HealthStream Announces Third Quarter 2008 Results

Business Wire, Oct 28, 2008

HealthStream Research Update

We support healthcare organizations with research solutions that provide valuable insight about patients' experiences, workforce engagement, physician relations, and community perceptions of hospital services. This insight, in turn, provides data-driven roadmaps for organizational and workforce development--which can be achieved through HealthStream's learning solutions. Our primary research solutions include physician, employee, patient, and community surveys that deliver insight, analyses, and industry benchmarks to healthcare organizations.

During the third quarter of 2008, HealthStream Research added several new healthcare organization customers, including Decatur Memorial Hospital, Jacobi Medical Center, and McAlester Regional Health Center. Among our existing research customers, 52 renewed their contracts for multiple survey products, while 60 chose to contract for more research services in the third quarter to add to their current services received from HealthStream Research.

HealthStream Summit 2008

On September 2nd - 5th, 2008, we welcomed approximately 670 of our learning and research customers from across the nation to our Summit 2008, held in Nashville. At this annual event, workshops, sessions, and presentations focused on the sharing of best practices for developing the healthcare workforce and on improving healthcare organizations. In addition, the Summit provided us with another venue to connect with our customers to learn more about their learning and research needs, while offering one-on-one time to explore new opportunities to support their organizations.

Financial Expectations

Revenues for the fourth quarter of 2008 are expected to range between $13.0 and $13.5 million, an increase of approximately $1.0 to $1.5 million, or 8 to 12 percent, over the same quarter in the prior year. We expect revenues from HealthStream Learning to increase between 9 and 11 percent over the fourth quarter of the prior year resulting from continued growth in our HLC subscriber base and courseware subscriptions, which we anticipate will be partially offset by continued declines in several of our project-based products. We expect revenues from HealthStream Research to increase between 10 and 12 percent, compared to the fourth quarter of 2007.

We anticipate gross margins for the fourth quarter of 2008 to be up slightly compared to the same quarter in the prior year, but be comparable to the third quarter of 2008. Product development expenses are expected to increase in amount and as a percentage of revenue compared to the prior year fourth quarter, but be comparable to the third quarter of 2008. Sales and marketing expenses are expected to increase in amount and as a percentage of revenue compared to the prior year fourth quarter, but decrease in amount and as a percentage of revenue compared to the third quarter of 2008. Depreciation and amortization are expected to increase compared to both the prior year fourth quarter and the third quarter of 2008 as a result of capital expenditures incurred during the second half of 2008. General and administrative expenses are expected to increase slightly in amount but decrease as a percentage of revenues compared to the prior year fourth quarter. We expect net income for the fourth quarter of 2008 to range between $0.04 and $0.06 per diluted share.