Health Catalyst, Inc

Thank you for standing by, and welcome to the Health Catalyst Earnings Conference Call for the first quarter of 2021. At this time, all participants are on a listen-only mode. After the speaker's presentations, there will be a question and answer session. To ask a question at that time, please press star then 1 when you touch your phone telephone. As a reminder, today's conference call is being recorded. I will now turn the conference over to your host, Mr. Adam Brown, so you may begin.

Good afternoon, and welcome to Health Catalyst Earnings Conference Call. for the first quarter of 2021, which ended on March 31st, 2021. My name is Adam Brown. I'm the Senior Vice President of Investor Relations and Financial Planning and Analysis for Health Catalyst. And with me on the call is Dan Burton, our Chief Executive Officer, and Brian Hunt, our Chief Financial Officer. A complete disclosure of our results can be found on our press release issued today, as well as in our related Form 8-K, furnished to the SEC, both of which are available on the investor relations section of our website at ir.healthcatalyst.com. As a reminder, today's call is being recorded, and a replay will be available following the conclusion of the call. During the call, we will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding trends, strategies, the impact of the COVID-19 pandemic on our business and results of operations, our pipeline conversion rates, and our general anticipated performance of the business. These forward-looking statements are based on management's current views and expectations as of today and should not be relied upon as representing our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. Actual results may materially differ. Please refer to the risk factors in our Form 10-K for 2020 filed with the SEC on February 25, 2021, and our Form 10-Q for the first quarter of 2021 that will be filed with the SEC. We will also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of these non-GAAP measures to their most comparable GAAP measures is provided in our press releases. With that, let me turn the call over to Dan for his prepared remarks, and then Brian will subsequently provide his prepared remarks. Dan and Brian will then take your questions.

Dan? Thank you, Adam, and thank you to everyone who has joined us this afternoon. We're excited to share our first quarter 2021 financial performance, along with additional highlights from the quarter. I will begin today's call with some commentary on our first quarter 2021 financial results by sharing that we are pleased with the company's overall financial performance. Our Q1 2021 total revenue was 55.8 million, and our adjusted EBITDA was a loss of 0.8 million, with these results exceeding the midpoint of our quarterly guidance on each metric. Additionally, Our Q1 2021 technology revenue was $33.8 million, which represents 37% growth year-over-year, and our Q1 2021 total adjusted gross margin was 54.3%, representing an increase of 540 basis points year-over-year. Now let me highlight some additional items from the quarter. You will recall from our previous earnings calls that we measure our company's performance in the three strategic objective categories of improvement, growth, and scale. And we'll discuss our quarterly results with you in each of these categories. The first category, improvement, is focused on evaluating our ability to enable our clients to realize massive, measurable improvements while also maintaining industry-leading client and team member satisfaction and engagement. Let me share a few examples of client improvements from recently published case studies. The first improvement vignette highlights our work with one of our clients supporting their journey to financial and operational recovery from COVID-19, while the latter two vignettes highlight clients leveraging our technology and services to do meaningful improvement work outside of their COVID-19 response. First, Carle Health, employed our software, including the DOS data platform and our new healthcare.ai solution, to apply advanced data science and analytics to their COVID-19 capacity planning. Our technology enabled our colleagues at Carle to forecast census and related bed, staffing, and supply needs at the level of patient acuity, which provided the ability in real time to anticipate and meet the demand for facility, supply, and human resources required to care for COVID-19 patients across CARL's community. Next, Thibodeau Regional Health System leveraged our solution to employ a data-informed approach to meaningfully improve care delivery and achieve reduced costs. Our software enabled our colleagues at Thibodeau to significantly reduce their patients' stroke, pneumonia, and sepsis mortality rates, in addition to decreasing length of stay, the incidence of complications for patients undergoing joint replacement surgery, and the use of blood products. As a result, Thibodeau has achieved over $6.6 million in financial improvements, while also improving health outcomes for thousands of its patients across multiple service lines. Finally, Hospital Sisters Health System utilized our solution, including the DOS platform and our quality and regulatory measures analytics software, to integrate claims and clinical data from disparate EMRs across its ACO. This real-time integrated quality data and analytics enabled Hospital Sisters Health System to improve their ACO quality measures performance across 11 measures in a single year, close care gaps, and enhance reporting accuracy and effectiveness. Moreover, Hospital Sisters Health System gained an additional $1 million in Medicare Shared Savings Program revenue, and they achieved $320,000 in cost savings, the result of eliminating a third-party quality reporting software vendor. Also within the improvement category, I'd like to highlight our team member engagement. Approximately every six months, we utilize the Gallup organization to measure our team members' engagement levels. In our most recent results, we achieved an overall team member satisfaction score in the 96th percentile. This latest engagement level continues a pattern that has been in place for many years of industry-leading team member engagement consistently ranking between the 95th and 99th percentile in overall team member satisfaction scores. This latest result is of particular significance given that it comes during a period where we were required to adapt to a global pandemic, necessitating a remote-only work environment, as well as having welcomed nearly 200 new teammates who came to us primarily through multiple recent acquisitions. We as a leadership team continue to maintain a primary, prioritized focus on team member engagement, the center of our strategic flywheel, because we recognize the central and foundational contributions that our team members make in building and then utilizing the software that enables our clients to achieve massive, measurable improvement. These Gallup results, coupled with our clients' high satisfaction levels throughout the pandemic, our heartening confirmation of our prioritization and focus. On a similar note, I would highlight that we have been fortunate to receive multiple other external recognitions related to team member engagement, including the company's fourth recognition as a Glassdoor best place to work, in addition to inclusion in Fortune's best place to work in technology list, the Women Tech Council's shatter list, and in her site's best information technology and services companies to work for list. We were also thrilled that two of our team members were recently recognized as 2021 Black Engineer of the Year Science Spectrum Trailblazer Award winners. Lastly, in the improvement category, I would like to highlight our recent announcement that the company achieved certification for information security by HITRUST, HITRUST leverages nationally and internationally accepted standards to ensure a comprehensive portfolio of security controls. As trusted stewards of our clients' data, we take information security and data privacy very seriously, as we recognize that they are central to the success of our client and our mission. And this announcement highlights our ongoing commitment to implementing best practice standards for protecting data confidentiality, integrity, and availability. Our next strategic objective category is growth, which includes beginning new client relationships while also expanding existing client relationships. To begin, I would comment that our current operating environment is consistent with commentary that we shared on our Q4 2020 earnings call. The COVID-19 pandemic continues to result in both headwinds and tailwinds as it relates to our growth. And as such, we are reiterating the 2021 bookings expectations that we shared on our Q4 2020 earnings call. In terms of headwinds, we anticipate our provider and market will continue to be under some amount of operational and financial strain over the coming months as healthcare organizations deal with the continued COVID-19 surge, alongside the vaccine rollout logistics. And as it relates to tailwinds, we continue to see meaningful evidence that the healthcare provider ecosystem is better equipped and prepared to respond to the ongoing pandemic in areas including treatment efficacy, supply chain logistics, capacity planning, and broader operational optimization. Likewise, we're encouraged by the pace of the vaccine rollout efforts. And lastly, we continue to believe that the COVID pandemic will serve as an overall tailwind in the industry's adoption of data and analytics, significantly highlighting the need for a commercial-grade data and analytics solution to replace patchwork homegrown systems. Lastly, on the topic of growth, I would share that consistent with previous commentary, we continue to believe that we have a meaningful consolidation opportunity, especially at the applications layer of our solution stack. We currently have greater than $265 million of cash and short-term investments on our balance sheet, a meaningful portion of which is available for acquisitions. And while the pace of our acquisition efforts will always be driven by the quality of opportunity set, we continue to be encouraged by a high-quality acquisition pipeline. And we believe that the COVID-19 pandemic has brought certain opportunities to the forefront that may not have presented themselves otherwise. Finally, I will make a couple of comments related to our board of directors. Dr. Tim Ferriss, who has served on our board since January of 2018, and most recently as its chair, has concluded his service on the board, effective May 1, 2021. England's National Health Service required Dr. Ferriss to resign from our board in connection with his appointment as NHS's National Director of Transformation. We are extremely grateful for the opportunity to have benefited from Dr. Ferris' wisdom and experience for many years, and we wish him well in his exciting future role with the NHS. In Dr. Ferris' place, we are thrilled to announce that Jack Kane has accepted the invitation to serve as chair of our board of directors. effective May 1st, 2021. Jack has served on our board since 2016, including several years as audit committee chair. Jack has more than 30 years of experience in healthcare technology, including as a public company CFO, and currently serves on the board of directors of several companies. We are grateful for Jack's dedication to our mission over many years, as well as his depth of financial leadership experience in healthcare and in technology. He is uniquely qualified to serve as our chair moving forward. With that, let me turn the call over to Brian. Brian?