Welcome to the Health Catalyst First Quarter 2023 Earnings Conference Call. All participants are currently on a listen-only mode, and we will open the floor for questions after the presentation. I would like to turn the call over to Adam Brown, Senior Vice President of FP&A and Investor Relations.

Good afternoon, and welcome to Health Catalyst's earnings conference call for the first quarter of 2023, which ended on March 31, 2023. My name is Adam Brown. I'm the 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 Hunt, 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 at ir.healthcatalyst.com. 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, the impact of the macroeconomic challenges, including high levels of inflation and high interest rates, the tight labor market, our pipeline conversion rates and the 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-K for the full year 2022 filed with the SEC on February 28, 2023, and our Form 10-K for the first quarter 2023 that will be filed with the SEC. We will also refer to certain non-GAAP financial measures to provide additional information to investors. A reconciliation of these non-GAAP financial measures to their most comparable GAAP measures is provided in our press release. With that, I’ll turn the call over to Dan.

Thank you, Adam. And thank you to everyone who has joined us this afternoon. We're excited to share our first quarter 2023 financial performance, along with additional highlights from the quarter. I will begin today's call with some commentary on our first quarter 2023 financial results by assuring that we are pleased with the company's overall financial performance. Our Q1 2023 total revenue was $73.9 million, representing 8% growth year-over-year, and our adjusted EBITDA was $4.2 million, with these results beating the midpoint of our quarterly guidance on each metric. Additional financial highlights from the first quarter include our technology revenue of $47.2 million, representing 12% growth year-over-year, and our adjusted technology gross margin of 70%. Now let me highlight some additional items from the quarter. You will recall from our previous earnings calls that we measure our company's performance in the three strategic objective categories of improvement, growth and scale, and we'll discuss our quarterly results with you in each of these categories. The first category, improvement, is focused on evaluating our ability to enable our clients to realize massive, measurable improvements while also maintaining industry leading client and team member satisfaction and engagement. Let me begin by sharing a couple of examples of client improvements from recently published case studies. First, as part of its Accountable Care Organization Participation, UnityPoint Health needed advanced analytics capabilities to support its achievement of shared savings in its risk-based contracts. To achieve this goal, UnityPoint partnered with Health Catalyst leveraging our data platform and robust suite of analytics applications to develop standard analytics processes, measures and tools that are now used across its organization. This data-informed approach has driven material success in its Accountable Care Organization's risk-based contracts, including an average achievement of $35 million in annual shared savings as part of UnityPoint's next-gen ACO shared savings participation in 2019 and 2020 largely the result of improved care processes and decreased post-discharge utilization. Next, Blessing Health System, in an effort to meaningfully improve its revenue integrity and charge capture efforts, implemented our VitalIntegrity application, a component of our Financial Empowerment Suite benefiting from VitalIntegrity's rules, management system, advanced reporting, analytics, and auditing processes, Blessing Health leveraged our software to not only integrate, centralize and visualize charge capture issues but also to identify root causes and quickly address them to reduce revenue leakage. Adopting our technology enabled Blessing to increase its revenue by $552,000 in the first full year, and achieve a greater than 25% increase in charge capture team member productivity, creating capacity for increased performance audits, issue identification and resolution, while also successfully auditing 100% of all charges. As you can see illustrated in these recent improvement vignettes with UnityPoint Health and Blessing Health System, our solution continues to deliver meaningful hard dollar ROI across our client base, which is particularly important to our clients in this operating environment. Also in the improvement category, we have been fortunate to receive additional recent external recognition related to our team member engagement. For the sixth year in a row, the Women Tech Council named Health Catalyst to its annual Shatter List, the Council's list of technology companies with active programs leading and accelerating progress towards breaking the glass ceiling for women in the industry. Our next strategic objective category is growth, which includes beginning new client relationships while also expanding existing client relationships. Related to our current selling environment, I have now, over the last 10 months, personally had over 130 opportunities to visit face to face with senior executives at our top 100 clients. As I along with our growth organization, have synthesized recent feedback from our clients and prospects, I would share that we continue to see similar headwinds and tailwinds related to our growth in 2023. As what we shared in our recent Q4 2022 earnings call. As it relates to headwinds, our health system end market continues to experience meaningful financial strain, primarily due to significant increases in labor and supply costs without a commensurate increase in revenue, leading to substantial margin pressure. We continue to anticipate this dynamic will persist for the next few quarters. Translating this to our business, we have seen a decrease in pipeline demand in some realized and anticipated elevated churn levels, primarily for the parts of our solution portfolio that do not offer near-term financial ROI, such as our clinically focused technology offerings, and our more traditional consulting professional services. As it relates to tailwinds, while we have seen that the financial strain has continued to pressure our system budgets. In our recent sales conversations, we have also received strong acknowledgment that our portfolio includes solutions that directly reduce health systems current financial pressure, especially related to the segments of our offerings that have a clear near-term financial ROI, such as our tech-enabled managed services offering, our financial empowerment technology suite, and components of our population health technology suite. Likewise, as I step back and reflect on our progress over the last few quarters, I am confident that our go-to-market focus on strategic, demonstrable ROI solutions is resonating across our client base, and that the breadth and comprehensive nature of our end-to-end solution is well suited to serve our health system end market in this current market environment. Influenced by the headwinds and tailwinds that I just described, Q1 2023 overall pipeline development and bookings conversion rates, inclusive of tech-enabled managed services performed largely in line with expectations. And our sales pipeline continues to support the 2023 bookings expectations shared on our most recent earnings call. As such, we are reiterating our 2023 bookings expectations, inclusive of net new DOS subscription client addition in the low double digits, and $1-based retention rate between 102% and 110%. Related to our full year 2023 bookings expectations, let me share some additional commentary, which largely aligns with what we shared on our recent Q4 2022 earnings call. First, we continue to anticipate a higher proportion of our gross bookings will come from our existing client base, as compared to historical levels, inclusive of upsells to both our DOS client base, as well as upsells to our over 400 other more modular non-DOS clients. Aligned with what we shared last quarter, this expectation is driven by the current end market dynamics, in which we have observed that many existing clients who have already realized a strong ROI and are aligned on a long-term partnership framework tend to be more receptive to expansion conversations in this financial environment. Next, we continue to anticipate our 2023 Professional Services dollar-based retention achievement will be higher than our technology dollar-based retention rate, largely driven by our tech-enabled managed services expansion achievement to date, and pipeline. Additionally, we anticipate that the elevated technology churn levels primarily for the parts of our portfolio that do not offer near-term financial ROI will be more heavily weighted towards the first half of 2023, inclusive of some smaller, more modular DOS relationships. Next, let me share that we continue to anticipate a higher portion of our net bookings will occur in the second half of the year as compared to our historical average, largely resulting from the anticipated timing of our larger pipeline opportunities, inclusive of our tech-enabled managed services pipeline. Lastly, we continue to expect that our new DOS plan additions will have a lower average starting ARR as compared to historical levels, driven by the current end market dynamics influencing a greater proportion of clients to start with a more modular solution as compared to historical levels. Next, I'm excited to announce a meaningful expansion of our tech-enabled managed services partnership with our longest-standing client Allina Health. This expansion, which includes more chart abstraction responsibilities shifting to Health Catalyst, increases our recurring revenue with Allina to now be approximately $11 million per year. We continue to appreciate Allina’s multifaceted partnership and trust in Health Catalyst since the beginning of our relationship with them nearly 15 years ago, and we are encouraged to see other potential areas of expansion with them in the future. We look forward to welcoming these teammates to Health Catalyst in the near future. Additionally, we are excited to announce a new DAS plan partnership with Sea Mar Community Health Centers, a national leader in health and social services delivering high-quality, integrated care for underserved communities, specializing in service to Latinos in Washington State. Sea Mar services include a network of more than 90 medical, dental, and behavioral health clinics, and a wide variety of nutritional, social and educational services. Sea Mar will leverage our technology including our data platform, Pop Analyzer, Pop Insights, and Self-Service Analytics, along with our professional services, in order to make more proactive data informed decisions throughout their patient care. We are honored to welcome this mission-aligned healthcare provider into our client base. Lastly, prior to turning the call over to Bryan, I would like to share a couple of additional updates related to new leadership promotions to Health Catalyst connected to our annual planning process and in response to the company's continued growth and expansion. First, as previously disclosed, Anne Marie Bickmore has been named Health Catalyst’s Chief Operating Officer, in addition to her responsibilities as Chief Product Officer. Anne Marie has served in various leadership roles in Health Catalyst since joining the company in 2012. Most recently as our Chief Product Officer since 2021. Anne Marie’s contributions to Health Catalyst’s historic success are significant and I am thrilled to expand and raise her set of responsibilities and leverage her proven ability to lead high-performing teams and develop innovative products to further Health Catalyst’s mission. As a reminder, Paul Horstmeier, Health Catalyst’s prior Chief Operating Officer, has taken a three-year leave of absence to serve as a mission president for the Church of Jesus Christ of Latter-day Saints. I would like to once more acknowledge and thank Paul for all that he has done for Health Catalyst over the course of more than a decade, and we look forward to his return in a few years. Additionally, as previously disclosed, Ben Landry has been promoted to General Counsel and Corporate Secretary. Ben has been with Health Catalyst since 2019, most recently serving as Assistant General Counsel. Ben has a proven track record of wise counsel and strategic thinking. And I am confident he will enable Health Catalyst to continue its position as a leading healthcare company. I also want to thank Dan Orenstein for his many contributions to our company's success as general counsel over the last seven years, as he transitions to a strategic advisor role. Lastly, as part of our normal course annual planning cycle, we have simplified our business unit structure, leading to expanded responsibilities for TJ Elbert as the General Manager of our Data Platform Business Unit, Dan Unger as the General Manager of the Improvement Applications Business Unit, and Dan LeSueur as the General Manager of the Professional Services Business Unit. I'm confident in each of these leaders' capabilities in driving our growth and profitability moving forward. With that, let me turn the call over to Bryan.

Thank you, Dan. Before diving into our quarterly financial results, I want to echo what Dan shared and say that I am pleased with our first quarter performance. I will now comment on our strategic objective category of scale. For the first quarter of 2023, we generated $73.9 million in total revenue. This represents an outperformance relative to the midpoint of our guidance, and it represents an increase of 8% year-over-year. Technology revenue for the first quarter of 2023 was $47.2 million, representing 12% growth year-over-year. This year-over-year growth was driven primarily by recurring revenue from new client additions, and from existing clients paying higher technology access fees as a result of contractual builds and escalators. This quarterly revenue performance was slightly higher than anticipated in our quarterly guidance, due to a few technologies environment go-lives that generated a deferred revenue catch up occurring earlier than forecasted. Professional Services revenue for Q1 2023 was $26.7 million representing 3% growth relative to the same period last year. This amount was also slightly higher than anticipated in our quarterly guidance. Mostly the results of a timing-related pull forward from a few nonrecurring revenue items that we had forecasted to hit in subsequent quarters. Given that this upside resulted from nonrecurring revenue items that were primarily timing-related, we do not anticipate that these quarterly revenue outperformance items will represent upside to our full year 2023 forecasts. For the first quarter of 2023 total adjusted gross margin was 52%, representing a decrease of approximately 270 basis points year-over-year. In the Technology segment, our Q1 2023 adjusted technology gross margin was 70%, a decrease of approximately 20 basis points relative to the same period last year. This year-over-year performance was mainly driven by headwinds due to the continued costs associated with transitioning a portion of our client base to third-party cloud-hosted data centers in Microsoft Azure, which increases our hosting costs, partially offset by existing clients paying higher technology access fees from contractual builds and escalators without a commensurate increase in hosting costs. In the Professional Services segment our Q1 2023 adjusted professional services gross margin was 20%, representing a decrease of approximately 900 basis points year-over-year, and an increase of roughly 260 basis points relative to the fourth quarter of 2022. This quarterly performance was slightly higher than the expectations we shared on our last earnings call, mostly the result of the Q1 higher margin, nonrecurring revenue milestones mentioned previously. In Q1 2023 adjusted total operating expenses were $34.2 million. As a percentage of revenue adjusted total operating expenses were 46% which compares favorably to 54% in Q1 2022. Adjusted EBITDA in Q1 2023 was $4.2 million. With this performance exceeding the midpoint of our guidance, and representing an increase of $3.5 million relative to the same period last year. This Q1 2023 adjusted EBITDA result was mainly driven by the quarterly revenue outperformance mentioned previously, along with the timing of some non-headcount expenses that we anticipate will be pushed out to later in the year. Our adjusted basic net income per share in Q1 2023 was $0.05. The weighted average number of shares used in calculating adjusted basic net income per share in Q1 was approximately 56.3 million shares. Turning to the balance sheet. We ended Q1 2023 with $356.9 million of cash, cash equivalents and short-term investments compared to $363.5 million at year-end 2022. Additionally, the face value of our outstanding convertible notes is a principal amount of $230 million. And the net carrying amount of the liability component is currently $226.9 million. As it relates to our financial guidance for the second quarter of 2023, we expect total revenue between $70.3 million and $74.3 million. And adjusted EBITDA between $0.75 million and $4.75 million. And for the full year 2023, we continue to expect total revenue between $290 million and $295 million. And adjusted EBITDA between $9 million and $11 million. Now, let me provide a few additional details related to our 2023 guidance. First, as it relates to our Q2 2023 revenue expectations, we anticipate that our Technology segment revenue will be flat to slightly down quarter-over-quarter, primarily driven by the previously mentioned Q1 go-lives that generated a deferred revenue catch up. For our Professional Services segment, we anticipate that our Q2 revenue will also be flat to slightly down sequentially, mainly driven by the previously mentioned pull forward to Q1 for a few nonrecurring revenue items. Next, in terms of our adjusted gross margin, we continue to anticipate that our adjusted technology gross margin will be in the high 60s in the second quarter. In the Professional Services segment, we anticipate that our Q2 Professional Services adjusted gross margin will be flat to slightly down as compared to Q1 2023. Lastly, we anticipate our operating expenses will be roughly flat to slightly up relative to Q1 2023 mainly the result of some non-headcount expenses that we now anticipate will occur in Q2, as opposed to Q1 2023. Next, let me share a few additional details related to our full-year 2023 guidance, which is largely consistent with what we shared on our Q4 2022 earnings call. From a revenue mix standpoint, we continue to anticipate professional services year-over-year revenue growth will slightly outpace technology year-over-year revenue growth driven by the heavier weighting of our tech-enabled managed services bookings. Next, in terms of our adjusted gross margin, we continue to expect that our adjusted technology gross margin will be in the high 60s through 2023. Also, we anticipate our adjusted professional services gross margin will be roughly 20% for the year, given that our anticipated utilization rates will continue to be lower than historical levels for the next couple of quarters. And that our mix of professional services is comprised of a larger percentage of tech-enabled managed services, which start out at a lower gross margin and expand over time. Lastly, we continue to anticipate our adjusted operating expenses, as a percentage of revenue will be down between approximately 500 to 750 basis points year-over-year, largely the result of our restructuring efforts, and meaningful continued operating leverage, with the largest year-over-year reduction occurring in SG&A. With that, I will conclude my prepared remarks. Dan?

Thanks, Bryan. In conclusion, I would like to recognize and thank our highly engaged clients and team members. Without their consistent contributions to our shared mission, none of this would be possible. And with that, I will turn the call back to the operator for questions.

Our first question is coming from Anne Samuel with JPMorgan.

Hi, guys. And thanks for the question. And congratulations on the great results. I wanted to ask about the hospital customers; it seems like commentary that we've heard out of some of the more publicly traded hospitals that have reported so far, it's actually been a little bit better around labor, but still very focused on cost management. And I was wondering if perhaps as a result of that you're seeing maybe any shifts in what types of products your customers are looking to utilize? Or if it's still similar to what you saw in prior quarters.

Yes, thank you, Anne, for the question. We are also observing among our client base that over the last few months, there's been a slight improvement in their overall financial performance, though it is only slight in our experience, both across the not-for-profit health systems and the for-profit health systems that we work with. We've also observed that there's been a slight easing of the pressure on labor expenses. That has been so significant over the last few years, but in our experience and my direct conversations face to face with these clients, it's still at significantly elevated levels of expense and expense growth, relative to what we might have experienced five years ago as an example. And so while the trend is slightly better, the overall performance of these health systems from a financial perspective is still I would characterize as under meaningful financial pressure. And that includes in the labor category, and to your point in non-labor categories, like supplies expenses, and other expenses as well. So there's still meaningful financial pressure that is still largely from my direct experience and our direct experience, recently, in terms of face-to-face conversations with our top 100 clients, still the primary focus for these clients. And as a result, as we shared in our prepared remarks, we continue to focus on those parts of our solution that offer that near-term ROI. And that still is the primary focus of our clients, we do anticipate over the coming quarters, that hopefully, as we continue to see some slight improvements, that there will be more of an openness to discuss other parts of our portfolio that also meaningfully contribute to improvement. But it might not deliver as many short-term financial ROI elements as some of the other components of our solution. I would still classify the current environment as very much largely still focused on that near-term financial pressure and the near-term financial ROI that's needed.

That's really helpful color. And thank you, and hopefully we start to see some green shoots soon. You spoke about the opportunity to sell into your modular client base and you have a lot of those customers now. I was hoping you could speak to what proportion of your low double-digit new DOS clients who expect to come from that base, and maybe what the cross-sell opportunity looks like down the line with that base just given you have so many of those clients?

Yes, great question. We do think about the foundation of our growth over the next several years really coming from our full existing client base, and then includes, obviously our 100 or so DOS subscription clients, but also the other 400 or so clients where we have a relationship that's more modular to your point, but there's an open door there that's a meaningful difference from starting from scratch with a prospective client. And so I would characterize that we're thinking of a large percentage of those net new DOS subscription client adds coming probably from that base of the 400 plus non-DOS clients that we have, where we have that open door and an opportunity to visit with them without expanding the relationship, though we will still have some meaningful adds we anticipate from prospective clients as well.

Let me add, Anne, in terms of the use case and focus areas that we are engaging with those types of prospects and existing clients to Dan's point, they focus again on those near-term, hard dollar savings opportunities. So things like our financial empowerment suite, coupled with our data platform, as well as the meaningful kind of technology-enabled managed services opportunities that those health systems also can benefit from, in terms of saving costs.

Our next question comes from Ryan Daniels with William Blair.

Yes, good afternoon. This is Jared Haase for Ryan, thanks for taking the questions. And congrats on a solid start to the year. I was hoping to get a little more color on the Allina relationship. I was just hoping you can maybe speak to how that's evolved over the years. And specifically then what drove this tech services expansion? And I think you said approximately $11 million per year. But could you just maybe help us understand what's incremental in terms of how big that expansion was?

Yes, absolutely. Thanks for the question, Jared. So as we mentioned in our prepared remarks, Allina is our longest-standing client relationship. And we're coming up on our 15th anniversary as a company in our 15th anniversary with them here in a couple of months. And over time that relationship has evolved and changed and expanded really meaningfully. As we've mentioned previously, Allina was the first client to enter into a tech-enabled managed services relationship with Health Catalyst about eight and a half years ago. And that relationship is expanding that tech-enabled managed services scope is expanding with this most recent contractual expansion. And as we mentioned in the prepared remarks, that expands our responsibility for chart abstraction and represents a few million dollar expansion just meaningful in the context of that overarching relationship. And as we mentioned, the prepared remarks we are excited about additional opportunities to expand. And I think, in terms of what led to the expansion opportunity at a foundational level, this is true with Allina and it's true with all of our clients. The foundational element that opens the door for expansion is great delivery against the existing scope of responsibilities that we have. And that always needs to be the foundation of our focus. And that has been the case of Allina. And we've been grateful throughout the partnership that have really meaningful shared success together. And Allina, like so many other health systems is facing additional financial pressure. And this was an opportunity to help them with regards to the financial pressures that they're facing, with Health Catalyst being viewed as a trusted long-term partner, where we had had success in this kind of a partnership model for many years. And so this was an exciting opportunity for us to expand in a relationship model that both sides knew was working well. And it's one of the reasons why we're excited about potential for additional expansion opportunities in the future.

Just add to that, Jared, and Dan kind of alluded to the directional size of that expansion. But this is an example where Allina has chosen to expand meaningfully over several years and over time, as compared to other examples where we can engage with a client who may take on a larger portion at once like with Carle or INTEGRIS, those recent expansions that we had so grateful to have kind of different options for clients in terms of the level of expansion over time.

Absolutely, yes, that makes sense and appreciate all the color. And then maybe I'll sneak one in on the other customer announcement. It seemed like there was a health equity component with the Sea Mar win. So I'm wondering if you could maybe speak to the role of that sort of data and helping clients achieve equity initiatives and maybe how you communicate that as a value proposition to clients.

Thank you for bringing that up, Jared. And health equity is something that we care a great deal about. We try to start with Health Catalyst, first and foremost. And then it extends to our clients to health equity component to our data and analytics and improvement tech-enabled services that we offer to clients. And we certainly always welcome clients who have a deep mission alignment and Sea Mar is certainly one of those clients that deeply cares about the patients and the members that they serve, and has a passion around how health equity and data and analytics plays such an important role in understanding where each health system is on their journey towards equitable care. And we have a specific solution that we've now implemented across many clients. That will also be available to Sea Mar to ensure that first we understand how well we're doing, where we're doing well, and where we could improve. And then we specifically focus on those areas of improvement and see measurable improvement results as we focus in those areas. And that's our intent and our shared focus with Sea Mar among other areas of focus, and it will continue to be our focus with many other clients as well.

Next question comes from Jessica Tassan with Piper Sandler.

Hi, thank you guys so much for taking the question. So Dan, I know you've been visiting customers for the last maybe six or nine months, or actively visiting customers for the last six or nine months. Do you have a good sense at this point of customer intention with respect to kind of contract persistence across the entire base? And then just curious to know what percent of the DOS space is going to have managed services attached by the end of 2023? And kind of when do we expect churn or retention rate to normalize and at what level? Sorry, that's a lot. Thanks.

Yes, great questions so I am just taking some notes. So, Jess, thank you for those questions. So first, as it relates to those customer visits, yes, over the last 10 months, as mentioned in the prepared remarks, I've now had over 130 opportunities to have face-to-face discussions with our top 100 clients. And that's not going to stop. And it's not just me, it's the team that's going out and visiting face-to-face with these clients. And that very much informed what we shared in terms of both headwinds, as well as tailwinds that our clients are facing on the headwind side, as we've mentioned, in previous quarters, as well, we continue to observe. I continue to observe that there's meaningful financial pressure. And while that's improving slightly, it's pretty slight, in terms of operating margin performance, and there's still very, very significant financial pressure. And that's one of the reasons why we see both on the tailwind side elevated interest and elements of our portfolio that offer that near-term ROI, like tech-enabled managed services, like the Financial Empowerment suite like elements of our pop health suite. And we're excited and encouraged to see large meaningful pipeline opportunities there primarily with our existing clients. And then on the flip side, we see headwinds, as we've mentioned, in our prepared remarks today, and over the last few quarters, as it relates to, particularly for us, more of our smaller, more modular client relationships, and particularly those modules in client relationships, where those modules don't offer a near-term financial ROI. And so we see a little bit of elevated, continued elevated, somewhat elevated churn in that category. So there are both headwinds and tailwinds. I would share that from the tone perspective. I've been appreciative of the way in which our top 100 clients in particular, view Health Catalyst as an important long-term partner are encouraged and excited about long-term expansion in that relationship, and that's where I would classify maybe some of the headwinds is more near-term to mid-term, which gets to one of your questions around normalizing churn. And I do think maybe for a couple more quarters, we might see the results of some of that elevated financial pressure, resulting in a little bit more modular churn and then what might happen might have happened a few years ago. But on the flip side, I feel like the tailwind interest in those parts of our portfolio that are meaningfully delivering against hard dollar financial ROI are more of a permanent tailwind, a long-term tailwind. And maybe that gets to your last question about where do we see the client base, materializing from a technical data services perspective? Right now we're sitting at around 10% of our DOS subscription clients that have a tech-enabled managed services relationship. I certainly hope that five years from now that number will be 100% and we'll work very well with our clients to enable them to tap into those advantages. But as we've also shared, we're finding as we gather data on the pipeline conversion and the timing and cadence, that it takes some time to work through those expansion opportunities and a one-year timeline might be a reasonable expectation. And that is one of the reasons why we continue to forecast that more of our overall bookings will likely happen in the second half of this year as we really started those significant discussions about cyber teams like Tim's starting in the July timeframe of last year.

And just to add, Jess, great questions. Yes, to Dan's point, that 10% penetration rate, roughly of the TAM’s opportunity is applicable to our DOS client base. And we do anticipate as Dan shared a few more wins like we've seen the last few quarters with Carle and Integris and Allina, as we continue forward through the rest of 2023. So we're encouraged by that pipeline. The other nice thing is that even with an existing TAM client, like Allina, there are still opportunities to expand further in areas like analytics and further chart abstraction opportunities and other areas that our clients are potentially interested in. So that's also a nice potential runway for us as we deepen the TAM's footprint as well as expand within those clients.

And just one note, along those lines, Jess, we have the most experiences expanding in technical managed services relationships around areas like analytics and chart abstraction, data management. We have quite a bit of experience now there with many clients that are leveraging our capabilities and our teams to do that, we are finding that we have a number of clients that are asking us about some other adjacent areas where they might want us to consider tech-enabled managed services. And so we try to be very careful and thoughtful, as we consider those other growth opportunities, expansion opportunities to try to make sure that we have some tech components that we can directly leverage to drive efficiencies. And we feel strategically like this is an area that we would like to occupy and that we feel we can be differentiated long-term. But that is something that is included in our pipeline is a lot of opportunities in these core areas where we have a lot of experience, and then some opportunities that are adjacent to those areas as well.

It appears we have no further questions. At this time, I'll turn the floor back to Dan Burton for any additional or closing remarks.

Right. Thank you all for your continued interest and involvement with Health Catalyst. And we look forward to staying in touch in the months and quarters ahead. Take care.

This concludes today's Health Catalyst First Quarter 2023 Earnings Conference Call. Please disconnect your line. And have a wonderful day.