Thread by @Samdtoole

1) Today, we’re diving into Health Catalyst (HCAT) — a data and analytics business that helps top health systems in the US run more efficiently.

Despite being a public co, HCAT is a classic example of a healthcare company that most people have never heard of…

#digitalhealth

2) HCAT was founded in 2008 by co-founders Tom Burton and Steve Barlow who met at @Intermountain and grew frustrated by the lack of data used to drive the health system.

In the simplest terms, they founded HCAT to reimagine and improve healthcare through data.

3) So what does this actually mean? HCAT helps orgs manage and understand data so they can reduce administrative waste, better manage cost, & improve clinical outcomes.

Although a bit of an eye-chart, this helps highlight all of the different parts of an org that HCAT touches

4) There are multiple tailwinds that are driving HCAT's growth as health system prioritize new data and analytics solutions — rising healthcare costs, the transition to VBC, increased health data complexity, and a plethora of operational and clinical inefficiencies

5) HCAT consists of 3 main products a 1) cloud-based Data Operating System (“DOS”), 2) analytics software, and 3) professional services.

HCAT has understood the limitations of their customers from the start and have incorporated consulting services as a core growth driver

6) By providing a holistic solution consisting of data, analytics and services, HCAT is well positioned to capture meaningful share of this $8B market.

Today, competition mainly stems from home grown solutions at health systems and EMR vendors including @Cerner and Epic.

7) Going deeper into HCAT's main product — DOS is a data platform that contains more than 100m patient records.

DOS provides an open and self-service interface for database-level querying & custom analytics use cases making it easy to ingest and analyze massive amounts of data

8) Currently the business has a market cap of $1.4B. Prior to IPO, the company raised $427m from investors including @transformcptl, @NorwestVP & @sequoia. HCAT went public on August 10, 2021 at $53 / share but has since lost ~50% of its value trading at $26.68 as of March 4th

9) With 90%+ recurring revenue, DOS drives the majority of revenue & the company uses its DOS customer count of 90 (vs. 450 total customers) to measure market penetration

With ~1,200 health systems & risk bearing orgs in the US, HCAT has penetrated only 7.5% of the market

10) Today, HCAT works with orgs like @UPMC and @MassGenBrigham

One risk to highlight is HCAT's customer concentration — the top three customers contribute 18% of revenue! But, due to the quality of the product and high switching costs, current net dollar retention is 112%

11) From a financial perspective, HCAT booked FY21 revenue of $242M, with a 61%/39% split across tech & professional services

The 20% YoY rev growth lands at the midpoint of mgmt’s long term guidance for top-line growth and the company is tracking to hit EBITDA breakeven in '22

12) Over the past year, the company has seen a large increase in demand for its population health and financial empowerment solutions as there continues to be a heightened focus on value based care and revenue/cost optimization in light of Covid-19

13) To help drive additional growth, HCAT has an active M&A history and currently sits on top of $400M in cash.

Management has positioned the company well to be a consolidator over the long-term, with a core focus on the application layer, and we expect more M&A in the future

End) Although HCAT hasn't been treated well by the public markets yet, it's clear there is enormous growth potential in a market that is desperate to modernize their data and analytics capabilities

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