HSTM - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen. And welcome to the HealthStream’s Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. And later, we will conduct a question-and-answer session and instructions will follow at that time [Operator Instructions]. And as a reminder, this conference is being recorded. introduce for to conference, like would your today’s host Ms. I Relations Vice President Condra, and of Mollie Investor Communications. may you Ma’am, begin.

Mollie Condra

to contain XXXX conference and the SEC, Thank I and and you, statements. the Robert statements, forward-looking HealthStream from to the remind quarter including and today to to involve for A. risks would cause joining Also the call future performance and in differ good contained future forward-looking filings and of XX-Q. are that results events forward-looking Senior with factors materially concerning Information you HealthStream Forms morning. also discuss Thank actual materially Frist Jr., Company’s uncertainties Gerry statements our like Chairman that risks other me from those differ and the could Hayden, call regarding and CFO. with cause those conference that in XX-K you the may CEO us results. these this projected could are on of third that results President the Vice

the start, turn will now to over with that Frist. So Bobby I call

Robert Frist

the Good each information morning, welcome third past our XXXX variance conference everyone. call. is call out to earnings of sentence. carefully The written quarter And detailed

a here we go, of So everybody for we lots this details morning. have you great

flow strong also XX%, so leveraged operating revenues XXX% ICD-XX and also decline cash were is led knowledge the solutions of million. with up place it performance, last segment, up balance. by was of corporation the quarter-over-quarter of third growth at driven quarterly period one of third In improvement primarily year, EBITDA same in of that confidence closely quarter Solutions quarter. growth for expectation segment, in year. in-spite by it Operating a really our was metrics, free last showed Workforce our quarter year our net which our X% over third last sequential was income up in Workforce same of results solid income over quarter This up the if that revenue, a $X.X good last quarter, gives quarter revenues quarter Our segment to we which of in that record in million quarter over look to performance was XXX%, financial at newer $XX.X was income compliance the XXXX. was a revenues of was These for core Solutions good a queue, measures and and Compared us Workforce which kind sales cash million $X.X solutions, our were XX% the second in Workforce segment, segment. followed were resuscitation adjusted the

last margins the the X% quarter deliver improve Patient segment quarter to Although, were down same Experience our third to operating from improved continued efforts in Solutions revenues our year, leverage. income

contracts Joe adjustment really related and amount XX%. of growth and on acquisition in saw earlier same deferred few organic in lower of This XX% improvements segment, we actions that full of acquisition Morrisey lot the business components; In quarter up Patient nice of period; Experience a period shows not on detail some over Solutions Provider the reviewed quarter write-downs, the this increase revenue of reflects one-time this from a it So year. third a about were were that; up comparable inclusion revenue the year. for year; our last a and related Associates revenues based give so to will customer taken more

of mentioned are last a Solutions less were Development there many expected. our and quarter’s XX% growth included from that components balance we sales In Provider organic call, but than in So in Workforce Solutions, segment it that Provider growth. nice

some concerns productivity gave the about talking relevant of expectations we’re quarter, again, the now So around of to productivity. the We sale and internally. organization

segments. our recovery fourth know challenging did we orders quarter, the base recovery quarter third continue enter same from to those client and sales quarter. This be in as that see for micro the we But we a conditions generally

sales little a a up QX contract as we order sales maybe us was less velocity So certainty enter But value around for catch QX. and values. in good

contributors So exciting that we exciting and is were some revenue we call, that either that or concepts, February felt the product to profitability. in products. recently they and of those but good. of time, sale pretty some In XXXX from wouldn’t market very that concepts at they new commented introduced conference be we’ve begun What’s ‘XX, we,

shown six an fact, is you update And great. but of couple orders which a very a small Again, some revenue in start. sales and give on I’ll In them. products have all this quarter, nice

HealthStream’s excited Hospital, award pathway that’s our program, customers Nurse in as Southeast settings. is that, faced the Residency which program, First, recently. new just Well, enter that to quarter, Pathway, the Residency accreditation mouthful. winning the blended the achieved Residency to infrastructure. our and address Texas learning see were running ANCC by designed are a of nurses new in care work program program Elizabeth's Christa’s as Nurse one acute We challenges our with Nurse Saint But Residency third so Nurse was that Workforce

point blend way we’re of us products our deliver higher this that carries great now excited brand the assets subscription marketing helps a the and most in to because in That solution of the of solution year. education. by content many that so SaaS learning pretty our and it’s than the portfolio, price out everything And new that because

Residency So Pathway. that’s an to exciting breakthrough Nurse the

saw our to going third in to product a At The We party second update successful. that represented program. be area. this regards it's one we OB risk point, is

products with our system staff the maternal end OV it's knowledge customers clinical providing MedStar some a OB the the MedStar, this pretty will on our the and is to focused we entire top distress, into and higher also enterprise-wide At from risks indications account SiTEL, of HealthStream time. that’s ended co-develop with that on in multiyear our margin an program. of large profile we result year added SiTEL. base, renewal have system-wide selected co-developed area partners, which early in the Risk signs one anyway. a seen high and one identify platform they renewal, of five for that year. years early I’ll they over next customer excited, really up core Risk co-own program account renewed the co-developing breakthrough early of of we we’re a warning third success. We've their OB risk provide the By and our year, an other and one health preliminary reducing in some program with four So the quarter, program early deployment risk and way, an for That exciting program, co-own Risk our its now, developed part MedStar skill We those that on same excited risk by to in in OB agreement, of and settings. update so so about two infant OB new largest because program we're as of one of about that it's purchased use early the

some new that compliance that Again, just and -- contract. the one in added knowledge a year product. group example, the being its of a they stayed segment And leading I for within quarter group contributor early. this solution standpoint, was but the a products, from earlier Workforce it's essentially knowledge five sales newer one it's it’s year. our Q product precede the hotter So additional And process, in year mentioned

risk Q knowledge data account for the will a be was subscribed product five time So same nearly with also driven in HealthStream. at year top renewal program the conjunction as a there product five

of of we largest technologies. equation accounts dive that There’s on So, the our outperformance lot numbers. part in one of There quarter. the the a there’s relative pieces lot our is move that things exciting of to a third to contributed detail, to of as mixture newer

And little why so we bit be decline. events of detail help onetime to QX context next be a sequential important as the to little and essentially listen some we exceptional, of give that may have a it's the section

we to we're year, Although, little raise sequential for of able the into decline full head our a as guidance bit QX.

Hayden. to Gerry turn over carefully So CFO, it as listen I our

Gerry Hayden

quarter earnings was of summary in million, share Getting Thank were versus income of XXXX. our million million $X.XX you, third EBITDA income of operating up morning $X.X income $XX.X was was third share from per quarter. everyone. last $X.X up and Bobby, consolidated third operating million revenues $X.XX million per X% of Adjusted to results, $X.X year’s the in $X.X to in million of last quarter to year’s and $X third Net $XX income XX% XXX% good million up was quarter. and net versus

segment our year-over-year in statement; segment income income. areas Now operating increased let's million, at and from overcoming gross third the decline while readiness look Solutions expenses the by Revenues million $X.X operating of the quarter. in $X.X revenues four revenue, margins, ICD-XX Workforce

Now, let’s Development a quick at take Workforce ARIS. the look

line Workforce Solutions, quarter that not HealthStream’s though three are our which For our a in two over in segments, ARIS Experience the of of include all. third keep up business prior quarter. ARIS important as not at It was is $XX.XX, Provider at complete the is a XXXX, sequentially mind record business and included Patient to ARIS look does

Solutions ARIS in from XXXX. of reasons, for evaluate surveys may XXXX. towards from higher and for the that that surveys, million increased third compared entirely new metrics quarter Patient little these and $X.X surveys Revenues encompass patient third million points Experience Insight all Revenues trend phone online our XXXX continuing of price for segment to great the quarter carry Patient in were us. the continue to of which adoption $XXX,XXX by produce our margins We business the and retire measured $X.X

made the of of decreased $X.X or a XXXX, revenues online reduction increased compared one-time growth. few of adjustment $XXX,XXX The For patient to to due annual write-down, is third timing HealthLine systems Solutions period. organic deferred acquisition, engagements third by quarter volume quarter XXXX. surveys including up primarily year. of In Morrisey from of while decrease approximately $XXX,XXX Solutions, the representing Patient on conducted Provider to This prior led XX% related increased customer surveys and is same approximately the based to million to contracts Experience phone biannual third revenue the that from the quarter by the the XXXX, balance $X XX%, increase. surveys with the Associates cycles, compared our for $XXX,XXX increase Revenues million of from of Morresey segment other $XXX,XXX declined a in by of patient revenue

let's margins. at Now, look gross

in this quarter was quarter. in Our year's versus XX.X% margin gross third XX.X% last

the Laurel over margin margin this increased expansion; factors to nine relocation It in The fourth as of greater of the a of which This quarter approximately SMS improvement of contribute XXX this email, Experience we our Solutions. decreases. phone also Nashville, margin the contribution basis phone is from by third the the trend points Several deferred margin write-down successful margin since second improves performance gross reflects the shifts which gross reflects year. operations Patient to continued completed a The Provider surveys. first had ongoing sequential revenue notable quarter improving XXXX Also gross on in months from year. this text XXXX. of to quarter

to now XXXX. expenses. this product operating The third the flat and and were were for the combination investments turn Operating quarter capitalized third between last year's of expenses development of up expenses for quarter quarter. Let's, software quarter X%

a year-to-date capitalized on managed development by basis priority However, software as their developments has software XXXX. XX% in grown

on guidance our expenses. marketing increased of decreased level development to and software quarter this reduction of marketing in also expenses XXXX, general the have Sales expenditures primarily a third by over increased capital activity. reflect We driven

of place take some XXXX As but occurred XXXX. quarter will fourth a fourth of in now reminder, quarter in that the the

This meetings last rather of important revenue still as reflects related the capitalized increased over of quarters the It’s increased product than In transaction summit quarter quarter the to in the to to lower of foreseeable year’s quarter. amortization continues of it the assets improved the note in fact, quarter acquisition Nashville. of quarters two costs XXXX. increase third depreciation from a regional G&A XXXX have reflects acquisition. expenses for acquired Depreciation and percentage slightly, single third for shifted increased as and that is the of and Morrisey third amortization intangible levels XXXX. and year’s prior inclusion than holding compares XXXX and future, and we XX.X% which third large events, in third to amortization development. Last in software development to but amortization included of XX.X%, Morrisey XX% invest a

ASC XXX. will $XXX,XXX new to include recognition XXXX. be the costs quarter standards, of accounting related fourth However, the inhibit expenses third quarter XXX We does and XXXX compliance GAAP compliance in implementation approximately known new ASC

base level in in our number increasing an XXXX our as customers years. seen hospital risks this prior of and volatility in credit have evidenced among customer greater year painted by of bankruptcies We than

bad in of amortization increase this of year. in the This operating leverage Our expense million increased operating depreciation from months reflects Operating third expenses. development period was the loss expenses, last in deferred year. the had income of revenues, and growth, first our third but million ICD-XX same to downs $X to Morriseyd income from in revenue XXXX the $XXX,XXX we quarter million G&A product debt of XXXX $XXX,XXX $X the $X.X quarter nine in and and the decline overcame on write margin higher in compared income

sheet. to Now, balance the

cash balance sheet Our overall strong. remained position

receivable at reduction XX September increase at drop XX cash XXst of $XXX of contributor accounts accounts September to year. receivable an has $X.X growth management. XXst days in in in balance DSO XXth approximately last December balances. and sequential balance as $XX year Our since was December million, this collections improved million from resulted million a The A cash of days this to XXth

and We capital XXXX optimization to first total has as organic $XX $XX and months by $XX overall the likely million other of support have inorganic outstanding Net last our of We our year. on to structure shareholder same credit provided and flow cash our operating available is our and capital believe is for period of support cash value to activities line million debt no opportunities versus the maximization growth position nine for strategies capacity appropriate. maybe million statement improved us.

third than tax year's effective occurred effective tax rate quarter. Before income we The income discuss quarter rate the XX% the favorable third year’s industry was quarter our more income in in Last in XXXX. this tax guidance, I’ll this of describe items XX% versus year the fluctuation of included rate. quarter third in tax this

earnings full our the consolidated the in of estimates XXXX grow for is these XX their we into This important is XXXX affecting anticipate XX% year. three to year revenues items our contains between to in guidance We impact [indiscernible] X% guidance updated XXXX, we as Solutions deploying growth release an have However, representing and Yesterday's our discreet versus year. includes this for large to readiness tax reduction X%. and year's that the compared any operating be on for between full quarter. and greater during current XXXX, to segment, for quarter satisfy approximately larger million Patient was repeated Client will Also segments two it will X%; our QX year. decline in because licenses the reflects XXXX. million some down Workforce we from of from see be worth X% timing be clients our in magnitude fourth ICD expectations the in HeartCode X% Solutions revised time-to-time this probably million made to will two expect to anticipated makes moving QX. not of purchases in accounts that follows; XXXX two needs increase additional $X $X as decline understand the through noting Experience Workforce, will these current purchases the $X the item. than decline a needs sequential in their from will generally revenues surveys, But the

start CAHPS. Medicaid date to covering ambulatory Second, has the for Medicare for subject survey, services services, outpatient deferred and CMS cap the new OAS

expenditures Solutions OAS We full had grow between in and As ambulatory year’s XX% operating year income the related last more several over will a until office schedule. there’s anticipate XXXX Provider result, results. revenues XX% declines anticipate clarity $XX that between $XX capital and XX% will be will tax our XX% over XX% to and million, million year be between XXXX. XXXX. full will the effective rate and for We increase XX%

to does not acquisitions any for Thank guidance call time. may during impact the I'll this Bobby. Finally, that XXXX. back complete turn of the you include your we

Robert Frist

to ready in the year, XXX,XXX is a with a accounting push the new There Sure, to we’ve facts some compliant on next really in that pick-up thanks, of important true in the be important year. for over there, final and quarter is and Gerry. get important won't in regulations lot been that’s that lot compliance one-time in working ups, fourth the be the to repeated just a all there, from quarter. segment some Workforce facts There of and revenues

So thanks resuscitation our and of lines some Gerry, segment. for to Solutions lot I are all which report to and take a focus from segments to product our part moment view. out would business and of point great of people details on like in pick our on of stimulation businesses, Workforce business And there development up a model.

committed validating simulation we're the at broadening part technologies as of future first, that beyond exciting We of range there’s to competencies, of methods skills. utilization and of scope wide believe core a clinical our So and HealthStream. a including resuscitation

reality, learning, in of mannequins, virtual development in intelligence excited of staff skilled and be generation bring year, technologies of applied RQI for this development current At Next filed be mode a healthcare HeartCode, are agreements the the skills, among we’re innovative to Laerdal can reality, emerging that all augmented of bear announced resuscitation. And all this clinical machine XX, artificial to to organizations. the expire and products the on including for range Medical those to with December develop our will of we end June XXXX. broad clinical

service next the our after We next right of beyond our lose we the to all so 'XX of those the however, XXXX for we As those to and customers will XXXX. rights of extend and But with renewal months, will up all continue the contracts XXXX, end continue end that way sign to HealthStream products. to extend for to selling class top the XX products HeartCode service on retains expects explained, year. and those for through selling can, RQI point, that that out

I'm of extend for and pleased opportunity for product just announced preparation we’ve in on we we HealthStream, quality January carry competing bringing the shares These we products and clients which in of two the have new our expires, improved price for new sell one an to ability have that’s inserted will some these these choice resuscitation second the lower the XXXX. bringing favorable margins also of signed call. So week. in renew control the for that historical first today. vision market new of property And early to price agreements Each control point last we a partners historical had. days, let than existing better and restrictions feature once In know product to we innovation, prior our our signed than more market you And customers. in 'XX, to our partner to importantly, partnerships through strategic and the points XXX more level in intellectual last at solutions

So attention And really would of resuscitation partners obviously excited. segment. dynamic surrounding those new next XX that more those not to mentioned, a patient technologies, But launching of bring to we’re we There and experience business. a in some from to to is in hope the resuscitation. skills of to lot clinical skills. year, be active little on introducing to I in products I there Again, focus mode of months year types in still months, additional In stimulation business really be like launching January the bringing a we’re as inside developments. would development excited of XXXX, we’re I throughout products And resuscitation. about again in just the interesting partners, coming away turn new technologies, set around broader mentioned.

but segments is a there businesses. in spirit growth business revenue does the more dynamic margin of higher all fact, couple challenging, they’re of interesting make towards that moving in In our

in continue purchasing than surveys. a So we point, clients patient online uptick the a margin phone to price business, lower an higher see survey The new experience in survey. online has but

email growing margin. much higher profits revenue surveying delivering but continue phone just makes difficult, lower to clients text a by and higher to convert definition So modality SMS point also improving and more makes Existing actually from modality. probable, price

the almost converted we as And so continue this converted being year. to half phone we’ve expect all surveys capable of surveys of trend to from the throughout online of And remainder this point. of now conversion

challenge expected operations you two has As Maryland Nashville. And positive and mentioned not the to to In impact, will things sales. we’re years, on revenue move the have dynamic our segment, the as backlogs. know, a moved Laurel, doing Provider And also ongoing patient have those And the there work to from center and growth. software in of profitability experience those our it similarly, interview is installed software lots coming it that implementation an developments we of both sales collections service through in that growth impact closed margins. I are to improve Solution cash a but

we Provider that the launch year. with quarter, the week Morrisey just as remainder of was And exciting so occurring to sustainable. success be EchoCredentialing of of Solutions in remained for challenges as to further of in reduced to Solutions the over night a the product expect have merge blend third backlog The backlog last announcement our the in Morrisey consider our of this segment. the recently our currently significantly customers business that lines we unimplemented echo as in solution future and we and lot replicate levels Also, Solutions, the but to routine we more the

So some watch well. new really for around and branding the with January there, new exciting some as timeframe news potentially product introductions

internally. of to outstanding our year focused a It’s recently being healthcare of in on for reported work moment organization, our responded survey vision our reported completed we in work of really group employees take engagement our XX% we were These few Company. to HealthStream. our in exceptional engaged at and most that our employees I’ll employee an being highly highly quarter. thank to employees their conduct it’s improving people -- are it’s XXX XX% months conclude, over driven an just and we in a back hard and we employees exciting that their each delivering survey, and As XX fun

And really this reporting We’re are things And are quarter. go accomplishments. in We direction. the all challenging. great. when do. get strong them get of too I grow when a their the trying as to get that was We always too same caution don’t and privilege quarter on excited things I I’m of down don’t excited course,

ahead, to I segment things, mentioned top see some we in Jerry growth, mentioned spirit challenges measures all and margins just patient look line but cash higher the ultimately, which operating can measure margins experience. improved free are about improvements the As general Provider in like as in profitability, Solutions in in flow that you our well. that we talked And

of a so And lot great there. in news

also our macro I’m noted debt follow that. be gone has questions up. We sure so up mentioned some on expense Jerry some conditions, there’ll bad and

And is the we’ve an in general. the increasing so pressure -- Provider increasing provider Solutions just that on trend seen marketplace

look the sure of forward thanks reporting I’m everyone, get would effort to and quarter. all a So who in by was discussion. that Again, in. It solid the next top are our employees listening

Let’s go to Q&A now.

Operator

question Thank Instructions]. Blair. you comes of Ryan the from line the first William [Operator of And Daniels

line open. Your is

Ryan Daniels

Bobby, the the and bet I’ll take microenvironment. the initial on question ask

indicated make too sounds the seeing was definitely some to last call early now think you’re market seeing it like end pressure. I quarter that was But it that. a

a number that is type ROI sales pitching uncertainty? it save part or versus one, pressure money Meaning, broader area? and two more approach? particular more of solutions is some that, your then can that And So approach changing driving are in maybe products how you going in question; just Thanks. what margins to two, is

Robert Frist

for So, for leverage and at, we pressure years, through efficiency was I scale for I’ve and I quite think again, which don’t we’re -- grow they’re hospitals to showing example, continue an our our the to bad as disappointing how do I and thanks but bad about up we’ve feel the to to margin or small expense, if is performance we last. in long where a And suppose send a some seen attribute $XXX,XXX letters Ryan. reorganization. never will public expenses it’s in customers. But and is period. way important going saw about the haven’t bankruptcy debt G&A, to this even know And to that. always $XXX,XXX, it's in contracts we’re see conditions. because small try at G&A pain it I plan there right macro number we doing we been a we of the mentioned, XX just always many something uptake from as for of

content should of we should high data in call not we’ve knowledge their So in tune people know haven’t material we their in It's as propositions. lines, compliance past. build last expect the people Q to program I running see G&A. And of it, -- its to last along are trend that helps our factoring thought we in several going but in it's of Like mentality and been products because But -- program. are note I the tools us a G&A don’t not really years to -- cost ROI in the deliver it compliance just we the performance. But don’t the say our course, six think it's the and the role months it's trying shift program was and our out, desired those now. most just to overall

and So knowledge and of to in minimize knowledge people liability of which requirements. of area high as their data a the to OB like attacking and the hospitals risk let’s your Risk these is self medical dimension program maintain on Workforce a cost mission but insured. joint cost Similarly, are lot their areas analyzing try safety

high of that last Risk And and malpractice OB organization modules. we of curriculum units we so related directly out it to our an It's as area and the curriculum, birthing year were for see programs, to the to medical their excited OB just built really has expenses. multiple risk

informed a so that they calling health creates believe about it. area it that because it of of time, on for a well return exciting high chose systems a have will And system major fetal believe I solution. lot people see distress this investment, really recognizing liability to aren’t was that on in

So yes, being our and are arguments more systems a knowledge Risk, I focused component at cost data to high position areas ROI solutions as queue savings as for our in on an think the make OB by customers. hospital risk having us and

Ryan Daniels

Okay and now to helpful agreement larger sink the some the cetera. going have market, curious I'm resuscitation you to And of that about Laerdal talk willing the your programs opportunity car, and my into to like et time importance a since some open follow I'm wondering AJ simulation up, look other BR, novelties to involve if that’s they have if very as if the or has the color. any are customers of be to that’s prerequisite to then to

Just there? any updated outlook

Robert Frist

all, we We Well, that’s move for out models really partner of Laerdal them from of great to have a train. together. first and old in of seven over and change books in learning years and together, the print and partnership industry modality better of a we the three AJ, year

first machine mannequin-based one, is learning those are wave learning, the is all learning of two, wave generally that wave the news a about was of So three. technology and the lot there then acceptance has the excitement but types of units them, AI

to general, much as solution. market continue the for products other really up In we And be marketplace market. proven really in into we be strong receptive And to carry so hasn’t provider plan, those of we that. the to additional set that to there about mentioned,

the But really about not We ways to card, the to a bigger to receptivity just largest of system partners. AHA long and introduce the January may partners. challenge just plan have refers about there’s best brands, the no That and be of But to we encouraging, the models and was again Because of hearing. our challenge, years to We’ve And brands. multiple certificates no going additional, will with said is trying new our other like things of one certainly because areas, we models introduce it be of a and one and different brand. other some we’ll new a the other to approaches, because seven customers with spent these there market clients strongest. quote. this it's I everyone one something new card. the strong an this largest 'XX, competency, begin health started so that dialog care And established models discussion underdog that in be going is in shot. card doubt show as -- getting really are be to telling It’s by we’re our

alternative And we prove I it that the to receptive solutions. we think things, risk incumbent And the our and outcomes. so, partners be and I competency on develop reduce the think will to be and do if the new will market improve those HealthStream

my that. to Now, job say believe I do it. that’s

the of directly an of again, I of new I’ve proud we’re And doubt the from definitely believe partners think and largest exists. power to enjoyed mouth We’ve it. the it that it impact resuscitation is market, customers. in no made system our brand. heard our incumbency health there brand But of one carrying and that outcomes. it’s

confidence we’re market. I suite just And good We’re have to now have alternatives increasing relationship a change going to by bring of solutions. to the required

remember so thing other series. bring selection the plan our to to we told The partners that all choice new we and is

ways, not all to just lower models goal our bring do And our here if that comply things. not way a there’s there think I body going partners believe do that’s beholden And the international, things knowing those I is do the And to new the standards one guidelines just a to alternative we really same credentials good vendor. of with is going to got to market. there’s one international we’ve shot. we’re all right, cost. way so to one alternative at We So never something. time, and

in cost. it’s on a important focus we just really about, So have talked to environment

is we with partner signed sensitivities we in so that today points cost talked we’ve price not we’ve we understand signed true resonate lower two, given care about job think to pressures, officers as bring in our will card. all the about that the that what market. financial it the to think the if competency and just institutions, And every particularly I quote today area well of the the holds these I see And this the

Operator

Thank comes the question Capital. you. And of Craig-Hallum our Matt of Hewitt next from line

open. Your line is

Matt Hewitt

ramping your have had that sales challenged hiring. First question, mentioned quarter, you been last up you on

that were the on sales people think You I'm front. curious your short progress roughly XX any at of were, I time, goal.

Robert Frist

hire We continue number mean, you to as recruiters to know do hiring. drives and change mostly that to I really organic is the cost. that way

So we’ve in our taken recruiting. lines on reducing backfilling. in That the XX say last really a of different approach months slowdown created a has

think And operating And better probably so margins. select frankly, in progress. people and made we’re we instead have a brought get I and not -- we by by But leverage we of when more being outcome and have hand our being there, of chipped it recruiters. we some away cognizant carefully here

think is to us but is So going maybe up, it quality go fill to the I the taking spot. longer

completely hole. so that not to plugged have really And back we

I planning end as year, before are do we get end of to place to of sales the new or positions sessions, try in like sales January usually Now, February. the very our enter which

be accelerating try to and February. And catch now our find so between would those way to keep the to up goal and

Matt Hewitt

And multiyear quarter, a that then of customer? rollout will across in flip contract. simple Or Risk layer large the that that a on? that the question about will and access? system the How steady a a the sale entire switch be OB large Is will have it’s

Robert Frist

universal hospital-to-hospital cost be access quick should there a And require system it implementation. It does has it of implementation. and fairly to not

linear should so, adoption it the And product recognition utilization. turned revenue once on begin it contracts be on, and fairly now pretty quickly, should and

should of to they systems our these and that us, buy the very that pretty valuable on, higher adoption, again see to from probably is is be turn available. which them very the issue power think a to So, they an health of if I so our and value get and quick make us shareholders. And integration using to don’t product quick are familiar power platform, than valuable I integration

Matt Hewitt

and last one caps to worked been them I when in or with efficiently at either running back One customers. think help and And has with a good me. quickly you’ve as help them you’ve each as push up off and back natural for possible. hospitals then the been your times disasters get as there Historically, partner or other surveys

any related here similar facing there weather the to working some impact, hurricane a Texas storms, Thank the with where was what quarter your the and color customers maybe helpful. of along situation Was you. were happened it them third any in you’re or Florida. navigate help those because challenges be of Given in that you in line would

Robert Frist

mean myself, And of understanding sent many affected help. unit out at financial to customers of corresponsive senior I make in to occurred. And executives, help offers certainly, directly that and hurricanes and sympathy were So, by disasters these lot the including communication to certainly natural a least business one our financially. offers

some actually that’s and part And DNA we to see HealthStream We so, our we common reach a let what our off employees days have can out and of -- is also do do. the our those to a not directly some down travel neighborhood, help trying to in to and and there, disaster areas, customers out. spent Texas down travel but over to week in work in of

by almost see happens, when tried we’ve a the visual like be that there. something is our here is map. usage like shifts broadly to can solution so region pattern So, that part you fascinating state. of system It’s now adopted and What’s

can utilization at that we’re our consumption But coast-to-coast offline them online. watch back job as offline of And as You help of on our then almost so map, can. almost can look disaster you network. like impact soon the weather can course. broadly get off distributed as drops we hospitals look and you at it’s and we online coming a and And back the our hospitals area is go see live the

So, do that we we’re some the and things their of they to that a the part want e time proud certainly of employees taking to our of solution, did.

Operator

from Close next of line Richard of our And you. Thank question the comes Canaccord Genuity.

open. is Your line

Richard Close

the Question on to Ryan’s metrics just on debt, bad follow the on you the engagement for posted you up that congratulations questions, Thank question. here.

On see the product engagement in more area, the specific it revenue into fall does in Workforce you that of debt, services? or pocket is bad did any or other provider

Gerry Hayden

no or one hospital been one a of pocket. location particular is it’s generic particular in know terms hospital trend across of segment, the area size. I and board There kind

one particular there So characteristic. identifying no is

Richard Close

the assume the there market bit us to nurse can Knowledge be size? type for with about those terms and product share ready and you within of products market. But could these be bringing sizeable, would I may a With little any base? you Risk, that in market OB us to of you are magnitude addressable talk new Q, your addressable

Robert Frist

as think a but time, me characterization. over plan Knowledge a third compliance let you generation give That’s some Q, Knowledge product. Q of

then requirements basic and training and you it over we to services commission responsive. joint have content. testing if and So back evaluations, we’ve enhanced content we’ve the safety bundled to benchmarking analytics and think And OSHA had requirements, a in and introduced we And with and be mobile updated library. history, our include and data

but product that not it product. to in is And generation value sold separately, bundled the ascribed so now does with some platform, there’s prior -- learning the

own all does to potentially a the lower but benchmarking, high So is all Knowledge content components own that of point, something we We margin it. delivery price have of platform could believe, because Q. data broad product, it that it’s we And I and everyone. sell adoption. of is It elements the of

a high So margin it’s product.

Nurse actually low Residency, that’s It's volume product. an You a mentioned the one. interesting

cohorts, in, over XX new type you four runs of good three hospital maybe cohorts a And size take the small, kind classes be they or So may year, at nurses a year. course medium XX are essentially hospital. hospital have out or a or they two three to if bring people of run the fairly classes

workforce they’re is into year for new So prospective just not we nurse think of XX are XX there’s new the nurses first the just And recent This program it hire. remember of as targeted program. give They to time in. a these coming graduated, graduates. grade, nurse them coming one new

ever much in almost it Now, a experienced we Because everything into XX, what's any our say bundles though fact. about class point products a exciting higher of it’s this have product we’ve of low even one almost year program. a volume it’s in than price

learning to access management system, per accountancy checklist, a our our get You basis. to system person our on

You get different vendors. curriculum up from four to

of just put -- $XXX $X,XXX yet, person so the $XXX, there is it's over it's per shy actually in And and the per price point this haven’t year. but out we

coming it's so, XXX,XXX the price high graduates but low into point, really There nurse is year new product. And volume marketplace. about each

price as includes You as could the point. hospital, Good that products product so workforce partners. of again margins volume targeting a of join this and low audience in other think from high they mix

But for earn platform and a from as program into safe is aren’t margins accreditation partners in margins it higher than the knowledge mobile are standpoint. the say the mix to as hospital so residency And really help there, that’s residency believe because or Q. includes those margin Again, somewhere I of marketing the recently current which their content program. a average exciting high it’s of the our program,

point. care and Nurse and as but grads at settings very So point. post Q for in every I then knowledge coming the price hospital, is low then acute applies One hospital. We nurse about marketplace, targeted we that think it every term actually long a helps. have a Residency that’s price version in the And much XXX,XXX higher to into volume one well. And hope is employee every year long

Richard Close

about guess thinking talked of final would and away I subscriber revenue with about average my metric, one implemented you’re questions that. doing Jerry, here you be.

puts over the on takes that. go just could and you If

Robert Frist

most from and it covered I provider. any believe mentioned patient important contribution my one experience does remarks the consideration, the think was I really in business, third I include of workforce I or development So, It think segment. not

that’s one consideration. So

The distinct skews the the the the fluctuations subscriber in with than And you I the by change on ICD the line think subscribers, saw the third to be as the much only seems last morph, is count year product as important segment. second results. it more is, XX calculation combination and thing

as incredible to I think, metric meaningful agree I can we do all yet, get overall a that. not comprehensive So is

more away. two of much what So we as it with taking it question place a as it’s

Gerry Hayden

let’s ideally we we feedback have said, number analysts years, into Provider then divide at a us of that just the couple of because, for end era. or have up facility on employees, and price and last this this do Solutions that never over brought replacement quite retire we order and would per In say good revenue of we approximate we

facility, for you or subscriber a find the per account way other per segments. a much per how So in value those or sense get business two attribute revenue to

growing I to that other revenue segments units. the but have figured They So out, encapsulate and slightly metric that are in doesn’t their dimensions different we importance. those haven’t yet think

at maybe given reflect would may but think on rely segments. just we’re year. we February holistic we of also heads we reporting in sure completely level that to But more that that, that not individual we’re up instead next GAAP the metrics like So of retire metric

Richard Close

metrics, different decide are? change the do trends see what provide you or to historical to will you point in us If facilities and provide data some order

Robert Frist

provide we surely a we -- a sometime it Yes, would more had to will be new of if metric, metric. we proxy have

really So could generate but credential of the work. sale the business by of there. it from based they take revenue large providers get say be for that sold the the And it's that that provider a solutions, account, of example. systems are divided on for be They to scope employees number number health and generally, account would proportionate

with metrics, revenue the at scale also which But and And from we difficulty rotations said. be experience by based much we number be have, surveys. directional I given employees, just way of on revenue proxy we employee. an of like approximation ARIS would same system is of the that if into that a derive, experience of per size for indicator do health a employee. from derived patient surveys is revenue The there the so took hospital per were of to the employee how if of that the it’d proxy hospitals do and volume added number try more And by derived divided get in probably a of hospital you to patient

tried more into they’re not metric, we’ve of all the together because quite we’re it comfortable that releasing to put one way So and just derivative.

maybe it on So we’re in working sessions.

is low the how a But interpret. go take point too metric You just could or advise. lose things you to you out be add we’ll do know and that price customer price a would times it can the can very you below We’ve to anomalous almost is us see you give But a up. into we at that at ARIS hard can X.X ARIS other very ideas pointed on subscribers margin, like us million point, that when big that’s dilutive customer. to lost the measure,

puts reason, thinking that struggle to we takes we’re it. retiring and do about it, and the for on So

Operator

next line our And Nicholas from comes you. Jansen of the Thank of question Raymond James.

Your line open. is

Nicholas Jansen

wanted little to just deeper organic a into bit I drill growth.

you’ve get the strip wanted sense or on math just quarter. that a thoughts total evolving organic ICD-XX your the quarter, Solution side range puts as or given pressures at second to to How business better the this patient of you And so trying Morrisey, X% you my that so deferred in given talked one-timers least that the ’XX? business. get one experience subscription we again? Provider SaaS just growth about about on benefit. and magnitude models double-digit And out transition your the the Thanks. Can of takes, on, think for is that be of as I then true do revenue mentioned two a in some revenue we for in the and our think up the to

Robert Frist

bit. pipeline doubt. focus little it way with is growth, transformations is the got our as intentional transformational We’ve maybe content in we on there into Because mentioned that OB implied if their the no business will only people So, challenge a interest. challenge, Risk, Netflix will story, some

doing see You that. us

it's a margin. partnership to a a So co-developed higher prior margin was that’s and co-long lower driven by with product move and one

that good a And and case, in a product. there’s focus having on replacement so margins

more valued. they’re We ultimately free growth top should two that you’re I businesses be cash But line dynamics, think challenging. focused on make and how very flow dynamics also mentioned the healthy EBITDA and that’s

to drastically think is growing But transformations. going that idea is ever bad finish months I installed fair time to the cash gross Patient in even result e-survey anyone from a lower, be no a by than heard it’s so, net to the business, in the years, I’ve that in moving no argument line in we moving And as an recognition. and we’re is phone coming price even the top these revenues Experience can in points higher and from survey. e-surveys, have be that have though flows that pressures moving point that There say can in to SaaS there our more argument

and of a pretty dramatically. at transform the so a just really a lower big margins business dollar but is sale price And it imagine expand point, that revenue

we So, important. I cash years and on free think I if you’re intentional growth be focused think top focus that EBITDA, as watching bottom we HealthStream, flows, those the cash transformations to because watching to about change from next leverage delivering pretty better pull growth. line And overtime, operating line our these may free some analyst several as watching to have going think of flow, is transformations are we on

Nicholas Jansen

assume would I How your That’s already any And be then through we helpful. that this we dilutive cash certainly sheet. this margin about pipeline, a transformation, effort desire would you to acquisition you go in flow pristine very do transformation, money certainly the because M&A on to think think perhaps short-term. balance have your spend as the about

you. So get your just Thank to M&A? on thoughts want

Robert Frist

of So, transformation the the to that their big of product, contract want drop before access mentioned I off the dollar, to drop the of I year. meaning do now. one We end more that, add next off in known that’s at

sell And that so revenues ICD-XX the and quantifiable we product, selling and almost product. decline we’re new a able known that start like no as longer to in have will

that Now We’ll more contracts. than right the the on current good one margins. is now based double news believe on product is have the we new

as in revenues to not that money. But product the going from make challenging the the sell So we half coming in XXXX. only to to much have be same declines beginning XXXX, amount years, of is

December analysts only But can if revenue think the some we next seen product I’ve sell of the it, some in in you XXXX. through So model, of declines year.

to not right And up so will for renewal account. 'XX, of February come the an renew in accounts we that have

right to they We it to the the if the lower will not them to something them us. existing But have product. price sell that option want point renew new and what double margin we to have at is them will

the months. we about year-to-date cash really strong. So quarter, the That from million think will early 'XX. as think, mean, that look it’s top it's free $XX I if million, talk it pressure flows line up as was our coming element the about that’s in I beginning the I nine capital $XX at in years, in said, growth third do position, you prior

businesses. capital be into do here inorganic a deploying have integrate so and our that strategies got We’ve story. how talented will acquire and to And part team knows to of

of expect so our our years deploy we current of expect credit and $XXX coming And and our you our of some cash to us balance would in free an to in in flow to inorganic million, story. line component the have use

our line credit capital, the deploy a years, greater we because well to course, just $XXX is Of as chase want can in to you have deal of cash think cash the are always do we we’ll we million probably as cognizant as the to access But improvements. to need the we’ve be challenge of to the that to been. try in now careful top line, the flow and done coming

and growth a can't to good give model really just will we're that deals. have inorganic story, promise be develop to even part to I we're that of and bit uncomfortable so working because story, board going will forward, But And our of confident pipeline. you a because deals, to hard and it of and to that’s our hard it's be part it’s our model, know you

Operator

Matthew And you. the comes Thank of Gillmor Robert Baird. the question line of next from

open. is line Your

Matthew Gillmor

get I I on to content which and just wanted overall one, strategies. partners an had update your is, your

party versus content you and next your partners should that remind revenues see content time? months much with your over key all, there on from us update derived we that how of going third can layered be or you over developed outside renewals are monitoring? where then partners, us the of may And be other So XX self

Robert Frist

different question on of at migrate, first. kind to scale piece the Laerdal, we need There we of It's or So, partners the model either content that no of I’ll other partners depend are last take multiple last partners. AHA. and

the in so skills. transformation And prior years, announced of clinical the we

we For example, providers the world large skills very is actually, just that to clinical three one corporations use represent clinical two three say and multibillion the only in until three, the of dollar and there three. months up that proud provide about two represented year I rep ago, of And now one we training skills we the I'm guess or XX top nursing. to ago of to of

and our have favorable been to some points choice price to that’s variety choice and those and customers more So and we get better competition -- and created selection. bought partners

So been would dependence I on a partner clinical moved dependence would in over clinical from one skills have said that skills ago. the year secondary away actually in that have we about

So that’s exciting.

will into their in be way a very targeted, investment own the our building of own of things. moved some Now, say content couple content. I'll the But Netflix

and clinical content is and our from It's shows breath, what provide in really healthcare. organizations party expertise model. our important in selection choice expertise Third and and domain

add a So more lost We’ve in three we several partners at five lost year. that than shrink. can maintaining think than in years partnership that XX a over always and we -- of growing is last more I grown each

growing. So is part having important mainly it the The network, a and that XXX,XXX in do of our that for product our an network products niche partner integrated value that is catalog of easily have here, proposition. even breath

the So breath important. our partners of is very

top owned owned also of a our content and key I margins known, we’re and small area introduce Q, that’s developed earlier, of the of But publicly decision makes Now, we’ve as Risk where The our areas. it partners a by HealthStream. percentage in so to knowledge and brand making HealthStream. that the sense OB house high and is very first grower is is made by a mentioned couple is

Q are in -- are the into into that OB Risk. some content Knowledge we’re like functioning little already stepping products today development, key And So more development. two there moved it. in house-owned Netflix And and are step

In fact, going program, department program I into think the we’ve just risk the it's risk and ED announced emergency marketplace.

not branded with to all you owned that see deal supplemental some to it's I to the programs market. something -- we’re have content, coming house to association healthcare so want going don’t But workers. of new of to bring to owned nursing some million in your XX to It’s brands. have We’ve their gold involved associations our critical just X.X the standard the them signed to house power content move way And dimension top network market. associations

mix And important. so is that

Operator

Thank you.

line Our Berg Scott the of Needham. of next question comes from

Your open. line is

Scott Berg

Gerry, assessment to I the First next give us sure of year. all, along think you of some you next would you not how your am highlights your be on But can far model are what impact in implementing maybe year? ASC XXX

Gerry Hayden

that. on gone of research quick then process, So policy I the question. the both We’ve completed portion of second can projects accounting the discuss update part through your accounting

How workflows, phase change in of with how out the now institutional to our We’re contracts standards. we our new read comply the implementation. we’ll

very, to periods. and and from by not this we life. other will the customer standard In in one not general to themes you if -- most some commissions life, HealthStream the we footnotes is the over very quantified different. on commission likely what capitalize over go I then can follow, of, are mean really and side the and gave change, amortize companies that but one But think And requires But we’ve future will similar really is find be maybe contract just the in seem revenue today. accounting very The the across, I I new the to companies change what terms there. recognition come how they

had think one we’ve rate. very example, you about HealthStream if So, renewal as high

exceeds life period. our customer contract our So

And amortization But I notable that as that see can a -- now. so, on you change period or signal to work right -- would new out expect think all HealthStream. you’ll longer and I impact standard kind in on of more with with the actuarial experts

Robert Frist

standards. and that we’re just Gerry maybe quarter the year the the fourth for -- to the on sure full estimating add -- And implementing costs models make new these

Gerry Hayden

Yes.

incurred XXX,XXX months expense So to about September, efforts. to-date for the nine we’ve of or compliance the so

workflows our wrap and with $XXX,XXX, auditors mentioned the I own tax and expect to up on. platform think my plus in or work we execution internal E&Y our so of fourth new quarter new

Robert Frist

on It does cost G&A…

Gerry Hayden

through Yes, G&A…

Robert Frist

we have we’re compliance expense So government good on that cost accounting pressure getting where area. that leverage increased and regs and just bad debt G&A operating

we what our unfortunately recently. that’s and obviously getting reports that So is is, plan it just it but to

for We’re and requirements, them expect on with schedule beginning with January deliver those on compliance X. to compliance

Scott Berg

products this as wait last expectations you’re see well months. maybe existing see in that expecting products? over cycles Bobby of they those over from coming new that’s Are on you continue the what’s Laerdal they me hearing they sales that? think maybe XX new quickly sold now, customers, Or couple Last for to have and from slow next to do new years. to with have as maybe trajectory your of for the the change the right you impact is, customers products months? And to guys you your sales XX Wanted

Robert Frist

the That’s a at we’re out. from flop mentioned the actually We’ve we I partner two from one to big to flip was is thing ability looked two And clinical products, others, product change figure observation one have remember to as and our trying over same others. -- sale did year, as flop which those the that when we really flip sale that growing. essentially prior of was ended we the

it out experience flattened a other So, we In stayed off. a drop bit strong. it but words, didn’t

beyond customers that end In to product rights secure relationship. some to the of did see trying fact, we our

surgeon I in at or very end little say. increase should the there’s an And so buying buying,

figure out. we’re that to So, trying

it’s think mentioned. as customers really I product, I a good

customers they really I will And our long secure to to integrated. as the they think for I can value likely fully product probably want think integration. as be

essentially XXXX. clients out And so some maybe we a that be longer is through little average my that secure will to is now XX like than they’ll want a this predict. is XX secure months, what months will we of hospitals hard what that. enter version thinking contract to now thinking going period, period partnership, longer to about little a average And working than want is for to as it is their probably we’re is next to But

we’ll probably little in in maybe essentially next in year, as modeling. a this the we’re in the beginning to And deliver sale year, to the about last the coming uptick now, at it’s way we’re January, is so XX amount months sale going same modeling right this

be a XXXX. mark so here ’XX, expect ‘XX. not ‘XX, in a on but so, year because sale, cannot we to January going X, in then until it’s we that good And really a flat repeat in And distribute decline to difficult flat mostly or competing product

replacement even products January we XXXX. So can’t until X, selling begin

it’s to integrate be our integrated We’ve because over right products. network products But of in do do us. going out think and question, come partner. they to a going shift now that value partners scale, to are so, prior from the answer customers mentioned that hard your to to want it, willing a that seen the specific on for good over backfill again shift when customers we I as clinical And secure really

And relatively we're modeling flat, in strong 'XX, I strong again, year in year so it’s so expect ‘XX. but it a

Operator

you. Thank

next is of Our from Barrington the Research. question line Vincent of Colicchio

open. is line Your

Vincent Colicchio

Bobby, In Yes, that most from mine solutions, are expected? provider seeing selling me. of of cross were activity one you’ve asked, you the level just

Robert Frist

we’ve business up. that cleaned seen would Not get yet. I say

remember January. and -- that news we merger fine to of of announcements will -- exciting from a products be And and come leverageable on new three have there back It’s forth. businesses. done parts have that our the three data I But more to is we’ve the we job other ecosystem, will of businesses. merging that think We have in really in more watching the products including January launched new that receive technologies front, other and

I So more see we’ll think products.

if some accounts would of that. seeing in Now, buying you we’re that sets say, to I our product mean both

think, first are the quarter really in next technical try will January, But to more integration, to which selling of against us a wins actual have begins advantage, competitors. We this relationships leveraging year. the get I

that one mobile see products, we value have from buying they of So lots I vendor. do shared accounts think products

integration has the we that been helpful, really process. leverage when currently we so And for next actually is technological that in that sales scheduled QX of have get year but product can

Operator

you. Thank

First from question Our of Analysis. line of next Frank Sparacino is the

is Your line open.

Frank Sparacino

There may post be quickly. any space. just the acute Bobby, talk hasn’t been around

anything So noteworthy?

Robert Frist

a growth, got we’ve so team contributor sales steady kind of just and subscriber So folded to it's in. a strong our there,

acute care outside few and space, acute first operations systems in market, penetration post the great within some a consistently have of both our We has market. that have from been growth so the coming health the

it's It’s because us to would a so harder scale. And story. I more in growth It's by at to little there. just maintain contributor adding call our sell helping subscriber definitely a steady fragmented space, it that

story. But just new learning steady our selling. I progress models pleased say the we’re So with and of to contributor would

Q, have acute post channels into We and products our We’ve our several, -- library the can adapted on mentioned have many be acute. acute. sold I to Knowledge of both post as

And now so as she are million and growth million. opportunity, I goes our of as about people, our target XX would and study just report we’ve audiences articulated they part X.X

the gives adding chance opportunity, account. us subscriber growing so keep market to And that

Operator

of do Genuity. Thank Richard a of have Canaccord from follow line question up Close you. the We

line Your is open.

Richard Close

the the back update there on the the months Just Laerdal? last $XX.X I really you Is you for think quickly. spring, XX Can million. in there? any XX made when was us revenue months update announcement originally trailing

Robert Frist

now little products $XX quarter. on that. that that basis to It Laerdal maybe the we that. of were around Well, revenues north totality $XX But at months a million, ago. million, that’s don’t point, update from consider we’ll at little over of a plan a we’ll was probably all on relationship based But a look line-by-line every the just few

XX basis. much changed a on So, I trailing very month don’t suspect it’s

Operator

Robert questions. call to back would the turn Frist, time, like Mr. at closing further his this you. I Thank CEO no I'm And for showing over to remarks.

Robert Frist

for participating year forward our you in the Bye-bye. reporting quarter Thank results. Thank to much. end you call. February third We look in

Operator

Ladies and gentlemen, conclude program. thank the you conference. in This for does your today's participation

You may day. have disconnect. a now great Everybody,

HealthStream (HSTM) 24 Oct 172017 Q3 Earnings call transcript