HealthStream Posts Better-Than-Expected Q2 Earnings As Value Proposition Remains Strong: Analyst

HealthStream Inc HSTM posted second-quarter (Q2) EPS of $0.13, up 30% year-over-year, beating the consensus of $0.09.

Sales increased 5% Y/Y to $69.2 million, surpassing the consensus of $68.89 million.

The revenue growth was attributable to several product categories, including contributions from recent acquisitions. 

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Subscription revenues increased 6%, with professional services revenues declining by $500,000.

Operating income was $4 million, up 36% Y/Y. The improvement in operating income was primarily attributable to increased revenues and increased capitalized labor associated with software development activities.

Net income was $4.1 million, up 34%, while adjusted EBITDA improved 17% to $15.3 million.

 FY23 Guidance: HealthStream reaffirms its sales guidance of $277.5 million - $283 million, compared to the consensus of $280.64 million.

It expects adjusted EBITDA of $57.5 million - $60.5 million.

Analyst: William Blair points to a solid demand environment for healthcare workforce efficiency and training solutions.

The outlook is largely consistent with management's medium-term financial model targets (mid- to high-single-digit revenue growth, mid- to high-60% gross margin, and low-20% adjusted EBITDA margin), the firm noted.

Analyst Ryan Daniels reiterates Outperform rating, saying the Q2 results reflect a solid print for the organization and provide incremental confidence in the slight growth acceleration implied in the second half of the fiscal year based on guidance.

William Blair analysts also remain positive on the profitability strength. The company's sales execution and strong client retention remain favorable data points that indicate durable organic sales growth going forward.

Price Action: HSTM shares closed at $23.16 on Monday.