Q2 2022 Health Catalyst Inc Earnings Call

August 4, 2022

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

[music].

The conference will begin shortly to raise your hand during Q&A.

Good day, ladies and gentlemen, and thank you for standing by walking to the health catalyst incorporated second quarter.

The conference call at this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

I ask a question during the session.

One one on your telephone keypad.

I would like to turn the conference over to Mr. Brown.

Good afternoon, and welcome to Health Catalyst's earnings Conference call.

Second quarter of 2020.

Which ended on June 32022.

My name is Adam Brown.

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 Bryan.

Our Chief Financial Officer.

A complete disclosure of our results can be found in 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.

IR got health catalyst dos.

Tom.

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 trends.

Strategies.

Fact of the COVID-19, pandemic and the high inflationary environment 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-Q for Q1 2022.

With the SEC on May 10, 2022.

In our Form 10-Q.

For Q2 2022.

Will be filed with the FTC.

We will also refer to certain non-GAAP financial measures to provide additional information to investors.

A reconciliation of these non-GAAP financial measures.

The comparable GAAP measures is provided in our press release.

With that let me turn the call over to Dan for his prepared remarks.

And then Bryan will subsequently provide his prepared remarks.

And Bryan will then take your questions.

Sam.

Thank you Adam.

Thank you to everyone who has joined US this afternoon.

I am happy to share that our Q2 2022 revenue came in at the high end of our guidance range and that our Q2 2022, adjusted EBITDA outperformed the top end of our guidance range.

While we are pleased with these Q2 results. We are disappointed that we referenced in our earnings release. This afternoon, we are revising down our revenue and adjusted EBITDA outlook for the full year.

Although I will spend the majority of my prepared remarks, commenting on how our end market dynamics are impacting our bookings performance.

First want to take a moment to set the broader context.

As we have entered our fourth year as a public company.

You need to have confidence in our ongoing position as the market leader in data and analytics technology and services that drive measurable improvement.

Our engaged and committed team members, our deep customer relationships.

Our ROI centric value proposition and our strong balance sheet leaves us well positioned to be the long term market leader in an industry that is still early in its adoption of commercial grade data and analytics technology and services.

Likewise, as we navigate a challenging macroeconomic environment.

We are committed to operating with financial discipline.

As such while our near term growth is impacted by the macroeconomic pressure on our end market.

We are confident in our ability to drive meaningful positive adjusted EBITDA in 2023 and beyond.

With that let me walk through the three main drivers.

Caused us to reassess our full year growth outlook.

First.

Our health system and market is currently experiencing meaningful financial strength.

In which they have realized significant increases in labor and supply costs without a commensurate increase in revenue.

Leading to substantial margin pressure.

As a result, our sales cycles have elongated at our first half bookings achievement was materially lower than anticipated.

Impacting both our new customer additions and our dollar based retention metrics importantly.

Importantly through the first half of 2022, we have maintained a robust pipeline and have not seen a material negative impact on our win rates How's.

However, what we have observed is that many health care organizations are delaying near term purchasing decisions.

They reevaluate budgets given their financial situation.

Additionally, in a few instances we are experiencing customers trimming back their near term spend with health catalyst in an effort to meet shorter term budget cut requirements.

Within our professional services segment. This has translated to a subset of customers modestly reducing the number of ftes engaged and their initiatives while in the <unk> segment. This is mostly translated to a small subset of modular customers lowering their application and analytics spend.

In many ways, we would characterize the selling environment in the first half of 2022 is similar to what we experienced in the first half of 2020 with significant economic challenges related to COVID-19 resulted in many of our customers and prospects pausing their purchasing decisions in some customers reducing.

Their spend with health catalyst as they work through near term re budgeting exercises.

Just as we saw our customers stay withheld catalysts through the worst financial aspects of the COVID-19, pandemic and then choose to expand their relationships in 2021, we.

We believe our long term partnership orientation with our customers will over time provide opportunities for meaningful future expansion in those relationships.

The second driver of our revised 2022 outlook is the loss of a large enterprise dos customer.

While this event is certainly unfortunate as a reminder, our historical gross customer retention has been extremely high, especially amongst our enterprise dos customer base.

And based on our engagement with existing customers. We believe this was an isolated customer specific events as.

As context this customer was added shortly after the onset of the COVID-19 pandemic.

Customers recent decision to bring their analytics function in house was primarily driven by near term cost savings needs in light of the significant financial pressure.

We also acknowledge that we could have performed better in our implementation and time to value and we have taken taken active steps to learn from this experience and improve.

Importantly, we have not experienced this feedback as an overall trend from our customers.

The third driver of our revised 2022 outlook relates to our decision to pause our investments in the life sciences adjacent market outside of continuing to provide our twist of patient engagement solution.

While we continue to believe there is a larger opportunity to leverage our robust data asset within the life Sciences end market.

Our investment over the last few years has not played out as meaningfully as we had forecasted.

The life Sciences adjacency previously accounted for a few million dollars.

In our 2022 revenue forecast that we no longer expect to achieve.

Additionally, it will result in the loss of a few dos subscription customers each with relatively low <unk> values.

We believe this strategic decision will bolster our efforts to concentrate on our core value proposition.

Prioritize continue progress toward profitability and drive operational focus.

<unk>, allowing us to reallocate a subset of this investment toward our core product roadmap as.

As we continue to invest in core data and analytics technology infrastructure. We are building this infrastructure with life Sciences use cases in mind, keeping open the possibility of future reinvestment in the life Sciences market.

Moving on to commentary on the second half of 2022, we.

We are proactively responding to the challenging macroeconomic environment and near term top line pressure with a focus prioritized operating plan.

First I would emphasize that we are strategically focusing our operations to enable continued meaningful operating leverage.

This operational focus includes as mentioned previously.

Our investment in the life sciences adjacent market as well as reducing our investment levels in other areas.

This also includes further expanding our offshore delivery capabilities.

Enabling greater savings in certain operating expense and delivery functions.

Next I would highlight that we are continuing to make several strategic investments to continue to position ourselves as a market leading data platform and focus on providing our customers with a strong ROI through our technology and services offerings.

Related to our data platform, we have made meaningful recent investments in high value data and analytics to enable faster time to value and greater scalability.

On time to value our investment has and will continue to focus on plug and play data acquisition enablement.

Enhanced data quality and.

Embedded AI and machine learning capabilities, and an extensible unified data model.

And as it relates to scalability, our investment will continue to focus on modern architecture capabilities, including Snowflake enablement elastic compute and event driven processes.

All of these data platform capabilities enable our clients to more quickly and effectively use data and analytics to make more data informed decisions and measurably improve.

Given the financial pressure that health systems are currently facing we are also prioritizing investments in applications and services that we believe have a clear financial ROI, such as our financial empowerment suite of population health suite and our tech enabled outsourced services we.

We are prioritizing these solutions in our conversations with prospective clients and we are encouraged to see a meaningful and positive responses to these offerings in our current pipeline.

In the second half of 2022, we anticipate we will see an improvement in our pipeline conversion rates and timelines relative to the first half of the year.

Though there will likely continue to be some amount of strain on our near term conversion rates given the ongoing end market financial pressure.

Next let me share a few comments on the implications of these updates for the second half of 2022 and beyond.

We are lowering our full year 2022 revenue outlook, which Bryan will cover in more detail.

Importantly, however, our adjusted EBITDA guidance is only minimally impacted relative to the revenue guidance revision.

As we have quickly adjusted our operating plan to balance the lower growth forecast and enable continued operating leverage in terms of our 2022 bookings outlook. We now anticipate our dollar based retention will be in the mid to high nineties.

And that our net new dos subscription additions will be in the mid to high single digits.

And though we are not sharing specific guidance related to our 2023 outlook today, we do anticipate that our 2023 revenue growth rate will be materially impacted by the lower bookings performance in 2022 as compared with previous expectations.

Even with a lower growth profile in 2022 and 2023.

We are committed to realizing positive adjusted EBITDA in 2023 and.

And anticipate similar adjusted EBITDA annual margin improvement in 2023.

We are expecting in 2022, namely approximately 300 basis points of improvement.

We aim to realize this continued profitability improvement through a combination of operational focus and cost optimization as.

As we look beyond 2023, and acknowledged that the macro environment is evolving and that our end market remains challenging.

We remain confident in our ability to achieve our long term adjusted EBITDA target of 20% plus.

Additionally, as we enter our fourth year as a public company and having demonstrated our ability to achieve our adjusted EBITDA breakeven timeline set out at the time of our IPO.

Today, we are providing our midterm target of 10% adjusted EBITDA margin and positive free cash flow in 2025.

We believe this margin target still allows us to make the level of investment required to maintain our long term strategic differentiation and market leadership, while also beginning the realization of meaningful free cash flow generation.

On a related topic.

Now share that our board of directors has authorized a share repurchase program.

Which allows us to repurchase up to $40 million of our outstanding shares.

As we evaluated our corporate finance options informed by our strong cash position and our high level of conviction in our path to meaningful free cash flow generation for full year 2025.

We determined that a share repurchase program would create value for our shareholders by allowing us to opportunistically repurchase repurchased a subset of our shares with a recognition that current share prices do not match, our view of the long term value of shares of the company stock.

Given the size of the repurchase program relative to our overall cash balance. We also maintain the ability to utilize our balance sheet to conduct opportunistic future M&A.

We will continue to be disciplined in our M&A evaluation process, requiring acquisitions to be both strategically and financially compelling for our catalyst.

While in the near term, we anticipate M&A is less likely given.

Given the market dynamics and ongoing disconnect between public and private market valuations.

And our intention to drive additional focus and execution against our current offerings.

We continue to believe M&A will contribute to our long term strategy.

Before I turn the call over to Bryan. Let me also take a couple of moments to share a few positive company updates from the second quarter.

First 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 engagement score in the 97th 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 95 to 99 percentile in overall team member engagement scores, we as a leadership team continued to maintain a primary prioritized folk.

Chris 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 the software and providing the services expertise that enable our customers to achieve massive measurable improvement.

Second we have been encouraged to see another of our solutions power costing <unk> <unk>.

<unk> record meaningful improvement in customer satisfaction towards industry, leading levels as measured by the class organization. These.

These gallup in class results are encouraging confirmation of our prioritization and focus.

Additionally in June we as a company celebrated publishing our 300 customer improvement case study.

<unk> 300 customer approved case studies have documented a total of $1 5 billion.

Validated measurable improvements and $5 4 million lives positively impacted and these 300 published case studies represent a small fraction of the measurable improvements that our customers have realized as a result of their partnership with health catalyst.

Lastly, we are excited to have publicly announced two of our recent customer additions.

First I am happy to share that our new relationship with life <unk> health will allow them to leverage our robust technology offering.

Along with our professional services expertise.

To support their efforts to reduce their variation in clinical outcomes improve their overall quality of care and drive toward their population health goals.

Next we're pleased to share that Akron children's hospital will leverage our data platform and population health software along with our professional services expertise to improve their patient experiences and outcomes personalized value based care create operational efficiency and compete more effectively in there.

Marketplace.

We are honored to have the opportunity to serve these two leading healthcare organizations and we believe these new relationships highlight our industry, leading solution the importance of our value proposition and that the breadth of our offering enables us to effectively serve clients across the healthcare ecosystem.

With that let me turn the call over to Bryan Bryan.

Thank you Dan.

For the second quarter of 2022, we generated $76 million in total revenue.

This total represents an outperformance relative to the midpoint of our guidance and it represents an increase of 18% year over year.

Technology revenue for the second quarter of 2022 was $45 4 million.

Representing 28% growth year over year.

This year over year growth was driven primarily by recurring revenue from new customer additions from.

From existing customers paying higher technology access fees as a result of contractual built in escalators.

As well as from our twisted acquisition that closed on July one 2021.

Professional services revenue for Q2 2022.

It was $25 2 million.

Representing 5% growth relative to the same period last year and.

And a decrease of 2% relative to the first quarter of 2022.

For the second quarter 2022 total adjusted gross margin was 54, 7%.

Presenting an increase of approximately 35 basis points year over year.

In the technology segment, our Q2 2022 adjusted technology gross margin was 74%.

An increase of approximately 215 basis points relative to the same period last year.

This year over year performance was mainly driven by existing customers paying higher technology access fees from.

From contractual built in escalators without a commensurate increase in hosting cost.

Partially offset by headwinds due to the continued costs associated associated with transitioning a portion of our customer base to third party cloud hosted data centers in Microsoft Azure, which increases our hosting costs.

And the professional services segment, our Q2 2022 adjusted professional services gross margin was 26, 5%.

Representing a decrease of approximately 740 basis points year over year.

And the decrease of approximately 275 basis points.

Relative to the first quarter of 2022.

This quarter over quarter decline is in line with the expectations, we shared on our last earnings call.

In Q2 2022, adjusted total operating expenses were $36 7 million.

As a percentage of revenue adjusted total operating expenses were 51, 9%.

Adjusted EBITDA in Q2, 2022 was positive $2 million.

With this performance, beating the top end of our guidance and comparing favorably to an adjusted EBITDA gain.

A $1 7 million in the second quarter of 2021.

This Q2 2022, adjusted EBITDA outperformance relative to guidance was mainly driven by the strong quarterly revenue performance.

Without a commensurate increase in expenses.

Along with delays in the timing of some non head count expenses that we anticipate will now occur in the second half of 2022.

Okay.

Our adjusted net loss per share in Q2 2022 was <unk>.

The weighted average number of shares used in calculating adjusted net loss per share in Q2 was approximately $53 7 million shares.

Turning to the balance sheet, we ended the second quarter of 2022.

$403 million of cash cash equivalents and short term investments.

Compared to $445 million at year end 2021.

As a reminder, our first half 2022 cash balance is reflective of the approximately $28 million of cash payments related to our two recent acquisitions of TPI Ninja in Rms.

Also as a note the face value of our outstanding convertible notes as a principal amount.

$230 million and the net carrying amount of the liability component is currently $225 8 million.

As it relates to our financial guidance for the third quarter of 2022, we expect total revenue between $65 3 million and.

And $68 3 million.

And adjusted EBITDA losses between 6 million and $4 million.

And for the full year 2022, we now expect total revenue between 271 5 million.

And 275 5 million.

And adjusted EBITDA loss between 6 million and $4 million.

Now let me provide a few additional details related to our 2022 bookings expectations and financial guidance.

Year to date, our dollar based retention rate has been in the low nineties.

Driven by the dynamics, Dan shared including the loss of a large enterprise dos contract.

A subset of more narrowly scoped modular customers, reducing their technology spend.

And modest professional services FTE trimming.

Across a subset of our customer base.

In terms of our full year 2022 expectation, we now anticipate our dollar based retention rate.

<unk> of both technology and recurring professional services.

To be in the mid to high nineties.

In the first half of 2022.

We added a few net new dos subscription customers.

Which was lower than our previous expectations.

We now anticipate that our net new dos subscription customer additions will be in the mid to high single digits range for the full year 2022.

Consistent with Dan's remarks, this implies that we are.

That we expect our bookings performance for the remainder of the year to improve.

Especially when considering the expected wind down of a few life Sciences dos subscription customers.

<unk> average <unk> value.

In terms of our full year 2022 year over year revenue growth by segment.

We now expect the technology segment to grow a little less than 20%.

And for the professional services segment to grow in the mid single digits.

In terms of Q3 revenue expectations, we anticipate that both our technology revenue and professional services revenue will decline a few percentage points sequentially.

This quarterly technology revenue dynamic is driven by the items Dan highlighted previously.

With our technology dollar based retention being in the low 90% range year to date.

Inclusive of the large enterprise dos.

Customer loss that accounted for a little over $1 million per quarter.

Along with some more modular reductions in our customers' application analytics spend.

Additionally related to the technology segment.

There was an outsized deferred revenue catch up in Q2.

Related to a project implementation.

That accounted for approximately $1 million of revenue that will not reoccur in Q3.

The third quarter professional services sequential revenue decline.

This is driven primarily by our first half dollar based retention performance.

Customers on average trimmed back their usage of our professional services team members.

Next in terms of our adjusted gross margin.

We continue to anticipate that our adjusted technology gross margin will be in the high <unk> for the next two quarters.

And the professional services segment, we now anticipate that professional services adjusted gross margin will decline.

To approximately 20% in the second half of 2022.

Mainly driven by lower anticipated utilization rates as our staffing levels have not yet rebalanced with our downward revised revenue forecast.

Additionally, this professional services margin pressure is driven by the anticipated mix of services to be delivered in the second half of the year.

Lastly, and consistent with what we shared on our last earnings call.

We continue to expect seasonality in our operating expenses.

Especially in the third quarter related to the to our healthcare analytics summit.

Which accounts for approximately $3 million of in quarter sales and marketing expense.

As well as the timing of certain other non head count operating expenses throughout the year.

Lastly, we anticipate that the cost efficiencies, Dan referenced pertaining to our updated and prioritized operating plan.

Drive savings as we enter into 2023.

Although some of the cost savings initiatives will not be completed until towards the end of Q4 2022.

With that I will conclude my prepared remarks, Dan.

Thanks, Bryan in conclusion, I would like to recognize and thank our highly engaged team members.

For their continued engagement commitment and dedication even in challenging macroeconomic circumstances.

And with that I will turn the call back to the operator for questions.

Ladies and gentlemen, once again, if you have a question or comment at this time. Please press star one.

Multi pad.

Again, Thats star one one standby, while we compile the Q&A roster.

Our first question or comment comes from the line of Anil.

And Samuel from J P. Morgan.

Hi, Thanks for taking the question.

Hoping maybe you could provide just a little bit of color on the enterprise customer that you lost how big it was was it a non renewal or did they break a contract and maybe just a little bit of color on what the rationale was there for them for them deciding to move on.

Yeah happy to address that thanks Annie.

So.

As we mentioned in the prepared remarks it was a recent.

Large enterprise dos subscription clients that we added during the COVID-19.

Endemic during the early stages of the pandemic.

One of the challenges that we faced as a result of that.

Not being able to do any sort of in person.

Implementation team.

Related actions was some delays and the.

The actual implementation of the data platform.

And we here.

And from those <unk>.

As it relates to that implementation process.

And there were a couple of specific elements that happened there first it took longer than we anticipated and longer than it normally takes to get the data platform up and running and an important part of the ROA.

Associated with partnering with health catalyst is the ability to sunset other data infrastructure and the delays and being in a position to sunset that.

That homegrown data infrastructure was one challenge in the <unk>.

Delays also also then impact our ability to get to the use of the data and analytics to drive measurable improvements from a financial ROI perspective, and so as the financial pressures and came in to this health system client and we haven't yet gotten to the point, where we had retired and realize.

Some savings from the.

Homegrown system.

Made the decision to.

To get to the savings another way through to the ending of the relationship that was certainly unfortunate for us. It has been an isolated incident and were striving to learn from that experience as Bryan mentioned in the prepared remarks. This is a client that represented a little over a $1 million a quarter.

In terms of the subscription value of the contract.

Alright, then, yes, and just to add to that any so so for us in terms of the size.

Think about it is roughly a little over $6 million of.

Value most of which is on the technology side.

So it is a material customer from us for us it's good to think about it.

Top 10 customer across our enterprise customer base and this was essentially to Dan's point of non renewal that they came up upon and decided.

To shift toward the in house kind of option there.

Okay. Thank you that's helpful color and then I was hoping you could maybe just talk about the decision to initiate a share repurchase program versus investing in the business doing M&A, what catalyze that and what went into that decision.

Absolutely so as we thought about.

Our capital strategy as a board and as a leadership team one of the things that we benefit from is a very strong balance sheet with ending the second quarter with over $400 million of cash and cash equivalents and as we have an updated view of the M&A landscape in an environment and an updated view of our.

Progression towards profitability and the establishment of.

Positive free cash flows we felt comfortable with a modest share repurchase program up.

Up to $40 million range that.

That reflects our view that the current value of the shares.

Has a disconnect between that and the <unk>.

Intrinsic value that we believe.

Exists in the shares and therefore represents a good use of our capital to to reduce some of the dilution thats occurred since the IPO.

And likewise still leave us with a very strong balance sheet and the ability to continue to pursue M&A.

Financially disciplined strategically disciplined.

Or like we've tried to do these last several years as a company as well. So those were some of the elements I think.

Also informed by the fact that we continue to make really meaningful progress from a profitability perspective, we have confidence in our ability even.

In a near term slower growth environment to continue to make that really meaningful profitability progress and as such.

We have the balance sheet strength that we need in the rooms too.

We've got board authorization for share repurchase.

That's great color. Thank you.

Thanks Anthony.

Thank you. Our next question or comment comes from the line of Jared Haas from William Blair.

And thanks for taking the questions I guess I appreciate all the detailed commentary here about kind of the revised outlook I guess, maybe just sticking with that point for my first question I'm just sort of curious.

I guess what changed that you are seeing in the end market because I think a lot of these <unk>.

Financial strain issues are you thinking about labor and workforce and supply chain I think a lot of those have been present now for a couple of quarters and so I'm just sort of curious what you saw in the market that would really be incremental or new that led to the revision in your outlook I guess it's.

All that has to do with Q2 being kind of more of your heavy selling season. So those.

Impacts were just a little bit more pronounced during those conversations, but just curious to hear.

Any thoughts around that first.

Yes happy to share a few thoughts Jared so one of the dynamics that's been interesting for us to observe with our health system clients as that actually 2021 was a fairly strong and robust year financially for most of our health system clients.

A combination of factors.

That influenced that but.

But coming into 2022, there were a couple of factors that were hard to anticipate we are hearing some keyboard typing and by the way in the background I don't know if others can go on mute.

There we go perfect. Thank you.

So there were a couple of factors coming into 2022 were hard to anticipate one of them was the <unk>.

Spike in the Omicron variant of Covid, 19, which had a material meaningful negative impact.

On the financial.

The performance of these health systems and likewise.

<unk>.

Came into focus a better sense for the impact.

Higher labor costs are much higher.

Supplies costs through inflationary pressures along with the fact that the annual increases on the revenue side, we are much more modest.

When our observation and discussions with our health system clients was that the first half of the year was really when they discovered that many of them were underwater financially from an operating margin perspective.

As a result.

Really late in Q2 is when we started to find that many of our clients and prospective clients were starting to put into place mitigating measures to try to adjust for the fact that they were struggling.

Perfect.

Also still hearing that keyboard noise in the background by the way.

And so late in Q2 is really Jared when we started to to hear more of our clients trying to adjust to that reality of being underwater provided.

Financial pressure perspective, and having a dialogue with us about how to work their way through our observation is that the the financial pressures are starting to subside. We're seeing some anecdotal evidence I think theres. Some third party research that suggests that health systems financial.

Circumstances are improving but that can take time and that appears to be a more gradual improvement and so we've tried to be sensitive to that as we think about our projections for the second half.

Development standpoint.

Speak more to near term financial ROI.

And savings opportunities for our customers and prospects and those include things like our financial empowerment suite revs.

Our revenue cycle offerings cost and labor offerings are some of our population health offerings that speak more toward financial ROI as well as some some of our outsource services offerings that can offer near term savings. So those will be areas that as we move forward in a prioritized way in a disciplined way with our spend that we'll continue to emphasize.

And this type of end market environment.

Sure.

Context, and then I guess, just one quick follow up for me.

I appreciate some of the longer term commentary you gave around EBITDA and free cash flow by 2025, I believe was the target.

I just wanted to add a little layer to that is there an underlying assumption for organic growth. There is that sort of predicated to getting back to kind of your normalized expectation that used to be kind of in the 20% range is it predicated on getting back to that at a certain point in time or does it kind of assume that maybe some of these headwinds persist for a while.

You may be continuing a little bit of a slower growth environment. Thanks.

Yes, great questions Jared so as we made that commitment it was with an understanding of realization that some of these financial pressures that our health system clients are facing will take some time to work their way through that today, we're not we're not changing that long term perspective.

We've shared in the past of that 20 plus percent growth trajectory, but we are recognizing that it may take some time.

To ramp back up to that kind of growth trajectory and our commitment from an EBITDA perspective, and a free cash flow perspective.

It is a commitment that crosses across a spectrum of ways in which that ramp may occur from a growth perspective. So it's not dependent on any specific growth scenario, we're making that commitment that we can we can achieve that EBITDA.

<unk>.

Margin percentage of 10% and be free cash flow positive.

Even in a lower growth scenario, then that long term growth.

Long term organic growth.

<unk> of 20% and just to add to that answer so in the prepared remarks shared we did share that we do expect an impact on our growth rate into 2023 based on this updated bookings expectation for 2022, which kind of in a recurring revenue model rolls onto the P&L next year.

And we're not giving a specific range there on 2023, yet because there are a few factors that will play into that including our bookings performance next year, which generally we would expect to improve as health systems.

Financial situation continues to improve so we do view 2023 is a trough year, a low point in terms of our revenue growth profile, but.

But to Dan's point, we expect to ramp back up and as Dan mentioned that exact ramp is a little bit hard to determine based on the macroeconomic environment, but but as he said generally expect to continue to ramp towards that long term.

Gross growth rate.

Thanks again for all the color.

Thanks Sharon.

Thank you our next question or comment comes from the line of Elizabeth Anderson from Evercore.

<unk>.

So much of the question.

You mentioned some customers that are cutting services are sort of rethinking through how they're working with you could you provide a little bit more color on sort of how that generally been.

Impacting and I don't know.

If you have this number at your finger tips, but do you have the dollar based retention number like X that one customer loss.

Yeah. Thanks for the question of asbestos so I'll speak to the first item and then Bryan if you'd like to add any.

Specific commentary as well so as we mentioned in the prepared remarks.

We continue to benefit from long standing deep relationships with our enterprise dos subscription clients, many of whom have more of an enterprise wide.

Subscription to our solutions and that continues to be very robust.

As we mentioned in the prepared remarks, we have seen among some of our more modular clients. Some trimming back both on the technology side.

For those modular clients and then more broadly.

With regards to our services, we have seen a little bit of trimming back in terms of the number of ftes that our clients are requesting during this.

Temporary time of more.

More elevated financial pressure as we mentioned in prepared remarks that reminds us.

A number of ways to the pressure that our clients are under in the first half of 2020 and.

One difference between now and 2020 as we haven't been offering any discounts from a professional services perspective, but we are seeing some similar trimming back.

Among our broader client base on the professional services side and then I'll.

Outside the one enterprise dos subscription client churn that we referenced earlier.

The other category of technology.

The reduction that we're seeing is more in that modular client space, which as we've mentioned previously we've always known is a little bit different space, where they're not quite as deeply committed to health catalyst.

Long term is.

As compared with those more broad enterprise dos subscription clients.

Just to add to that to your question Elizabeth.

If you think about kind of the impact of that enterprise dos customer on a retention rate. So historically, our retention rates have been in the 107% to 109% range, a little higher than that last year.

The enterprise customers a few points you could think about it is that the impact to that retention rate and then as we shared our overall expectation for 2022 is to be in the mid to high <unk> for our dollar based retention rate.

<unk> technology and services and so the difference there would be the type of kind of trimming that dan's mentioning on the on the tech side the modular.

Customers in particular and on the services side more just kind of re budgeting exercises and an average kind of a pullback in terms of the usage of our ftes.

Got it that's super helpful and just.

I heard you say hey go unlike in the Covid time, you guys are not changing pricing right now.

A reduction in Ftes, but youre not that temporary discount then obviously you gave some people in the height of Covid that is not something that you Don or is that should be something that you would contemplate.

It's not.

It is a little bit we still enable that flexibility as you know Elizabeth, especially on the services side, where customers can ramp up and ramp down their FTE usage with us and so that's more so what we're seeing is on average just a little bit of trimming in terms of the usage of our of our team members.

Got it.

Thanks Elizabeth.

Thank you. Our next question or comment comes from the line of Stephanie Davis from SBB Securities MS. Davis Your line is open.

<unk> opened to a comment as well look at that.

Yeah.

So I'm curious does thank you and kind of a tale of two cities.

Number of large wins intra quarter, but the macro commentary in the call.

Yeah David.

Was there any reason suddenly be bear.

<unk> systems, we're getting across the finish line.

As a last minute sprint or a greater need in this macro backdrop for your CFO solution.

Or is it just kind of a coincidence that have been closed out one.

Yes, great comments last question Stephanie.

Insightful question so.

I think there were a couple of factors and as you know we tried to be data informed and this is still a small end and so we don't want to extrapolate over extrapolate but.

As it relates to some of the recent customer wins that were announced like for example life point was a large.

A large contracts and a large relationship now that's a relationship that we've been contemplating and discussions that we've been having for multiple years with.

<unk> point, and we actually were familiar with them in terms of <unk>.

Providing them with some services through our interoperability solutions, but that's.

That's been a multiyear conversation with them. It is true however that.

Components of our solution that were of particular interest to them are also very helpful. Within.

Financially strained environment and they did I believe I. Appreciate the fact that we had some near term hard dollar ROI opportunities to help them.

Navigate through this particular timeframe, but also I think informed in our multiyear discussions was a desire to have a very long term deep partnership with them consistent with what we strive to do with each of our enterprise dos subscription clients and that seem to be more of a consistent theme that we have.

See through different economic cycles that wasn't particularly specific to to what health systems are experiencing today.

So with that in mind, what does that do their philosophy on head count.

Is it possible to be bad some folks from one project to another as the macro backdrop moats around or.

One more of a need to cut back.

A question or a different sort of focus area or the current environment.

Yes, so as you know Stephanie we care deeply about our team members and.

We do keep a focus a central focus on that relationship with our team members and strive to find ways from a cost.

Perspective, a cost management perspective to continue our relationship with our team members and to prioritize that it doesn't always work out like the decision to pause the life Sciences business. For example, as you might imagine impacted team members.

We've tried it out catalyst over many years to be very thoughtful and careful about.

About doing all that we can to continue that relationship with team members. So for example in the professional services space, even though our utilization rates are a little below in the near term, where we would have forecasted.

Consistent with the brand's prepared remarks, we plan to just grow into the right utilization levels there.

Other than.

Near term layoff for for example, and that's consistent with the approach that we have taken for many years as it relates to our teammates and likewise there are some other ways in which we can be flexible in terms of.

Slowing our backfill.

<unk>.

I'm in a position for example, where I could voluntarily and have voluntarily reduced my compensation to help us just bridge through some near term.

<unk>.

Yes.

<unk> of our clients.

Science experiencing this financial pressure, but then also enabling us to be able to to keep moving forward with our team members.

And then be in a position to continue to make the right investments from an R&D perspective as well. So those are some of the actions that we're trying to take.

That's awesome demand at this dose in the Gallup great. Thank.

Thank you guys.

Thanks, Stephanie.

Thank you. Our next question or comment comes from the line of John Ransom from Raymond James Your line is open.

Hey can you hear me.

Yes.

Sorry.

I did take my phone out.

So just.

It's curious to me at least a pause now from the hospital hospitals not do that.

<unk> been under distress.

So why are they now.

<unk> do you think gets the burn off of Covid money.

Because it seems like this should have happened.

A year ago or more so what whats what's happening now that's different than a year ago.

Okay.

It's a great question, John and I've I've been exploring that in conversations with C suite executives over the last month to six weeks to try to better understand why is it that now feels different than even three months ago for example.

Here are the kind of the most.

Most salient data points that have that have resonated with us so one.

There were some elements that we're really hard to anticipate hard to forecast coming off of what turned out to be a pretty robust 2021 for most of our health system clients and to your point John one of the elements of that robustness was meaningful support from the federal government for example in the form of a specific.

Covid related funds. So they are coming off of a robust year in 2021.

The other con Spike in Q1 of 2022 was not something that most organizations ours included.

Forecasted.

The acuity level on the significance that it actually occurred.

That was a significant financial component and then I think.

The way in which.

The very high in a number of cases double digit percentage increases year over year, and labor costs and supplies costs without the commensurate.

Similar support from government subsidies.

That may have existed in 2020 in 2021.

Really hit the P&L at the same time.

For these health system clients in early 2022, and then having a little time to process that had occurred and realize.

The extent to which they were underwater really didn't hit for most of.

The health system client that we were deeply with until sort of late Q2.

The realization of where they were.

And the realization of the importance and the need to make financial adjustments really started hitting in sort of a late may.

And into June and July Timeframes, where that was when we started to have those conversations with our clients and prospective clients to say Wow.

We need to make some adjustments here to get back above water to get back above a breakeven operating margin and our sense is as we mentioned earlier is we're seeing progress in terms of the financial help progressing of our of the <unk>.

<unk> system community.

But it's going to take some time and many health system clients that we're working with are still not quite above breakeven from an operating margin perspective progress but.

And Q2 was better than Q1 certainly.

But it's going to take some time and so we wanted to be sensitive to that we try to take a long term view of the relationship with our clients and meet them, where they are and be helpful. With what they need right now and that's why we've been willing to to support the trimming back some initiatives to delay some initiatives.

And then also to reemphasize some of the components of our solutions that can deliver more of those near term a hard dollar ROI components like our financial empowerment suite like Tech enabled outsourcing for example to make sure that we're doing what they need.

To receive right now.

So.

The rhythm of hospital capital budgets are.

Are they planning the fall when you think about 2023, so do you think.

23 decisions will be informed by the reality of Q1, 'twenty two and there'll be constraints. That's really we're probably looking at Q, probably 2024 before.

But Matt loosen the purse strings or is that an overly bearish reading of the landscape.

Well, it's hard to tell.

And I think you've got you've got some puts and some takes going on here John So so so on the negative side I think there is a greater realisation like I said in the May June July timeframe that early in 2022, there was a lot of financial pressure and a lot of negative operating margin.

So health systems have a better appreciation for that at the same time.

They are also seeing meaningful improvement and so that's that's a positive factor.

To inform where they might think about in terms of budgeting for 2023, it's hard to exactly predict how that will play out.

But we're trying to factor in that there will be some headwinds in the second half there will be some headwinds that likely do impact 2023 decision, making and.

And that's why we wanted to be a little bit better prepared for this taking some time to work its way through and just to add to that there are some specific elements to us as well, where we would expect improvement in 2023. So for example, the large enterprise dos contract loss that we had in the first half.

Like we mentioned, we do view as isolated events were highly focused on our project management and implementation Timeframes for recently other customers and so that on its own should be a benefit to us we wouldn't expect next year and so to Dan's point. It can take some time, but we're expecting.

Bookings improvement in 2023 compared to what we're seeing in 2022 and to that point, Jon I would add we.

We would anticipate second half of 2022 bookings performance to be better than first half as we mentioned in our prepared remarks, but anticipate 2023.

To likely show some additional improvement, we're watching and gathering data to understand that at a more detailed level.

So last one for me I would assume the life point.

Contract is better than the typical.

Hospital system contract that are much bigger organization. So if we said.

We didn't contemplate light point, but we didn't contemplate this dos loss that maybe that's a push.

And so what's going on and Thats, an assumption on my part so what's going on.

And the rest of your commentary, especially just a degradation in the.

Activity among your existing clients, that's also being factored in to your guidance.

Yes, so a couple of thoughts there.

We are certainly excited about the lifetime relationship and would agree with your assessment that Thats a large relationship that we're beginning there with five point and there are a large health system and so that is exciting and put them kind of in that same category as some of the comments that Bryan made about the large client that we.

We recently experienced churn with so would agree with that general assessment I think.

The other piece of that.

We would sure as context in detail would be on the technology side, we have seen some trimming back mostly <unk>.

<unk> focused around those modular clients that are a little bit less deep and their relationship built catalyst and then on the services side, just a little bit of trimming back, but we would anticipate likely.

<unk> in 2020, we'll come back and that those relationships remained really strong and robust and that as the financial health of our health system clients improves we will see more of that expansion opportunity much like we did in 2021 after the worst financial components of.

COVID-19, alright.

Thanks, So much I appreciate the comments thanks, John Thanks, John .

Thank you. Our next question or comment comes from the line of Jessica <unk> from Piper Sandler Your line is open.

Dan.

Just curious to know with respect to the revised or the revised guidance and some of the tepid comments about the customer base.

How have you guys changed your sales strategy or the organization our compensation structure within your sales.

Within your sales organization to kind of better.

And market if at all.

Yes. Thank you for the question, Jeff So we.

We are emphasizing and focusing and prioritizing conversations.

Conversations around those specific solutions that deliver near term hard dollar ROI with our clients, both with our clients and prospective clients.

And that includes the financial empowerment suite, both from a revenue side, making sure that we're capturing all the charges that debt.

That we should be paid for with our charge Master management solution through through the <unk> acquisition.

And on the on the cost management side that were using power labor, we're using power costing to really deeply understand how we're doing with regards to our large cost components that were utilizing them that we're that we're managing them in the best possible way and then as we mentioned with Tech enabled outsourcing is another example, where we're seeing.

<unk>.

The need for these clients to generate budget savings in the near term and that's one of the components of that solution protect enable outsourcing as we can usually guarantee hard dollar budgeted savings within a relatively short period of time through the outsourcing of certain functions like charter.

Traction and so we are shifting our sales teams and our client account teams are focusing on those messages with clients and we're trying to provide that support to them to make that shift another you've kind of changed Jeff.

We are re emphasizing and focusing on as well.

A little bit less directly tied to kind of the more traditional sales force and team, but it is actually tied to our to Dan's point, our customer success and account management functions. We're now part of what we're seeing this year to Dan's earlier comments is some trimming and pullback on the technology side of more modular components to what we do or more narrowly focus.

Scope there.

So we are re emphasizing and focusing on how can we measure and track and drive improvement and drive.

Progress across all of those customers, including some that are smaller than our typical enterprise dos customer base and so that customer success focus will be a big piece of that going forward to ensure that we continue to drive net expansion and future.

Got it that's helpful. And then I guess, just two quick one or two more quick ones for me.

As we think about just your annual recurring revenue or the expansion within existing customers is that sort of moderating. In addition to just net new adds and then should we think about the average revenue per <unk>.

Our new customer signed as being sort of.

Lower for the next several quarters or maybe yes, maybe even into 2023.

Yes, so couple of thoughts there so we are.

Whereas we mentioned in the prepared remarks, seeing one dollar based retention rate.

That is lower than what we would have originally forecasted for the year.

We're expecting the mid to high <unk>.

And so that would have impact kind of where we are with regards to our existing clients.

We do believe that just like we did see a couple of years ago as our clients get through their financial pressure, we expect them to continue to expand that relationship over time, but in the near term that's what we're seeing on the existing client side and on the new client side.

As was mentioned earlier some of our recent.

New client additions were.

Fairly large and.

Larger than.

Our historical averages in some cases so.

I don't think we would suggest thinking differently about what we've communicated historically in terms of.

The starting point.

Our new relationship being in that $1 $5 billion plus range on the new client side.

But rather that we.

We did share in the prepared remarks, a lower number of net new dos subscription clients for this year would you expect that the second half or 2022 from a bookings perspective will sort of be the low point for us.

Which will then translate into our P&L low point from a growth perspective in 2023, and then building back up in.

In 2024 and beyond towards that longer term growth profile that we've talked about and we did mentioned Jess in terms of the net new dos subscription adds first half compared to the second half. So we added a few in the first half.

A few in the second half net however, there are a few life sciences dos subscribers, where they were kind of testing the dos functionality in certain life science has use cases that we will have we will wind down in the back half of the year and that will impact our net net new dos subscription customer add.

There is a fairly low value for those dos subscription customers in the life Sciences side. So we do not we did want to point that out as well as you think about modeling kind of the back half of the year ads.

Okay got it that's helpful. Thank you guys.

Thanks, Jeff.

Thank you. Our next question or comment comes from the line of Richard close from Canaccord Genuity. Mr. Close your line is open.

Yes, thanks for the questions.

Maybe a follow up to one of John's questions or your answer to one of John's questions.

With respect to.

The delays are.

Our people dropping out of the pipeline or are they still warm and just waiting for a quarter or two I think you said you expect some to come back.

Curious if you can quantify.

Yes.

Degree that people dropped out or are still.

Talking to you guys.

Sure Richard So it feels more like delays as opposed to dropping out so our pipeline. Today. For example is larger than it was at the first of the year and you would expect that to be the case, if folks are delaying but there's still that opportunity to expand or to begin a relationship and thats.

More of what we're experiencing as we mentioned in the prepared remarks, we haven't seen a degradation in our win rates but.

But we are seeing any obligation in the timeframe within which clients and prospective clients are making decisions.

Okay.

And with respect to life point, obviously a big.

Customer can you talk a little bit about the.

The timeline on light point in terms of.

The rollout there within that.

Footprint.

Yes. So we were very excited about that relationship. We're excited about the rollout of that relationship as well as is typically the case, we will start our relationship with the client focused on the rollout of the data platform and.

Last point, we are taking advantage of some new.

Investments that we've made in and really robust modern.

Data architecture, there that they can then ticketed take advantage of so we've started with the data platform, but we also have some specific use cases as it relates to variation reduction to other pop health and clinical.

<unk> initiatives that we're excited to follow quickly on the heels of the implementation of a data platform and time to value has been a real focus for us and we're excited about the progress that we're already seeing there and our ability to to get to time to value.

At a significant level just to add to that from a financial standpoint, Richard So.

So the customer signed in Q2, we have started to ramp up the professional services revenue in Q3 and that will continue to ramp into Q4.

From a technology standpoint, there is typically a delay from contract signing to go live of the platform. So.

We don't expect much.

Q3 contribution on the technology side, but that will start into Q4 and beyond.

Okay, and I guess I'm more interested in.

So like 60, some odd hospitals or something is it like a staggered start.

Or is it like a big Bang.

Sure.

Just curious.

Yes, I think more of the latter so we're focused from a data infrastructure perspective at an enterprise wide level and so well.

We're contemplating ingesting data from from enterprise wide sources that then can feed the first few use cases that we're most focused on that are also more system wide focus areas.

Okay. Thank you.

You bet. Thanks Richard.

Thank you. Our next question or comment comes from the line of Daniel gross light from Citi. Mr. Gross like Youre line is open.

Hi, Thanks for taking the question.

You mentioned you expect mid to high single digit bookings this year a few in the first half a few on the second part curious.

Curious if you can provide a little more color around the cadence for that do you still expect more if do you expect now more to be added in the second half versus the first half.

I know you have those life sciences.

Clients Rolling off but can you just help us think about the cadence and how much should we assume.

Goes into <unk> versus <unk>.

Yes, I think from a first half second half perspective, youre thinking about it right Daniel.

Given that.

We will be replacing an effect some of those life Sciences few of those life Sciences dos subscription clients with with new clients, we are forecasting and expecting that we will add more gross new clients in in the second half.

Relative to what we experienced in the first half.

As it relates to Q3 or Q4 as we've mentioned previously we do have some seasonality in our sales processes with Q2, and Q4 typically being more heavily weighted than Q1 and Q3, yes, thats, what wed expect and we do have kind of upcoming in Q3, our healthcare analytics summit in September Daniel Dos.

Serve as a great opportunity for us to talk with late stage prospects as well as generate new opportunities and hear feedback from our customers. So that'll be an important catalyst in touch point to Dan's point as we get into the Q4 kind of more material selling season.

Yeah makes sense, Okay, and then you mentioned <unk>.

Shouldnt expect to see any kind of degradation in the $1 5 million starting point for most new ads.

It would seem that most new clients would opt for the modular or the skinny bundles just given.

The financial pressures, but.

I guess, what the starting point not changing much it seems like youre not seeing much of a shift from the all you can eat model to the more modular modular models is that writing.

I guess, what's behind that assumption given.

It seems like that's an easier.

For you guys.

Yes, it's a good question, but I think youre thinking about it right Daniel.

While we see a small portion of our pipeline focus is a little bit more on that lighter version the more modular version and we still see a large portion of our pipeline focus more at an enterprise wide level and I think there are a few reasons for that while on the one hand the <unk>.

Actual near term investment that's required upfront to begin a relationship with health catalyst as smaller with the light version.

The savings and the ROI.

Can be much more substantial when you go into a deeper relationship with health catalyst and often you can run against more use cases for cost savings with a deeper.

Starting point in the relationship and so we think those are all being factored in and reasons why we see elements of our pipeline.

Our inclined towards towards either of those value propositions and what we are seeing Daniel was more so not necessarily.

A shift in terms of their focus from prospects on the size of the relationship but more so to Dan's earlier commentary shifts in terms of what is more near term focus for them. What is the most important kind of near term.

Financial ROI that they can generate so we are trying to emphasize those types of solutions that we offer revenue cycle costing labor solutions.

Outsourced services solutions, both for our enterprise prospects as well as for the more dos flight offerings.

Makes sense, thanks for the color guys.

Thanks, Danielle thank you.

Thank you. Our next question or comment comes from the line of David Larsen from <unk>. Mr. Larson Your line is open.

Hello. Thank you for taking my question. This is Aaron on for Dave.

I had a question regarding your.

I guess demand for your new solutions twists, all Kpis Ninja mixer, our hospital customers spending on these solutions and then in terms of M&A, what would you like to add share offering.

Specifically in the value based care space.

You mentioned a lot about revenue cycle management labor costing but are there additional solutions that youre targeting in value based care initiatives. Thanks.

Yeah, Great question Erin so.

First as it relates to demand for our new solutions. We are pleased to see continued demand.

I think I would characterize also a similar pipeline dynamic that we're seeing more broadly that.

There are some delays based on the financial pressure.

With system clients and prospective clients are facing not so much that they're canceling, but rather that they are delaying their postponing taking a little bit more time to select but we continue to have meaningful pipelines.

In those areas of our new solutions, we were pleased with that as it relates to the second question from.

From an M&A perspective, we do turn we do keep our ear to the ground and we are continuing discussions across a variety of of areas of potential interest and that includes in the value based care space at the same time as we mentioned in our prepared remarks, we mentioned previously we do intend to stay very financially disciplined.

And there are still some persistent disconnect between public market and private market valuation expectations and so we're cognizant of that and we've also as we shared in our last earnings call I have been fortunate that we have.

<unk> acquired six organizations over the last two and half years and Theres plenty for us to do to really deeply integrate those solutions and ensure that we are enabling all of our shared clients to benefit from that.

Our full portfolio of what we can offer so there is lots of work for us to do we're pleased with the solution set that we have the robustness of the portfolio that we have in and Theres plenty of work for us to do to continue to focus there and Thats why as we shared in our prepared remarks.

We wouldn't anticipate a lot of M&A activity in the near term, though we still believe in the long term that M&A will contribute to our strategy.

That's very helpful. A quick follow up in terms of the.

Right.

Hiring environment, I know that impacted more professional services.

Business.

Do you foresee any sort of potential compensation increases that you're retaining your employees or other measures that you're taking to too higher.

In this business.

Yes, so we.

We we maintain a focus through business cycles on our team members and their engagement and.

Part of what we're observing and I think many companies are seeing this as there is some softening in the in the labor environment right now with <unk>.

Many companies announcing layoffs.

Or hiring freezes or downsizing.

<unk>.

And yet that doesn't change our focus on on our team members and their engagement.

We have a permanent focus there and we listened carefully to our team members and try to prioritize those elements of compensation that are most important to them.

And we're going to continue to do that.

This last planning cycle for example, we.

We included meaningful base salary increases for team members and.

That was a helpful foil against the high inflationary environment that they're all experiencing we anticipate doing similar actions in this next planning cycle, even in the midst of meeting to pullback and streamlined in some areas. So that we maintain our ability to to make really mean.

<unk> profitability progress, but we're still going to prioritize elements like base salary increases for our team members.

So that we remain competitive and we keep our commitments to our team members as it relates to their competition as well and that's certainly helped US we've we've seen.

Through the first half of this year actually a reduction in the turnover rates and they were already a fraction of the industry averages and as we mentioned in the prepared remarks, we were pleased to see even an increase in our engagement scores up to the 97th percentile.

As of July and so we will keep our focus there we've benefited greatly from a highly engaged team member base and we want to keep it that way. We also continue to diversify our team member base and talent pools. So we do now have with our kind of keep your eye and Ninja acquisition a.

Our talent pool in an office in India.

And that is part of our strategy in terms of driving cost efficiencies and continued profitability to Dan's point is to continue to leverage and utilize.

A variety of talent pools kind of across the globe to deliver on customer engagements as well as to continue to build from an R&D standpoint.

Okay.

Thank you.

Thanks Aaron.

Thank you.

Our next question or comment comes from the line of.

<unk> <unk> from Guggenheim Partners. Your line is open Sir.

Hey, Thanks for taking my question I just had one.

In the first quarter call you mentioned challenging end market conditions, but reiterated guidance. Since then did the market get materially worse or where are you hopeful that the market would see your value prop as a way to provide a way to help providers to operate more intelligently inefficiently.

Yes, great question Mohan so.

In the first quarter call as I as I mentioned previously I think the conversations that we're having with our C suite executives at clients.

Still.

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