HealthStream Announces Fourth Quarter & Full Year 2008 Results

Business Wire, Feb 25, 2009

Full Year 2008

Revenues for 2008 increased $7.7 million, or 17 percent, to $51.6 million, compared to $43.9 million for 2007.

Revenues for HealthStream Learning increased $5.4 million, or 20 percent over 2007. Of this increase, $6.4 million was derived from our Internet-based subscription learning products, which includes revenue increases from the HealthStream Learning Center[R] (HLC) of $3.6 million and from courseware subscriptions and online training services of $2.8 million. Revenues from our Internet-based subscription products collectively increased 29 percent over the prior year and approximated $28.7 million for 2008. In addition, revenues associated with implementation, development, and consulting services increased $935,000 over the prior year. These increases in revenues were partially offset by a decline in revenues from live events, study guides, and association activities, which collectively declined $1.9 million compared to the prior year.

Revenues for HealthStream Research increased $2.3 million, or 14%, over 2007, primarily resulting from the impact of the March 2007 acquisition of The Jackson Organization Research Consultants (TJO). TJO revenues during 2007, prior to our acquisition and not included in our results for 2007, approximated $2.6 million.

Gross margin declined to 62 percent for 2008 from 63 percent for 2007. The decline in gross margin was primarily a result of changes in our revenue mix within HealthStream Research, but this decline was partially offset by improved gross margins for HealthStream Learning. Contributing to the increases in cost of revenues were increased royalties paid by us associated with courseware subscription revenues and increased survey costs associated with increased patient and community revenues.

Net income for 2008 was $2.9 million, or $0.13 per diluted share, compared to $4.1 million, or $0.18 per diluted share for 2007. Net income for 2008 and 2007 includes a deferred income tax benefit of $375,000 and $2.0 million, respectively. Operating expense increases during 2008 included: product development expense increases of $1.4 million, which were primarily associated with platform maintenance and support; sales and marketing expense increases of $1.6 million, which were primarily associated with additional personnel and related costs and increased marketing expenses; depreciation and amortization increases of $319,000, which resulted from intangible asset amortization and depreciation of capital assets; and other general and administrative expense increases of $304,000, which were associated with personnel expenses, facility costs, and other corporate expenses. In addition, other income decreased $154,000 due to lower yield rates and lower invested cash balances.

Adjusted EBITDA was $8.1 million for 2008 compared to $7.2 million for 2007, an increase of 13 percent. This improvement is consistent with the factors mentioned above.

Other Financial Indicators

At December 31, 2008, the Company had cash and related interest receivable of $4.1 million, compared to $3.0 million at September 30, 2008. The increase in cash balances primarily resulted from cash generated from operations, but was partially offset by capital expenditures and other operating expenses. Capital expenditures and capitalized feature enhancement development totaled approximately $0.7 million for the fourth quarter of 2008 and approximately $2.3 million for the year.