HealthStream (NASDAQ:HSTM), a health care technology company, reported record revenue and adjusted EBITDA for the third quarter of 2023. The firm saw a 5% increase in revenue to $70.3 million and a 28% improvement in adjusted EBITDA to $16.2 million, aligning with InvestingPro data which shows a 5.6% revenue growth and a 9.43% EBITDA growth for the last 12 months till Q2 2023. The company, which operates with a moderate level of debt according to InvestingPro Tips, also reported a strong cash balance of $71 million and is confident in its ability to meet its Q4 guidance range for adjusted EBITDA of $59 million to $62 million.
Key takeaways from the call include:
- HealthStream's gross margins improved to align with their financial goals of 65% to 68%, and they have achieved increasing revenue per employee for the past four quarters. InvestingPro data shows their gross profit margin at 65.57% for the last 12 months till Q2 2023.
- Subscription products accounted for 96% of total revenues, with subscription revenue increasing by 5%.
- The company has a dividend program in place and has made 3 quarterly cash dividend payments so far this year, returning $2.3 million to shareholders. This aligns with the InvestingPro Tips that suggest the company's strong earnings should allow management to continue dividend payments.
- HealthStream is expanding its market by targeting nursing students and nursing schools and has seen a 27% increase in revenue from myClinicalExchange, a product that connects nursing students with hospitals for rotations and credentialing.
During the quarter, HealthStream saw an increase in revenues of $3.1 million, or approximately 5% compared to the same period last year. Subscription products accounted for the bulk of total revenues, with a 5% increase in subscription revenue. However, revenues from professional services declined by 11%.
The company's gross margin improved to 66.5%, benefiting from changes in revenue mix. Operating expenses increased by $0.4 million or 1% over last year, with depreciation and amortization up 8% and G&A up 2%.
HealthStream (NASDAQ:HSTM) ended the quarter with cash and investment balances of $71.8 million, up from $56 million in the previous quarter. Cash flows from operations improved by $7.1 million or 16% year-to-date, and free cash flows reached $18 million in the third quarter. This is consistent with the InvestingPro Tip that the company has a high earnings quality, with free cash flow exceeding net income.
The company also has a share repurchase program in progress, with $8.9 million of shares repurchased to date. HealthStream renewed its line of credit facility with Truist Bank for another three years, capping it at $50 million.
Looking ahead, the company expects consolidated revenues to range between $277.5 million and $283 million, with adjusted EBITDA ranging between $59 million and $62 million. Capital expenditures are expected to range between $27 million and $29 million.
HealthStream is expanding its market by targeting nursing students and nursing schools. It has seen traction in this area with a 27% increase in revenue from myClinicalExchange. The company has also made efforts to support healthcare professionals in Maui through partnerships and online training offerings.
The company has a dividend policy in place and expects to return approximately $3 million to shareholders in 2023. They will consider expanding the dividend program next year. The company aims to deliver steady growth and share gains directly with shareholders. For more in-depth analysis and tips, consider subscribing to InvestingPro which offers additional tips here.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.