Healthstream Inc. (NASDAQ:HSTM) Q3 2019 Earnings Conference Call - Final Transcript

Oct 22, 2019 • 09:00 am ET

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Healthstream Inc. (NASDAQ:HSTM) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by, and welcome to the HealthStream Incorporated Third Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference to your speaker today, Mollie Condra, Vice President, Investor Relations & Communications. Please go ahead, madam.

Executive
Mollie Condra

Thank you, and good morning. Thank you for joining us today to discuss our third quarter 2019 results.

Also on the conference call with me are Robert A. Frist Jr., CEO and Chairman of HealthStream, and Scotty Roberts, CFO and Senior Vice President.

I would also like to start by reminding you that this conference call may contain forward-looking statements regarding future events and the future performance of HealthStream that involve risks and uncertainties that could cause the actual results to differ materially from those projected in the forward-looking statements. Information concerning these risks and other factors that could cause the results to differ materially from those forward-looking statements are contained in the Company's filings with the SEC, including Forms 10-K and 10-Q.

So at this time, I will turn the call over to Bobby Frist.

Executive
Robert A. Frist

Thank you, Mollie. Good morning, everyone. Welcome to our third quarter 2019 earnings call.

Our third quarter performance was in line with our expectations, and revenues were up 4% over the same quarter last year and adjusted EBITDA up 3% over the same quarter last year. Supported by strong cash flows from operations and a record low days sales outstanding, we ended the third quarter with a cash balance of approximately $173 million. So strong balance sheet. In a minute, Scotty will elaborate more fully on financial results, so I'm going to dive into some of the operational updates.

To start today, I want to provide updates with regard to the three business transitions that we introduced and discussed in previous calls. All three transitions are designed to move us towards being a higher margin, more profitable company in the coming years. We are about nine months into what I described as a 36 month journey. So we're about nine months and we're about 25% through these migrations, and I'm pleased to report we're making steady progress on all of these transitions.

During the quarter, for example, we contracted 48 new accounts for our new resuscitation offering. We increased new Verity platform subscriptions by 50% over the last quarter and we added approximately 434,000 hStream subscriptions in support of our SaaS to PaaS migration or strategy. If we continue to progress on these three transitions, we expect to cross the 60% gross margin level at this time in 2020. So we're kind of excited that we expect to see some of those transitions start to play out in the gross margin line by the middle of next year.

So let's look at each one in a little more detail. First, we have transitioned our sales and marketing efforts from the legacy resuscitation products to our new resuscitation offering which includes the American Red Cross Resuscitation Suite program and the