacted wanting build could opportunity was there's that so COVID, around cases and an to And And recruitment COVID study to clinical or

as multiple And opportunities pipeline And a as to organically include in space well. of mentioned company. also the we've in our as market sciences times, M&A invest so we'll continue we adjacent opportunities, life

Bryan Hunt

to that on to point of add inorganic to that opportunity just And there. kind

part Just of Twistle terms medication small relevant the do with a medical mention, device of the space did that acquisition, like. in the we adherence have that to announcement, in they call sciences and presence tracking and out as life adherence

sciences also through factor as term, continue And to mentioned, contribution something, into our long so might think life the that's Dan that we'll that strategy. over how

Dan Burton

we longer-term where data would I a differentiation, where evidence rich include think just as we long-term, meaningful cases might markets category the well. find real-world we And analytics as set about have evidence use and can note, that to one a other contribute as real-world

Daniel Grosslight

Got it. Thanks, guys.

Bryan Hunt

you. Thank

Dan Burton

Thank you.

Operator

is question Iris from from next Berenberg. Wang Our

Iris Long

Hi. team. for question. taking Thanks Good afternoon my

for question So Dan. first, picture big a

already we on I'm Twistle you health solution. also customers internally? some total view have existing get acquisition, addressable the TAM your how the engagement this have patient updated after and So wondering solution I'm may view sort can thoughts TAM? catalyst an then curious the the health patient your market? of about how curious just engagement And population many I'm long-term change reassessed on

Dan Burton

Yeah. Thank for question, you the Iris.

years a reassessed for but a beginning picture We're company level, I of It the think, at we X.X step do going public have year. areas. the been we not have some the next at TAM of So back. and since anticipate take the updated likely, company, big these will to went

health would that as it had we that the recent of certainly, those updated organically And time I the addition patient. have the of public, one entrants observed One, relationship where into in increases, we that trying market place. which a And we response we the areas feeling when characterize many yet the of and introduction acquisition. Twistle of and solution. being X the the space, overall had application existing whether they TAM. each addressable but one built to and have between couple the the of occurs, Twistle with not to certainly already XX. example, come So have And disrupt a customers, and systems that have other thoughts. for many we went direct new their our Today, we four to total we relates a customers acquisitions, threat product had from solution clinician

relatively early to perspective of early space some do not And maintain our they automates kind manual can so very customers, and patient interested scalable saw they form in this have make very wanted having engagement, on and customers smaller we and players, that patient or solution but technology our and excited that scalable there of is health And of are interested that system themselves we're that adoption they our the a many today we to focused of solution that have this see scale, solution they or engagement that players the of some processes ways capabilities. offer very to developed often them some and have being that response scalable been have place in this that in patchwork industry from sure are a system to relationship a found important health capability. we're so - very in space

Iris Long

Great. follow-up question wondering the to And length, if what and And service Is on maybe contract that, or number look sales Bryan. maybe based, a comment subscription I'm for for then line? the of like? Twistle? you cycle it then that modules revenue in of does a can terms model the by

Bryan Hunt

Thank you.

is model So the contract subscription-based model. and sales a

what the So subscriptions. total Sorry, to value. terms kind in multiyear software with - typical small technology tend with a of what was implementation Iris? terms of you'd Twistle in subscription technology And amount of terms be contract services your Contract of to there last question? are expect,

Iris Long

Sales cycle.

Bryan Hunt

Sales cycle. Yes.

more what cycle. the sales relative kind DOS suite sales of with sales cycle application terms the line it's expect of of type cycle, with our in you'd In to

than a So a lower lower our level it of compared often cycle price is offer. then which average does selling slightly our to be into for approximately shorter just point DOS and given year, organization the sales an to tend DOS,

Iris Long

Great. Thank you.

Bryan Hunt

Thank you.

Operator

at And no have questions further this we time.

Dan Burton

Catalyst, for you, forward interest continued keeping we touch. everyone, Health care. and Thank right. in All in to look your Take

Operator

concludes may and and now for Thank That disconnect. ladies participating, you Thank today's you call. you, gentlemen.

Health Catalyst (HCAT) 8 Aug 212021 Q2 Earnings call transcript