Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standby and wants to Healthstream first quarter 2020, <unk> earnings Conference call.
At this time, all participant my going away.
After the speakers presentation, there will be a question answer session last question. During the session you need to press star one or your telephone.
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Now, let's have a comfortable that you're speaking today, probably cauldron Vice President Investor Relations Communications. Thank you. Please go ahead.
Thank you and good morning.
Thank you for joining us today to discuss our first quarter 2020 result.
Also on the conference call with me are property purchase junior CEO and chairman of Healthstream, That's got to Robert Yes, always senior Vice President.
I'd also like to remind me with this conference call may contain forward looking statements regarding future events and the future performance of helps training and involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward looking statement.
Information concerning these risks and other factors that could cause results to differ materially from those forward looking statements are contained in the company's filings with the FCC, including forms 10-K, 10-Q, and our earnings release.
So with that start at this time I'll turn the call over to Bobby Frist.
Thank you Molly good morning, welcome that first quarter 2020 earnings conference call normally the team and I'll be speaking to you from a conference room at our headquarters.
And Oh about inner homes.
Calling you from remote places I hope that facilitates well.
And the cold pandemic has changed a great deal since our last earnings call, which is only 10 weeks ago.
At that time over 56000 people on the U.S. have died due to cold 19, a number of continues to grow.
If this trend hold you ask will soon reach over 1 million documented cases, a cold at Nike.
Many of which are healthcare workers themselves. That's an April 14th two C.D.C. said the between 10 and 20% of all U.S. car buyers cases, or among health care professionals.
Healthstream, we'd never been more resolute in our mission to support that's helped your workforce the heroes.
Literally putting their lives it refers to provide care to others.
Let's start this call by acknowledging surely thinking healthcare workers the world over for their attention to our needs and their selfless getting to take care of muscle. Thank you.
The impact of Cold 19 has been widespread rapidly evolving generally characterized by uncertainty.
Temps to contain the spread of probably 19 authorities have implemented measures that have resulted in quarantines travel bans and restrictions children placed orders the promotional social dispensing and limitations on business activity among other actions.
These measures and then pen damage.
Causes significant economic downturn U.S. and globally.
Correct me relevant to our business is the adverse impact pandemic is having 10, you likely continue to have on health care industry.
Our business is focused on providing workforce and provider solutions to help organizations along the continuum of care.
An adverse impact on health care organizations is likely to result in an adverse impact on our company.
No Coburn I came to not have a significant impacts on our first quarter financial results based on what we're now seeing the cold at 19 pandemic will begin to negatively impact our financial results in the second quarter 2020.
The extent timing and duration of such impacts on our business remains uncertain and will depend on other things link and severity of the code 19 pandemic.
Especially with respect to its impact on health care organizations.
Anyone watching the news knows that help organizations are being adversely affected on a number of levels clinically financially and operationally significant source of revenue from services, such as elective surgeries of ground to a near home due to restrictive measures, including quarantine and self shelter in place orders.
Same time, the cost of your body emergency care to covert 19 patients has sharply increased.
We could go to date on April 21st back Yourself, you reported at 939 hospitals, just received negative S&P rating, noting that they each had about 100 days cash on hand or less.
No health care provider seems exam as evidenced by a few examples of challenge as reported by some of our larger customers. For example, Quorum health Healthstream customer, which operates 23 hospitals in 13 States announced on April seven set is filed chapter 11 bankruptcy protection.
Its quarterly earnings release on April 20, or 21st starting the uncertainties associated Koby 19, H.T.A. Another large healthstream customer announced that it was the spend its quarterly dividend program and was withdrawing its previously issued guidance for 2020.
On the same day Southfield, Michigan based Beaumont health, another healthstream customer, which has 38000 employees.
Yes, it will temporarily lay off.
2400 employees and permanently eliminated about 450 positions and cut executive pay do the financial effects from the ground of ours.
Similar stories are being reported across many of our customers.
In light of these adverse developments experienced organizations, we're continuing to monitor your ability and willingness of our customers to pay for our solutions in a timely manner implement solutions and purchase from us.
And renew existing or purchase new products and services from us.
We monitor our cash position in credit exposure, primarily measuring weekly cash receipts.
Request to modify payment or contract terms and bankruptcy notices since March each of these areas has begun to show signs of slowing or deferral, we were unable to quantify the future impacts and such negative indicators.
Or no weather and to what extent they may increase overtime.
Any further deterioration in the flexibility of our accounts receivable all the timing of payments for customers will adversely impact our financial results. In fact customers are currently making requests for extensions of time to pay their bills without incurring penalties and we're working with each.
It's simply can't.
The timing of implementations is also relevant to our business because our software solutions did not result revenue recognition or billings until they are implemented.
To the extent our customer delight failed to implement products and had previously purchased our financial results will be adversely impacted.
Well customer implementation projects are continuing several customers have delayed starts or have put implementation projects on hold that were already in progress, making it difficult superjack number of implementation delays that we will ultimately receipt.
For example to large implementations on the Red Cross was let's take the Sweet program have been impacted.
One is been put on hold and second has been partially late.
In terms of sales and renewals well continue but at a slower pace with uncertainty as to when customers and prospects will broadly returned to pre cobot 19 levels of buying decisions. This should come as no surprise getting what our customers dealing with during this time.
In fact, many customers are not allowing sales representatives on site until probably 19 can be better controlled.
Our sales representatives account managers remain active in a dialogue with our customers, but their primary focus over the past several weeks it shifted more towards maintaining relationships and providing support where we can.
Well, we've been able to close deals across our solution sales teams, we are experiencing purchasing decisions being put on hold temporarily or deferred to later in the year.
Given the uncertainty surrounding adverse impact that code 19 is having on the health care industry and our business, we would take certain expense management measures. These include.
Definitely postponing and potentially foregoing increases the base salaries, including executive base salaries.
Limiting hardy hiring to critical positions limit during the fourth one can't match the company's for one K. match.
We've been negotiated with key vendors in hours to allow payment term extensions without penalty.
We're continuing to monitor developments regarding the cold in 19 pandemic and they undertake further expense management initiatives, if we deem necessary.
Despite cobot 19 business does continue so I want to provide updates with regard to the three business transition that we introduced I discussed in previous calls.
All three transitions are designed to move us toward being higher margin more profitable company in coming years, even though the impact the pandemic is likely to extend these transitions longer than we had previously thought.
First we have transitioned our sales and marketing efforts from the legacy or substation products to our newer substation offering.
I was reminded the new Red Cross Resuscitation suite program, it's comprised the BLS adolescent pals competency development curricula and we launched it in January 2019.
Brings an updated highly adaptive competency based development solution health care professionals.
Offers certification health care professionals successfully demonstrating proficiency of lifesaving, Brazil station knowledge and skills.
We now since our last conference call.
Oh for the full year 2019, we had signed over 38.8 million and contract or value Healthstreams, new resuscitation offerings.
These new contracts that from a mix of over 3000 of our hospitals and health care facilities and their from across the continuum of care, including new and transitioning customers.
Oh I customers focus as necessarily shifted in the last couple of weeks responded to developments related to cope with 19 and treated cope treating cobot 19 patients. We have continued to see some new sales.
Some given some customers preference to proceed with training implementation our team created an innovative studio were virtual instruction could be provided customers feedback on our ability to accommodate their preference to stay on schedule using virtual training as a component of their implementation has done a positive developments.
In February we now see expansion over a substation offerings. Good stable program, a leading neonatal education solution. It's highly respected program is now available online exclusively through Healthstream, we're encouraged to see buying activity.
Activities and surrounding activities.
Back to the hosted a webinars on April seven.
Had over 813 attend the show up and 30 385 follow up request for information we've already closed a handful contracts. Shortly after the Webinars [laughter] division of the stable program further diversifies, our product portfolio of simulation offerings.
Second transition involves the adoption of and migration of our new Verity stream platform.
In the first quarter 2018, we announced the launch Verity stream, our new platform for managing Credentialing, and privileging and health care organizations.
During the first quarter 2020 over 20, new customer accounts were contracted for the Verity stream platform, bringing bringing our cumulative total over 220.
These 220 customers represent a mix of new customers and existing customers, who chose to migrate from our legacy Credentialing and privileging platforms at the new Verity stream platform.
Sales of severity stream platform were exceptionally strong during the second half of 2019.
Well below our expectation for the first quarter.
Additionally, the sale success realized in last half of 2019 created an implementation backlog.
Hoping and longer implementation cycles for our customers and time to revenue from Baird. He's trying to address the backlog and accelerate the implementation cycle, we've hired additional staff.
These two factors lower new sales and slower implementation, even without factoring impacted co 19 like will result in lower revenues and operating income than we anticipated.
The provider solutions segment for this year.
Third transition involves our customers upgrading to the eight stream platform, which is the essential technology working behind the scenes that powers all activity in Healthstream ecosystem.
In the first quarter, we added approximately 240008 stream subscriptions, bringing our cumulative total approximately 3.4 million subscriptions, which is up from 3.15 million contracted subscriptions that ended the fourth quarter of 29 team and up 85% since the first quarter 2019.
I would remind everyone that these three business transitions all represent multiyear journeys back my perspective last quarter I said that we were about 12 months into a 36 month journey.
Given the I know and associated with CODI 19, especially its duration, it's hard to predict with certainty how much time will be added to the journey, but 15 months in Oh I can say, we continued to make real progress on all three transitions at the end of these journeys, we still expect higher margin more profitable company.
We are fortunate to have entered pandemic with a solid balance sheet no debt and a 50 million dollar credit facility the remains fully available to us.
Rather than being in the liquidity crisis, we believe that we're well positioned to continue Alan allocating capital to invest in the future of company.
Time being that means keeping our share repurchase authorization in place and maintaining capital investments in new and existing product development.
She said circumstance deteriorate, we prepared to curtail or discontinue one or both of these initiatives, but do not believe it isn't the best interest to shareholders for the company to do so at this time.
At this time, Scotty Roberts will provide more detail discussion on the financial metrics from first quarter results along.
Further comments with how we view our financial outlook for 20, Scully given the cobot 19 pen down it Scott.
Thank you Bobby and good morning.
Today I plan to cover our financial results for the first quarter.
And provide some additional thoughts about how the Cabot 19 pandemic is impacting our business and financial outlook.
Consistent with past quarters, the discussion of our results today well be for continuing operations only.
And our comparisons will be against the prior year first quarter unless otherwise stated.
It's began with an overview.
Our first quarter highlights.
Revenues were down 6% or 3.6 million.
To 61.6 million.
Operating income was up 35% to 7.2 million.
Which was positively impacted by 3.4 million dollar fable contractual adjustments the cost of revenues.
Income from continuing operations was up 48%.
He 7.1 million.
Which was also positively impacted.
About $2.6 million from the favorable adjustment to cost of revenues.
He P.S. from continuing operations were 22 cents per diluted share count.
Compared to 15 cents per diluted share in the prior year.
He P.S. was positively impacted by eight cents per share under favorable adjustment the cost of revenues.
Our adjusted EBITDA from continuing operations was down 6% to $11.8 million.
In the quarter, we completed the acquisition of nurse grid on March Tonight.
And on March the 13th we announced the approval of a 30 million dollar share repurchase authorization.
Revenues from the workforce solution segment totaled $49.8 million for the first quarter and are down 8% compared to the prior year.
This decline was primarily influenced by the expected production and the legacy resuscitation products.
Which decreased by 35% or 6.1 million.
And were 11.2 million this year compared to 17.3 million in the prior year.
Revenues from all other workforce products experienced modest growth, 4.5% over the prior year.
Revenues from the <unk> provider solutions segment were 11.7 million and grew by 8%. This growth came from professional services for client implementation.
And new they already stream subscriptions.
Revenues from the recent acquisition of credential My Dot.
Which was completed in the in December of 2019 were approximately 400000 in the quarter.
66.9% compared to 58.8% in the prior here.
Gross margins were past positively impacted by $3.4 million favorable contractual adjustments.
Royalty expense, resulting from the resolution of a mutual disagreement over various elements of the past partner contract.
Excluding the impact of this favorable adjustment gross margins with a 61.3% for the first quarter.
An increase of 250 basis points over last year.
This improvement is primarily a result of the reduced revenues from the low margin legacy resuscitation products.
And revenue contributions from other higher margin products.
Operating expenses, excluding cost of revenues were up 3% or $1 million over the prior year.
And includes approximately $650000 of expenses from the credential my dog and nurse spread acquisition.
Our investments over the past year in product development capitalized software.
Our corporate office relocation, which occurred during the second quarter of last year.
Contributor to the increase in product development, and depreciation and amortization compared to the prior year.
Operating income improved by 35% to $7.2 million it was positively impacted.
By the 3.4 million dollar favorable adjustment cost of revenues, while adjusted EBITDA declined by 6% to $11.8 million.
That's the point of clarification 3.4 million dollar favorable adjustment the cost of revenues is excluded from the calculation of adjusted EBITDA.
Well revenues and adjusted EBITDA experienced declines versus last year's first quarter, we were able to mostly ever come to lost revenues and margin associated with the 6.1 million dollar decline in the legacy resets station products.
Now, let's turn to the balance sheet and cash flows our cash and investment balances ended the quarter at approximately $142 million and working capital was approximately 98 million.
During the quarter, we completed the acquisition of nurse grid, utilizing 21.4 million that's cash to acquire the remaining equity in their screen.
We previously acquired a 10% minority interest in her script during the first quarter of 29 team.
As part of the accounting for the acquisition. We also recorded a 1.2 million dollar gain due to a change in the fair value of this minority investment.
Cash flows from operations were 6.1 million compared to 16.1 million in the prior here.
Lower cash collections and higher payments of loyalty is contributing to this reduction.
Q1 was our strongest quarter of collections last year.
Cash collections were also strong in Q1 of this year actually exceeding we're seeing levels during the third and fourth quarter's a 2019.
Were lower than the bar, we set lapping last year's first quarter.
Our day sales outstanding for the first quarter were 44 days, which is favorable compared to 52 days in the prior year first quarter.
But as a favorable compared to 39 days from the fourth quarter of 2019.
Capital expenditures incurred during the quarter were approximately $4 million and were primarily comprised of software development and content.
Marks the 13th we announced the authorization for share repurchase program up to $30 million of our outstanding common stock.
20 announcement date on March 13 through the present, we've acquired shares valued at approximately $10 million pursuant to the program.
Repurchase program will terminate on an earlier if March 12 2021.
So when the maximum dollar amount under the program has been extended.
It makes a spin or discontinue making purchases under the program at anytime.
We plan to closely monitor factors such as market conditions, our liquidity working capital.
Cash what projections, when making decisions regarding the program.
Now I will discuss our forward looking expectations, including the financial impact that's kind of in 19 on our business and how we are responding.
As announced in our earnings release yesterday, we have decided to withdraw our previously issued financial guidance for 2020 due to the uncertainty and inability.
Reasonably quantify how the cobot 19 pandemic when in fact operations and financial result.
We entered 2020 optimism regarding our plans and delivered a solid first quarter, we completed an acquisition.
Initiated the share repurchase program began executing against our product development Roadmaps started filling open positions to support our growth initiatives.
Over the past six weeks, though we've seen several emerging indicators affecting our operations.
Which could have an adverse impact on our business.
Although our financial performance during the first quarter was strong with minimal impact from 'cause 19.
We anticipate several headwinds for the remainder of the year, which will be strongly influenced by the impact the pandemic has our customers.
As Bobby mentioned earlier, our customers, who are all health care organizations are not only focused on serving their communities faced with cobot 19 infections.
But they are also being faced the financial challenges, resulting from lost revenues and higher operating costs.
Many health care providers have been unable to provide their full range of services and are losing revenue.
For example, they're performing fewer electric medical procedures as well as a result of corn teams and shelter in place mandates.
And there are incurring higher operating costs, so medical supplies such as P. D.
Many are faced with the decision to reduce their operating expenses reduced their workforce or even closed their facilities.
Because our revenues and cash flows are directly impacted by the strength of our customers to the extent they continue to experience. These disruptions.
This is likely to negatively impact our business.
Because of these factors, we anticipate slower sales.
Especially in the second quarter, and we expect longer or delayed customer implementation cycles.
Several customers have already elected to defer or holder implementations.
It's where it was all and delays in our revenue recognition and billings.
Failure to achieve our sales goals or continuation or acceleration of implementation delays will have a negative impact on our revenues for the remainder of the year [noise].
We may also experienced slower cone cash collections higher credit losses and fewer renewables.
We've already begun to see slower customer payment patterns and at least one multi facility hospital system recently filed for bankruptcy.
We anticipate the summer customers, what we're seeing federal eight under the cares Act, but we don't know if they will deploy those funds towards our solutions.
These factors among others like a difficult to estimate the impact of the Coca 19 will ultimately have on our operations.
Our financial performance and our financial condition.
On March 16th they required all of our employees to begin to begin working from home.
Anyway restricted all business travel.
We don't anticipate incurring any significant incremental costs facilitate decent <unk> <unk>, our employees work from home arrangements.
It was nearly all of our employees already had the necessary equipment and resources to make this transition.
We had already Virtualized systems, which we used to run our business.
In anticipation of revenues and cash was being Nick negatively impacted from cup in 19.
We have already taken several actions to manage our expenditures.
Our executive salary increases, which were approved by our board of directors in early March and would be effective made the first have been placed on hold.
And annual Merit increases tall to all other employees have been paused as well.
We are reviewing all budgeted new positions and have deferred hiring most of them until we have more clarity on the future.
We have rescheduled several customer conferences until 2021 and are cutting back on other non essential business expenses.
We believe the precautionary measures taken today are prudent.
We are prepared to take additional cost saving measures should the circumstances deteriorate further.
We believe we have adequate access to capital, which which will provide sufficient liquidity to manage our business through this crisis over at least the next 12 months.
Enter these challenging times or with a strong balance sheet, including 142 million of cash and investments and full access to a $50 million <unk> credit facility.
Lets remains untapped.
As Bobby discussed earlier based on a relative strength of our balance sheet and what we believed to be an iterative plan to responsibly manage expenses.
We have several projects relating to the development of new products under way that we intend to continue.
Additionally, we have decided not to suspend or share repurchase program at this time.
We believe these initiatives remain in the long term best interests shareholders and the company.
We will continue to evaluate them in connection with cut the 19 related developments and adjust them if necessary.
Thank you for your attention. This morning, now now I'll turn the call back over to you body.
Thank you Scott I'd like to make a few closing remarks.
First I'd like everyone to know that we're focused on the safety and well being about 900.
Employees, we required our entire workforce across the country to begin working remotely from home as of March 16th 2020, and we continue to work remotely today.
We were particularly focused particularly well positioned to have all employees work from home as approximately 30% of our employees worked remotely prior to Koby 19, and the approximately 400 employees that work in our headquarters Nashville, Werent remotely for almost a month last year, when we were making the transition to our new corporate office. So it's kind of had some practice and the remote work and I've.
Seen a amazing.
Productivity and camaraderie online a workforce has been truly amazing last several weeks.
So we already had our technology processes in place and they were proving out. So we're confident that we were ready to just go virtual and and we were able to very seamlessly virtualize, our entire workforce and it's been a truly been great to watch their effectiveness and getting things done.
To support health care organizations in their employees on the frontline. We have made available curated library of course is relative to covert 19 free of charge to all of our existing customers and all caregivers in support of their preparation to provide safe and effective care to cope with 19 patients. The courses in this bundle include a wide range of relevant content topic I can't hide.
Gene ventilator safety protecting yourself with personal protective equipment contact and droplet transmission based precautions things on controlling screen transmission of infection. There's just a few of the courses that we created a library and provided free and easily available to our platform and made available in other mechanisms could <unk>.
On customers.
Platform has seen record utilization on some of the days during the pandemic well performing consistently without disruptions and so again, we've been able to operate seamlessly through this period, serving customers in applications up as needed.
Also announced early this month Healthstream in partnership with state of tend to see office of the Governor is providing its cobot 19 rapid response program, which includes training bundles and its workforce platform along with other workforce resource to support the state's efforts to rapidly train new returning in current caregivers, who are all volunteering to work in the old.
Turning to health care facilities being set up across the state.
So this program has been very exciting.
And.
Great receptivity by the Governor Lee.
And ER and was made available in a matter of days to the organizations as needed. It's been really again amazing to watch our teams respond and provision these resources as needed we become a key communication channel for lots of current information a news across our broad network of about 5 million subscribers one of.
Most consume pieces of content is is rapidly updated a set of documents from the CDC that we post into our network as well along with the curated libraries, we provision.
So you can tell we turned a lot of our attention to just service right now taking care of customers working with them on their everything from their bill payment a two to making sure that have the educational resources they need to quite a this pandemic.
So in addition, what we've seen is interesting internet work or the Threeq <unk> free resources that we provided made available our customers are using our learning platform to deploy we call self authored course [noise].
And what's really interesting to see as the trends we're seeing in our data on January nine of this year. For example, the first course with Corona bars in the title was taken by radiologist at a hospital in Jackson, Wyoming. So it's just fascinating to see inside of our data the <unk>. The most prescient organization was in Jackson, Wyoming that.
Created a self all three course and started to distributed to their staff in January on January nine, but this year.
Since that time, our customers have signed over 1.1 billion courses with Corona virus or co that 19 in the title taken together with the approximately 300000 enrollment of the freak curated courses, we provided our customers have assigned to over 1.4 million courses to more than 760000.
Unique learners across our network.
It's gratifying to see our network spring to action in fact, some some of our partners have also added their content of these free bundles as well and the again, they're met with sometimes even emotional response and equipping people that may otherwise have never.
Then in that situation of providing care to someone that is in fact, we like this.
In March we expanded our growing ecosystem of health care professionals to the acquisition of nurse grid, Portland, Oregon based technology company that is known for their nursed grid mobile App. This app has a growing community of over 260000 nurses as monthly active users and the number one rate it out for nurses in the Apple App store.
The 4.9 star rating over 44000 reviews.
We believe that nursed good provides us an opportunity to further engage supported connect the community of nurses across the U.S.
In fact.
Just about 48 hours ago. We now the result of an in House survey for over 15000 nurses, who are nurse grit, who use nurse grid responded about providing care to independently I personally think it's one of the most authoritative and current surveys of the nurse opinions and thoughts and concerns.
During the pandemic, that's that exist and you can see it on our web sites go to nursed good dot com and you can see the the just published a results of that survey was amazing to me was that 15000 nurses responded to these 10 questions in about three days and again. This is some of the most accurate and recently published stayed about nurses opinions as.
It relates to cope with my team shows the power of our ecosystem and the power to collect quick opinions.
And publish them out so in support of and improving outcomes overall.
In the survey, 79% nurses report that one of their top three concerns was infecting family and friends with the Corona bars, and I think this being or top concern of all other concerns mentioned shows what a thoughtful a group of people are serving us is our health care providers.
About 64% of nurses are experiencing a change in their work assignment do the pandemic and approximately 84% of nurses still reports shortages in 95 masks and so again when we look into the activities in our eco system from the first course taken on granite virus in January 9th this ability to instantly poll survey 15000 nurses are there.
Concerns and opinions shows the power of our ecosystem and its efforts to support the health care organizations through this pandemic.
As we continue to shelter in place and working remotely Healthstreams employs arrived to the occasions, we battle against dependent I.
Began this call by thinking healthcare workers I'd like to end the call a thing hellstrom employees and the great job there does [noise].
Thank you to all of our nearly 950 employees.
As we wrap up this part of the conference call I'd like to remind you that our annual shareholder meeting, which will be held on Thursday may 21st at two PM Central time will be virtual this year as a result, and the cold at 19 pandemic hope many of you will be able to participate in the meetings this year.
At this time I'd like to turn it over to questions from the Investor community.
As a reminder, Tessa question do we need to press star one or your telephone to withdraw your question press the pound King.
Leaps and bounds compiled the county roster.
My first question comes from Matt Hewitt with Craig Hallum Capital you may begin.
Good morning, and thank you for taking your questions.
The first one I guess is related to your customers and you <unk> you talked about some of the disruptions that they're facing some of them even dealing with bankruptcy and I'm curious.
Given that well I guess, there's two questions here number one a number of hospitals have been furloughing employees and I'm curious are they still on the roles as far as or as you look at them from a customer perspective are they if your furloughed or are you still counted as being active.
User and therefore is the hospital charged and then the second piece to the question is you know I recall that this goes back probably six seven years ago, but I recall, a situation where a hospital customer of yours that was going through bankruptcy. They were still able to acquire your platform and.
I'm curious under the current situation you if those types of events are still happening or hospital budgets are definitely have been impacted but are they still buying your products, even though even if at a lower level, but they're still fine. Thank you.
Yeah sure Thanks, Matt and I think as insightful. The we ask the question because you know our customers if they do Les Austin and I've seen a half dozen announcements of actual layoffs clearly reduces their customer counts and lot of our platforms are based on subscribers and so we would expect them to want to.
Draw down payment, where they wouldn't pay for those that were gone Inferno workers are still in the platform, but I can make stacked and although again the sat in the last few weeks you know I imagine helps us want to negotiate to it those furloughed workers are not accessing the system to not pay for them and so those are two examples where there's a direct correlation to.
To the size of workforce or whether they're actively working whether we're actively going and while our contracts in most cases or subscription base and more fixed or I think it would be why is it provides flexibility.
In in how we build them through these times, and then unwise and tax adult per se furloughed employees or laid off and play certainly.
So you're right to draw this correlation at one of our concerns now it's just been a few weeks here. So we haven't really seen that in the negotiation discussions yet, but we're we're expecting it and we want to be flexible to maintain healthy relationships with our customers. Second question is we are seeing some buying which you know so it hasn't completely stopped.
It is lower than expected, but you know we've we've closed or you know half does more red Cross solutions in the last month, we've we signed up as I mentioned, a new contracts and stable program. A few of them I think it'd be many many more work for cold at 19, but it's a <unk>.
So really beautiful product and it's going to have a major impact on neonatal care.
We've seen a other forms of contracts being more creative for example, a large health system that had partially adopting our platform wanted a continuous access to our free cobot bundles, we actually signed a a free access to our full platform for 90 days into 90 days they'll need to assess for their other.
Uh huh tens of thousands of employees.
And at the end of that term they'll have to decide what they want have continued access to our platform for all employees not just the Carson subscription so.
There are some signs that we may get growth in that particular case about a third of the workforce, which was in the tens of thousands were using our platform under contract and they and when they saw the free cobot bundles. We provided they said look we need to provide just south of tens of thousands more people immediately to the same platform and a and again they stay.
Did sign an agreement to have for use of the platform for the other two thirds of workforce and then maybe that will convert into a full time contract I can't I can't know that but the but we were able to sign an agreement around around that so program.
So you know there's so many conflicting signs right essential services are being purchased a regulatory oh components.
Non essential or lack of things as you can imagine are completely on whole implementations are you know they just can't go through software implementations right now I don't know what you're seeing with your other vendors but.
They're asking for delays or are waiting and it is mix. We see you have a few that their take advantage of our virtual implementation services and a few they're asking for deferrals and implementation as you know I revenues are tied to successful activation of an account. We don't start building, we signed a contract we start doing when we implemented in most cases.
And so delays in implementation will affect our revenue recognition.
So I think you called out a really important.
Relationship between our customers health and how they're treating their employees for loader lay off the subscriptions that we sell or based on those counts or potentially being negatively impacted and a and then the unknown of at all how fast with furloughed workers come back on.
How many will go through a lay offs and then go rehiring now fundamentally underneath all this.
Believed that the health care services bother will keep expanding.
Shifting to companies that are home care provided a they you know there's going to be more of that overall needs for health care Gonna go up elective surgeries is my personal opinion. It had been deferred we'll come back online because people that need those surgeries to walk better are going to come back into the system.
So I think you know.
I think that.
And health system, just has to survive and so the government is providing specific us financial support to hospitals and health care organizations to make sure that there they remain viable and can service our population so well the nature of care delivery may change in the care settings may accelerate some more homecare and other settings, where again, we have growth going on.
And those markets.
You know overall.
Eventually this has to come back and normalize again.
Understood and thank you.
Thank you. Our next question comes from Ryan Daniels with William Blair.
Okay.
Yeah. Good morning, just as Jared Haas infer Ryan Thanks for the questions I wanted ask another question on the implementation process actually it sounds like you've seen maybe a few pockets here and there have customers that have relied on some of the virtual training services virtual implementation services. Just curious are there anything.
Is there anything unique in those instances or is that something that could conceivably be applied across you know all types of implementations are all customers.
Maybe as a quick follow up Im just curious if there's anything that you've seen there that suggests maybe once things sort of normalize bianco everything team. If that's something that could maybe persist as a more efficient way to conduct the implementation either at a lower cost or maybe speed up the time to revenue something like that.
Yes, that's great great.
Good insights actually some services or there's a blended like the the Red Cross solution has this blended nature to it where it has a physical component. These mannequin technologies and the Apple App that uploads this system to the cloud to our systems and they're not just pure software implementations and and historically, we've had a little bit more of a hands on sales effort.
But demonstrate the product and implementation process. So it's kinda physically demonstrate components of that solution that that against the subscription base, but has a physical dimension to it as well in software dimension.
And so the virtual implementation of those it's been fascinating and I think it could result in kind of a new set of options and and the overtime favoring these virtual support mechanisms. Its still has a tangible product dimension to it. So I think it is important to get that sales team back out the feel when they're able to to demonstrate the.
Differences and the capabilities, but that that said I think you're you're right. There will be customers. It will grow to favor. This form of implementation now elective implementations say the Verity stream platform, where you have a working credentialing and privileging platform you have selected our even comp.
Tracking for it because its superior and and you know now is not going to be the time to undertake a switch you know, even though you contracted Florida on our platform in the do you have the customers superior it'll have eventually more benefits you do it or whether it's in person or a remote it's likely.
Those kinda systems would be delayed because you know what they have maybe functional even though what they bought from us maybe superior and so.
You know, we're refining or implementation methodologies there on systems like that as a pure software deploys and I think I think you're right I think we may see some favorites isn't going to these new of virtual models for deploying.
We can certainly support them operationally.
As I've noted our whole company almost without a hitch over 48 hour period, a went completely office lists and virtual and unfortunately in the year. Prior we had essentially been homeless waiting for our new office space to be developed and had stress test every infrastructure system for a full month to make sure we were virtually able to service.
And so.
I think you're gonna see delays in implementation for selected products that they already know they favor because they just can't pay attention to them now.
And then the long run I think you're going to see on balance a little bit of a shift the more virtual implementations.
For lots of our product such a hope that it gave you enough color to see direction I think you're accurate and your assessment.
Absolutely yeah very good color. Thank you.
Thank you. Our next question comes from Richard close with Canaccord. Your line is open.
Oh, yes, thanks, a hope everyone is safe and healthy.
With respect to Bobby.
Obviously, you've been running this company for a long times bend through some ups and downs, obviously, the current situation dealing with your customers specifically.
If you just take us back in terms of some of the Dow Jones, what have you guys seem to in terms of customer attrition in the past you're maybe if you can sort to give us some perspectives on that whether it's the euro 2008 2009 timeframe.
Or a the early two thousands just some perspectives.
Yeah, a couple things about that Richard we're definitely a thought through a couple of things over our 28 year history 29. Your history. One was long time ago. This is reaching back up over 20 years, we upgraded our core platforms or through a whole upgrade cycle and hit some capacity issues and we are very small then.
It's 20 years ago, and we added ask our customers for favors like would they agree to Oh are bigger customer we had to say would you not use our system on Thursday, and Friday, so others can have the capacity.
And we built strong relationships through that period, and our software struggled for gosh, almost six months, but we eventually stabilize that and the way. We had managed accounts. Obviously you can see the result of this 20 years ago, we've grown quite a lot. Since then and didn't lose a lot of customers. We went to a direct communication mode. We told me.
After what was happening and learned a lot of lessons there about about periods when our own platforms and technology, we're struggling and ER, obviously results from a grown from that period in 2008 financial or kind of crisis and melt down we saw ship it shifts in usage patterns and delays in purchasing.
But ultimately there were still financial benefits to moving to our platforms of managing costs overall downward being the low cost provider on required federal training. For example, still is a competitive advantage and and so they were doing classroom training for example, they still need to ship their training to online and so we were able to growth.
Through that period as well I think we're going to see a little that here you know we believe the material part of the reset station market is still done in classrooms believe it or not you know maybe as much as half of the market still doing their training and classrooms with instructors.
This could be the thing that pushes an inflection point in and continuing to move that kind of instruction online and through mannequins self certification and not destructor led in fact, I think we'll see that now and this time or not really willing to implement new technologies, it may favor incumbencies or more so.
But again I think overall this will be an inflection point to ship, even more to online training and we're seeing that in our platform. We use a hospital use our system to manage classroom training as well and the registration on the classroom portions of our self self created classrooms and lectures those registrations are really.
Dropping down dramatically, while we just talked about the nearly 1.4 million assignments of online courses.
So and then what do we do our main lesson on this time I think is focus on customer need and flexibility to win a hearts and minds. So all of our newly hundred 50 salespeople are really an account management mode.
Calling up in asking what do you need and trying to get it customers.
Some customers are returning that with.
Emotional response is an appreciation and my thought is that that will result in stronger relationships with our customers overtime and it turned more to us for a broader solution sets overtime.
We're trying to do the right thing first and and and of course protect the business Oh, you've heard some they actually taken on expense management, but do the right thing first thought of customers is my experience to the prior to crises.
Spanning over 25 years, and it'll return and and ultimately in growth and so that's what we're doing and we're doing it for all the right reasons and we're seeing great uptake. We're also learning the power of an ecosystem. Our partners are responding with US I think that's building relationships for them as they offer up some of their.
Content and curriculum for free with US Oh, you know, we're just meeting the needs and we're going to worry about contract signings here a little bit later in a few months.
And like I said I get that one example of a large health system.
Actually expanded their data feeds that I assume that all of their employees that have access to our platform for 90 days for free.
And you know my hope is they'll end up appreciating the power of that platform and turning it into a real relationship but if they don't we will also help their short term needs and built a strong relationship the problem with all this is it's not unquantifiable hand, a I'd characterize the lessons learned from one once our platform struggled and once when there was financial backing.
I'm at or near recession.
And in both cases the actions we took a we came out a stronger company on the backend.
I do think Drake news for US is we're not in the liquidity crisis, we actually have capital.
He to figure out how to deploy yet.
If we have to rightsize our operations to match, what's happening in the market on the purchase decision delayed implementation you see we've taken some actions to do expense management to make sure that operationally, we're aligned with what's happened financially, but that doesn't slow my desire to also be active making sure we're building new crop.
Products, we have a couple of new products due out this year and we're actually trying to accelerate capital investment in and those products to come out with those one of them actually deals with the social well being of the workforce, which Oh, no probably never done a more relevant topic I wish that product. We're ready now it's still you know probably mid year later.
I hope that gives a little color, but lot of lessons learned and we're trying to react with those accordingly.
Great. Thanks, as a follow up I'm curious.
It's sorta dived into this with the new products, but.
Euro I'm sure other organizations that deal with hospitals, her probably struggling as well.
As you think about M&A, obviously, you don't want to spend all your capital you know given the situation, but how are you thinking about where this might accelerate opportunities for you guys to broaden the platform.
Yeah, that's really great question and actually a it's a complicated answer because here's what I'd say.
Our desire and ability remain active.
We were in the middle of a very small deal, which we decided to not consummate because I wanted to get our you know take 60 days get our hands around everything takes some actions as we mentioned related to the raises and the other at some other deferrals, we'd gone to get to make sure we have good financial controls.
But our desire to Reengage deploy capital is still in place and in some ways, having a strong balance sheet and troubled times could be a good time to think about investing its complicated because you know it's kinda like a 90 day cause for me, but realizing we have strong balance sheet and seeing.
Balance and how things play out next 90 days on Dsos and collections.
You know.
We don't perceive as I mention any liquidity issues that our company and in fact I have a full line of credit that we didnt drawdown.
149, and cash so maybe in the second half the year they'll be a way to actively deploy that capital.
But we do have a short term pause on it but an active interest then still intelligently deploying it I think we need a little wait and see here on Biz Dev.
To make sure I'm right about all that but and we did enters the year with very active pipeline and maintaining that activity and we're telling people we need nowadays their hands around things instead of moving towards no negotiations for example, so I hope that helps characterized I call. It a an active desire to deploy.
Capital, but a 90 day cause is probably the best way to describe it.
Alright, thank you.
Thank you once again they show and if you wish that's question at this time. Please press Star then one are you touched on telephone. Our next question comes from Nissin Kogyo with Barrington Research. Your line is open.
[noise] Yeah, Bobby I was wondering if you could give us some insights and how April has trended versus March maybe a year ago period.
Yeah Uh huh.
Now, let me think about that so some of things were seeing I mentioned.
Shifting usage patterns of our platform. For example is a good example, where the shift away from classroom towards online is a is is a very apparent we've seen in the last few weeks. So first part of April.
More accounts, obviously call us and asked to renegotiate their there a implementation schedules or or some at asked for and we have granted their ability to pay us later or slower and so those are new in the last three weeks. The first part of April where we have a discrete negotiations with some accounts that.
That help them facilitate slower payments or delayed implementations.
So not not much of that has happened in the middle of March but in the last three weeks of April those are three shifts that we've we've kind of mentioned on the call here that occurred really if you think about it from about April.
People fifth till today.
Okay, and then the you'd mentioned that one bankrupt a client or are there any others and do you have any sense for what portion of revenues associated with the back of clients at this point, yeah. Unfortunately have a very large and very diverse and not overly reliant on any number of accounts are we began tracking.
Our top 100 accounts for furloughs, layoffs, and and bankruptcies or you don't even through bankruptcy, we're expecting them to continue operating and you didnt using our platforms and then they have some collection issues on on build to that date, but in general as Scotty noticed and either this is true even.
To the last week, we've had decent cash collections on someway surprising.
And so I don't know appease the delayed payments you're going to come later or not.
And so even some of those that are that we would be concerned about paying have made reasonable and large payments against their our accounts receivable there their accounts payable to us.
So.
Got it just mixed bag of the public disclosures were seeing a furloughing and lay offs and what we're anticipating to be potentially lower subscriber counts at some accounts or request for deferred payments and and I would say only a few of those have materialized in the first few weeks of April on <unk>, We believe more ecomm and.
Sorry inability to quantify those things that has resulted in that's obviously, having a pull guidance we just.
We just don't know.
Thanks for answering my questions.
Thank you Vince.
Thank you and I'm currently showing no further questions at this time I turn the call back over Robert Frist for closing remarks.
Thank you to everyone hope everyone listening call stay safe I want to thank our employees that work has been amazing not missing a beat through going fully virtual a that just outstanding outstanding work. The surge efforts to provide a stated Tennessee and all of our customers nationally with these three supporting.
Resources than amazing that calls and coordination with the CDC others to help distribute much these information.
The team at Healthstream has really rallied around our purpose, which is to improve the quality health care by developing the people to deliver care and we are busy busy busy doing that I think that will eventually turn around and result in business growth again, and a renewed optimism, but for now the right thing to do.
As to do the right thing and that's what we're doing it healthstream and appreciated by listening to call. It look for the next update where hopefully we'll have a little more clarity than we do today. Thank you all.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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