HealthStream(US:HSTM)2025-11-06 21:40Financial Performance - Revenues of $76.5 million in Q3 2025, up 4.6% from $73.1 million in Q3 2024[61] - Operating income of $7.6 million in Q3 2025, up 16.5% from $6.5 million in Q3 2024[61] - Net income of $6.1 million in Q3 2025, up 6.3% from $5.7 million in Q3 2024[61] - Adjusted EBITDA of $19.1 million in Q3 2025, up 7.9% from $17.7 million in Q3 2024[61] - Revenues increased by $6.9 million, or 3%, to $224.4 million for the nine months ended September 30, 2025, compared to $217.4 million for the same period in 2024[80] - Subscription revenues rose by $7.5 million, or 4%, to $216.6 million, representing 97% of total revenues for the nine months ended September 30, 2025[81] - Net income for the nine months ended September 30, 2025, was $15.8 million, compared to $15.1 million for the same period in 2024, with EPS increasing to $0.52 from $0.50[88] - Adjusted EBITDA was $52.9 million for the nine months ended September 30, 2025, compared to $50.6 million for the same period in 2024[88] Revenue Composition - Subscription revenues increased by $4.0 million, or 6%, while professional services revenues decreased by $0.6 million, or 19% in Q3 2025 compared to Q3 2024[69] Cost and Expenses - Cost of revenues increased by $2.0 million, or 8%, to $26.5 million in Q3 2025, with cost of revenues as a percentage of revenues rising to 35% from 33%[70] - General and administrative expenses decreased by $1.2 million, or 13%, to $7.3 million in Q3 2025, representing 10% of revenues compared to 12% in Q3 2024[73] - Cost of revenues increased by $5.6 million, or 8%, to $78.4 million, with cost of revenues as a percentage of revenues rising to 35% from 33%[81] Cash Flow and Investments - Net cash provided by operating activities increased by $3.6 million to $50.1 million during the nine months ended September 30, 2025[95] - Net cash used in investing activities was $27.0 million for the nine months ended September 30, 2025, compared to $25.9 million for the same period in 2024[96] - Capital expenditures were $7.5 million in Q3 2025, compared to $6.8 million in Q3 2024, reflecting increased investment in product development[66] Shareholder Returns - The company repurchased 905,786 shares of common stock at an aggregate fair value of $25.0 million during the nine months ended September 30, 2025[103] Financial Position - The company has a working capital of $35.1 million as of September 30, 2025, down from $37.4 million at December 31, 2024[98] - The company has a $50.0 million revolving credit facility with no outstanding borrowings as of September 30, 2025[99] - The Company is in compliance with all covenants under its revolving credit facility as of September 30, 2025[105] - The Company had no outstanding debt as of September 30, 2025, but may face interest rate market risk with future borrowings[107] Cash and Investment Risks - Cash and investment balances were $92.6 million as of September 30, 2025, with a hypothetical 10% decrease in interest rates potentially reducing annual interest income by $0.3 million[107] - The Company is exposed to foreign currency risks related to revenues and operating expenses in currencies such as the Canadian dollar, New Zealand dollar, and Australian dollar[108] - The Company has not entered into foreign currency hedging contracts to date but may consider doing so in the future[109] - The Company's investment strategy focuses on highly rated securities to minimize principal loss risk, with limits on credit exposure to single issuers[110] - The investment portfolio includes strategic investments in early-stage healthcare technology companies to expand the ecosystem[111] - The Company may experience volatility in its financial statements due to changes in market prices and impairments of strategic investments[111] - Future results may differ materially from projected market risks due to actual market developments[112] Taxation - The effective tax rate was 26% for Q3 2025, compared to 23% for Q3 2024[76] - The company expects to record sublease income of approximately $0.8 million during the last three months of 2025 and $3.2 million annually thereafter[62]