Health Catalyst, Inc

Welcome to the Health Catalyst first quarter 2025 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. To get to as many questions as time permits, we kindly ask that you limit yourself to one question. If you have any follow-up, please read and can hear your questions clearly. We ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. Now I would like to turn the conference over to Jack Knight, Vice President of Investor Relations. Please go ahead, sir.

Good afternoon and welcome to Health Catalyst Earnings Conference Call for the first quarter of 2025, which ended on March 31st, 2025. My name is Jack Knight. I am the Vice President of Investor Relations for Health Catalyst, and with me on the call is Dan Burton, our Chief Executive Officer, Jason Alger, our Chief Financial Officer, and Dan Lesweir, our Chief Operating Officer. A complete disclosure of our results can be found in our press release issued today, as well as in our related Form 8K furnished to the SEC, both of which are available on the Investor Relations section of our website at As a reminder, today's call is being recorded and a replay will be available following the conclusion of the call. During today's call, we will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our future growth and our financial outlook for Q2 and fiscal year 2025. our ability to attract new clients and retain and expand our relationship with existing clients, trends, strategies, the impact of the macroeconomic challenges, including the impact of inflation, tariffs, and the interest rate environment, potential changes to government funding and payment programs that could negatively impact the business of our clients, bookings, our pipeline conversion rates, the demand for deployment and development of our Ignite data and analytics platform and our applications, timing and status of Ignite migrations, acquisition integration, and the general anticipated performance of our 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 the full year 2024 filed with the SEC on February 26, 2025, and our Form 10-Q for the first quarter of 2025 that will be filed with the SEC. We will also refer to certain non-GAAP financial measures to provide additional information to investors. Non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. A reconciliation of non-GAAP financial measures for the first quarters of 2025 and 2024 to their most comparable GAAP measures is provided in our press release. However, we have not provided forward-looking guidance for professional services gross margin, the most directly comparable gap measure to adjusted professional services gross margin discussed today, technology gross margin, the most directly comparable gap measure to adjusted technology gross margin discussed today, and have therefore not provided related reconciliations of these non-gap measures to their most comparable gap measures because there are items that are not within our control or cannot be reasonably forecasted. With that, I will turn the call over to Dan Bird. Dan?

Dan Bird Thank you, Jack, and thank you to everyone who has joined us this afternoon. We are happy to share our first quarter 2025 financial performance along with additional highlights from the first quarter. I will begin today's call with summary commentary on our first quarter 2025 results. We are pleased with our first quarter 2025 financial results including total revenue of $79.4 million and adjusted EBITDA of $6.3 million, with these results above our most recent guidance on each metric. Additionally, we are encouraged with the results of our tech segment, which had revenue of $51.5 million for the first quarter of 2025, representing 10% growth year over year. A key driver to our strategy and growth moving forward is the Ignite platform, and we're pleased to report a strong start to the year with 10 net new platform clients added in Q1, with approximately two-thirds of these net new additions coming from our existing app clients, reinforcing the strength of our cross-sell strategy. Importantly, the aggregated average total ARR and non-recurring revenue per net new platform client came in around the midpoint of the range of 300,000 to 700,000. This is especially encouraging given that Q1 is typically a quieter bookings quarter. And we believe that the momentum we see from Ignite with its additional modularity compared to DOS is the primary driver of this performance. We are encouraged to see Ignite's flexibility and lower average starting price providing a streamlined sales process compared to DOS. This performance reinforces our confidence in achieving our full-year guidance of approximately 40 NetNew Platform clients, and we anticipate being around halfway to that goal by the end of June. We are encouraged by this result as it underscores the effectiveness of our strategic shift to Ignite, a flexibly priced, consumption-based platform. Ignite is a strategic shift away from the rigid, high-tech model built around legacy DOS. The shift to Ignite allows us to accelerate sales cycles is we can offer Ignite at a much lower entry price than the roughly $1.5 million price tag of DOS, particularly when clients are looking to start with a single use case. Built on a solid foundation of industry standard technology, Ignite is a quicker, more cost-effective platform, allowing clients to see a faster ROI. It also opens the door to built-in cross-sell and up-sell opportunities across our expanded portfolio, including our recently acquired patient experience and cybersecurity solutions. Ignite is a more profitable platform than DOS, with approximately 70% gross margins compared to approximately 60% for DOS. Additionally, net new Ignite platform client ads generally have a more profitable 80-20 revenue mix between technology and professional services versus the roughly 50-50 historical mix for new DOS clients. And with our 10 net new platform client wins, this model shift is already delivering tangible bookings results. The pace and quality of these wins underscore the effectiveness of our improved go-to-market strategy with the decision we made earlier this year to sharpen focus on lead generation, including moving marketing under the sales organization, and validates the improved flexibility, speed, and value that Ignite brings to clients. Ignite has also been key to our partnerships with leading platforms like Databricks and Microsoft. In addition, certain Ignite modules like healthcare.ai are now transactable on the Microsoft Azure Marketplace. Given the strategic importance of Ignite and the importance of the migration of existing platform clients to Ignite, I'll now turn some time over to Dan LaSueur for an Ignite migration update.