Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- HealthStream Inc (HSTM, Financial) reported year-over-year increases in major financial categories for Q2 2024.
- Strong sales pipeline, particularly in CredentialStream, ShiftWizard, and the new enterprise competency suite.
- Ongoing progress towards key development milestones on the HealthStream platform, enhancing interoperability.
- 96% of revenues are subscription-based, providing predictable and recurring income.
- HealthStream Inc (HSTM) has no interest-bearing debt and a strong cash balance of $83 million.
Negative Points
- A timing anomaly at a large customer led to a temporary revenue shortfall, expected to self-correct over the year.
- The bankruptcy of Steward Health Care System negatively impacted net income, adjusted EBITDA, earnings per share, and operating income.
- Revenue from the ANSOS scheduling product declined by 15% year-over-year.
- The consumption-based billing model caused revenue volatility and is not planned for expansion.
- The impact of the Steward Health Care System bankruptcy may push HealthStream Inc (HSTM) towards the lower end of its revenue guidance range.
Q & A Highlights
Q: Was there any impact for HealthStream directly from the CrowdStrike situation?
A: From our perspective, the impact was minimal on us. We found one or two isolated cases where it was impactful, but we worked through that fairly quickly. Overall, the impact on our base as it relates to the use of our products was minimal and almost non-existent across our broader network. - Robert Frist, CEO
Q: How much does the network by HealthStream increase your end market opportunity?
A: We haven't scoped it yet. We're working on recalibrating our launch. We've got initial success with 10 locations, mostly health plans attached to health systems. We feel good about our opportunity there but haven't added it to our TAM yet. We'll report on how it impacts our TAM in the coming quarters. - Robert Frist, CEO
Q: Is the 3.5% price escalator a component across your customers, and how should we think about it?
A: We've never really used escalators at any scale. Our pricing models are based on term and volume commitments. This is new, and it took over a year of planning. Less than 1% of our contracts have escalators today, but we're working to make it a standard practice. - Robert Frist, CEO
Q: How are you thinking about the evolution of your sales force as you move to more of a cross-sales motion?
A: We feel we have the sales organization about the size we need now. The nature of some positions may shift over time. We have around 200 people focused on selling products, with about 60 account managers and 140 specialists. We might see a higher ratio of account managers to salespeople over time. - Robert Frist, CEO
Q: Can you talk more about how you're approaching the move to a single sign-on and where you are in terms of tech investments?
A: One of the core features of our platform is the hStream ID. We have 14 of our 27 apps implemented on hStream ID. We don't need to add more CapEx or developers; it's more about sequencing the features and platform. It's a multiyear journey, but we're seeing exciting benefits. - Robert Frist, CEO
Q: Can you provide additional color on the strong selling trends to close out the quarter?
A: We had been a little short of our desired outcomes in Q1, so it was exciting to see the last month of Q2 perform well. The nature of the pipeline has shifted; we're doing a better job of describing value and bundling products. We have the largest pipeline we've ever had in our competency suite. - Robert Frist, CEO
Q: Are there any other clients in financial distress we should be concerned about?
A: On the whole, we're not seeing any change patterns in payments. Our DSO remains good and consistent with the past couple of years. We hope the Steward Health Care System bankruptcy is an isolated problem. - Robert Frist, CEO
Q: Can you clarify the 15% decline in ANSOS scheduling products?
A: The decline was 15% on last year's revenue, about a $600,000 decline versus the same period last year. The rate of attrition has been at that rate for the past four to six quarters. - Scott Roberts, CFO
Q: Can you provide more details on the $1 million charge associated with Steward Health Care System?
A: The $1 million charge impacted the P&L in the G&A line. Our bad debt charges flow through that category. - Scott Roberts, CFO
Q: What kind of activity drove the commerce revenue in the second quarter?
A: We have three forms of commerce: big collaboratives, B2B commerce at the manager level, and direct to professional marketing. The primary driver right now is the DEA MATE opioids course. We project a few more quarters strong on DEA MATE and are growing in our nurse channels. - Robert Frist, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
