HealthStream, Inc. (HSTM) Bundle
Understanding HealthStream, Inc. (HSTM) Revenue Streams
Understanding HealthStream’s Revenue Streams
The company generates revenue primarily from two segments: subscription services and professional services. The following table summarizes the revenue breakdown for the nine months ended September 30, 2024, and 2023:
| Revenue Source | 2024 (in thousands) | 2023 (in thousands) | Percentage Change |
|---|---|---|---|
| Subscription services | $209,136 | $199,993 | 5% |
| Professional services | $8,275 | $8,489 | -3% |
| Total revenues, net | $217,411 | $208,482 | 4% |
Year-over-Year Revenue Growth Rate
In the third quarter of 2024, the revenues amounted to $73.1 million, reflecting an increase of 3.9% from $70.3 million in the same quarter of 2023. For the nine months ended September 30, 2024, revenues increased by $8.9 million or 4% to $217.4 million, compared to $208.5 million for the same period in 2023.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, subscription services accounted for 96% of total revenues, while professional services contributed 4%. This distribution has remained constant since the previous year.
Analysis of Significant Changes in Revenue Streams
Subscription revenues increased by $9.1 million, or 5%, in the nine months ended September 30, 2024, while professional services experienced a decline of $0.2 million, or -3%. The overall revenue growth was primarily driven by an increase in subscription services.
Overall, the company's revenue growth reflects its focus on enhancing subscription offerings and optimizing service delivery within the healthcare sector. The stability in contribution from subscription services is indicative of a solid customer base and recurring revenue model.
A Deep Dive into HealthStream, Inc. (HSTM) Profitability
Profitability Metrics
Profitability metrics are essential indicators of a company's financial health, reflecting its ability to generate earnings relative to sales, assets, and equity. Below is a detailed analysis of profitability metrics for HealthStream, Inc. as of 2024.
Gross Profit, Operating Profit, and Net Profit Margins
For the third quarter of 2024, HealthStream reported:
- Gross Profit: $48.6 million, compared to $46.3 million in Q3 2023.
- Operating Profit: $6.5 million, up from $4.9 million in Q3 2023.
- Net Profit: $5.7 million, an increase from $3.9 million in Q3 2023.
The margins calculated from these profits are as follows:
- Gross Margin: 66.4% (Gross Profit / Revenues of $73.1 million).
- Operating Margin: 8.9% (Operating Profit / Revenues of $73.1 million).
- Net Margin: 7.8% (Net Profit / Revenues of $73.1 million).
Trends in Profitability Over Time
Analyzing the profitability trends over the past year:
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Gross Profit | $48.6 million | $46.3 million | +5.0% |
| Operating Profit | $6.5 million | $4.9 million | +33.6% |
| Net Profit | $5.7 million | $3.9 million | +48.0% |
For the nine months ended September 30, 2024, net income was reported at:
- Net Income: $15.1 million, up from $10.6 million in the prior year.
- Earnings Per Share (EPS): $0.50 (diluted) compared to $0.35 in the previous year.
Comparison of Profitability Ratios with Industry Averages
When compared to the industry averages, HealthStream's profitability ratios reflect competitive positioning:
- Gross Margin: Industry average is 60%, HealthStream at 66.4%.
- Operating Margin: Industry average is 10%, HealthStream at 8.9%.
- Net Margin: Industry average is 5%, HealthStream at 7.8%.
Analysis of Operational Efficiency
Operational efficiency is assessed through cost management and gross margin trends:
- Cost of Revenues (Q3 2024): $24.5 million, representing 33.5% of revenues.
- Cost of Revenues (Q3 2023): $23.6 million, representing 34.4% of revenues.
The decrease in the cost of revenues as a percentage of revenues indicates improved operational efficiency:
| Expense Type | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Cost of Revenues | $24.5 million | $23.6 million | +3.8% |
| Product Development Expenses | $12.1 million | $10.9 million | +11.0% |
| Sales and Marketing Expenses | $11.5 million | $11.3 million | +2.0% |
Overall, the financial metrics indicate a positive trend in profitability and operational efficiency, positioning the company favorably within its industry.
Debt vs. Equity: How HealthStream, Inc. (HSTM) Finances Its Growth
Debt vs. Equity: How HealthStream, Inc. Finances Its Growth
HealthStream, Inc. maintains a balanced approach to financing its operations and growth, utilizing both debt and equity. As of September 30, 2024, the company reported the following debt levels:
- Long-term debt: $0 million
- Short-term debt: $0 million
The company has no outstanding long-term or short-term debt, which positions it favorably in terms of financial flexibility and risk management.
The debt-to-equity ratio stands at 0.00, indicating that the company is entirely equity-financed. This ratio is significantly lower than the industry average, which typically ranges between 0.5 and 1.5 for similar companies in the healthcare technology sector. This conservative approach minimizes financial risk and interest obligations.
Recent Debt Issuances and Credit Ratings
As of the latest financial report, HealthStream has not conducted any recent debt issuances. The company has a credit rating of BBB, reflecting a stable outlook and solid financial health. The absence of debt allows the company to maintain a strong credit profile, which can be advantageous if it chooses to pursue borrowing in the future.
Balancing Debt Financing and Equity Funding
HealthStream's strategy primarily revolves around equity funding, which is evident through its history of share repurchases and consistent dividend payments. Over the nine months ended September 30, 2024, the company declared dividends totaling $2.55 million. The dividend per share was $0.028, reflecting a commitment to returning value to shareholders while maintaining a robust equity base.
The following table summarizes the company's financial structure:
| Financial Metric | Value |
|---|---|
| Long-term Debt | $0 million |
| Short-term Debt | $0 million |
| Debt-to-Equity Ratio | 0.00 |
| Industry Average Debt-to-Equity Ratio | 0.5 - 1.5 |
| Credit Rating | BBB |
| Total Dividends Declared (2024) | $2.55 million |
| Dividend Per Share | $0.028 |
This financial structure highlights the company's focus on equity financing while maintaining a strong liquidity position and minimal reliance on debt, which is a strategic advantage in the dynamic healthcare technology industry.
Assessing HealthStream, Inc. (HSTM) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company as of September 30, 2024, stands at 3.05, calculated from current assets of $114.9 million and current liabilities of $37.6 million. The quick ratio, which excludes inventory from current assets, is 3.00, indicating a strong liquidity position to cover short-term obligations.
Analysis of Working Capital Trends
As of September 30, 2024, working capital is reported at $35.1 million, significantly improved from $11.8 million at December 31, 2023. This increase is primarily attributed to a rise in cash and cash equivalents, which totaled $57.5 million as of the same date.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow statements reveal the following:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $46,500 | $50,158 |
| Net Cash Used in Investing Activities | $25,900 | $47,200 |
| Net Cash Used in Financing Activities | $3,500 | $4,800 |
Operating cash flow decreased by $3.7 million, primarily due to increased tax payments. However, investing cash flow saw a decrease as well, from $47.2 million in 2023 to $25.9 million in 2024, reflecting a shift in capital allocation strategies.
Potential Liquidity Concerns or Strengths
The company maintains a $50 million revolving credit facility, with no outstanding borrowings as of September 30, 2024, providing additional liquidity support. Furthermore, the days sales outstanding (DSO) improved to 37 days from 43 days year-over-year, indicating enhanced collection efficiency.
Overall, the financial metrics reflect a robust liquidity position, with ample cash reserves and a favorable working capital ratio to meet short-term obligations.
Is HealthStream, Inc. (HSTM) Overvalued or Undervalued?
Valuation Analysis
Evaluating the valuation of the company involves analyzing key financial ratios and stock performance metrics such as the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the diluted earnings per share (EPS) for the company was $0.19. The stock price was approximately $22.07, resulting in a P/E ratio of:
P/E Ratio = Stock Price / EPS = $22.07 / $0.19 = 116.68
Price-to-Book (P/B) Ratio
The book value per share as of September 30, 2024 was calculated from total shareholders' equity of $355.5 million and total shares outstanding of 30.415 million:
Book Value per Share = Total Shareholders' Equity / Total Shares Outstanding = $355,481 / 30,415 = $11.68
Thus, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = $22.07 / $11.68 = 1.89
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) can be calculated as follows:
- Market Capitalization: $22.07 x 30.415 million = $672.6 million
- Total Debt: $0 (no outstanding borrowings under the revolving credit facility)
- Cash and Cash Equivalents: $57.5 million
EV = Market Capitalization + Total Debt - Cash = $672.6 million + $0 - $57.5 million = $615.1 million
Adjusted EBITDA for the nine months ended September 30, 2024 was $50.6 million.
EV/EBITDA Ratio = EV / Adjusted EBITDA = $615.1 million / $50.6 million = 12.16
Stock Price Trends
Over the past 12 months, the stock price has exhibited the following trends:
- 12 months ago: $18.00
- Current stock price: $22.07
- Percentage increase: 22.93%
Dividend Yield and Payout Ratios
The company declared a quarterly dividend of $0.028 per share. Based on the current stock price of $22.07, the dividend yield is:
Dividend Yield = Annual Dividend / Stock Price = ($0.028 x 4) / $22.07 = 0.508%
The payout ratio based on the EPS of $0.19 is:
Payout Ratio = Dividend per Share / EPS = $0.112 / $0.19 = 58.95%
Analyst Consensus on Stock Valuation
Analysts have provided the following consensus ratings as of October 2024:
- Buy: 5
- Hold: 2
- Sell: 1
| Metric | Value |
|---|---|
| P/E Ratio | 116.68 |
| P/B Ratio | 1.89 |
| EV/EBITDA Ratio | 12.16 |
| Stock Price (12 months ago) | $18.00 |
| Current Stock Price | $22.07 |
| Dividend Yield | 0.508% |
| Payout Ratio | 58.95% |
| Analyst Consensus (Buy) | 5 |
| Analyst Consensus (Hold) | 2 |
| Analyst Consensus (Sell) | 1 |
Key Risks Facing HealthStream, Inc. (HSTM)
Key Risks Facing HealthStream, Inc.
HealthStream, Inc. faces a variety of internal and external risks that could impact its financial health as of 2024. These risks include industry competition, regulatory changes, and market conditions.
Industry Competition
The healthcare technology sector is highly competitive, with numerous players vying for market share. As of September 30, 2024, the company's total revenues reached $73.1 million, reflecting a 4% increase compared to $70.3 million for the same period in 2023 . This growth is partially attributed to increased subscription services, which made up 96% of total revenues . However, the presence of established competitors could pressure pricing and margins.
Regulatory Changes
The healthcare industry is subject to extensive regulation. Changes in healthcare laws or regulations could affect operational costs and service delivery. For instance, during the nine months ended September 30, 2024, the company recorded an income tax provision of $4.2 million, compared to $2.5 million for the same period in 2023 . Increased compliance costs may arise from new regulations, further straining financial resources.
Market Conditions
Macroeconomic conditions, including inflation and interest rates, have been challenging. The company reported an increase in labor, supply chain, and capital expenditures due to inflationary pressures . This has led to a decrease in net cash provided by operating activities, which fell to $46.5 million for the nine months ended September 30, 2024, down from $50.2 million for the same period in 2023 . Such economic factors can adversely affect customer spending and, consequently, company revenues.
Operational Risks
Operational risks include reliance on technology and potential disruptions. The company’s hStream technology platform is central to its operations. Any failure in this platform could lead to service interruptions. As of September 30, 2024, capital expenditures were reported at $6.8 million for the quarter, reflecting investments in technology and infrastructure .
Financial Risks
Financial risks also persist, including credit risk from customers. The provision for credit losses increased to $2.0 million for the nine months ended September 30, 2024, compared to $0.7 million for the same period in 2023 . This highlights the potential for increased defaults, particularly in a challenging economic environment.
Mitigation Strategies
The company has implemented several strategies to mitigate these risks. This includes maintaining a revolving credit facility of $50.0 million, which had no outstanding borrowings as of September 30, 2024, providing liquidity to manage unforeseen challenges . Additionally, the company continues to monitor economic conditions closely to adjust its operational strategies accordingly.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Industry Competition | High competition in healthcare technology sector | Revenue growth at $73.1 million, 4% increase |
| Regulatory Changes | Changes in healthcare laws affecting operations | Income tax provision increased to $4.2 million |
| Market Conditions | Inflation and economic pressures impacting costs | Net cash from operations decreased to $46.5 million |
| Operational Risks | Reliance on technology platforms | Capital expenditures at $6.8 million for technology |
| Financial Risks | Credit risk from customer defaults | Provision for credit losses increased to $2.0 million |
Future Growth Prospects for HealthStream, Inc. (HSTM)
Future Growth Prospects for HealthStream, Inc.
Analysis of Key Growth Drivers
HealthStream has identified several key growth drivers that are expected to enhance its market position and revenue streams. These include:
- Product Innovations: The company's ongoing development of the hStream technology platform is central to its strategy, enabling integration and efficiency across its applications.
- Market Expansions: HealthStream is focusing on expanding its services into new healthcare segments, including nursing schools and healthcare organizations beyond its current client base.
- Acquisitions: The recent merger with VerityStream is anticipated to broaden the service offerings and client base, providing a more comprehensive suite of solutions for healthcare organizations.
Future Revenue Growth Projections and Earnings Estimates
HealthStream's revenue growth is projected to continue on an upward trajectory. For the nine months ended September 30, 2024, revenues increased to $217.4 million, up 4% from $208.5 million in the same period in 2023. Subscription services alone accounted for $209.1 million, representing a 5% increase from the prior year. The company’s net income for the same period rose to $15.1 million, with earnings per share (EPS) increasing to $0.50 per share (diluted), compared to $0.35 per share in 2023 .
Strategic Initiatives or Partnerships That May Drive Future Growth
HealthStream has undertaken several strategic initiatives to bolster its growth:
- Partnerships with Healthcare Providers: Strengthening alliances with major healthcare providers to enhance service offerings and customer reach.
- Investments in Technology: Continued investment in the development of the hStream platform, which is expected to improve customer satisfaction and retention.
- Focus on Data Analytics: Leveraging data analytics capabilities to provide actionable insights to clients, thereby enhancing the value proposition of its services.
Competitive Advantages That Position the Company for Growth
HealthStream enjoys several competitive advantages:
- Established Market Presence: With a significant foothold in the healthcare sector, the company benefits from brand recognition and a loyal customer base.
- Robust Technology Infrastructure: The hStream platform provides a strong technological backbone that supports scalability and integration of services.
- Diverse Revenue Streams: A balanced mix of subscription and professional services allows the company to mitigate risks associated with market fluctuations.
| Financial Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Revenues | $73.1 million | $70.3 million | +3.9% |
| Net Income | $5.7 million | $3.9 million | +48.0% |
| EPS (Diluted) | $0.19 | $0.13 | +46.2% |
| Adjusted EBITDA | $17.7 million | $16.2 million | +9.0% |
As of September 30, 2024, the company reported a working capital of $35.1 million, a significant increase from $11.8 million at the end of 2023. The primary sources of liquidity included $57.5 million in cash and cash equivalents and $37.4 million in marketable securities .
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Article updated on 8 Nov 2024
Resources:
- HealthStream, Inc. (HSTM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of HealthStream, Inc. (HSTM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View HealthStream, Inc. (HSTM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.