Health Catalyst, Inc. (NASDAQ:HCAT) Q4 2022 Earnings Call Transcript

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Bryan Hunt: Yes. I think that was well said. And just to add to your question around kind of Daniel, longer-term, 2024 existing client focus. We are €“ so one, we’re still gathering data and learning and kind of assessing the best way to drive toward our long-term growth model. We’re encouraged to see the improvement this year on both the existing client, new client side. But we do have and are excited by this kind of under penetration across our 98 DOS subscription customers for the tech-enabled managed services opportunity. So we’re very early in that deployment of that across those clients. And then we also have over 400 of these smaller relationships, modular clients that will again be more of a focus for us moving forward on how we can drive cross-sell and expansion to those clients. And so we have a lot to be to be excited about in terms of how we can drive growth within the existing client base.

Daniel Grosslight: Makes sense. Thanks for the color.

Dan Burton: Thanks, Daniel.

Operator: Thank you. Our next question will come from Elizabeth Anderson with Evercore ISI. Your line is open.

Elizabeth Anderson: Hi guys. Thanks so much for the question. As you think about sort of the R&D spend going forward, maybe sort of like longer-term, how do you kind of balance or how do you think about what your priorities are between some of these sort of short-term, maybe financially focused products and sort of your longer-term need to sort of integrate what sort of customers will need over the longer-term in regards to sort of also balancing the OpEx leverage? I’m just kind of wondering where your sort of priorities and focus areas are for the next maybe year or two.

Dan Burton: Yes. Thank you for the question, Elizabeth. So I think that’s well said that right now we want to be sensitive to and focused on those areas of our portfolio that can help our clients the most. And like we’ve talked about, there are a couple of areas of our portfolio that are really compelling, whether it’s technical managed services or financial empowerment suite or elements of our pop health suite that really help meet them where they are and deliver what they need. And so we will be focusing there. We will be focusing our go-to-market and focusing our R&D investment in those elements, both at the data platform level and at the use case level that really helps us make sure that we’re in good stead there. I think longer-term, we do feel good about the portfolio that we have and have found over and over, and I’ve heard this directly many, many times that the portfolio that we have from a technology perspective is already compelling and gives us multiple years of runway to keep helping our clients expand and realize a greater ROI from their technology relationship with Health Catalyst.

As a result, we do see multiple levers that should enable meaningful R&D leverage €“ R&D OpEx leverage in 2024 and beyond. One that Bryan mentioned earlier is, we’ve been meaningfully investing in our multi-tenant Snowflake and Databricks-enabled data platform infrastructure that the bulk of that investment will really finish in 2023 and start really tapering down in 2024 and beyond. There’ll be a lot of leverage as we deploy that infrastructure for a number of years. So that will provide us with some meaningful R&D operating leverage. And then I think us focusing on the existing portfolio that we have and refining and strengthening that is a higher leverage activity than trying to go into a new area, as an example. And because we have a strong portfolio as it stands today for a number of years, we feel like there’s some pretty meaningful leverage in making sure that all of our clients are taking advantage of that full portfolio.

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