HealthStream, Inc. (the “Company”) (Nasdaq: HSTM), a leading
healthcare technology platform for workforce solutions, announced
today results for the third quarter ended September 30, 2023.
Third Quarter 2023
- Revenues of $70.3 million in the third quarter of 2023, up 5%
from $67.3 million in the third quarter of 2022
- Operating income of $4.9 million in the third quarter of 2023,
up 104% from $2.4 million in the third quarter of 2022
- Net income of $3.9 million in the third quarter of 2023, up 5%
from $3.7 million in the third quarter of 2022
- Earnings per share (EPS) of $0.13 per share (diluted) in the
third quarter of 2023, up from $0.12 per share (diluted) in the
third quarter of 2022
- Adjusted EBITDA1 of $16.2 million in the third quarter of 2023,
up 28% from $12.7 million in the third quarter of 2022
- Authorized a share repurchase program on September 13, 2023 to
repurchase up to $10.0 million of outstanding shares of common
stock
- Board of Directors declared a quarterly cash dividend of $0.025
per share, payable on December 22, 2023 to holders of record on
December 11, 2023
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: Third Quarter 2023 Compared to
Third Quarter 2022 Revenues for the third quarter of 2023
increased by $3.1 million, or five percent, to $70.3 million,
compared to $67.3 million for the third quarter of 2022.
Subscription revenues increased $3.4 million, or five percent, and
professional services revenues declined by $0.3 million.
Operating income was $4.9 million for the third quarter of 2023,
up 104 percent from $2.4 million in the third quarter of 2022. The
improvement in operating income was primarily attributable to
increased revenues, a reduction in labor costs, and an increase in
capitalized labor associated with software development activities,
which were partially offset by increases in amortization, bad debt,
professional fees, software, and cloud hosting expenses. Other
income during the third quarter of 2022 included a $2.7 million
gain associated with the sale of a company in which we owned a
minority equity interest.
Net income was $3.9 million in the third quarter of 2023, up 5
percent from $3.7 million in the third quarter of 2022, and EPS was
$0.13 per share (diluted) in the third quarter of 2023, up from
$0.12 per share (diluted) in the third quarter of 2022. Net income
and EPS during the third quarter of 2022 were positively impacted
in the amount of $2.1 million and $0.07 per share (diluted),
respectively, from the gain associated with the sale of our
minority equity interest as set forth above.
Adjusted EBITDA was $16.2 million for the third quarter of 2023,
up 28 percent from $12.7 million in the third quarter of 2022.
At September 30, 2023, the Company had cash and cash equivalents
and marketable securities of $71.8 million. The Company does not
have any outstanding indebtedness for borrowed money. Capital
expenditures incurred during the third quarter of 2023 were $6.5
million.
Year-to-Date 2023 Compared to Year-to-Date 2022 For the
nine months ended September 30, 2023, revenues were $208.5 million,
an increase of five percent over revenues of $198.3 million for the
first nine months of 2022. Operating income for the first nine
months of 2023 increased by 26 percent to $11.8 million, compared
to $9.4 million for the first nine months of 2022. The increase in
operating income was primarily attributable to higher revenues and
an increase in capitalized labor associated with software
development activities. Operating income was also impacted by
higher personnel costs, including severance charges incurred during
the nine months ended September 30, 2023 due to the previously
announced elimination of 33 job roles as a result of several areas
of consolidation in connection with restructuring HealthStream’s
business under a single platform strategy, higher amortization,
cloud hosting, software, contract labor, and travel expenses. Net
income for the first nine months of 2023 increased to $10.6
million, compared to $9.6 million for the first nine months of
2022. Earnings per share were $0.35 per share (diluted) for the
first nine months of 2023, compared to $0.31 per share (diluted)
for the first nine months of 2022. Adjusted EBITDA increased by 14
percent to $45.3 million for the first nine months of 2023,
compared to $39.8 million for the first nine months of 2022.
Other Business Updates As of September 30, 2023, we had
approximately 5.70 million contracted subscriptions to hStream, our
Platform-as-a-Service technology platform, which characterizes our
single platform approach. By establishing interoperability, the
hStream platform enables healthcare organizations and their
respective workforces to easily connect to and gain value from the
growing HealthStream ecosystem of applications, tools, and
content.
On September 13, 2023, the Company announced a share repurchase
program approved by the Company’s Board of Directors under which
the Company is authorized to repurchase up to $10.0 million of its
outstanding shares of common stock. Pursuant to this authorization,
repurchases may be made from time to time in the open market,
including under a Rule 10b5-1 plan, through privately negotiated
transactions, or otherwise. During the third quarter, the Company
acquired shares valued at $2.1 million pursuant to this
authorization and the Company has continued to acquire shares
pursuant to this authorization during the fourth quarter. The share
repurchase program is scheduled to terminate on the earlier of
March 31, 2024, or when the maximum dollar amount has been
expended. The share repurchase program does not require the Company
to acquire any amount of shares and may be suspended or
discontinued at any time.
On October 23, 2023, the Board approved a quarterly cash
dividend under the Company's dividend policy of $0.025 per share,
payable on December 22, 2023 to holders of record on December 11,
2023.
Financial Outlook for 2023 The Company is updating its
guidance for 2023 for certain of the measures set forth below. 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 2023, see the table included on
page ten of this release.
Full-Year 2023
Guidance
Low
High
Revenue
$
277.5
-
$
283.0
million
Adjusted EBITDA1
$
59.0
-
$
62.0
million2
Capital Expenditures
$
27.0
-
$
29.0
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.
2 Previous expected Adjusted EBITDA
guidance range was $57.5 to $60.5 million.
The Company’s financial guidance for 2023 set forth above
assumes that public health conditions associated with COVID-19 and
current economic conditions, including in relation to ongoing
inflationary and recessionary pressures, do not deteriorate during
the remainder of 2023, particularly with regard to how such
conditions impact healthcare organizations. The guidance does not
include the impact of any future acquisitions that we may complete
during 2023.
“HealthStream’s performance in the third quarter of 2023 was
strong and on target with our expectations, which included both
record quarterly revenues and record adjusted EBITDA,” said Robert
A. Frist, Jr., Chief Executive Officer, HealthStream. “As we move
into the final quarter of 2023, we are executing well, and I
believe our data-driven, increasingly interoperable products are
powering the future of workforce development, credentialing, and
scheduling in the nation’s healthcare organizations and also
enabling our market expansion into the nursing student
vertical.”
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, October 24,
2023, 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/vbz5uo3u. To participate via
telephone, please register in advance using this link:
https://register.vevent.com/register/BI7a57e9c30456432f93cebc3037ca0c87.
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 excluding
the impact of the deferred revenue write-downs associated with fair
value accounting for acquired businesses (as discussed in greater
detail below) and 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. We also 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, short-term cash incentive bonuses and certain
performance-based equity awards are based on the achievement of
adjusted EBITDA (as defined in applicable bonus and equity grant
documentation) targets.
As noted above, the definition of adjusted EBITDA includes an
adjustment for the impact of the deferred revenue write-downs
associated with fair value accounting for acquired businesses.
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. When the Company
was required to record a write-down of deferred revenue, it
resulted in lower recognized revenue, operating income, and net
income in subsequent periods. Revenue for any such acquired
business was deferred and was typically recognized over a
one-to-two-year period following the completion of any particular
acquisition, so our GAAP revenues for this one-to-two-year period
would not reflect the full amount of revenues that would have been
reported if the acquired deferred revenue was not written down to
fair value. Management believes 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 provides useful information to
investors because the deferred revenue write-down recognized in
periods after an acquisition may, 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
and thus adjusting for this amount may assist in comparing the
Company’s results of operations between periods. Following the
adoption of ASU 2021-08, contracts acquired in an acquisition
completed on or after January 1, 2022 are 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 (for acquisitions completed prior to
January 1, 2022, the Company continues to record deferred revenue
write-downs associated with fair value accounting for periods on
and after January 1, 2022 consistent with past practice). At the
current time, the Company intends to continue to include an
adjustment in the definition of adjusted EBITDA for the impact of
deferred revenue write-downs from business acquired prior to
January 1, 2022 given the ongoing impact of such deferred revenue
on our financial results.
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.
Adjusted EBITDA 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
reconciliation 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
Nine Months Ended
September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Revenues, net
$
70,339
$
67,285
$
208,482
$
198,290
Operating costs and expenses:
Cost of revenues (excluding depreciation
and amortization)
23,587
23,374
71,010
67,606
Product development
10,901
11,476
33,610
32,470
Sales and marketing
11,290
11,365
34,324
32,652
Other general and administrative
expenses
9,295
9,096
27,223
27,856
Depreciation and amortization
10,403
9,592
30,550
28,334
Total operating costs and expenses
65,476
64,903
196,717
188,918
Operating income
4,863
2,382
11,765
9,372
Other income, net
590
2,543
1,329
2,945
Income before income tax provision
5,453
4,925
13,094
12,317
Income tax provision
1,586
1,259
2,471
2,675
Net income
$
3,867
$
3,666
$
10,623
$
9,642
Net income per share:
Basic
$
0.13
$
0.12
$
0.35
$
0.31
Diluted
$
0.13
$
0.12
$
0.35
$
0.31
Weighted average shares of common stock
outstanding:
Basic
30,683
30,570
30,653
30,672
Diluted
30,769
30,662
30,734
30,717
Dividends declared per share
$
0.025
$
—
$
0.075
$
—
HEALTHSTREAM, INC. Condensed
Consolidated Balance Sheets (In thousands)
(Unaudited)
September 30,
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$
44,123
$
46,023
Marketable securities
27,691
7,885
Accounts and unbilled receivables, net
34,805
42,710
Prepaid and other current assets
20,260
17,759
Total current assets
126,879
114,377
Capitalized software development, net
39,711
37,118
Property and equipment, net
13,536
15,483
Operating lease right of use assets,
net
20,806
22,759
Goodwill and intangible assets, net
262,615
273,951
Deferred tax assets
383
383
Deferred commissions
29,460
28,344
Other assets
4,660
5,326
Total assets
$
498,050
$
497,741
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable, accrued and other
liabilities
$
31,361
$
37,744
Deferred revenue
83,221
79,469
Total current liabilities
114,582
117,213
Deferred tax liabilities
15,324
17,996
Deferred revenue, noncurrent
2,740
2,937
Operating lease liability, noncurrent
21,016
23,321
Other long-term liabilities
2,142
2,210
Total liabilities
155,804
163,677
Shareholders’ equity:
Common stock
254,950
254,832
Accumulated other comprehensive loss
(1,239
)
(981
)
Retained earnings
88,535
80,213
Total shareholders’ equity
342,246
334,064
Total liabilities and shareholders'
equity
$
498,050
$
497,741
HEALTHSTREAM, INC. Condensed
Consolidated Statements of Cash Flows (In thousands)
(Unaudited)
Nine Months Ended
September 30,
September 30,
2023
2022
Operating activities:
Net income
$
10,623
$
9,642
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
30,550
28,334
Stock-based compensation
3,076
2,609
Amortization of deferred commissions
8,467
7,826
Deferred income taxes
(2,634
)
1,225
Provision for credit losses
675
400
Gain on sale of fixed assets
—
(25
)
Loss on equity method investments
330
621
Change in fair value of non-marketable
equity investments
(45
)
(3,596
)
Other
(603
)
30
Changes in assets and liabilities:
Accounts and unbilled receivables
7,230
2,273
Prepaid and other assets
(11,748
)
(9,370
)
Accounts payable, accrued, and other
liabilities
683
1,514
Deferred revenue
3,554
1,597
Net cash provided by operating
activities
50,158
43,080
Investing activities:
Business combinations, net of cash
acquired
(6,621
)
(4,009
)
Changes in marketable securities
(19,235
)
1,424
Proceeds from sale of fixed assets
—
26
Proceeds from sale of non-marketable
equity investments
45
3,494
Purchases of property and equipment
(1,854
)
(1,570
)
Payments associated with capitalized
software development
(19,552
)
(17,392
)
Net cash used in investing activities
(47,217
)
(18,027
)
Financing activities:
Taxes paid related to net settlement of
equity awards
(817
)
(518
)
Repurchases of common stock
(1,648
)
(23,137
)
Payment of cash dividends
(2,301
)
—
Net cash used in financing activities
(4,766
)
(23,655
)
Effect of exchange rate changes on cash
and cash equivalents
(75
)
(46
)
Net (decrease) increase in cash and cash
equivalents
(1,900
)
1,352
Cash and cash equivalents at beginning of
period
46,023
46,905
Cash and cash equivalents at end of
period
$
44,123
$
48,257
Reconciliation of GAAP to
Non-GAAP Financial Measures(1) Operating Results Summary (In
thousands) (Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
GAAP net income
$
3,867
$
3,666
$
10,623
$
9,642
Deferred revenue write-down
30
46
128
223
Interest income
(667
)
(124
)
(1,580
)
(155
)
Interest expense
33
33
99
99
Income tax provision
1,586
1,259
2,471
2,675
Stock-based compensation expense
1,038
918
3,076
2,609
Depreciation and amortization
10,403
9,592
30,550
28,334
Change in fair value of non-marketable
equity investments
(45
)
(2,653
)
(45
)
(3,596
)
Adjusted EBITDA
$
16,245
$
12,737
$
45,322
$
39,831
(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 2023 (In
thousands) (Unaudited)
Low
High
Net income
$
12,500
$
14,600
Deferred revenue write-down
200
200
Interest income
(2,300
)
(2,400
)
Interest expense
100
100
Income tax provision
3,200
3,900
Change in fair value of non-marketable
equity investments
(100
)
(100
)
Stock-based compensation expense
4,200
4,300
Depreciation and amortization
41,200
41,400
Adjusted EBITDA
$
59,000
$
62,000
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 2023, our share repurchase program, 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 Israel
and surrounding areas, and the potential expansion of such
conflicts), any developments related to the COVID-19 pandemic,
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, legal requirements and
contractual restrictions which may impact repurchases under our
share repurchase program, as well as risks referenced in the
Company’s Annual Report on Form 10-K for the year ended December
31, 2022, filed on February 28, 2023, 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/20231023418025/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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