Health Catalyst, Inc. Q3 FY2024 earnings call

• Third quarter 2024 results: Total revenue of $76.4 million and adjusted EBITDA of $7.3 million, both exceeding previous guidance. • Updated guidance: 2024 revenue expected between $305 million and $311 million, adjusted EBITDA between $25 million and $27 million. Q4 2024 revenue expected $78 million-$84 million, adjusted EBITDA $6.8 million-$8.8 million. • Client improvement example: Guy's and St. Thomas' NHS Foundation Trust partnered with Health Catalyst to improve data archiving. • Growth initiatives: Reiterated full year 2024 bookings expectations, low 20s net new platform subscription client additions, dollar-based retention rate 100%-106%. Ignite platform migration progress with existing and new clients. • Acquisition: Signed definitive agreement to acquire Intraprise Health, a cybersecurity provider. • Board appointment: Dr. Jill Hoggard Green to join Board of Directors effective December 1, 2024.

For the third quarter of 2024, total revenue was $76.4 million, representing a 3% year-over-year increase. Technology revenue was $48.11 million, up 6% year-over-year. Professional services revenue was $27.7 million, roughly flat year-over-year. Adjusted technology gross margin in Q3 2024 was 65%, a decrease of approximately 330 basis points relative to the same period last year. Adjusted professional services gross margin was 17%, an increase of approximately 550 basis points year-over-year but a decrease of roughly 330 basis points relative to the second quarter of 2024.

• 2024 revenue expected between $305 million and $311 million, adjusted EBITDA between $25 million and $27 million. • Q4 2024 revenue expected $78 million-$84 million, adjusted EBITDA $6.8 million-$8.8 million. • Anticipate return to double-digit revenue growth in 2025, driven by new client additions, existing client expansions, and inorganic activities. • Ignite platform migration and cross-selling within existing clients to drive growth.

• Macroeconomic challenges including inflation, interest rates, and tight labor market. • Pipeline conversion rates and demand for deployment/development of data and analytics platform. • Complex implementations for international and health information exchange clients leading to near-term challenges. • M&A activity and integration risks.

Q: On the outlook for 2025 and return to double-digit growth, what's the pipeline like?

A: New client additions on track for best year in history, existing client expansions with high margin opportunities, and inorganic activities contributing to growth.

Q: Looking to 2025, similar bookings mix with international and HIE customers?

A: Encouraged by pipeline of international and HIE opportunities, though initial implementations are complex but lead to recurring revenue.

Q: Are non-recurring services contracts related to existing or new customers?

A: Skew heavily towards existing clients, include U.S. and international, related to clinical/operational/financial improvements.

Q: Synergies of acquiring Intraprise Health?

A: Extends security and risk management capabilities to clients, leverages R&D and sales/marketing synergies.

Q: Impact of Steward Health on revenue expectations?

A: Contract assigned to new party, full repayment of receivables, expected revenue included in guidance.

Q: Broader market demand and labor/inflation impact?

A: Improved operating margins, labor and inflation more manageable, clients pursuing AI use cases with Ignite.

Q: Rhythm of meeting with customers in hybrid world?

A: Quarterly face-to-face with larger clients, regular virtual contact in between, focus on cross-sell in existing relationships.

Q: Choosing higher-margin tech business over lower-margin services?

A: Prioritizing higher-margin areas like tech expansion and new logo additions, leading to overperformance and profitable growth.

Q: Timing and pacing of new client go-lives?

A: Health information exchange implementations take longer and are complex, but once live, revenue is recurring and predictable.