HealthStream Inc (HSTM) 2008 Q1 法說會逐字稿

Good day and welcome to the HealthStream, Inc. first quarter 2008 earnings conference call. Today's conference is being recorded. At this time I would like to turn the conference over to Robert A. Frist, CEO and Chairman.

Thank you. Good morning and welcome to our first quarter 2008 earnings conference call. Also in the room with me are Art Newman, Executive Vice President and CFO, and Mollie Condra, Senior Director of Communications, Research and Investor Relations. Art, would you read the forward-looking statement please?

I'd be happy to. The conference call will contain forward-looking statements regarding future events and the future performance of HealthStream that involve risks 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 risks 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.

Thank you, Art. We have several bits of news to report today, and a review of the numbers in our release that we issued last evening. First I would like to get on with what I would consider the headline news, and begin by thanking Art Newman for serving as our interim CFO. This is the last conference call that we'll serve together in his role as CFO. Consistent with that, our announcement last evening of the appointment of Mr. Gerry Hayden as our CFO. That will be effective in a few weeks here. What's the date? Mid May. We're looking forward to the contributions of Mr. Hayden to our senior executive team. With his prior experience at Private Business, Covation, Meridian Health, ENVOY and Allied Clinical Laboratories, completing multiple M&A transactions, fund-raisings, he brings a wealth of experience to the team, and we're looking forward to Mr. Gerry Hayden's contributions to our senior executive team.

Also rounding out our executive team was the addition of a chief technology officer. As the Company has grown and added the new capabilities of research, the demands on our technology teams has grown, and we have undertaken a nationwide search that lasted for several months, and interviewed many candidates, and ended up selecting Mr. Jeffrey Doster, who also will join us in mid May. Jeff brings about 20 years experience to our technology operations. We hope that Jeff will lead our teams to leverage the wonderful data, information and the platforms that we've built across the Company. And we're looking forward to his contributions to our senior executive team as well. He's served in businesses like The Shop at Home Network and New Roads, Inc., and brings tremendous wealth experience to the type of operation that we are, a 24/7 technology operations that's ASP Web delivered. And we look forward to his leadership over our technology teams in the coming years. Welcome, Gerry and Jeff.

The financial performance for the quarter was solid and was within expectations, and Art is going to cover that in some detail. I thought I'd highlight a few of the operational metrics.

The first is the number of implemented subscribers in the quarter was 53,000, which we consider a very strong number. It annualizes at about 200,000 a year. So, it's a strong number for the quarter, and we hope to continue delivering implementations at a good rate in the following quarters.

On the contracted side, the new sales side, the contracted subscribers were at the bottom of our acceptable range. We always say 20 to 50,000 new, net new subscribers in the quarter. We added 23,000 in the quarter, and added some important new customers like Southern Maine Medical Center, Robert Wood Johnson University, Walla Walla General Hospital and Henry County Health Center, [NAT] Medical Center. We'd like to welcome our new customers on board, and we're excited and look forward to implementing them on our platform as well. The backlog of unimplemented subscribers remains strong at 134,000, so we have a couple of quarters' work ahead of us just in the already contracted backlog. So, we're excited to dive into that and continue to see progress on that.

At this time I'd like to turn it over to Art to run us through the numbers for the quarter. We'll wrap with a few closing comments and get on to your questions.

Thanks, Bobby. Good morning. In keeping with what we had established at the prior earnings calls, I'm going to keep my comments brief as well. As we indicated then, we go into rather excruciating detail on the release itself. So, I'll summarize that, and then, as Bobby said, we'll be more than happy to take your questions.

First quarter, as Bobby indicated, $11.4 million, which was up 41% over the first quarter of '07, where we had $8.1 million. The components of that in the growth sense were TJO accounted for about 2.6, or 32% of the growth, and the remaining 9%, or $700 million, came from organic business -- $700,000 came from organic business.

Net income was 66,000, which rounds to breakeven compared to 45,000 in the prior first quarter of '07. And as Bobby indicated, those were within previous guidance. We were actually up slightly from the revenue guidance we had given of 11 to 11.2. But, we're in the range of net income. Revenue, as I mentioned, was favorable. However, the mix of revenue resulted in slightly lower gross margins, which only took part of it to the bottom-line in net income.

A few comments on HealthStream Learning. As we indicated in the press release, platform and courseware, which we refer to as our Internet-based business, grew by $1.5 million this quarter versus the first quarter of '07. That's a 30% year-over-year increase, and it represents about 58% of our business. Strong. Implementation, development and consulting services, which this time last year only had one principal account in it, now has several, and that business grew from about $100,000 in the prior quarter, first quarter, to 400,000 in this quarter. So we're seeing that business expand. Project-based business was down, principally due to fewer live events and association business.

Bobby mentioned we have 53,000 new subscribers. That was down from the fourth quarter, which typically is our strongest implementation quarter due to many of our customers wanting to be up and operational on January 1 of that year. We do feel like we have a good annualized run rate on implementations, and we came into the year with 166,000 in backlog, and left the quarter with 134. So we're eating through the backlog at this point in time.

Renewal activity was strong. We had 99% of those customers up for renewal on an annual contract basis renewed. And that represents about 93% of the subscriber base. Off slightly from the first quarter of '07, where we had 95% of our customers renew -- subscriber base, and 102% on the contract value. But we feel that's in range, and it's hard to judge in the 90-day periods of renewals because of the nature in which the renewals come up for renewal in the period.

Of interest, the courseware revenues are showing very good traction. Laerdal, which we have our BLS and ACLS product with, has done remarkably well this quarter. AACN and APS were also strong contributors. In addition, we have several new offerings that are gaining momentum when we look at the first quarter of '08.

Turning to research, actually, research was the main positive contributor for us, being over our guidance that we had provided 90 days ago. [That primarily] came from customers requesting what we refer to as point-in-time surveys. These surveys tend to be physician, employee or community-based. And as we mentioned in the last quarter, it's difficult to predict exactly when these particular surveys are going to fall within a quarter. So, we had a positive variance in this quarter due to the nature of those less predictable types of instruments.

Patient surveys, which represent over 50% of the total research revenue, tend to be performed more on a periodic basis throughout the year, and thus were more predictable. I thought it would be good just to explain that a typical research customer may perform quarterly patient tracking surveys. They will also contract with us to do annual employee and or physician surveys. And then, they may also contract to do community surveys, which tend to be either annual or biannual. So there's a cadence within a customer of the different types of surveys that, as we've indicated, creates some challenge in terms of predicting the exact 90-day period in which they're going to occur. Having said that, we believe there's a strong value proposition for our customers in having us perform multiple survey offerings that correlate with each other, and as well, tie into some of the Learning products, which Bobby, I think, will mention in his closing remarks.

Second-quarter guidance, as we indicated in the release, we expect to be somewhere between 12.8 and $13 million on the top side revenue side, which compares to $12 million in the prior-year first quarter. [Learning] growth is expected to come from additional platform implementations and continued growth in our courseware revenue, offset somewhat by declines in our project-based activities. We expect somewhere between 18 and 20% growth rate in the Learning part of the business.

Research will grow over the first quarter '08, but we expect that some of the point-in-time surveys I mentioned a moment ago that were particularly strong in the second quarter of '07 will not repeat in the second quarter of '08. So, that part of the business down 8 to 10% year-over-year. All that wraps up into the 12.8 to $13 million of top-line revenue.

Gross margins are expected to be comparable in the second quarter of '07 and improve compared to the first quarter of '08. We've given some guidance on the operating expenses in the document itself. All that will net out into expected net income for the second quarter between $0.02 and $0.03 per share, diluted share. And I should note that this assumes no additional tax income -- income tax benefit related to the realization of deferred tax credits.

Full-year guidance. At this time, we're maintaining our previous guidance of between 22 and 24% growth over full year '07, which was about 44 million -- just slightly under $44 million. So our top-line target is between 53.5 and $54.5 million. Net income we expect to be between $0.12 and $0.15 per diluted share, and that compares to last year of $0.18, which we had -- $0.09 of which tied into income tax benefit. Again, this assumes no additional income tax benefit realized from deferred tax assets.

So that's the summary for the financial part, and I'm going to turn it back to Bobby. Thanks.

Thank you, Art. A few closing comments here. Wanted to congratulate Alex Scott and his team, the market development team, which is a newly launched team in the sales organization, for the training, hiring and organizational efforts that went into launching this new sales organization. It's already delivering ahead of quota, and their primary focus is to sell content down to existing customers through the existing channel, with a new focus on using lead generation out of our marketing teams. Their process is getting refined and we're only 90 days into the process. So I'm very pleased with the performance of that whole team. The marketing team as well, and the way they're qualifying and delivering leads to the team using everything from Internet technologies to advanced call screening and lead generation and qualification partner and methodology. Alex Scott and Luther Cale leading the marketing efforts, and Alex Scott leading the market development and sales efforts. The team is performing very well, and we look forward to both growing that team and seeing them continue to deliver results.

Also in the first quarter we did land our first sale of the HCAPS curriculum, which was the collective -- the product that links Research and Learning. The HCAPS is a survey that we perform for our customers, and collect the data and report on it. The HCAPS curriculum is a content library that is linked to helping improve HCAPS scores and HCAPS performance. So we have a learning product linked to a research product, and Tenet Healthcare was the first purchaser of the HCAPS curriculum. So we're excited to see that product both get its feet on the ground from its launch just 65 days ago, and (inaudible) one of our strategic accounts, one of our top accounts. So we're very excited to see that product gain some early acceptance, and hope it will continue to perform throughout the year.

I think that concludes our general remarks, and we are prepared to take questions. Thank you, operator.

(OPERATOR INSTRUCTIONS). Vincent Colicchio, Noble Financial.

Can you provide more detail on the decline in subscriber renewals? Was there any large client that chose not to renew? Any color there would be helpful.

Actually, we think any number above 80% is a very strong number in the subscription model, although 93% was lower than our usual. We think that in particular we have a product called Connect, which is not our core platform. Connect allows people on organizations on other learning systems to connect to our library. And we had one company, one organization, shipped off the Connect model that was probably the primary contributor to, instead of having a 98, 99% renewal rate, having a 93%. So I would repeat we feel it's strong. The defection was not on the core learning product, the new platform. It was on the Connect model. And I would say that we'll probably have a shot at getting those customers back in the near future as they scour through our library and the new content we're adding. Hopefully it's just a temporary setback on the Connect platform.

How big a contributor is the Connect platform to your revenue these days?

Overall it's relatively small. (multiple speakers)

For example, the number of subscribers that are Connect now are about 15,000 out of 1.5 million. So it's a very small number. And as Bobby said, the nice part about that is it enables us to sell some of our courseware to people who have a different learning management system. The part that is a little challenging is that as they finish the courses, they don't have to continue. But, the more courses we offer that they want to come back to, they will become renewed subscribers.

One other point I think is very important to make is that we did have a large Connect customer of over 50,000 subscribers, and they converted to our platform. So one of the things we hope Connect is is a lead into a conversion to our platform. And last year we had a large Connect customer that we had landed convert to our full platform. So we're more likely to upsell connect, and I enjoy keeping that number low because it, hopefully, means we're converting to the full platform.

On new products, can you provide us with an update on the BLS and the Competency Center product, any revenue you (inaudible) any bookings you did in the quarter, and sort of what your outlook is for the year?

The BLS product looks strong, and I'll let Art comment on that. We're very excited about that. Competency center is a little more challenged right now. We're experiencing some deploy difficulties. It's a new product, as you know. It's integrated into the core platform. In fact, the code bases for those products were merged just in the first quarter. So, I would say our development cycles are a little bit behind where we want to be, maybe 90 days to a quarter.

Sales cycles are going fairly well. We've added accounts. We have about 12 contracts on the platform, and implementation with those accounts continues. But, I would say the development cycles are probably a quarter behind where we would like them to be on the competency product. There's still good energy in the market, and there's good lead generation and good sales activity. But, the actual realization of revenue of that product is probably going to be delayed another quarter until midyear, as we sharpen up the early release version, and go from sales and pilot programs into full customers on that product. Art, will you comment on the BLS product?

We have -- the [percent is wild]; it's probably about 400% growth year-over-year in the Laerdal product. And as we --

BLS.

Yes. The BLS part of the Laerdal product. And as you know, we sell that in. It's a subscription-based product, so we did a lot of new order sales last year. And the people are utilizing it this year. So that's why the year-over-year growth and the revenue also say that we -- the BLS product has done well this year in terms of additional new order value, and the ACLS product has come onstream, and we've sold a considerable amount of that on a new order value base this year, which will result in revenue later this year and next year as that subscription is implemented. So we're pretty upbeat about the Laerdal product, both the BLS and the ACLS product line.

I think you mentioned, Art, in your comments that some other products contributed. What were you referring to?

One I can give you the name -- well, actually two of them. One is the AORN, which is the perioperative nurse organization; we have one of their new products, and it's called Periop 101, which launched late last year, and is beginning to show some traction. We also have a product line called Digital Med that had been a little slow on the uptick this past year, and we're starting to see some traction on that. We believe this is starting to tie in with the insight To action, so we're being able to show how these -- this library of over 400 course offerings can be tailored to meet specific remediation needs in the hospital, predicated on some results from surveys who are other learning exercises, the facilities are going, trying to tackle. So we feel pretty good about that one as well.

One last question for now. Could you refresh our memories here? You're expecting the research business to have a pretty good fourth quarter. Is that on a pickup in physician and employee surveys?

Yes. Actually, we'd expect -- when you say fourth quarter, I would say second half in general. Yes. We have seen continual growth in the patient part of the business. As I mentioned in my comments before, it's in excess of 50% of the total research business revenues. That's continued to increase the focus, the emphasis of the sales team. HealthStream Research is to focus in on selling that. And when I try to give the explanation, they lead with the patient, but they try to tie in the physician and the employee and the community as well. So the lead is the patient, and the other ones follow suit, and they become some of the point-in-time additional activity that we see hit us and benefit us over the period.

How predictable are they in terms of that timeframe? Could they be delayed beyond this year?

That's a tough question to -- I wish I had the answer to that one in terms of it. The timing of this stuff seems to be predicated on some annual cycle. However, falling on the month of May every year it doesn't happen that way. We're trying to get a little bit better handle on how to predict it. But the focus, again, is on the patient side of the -- patient surveys, which are the more predictable and the single most large component of the business.

I'd like to also point out another advance in our research unit that's very exciting. It's a [fifth] survey instrument. It's an exit interview survey instrument. And we delivered the first series of those new instruments through our learning platform to the employees of one of our hospital customers. So, this is the first sign of leveraging the technology platform to deliver and collect survey data, and then distribute back results to the organization. So, again, it's kind of the future. But when we talk about the future, one of the reasons we hope these two businesses will lever each other is to use that common platform, hence the addition of the new CTO to further that leverage. But it's very exciting to see both the first HCAPS curriculum sell, linked to the HCAPS survey, and the first delivery of a survey itself through the learning platform. So, two kind of early advances in linking the two business units that, we think, hold promise in the years to come.

Thanks.

(OPERATOR INSTRUCTIONS). Cris Blackman, Empirical Capital.

Could you go into a little deeper explanation on the delay in the Competency Center product?

Yes. We have shifted some of the development resources and had some unplanned attrition in some of the development team around the Competency Center product that has deferred the development pipeline by about 90 days. We've already begun the rehiring and retraining process, and we're working to get that back on track. But, again, as software development cycles go, we're a year into the development cycle and release cycle. And those personnel setbacks have just kind of slowed the release cycle. Also, now that the product is integrated with the core platform, it gets on the official monthly release cycle. So, advances occur every 30 days in the whole of the platform, so it's on a new cadence for development. So I would say that the challenges there are hopefully a one-quarter setback, and they're a result of some technology issues, which we hope our CTO will bring some leadership to.

I think on your last conference call you commented that you had eight contracts for the Competency Center product.

We'll have to verify that. I believe the number is 12 at this time.

So of those 12, nothing is happening with those, or are those in process with --

They're in process and on their way to revenue recognition. I think, as we've held all along, the revenue recognition on this product will be a second-half phenomenon, almost irrespective. The implementation process involves some front-end consulting, some consulting around the implementation strategies, the organization, and all those accounts are advancing through those implementation phases. So, we don't see any problem with the continued advancement of those customers, even though some of the feature development sets are getting a little behind where we want them to be.

But of the eight that you had last quarter under contract, you haven't lost any that you're aware of?

That is correct.

Would you comment on the average price per FTE as you're moving to the new platform? Are you seeing that number move?

If you -- one indicator of that is the fact that when we -- and the notes on the renewal that 93% of the subscribers renew, but the order value of that -- those subscribers was 99%. And that's made up of two components, order of priority or materiality. One is price increases, and the second is that at times, facility may have had 1000 subscribers when they had their first license with us, or contract, and now they have 1100 or 1050 on the renewal. So, yes. We've -- particularly for customers who had been on our -- what we call our installed model product, we have given them or provided them an incentive to migrate from the installed over to the ASP model. And they have what I would call sub-premium pricing. So when they come up for renewal, we bump them up to a level that's more comparable to the retail pricing model that we have for new customers. So all those contribute towards that number going up.

And that should have legs, and we should continue to see that trend?

Yes. I will say that as you understand, on any given year, only about a third of the customers come up for renewal. And so it goes through, but it goes through -- it trickles through and builds -- crescendos over a period of time. But you'll never see a big blip in any given quarter that would be a result of that.

Could you comment on the number of critical care nurses? What are you seeing as far as critical care nurse numbers? Is that -- are we seeing that number continue to increase?

I don't know that the number is changing much in the market. As we continue to add hospitals and, therefore, the opportunity to sell the critical care content, we continue to see that content library sell. And we do have a very strong branded partner there, the Association of Critical Care Nursing. So I would say our opportunity for critical care, even if the overall opportunity in the market isn't changing, as we add hospitals and subscribers, it always includes a subset of critical care nurses. So, our opportunity continues to grow for that specific content library.

Obviously anxious to see that content library and the market it serves continue to expand, just because of the margins that are there.

When we left our strategic retreat last September, we determined that one of the core focuses for '08 was going to be to ramp up content sales to existing customers, that channel development was a priority for the Company. In fact, we declared it our hedgehog, if you're familiar with the good to great paradigm. We're beginning to see some traction on that, as Art mentioned, with the BLS product up 400%, the new market development team we mentioned a few minutes ago that is focused on selling these libraries, these growing libraries we have. We think it's a real strength of our company, the libraries, and not just the core platform. So we hope to continue to add to those efforts and see them accelerate the sale of all these libraries we've been mentioning.

Just to add to that, I was actually -- our team is negotiating a third product line with AACN to license and distribute through our HealthStream Learning Center. And the first one had done remarkably well; the second one we introduced about a year and a half ago -- that has done well. And the third one, which we expect to introduce in the next several months, would be a third offering. And they complement each other, so they're at different points in time of the critical care nurses' career development within the hospital. It's a nice ladder approach offering that bodes well for us, because it's got the imprimatur of the AACN on it, and they have been well received by our community.

Sounds like certainly a key area to focus in on. I missed part of the conference call; have you given the backlog number from new platform features?

For features, or for implementation?

Both.

On the development side, the backlog of features -- the actual technical development of features is as long as our vision is, and our dreams. So we have a very robust process of collecting input from customers, hundreds and hundreds of identified features to build, and capability sets. One of them that we're excited about in the second half of the year is a more interactive content catalog that allows for features like user ratings to occur, bringing our community of subscribers more together as a community, instead of separate users of our platform.

So, we have the feature set. The technical development pipeline is rich and long, and we are getting to it as fast as we can.

On the customer implementation backlog, I believe it's about 134,000 FTEs. We implemented 50,000 or so in the first quarter, so we have a couple of quarters of full backlog at the latest implementation rate. So we'll continue to work through that as quickly as we can, and get those customers live, which is when revenue recognition does begin.

And you said that number was how many that you had in (multiple speakers)

134 at the end of March. And coming into the year we had 166 or 168. So, we burned through some of that backlog. As Bobby said, our intent is to have very little backlog in that stage, because when -- not until we implement them do we begin to revenue recognize those fees.

Again, I apologize; this may have already been covered. What kind of organic numbers are you seeing out of your HealthStream Research versus TJO for '08, or for -- for '08? What do you see that mix being?

We indicated in the press release that the organic growth was down year-over-year for research in the first quarter. This will be the last quarter that we will refer to TJO, because it became part of HealthStream in March of '07. Going forward, we'll only refer to HealthStream Research. But, if you look at the second quarter, this year versus last year, we're down $0.5 million in business, and we describe that to be part of these point-in-time surveys. I would say we're not going to go -- first all, we're blending the business together, the two units together, so we're not going be able to say which one is higher or lower, DMR or TJO. But, I will say that when we look at the guidance we've given, we've indicated that the business is going to grow; Research is going to grow year-over-year, including the TJO as if it were in for the entire business year. So, the business is growing organically.

First half --

No.

No. Second half is the organic growth projections.

Yes.

On your stock buyback, I know when the Q came out, I saw that the shares you bought back -- which was, obviously, a very limited number, and I know there's buying restrictions on you all (inaudible) transactions -- could you comment on has there been any activity so far here in the second quarter?

We don't, as you know (multiple speakers) report on it until the filings.

And why is that, Bobby?

That's just a good forum for us to do that, and it allows us to have consistent reporting. We don't want to comment on the style, method; it's just something we don't want to provide any commentary on, so we just defer to the program itself and the official reporting. We're trying to avoid questions on it. Of course, you can look at our cash balance, and that comes out a little bit before the filings. That might be an indicator. The cash balance has been growing, and we feel that's a good thing right now. So those two things balance each other. We're excited to have the program in place, and we're excited to have it there over time. But, it's just one of many tools. I think right now we've had some good wisdom behind growing the cash balance the last two quarters.

Good wisdom as far as putting yourself into position for --?

I just believe in a strong balance sheet, and I believe in the opportunity to buyback. But I think on the whole in the market today that people are favoring -- should be favoring, my personal opinion -- building up the cash position a little bit. So that's what we've been doing.

Okay. Because I show you bought 27,000 shares in the last quarter; that came up in your Q at [294]. But when I go back and look at the press release that came out on the announcement of the share repurchase, your quote was we believe that our stock is currently undervalued and our financial position is sufficient to enable the Company to invest in both continued growth and repurchase of shares (inaudible) authorized share repurchase program reflects our confidence in our ability to execute our strategy plan on ongoing commitment to increased shareholder value. Granted, the stock doesn't trade much volume; doesn't seem to be too many buyers out there. But, boy, we'd love to see the activity and maybe the float tighten up a little bit on that. So, I would encourage an increase in maybe the level.

It's one of many tools. We're excited to have that tool board approved, and hope it will have a continued impact and get executed. It has seen some activity. We won't comment on whether that will go up or down, but we will report on it in a few days here.

Finally, from a cost standpoint, I know you've been building the Company for the future, and very little has been flowing to the bottom line. I know we're starting to -- we expect the second half to see some improvement there, but is there an inflection point, Bobby, and time when we do start to see generation to the bottom line, where shareholders can start to expect to see the retained earnings or the accumulated deficit turn into retained earnings, and this company really to start to get legs on it? I know the movement to this new platform, the new features and enhancements and all that were going to come with that, is a cycle that an investor, I think, should want to hold through and start to see some real shareholder value improvements from. Do you still expect this upgrade cycle is a cycle that we'll start to get some traction?

Yes. I think it was a good investment. I think you see additions to the senior team that will begin to have a positive impact on our company in the second half of the year, but, obviously, add cost to a company of our size. But I think they're wise investments, just like I do believe in the platform investment. So, you can see a lot of our guidance is weighted to the second half of the year, which we're excited about. And we're already beginning to see some leverage and traction on content sells. And we do have a robust product pipeline in the future, although we have announced a little bit of a delay today in one of them. New content products coming online all the time.

So, I think, again, we've delivered consistent profits now in spite of growth, and continue to try to make wise investment to continue profitability, balance things like buyback programs with cash and strengthen the balance sheet to be responsible. And I think on balance, we're doing all that pretty well. But the leverage we're looking for this year is in the second half of the year.

Finally, one last question. I just noticed in some old notes, and it may be something that's not even on our radar screen, you mentioned -- somebody mentioned about these -- what do you call them -- centers -- pain management clinics, and your ability to, I guess, provide a service to the pain management clinics. I know that there has been some movement to try to corral those in, or more closely monitor the pain management clinics, and maybe force those clinics to use drug testing products to try to make sure that their patients are taking the proper prescriptions, or are not diverting those prescriptions. Are there any comments -- when you say opportunities in the pain management clinic, what are you all doing within the pain management clinic area?

I'm not sure which of our products addresses that. I'd have to look back at the notes. Our focus, in order of priority, is really the acute care hospitals first, and their needs across the whole span. We have a little bit of rehabilitation hospitals, like Health South, as an organization, as a customer. So that's a strength. We have some surgery center customers as well. So, pain management clinics, we may have content libraries that address some of those needs inside of hospitals, but are not a particular sales channel focus for us right now.

The only reason I brought that up is I'm aware of a company that is growing very, very rapidly that's supplying drug testing for that sector. And there's just an explosion, I guess, of concern over how those centers are being managed. And I guess there is a movement to try to put them under much heavier scrutiny. I didn't know if --

We'll take a closer look at that. I think our focus for the next several quarters is selling to the existing channel of acute care hospitals this increased content library. But we're always evaluating new opportunities, and would be glad to take a look at that if you send me an e-mail.

Thank you. Appreciate it.

(OPERATOR INSTRUCTIONS). With no further questions, I'll turn the conference back over for any additional or closing remarks.

Thank you. I'd like to close by saying thank you to the teams at HealthStream that have led us. Thank you to Art Newman serving as our interim CFO. Welcome aboard, Gerry and Jeff. We look forward to reporting our second-quarter earnings call in the near future.

Thank you. Ladies and gentlemen, that will conclude today's conference.