HealthStream, Inc. (HSTM)
Q4 2012 Earnings Conference Call
February 27, 2013; 09:00 a.m. ET
Robert Frist Jr. - Chairman & Chief Executive Officer
Gerry Hayden - Senior Vice President & Chief Financial Officer
Mollie Condra - Associate Vice President of Investor Relations & Communications
Jeff Garro - William Blair & Co.
Matt Hewitt - Craig-Hallum Capital
Vincent Colicchio - Noble Financial
Frank Sparacino - First Analysis
Terry Lally - Spotlight Funds
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I’d now like to turn the conference over to your host, Ms. Mollie Condra, Associate Vice President of Investor Relations and Communications. Please go ahead.
Thank you. Good morning and thank you for joining us today to discuss our fourth quarter and full-year 2012 results. Also in the room with me are Robert A. Frist Jr. our CEO and Chairman of HealthStream, and Gerry Hayden, our Senior Vice President and CFO.
I would also like to remind you that this conference call may contain forward-looking statements regarding future events and the future performance of HealthStream that involve risk 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.
With that I’ll turn the call over to our CEO, Robert Frist.
Robert Frist Jr.
Thank you Molly. Good morning. I’d like to start this morning by highlighting a few financial metrics, and then we'll cover operational performance for the company, and then exciting new product updates and then after Gerry's financial comments, we are going to discuss our entry into the new market opportunity, the post-acute care market and so we look forward to discussing those topics with you in the next 20 or so minutes.
From a financial highlights standpoint we had an exciting quarter. Consolidated revenues were up 27% to $27.8 million in the fourth quarter of 2012. They were up 26% for the full year to $103.7 million. Operating income was up 12% to $3.3 million in the fourth quarter of 2012, while increased 19% to $13.5 million for the full year. Net income was $1.8 million in both the fourth quarter of 2012 and 2011, up about 2% over the prior year quarter.
On the operational performance metrics we have just many numbers, most of them in our release, but I’d like to highlight a few of them. We're pleased to report that over 350,000 subscribers were newly contracted to use our enterprise learning and talent management platform in 2012.
This is up from last year where we added approximately 300,000 subscribers and we also turned in an exceptional and a strong fourth quarter, adding approximately 125,000 contracted subscribers in that 90-day period. This number, 125,000, exceeds our long-standing quarterly goal of contracting 20,000 to 50,000 per quarter. We continue our string of beat of that targeted range of adds every quarter.
The total number of contracted subscribers is now over the 3 million marker, sitting at close to 3.1 million and more precisely at 3.99 million contracted subscribers. Importantly, we'll discuss our implemented subscriber number, which helps drive revenue.
Over 365,000 subscribers were implemented to our platform in 2012. We now have 2.937 million healthcare users implemented; and again, that's important because that's when we began revenue recognition once these healthcare professionals are implemented onto the Learning & Talent Management platform.
Approximately 68,000 subscribers were implemented in the fourth quarter and we currently have a backlog of approximately 160,000 in the queue for implementation. So we feel well positioned to having already had a strong selling season, to have such a strong Q entering the year that essentially helps provide additional visibility into our revenue streams in the future, as we implement the backlog of already sold subscribers.
We had another strong quarter of renewals with rates above the 90% level. The renewal rates for the fourth quarter were 92% based on the full-time equivalents or the subscriber number and 96% based on the contract value. Our renewal rates reflect the addition of subscribers compared to the previously contracted months, combined with any pricing adjustments that may occur at the renewal.
Also importantly, for the trailing four-quarter period ending December 31, 2012, customers representing 99% of subscribers that were up for renewal renewed, while our renewal rate based on contract value was 100%. And so you can see that the cumulative and four quarter trailing averages held strong. The fourth quarter wasn't -- there weren't as many renewals up during the fourth quarter and so the average over the four-quarter period remained very strong at 99% and 100% respectively.
The product line update, there’s just many exciting things going on in product development and product launches. We've tried to launch our products with a certain cadence that allows us to get our feet grounded in service and support, and we just have a constant parade of new products. Those are very exciting years, looking back.
At the end of the first quarter last year we launched the Performance Center and that product continues to perform well and pick up steam in the market. During the fourth quarter of 2012 we continue to expand our customer base for these two important talent management product offerings, the Performance Center and the Competency Center.