HealthStream, Inc. (the “Company”) (Nasdaq: HSTM), a leading
healthcare technology platform for workforce solutions, announced
today results for the first quarter ended March 31, 2024.
First Quarter 2024
- Revenues of $72.8 million in the first quarter of 2024, up 6%
from $68.9 million in the first quarter of 2023
- Operating income of $5.7 million in the first quarter of 2024,
up 97% from $2.9 million in the first quarter of 2023
- Net income of $5.2 million in the first quarter of 2024, up 99%
from $2.6 million in the first quarter of 2023
- Earnings per share (EPS) of $0.17 per share (diluted) in the
first quarter of 2024, up from $0.09 per share (diluted) in the
first quarter of 2023
- Adjusted EBITDA1 of $17.1 million in the first quarter of 2024,
up 24% from $13.7 million in the first quarter of 2023
- Board of Directors declared a quarterly cash dividend of $0.028
per share, payable on May 17, 2024 to holders of record on May 6,
2024
1 Adjusted EBITDA is a non-GAAP
financial measure. A reconciliation of adjusted EBITDA to net
income and disclosure regarding why we believe adjusted EBITDA
provides useful information to investors is included later in this
release.
Financial Results: First Quarter 2024 Compared to
First Quarter 2023 Revenues for the first quarter of 2024
increased by $3.8 million, or six percent, to $72.8 million,
compared to $68.9 million for the first quarter of 2023.
Subscription revenues increased $4.2 million, or six percent, and
professional services revenues declined by $0.4 million.
Operating income was $5.7 million for the first quarter of 2024,
up 97 percent from $2.9 million in the first quarter of 2023. The
improvement in operating income was primarily attributable to
increased revenues, a reduction in labor costs (primarily resulting
from $1.0 million of severance charges incurred during the first
quarter of 2023 in connection with the Company’s restructuring
under a single platform strategy), a decrease in professional fees,
and an increase in capitalized labor associated with software
development activities, which were partially offset by increases in
software, cloud hosting expenses, royalties, amortization, and
general marketing expenses.
Net income was $5.2 million in the first quarter of 2024, up 99
percent from $2.6 million in the first quarter of 2023, and EPS was
$0.17 per share (diluted) in the first quarter of 2024, up from
$0.09 per share (diluted) in the first quarter of 2023. Net income
and EPS for the first quarter of 2023 were negatively impacted by
severance charges recognized in the amounts of $0.8 million and
$0.03 per share (diluted), respectively, in connection with the
2023 restructuring discussed above.
Adjusted EBITDA was $17.1 million for the first quarter of 2024,
up 24 percent from $13.7 million in the first quarter of 2023.
At March 31, 2024, the Company had cash and cash equivalents and
marketable securities of $83.7 million. The Company does not have
any outstanding indebtedness for borrowed money. Capital
expenditures incurred during the first quarter of 2024 were $6.9
million.
Other Business Updates On September 13, 2023, the Company
announced a share repurchase program under which the Company was
authorized to repurchase up to $10.0 million of its outstanding
shares of common stock. Pursuant to this authorization, the Company
repurchased shares valued at an aggregate of $8.9 million, with no
shares repurchased during the three months ended March 31, 2024.
The program expired on March 31, 2024.
On April 22, 2024, the Board approved a quarterly cash dividend
under the Company's dividend policy of $0.028 per share, payable on
May 17, 2024 to holders of record on May 6, 2024.
Financial Outlook for 2024 The Company reaffirms its
guidance for 2024 for the measures set forth below as previously
announced on February 19, 2024. For a reconciliation of projected
adjusted EBITDA, a non-GAAP financial measure defined later in this
release, to projected net income (the most comparable GAAP measure)
for 2024, see the table included on page nine of this release.
Full-Year 2024
Guidance
Low
High
Revenue
$
292.0
-
$
296.0
million
Adjusted EBITDA1
$
64.5
-
$
67.5
million
Capital Expenditures
$
28.0
-
$
30.0
million
1 Adjusted EBITDA is a non-GAAP financial measure. A reconciliation
of projected adjusted EBITDA to projected net income (the most
comparable GAAP measure) is included later in this release.
The Company’s guidance for 2024 as set forth above reflects the
Company’s assumptions regarding, among other things, expectations
for new sales and renewals, and assumes that general economic
conditions, including inflationary pressures, do not deteriorate.
This consolidated guidance does not include the impact of any
acquisitions that we may complete during 2024, gains or losses from
changes in the fair value of minority investments, or impairment of
long-lived assets.
Commenting on first quarter 2024 results, Robert A. Frist, Jr.,
Chief Executive Officer, HealthStream, said, “We were pleased to
achieve record quarterly revenues, record adjusted EBITDA, and a
strong quarter overall, giving us confidence to reiterate our
previously announced financial guidance. We believe our workforce
solutions are well-aligned with the current industry focus to
engage, retain, and develop the healthcare workforce.”
A conference call with Robert A. Frist, Jr., Chief Executive
Officer, Scott A. Roberts, Chief Financial Officer and Senior Vice
President, and Mollie Condra, Vice President of Investor Relations
and Corporate Communications, will be held on Tuesday, April 23,
2024, at 9:00 a.m. (ET). Participants may access the conference
call live via webcast using this link:
https://edge.media-server.com/mmc/p/qb8uq3o7. To participate via
telephone, please register in advance using this link:
https://register.vevent.com/register/BI99e7a8ec23464d6b8234f2b518bc2799.
A replay of the conference call and webcast will be archived on the
Company’s website in the Investor Relations section under “Events
& Presentations.”
Use of Non-GAAP Financial Measures This press release
presents adjusted EBITDA, a non-GAAP financial measure used by
management in analyzing the Company’s financial results and ongoing
operational performance. In order to better assess the Company’s
financial results, management believes that net income before
interest, income taxes, stock-based compensation, depreciation and
amortization, and changes in fair value of, including gains
(losses) on the sale of, non-marketable equity investments
(“adjusted EBITDA”), is a useful measure for evaluating the
operating performance of the Company because adjusted EBITDA
reflects net income adjusted for certain GAAP accounting, non-cash,
and/or non-operating items which may not, in any such case, fully
reflect the underlying operating performance of our business. In
addition, as discussed below, for periods ended on or prior to
December 31, 2023, adjusted EBITDA excludes the impact of the
deferred revenue write-downs associated with fair value accounting
for acquired businesses. We believe that adjusted EBITDA is useful
to investors to assess the Company’s ongoing operating performance
and to compare the Company's operating performance between periods.
In addition, certain short-term cash incentive bonuses and
performance-based equity awards are based on the achievement of
adjusted EBITDA (as defined in applicable bonus and equity grant
documentation) targets.
As previously disclosed, prior to the Company early adopting ASU
2021-08 effective January 1, 2022, following the completion of any
acquisition by the Company, the Company was required to record the
acquired deferred revenue at fair value as defined in GAAP, which
typically resulted in a write-down of the acquired deferred
revenue. In connection therewith, management determined that
including an adjustment in the definition of adjusted EBITDA for
the impact of the deferred write-downs associated with fair value
accounting for businesses acquired prior to the January 1, 2022
effective date of the Company's adoption of ASU 2021-08 (the
“Pre-2022 Acquisitions”) provided useful information to investors
because the deferred revenue write-down recognized in periods after
any such Pre-2022 Acquisitions could, given the nature of this
non-cash accounting impact, cause our GAAP financial results during
such periods to not fully reflect our underlying operating
performance. Following the adoption of ASU 2021-08, contracts
acquired in an acquisition completed on or after January 1, 2022
have been measured as if the Company had originated the contract
(rather than the contract being measured at fair value) such that,
for such acquisitions, the Company no longer records deferred
revenue write-downs associated with acquired businesses. With
respect to periods ended on or prior to December 31, 2023, the
Company has included an adjustment in the calculation of adjusted
EBITDA for the impact of deferred revenue write-downs associated
with the Pre-2022 Acquisitions consistent with this prior
accounting standard, given the ongoing impact of such deferred
revenue on our financial results under GAAP over this time period.
With respect to periods beginning on and after January 1, 2024, the
Company is no longer recognizing any deferred revenue write-downs
associated with the Pre-2022 Acquisitions under GAAP, and
accordingly such deferred revenue write-downs are no longer an
adjustment in connection with the calculation of adjusted EBITDA
for periods beginning on and after January 1, 2024.
Adjusted EBITDA is a non-GAAP financial measure and should not
be considered as a measure of financial performance under GAAP.
Because adjusted EBITDA is not a measurement determined in
accordance with GAAP, adjusted EBITDA is susceptible to varying
calculations. Accordingly, adjusted EBITDA, as presented, may not
be comparable to other similarly titled measures of other companies
and has limitations as an analytical tool.
This non-GAAP financial measure should not be considered a
substitute for, or superior to, measures of financial performance,
which are prepared in accordance with GAAP. Investors are
encouraged to review the reconciliations of adjusted EBITDA to net
income (the most comparable GAAP measure), which is set forth below
in this release.
About HealthStream HealthStream (Nasdaq: HSTM) is the
healthcare industry’s largest ecosystem of platform-delivered
workforce solutions that empowers healthcare professionals to do
what they do best: deliver excellence in patient care. For more
information about HealthStream, visit www.healthstream.com or call
800-521-0574.
HEALTHSTREAM, INC.
Condensed Consolidated
Statements of Income
(In thousands, except per
share data)
(Unaudited)
Three Months Ended
March 31, 2024
March 31, 2023
Revenues, net
$
72,760
$
68,946
Operating costs and expenses:
Cost of revenues (excluding depreciation
and amortization)
24,617
23,856
Product development
12,032
11,680
Sales and marketing
11,773
11,728
Other general and administrative
expenses
8,312
8,865
Depreciation and amortization
10,336
9,926
Total operating costs and expenses
67,070
66,055
Operating income
5,690
2,891
Other income, net
853
250
Income before income tax provision
6,543
3,141
Income tax provision
1,316
518
Net income
$
5,227
$
2,623
Net income per share:
Basic
$
0.17
$
0.09
Diluted
$
0.17
$
0.09
Weighted average shares of common stock
outstanding:
Basic
30,313
30,591
Diluted
30,418
30,659
Dividends declared per share
$
0.028
$
0.025
HEALTHSTREAM, INC.
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
March 31,
December 31,
2024
2023
ASSETS
Current assets:
Cash and cash equivalents
$
52,407
$
40,333
Marketable securities
31,265
30,800
Accounts and unbilled receivables, net
44,054
38,446
Prepaid and other current assets
19,663
20,631
Total current assets
147,389
130,210
Capitalized software development, net
41,118
40,643
Property and equipment, net
12,537
13,005
Operating lease right of use assets,
net
19,483
20,114
Goodwill and intangible assets, net
255,522
259,410
Deferred commissions
30,671
31,700
Other assets
4,885
4,860
Total assets
$
511,605
$
499,942
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable, accrued and other
liabilities
$
27,802
$
34,738
Deferred revenue
98,268
83,623
Total current liabilities
126,070
118,361
Deferred tax liabilities
16,868
16,132
Deferred revenue, noncurrent
2,076
2,169
Operating lease liability, noncurrent
19,484
20,247
Other long-term liabilities
2,253
2,281
Total liabilities
166,751
159,190
Shareholders’ equity:
Common stock
249,280
249,075
Accumulated other comprehensive loss
(1,172
)
(691
)
Retained earnings
96,746
92,368
Total shareholders’ equity
344,854
340,752
Total liabilities and shareholders'
equity
$
511,605
$
499,942
HEALTHSTREAM, INC.
Condensed Consolidated
Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
March 31,
March 31,
2024
2023
Operating activities: Net income $
5,227
$
2,623
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
10,336
9,926
Stock-based compensation
1,060
945
Amortization of deferred commissions
2,957
2,712
Deferred income taxes
771
800
Provision for credit losses
174
209
Loss on equity method investments
31
127
Other
(346
)
(85
)
Changes in assets and liabilities: Accounts and unbilled
receivables
(5,782
)
(4,787
)
Prepaid and other assets
(1,783
)
(2,750
)
Accounts payable, accrued, and other liabilities
(6,259
)
(3,683
)
Deferred revenue
14,552
14,504
Net cash provided by operating activities
20,938
20,541
Investing activities: Business combinations, net of
cash acquired
—
(6,621
)
Changes in marketable securities
(124
)
(1,850
)
Proceeds from sale of non-marketable equity investments
765
—
Purchases of property and equipment
(742
)
(879
)
Payments associated with capitalized software development
(7,019
)
(7,566
)
Net cash used in investing activities
(7,120
)
(16,916
)
Financing activities: Taxes paid related to net
settlement of equity awards
(855
)
(791
)
Payment of cash dividends
(849
)
—
Net cash used in financing activities
(1,704
)
(791
)
Effect of exchange rate changes on cash and cash equivalents
(40
)
(21
)
Net increase in cash and cash equivalents
12,074
2,813
Cash and cash equivalents at beginning of period
40,333
46,023
Cash and cash equivalents at end of period $
52,407
$
48,836
Reconciliation of GAAP to
Non-GAAP Financial Measures(1)
Operating Results
Summary
(In thousands)
(Unaudited)
Three Months Ended March
31,
2024
2023
Net income
$
5,227
$
2,623
Deferred revenue write-down
—
50
Interest income
(904
)
(363
)
Interest expense
24
33
Income tax provision
1,316
518
Stock-based compensation expense
1,060
945
Depreciation and amortization
10,336
9,926
Adjusted EBITDA
$
17,059
$
13,732
(1) This press release presents adjusted
EBITDA, which is a non-GAAP financial measure used by management in
analyzing its financial results and ongoing operational
performance.
Reconciliation of GAAP to
Non-GAAP Financial Measures
Financial Outlook for
2024
(In thousands)
(Unaudited)
Low
High
Net income
$
14,500
$
16,500
Interest income
(2,400
)
(2,600
)
Interest expense
100
100
Income tax provision
5,200
5,800
Stock-based compensation expense
4,800
5,000
Depreciation and amortization
42,300
42,700
Adjusted EBITDA
$
64,500
$
67,500
This press release includes certain forward-looking statements
(statements other than solely with respect to historical fact),
including statements regarding expectations for financial
performance for 2024 and our quarterly dividend policy, that
involve risks and uncertainties regarding HealthStream. These
statements are based upon management’s beliefs, as well as
assumptions made by and data currently available to management.
This information has been, or in the future may be, included in
reliance on the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995. The Company cautions that
forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause the actual results,
performance, or achievements to be materially different from future
results, performance, or achievements expressed or implied by the
forward-looking statements, including as a result of negative
economic conditions, ongoing inflationary and recessionary
pressures, geopolitical instability (including as the result of the
Russia/Ukraine conflict, the conflict in the Middle East, and the
potential expansion of such conflicts), legal requirements and
contractual restrictions which may affect continuation of our
quarterly cash dividend policy and the declaration and/or payment
of dividends thereunder, which may be modified, suspended, or
canceled in any manner and at any time that our Board may deem
necessary or appropriate, as well as risks referenced in the
Company’s Annual Report on Form 10-K for the year ended December
31, 2023, filed on February 26, 2024, and in the Company’s other
filings with the Securities and Exchange Commission from time to
time. Consequently, such forward-looking information should not be
regarded as a representation or warranty or statement by the
Company that such projections will be realized. Many of the factors
that will determine the Company’s future results are beyond the
ability of the Company to control or predict. Readers should not
place undue reliance on forward-looking statements, which reflect
management’s views only as of the date hereof. The Company
undertakes no obligation to update or revise any such
forward-looking statements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240422804604/en/
Scott A. Roberts Chief Financial Officer (615) 301-3182
ir@healthstream.com
Media: Mollie Condra, Ph.D. Vice
President, Investor Relations & Communications (615) 301-3237
mollie.condra@healthstream.com
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