Health Catalyst Inc (HCAT) Q4 2021 Earnings Call Transcript

Health Catalyst Inc (HCAT -7.13%)
Q4 2021 Earnings Call
Mar 01, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Health Catalyst fourth quarter 2021 earnings conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your speaker today, Adam Brown, senior vice president of investor relations, financial planning and analysis for Health Catalyst.

Please go ahead.

Adam Brown -- Senior Vice President of Investor Relations, Financial Planning and Analysis

Good afternoon, and welcome to Health Catalyst's earnings conference call for the fourth quarter of 2021, which ended on December 31, 2021. My name is Adam Brown. I am 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 and the impact of the COVID-19 pandemic 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 the third quarter of 2021 filed with the SEC on November 9, 2021, and our Form 10-K for the year ended December 31, 2021, that will be filed with the SEC today. 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, let me turn the call over to Dan for his prepared remarks, and then Bryan will subsequently provide his prepared remarks. Dan and Bryan will then take your questions. Dan?

Dan Burton -- Chief Executive Officer

Thank you, Adam, and thank you to everyone who has joined us this afternoon. Before we begin, we at Health Catalyst wanted to express that our thoughts, prayers and support are with the people of Ukraine as they respond to the invasion of their country. Now let me transition back to sharing our fourth quarter and full year 2021 financial performance, along with additional highlights from the fourth quarter. I will begin today's call with some commentary on our fourth quarter and full year 2021 financial results.

Reflecting back on 2021, I am extremely pleased with all that we accomplished during the year, especially in light of the continued challenging macro environment. For the full year 2021, our total revenue was $241.9 million. This represents 28% year-over-year revenue growth, and it represents an outperformance of over $12 million relative to the midpoint of the guidance that we shared at the beginning of 2021 after adjusting for our Twistle acquisition. Likewise, for the full year 2021, our total adjusted EBITDA was a loss of $11.2 million.

This represents an improvement of $10 million relative to 2020. And it represents an outperformance of over $6 million relative to the midpoint of the guidance that we shared at the beginning of 2021 after adjusting for our Twistle acquisition. Looking at the fourth quarter of 2021, total revenue was $64.7 million, and our adjusted EBITDA was a loss of $6.3 million, with these results beating the midpoint of our quarterly guidance on each metric. Stepping back to comment more broadly, I wanted to acknowledge how seriously we strive to keep the financial commitments that we make to our investors.

We have now reported as a public company for 11 quarters, following our IPO in July of 2019. As I reflect on this experience, I'm extremely proud of the track record we have demonstrated related to our actual quarterly revenue and adjusted EBITDA performance over this time period relative to the guidance that we have provided. This consistency of performance was something that we, as a management team, set as an objective years before going public, and we're pleased to have delivered this level of consistency during our first three years as a public company. 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 three categories. The first category, improvement, is focused on evaluating our ability to enable our customers to realize massive, measurable improvements while also maintaining industry-leading customer and team member satisfaction and engagement. Let me begin by sharing a couple of examples of customer improvements from recently published case studies.

In the U.S., claims denials are a major revenue issue for healthcare providers, with roughly 8.5% of claims denied in the year 2020. Albany Med, Northeastern New York's only academic medical center, suffered from significant annual revenue loss resulting from claims denials. Exacerbating this issue, Albany Med lacked a single source of truth for payer denials data, resulting in limited access to aggregated data, variations in reporting and siloed workflows between various departments. In response, Albany Med leveraged our DOS data platform and a robust suite of analytics applications to centralize payer denial data from multiple disparate software systems, including case management, patient billing, physician practice data, at both the hospital visit and practice service levels.

Our data and analytics software enabled Albany Med to materially improve their denials management process and establish a single source of truth, resulting in the ability to visualize and analyze the relevant data, conduct deep-dive analyses and identify opportunities for improvement. This effort contributed to $3 million in revenue recovery for Albany Med in just one year. Next, as healthcare providers seek to optimize their cost structure and focus on their core competencies, outsourcing specific functions has emerged as a cost-effective consideration. Along these lines, Banner Health partnered with Health Catalyst to successfully outsource its clinical chart abstraction needs, leveraging our software to automate many of the manual tasks previously performed by registered nurse data abstractors.

We enabled Banner Health to avoid $650,000 in abstraction labor costs and save $100,000 in registry costs in one year. Additionally, clinical chart abstraction resources can now perform higher complexity work as demonstrated by a 46% improvement in submission accuracy for electronic clinical quality measures reporting and a 30% relative improvement in team member engagement. Also, within the improvement category, I would 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 96th 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 95th and 99th percentile in overall team member engagement scores. This latest result is of particular significance given that it comes during a period where we were required to sustain a remote-centric work environment, necessitated by the ongoing global pandemic. We welcomed greater than 150 new teammates during the last six months of 2021, including those who came to us through our Twistle acquisition, and we responded to an increasingly tight labor market.

We, as a leadership team, continue to maintain a primary, prioritized focus 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. These Gallup results, coupled with our customers' high satisfaction levels throughout the pandemic, are encouraging confirmation of our prioritization and focus. On a related note, I would highlight that we have been fortunate to receive multiple other recent external recognitions relative to team member engagement, including being named to Great Place to Work's Best Workplaces for Parents list, as well as the National Association for Business Resources 2021 list of Best and Brightest Companies to Work For in the Nation. And on the product front, we were very pleased with our continued high customer satisfaction rates throughout 2021.

And to share a recent highlight on this front, we were excited to have received the news that our chargemaster management software solution, our revenue analytics product that came to us through the Vitalware acquisition, was recently ranked best-in-class for 2022. This marks the fourth year in a row that the Vital-CDM product has achieved this distinction from the KLAS organization. Additionally, we were also pleased to see several of our other products achieve a score that was greater than 90 on a 100-point scale as measured by KLAS, including Twistle, Healthcare.AI and our value-based care managed services. Our next strategic objective category is growth, which includes beginning new customer relationships while also expanding existing customer relationships.

First, let me provide some commentary on our 2021 bookings performance. At a summary level, I was very pleased with our growth-related performance, which included bookings results at or above our historic performance levels across existing customer growth, and new customer additions. First, our dollar-based retention achievement for 2021 was 112%, meaningfully higher than our prior year's achievement levels on this metric and higher than the expectations that we shared at the beginning of 2021. As was the case in pre-pandemic years, our achievement levels on this metric were relatively similar between our technology and professional services segments.

Driving this same customer growth performance in the technology segment was primarily our built-in contractual escalators, along with increased customer demand for our acquired technologies. And in the professional services segment, we were pleased to see a rebound relative to 2020 in customer demand for our recurring professional services offerings, including our analytics services, domain expertise services and outsourced services. The positive performance on our overall dollar-based retention rate in 2021 was partially offset by the continued decline of our Medicity-acquired revenue base, which, as we have shared previously, is not included in our dollar-based retention metric. Next, our net new DOS subscription customer additions for 2021 was 16.

This result is meaningfully higher than our 2020 performance and is toward the high end of our mid-teens expectations set at the beginning of the year. This strong performance was largely driven by new customer demand for our enterprise analytics, population health and revenue and cost optimization offerings. We were pleased to see these results included the cross-sell of DOS to a few customers from our acquired companies. Additionally, we were excited to see our DOS-light offerings contribute a modest amount to this total.

As one recent highlight of our 2021 net new DOS subscription customer additions, we are excited to have publicly shared our partnership with Temple University Health System, a large Philadelphia-based academic health system recognized for its work driving medical advances through clinical innovation, pioneering research and world-class education. Temple selected our data platform and power costing application suite to strengthen its financial performance and optimize its risk-based contracting performance within its value-based care arrangements. Next, let me share that as we begin 2022, we encounter a sales environment that is largely consistent with what we experienced throughout 2021. While we are hopeful that our end markets' operating environment will improve as the year progresses, we anticipate that that will be largely driven by the path of the COVID-19 pandemic.

Currently, we have observed that the Omicron wave has had a similar impact on our pipeline as the Delta wave, whereby we have experienced some end market distraction but have generally found healthcare organizations better prepared to respond to regional spikes and operate in more normal course. Given all this, we anticipate the COVID-19 pandemic will continue to result in both headwinds and tailwinds as it relates to our growth in 2022. In terms of headwinds, our provider end market will likely continue to be under some amount of financial strain while also experiencing operational distraction, especially with the Omicron variant, alongside vaccine logistics. As it relates to tailwinds, we continue to see meaningful evidence that the healthcare provider ecosystem is much better equipped and better prepared to respond to the ongoing pandemic in areas including treatment efficacy, supply chain logistics, capacity planning and broader operational optimization.

And as we've shared previously, we continue to believe that the COVID pandemic will serve as an overall tailwind in the industry's adoption of data and analytics, significantly highlighting the need for a commercial-grade data and analytics solution to replace patchwork homegrown systems. With this backdrop, I will now share some perspectives on our anticipated 2022 bookings achievement levels. First, as it relates to our 2022 dollar-based retention, we anticipate achieving results between 108% and 111%. In the technology segment, we expect this same customer growth will be primarily driven by existing customer contractual expansions and increased demand for our new technology offerings, including our recently acquired technologies.

And in the professional services segment, we expect the same customer growth to be driven by increased demand for our recurring professional services, such as analytics services, domain expertise services and outsourced services, though I would caveat that our performance on this metric can be more variable depending on the demand mix of recurring versus nonrecurring services. Next, as it relates to our DOS subscription customer achievement, we anticipated adding high-teens net new DOS subscription customers in 2022. We are pleased to see our year-over-year pipeline grow to a size that we anticipate will support this level of customer growth. As we look at our pipeline, we anticipate this new customer growth will be driven by several factors, including, one, our end market's continued focus on enterprise analytics, population health and revenue and cost optimization solutions; two, our broader portfolio of technology and services as a result of our recent acquisitions and product development efforts; three, our continued execution on our cross-selling efforts; four, our DOS-light offering; and five, the growing industry recognition of the need for data and analytics capabilities, partially brought to light by the ongoing pandemic.

In terms of bookings cadence, in 2021, we experienced some outsized bookings earlier in the year than is typical, particularly in the professional services segment. For 2022, we anticipate a bookings cadence more aligned with historical years, which has been roughly 50% of bookings in the first half, weighted toward Q2, and roughly 50% of bookings in the second half, weighted toward Q4. Next, let me share that we have officially closed the KPI Ninja acquisition that we announced last week. We're very excited by this tuck-in acquisition, with KPI Ninja bringing to bear important technology capabilities that will help accelerate our existing product development road map.

Specifically, KPI Ninja offers real-time streaming capabilities and enhances our data processing and orchestration capabilities through standardized data ingestion, data normalization and data sharing. This software will help strengthen our real-time capabilities at the data platform layer, as well as meaningfully enhance our population health product capabilities. We also anticipate that KPI Ninja's technology will provide some secondary benefits within our payer and life sciences markets. The total acquisition consideration of this tuck-in transaction is $33 million, and the impact on our 2022 financials will be immaterial.

We are thrilled to welcome KPI Ninja's talented team members, and we look forward to working together with them in support of our shared mission to improve healthcare. Lastly, prior to turning the call over to Bryan, I wanted to share a couple of additional updates related to new leadership promotions connected with our annual planning process and in response to the company's continued growth and expansion. First, Jason Jones has been named as our new senior vice president and general manager of our data platform business unit. Jason is currently a member of our executive leadership team and will also continue in his role as chief analytics and data science officer.

Over the last few years, Jason and his team have successfully led our company in the introduction of Healthcare.AI to the market, a differentiated and industry-leading AI offering. To his expanded responsibilities, Jason brings over 25 years of deep healthcare experience in analytics, data science, decision support, research, brand, product development, consulting and information systems, working at some of the most renowned healthcare organizations in the world, including Kaiser Permanente, Intermountain Healthcare, Bayer and United Health. Next, I'm excited to announce that Maxine Liu will join our executive leadership team as our senior vice president of M&a Integration. This position was first contemplated following our recent equity fundraise, and it will enable our continued long-term success as we look to further enhance our offering through future acquisitions.

Maxine joined Health Catalyst over three years ago, most recently successfully building out a leading Health Catalyst partner program. Prior to Health Catalyst, Maxine held positions across technical and business development functions within healthcare, including time spent at Siemens Healthcare, Varian Medical Systems and others. With that, let me turn the call over to Bryan. Bryan?

Bryan Hunt -- Chief Financial Officer

Thank you, Dan. Before diving into our quarterly and annual financial results, I want to echo what Dan shared and say that I am pleased with our overall 2021 financial performance. I will now comment on our strategic objective category of scale. For the fourth quarter of 2021, we generated $64.7 million in total revenue.

This total represents an outperformance relative to the midpoint of our guidance, and it represents an increase of 21% year over year. For the full year 2021, our total revenue was $241.9 million, representing 28% growth year over year. As Dan mentioned, we are pleased that this full year total revenue performance represents a significant outperformance relative to the guidance we shared to begin the year. Technology revenue for the fourth quarter of 2021 was $40.1 million, representing 24% growth year over year.

This year-over-year growth was driven primarily by recurring revenue from new customer additions, from existing customers paying higher technology access fees as a result of contractual built-in escalators, as well as from our Twistle acquisition that closed on July 1, 2021. In Q4, Twistle contributed $1.8 million of technology revenue, inclusive of a purchase accounting-related deferred revenue write-down, which was in line with our expectations. For the full year 2021, technology revenue was $147.7 million, representing 34% year-over-year growth. Professional services revenue for Q4 2021 was $24.6 million, representing 17% growth relative to the same period last year.

This year-over-year performance was primarily due to our professional services being provided to new DOS subscription customers, as well as a modest amount of unforecasted nonrecurring revenue that was recognized in the quarter. For the full year 2021, our professional services revenue was $94.2 million, representing 20% year-over-year growth. This professional services full year revenue growth represents a meaningful outperformance relative to the expectations we shared at the beginning of the year, mostly driven by a few million dollars of outsized, onetime nonrecurring revenue, along with bookings achievement that occurred earlier in the year as compared to our initial expectation. For the fourth quarter 2021, total adjusted gross margin was 52.1%, representing an increase of approximately 15 basis points year over year.

For the full year 2021, total adjusted gross margin was 52.9%, representing an increase of approximately 255 basis points year over year. In the technology segment, our Q4 2021 adjusted technology gross margin was 69.7%, an increase of approximately 135 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 contractual built-in escalators without a commensurate increase in hosting costs, partially offset by headwinds due to the continued costs associated with transitioning a portion of our customer base to third-party cloud-hosted data centers in Microsoft Azure, which increases our hosting costs. For the full year 2021, our adjusted technology gross margin was 69.3%, an approximately 75-basis-point increase year over year.

In the professional services segment, our Q4 2021 adjusted professional services gross margin was 23.3%, representing a decrease of approximately 400 basis points year over year and an increase of approximately 330 basis points relative to Q3 2021. This quarterly performance was at the high end of the expectations we shared on our last earnings call, with these results being driven by the mix of professional services delivered, a more normalized utilization rate as compared to the first half of 2021, as well as the onetime bonuses that we mentioned last quarter would be distributed to team members given the tight labor market and strong 2021 performance. For the full year 2021, our adjusted professional services gross margin was 27.1%, an approximately 240-basis-point increase year over year. In Q4 2021, adjusted total operating expenses were $40 million.

As a percentage of revenue, adjusted total operating expenses were 61.8%, which is roughly similar to Q4 2020. For the full year 2021, adjusted total operating expenses were $139.1 million. As a percentage of revenue, adjusted total operating expenses were 57.5%, which compares favorably to 61.6% in full year 2020. Adjusted EBITDA in Q4 2021 was a loss of $6.3 million, which slightly outperformed the midpoint of our guidance, mainly driven by the strong quarterly revenue performance mentioned previously.

As a reminder, our Q4 2021 adjusted EBITDA performance included certain operating expense non-headcount items that had been pushed out until the fourth quarter, the onetime investment in acquisition-related integration expenses that we described in our previous earnings calls, as well as the onetime bonuses that we mentioned last quarter would be distributed to team members given the tight labor market and strong 2021 performance. For the full year 2021, our adjusted EBITDA was a loss of $11.2 million, which compared favorably to an adjusted EBITDA loss of $21.3 million in 2020. Similar to our revenue performance, we are pleased that this full year adjusted EBITDA result represents significant outperformance relative to the guidance numbers we shared at the beginning of 2021. Our adjusted net loss per share in Q4 2021 was $0.19.

The weighted average number of shares used in calculating adjusted net loss per share in Q4 was approximately 52.1 million shares. For the full year 2021, our adjusted net loss per share was $0.45 and the weighted average number of shares used in calculating adjusted net loss per share in 2021 was approximately 47.5 million shares. Turning to the balance sheet. We ended the fourth quarter of 2021 with $445 million of cash, cash equivalents and short-term investments, compared to $271 million at year-end 2020.

As a reminder, we conducted an equity follow-on offering in August 2021, which raised $245 million in net proceeds for general corporate purposes, including potential acquisitions. Also, as a reminder, in April 2020, we issued a private placement of convertible notes with a principal amount of $230 million. The net carrying amount of the liability component is currently $180.9 million. As it relates to our financial guidance, for the first quarter of 2022, we expect total revenue between $64 million and $67 million and adjusted EBITDA losses between $2.5 million and $0.5 million.

And for the full year 2022, we expect total revenue between $287.8 million and $292.8 million and adjusted EBITDA losses between $4 million and $2 million. Now let me provide a few additional details related to our 2022 guidance. First, as it relates to our Q1 2022 revenue, we anticipate that our professional services revenue will be slightly down as compared to Q4 2021, with the remainder of the quarterly revenue contribution coming from our technology segment. As a general reminder, while we had strong Q4 2021 bookings performance, we don't get the benefit of most of those sales converting to revenue in Q1 2022 given that our revenue recognition is typically dependent on technology environment go-lives and professional services staffing, which can begin a couple of months after contract signing.

On professional services Q1 2022 revenue specifically, there is a larger milestone-based contract which we anticipate will be completed in the first few months of 2022. If it is achieved in Q1, then we would anticipate coming in around the top end of our Q1 guidance range. Additionally, I would mention that the Twistle revenue contribution, which is primarily in the technology segment, will be more back end-weighted in 2022 given the purchase accounting-related deferred revenue write-down that persists through Q1 2022. Next, let me share a few additional details related to our full year 2022 guidance.

First, as it relates to our total revenue at the midpoint of our guidance, this represents 20% growth, which we are pleased is in line with our long-term revenue growth targets. In terms of the 2022 year-over-year revenue growth by segment, we expect the technology segment to grow a little above 20% and the professional services segment to grow a little below 20%. From a mix standpoint, this implies that the technology segment will be roughly 62.5% of total revenue for the year, which, in comparison to the last several years, represents continued meaningful progress as it relates to our technology revenue as a percentage of total revenue. As a reference, in 2019, our technology revenue was 54% of total revenue.

As a reminder of what Dan shared, our anticipated technology revenue growth is bolstered by the strong dollar-based retention performance in 2021, along with our Twistle acquisition, partially offset by the continued decline of our Medicity revenue base. Likewise, our anticipated professional services revenue growth is supported by our strong dollar-based retention performance in 2021, partially offset by a headwind resulting from the outsized onetime nonrecurring professional services revenue realized in 2021, along with a more normalized in-year bookings timing anticipated in 2022 as compared to 2021. Next, in terms of our adjusted gross margin, we anticipate our adjusted technology gross margins will be in the high 60s for the next several quarters and our adjusted professional services gross margin will be in the mid-20s. Our adjusted professional services gross margin expectations are driven by the mix of professional services we anticipate will be delivered, our forecasted utilization rates, as well as some wage pressure resulting from the tight labor market.

Lastly, as it relates to adjusted EBITDA, at the midpoint of our guidance, we anticipate our core business to be breakeven for the year and for Twistle and its related integration costs to add approximately $3 million in burn, mostly in the first half of the year, in line with the expectations we shared at the time of the Twistle acquisition. We are pleased to forecast achieving this adjusted EBITDA breakeven milestone in our core business, consistent with what we shared at the time of our IPO nearly three years ago, despite experiencing a global pandemic and realizing meaningful wage pressure within a tightening labor market. As it relates to the quarterly cadence of our adjusted EBITDA, you will recall that our -- that we typically experience some seasonality in our operating expenses, especially in the third quarter related to our Healthcare Analytics Summit, as well as the timing of certain other non-headcount operating expenses throughout the year. With that, I will conclude my prepared remarks.

Dan?

Dan Burton -- Chief Executive Officer

Thanks, Bryan. In conclusion, I would like to recognize and thank our highly engaged team members for all they have done to further our mission and growth in 2021, and I would share that I have never been more energized by the opportunity I see in front of us heading into 2022. And with that, I will turn the call back to the operator for questions.

Questions & Answers:

Operator

[Operator instructions] Our first question will come from the line of Ryan Daniels from William Blair. Your line is open.

Ryan Daniels -- William Blair -- Analyst

Thank you guys for taking the questions, and thanks for all the detail, and congrats on the strong year. I wanted to go into the net new client adds. Obviously, a nice metric and solid rebound from what the organization saw in the prior year. And I'm curious if you can go to a little bit more detail on any nuances there either geographically or in end market.

Were most of those still within the core health systems? Or were you able to branch out internationally with some of those sales or into other areas like life sciences?

Dan Burton -- Chief Executive Officer

Yeah, thanks for the question, Ryan. Most of those net new DOS subscription clients did come from our core market, but we did see a modest contribution from those adjacent markets as well.

Bryan Hunt -- Chief Financial Officer

And in terms -- just additional detail, Ryan, there. In terms of the contribution for the DOS adds last year, we did note in the prepared remarks that that did include a modest contribution as well from some cross-sell initiatives, as well as our DOS-light offering.

Ryan Daniels -- William Blair -- Analyst

OK. Perfect. And then, in one of your case studies, Dan, you mentioned reducing a form of manual labor on chart abstraction which helped improve employee satisfaction and pushed more value-added activities. And I'm curious if you're seeing more demand across the board for solutions like that given the provider burnout we're seeing and workforce pressures, especially in the nurse practitioner, nurse and physician markets.

Is that something that you see as a growth opportunity or solution set that you can actively sell into your customer base?

Dan Burton -- Chief Executive Officer

We do, and we are seeing that general trend, as you mentioned, Ryan, labor and staffing issues, particularly among nurses and other clinical professionals, is a real problem for most healthcare organizations today, and burnout is really a significant contributor to that. One of the strengths of Health Catalyst long-term is that focus on team member engagement. And so, part of what we saw in that case study example with Banner Health was an ability to not only deliver those outsourced chart abstraction services through a technology-enabled service solution that was better, faster and cheaper, but it was also delivered in a way that the engagement of those team members actually increased at the same time as that delivery of a better, faster and cheaper solution. We're really excited about that offering.

It fits right in the center of our mission as a company to help healthcare become more efficient, to help healthcare become better. And so, we're excited to see that continue to grow in the future.

Ryan Daniels -- William Blair -- Analyst

OK. Perfect. I'll get back in the queue. Thank you.

Dan Burton -- Chief Executive Officer

Thanks, Ryan.

Operator

Our next question will come from the line of Jessica Tassan from Piper Sandler. You may begin.

Jessica Tassan -- Piper Sandler -- Analyst

Hi. Thank you so much for taking the question. I was just hoping to circle back on the milestone-based contracts that you referenced for Q1. Are you seeing customers increasingly sort of err in the direction of contingency-based contracting? And is that only on the app side? Or is that within the DOS all-access base as well?

Dan Burton -- Chief Executive Officer

It's not all that common. Most of our contracts are still in that more common recurring revenue base, long-term arrangement, both on the tech side and on the services side. But occasionally, we do have a milestone-based contract, and that can be both on the tech and on the services side, though it's a little bit more common in those nonrecurring services-type relationships. Those are harder to project, as you might imagine, than the standard contracts.

But the vast majority of our contracts are still more in that normal recurring revenue model.

Bryan Hunt -- Chief Financial Officer

And just to add to that, Jessica, we do aim to provide our customers with some flexibility, especially as it relates to services engagements with us and that we want to not have that contract model be a barrier to customers adopting more technology, continuing to use our platform. So we do -- one concept is just that that flexibility is important to us as we really focus on driving improvements for customers.

Jessica Tassan -- Piper Sandler -- Analyst

Got it. That makes sense. And then, I think, just we were expecting that some of the acquired capabilities would be able to drive incremental subscription revenue at DOS all-access customers. Is that still the case? And can you just give us a sense of how penetrated the DOS all access customers are with your acquired capabilities, basically on the -- an update on the cross-sell effort? Thank you.

Dan Burton -- Chief Executive Officer

Yeah, absolutely, Jess. Great question. So we were pleased to see the impact of those acquired capabilities driving some of the performance that we reported on for 2021 in terms of our dollar-based retention, for example. That certainly contributed to that 112% dollar-based retention, which was meaningfully higher than any other year in the company's history.

We are excited about the cross-sell opportunities within our DOS client base, as we've described before, when we bring to bear a newly acquired technology that falls outside of the contractual definition of what's included in that all-access subscription that our clients have, and so that does represent upside, meaningful upside. And each time we acquire a new capability, that provides an incremental opportunity for upside. So we're excited about that. At the same time, cross-sell takes time to develop and mature and iterate on the right approach.

There's still long sales cycles, and we're still early in that process.

Operator

Our next question will come from the line of Cindy Motz from Goldman Sachs.

Cindy Motz -- Goldman Sachs -- Analyst

Thank you, and thanks for taking my question. Very nice quarter. So in general, it looked like you're ahead of where we were thinking too for next year. And I just wanted to delve into this retention rate that's very, very strong here.

And is there a reason why maybe -- I understand that you're still guiding to very high levels, but it would seem to me as customers start to realize the effectiveness of the product, I was wondering if you feel like you're taking share from competitors, but also if it might not stay pretty high because some customers are very happy and the results keep coming in, why wouldn't more then sign up for additional services. So that's the first question. And then, just with the EBITDA cadence, it looks like you probably will hit, if I had to guess, breakeven maybe second quarter, maybe go negative with HAS again third quarter, but then fourth quarter again positive. And so then, we exit the year with positive EBITDA.

Am I thinking about that correctly? And then if you would like to give any color for beyond that that would be great. Then I'll stop there. Thanks.

Dan Burton -- Chief Executive Officer

OK. Great questions, Cindy. So we'll take the first question around retention rate and how to think about that in 2022, and then we can talk about the EBITDA question as well. So on the first question, we were pleased to see really robust dollar-based retention overall at 112%.

Now there were some factors that were onetime in nature that impacted that 2021 dollar-based retention performance at 112%. For example, on the services side, there were some specific contracts that came through that are a little bit harder to project moving into 2022. And so, we want a little bit more data before we feel like we're fully data-informed in updating that perspective. We felt comfortable updating for 2022 to a higher level than what we've typically guided toward for dollar risk net retention, based on the amount of data that we've seen thus far.

And certainly, we're encouraged by more to cross-sell within our DOS client base, which is encouraging to us. But we do like to be data-informed and need a little bit more time to gather some more data before providing any additional updates. Anything you would add on that first question, Bryan?

Bryan Hunt -- Chief Financial Officer

Yeah, just to add to that, Dan. So Cindy, if you think about the segments of technology and services, which are both included in our overall dollar-based retention rate metric, the majority of the technology expansion is still driven by those annual built-in escalators that are ramping up for existing customers each year, as well as to Dan's point, the upsell or cross-sell of our acquired applications. That just provides a little more visibility and consistency on the technology side. Whereas on the services side, we don't have those same large kind of built-in escalators.

And so, it truly is more go-get, and to Dan's point, can be a little more variable on that retention metric.

Dan Burton -- Chief Executive Officer

OK. And then, as it relates to the second question, specifically relates to EBITDA, as we mentioned in the prepared remarks, and I might also just -- to add to the prepared remarks, that for both the full year 2022 and for Q1, we are pleased to have achieved what we said we would strive to achieve when we went public, which was to have our core business be adjusted EBITDA breakeven. So that's true in Q1 of this year and for the full year, that our core business is achieving at that level of adjusted EBITDA breakeven. We also have shared previously that with the Twistle acquisition, there was a few million, approximately $3 million, of EBITDA loss that would be added related to the integration of Twistle and their core business performance as well.

That will be weighted more toward the first half of this year. But as you mentioned also, we have some seasonality in some of our expenses, like the Healthcare Analytics Summit, which hits in Q3, which is a meaningful expense for us. And so, we anticipate, on a quarterly basis, you'll see some movement up and down. But we're pleased that, for Q1 and for the full year, our core business is at that adjusted EBITDA breakeven level.

Bryan Hunt -- Chief Financial Officer

Yeah, I think, you covered it well, Dan, and Cindy as well. Just as we think longer-term, so Cindy, we're not providing specific color beyond 2022 at this point. But as Dan mentioned, we continue to feel confident in our ability to continue to drive profitability progression and operating leverage as we work toward our long-term targets.

Cindy Motz -- Goldman Sachs -- Analyst

Sure. That makes sense. And just as a follow-up, yeah, so I mean, obviously, if you guys made it more like bolt-on acquisitions or things like that, it could change, but I'm guessing that, yeah, the progress is still going to be there. And then, I mean, yeah, if you wanted to give any more color, when could we see more like KPI Ninja or anything in that regard? And then I'll stop.

Thanks.

Dan Burton -- Chief Executive Officer

Yeah, absolutely. So to your first point about acquisitions, certainly, acquisitions play a factor in the way that our overall company performance plays out. So we keep that in mind. We're, obviously, focused on a series of financial components, as well as strategic components as we evaluate M&A.

And we prefer M&A opportunities that are neutral from an EBITDA perspective to positive, but that isn't always the case. And sometimes there's a strategic reason why we still feel good about moving forward. As it relates to KPI Ninja, let me just share a few thoughts there. So first of all, as we shared in our prepared remarks, from a financial perspective, the KPI Ninja contribution is immaterial.

So it's a small tuck-in acquisition. But in terms of the strategic rationale, we're very excited about the technology capabilities that will strengthen our data platform value proposition to clients in some specific ways. We are planning that the technology that we've acquired through KPI Ninja will be integrated into our data platform and accelerate our existing product road map. There's some specific capabilities that we're really quite excited about as it relates to real-time streaming capabilities and enhancement of our data capabilities through standardized data ingestion like through FHIR, CCD, HL7, data normalization, data sharing and some other interesting overall data orchestration capabilities.

It also offers some specific capabilities in our ability to handle the long tail of EMRs from a data integration perspective, and is also an NCQA-certified data aggregator vendor. So there's a lot of technology capabilities that we're excited about adding and accelerating from a product road map perspective on the data platform layer. We see specific use cases at a primary level that these capabilities help us with in pop health, in particular, at a primary level. There are some secondary benefits also that we think will come to us over time, to accrue to us over time in the payer space, in the life sciences space and even in the HIE market where they address some specific gaps that existed for us in our solution set, and we are excited to fill those gaps through the acquisition of this technology.

One other thing I'd mention. I'm sorry. One other thing I'd mention real quick. The KPI Ninja team has a presence in the U.S.

with a small team, as well as a presence with a small team in India, and we're excited about expanding our global footprint and team member base across the globe and inclusive of growing and investing in our presence in India as well. So this gives us a foundation upon which to build there.

Cindy Motz -- Goldman Sachs -- Analyst

Excellent. Thank you very much for taking my question.

Dan Burton -- Chief Executive Officer

Sounds good. Thanks, Cindy.

Operator

Our next question will come from the line of Elizabeth Anderson from Evercore ISI. Your line is open.

Elizabeth Anderson -- Evercore ISI -- Analyst

Hi, guys. Good evening, and thanks so much for the question. My first question is around the dollar-based retention rate. Obviously, that had a really nice step-up from 2020 to 2021.

I suppose we sort of think about the expectations, is that sort of maybe 112%-ish or around that, the kind of run rate that we should think about on a longer-term basis? Or were there any kind of, obviously, you had some -- 2020 was an unusual year for many reasons. So I just wanted us to think about -- understand how you guys were thinking about that over the longer time.

Dan Burton -- Chief Executive Officer

Yeah, thank you for the question, Elizabeth. We do view the 2021 performance as very strong, relative to what we've seen historically. There were some components of the 2021 performance that informed the fact that we raised our 2022 guidance from where it had been before 2021 to that 108% to 111% range. But that's the comfort level that we felt, given the data that we've seen thus far.

So there may well have been some onetime elements in 2021 that that we like to gather a little bit more data before making any other conclusions, so that we can be data informed. So we raised the expectation a little bit for 2022, but we need to keep gathering data before going above that range of way to 108% to 111% that we described in our prepared remarks.

Elizabeth Anderson -- Evercore ISI -- Analyst

Got it. That's very helpful. And then, in terms of the professional services gross margin, obviously, it's nice to see that you were pointing to the mid-20% range for the full year despite some of the wage pressure and mix. Is that something we should think of as sort of maybe seeing more pressure in the beginning of the year and sort of expanding as we go through the year and sort of lap some of the back -- lap on some of the results in the back half of 2021?

Dan Burton -- Chief Executive Officer

Yeah, that's a good question. I think, as we think about the impact of some of the wage pressure items in professional services, in particular, we would identify that there's probably a couple of points of margin pressure there, attributable to the need for us to be strong in terms of base salary increases that we offer to team members. Obviously, we keep team members and their engagement at the center of the flywheel. So it's very, very important to us to be competitive as it relates to compensation.

We also definitely leaned in on behalf of members as it relates to their equity compensation component as a really nice long-term incentive for our team members to stay at Health Catalyst. And we benefited greatly from that as we shared in the prepared remarks, with 96 percentile team member engagement as measured by the Gallup organization and much lower turnover rates than what the rest of the industry is experiencing. As we think moving forward, it's very hard for us to predict exactly each of the components that might impact that -- those gross margin performance levels in the pro services space. We're certainly watching and studying the situation as it relates to which inflationary elements tend to be longer term versus transitory that will have an impact.

But I would share that as we think over the next year or so, we do believe that this market will continue to be competitive, and we need to stay competitive in response to that market, keep our commitments to our team members to ensure that we stay consistent with our strategy to offer above-market compensation with those team members.

Bryan Hunt -- Chief Financial Officer

Just to add to that -- 

Elizabeth Anderson -- Evercore ISI -- Analyst

Perfect. That's really helpful. Sorry, go ahead. 

Bryan Hunt -- Chief Financial Officer

No, just to add to that, Dan. So on Dan's point around that headwind on gross margin on the professional services side relative to the wage pressure, it does take us a little bit of time to work through price changes on the services side for existing customers where most of our customers have contracts that are long term and kind of pricing in place, whereas we have a little bit more flexibility on that from a new customer standpoint. So that is something that we're working on, but can take a little time to play out. And to your question, Elizabeth, on kind of cadence or quarterly distribution of that margin.

I wouldn't say that I see a major kind of trend in terms of first half, second half professional services gross margin shifts other than as we've seen in the past, pro services gross margin can fluctuate a decent amount on a quarterly basis and annually, based on those factors that you mentioned, the wage dynamics, the mix of services and utilization. So it can move around a bit. 

Elizabeth Anderson -- Evercore ISI -- Analyst

Got it. Thank you so much.

Operator

Our next question will come from the line of Stephanie Davis from SVB Leerink. You may begin.

Stephanie Davis -- SVB Leerink -- Analyst

Hey, guys, thank you for taking my questions. More of a math kind of question. But as we look at your DOS adds and it becomes sort of a mix of DOS, DOS light and a broader number of adjacency add-ons, how should we think about the puts and takes to the contribution math and visibility? And what this does versus kind of your historical model?

Dan Burton -- Chief Executive Officer

Yeah, great question, Stephanie. I'll share a few thoughts and then, Bryan, please add. So there is a modest impact if you think about the 2021 contributions of net new DOS subscription clients, including a modest number of new structures like DOS light, for example, that might come in at a lower price point. But the vast majority of those net new DOS subscription clients were much more in line with what we've seen historically.

And so, the vast majority are still at that same kind of price point with a modest impact with those DOS light contributors. And that's how we've thought about it moving forward as well, that the majority of that high teens, the vast majority of the high teens net new DOS subscription clients that we're projecting for 2022 will fall within that more traditional price point and subscription type, with a modest amount of contribution of the smaller DOS light offerings. And those smaller offerings, obviously, started at a lower price point. They also offer more expansion opportunity relative to what you might see in a more typical contract. 

Bryan Hunt -- Chief Financial Officer

Yeah. I think, to add to that, Dan. Stephanie, to your point, as we think about that long-term revenue growth target of 20%-plus, to your point, we have seen a little bit of a shift in 2021, as an example, on the first piece of that long-term target, which is that dollar-based retention rate metric coming in a little bit higher than our historical 1.07 to 1.09. We've typically showed that the balance of that 20% comes from the new customer additions.

And so, to Dan's point, on the DOS light contribution and enterprise contribution, there's also a retention rate dynamic that we're trying to work through and think about how that might play out over time. And to Dan's point, we're not ready to kind of make immediate pronouncements in terms of a long-term shift on retention rate being higher and the DOS contribution being the balance. But those are the two factors we're thinking through as we go forward.

Stephanie Davis -- SVB Leerink -- Analyst

That's helpful. Following up on that then, how should we think about acknowledging still early on, the contribution from converting a DOS light client to a full DOS client, kind of what the strategy is for going through that process in terms of time line and maybe -- to kind of impact?

Dan Burton -- Chief Executive Officer

Yeah, it's a very important question. And in many ways, we've been getting some meaningful practice in that regard as we have integrated application layer companies in an organization where there's a client relationship there, but it's at a smaller level than what we would be talking about in terms of expanding to DOS. So we have some experience with that. It is, as you might imagine, a longer sales cycle.

There's more complexity, often we have to migrate up in the organization to more of the C-suite in order to make that transition. I think, the upside, as we mentioned just a few minutes ago, is that there's a lot more expansion opportunity when we start at a DOS light level or at the cross-sell level with an apps layer client relationship. But the downside of the challenge is we have to go get that rather than, that increase being contractually already built in.

Bryan Hunt -- Chief Financial Officer

And I would just add, Stephanie, to that that at a foundational level, I would say that expansion opportunity still does follow our long-term strategic flywheel orientation of we are starting with an initial use case of bringing in data in a specific department or analytic area. We are applying an application to that data, identifying unique insights to drive and then we're applying expertise to ensure that those improvements are executed on. And that really is what that flywheel entails and enables us to then expand beyond that department and circulate those successes within our organization and grow from there. So at a foundational level, it's similar, we're just, as Dan mentioned, getting more experience on executing against that quickly across these initial use cases.

Stephanie Davis -- SVB Leerink -- Analyst

Looking forward to when we can hear about some of these announcements and conversion. Thank you, guys.

Dan Burton -- Chief Executive Officer

Thanks.

Operator

Next question will come from the line of Richard Close from Canaccord. Your line is open.

Richard Close -- Canaccord Genuity -- Analyst

Yeah, thanks a lot. Congratulations on a great year and the positive pipeline. Dan, I'm curious if you could discuss maybe how you've factored in the current environment for your customers from a labor perspective and maybe how that got factored into the guidance.

Dan Burton -- Chief Executive Officer

Yeah, great question, Richard. So we are certainly sensitive to the fact that our customers are facing some specific challenges. Certainly, the challenges we discussed a few minutes ago around labor, labor shortages, burnout, difficulty around staffing is a thematic element that we're hearing. And that's one of the reasons why I think our PowerLabor application suite, for example, is something that we were grateful to be ready to introduce mid-last year, toward the second half of last year.

And we've seen a lot of interest in using that software to get our utilization as strong and as positive as possible with the staffing that we have. Likewise, as was discussed a few minutes ago, the fact that we can offer some outsourced tech-enabled services that can sometimes help out our clients who are facing a strain and some difficulty retaining existing staff and recruiting new staff, has also been an area of growth for us and something that we are excited to see continue to grow. At the same time, we recognize that there's so much strain within the healthcare ecosystem as we mentioned in our prepared remarks, that sometimes that can be a headwind in terms of talking about new areas to focus on, new work to do. That exhaustion level can be a challenge for us to overcome, but we're working our way through that.

And one of the strengths of the company is our depth of empathy and understanding for our clients and the depth of that relationship with clients. And so, a lot of what we try to do is meet them where they are, try to help with areas that give them a greater sense of hope and optimism for the future that then often opens up bandwidth to be able to consider new areas of growth and expansion.

Richard Close -- Canaccord Genuity -- Analyst

OK. And as a follow-up, since we're sitting here at the beginning of the year, I was wondering if you could talk a little bit about the competitive environment now, how you're thinking about your market share performance. And then maybe commentary on win rates and if you lose, what's the main reason that you lose?

Dan Burton -- Chief Executive Officer

Yeah, good question. So Richard, we see a competitive landscape that feel like similar to what we observed in the past. And we think about it in three different categories. So first is the data platform category.

We continue to see the biggest competitor is as home often with a little bit of help from a cross-industry tech vendor. And secondarily, competition from the EMR vendors trying to expand into the analytics space. A lot of the same dynamics have been at play, and we are pleased to see strong win rates through 2021. We anticipate those same strong win rates to continue.

Occasionally, over the years, we see someone at the apps layer or a couple of vendors at the apps layer that have started as more of a point solution trying to kind of broaden their offering into more of a horizontal offering. We've seen that in the last year or so, with a couple of vendors trying to do that in the pop health space, for example, to expand beyond pop health. And we've seen, as we've seen in the past, a number of challenges with that strategy. We found that it's a lot harder than it looks to go from a vertical point solution to a horizontal platform.

So we anticipate that the long-term competitive dynamic will continue to be really a focus on winning against homegrown, plus some help from cross industry and then winning against the EMRs at the platform layer. At the apps layer, it continues to be a very dynamic competitive environment with hundreds of different point solution providers often with very, very significant capabilities in one area or a couple of areas. And those point solution providers we have to compete head-to-head against, so in the pop health space or in the financial space or in the clinical space, we have to meet them and match their specific capabilities and then try to showcase why what we can do below the apps layer and above the apps layer, both added data platform and aggregation layer. And then above the apps layer with our services expertise make us so much better as a partner, not only in that one point solution area, but also across a broader array of problems that these health systems are going to have to face.

That's where we continue to see really strong win rates is the fact that we offer a full solution, not just help with one or two use cases.

Richard Close -- Canaccord Genuity -- Analyst

Thank you.

Operator

Our next question will come from the line of John Ransom from Raymond James. Your line is open.

John Ransom -- Raymond James -- Analyst

Hey, good afternoon. So you're approaching EBITDA breakeven, you're sitting there with over $400 million in cash. And I'm just -- I'm sure you've got a parade of investment bankers in and out of your offices. There are a million middle-market HCIT company platforms out there.

So how do you kind of sift through the wheat from the chaff? And when you're talking to people who want to sell you something, what guidance you give them not to show you something that's not going to be interesting to you?

Dan Burton -- Chief Executive Officer

Yeah, great question, John. So we do believe long term and has informed the strong balance sheet that we've striven to have that we can be a consolidator long term, especially at the apps layer, where, to your point, maybe there's not a million companies, but there are hundreds of companies that we respect, that we recognize had built really interesting technology that often solves a problem in a really effective way. And we try to emphasize humility at Health Catalyst to be excited when we see that technical capability that could accelerate what we can offer to our clients and the value proposition that we can get to more quickly through M&A and through consolidation. We do try to be very disciplined in the way that we think about the strategic framing of acquisition opportunities.

And we also pride ourselves on often instigating proprietary processes rather than banker-led processes, where we cultivate relationships over the long term with our ecosystem. We have a partner program as I mentioned earlier in the prepared remarks. Maxine Liu, who's just been promoted, built out Health Catalyst Partner Program, and that's an opportunity for us to get to know directly hundreds of these companies that we then build and deepen relationships with. And as we find that there's a great strategic fit and as it matches up with what we're hearing from our client base as important areas of capability, that's when we narrow the funnel and we deepen the focus on these organizations.

And as is often the case, and this was the case with KPI Ninja, there was no formal process whereby that organization was considering selling. We instigated a proprietary process. And that was true of the Twistle acquisition as well. And so, we believe that gives us some meaningful advantages and we try to leverage the fact that the company is often a preferred destination for these start-up organizations because we take care of their people, their team members and we take care of their clients at a really high level, that there's a preference to end up at Health Catalyst, and we intend to use our balance sheet strength to use a significant focus and investment to continue to be a consolidator in the future.

Bryan Hunt -- Chief Financial Officer

And just to add to that, Dan. That was well said on the strategic kind of framework that we use. One other dynamic that we're working through and trying to stay aware of is we have seen, over the last few quarters, valuations in the public markets shift meaningfully down. And that is still taking time to fully play out in the private markets.

And so, that is a dynamic that we're facing now, where we do aim to continue to be disciplined from a valuation standpoint, a financial standpoint. And we expect that that will adjust and roll through the private markets in the future, but it does take some time.

John Ransom -- Raymond James -- Analyst

And just as a follow-up, as your customers exit the COVID emergency and hopefully get back to "normal," what solutions do you think they will demand of you versus what you've been dealing with over the past couple of years? And how might that inform your strategy?

Dan Burton -- Chief Executive Officer

Yeah, great question. So we feel like we've already seen some early window into how this might play out. And one of the areas that certainly increased dramatically in terms of client interest as our clients became more capable, I would say, of responding to the ups and downs of the COVID pandemic was population health. And certainly, another area that was quite relevant through the worst of the pandemic and continues even thereafter, is the Financial Empowerment Suite where it continues to be really important on the revenue side and the cost side to manage things very carefully and very effectively.

So those are two areas definitely that we see increased demand, and I believe that will continue longer term. Clinical improvement areas are an area where we're starting to see an uptick where those were some example areas where we saw a pause during COVID, and we've seen some uptick in that activity as healthcare organizations have a little bit more bandwidth to think about more traditional clinical improvement activities as well.

John Ransom -- Raymond James -- Analyst

I mean, do you think though that for all the talk about value-based care and pop health and resharing, has that been overstated a bit? Or are most of your clients still in a fee-for-service world with a kicker? Or do you see -- I mean, certainly, in the for-profit healthcare system, it's largely fee-for-service. But do you see the not-for-profits moving more quickly into really taking meaningful amounts of risk?

Dan Burton -- Chief Executive Officer

Yeah. So I'll tell a quick story. My first job out of college was at the Boston Consulting Group, where my second client was a health system, and this is back in the mid-90s. And I was asked to model out how long will it take essentially to -- for the whole ecosystem to move to value-based care.

And I was debating in my mind whether it would take three or five years, and that was 25 years ago, right? And based on the research reports that you look at, the latest estimate that I've seen is about 10% of the revenue base is in true value-based, risk-based models within the provider ecosystem. So we're still only 10% of the way there. So certainly, this is taking a long time. On the other hand, we are seeing more and more contracts that have some component of risk in them among our client provider systems with both commercial and Medicare, Medicaid relationships that there are meaningfully larger components and increasingly more common components of risk elements.

And there's an appetite, I think, in a sense within the provider ecosystem that for multiple good strategic reasons, they need to be learning how to take on more risk, learning how to operate effectively in a value-based care world. Because even though it's taking a while, in many ways, the train has left the station on the increased prevalence of risk and understanding and utilizing and managing risk effectively as a provider, I think, is something that is here to stay. And that's one of the reasons why we've seen an uptick that I think will be more long lasting in terms of pop health offerings.

John Ransom -- Raymond James -- Analyst

Yeah, you're right, you're right. Thank you.

Operator

Our next question will come from the line of David Grossman from Stifel. You may begin.

David Grossman -- Stifel Financial Corp. -- Analyst

Thank you. It's getting kind of late here, so maybe I'll just limit it to one thing. And you've given some great detail in some of the previous questions on your services business. It sounds like the services segment has become less predictable impacting retention and margins.

So first, am I interpreting that correctly? And if so, is this really just an artifact of the pandemic, tight labor markets and kind of some financial distress at your customer? Or are you really preparing for a more fundamental secular shift and how the client is going to consume your service offering?

Dan Burton -- Chief Executive Officer

Yeah, it's a good question, David. I'll share a few thoughts and Bryan, please also share. I think, there's -- there are components of the variability of our services business that have been consistent for many years now. And we've spoken many times about them, for example, the mix of services that is demanded is something that we allow to shift over time based on a primary focus of ours, being what does the client need to be successful in realize measurable improvements, as Bryan mentioned a few minutes ago.

And so, if that mix shifts more toward lower margin or if that mix shifts from recurring revenue services to project-based, nonrecurring revenue services, we're very comfortable with that, and we operate as a business with the primary focus on client success from a professional services perspective. And so, as we've seen over last 11 quarters as an IPO company, the gross margin in the pro services space is as low as 20% and as high as high 30s, and we are comfortable with that. And we've tried to be transparent about that as a long-term component of our business that we will continue to optimize first for client success. So that's something that hasn't changed and that we believe will continue to factor into our services overall performance.

Now there's some specific elements in the near term that we're watching, one of which is something we talked about earlier, the tight labor market, the impact of inflation, the impact of needing to increase wages for our services-based team members and understanding which components of inflation pressure are long-lived and which are more transitory. It's something that we're watching over time. And to your point also, David, there may be some components of the mix of services that are being offered that could be related to the pandemic. And so, another component for us before we would make any pronouncements about updates to our long-term guidance, for example, would be allowing ourselves time to observe as the nation and the world hopefully get through the pandemic, and we move into more of an endemic state, to really observe where there are some structural elements that were just specific to the pandemic that now come back to a different state? Or were these a more permanent, long-standing shift.

And we want the benefit of observing that for a period of time before making any long-term updates.

Bryan Hunt -- Chief Financial Officer

Yeah, I agree, Dan. I think, David, you characterized it well in terms of having a little bit less visibility into that segment is something new for us, and that actually provided us a little bit of upside in our 2021 performance with some outperformance on that revenue segment. So there is more variation there and agreed with what Dan said, the new dynamic in 2021 that we're wanting to kind of see how that plays out through 2022, so that we can assess that go-forward profile.

David Grossman -- Stifel Financial Corp. -- Analyst

Right. So if you think about the dynamics impacting that business today, though, is it fair to say that -- and you would never say this as a blanket statement, but just given what you know now, a low watermark in terms of you've got wage inflation, so you've got margin pressure, you've got some variability and mix of outsourcing versus maybe more strategic professional services. So is that the right way to look at it, that we're probably in as uncertain environment for that segment as we would expect to be at least based on what you've seen as historically?

Dan Burton -- Chief Executive Officer

It could be. It could be. And at the same time, it's also pushed us as an organization to think about how can we do things more efficiently? How can we broaden and rethink the way that we deliver services? One of the things that I mentioned earlier about KPI Ninja that we're excited about is more of a global presence, a presence in India. And the thought processes around where we can provide certain services and how we can make them more efficient, I think, makes us stronger.

And so, we've appreciated that. And then, we'll see. And if you're right, then there may be some future upside. But we're not certain how that will play out, and so we want to gather some more data first.

David Grossman -- Stifel Financial Corp. -- Analyst

Got it. Thanks for that.

Dan Burton -- Chief Executive Officer

Thanks, David.

Operator

Our next question will come from the line of Daniel Grosslight from Citi. You may begin.

Unknown speaker -- Citi -- Analyst

This is Anna Grozinsky, on for Daniel. Thanks for taking my question. I wanted to go back and ask about the higher hosting cost headwinds associated with transitioning a portion of your customers to be at their platform. Just wondering if you anticipate that the customer is paying higher access fees and the built-in price escalators will continue to more offset these headwinds for '22 as your technology gross margins continue to expand nicely.

Dan Burton -- Chief Executive Officer

Yeah, thank you for the question, Anna. So we do anticipate finishing that transition, which has been a couple of year headwind in transitioning some on-prem clients to the Azure cloud environment. That should be completed by the end of this year. And so, that will be the point in which I think we'll have some of those headwinds behind us.

And then, we do anticipate that you'll see some meaningful positive expansion over time. Though as we've shared in the past, the data platform business from a gross margin profile perspective, we believe, long term will be a lower profile relative to the apps layer gross margin profile. But as the mix shifts over time toward more and more revenue, technology revenue coming through the apps layer, that's where you see a favorable trend toward the overall gross margin moving toward those longer-term targets that we've talked about. 

Unknown speaker -- Citi -- Analyst

OK. Thank you. That's super helpful. And then, if I could ask one more.

I know you mentioned a modest contribution from the DOS light customers. But I was curious if you could share what types of clients have seemed to be most receptive to this type of pricing model? 

Dan Burton -- Chief Executive Officer

Yeah, absolutely. So we have not modified the target client profile that we're focused on in terms of who would be a great long-term fit. So the same guidance that we provided in terms of net patient revenue on the provider side, for example, has applied. What we found to be the most telling factor is often where we can get traction within the organization.

As Bryan mentioned a few minutes ago, often there's one department that is facing one specific issue or problem. And our ability with DOS light to be more competitive from a price perspective relative to point solution players is the major advantage, and an opportunity for us where we've done a little bit better than what we have done in the past when we didn't have a DOS light offering and wouldn't be advanced in the process, especially when it's just a single department that's focused on a single use case. So that's the scenario where we've seen a little bit better traction with the benefit of DOS light than we saw before introducing DOS light. 

Bryan Hunt -- Chief Financial Officer

Yeah, I agree with that, Dan. And yeah, I agree with the comment around no major shift in terms of the type of customer end market. But I would note that in terms of the use cases, I would share what Dan mentioned as well where we do continue to see demand in both the revenue and financial optimization side, as well as the population health value-based care side, and do believe that we have some targeted DOS light use cases, standard situations where we are more competitive in those instances now.

Unknown speaker -- Citi -- Analyst

Gotcha. Thank you, and congrats on the quarter.

Dan Burton -- Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of David Larsen from BTIG. You may begin.

David Larsen -- BTIG -- Analyst

Hi. Congrats on the quarter. I thought I heard in your prepared comments some detailed discussions around a denials management solution. Do you have like that module built? And if so, like how new is it? That's one of the biggest challenges that a lot of hospitals are facing with denied claims.

And if you can address that effectively, it, obviously, accelerates cash to hospitals rapidly. So I would think that that would be of high value to hospital CFOs. Just any color around that would be helpful.

Dan Burton -- Chief Executive Officer

Yeah, absolutely, David. So as is the case across all of our offerings and inclusive of the financial offering and specifically even more narrowly as it relates to the denials management solution that we spoke about in our prepared remarks, DOS or the data platform is the foundation of gathering the right information that is necessary in order to make progress there and understand the specific opportunities for improvement. Then above that, as we've discussed in the past, part of what we offer at the apps layer includes a library of lighter touch analytics accelerators that are visualizations that can be customized to a specific situation at a specific healthcare organization. In this case, we used one of those analytics accelerators to help Albany Med specifically visualize where the opportunities exist and then act on those.

And so, that is something that we were able to leverage the DOS infrastructure, the data platform infrastructure. And then, they just needed a lighter touch solution at the apps layer to really visualize what they care the most about and then go after the savings and the improvement. And it is something that we could leverage and replicate elsewhere as well.

Bryan Hunt -- Chief Financial Officer

And just to add to that, David. To Dan's point on the foundation of these analytic use cases being DOS. One thing I want to call out that I think is an important differentiator at our foundational DOS level is the DOS platform is open and self-service. And our customers do build their own reports, to Dan's point, customize starter set dashboards and the like in a self-service way, which we think is differentiated in the market for healthcare.

And so, we do use that self-service building, as well as the customization that customers do to inform our, to your point, kind of longer-term application road map.

David Larsen -- BTIG -- Analyst

Great. Thanks very much. And then, was there a deferred revenue drag in the quarter that you did not add back? And will there be a drag in 2022 that you're not adding back? And can you quantify how much that is?

Bryan Hunt -- Chief Financial Officer

Yeah. Some, in particular, related to the main headwind that I called out in the prepared remarks, David, of the Medicity decline. So Medicity is primarily technology revenue, the legacy revenue base there. And as we've shared over the last couple of years, does continue to decline.

That's the primary kind of drag I would call out in terms of what we see going into 2022.

David Larsen -- BTIG -- Analyst

OK. But there's not like an acquisition-related deferred revenue adjustment, that's a headwind. OK. That's all I have.

Yes?

Bryan Hunt -- Chief Financial Officer

The small amount in Q1, yeah, remaining for Twistle for that write-down. That's true.

David Larsen -- BTIG -- Analyst

OK. Great. Thanks very much.

Dan Burton -- Chief Executive Officer

Thanks, David.

Operator

Our next question will come from the line of Glen Santangelo from Jefferies. You may begin.

Glen Santangelo -- Jefferies -- Analyst

Oh, yeah, good evening, and thanks for taking my questions. Dan and Bryan, I just have a high-level question and then a modeling question. First, it sounds like you have a fair amount of client momentum and you finished up the year pretty strong on the DOS add side, a record dollar-based retention. You did a couple of acquisitions and you have some cross-sell opportunities.

I think, you highlighted in your prepared remarks, strong bookings in 4Q. But yet, when I look at the fiscal '22 revenue guidance, you're calling for a deceleration of your revenues by 600 or 700 basis points. And it just seems inconsistent with the client momentum that you seemingly have. And I'm just wondering if you can maybe just frame that for us a little bit.

I'm sure there's some level of conservatism maybe you're building in there. Just any high-level thoughts around that inconsistency?

Dan Burton -- Chief Executive Officer

Sure. Yeah, happy to comment and then Bryan, please add as well. So we were pleased with the strength of the 2021 performance, both with existing clients and with new clients and encouraged by that. There were some elements that moving forward into 2022, both on the tech side and the services side that we wanted to pay attention to as we thought about our guidance.

I will note that as we mentioned in the prepared remarks at the midpoint, our guidance for the year 2022 represents 20% year-over-year growth, which is consistent with what we shared long term as the company's growth profile of 20%-plus. It's similar to the way we've thought about things in the past. But as we think about 2022, in particular, on the tech side, as Bryan mentioned earlier, there is a headwind as it relates to the Medicity business that will impact our tech overall revenue performance. And then, on the services side, in 2021, we did realize some specific services revenue around nonrecurring contracts that are harder for us to predict.

And there was a timing element in 2021 also that we called out in the prepared remarks, where we signed a particularly large services contract a little bit earlier in the year than we would typically see. And so, as we look forward to 2022, we've tried to normalize for a couple of those factors. But even with those factors, we were pleased to be able to guide to -- at the midpoint, that 20% growth level for 2022.

Bryan Hunt -- Chief Financial Officer

The only other thing I would add to that, Dan, to your question, Glen, on 2021, I think full year revenue growth. I just wanted to point out that 2021 did have the Vitalware inorganic contribution for a good portion of the year, given that we completed that acquisition in Q3 2020. So you would want to factor that in, in thinking through the growth rate for 2021 as compared to going forward? And you could look at Q4 as an example, where Vitalware had lapsed by that point in time in Q4 2021. 

Glen Santangelo -- Jefferies -- Analyst

All right then. That's perfect. That makes a lot of sense. Thanks for walking me through that.

And then, maybe secondly, it sounds like you're continuing to make progress on the margins. Could you maybe just give us a sense for -- embedded within that fiscal '22 guidance, what level of stock-based comp you're assuming, so we can ultimately think about that as it may relate to the balance sheet and cash flow statement? And I'll stop there.

Bryan Hunt -- Chief Financial Officer

Yeah, thanks, Glen. Yeah, so in terms of stock-based comp, what we saw in 2021, I'll just point out a couple of items there first. So 2021, I think, as you know, does have one nuance around stock-based compensation that is related to revested acquisition consideration from prior M&A deals where that is considered from an accounting standpoint, a stock-based comp, but it's really upfront acquisition consideration over time. We do break that out in our financial statements.

You'll be able to kind of see that contribution when you think about stock-based comp overall and as a percentage of revenue. When we look at it as a percentage of revenue, so in 2021, excluding that revested consideration, we were in the mid-20% range. And then, as we head into 2022, we do expect generally to have operating leverage on that metric as a percentage of revenue. But we did try to be really thoughtful from a team member standpoint in terms of ensuring long-term incentivization and retention of team members for 2022 and beyond, such that we expect to be in a similar range around that mid-20s level as a percentage of revenue for 2022.

And we really wanted to just be thoughtful about getting ahead of what some people are seeing in this tight labor market around the potential great resignation and other turnover dynamics where that is, obviously, very important for us, to ensure that we continue to attract and retain over the long term these talented team members. So that's what we see in 2022. And then, as I mentioned, over the coming years, expect to drive leverage in that metric going forward. 

Glen Santangelo -- Jefferies -- Analyst

OK. Thanks for the details.

Operator

Thank you. I'm not showing any further questions in the queue. I'd like to turn the call back over to Dan for any closing remarks.

Dan Burton -- Chief Executive Officer

Thank you all, again, for your interest in Health Catalyst. We appreciate your questions, and we look forward to having great future discussions as well. Have a good evening. 

Operator

[Operator signoff]

Duration: 96 minutes

Call participants:

Adam Brown -- Senior Vice President of Investor Relations, Financial Planning and Analysis

Dan Burton -- Chief Executive Officer

Bryan Hunt -- Chief Financial Officer

Ryan Daniels -- William Blair -- Analyst

Jessica Tassan -- Piper Sandler -- Analyst

Cindy Motz -- Goldman Sachs -- Analyst

Elizabeth Anderson -- Evercore ISI -- Analyst

Stephanie Davis -- SVB Leerink -- Analyst

Richard Close -- Canaccord Genuity -- Analyst

John Ransom -- Raymond James -- Analyst

David Grossman -- Stifel Financial Corp. -- Analyst

Unknown speaker -- Citi -- Analyst

David Larsen -- BTIG -- Analyst

Glen Santangelo -- Jefferies -- Analyst

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