HealthStream(HSTM) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported revenues of $63.5 million, a 3% increase year-over-year, despite a$ 1.6 million reduction due to deferred revenue write-downs related to acquisitions [52][56] - Operating income decreased by 54% to $3.3 million, while net income fell by 68% to$ 2.3 million, resulting in EPS of $0.07, down from$ 0.22 in the prior year [53][54] - Adjusted EBITDA improved to $13.6 million, marking a 14% increase and a record quarterly high for the company [54][55] - Gross margin was 66.5%, slightly down from 66.9% last year, but improved from an adjusted 61.3% when excluding a one-time reduction in cost of revenues [58] Business Line Data and Key Metrics Changes - Workforce Solutions revenues were$ 51.3 million, up 3%, while Provider Solutions revenues reached $12.2 million, up 4% [55] - Revenues from legacy resuscitation products declined significantly, contributing only$ 1.8 million in Q1 2021, down from $11.2 million last year [56][57] - Excluding legacy product revenues, consolidated revenues grew by 22%, with 8% organic growth and 14% from acquisitions [57] Market Data and Key Metrics Changes - The company added approximately 21,000 net new hStream subscriptions, bringing the total to about 4.34 million subscriptions [47] - The Verity hStream Application Suite contracted with 45 new customer accounts, totaling approximately 390 customers [39][40] Company Strategy and Development Direction - The company is focused on innovation, particularly with new products like Jane, an AI-driven competency development system for healthcare professionals [19][24] - The transition to a more comprehensive portfolio, including the Red Cross Resuscitation Suite and the Verity hStream platform, is seen as a key strategic move [30][39] - The company aims to achieve a gross margin of approximately 65% and return to adjusted EBITDA margins of 15% to 20% [17] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the ongoing pandemic and its impact on operations, emphasizing the need for continued investment and adaptation to new work-from-home models [8][50] - The company anticipates revenue growth despite challenges from declining legacy products and expects to achieve revenue between$ 245 million and $255 million for the full year 2021 [13][64] - Management highlighted the importance of customer adoption of new technologies and the potential for improved patient outcomes through investments in workforce competency [110][114] Other Important Information - The company ended the quarter with approximately$ 56 million in cash and investments, no debt, and full availability under its $65 million line of credit [76] - The company is evaluating potential M&A opportunities to support long-term growth objectives [77] Q&A Session Summary Question: What is driving the success of the Verity hStream product line? - Management attributed success to the comprehensive nature of the CredentialStream platform, which integrates the best features from acquired companies, leading to improved win rates in competitive situations [96][98] Question: How does the demand for workforce management solutions fit into broader AI priorities? - Management noted that while education and training often rank lower in budget priorities, organizations that recognize the link between competency and clinical outcomes are beginning to invest in solutions like Jane [108][110] Question: How are hospitals shifting their priorities as the pandemic eases? - Management observed a continued focus on quality outcomes, with stronger organizations prioritizing tools that can help achieve these goals, including the Verity hStream and other solutions [121][122]