Health Catalyst CEO says health systems need robust data and analytics to combat the 2nd COVID-19 wave

Financial earnings increase
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Health Catalyst's revenue grew 28% in the first quarter to reach $45 million, but the company reported a quarterly loss of $17.5 million.

A year ago, the Salt Lake City-based company reported revenue of $35 million and a net loss of $13.7 million.

On a per-share basis, Health Catalyst said it had a loss of 47 cents in the first quarter of 2020. Losses, adjusted for one-time gains and costs, were 16 cents per share based on the weighted average number of shares of 37.1 million shares. 

The results surpassed Wall Street expectations. The average estimate of five analysts surveyed by Zacks Investment Research was for a loss of 25 cents per share.

The data and analytics company's revenue outperformed its previous guidance and also beat Street forecasts. Six analysts surveyed by Zacks expected $43 million.

During a first-quarter 2020 earnings call Tuesday, Health Catalyst CEO Dan Burton reported the company's adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter was a loss of $6 million, which shows an improvement from a loss of $6.7 million for the same period in the prior year. 

"The outperformance relative to the midpoint of our guidance was driven primarily by new customers and expansion contracts signing earlier in the quarter than expected, increasing the revenue we were able to recognize within the quarter," said Chief Financial Officer Patrick Nelli.

Technology revenue was up 23% to $24.7 million, and professional services revenue was $20.4 million, an increase of 36% year over year.

In the first quarter of 2020, adjusted operating expenses totaled $28 million. As a percentage of revenue, adjusted total operating expenses were 62%, compared to 71% in the first quarter of 2019. 

RELATED: Health Catalyst reports 2019 revenue up 38%, Q4 earnings beat Wall Street estimates

"While the fluidity and uncertain timeline of the COVID-19 pandemic creates some near-term uncertainty, we believe this crisis significantly highlights the need for healthcare organizations to invest in data and analytics and thus will serve as a long-term tailwind for our business," Burton said during the earnings call.

Since the onset of the COVID-19 pandemic, customers' overall usage of Health Catalyst's data platform has increased significantly, he said.

"We can't think of an event in recent history that has highlighted the value of data and analytics in real-time the way that COVID-19 has," Burton said.

"We do anticipate that health systems at an individual local level, as well as state and federal government and regulatory bodies, will significantly prioritize improving what has often been a patchwork digital infrastructure so that we can be much better prepared in the future in response to potentially a second wave of COVID-19, as well as other similar situations in the future," Burton said.

He added, "The pandemic has shined a light on the fact that a homegrown data warehouse just doesn't have the scalability and the flexibility that is provided by a commercial-grade data and analytics platform."

To support its health system clients, Health Catalyst proactively and temporarily provided its professional services to customers at a discounted rate, Burton said, resulting in lower revenue and gross margin.

RELATED: A month after going public, Health Catalyst reports 60% revenue growth in Q2

"We are also observing that many of our healthcare provider customers are being challenged financially as a result of the COVID-19 pandemic as their higher-margin elective procedures have been delayed or canceled, particularly during March and April of this year. In light of this, we anticipate that we will likely see lower levels of professional services revenue growth in 2020," he said.

For the second quarter, the company is anticipating total revenue between $40.8 million and $43.8 million, and its guidance for adjusted EBITDA loss is between $7.8 million and $5.8 million.

The company withdrew its full-year 2020 guidance.

The company released 10 technology solutions in two months designed specifically to support healthcare providers during the COVID-19 pandemic. Those solutions include a patient and staff tracker tool that offers health system clients the ability to track where patients who test positive for COVID-19 have been within the health system setting as well as which staff members have interacted with these patients.

Other tools the company rapidly developed include a COVID-19 registry, a dashboard and a capacity planning tool. Health Catalyst also has a vast platform of 80 million de-identified patient records that it can analyze to offer real-world COVID-19 insights, according to the company.

During a Q&A with analysts, Burton said he anticipates health systems will face significant financial challenges through the month of June as organizations slowly ramp back up to performing elective procedures that were canceled or postponed in March and April.

"We do believe that their recovery will take longer than just through June, for example. And as a result, as we're having these discussions, while many of them have centered around discounting that might last through May or through May and June," he said.