New products are gaining momentum. The core learning platform still is exhibiting superior growth. But that line is bound to slow down as Healthstream fully saturates the market. Three new areas were launched in 2012 that could pyramid on that large installed base. The competency (assessment) and performance (performance reviews) platforms were bought by 12 hospitals in the September quarter. Faster gains are anticipated. Talent management (certification and workforce management) was bolstered by a pair of acquisitions this year and is being adopted even more quickly. And a joint venture with medical mannequin producer Laerdal Medical is exhibiting steady gains. The two companies are developing a high potential simulation technology that computerizes Laerdal's mannequins to grade how well a procedure is done automatically. So while the core line's growth may start to moderate, the overall software business could keep expanding at a 25%-40% rate well into the decade.
Rising government regulation is fueling that growth. Healthstream is ramping up for a major change in U.S. billing procedures scheduled for 2014. In addition, more OSHA, HIPPA, and HCAHPS rules are forcing administrators to update their personnel's knowledge of the laws to ensure compliance. Overall performance could be reinforced by a rebound in research surveys. Healthstream is beefing up marketing to exploit existing customer relationships it already has in the education area.
We estimate 2012 sales will finish around $105 million to provide income of $.35 a share. A 29% gain to $135 million appears attainable in 2013. Higher margins and lower tax rates could yield a faster improvement in earnings. Our estimate is $.50 a share (+43%). Another strong performance could develop in 2014 as the new billing codes ("ICD-10") go into effect and the full sweep of the new national health insurance law kicks in. The health care industry as a whole is certain to feel cost pressure as a result of that legislation. Healthcare technology may be left unregulated, though, on the presumption it will improve productivity and performance.
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