HCAT - Earnings call transcript Q3 2021

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Operator

Thank you for standing by and welcome to the Health Catalyst Third Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, today’s program is being recorded. And now I’d like to hand the program over to Adam Brown.

Adam Brown

Good afternoon and welcome to Health Catalyst’s earnings conference call for the third quarter of 2021, which ended on September 30, 2021. My name is Adam Brown. Vice for Investor Health Senior Planning and the Analysis and Catalyst. am President Relations of Financial I And with Chief me our Chief on the call Officer Bryan is and Hunt, our Financial Executive Officer. Dan Burton, release furnished of of on our the are in be our well A complete our SEC, ir.healthcatalyst.com. issued Form both results as X-K disclosure today related available section website the found at Investor can in Relations press to our which as of

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

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

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

Dan Burton

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

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

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

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

additional some the highlight from me items quarter. let Now

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

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

by case of couple begin recently customer a examples of me sharing Let studies. from improvements published

our in costs greater utilization contract performance, million manual its identified cost in efficiency. improvement a $XXX,XXX and $XX opportunity data enabled solution leveraged First, disposition contracting Alliance skilled This its and integrated Carle affiliated key largely response, emergency health and and struggled value-based and from to technology including a plan analytics approach manual In Carle last and and cost of and to optimizer a This improve and platform department on introduced inpatient utilization. XX inpatient nursing value allowed areas, metrics data than utilization software application, new performance risk-based XX% to avoided than labor readmissions, into multitude real-time our earnings DAS Carle Health facility across Alliance population in initiatives. Health our health we greater insight which with its health have analytics population Health discharge including and analytics Carle call.

with patients its that recognize helped UnityPoint chronic Next, complex conditions.

recognitions reduction engagement. highlight data initiative, management visits risk since patients with then AI home team intervene transitioning $XX.X when result enabled robust and gained identify hospital hospital that related have insight particularly effectively setting. its them from analytics managers healthcare relative by than has improvement fortunate care recent of appropriately to care platform, We utilization reduced its and at a in in admissions non-urgent the admissions its this software than their of XX,XXX DOS Also care decreased Likewise, of despite a volumes into to care lacked access services, an unplanned improvement emergency more result XX% health external UnityPoint applications utilized The receive across management ED we healthcare UnityPoint and our preventing unnecessary worsening patients spending relative with In been admission of data, the XX% suite to in member UnityPoint’s often large a Yet provided reduction I undertaking would months managers our along clinicians that enrolled and ED more to care more In ambulatory and hospital settings. conditions XX nearly are X,XXX had in in program and ambulatory response, high to spending. fewer to timely multiple visits. category, days have having or visits. the over-utilizing million, department and healthcare care acute program.

fortunate ranking Catalyst, Rimmasch, General was her to Sadiqa Manager class List XX top unit, Quality received Sciences our Clinical Women Work President Clinical also transformational of business year Health Modern the in of General be to Xth Tech First, Workplaces work Council’s Work have Senior innovators XXXX Vice award this row, Best Healthcare’s Companies Places Modern at year. Women for a President Life Analytics XXXX Health by named Holly COVID-XX. to leadership. Senior for this inclusion XXXX were in Manager and Likewise, to Healthcare’s and of recognized Chief related for Vice named Officer, Mahmood, Best distinction, Fortune Magazine’s in achieving Place Great XXXX We With, #XX and Health Best-Led Catalyst achieved to Inc.’s a also to Catalyst were list.

are differentiation our provides thankful of as to expertise company. Holly and have deep Sadiqa examples this having and domain of that two healthcare the great We benefits the

is next growth, The objective environment beginning expanding as tailwinds have To relates our new throughout sales existing continues pandemic largely that current to both XXXX. while also customer customer shared Our relationships consistent relationships. result we category includes and is headwinds with begin, strategic the COVID-XX which commentary to in it growth.

tailwinds, COVID-XX it as data an the some data highlighting of the be equipped healthcare respond third in we experiencing operational and commercial organizations terms evidence the shared and continued pandemic In we with continued significantly need continue in Delta distraction, also optimization. And dealing market our alongside pandemic to under believe provider logistics. while healthcare relates vaccine will of see serve the broader of meaningful strain, to a patchwork analytics headwinds, as the the treatment the financial and overall including for has efficacy, supply result before, especially we ecosystem to is the to in grade continue much industry’s end the areas, of and quarter, prepared planning solution analytics, rollout provider tailwind that chain operational the variant And homegrown with to rise pandemic, COVID-XX have as systems. in better capacity replace amount adoption that to ongoing to logistics,

expectations of our line with retention In continues to shared dollar-based track year. XXXX the we in expectations, terms the the of our at beginning bookings

still the that XXX% the XXXX our full to to And with our at to dollar-based reminder, professional this performance XXX%. anticipate a in performance, services, some historical historical line be of we experience XXXX metric XXXX year, our than year As to we we would of retention expected to beginning that we continue relative for technology robust shared levels. significantly on stronger levels strength be but

DOS net new our subscription to additions. related customer Next,

we sales, most throughout me seasonality customer that provide our represent bookings, QX This majority with with fourth aligned fourth history. been will fiscal of organization years. in company representing customer typically quarters and as have season, Let for healthcare new a quarter our an important its our reminder also normally the new selling QX experienced

DOS expect beginning achievement. customer mid-teens the net at new shared we year, continue of bookings the to subscription As

This provided within of healthcare in their user with group. successful deepening integrate We continue multi-domain growth September user follow-up optimization analytics. greater opportunity our the healthcare the with virtual and we a enterprise year’s success, and significant the leading thought analytics perspectives category annual registrants the hosted call such how Xth group representing a revenue was organizations domains this and our continue provide to our XX%, with in data year’s driven and highlighting than again on revenue, once was achieve and and our earnings our to leadership areas theme pipeline, cost summit This quality and health be as analytics cultivating new also Annual again to provide relationships and Healthcare population customer-focused year’s Health a encouraged from Summit, voices world, healthcare and opportunity more last to late-stage across XXX while Also in along participants Attendee demand in Analytics and commentary, many the few meaningful to cost satisfaction to further ecosystem, hear of in customers a having with multiple Catalyst analytics, organizations thousand data XX prospects. by countries. than as conference by outcomes. most strong customer the analytics, welcoming analytics

new power of Oklahoma and objective the to system. evaluate let have technology with their to Central With making. of networks goals, application platform United one Hospital. and largest true a relates system’s its analysts and transformational additions, with care the publicly the Bryan? offering it Oklahoma helping the Health located cost health comprehensive delivering cost to with as health Bryan. of partnered to Heart Next, will Hospital, Heart including growth, the a call to Heart excited drive key view better Catalyst data population over Mount Heart few and along performance patient of the including platform, Oklahoma support our data leverage clinicians announced manage its data that, across customer are our enable this improvements transparency cost turn understand Mitane decision and our care. executives Pennsylvania To our elements work, inform plans the population recent right leverage in of analytics States the Oklahoma insights, true empowering DOS our of with cardiovascular better their delivered costing Health Health Likewise, DOS and with Mitane risk we to accelerating of Mount in me

Bryan Hunt

Dan. Thank you,

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

temporary hosting midpoint the million million, we the on XXX representing XXXX half basis same an earnings decrease representing growth margin QX more incremental This gross shift professional quarter driven quarter last year-over-year in points was XXXX with revenue, points QX a to for XXXX. revenue XX% revenue. our adjusted representing quarter small additions, services $XX.X our X, third mix a margin year. QX portion as approximately COVID-related built-in QX with of we to This In escalators XXXX the costs. year-over-year in for QX driven to increase performance rate earnings customers inclusive contracts XXXX, call. associated in of margin services approximately XX% the paying normalized centers mainly by represents and year-over-year along primarily XXXX In revenue offset same delivered call, XXXX the relative the acquisition from contributed creating In higher XX line XXXX Microsoft XXXX, last the was the decline we XXXX. by quarter-over-quarter catch up shared well of recognized relative without revenue total hiring of gross into and that the purchase relative first of outperformance result expectations of growth guidance. our modest operating This by was compared new accounting-related expectations deferred claims Professional third year-over-year. in acquisition Twistle generated implementation by $X.X a forecasted. QX year-over-year were adjusted professional XXXX higher cloud-hosted Technology last which partially earlier our revenue segment, $XX.X outperformance September favorable QX contractual expenses services medical a a year-over-year Also services, Total to due approximately XX%, and XX.X%, in we on Professional QX, customers write-down, of that’s XXXX, the from to provided XXXX, Technology points the nonrecurring as of performance segment, result hosting outsourced in a which professional Vitalware XXXX due of mainly professional last This points was primarily XXX of year-over-year. transitioning fees customer was an to of plans. lower the built-in customer project-based that Services QX headwinds third professional being In able subscription were period to X,XXX basis to $XX.X adjusted new our million, revenue year-over-year utilization from on decrease was recurring customer adjusted our of than XX.X%, of that was a XX% quarter shared given revenue with technology technology was toward was increase as DOS more technology as company the million was in our some an approximately was a as services comparable. the our of increases year-over-year fees increase closed closed was on period increase cost existing escalators basis of was $XX.X This total higher amount customers of existing cost, services commensurate to our X, in paying contractual access cost data to year. representing gross growth technology of a XXXX. driven lower billed our access an self-insured discounts mainly signing with million. for a For Twistle relative services third-party This and our than of and continued Azure, and as QX new services line July our the base professional basis revenue, margin, from amount

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

of from XXXX, in some of this increase Twistle previously, Incremental midpoint was of adjusted earnings loss last loss and Healthcare with comparing QX million, of terms our timing result result favorably the Adjusted sales on well compared mainly EBITDA of QX an was the XXXX. of and to out expenses will and revenue EBITDA quarterly attendance. be the in expenses quarter QX the a from our expense that In third fourth Conference Analytics travel our of operating recent driven marketing quarter into XXXX. $X.X was along as HIMSS our EBITDA expenses. in to This beating Summit guidance expenses the we of adjusted strong mentioned as mainly $X.X as the increased of call, anticipate non-headcount XXXX million pushed by mentioned performance acquisition the

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

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

amount an million. of million million. As acquisitions. with for August net in a a principal Also, April $XXX of reminder, a reminder, The carrying placement is equity the amount we purposes, follow-on XXXX, including in $XXX in net conducted currently potential component notes proceeds convertible of XXXX, which general a private issued liability we corporate offering $XXX.X raised as

$X.X At for full relates losses $X.X As million. expect XXXX, this million $XX.X compared revenue year $XXX.X year now And quarter EBITDA between $XX.X revenue it revenue guidance and for an of $XXX.X full and represents we this provided our total the and full guidance, adjusted expect million year $X.X implies respective midpoints, quarter. the the between million. outlook. of last million and XXXX, to total our million financial increase fourth to raising are million their We we between we revenue

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

details a XXXX fourth let provide Now related me to additional quarter few our guidance.

services be As anticipate in our our will services third to total. professional line professional roughly it revenue we quarter QX revenue revenue, relates with

our QX gross be similar would Additionally, adjusted we services will for anticipate XXXX. I that QX margin to professional mention XXXX

a the team half more onetime and With cost professional a and QX, mix the most bonuses as members than labor compared half claims trends quarter XXXX XXXX utilization the strong as higher normalized planned member across same including to our similar fourth the first first rate as base well market given services seeing of medical to the tight of as the distributed delivered, team performance. in of

anticipate quarterly we lower our EBITDA as than implied QX be to by our guidance, slightly QX adjusted our Lastly, XXXX performance performance.

won’t in expenses conference quarter, is sales acquisition-related we offset in and bonuses pushed and that tight earnings by Healthcare to in XXXX market performance. Dan? Analytics incur this calls, fourth the items, as reduction including investment as that, described will on given marketing expense expenses distributed one-time fourth forecasted we conclude Summit out multiple remarks. certain previous prepared the items travel the well While quarter, my ramp expense quarterly operating strong members additional With been our integration expense that the until one-time labor I and team the HIMSS non-headcount have

Dan Burton

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

Operator

from Anne question Instructions] comes from Our first [Operator of line JPMorgan. the Samuel

please. question, Your

Anne Samuel

and on Hi, the quarter thanks great for Congrats taking question. a guys.

Operator

you mute? on have phone your may Ma’am,

Dan Burton

can Anne. you, hear We

Anne Samuel

theme. finding there? big And seeing in are your really Okay, of great. change was area? that you care you At Summit, from demand are the pace clients value-based Analytics accelerating more that And your was is a Healthcare wondering,

Dan Burton

was Anne. healthcare that was meaningful in interactions and major question, clients our increase informed interest with based and with topics seeing prospects, in data of theme general. on focus great value-based in That Yes, health and analytics a the population both on care specific a summit, and and

to we in that as one and prospective that informed focus And has clients that and now primary areas focus being in acceleration continue see relates was the to it an with right it market. data, clients existing so with the uptick of by both an

Bryan Hunt

focusing that about and would I well. on several last thing of as we’ve been our the strategy an terms this area Anne, development add, is and over our acquisition strategy has The that been quarters in thinking

So you’ve a the recent most ago there specifically year that in process. helps acquisition a just July, to acquisition acquisitions healthfinch seen health with in which focus space, engagement patient Twistle, health to and for customers and suite our applications our of then continues of a our round population out system recent be

So that encouraged alignment. we’re by

Anne Samuel

of great one, maybe That’s customers. you your hearing them shortages a anything labor from some and probably your customers with mitigate been And this about Are some then we’ve impact? color. that inflation solutions of finding to help doing quarter lot to

Dan Burton

specifically, talked management the it optimize clients our helpful specific in call, where we application relates which in and labor the to last power as We of shortages about are suite, specific system our areas the to need are. health earnings very is very force facing And ways. in labor

well environment. as that this challenging solution by been services domain So have expertise our clients and our it helping utilized through technology make them deep highly as

Anne Samuel

hear. guys. to great That’s Thanks,

Dan Burton

Anne. Thanks,

Operator

Thank you.

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

question Your please.

Unidentified Analyst

you the up But and on pick even than believe trend And the This on question. the expect think anticipated. quarter kind continued thanks pressures. year. guess to half and of quarter, don’t mentioned keeping success, of back taking last for the is the Daniels. of the guys. in for labor the Congrats hiring you Hey, on Ryan I I Jeff slower [indiscernible] the I that

any has mentioned pressures do remarks, you So color And prepared one-time I bonuses. far trending additional that on labor half? how to been know kind of you so the and in guess second the have the I just in

appreciated. color really here is Thanks. So any additional

Dan Burton

absolutely, Yes, Jeff.

we this see So services our did – earnings in call. catching had last were to hiring We last in referenced that quarter. remarks, as alluded we behind prepared in it relates as we to the professional our up some specifically

we environment So market as And some we’ve to environment. catching seen this up. continue current tight a labor see very

that. think of of in factor what bonuses one-time we an And about it so near-term. important to we referenced we’re the as terms as to cognizant And in relates That’s QX strong we XXXX. as about performance. do planning And an process recognize next our year our it team members’ every we important be year for component will engagement think as for and

put that we of team our the As and drives success. do you we all engagement center their at know, members everything

our make that always to as members relates And their and optimized engagement. want team we’re so to we sure it

Bryan Hunt

I bookings earlier anticipate thing our anticipate we only material impacts with that Jeff, any that development that we against or we our don’t remarks. map, in product would of those to on don’t delays the mentioned to our shared The – that add, referenced previously year, Dan in kind even is of the ability deliver didn’t some to XXXX and expectations road ability execute our and in that

no those. major So to impact

Unidentified Analyst

I guess that kind I acquisition want towards of follow-up, kind integration the Thanks then to Twistle just And and of going. Awesome. is the how info. just as pivot for a

standpoint. expected. think kind $X any helpful. And how we the additional kind loss the was also plan? integration to I I that of know mentioned last provide sales guidance? we the revenue. guys And So million color That think you in you be guess about and the you integration marketing to would the of of early from on should But I tracking think said million integration, tech about – that how you EBITDA $X.X contribution how of mentioned is kind of I is know phases I Can relative as for one know a progressing? quarter

helpful So here. Thanks. is anything

Dan Burton

few to and well. please then, Yes. a happy Bryan, as share share comments I’m

travel many which and an there team the highlight, I’m had integration is headquarters with the of I So one-on-one Twistle, office is pleased have opportunity and relative to had recently to where integration we are an how our we spend of how patient the and life as as focus we work talent Twistle it And relates as use in Albuquerque, level and the and with going, as be well health our where well would I’ll areas of sciences time the to which goals of clinical for relevant clinical the continue forecasted, in to we Catalyst is of with excited cases. pop really we and terms to members. other engagement, area analytics be Health improvement, impressed so expertise

about we’re integration. the So excited of level

We existing to are seeing existing And capability very among clients more meaningful more a and DOS engagement subscription me to by clients out unprompted important want about system obviously, Twistle. about interest our our find number our to executives have. health I’ve that personally capacity at asked very been C-suite Twistle. is tell of clients a patient

we’re about of about And that. I’ll the Twistle. financial So Brian let impact excited comment

Bryan Hunt

Yes, certainly.

in half XXXX, top revenue integration-related the in the a growing $X line and at adjusted for on Twistle the top revenue inclusive that Twistle about XXXX So about you second deferred execute that year. then would revenue approximately million the top forward as of half call and And think $X year, you of XXXX, on going did the $X.X next last well. XX% mention approximately will core of EBITDA $X we our then of that the think side of write-down million second about that Jeff, on contribute for of in shared acquisition in of the to then anticipated million EBITDA about of had of stand-alone line, time on through some the on inclusive could we XXXX. we year contribution mostly on burn technology the of business, of into we negative When the kind million expenses million XXXX $X EBITDA

Unidentified Analyst

guys. Thanks, Awesome.

Operator

you. Thank

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

Your please. question

Jessica Tassan

so Hi, much you question. thank for the taking

and to does historically I subscription mid-teens the I for DOS think of adds the year, refer that So services customers does kind seen? the we’ve all-access to verify, that just wanted DOS

Dan Burton

what included us importantly, when Access come note calls, it always new elements excluded. technology have through discussed there does. primarily earnings defined that we are And Yes, that been in in that is as like of All with subscription. to acquisitions that are that things outside And technology certain prior we’ve subscription the

we we a mid-teens when that an when opportunity. access so acquisition, where as the well. to that about DOS is some subscription-based capabilities And application they adds talk model both incremental perform But incorporates idea DOS there revenue and an can of

Jessica Tassan

Understood.

All So you’ve as existing X% should incremental annual maybe acquired – X% layered technologies about that about think the subscriptions, as appreciation? we Access think to your year-to-date to or you price being in

Dan Burton

incremental they side. Yes, built-in represent escalators would built-in those from that on contractual technology – the opportunity contractual growth

Bryan Hunt

prospect thesis land meet sell start where our standpoint. also of we a new a application acquiring have to to – And to as they’d to part Right. and analytics expand and Jess, base and the mentioned, an there customer from current customer like of broader to over places Dan time, is at one, the layer DOS portfolio into also but more develop

portfolio And on so the those both that of helps drivers. of breadth growth

Jessica Tassan

you for how the of subscriptions All Thank account year-to-date? sneak if follow-up. the acquired renegotiating to of And I solutions gone terms much could have you. the just quick you’ve I it. Access in Got just guess, one in through base

Dan Burton

topic new So a technology. mostly, of really discussion. rolling as we And that’s acquire happens that

a less existing So that client in technology. we months, acquire end period happens new will as during our with base the technology, the of at their X the we acquired level contract and within interest course newly a then have typically that of of about happens discussion a relationship more

Bryan Hunt

the customer, And a subscription in it’s – but anticipated sales customer. moderate a of a we’re Jess we’re cycle in contribution, faster lower by. there, other success seeing into app encouraged DOS some particular XXXX is early selling than to we’ve amount expansion application metrics, that point, seen are to a is we see price it direction which and And of an on able where our and DOS to an cross-sell

Jessica Tassan

again. you Thank

Bryan Hunt

Thank you.

Dan Burton

you. Thank

Operator

you. Thank

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

Your question please.

Unidentified Analyst

This ago. few I a hosted the on offering guys is Elizabeth. quick that on a Joe on sciences for to life weeks webinar just you a ask want question

that space? then the see those that, player sort Thanks. Is top Just it wondering, of offering tends competing of in another in with in Is of solutions the you general, space? with on competing CROs? to differentiate And who competing with? kind what

Dan Burton

for that question, Yes. Thank you Joe.

think is partner in of often about one potential new excited player. this the And we where market, that early companies, overall to as benefit And recognize to or oriented but from is solution, about base like there bring larger earnings able life then So of the calls, player we adjacent part life the we’re about provide and the this possibility with on. deal that can we learning market. solution the as and that another that or in of a described we’ve we experience complement to a very, we’re offering very the great are sciences the prior elements sciences but company regard CRO another we helps another us are

us complementing we’re So market. of of strengthening a in especially solution this players, more early think as some and as established I would adjacent

Bryan Hunt

contribute Just that, in the DOS, customers data that of a terms terms to is as rich the touch the data and very of data of depth points are subset of differentiate, from part that DOS, we where able into we aspect data do one is of aim centralized our patients of identified that data represents. platform. And in across the clinical and that data to breadth

analytic data terms to data of on ability so vendors, Dan that coupled on drive as with to that that And how mentioned, company. asset in in applications area with improvement with intent life sciences against other strength a we we build working the any top differentiate think that, of we’re our do is

Unidentified Analyst

Thank Great. you.

Operator

Thank you.

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

Your question please.

Stephanie Davis

shortage my you Hey, ask guys. I end new are some was strategic these question. going for. that questions away and Thank pivot questions labor taking some of to guys going about from for you market

of another about you Is just more lift market? end and sales in are to markets familiar going well more be an more questions, sales it to new or labor to are bigger can that R&D need tell build-out managers see to a and And sort for pharma get of flavor us headcount folks? primarily you So strategy you teams of little going but would target as order what in we with sciences pharma just arena? bit life the

Dan Burton

the Yes. Stephanie. Thank for question, you

to capacity we’ve to understanding end the need understanding that years So invest learned I differentiation, some companies. the specific we’ve that of we cases. recognized here capabilities excited see some incremental set R&D there We relates of of there the is to needed modestly that started use then life last R&D cases some sciences couple believe And incremental as take to to is both. is also but think do user that evidence needed over strengthen that go-to-market, suit leverageable understanding these we that build it are of and core and it’s and we our the use that

and cases. support clinical financial kinds improvement use it trial of real-world into a or data or the specific translate then health system having registries clinical evidence to As operational you and core that relates as market, there use of improvement, to that contributing data-informed at recruitment real-world cases of particularly we’ve our complete in isn’t the overlap between focused might imagine, health, been pop on,

in we’ve we’re minutes stage So to relates to to as I in to have longer playing are team and shared But benefiting hiring still the been that very some recognizing these meaningful members few long as it takes we’re from experienced of than that have this as be continue trying learning from we build game need times, in time, in we an the through from investments well. ago, investments something and But many make space that just adjacent we’re learning will we’re long-term. early process. a and mentioned as partners perspective who R&D early the our markets,

Stephanie Davis

it in tragedy biggest I’m the of a one that I’m not one. that pronouncing like real-world hard evidence sounds The it, alone Understood. time not science, really of

Dan Burton

Yes, that. Yes. we share

Stephanie Davis

hear there guys side I an in will buy of could justify prior do in is you. more hear that assets I versus of tag market you or I Should enough think the of the you opportunity sliver a that price you. Keeping is very the do as prospects. build to mind buying and assume higher for now read you into high this? expand market that sexy multiple incredibly right this the

Dan Burton

Yes, it’s great a question.

adjacent to financial we from we And an as want past, attention and a from disciplined that past, – the in include times pay perspective, of shared So the that M&A we’ve in believe we one shared maintain we to a markets the we’ve also discipline. perspective. areas in multiple as process

the sciences do think carefully – right we are them. that in framework a life in there that’s apply perspective long-term we international, framework when so whether the And We consider we that’s the And financial and we opportunities from board. adjacencies, or apply in strategy. study them, a across same discipline

through own are not, there that markets. them. find will pursuing opportunities be fit that framework, within we these to momentum continue will then ways other to our in if investments If we build So adjacent

Stephanie Davis

Looking that forward you. built Thank have to you out. see

Dan Burton

Thanks.

Bryan Hunt

Thank you.

Operator

Thank you.

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

question Your please.

David Grossman

can go if impactful Thanks. just perhaps that things back to for to of just the pass mentioned, we’re half back like Good are just passing you and margins magnitude a could benefits three the through? just minute in gross in secondly, margin more the that for have in flexibility wondering and could And just services the I’m of labor-related the what dimension wondering the afternoon. year? extent you you you most some then how costs which through we of much

Dan Burton

David. Thanks, Yes.

So question. good

in fluctuation. factors couple of more prepared that So we to quarterly mentioned so our over Technology we professional the contribute in years, some our as there basis, a And on three are have can the example. seen much than segment gross – that do that I remarks an last margin primary services fluctuation

So further. just kind of dig to those into

has of would the and have members, the rate our than little utilization first of half now. higher which, that year in is team anticipated as we is more first we’ve The described, normalized a

provide. is we in of that The second shift the mix services

basis. are higher of services member medical your team margins, fluctuate services kind some services quarterly last on like a our analytics consulting costs And lower to other that and some related are and can like costs. and was, So then the point,

power a I I that’s think describe the through we’re prepared change through, the shift, related labor-related two QX mentioned the look the You factors, that’s that being and to assessing kind that and over impact passing And of your rate to point can utilization points on being think other trying and as the pricing that QX of something remarks. we kind on to the about few that as costs percentage forward mix then how the remainder of QX.

have that that just that something as visibility that to relates XXXX. mix to thinking mentioned looking I profile, color see that enough we’re provide to QX We through we on but now and cost based our on is it margin QX current similar gross the

to into will there data provide team as of the going updates we and the then get more continue we we’re points cost year. next per price of seeing terms So in also that member

Bryan Hunt

of that data-informed pricing moving some that may own perspective thing be only be understand that an I have will pricing we changes as macroeconomic is David, be long think to backdrop as others from lasting. continue into be to changes input as data the to we strategy trying And we are shared as possible trying informed pricing XXXX. to more are many strive increases as transitory, pricing the our we But study add, would about and – others anticipate, economic a and we

David Grossman

come of your next first but may And the I kind but retention just vis-à-vis like in much – customers another kind about question, renewing what being existing start where as curious the maybe what will, historically? rate recall, it’s on Great. area are the the And your and targeting in earlier as apps first terms renew, perhaps over question, in at in months. first Thank of if going want of do automatic the or forward-looking you you up it, the I renewals with XX you renewals. think escalators increased look tranche, of been tranche, an think kind so this think present of not How then favor the you tranche for that. in to you have us of the portfolio will

Dan Burton

happy Yes. on I comment to that. am

element one their structure our way in including to So, opt subscription important the that’s wishes clients with any of relationships client of to the relationship, out relationship. who can we that always that is our every all of year, all remember technology

in time, in And isn’t up significant point year, a that they through so given any of all every there contracts cycle buildup coming opportunity.

there mechanism would us that upside of prior for relates fall outside have levels moving technology And stay as remaining forecast earlier, technology capabilities subscription, think our amount. And that some that built in value. forecast at way receiving of into that for beyond. to that’s And clients the the by discussions great robust seen really continue a doing mentioned those of about historical we make in as newly net acquired little of Bryan to today, bit the been that modest toes and cross-sell of calls and modest the XXXX the that will robust that, retention, I it is pandemic to model well would particularly be mentioned to well. cross-sell over-performance as that of so have as sure our is And and traditional we represent we anticipate forward, our amount And a as historical it of this XXXX. way all each relates we dollar-based a one it through business, to helpful through on those and robust

Bryan Hunt

to add David. that, to Just

of contracts X-year So, some those we of your and to have point, the ramp a original to up X-year term kind for seen, coming with renewal.

things an customers with beyond there The to As grow so only – the I customers typically applications. data of those the that a for that that do would as is broader on power go can are And Dan they opportunity and are expansion constraint portfolio, mechanism DOS can perform. computing that, that have the and with which as continue those amount environments even data access is mention at add our we the the helping thing for also mentioned, all cross-sell contractual hosted well. and new

us to dollar-based seen helped that So, drive on that continue average, that’s that historically. have has similar you – rate retention

David Grossman

growth levels to? generate sales that activity refers alone comment same-store just some So, is will last what

Bryan Hunt

as that is a There well. for Yes. mechanism

David Grossman

Right. Got it.

good. Very Okay. very Thanks much.

Dan Burton

Thanks David.

Operator

Thank you.

next Our the comes Daniel from from of Citi. Grosslight line question

please. question Your

Daniel Grosslight

Hi. taking for Thanks the question.

risk-bearing or with traction payers additional cycles, invest traditional market? you health i.e., providers? the in systems, Pop as of you had sales system Health, And sales have you As move have move into seen outside outside resources further you to this health more

Dan Burton

yes, Daniel. and Yes

We health core we just client offerings, are Health environment. Pop and system that interest in prospect broader in seeing increased seeing or interest the generally places than are

And so our as capacity for expand to us part there. to of that, been helpful capabilities our and our response it’s

remarks And case is relationship One in with more benefit and broader alliance their our where the health with prepared a of organization. of example meaningful a roadmap. to we in that experiences that continue payer includes to Carle then organizations relationship informs referenced our And as and messaging us in included a that that company continue traditional with our we studies where health a Health from good informs strategy also That go-to-market our population health directly than working helps system. are capability those we expand.

Daniel Grosslight

you we a Got could will on Okay. is help services months David’s I you on was question that are margin, it. you the kind over professional if similar how about to for XX keep or I think shift And us but understand helpful. yet XXXX then XXXX, of kind back not here really next gross getting the level, more high-XXs or to structural the Very some to directionally to the time? that Do wondering guiding should to in months? XXs of mid of there you XX anticipate out

Bryan Hunt

that something Question, year. rest are data on thinking through through we is the that assessing of and the and considering it

your not it to there saw is color more to mention we I So, impact kind to relates we make entirely yet professional or some margin. as QX. any of services that XXXX ready gross are in did point, that of formal guidance

that outsized bonuses QX be impact be margin to member could Some some run team nature. described. is one-time more could the our There an and compensation of related rate, also to we that in in more

impact professional of nature. gross services our Some will that also one-time more in that’s margin

or the half XXXX of And looks assess particular, QX, in year. our of pipeline, get So, and the guidance then in what rate really will are, have of our And that will no looking like we through services the utilization we through of sold assessing team of at visibility update this as we we over year, that have quarters. that in couple in that drive target in color long-term the again, the the next professional point XXXX. that mix that’s of and of beginning end mix services something at members time, first what terms next and will mid-XXs more to what provide we in

Dan Burton

when right working have being And have that be in mix customers seen And a for company. measurable on services measurably what on the mean we meaningfully. are strategy. the focused optimizing – mix really anticipate order that mentioned measurably of when The will we the reported be services, those think kind providing on And together, services shifts purpose need to add our those to first the public of of a of think previous we improve. up that to think based we professional you that can we dictate what and about And continue dynamic the that that, to that XX improvements, the when allow mix as only that just really needs I professional our which a offer our improve. of need as foremost, we that past would Health calls, those of they would enable clients we long-term And role that quarters thing certainly we clients. of throughout have the and what we that’s at right in we as are changes times Catalyst we number to optimize in favor

Daniel Grosslight

guys. sense. makes It Thanks Yes.

Operator

you. Thank

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

Thomas Keller

This Sean. for Thomas questions. is taking Keller afternoon. for the on good Thanks Hi,

discount. sort the me I wrong the So, about am selling pandemic, were to to type you version of offering working DOS been but prior And of talk you if I lighter all want here, on correct that at accelerated that a offering. have COVID-specific

that of how of a you the version continuing my use And are and is, in so And are all platform? those offering has evolved? question light to offer many

Dan Burton

that, to Happy Yes. on comment Thomas.

a DOS pandemic. we the as lighter had conceptualizing of mentioned, idea So, begun you offering the before

most there spring Health we accelerated hit continued the strategy. We develop and for of refine process. response a As have do relationship of some to XXXX, that cases to in our that were And pandemic. point the there good and to use clients some we processes thought is with believe Catalyst specific relevant lower a begin the evolve that our long-term and a thought for price entry a pandemic enabling

pipeline. We see representation we in a more and that few encouraged regard, have are to seen successes our in

of have to apps this to lighter certainly and through as as of that at As built more activities our now we our specific some which M&A with cases of lighter well coupling offering own the introduction the relates offering through capabilities use is us. it layer, encouraging

like in built amount We than of capability we more have represent would our forecasting. have some into and success that our of there talked capacity about a modest and amount before, upside that modest to a forecasting

Thomas Keller

to just the mid-teens options? does clarify, DOS so And target lighter some include

Dan Burton

level, modest a yes. At

Thomas Keller

for That’s Okay. Thank all helpful. That’s me. you.

Dan Burton

Thanks Thomas.

Operator

Thank you.

Berenberg. Iris Our next the question comes from line of Long from

Iris Long

taking question. Thanks for Hi. my

So first, and a on question escalator. pricing

are you in So, some the contracts? Are I for how price existing you general? and solutions wondering increase contracts, in your newer of for of am I thinking about would be then able inflationary environment, raise And you able to pricing you guess the escalators? for to this amount the – the to are going the

Dan Burton

Iris. for you Thank the Yes. question,

with that those shared that are built built-in we that some the a recall, increases. Catalyst subscription on DOS technology may side, Health offering you meaningful clients that application we have as do escalators access percentage So, have in have with pricing and subscription double-digit includes previously

expansion so that addition acquired built-in continue have And see already to through come and additional through some to expansion have to us. those accepted pleased M&A. that, chosen to to opportunity been in are have us clients renew. the And for opportunities we for meaningful that have then technology we And

As context both side of that think our about it professional and the services the to in the we contracts, inflation. relates on existing the way side technology

and to study lasting which more increase as we mentioned transitory a to relates minutes the are to long experiencing want we of decisions some space gathering understand way we price few it are specific we pricing. are I continuing components think still inform data. just to and the which continuing about any XXXX and We As that to more we data to are ago, data, time deeply price we components And that are beyond. that are think and before I more make and try understand,

Iris Long

And expansion Got to wondering, from thinking it. I you on level? I also from the guess question opportunity your about margins. appreciate you there. do the similar then am are adjusted QX continue next on How I insight expect margin a year? breakeven EBITDA

Bryan Hunt

Thanks, Yes. Iris.

we So, in over shared of Technology consistent quarters, I segment. on margin terms with couple of first so would the the gross the what last share, dynamics,

margin up last the typically the high-XXs the gross quarters well. that be ticked over years expect is has customer as a few margin over we year-to-date, over technology couple gross the Technology and basis of expanding on next per to do to Our case time.

rate. level, at a don’t our and but technology support same As costs hosting at revenue grows grow our customer the

of headwind migrating are a by who have hosted solution, which adds we offset customers that is on-premise that some technology. a However, to

gross So, that’s the share. margin would I dynamic technology

kind that EBITDA losses in be million guidance our in side, services we in EBITDA QX Twistle of in updates roughly or expected on prior the cycle. contribute that, to have would we basis. to and working are we planning go our a breakeven not just we point are reasons as sales factors. performance, million business prepared acquisition, services and but shared bookings core And half we XXXX. there the to guidance to conversations, is remind to then pipeline, provide this have QX. rate of in Dan and begin line in the on year, time, budget planning other we we incremental XXXX mentioned, specific I with profile so and expected are in XXXX of Main first then growth XXXX Twistle areas And professional mentioned at point what professional impact our for updates still $X then And the On as EBITDA had I this investment we are our – terms we across taking early trajectory, our related into process There into remarks, the lot gross color. next year. margin mentioned, $X.X through will of that or I visibility shared run And assessing, and enough QX the that the publicly where adjusted our with process, that commentary EBITDA any R&D variables at through providing of

metric next we typically, year. specific beginning into kind guidance share the we that so of of until on And get don’t

Dan Burton

And might just Iris, of add couple thoughts. I a additional

the in actually in exciting last in that as shared that we was QX a that element the one certainly company and territory. adjusted for achieve earnings first in us call So, EBITDA half company the was positive total, did

process that And each in back that Bryan of the when we so an with some thought terms in milestone an seasonality EBITDA – expenses shared what get just described went beginning earlier of year. there XXXX and business, and in was like the certainly, little that Healthcare Summit rate. to hit we exciting of our in And we expense in shared there a happens Analytics that half run what all than our terms had are breakeven timeline is of terms adjusted to of public in specific you the the on

as have investments the team labor So, process XXXX member ensuring us have in for XXXX, we and we be planning at long-term this benefited discussed some include financial a as Health in think to I that excited continue have, process and opportunities We relates They be forward year, it their members actions that much would important to I we engagement, we tight want very are share our of to highest the items team competitive from our are as making market low that also certainly company. that questions, to to the are as us. mentioned, accelerate team before and our part brought and me of individuals also also members some and as planning as that for of up as as very compensation R&D very have growth can QX Catalyst turnover as am favorable we for and few specific practices include case Bryan about a we here. member and help and sustainability sensitive, priority so retention, mindful the taking applies. for the positive we that rates, that well. our want our team definitely

number about thinking priorities. am of I So, a

even we to more as earnings next for are about an the position the in share will midst shared, to by think we a early in of As XXXX, planning be how of it process update Bryan but relates call, good XXXX. that we our in

Iris Long

Thank so much you the it. Got for color.

Bryan Hunt

Thanks, Iris.

Operator

Thank you.

comes Larsen from David line Our next from the question BTIG. of

Your question please.

David Larsen

You utilization area, the normalized. rates mentioned times services couple that the a of in

evolved busy am what XX has into nature that as if what in I you billing is means XQ were XX earlier get those they utilization will? have demand, the of year, slowed. the And the And hours or we on What hours So, assuming very earlier consultants changed the was that? working correct? a What rates or your drove were week. And year? Is here? in that what

Dan Burton

Yes. that the where we The hiring. primary were in play Thank for delays in question. services And relates was David, staffing hiring just behind the some professional in year arena. labor experienced in earlier just element on to tight that was it market, you, the we the

ask And utilization a we a existing from be beyond stretch perspective we meant level. commitments, a so Health view our to that to little needed would to really had Catalyst what members and we team sustainable

to are that. we And sensitive so

prepared caught We shared remarks earlier. as have we the perspective, hiring partially in from up a

we we kind that mix contributed the what of major factors what services so as And providing with ourselves factors and well other to are shared around today. Bryan and where utilization, watch some combined other find of we the that that are

David Larsen

in Okay. like profile per And of projects XXXX would and the expect any and are be into then – week utilization you XX% expectations hours in would XXXX? Just on per billed you very individual like utilization an rate would the pipeline thoughts per say, like, I mean helpful. or terms rates that like in expected expect margin consultant,

Dan Burton

Yes. Yes. David. Thanks,

that I that and this services item to have mentioned, margin the on as main but specific professional we guidance to. quite So, not profile are to contribute are are provide XXXX ready factors color margin, gross that referring you

primary have that that So, half assess XXXX a team sales our the utilization are can our and of rate better that we fluctuate sense provided, represents. going into mix get given are as bookings of we next selling a And that, is will as hoping basis there to of on first pipeline and we are as quarterly well through performance a factor. of our including that, as there and QX the it stay continues well, what at a other services members factors services we mix the that normal level services year. But

mix And of so that main terms and the data provide factors into that as in set two the are profile. will on we updates will that those of play we that, get through

David Larsen

Thanks very Congrats quarter. good Okay, much. a on great.

Operator

This today’s for session program would hand further like Burton the of question-and-answer you. program. I to Dan the does conclude any remarks. to back Thank

Dan Burton

Take ahead. for your involvement to in interest Catalyst. everyone. in we the Health months touch look all Thank staying care, you and And forward continued in

Operator

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

may day. disconnect. now Good You

Health Catalyst (HCAT) 10 Nov 212021 Q3 Earnings call transcript