Health Catalyst (HCAT) 2024 Wells Fargo Healthcare Conference summary

Market and business environment

• Operating environment has improved since late 2023, with end market health rebounding and client engagement returning to pre-pandemic levels.

• Record new client wins in the first half of the year, surpassing all of last year, driven by improved market conditions and new platform offerings.

• Updated guidance for new logo adds to the low twenties, marking the best year in company history for new clients.

• Confidence in returning to double-digit top-line growth and 50%+ EBITDA growth in 2025, supported by a robust pipeline.

• Current valuation reflects low growth, but management expects a re-rating as growth accelerates.

Product and technology strategy

• Launched Ignite, a modular, flexible data platform, replacing the heavier, more expensive DOS platform.

• Ignite leverages cross-industry tech (Snowflake, Databricks, Microsoft), enabling easier integration and future-proofing for AI and other innovations.

• Modular approach lowers barriers for client adoption, shortens sales cycles, and increases cross-sell opportunities.

• Cross-sell conversion rates have doubled with Ignite, and migration of 120 DOS customers to Ignite is on track for completion within three years.

• All new customers are onboarded directly to Ignite, with dedicated migration teams and offshore support to improve efficiency.

Financial performance and outlook

• Ignite platform delivers around 70% gross margin, compared to 60% for DOS; applications run at 80%+ gross margin.

• Company-wide technology gross margin expected to rise into the 70s as Ignite adoption increases.

• R&D and operating expenses are declining as Ignite investment winds down, with further leverage from offshore resources.

• Non-recurring, project-based professional services are outperforming, contributing 3-4 points of existing client expansion growth.

• Four-year outlook targets $500M top-line revenue and $100M EBITDA, with 10-15% annual revenue growth and 40%+ bottom-line growth.