Healthstream ( Nasdaq - HSTM ) -- Organic Growth Accelerates

Healthstream (HSTM $7.50) reported excellent on target Q4 results.  Non-GAAP earnings advanced 50% to $.06 a share.  Revenues increased 17% to $17.6 million.  The subscriber base expanded 14% to 2.25 million healthcare professionals.  The backlog of new subscribers who haven't been implemented yet rose more quickly (+125%) to 225,000.  Pricing remained solid.  The renewal rate was nearly 100%.  New educational materials are in the pipeline, which promise to increase average revenue per subscriber.  The company's research business regained momentum, as well, fueled by beefed up marketing efforts.  For the entire year income advanced 28% to $.23 a share.  Revenues improved 15% to $65.8 million.

New products will reinforce growth in 2011.  Organic gains in the core acute hospital market promise to be amplified by Healthstream's high potential Sim Ventures partnership with Laerdal Medical (Norway).   That product line will enable employees to acquire techniques and certifications using computerized mannequins, that relay what's happening over the Internet to an instructor or interactive computer program.  Healthstream is rolling out two additional products, which could yield further impetus.  Initial contributions are likely to be modest but substantial contributions could develop over the next several years.

We estimate 2011 income will climb 22% to $.28 a share.  Sales could reach $77-$80 million, depending on the new products' contribution.  Those lines probably won't generate significant income in 2011, due to start up costs.  But leverage could become sizable down the road.  (Please click on the "Labels" button to bring up previous reports about the company.)

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