HealthStream, Inc. (NASDAQ: HSTM), a leading provider of learning,
talent management, and research solutions for the healthcare industry,
announced today results for the first quarter ended March 31, 2013.
Highlights:
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Revenues of $29.6 million in the first quarter of 2013, up 25% from
revenues of $23.7 million in the first quarter of 2012
-
Operating income of $3.2 million in the first quarter of 2013, up 36%
from operating income of $2.3 million in the first quarter of 2012
-
Net income of $1.9 million in the first quarter of 2013, up 37% from
net income of $1.4 million in the first quarter of 2012, and earnings
per share (EPS) of $0.07 per share (diluted) in the first quarter of
2013, up from EPS of $0.05 per share (diluted) in the first quarter of
2012
-
Adjusted EBITDA1 of $5.4 million in the first quarter of
2013, up 30% from $4.1 million in the first quarter of 2012
Financial Results:
First Quarter 2013 Compared to First Quarter 2012
Revenues for the first quarter of 2013 increased $6.0 million, or 25
percent, to $29.6 million, compared to $23.7 million for the first
quarter of 2012.
Revenues from HealthStream Learning & Talent Management increased by
$5.3 million, or 30 percent, when compared to the first quarter of 2012.
Revenues from our Internet-based subscription products increased by
approximately $5.1 million, or 32 percent, over the prior year quarter
due to a higher number of subscribers and more courseware consumption by
subscribers.
Revenues from HealthStream Research increased by $630,000, or 11
percent, when compared to the first quarter of 2012. Revenues from
Patient Insights™ surveys—a survey research product that generates
recurring revenues—increased by $607,000, or 13 percent, when compared
to the first quarter of 2012. Revenues from other surveys, which are
conducted on annual or bi-annual cycles, were up slightly compared to
the first quarter of 2012.
Generally accepted accounting principles (GAAP) require companies to
write down beginning balances of acquired deferred revenue balances as
part of “fair value” accounting as defined by GAAP. During the first
quarter of 2013, HealthStream reported a $331,000 reduction to GAAP
revenues and a corresponding $331,000 reduction to operating income and
$200,000 reduction to net income as a result of deferred revenue
write-downs for the Decision Critical and Sy.Med Development
acquisitions in June and October of 2012, respectively. The table
reconciling GAAP to non-GAAP financial measures included in this release
shows the impact of beginning balance deferred revenue write-downs on
financial results.
Operating income for the first quarter of 2013 increased by 36 percent
to $3.2 million, compared to $2.3 million for the first quarter of 2012,
primarily resulting from the strong revenue growth. Operating expense
increases included higher royalties, personnel additions, sales
commissions, business taxes, depreciation and amortization, and other
general expenses. Offsetting these expense increases were lower
marketing expenses associated with the timing of our annual customer
Summit, which occurred during the first quarter of 2012, but is
scheduled for the fourth quarter of 2013. In the first quarter of 2012,
the Summit decreased operating income by approximately $520,000.
Net income for the first quarter of 2013 was $1.9 million, compared to
$1.4 million in the first quarter of 2012. Earnings per share were $0.07
per share (diluted) for the first quarter of 2013 up from $0.05 per
share (diluted) for the first quarter of 2012.
Adjusted EBITDA (which we define as net income before interest, income
taxes, share-based compensation, and depreciation and amortization)
increased by 30 percent to $5.4 million for the first quarter of 2013,
compared to $4.1 million for the first quarter of 2012.
At March 31, 2013, the Company had cash and marketable securities of
$95.6 million. Capital expenditures totaled $1.8 million for the first
quarter of 2013.
Other Business Updates
At March 31, 2013, approximately 3,032,000 healthcare professionals were
fully implemented to use our Internet-based HLC for training and
education. This number is up from approximately 2,659,000 fully
implemented users at March 31, 2012. The total number of contracted
subscribers at March 31, 2013 was approximately 3,167,000, up from
approximately 2,790,000 at March 31, 2012. “Contracted subscribers”
include both the 3,032,000 subscribers already implemented and the
135,000 subscribers in the process of implementation.
We are providing an additional measure of our progress in growing the
value of our customer base: “Annualized Revenue per Implemented
Subscriber.” The new metric, Annualized Revenue per Implemented
Subscriber, represents the quarter's revenue from Internet-based
subscription products, annualized, then divided by the quarter's average
total implemented subscribers. The table below shows the new metric for
the first quarter of 2013 and the preceding seven quarters.
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Learning & Talent Management – Annualized Revenue per
Implemented Subscriber
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Q2
2011
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Q3
2011
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Q4
2011
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Q1
2012
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Q2
2012
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Q3
2012
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Q4
2012
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Q1
2013
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$22.00
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$22.50
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$22.97
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$24.65
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$25.95
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$26.98
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$27.04
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$28.47
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Note: Internet-based subscription products include subscriptions
to our platform, plus courseware/content subscriptions. The above metric
does not include revenues from SimCenter; the Company reports those
revenues separately as part of our SimVentures collaborative arrangement.
Based on the number of subscribers, our renewal rate was 91 percent in
the first quarter of 2013. Our renewal rate for the number of
subscribers reflects the number of subscribers that were up for renewal
in the quarter that chose to renew plus the addition of new subscribers
on these accounts, compared to previously contracted amounts—which means
that the renewal rate can exceed 100 percent. The renewal rate based on
subscribers for the first quarter of 2013 compares to a renewal rate of
96 percent during the first quarter of 2012.
Based on contract value, our renewal rate was 87 percent in the first
quarter of 2013. Our renewal rate for contract value reflects any
pricing adjustment that may occur at renewal along with increases in
contract value due to the addition of new subscribers, compared to
previously contracted amounts—which means that the renewal rate can
exceed 100 percent. Our calculation of this renewal rate includes only
the base subscriptions to our platform; it does not include add-on
products or content purchased prior to or at the time of renewal. The
renewal rate based on contract value for the first quarter of 2013
compares to a renewal rate of 102 percent during the first quarter of
2012.
For the trailing four quarters ended March 31, 2013, customers
representing approximately 98 percent of subscribers that were up for
renewal did renew, while our renewal rate based on the annual contract
value was approximately 95 percent. The trailing four quarter renewal
measurements are calculated on the same basis as the quarter results.
Financial Outlook for 2013
The Company affirmed its previous guidance and anticipates consolidated
revenues for 2013 to grow between 20 to 22 percent over full-year 2012.
We anticipate revenue growth in the Learning & Talent Management segment
to be in the 24 to 26 percent range and the Research segment’s revenues
to increase approximately eight to 10 percent.
We anticipate that 2013 full-year operating income will be approximately
6 to 10 percent over full-year 2012, capital expenditures will be
between $11 million and $12 million, and our effective tax rate will be
approximately 42 to 44 percent.
“2013 is starting strong for HealthStream,” commented Robert A. Frist,
Jr., chairman and chief executive officer, HealthStream. “In the first
quarter of 2013, revenues were up 25 percent, operating income was up 36
percent, net income was up 31 percent, and adjusted EBITDA was up 30
percent—all over the first quarter of 2012. Our financial results were
matched with solid operational performance—as we implemented 95,000 new
subscribers and contracted for an additional 68,000 new subscribers in
the first quarter. Our focus remains on supporting healthcare
organizations in developing their workforce and improving outcomes—and I
believe our success in doing that positions us for sustained growth in
2013.”
A conference call with Robert A. Frist, Jr., chief executive officer,
Gerard M. Hayden, Jr., senior vice president and chief financial
officer, and Mollie Condra, associate vice president of investor
relations and corporate communications, will be held on Tuesday, April
23, 2013 at 9:00 a.m. (EDT). To listen to the conference, please dial
877-647-2842 (no conference ID needed) if you are calling within the
domestic U.S. or Canada. If you are an international caller, please dial
914-495-8564 (no conference ID needed). The conference may also be
accessed by going to http://ir.healthstream.com/events.cfm
for the simultaneous Webcast of the call, which will subsequently be
available for replay. The replay telephone numbers are 855-859-2056
(conference ID #41111382) for U.S. and Canadian callers and 404-537-3406
(conference ID #41111382) for international callers.
Use of Non-GAAP Financial Measures
This press release contains certain non-GAAP financial measures,
including non-GAAP net income, non-GAAP operating income, non-GAAP
revenue, and adjusted EBITDA, which are used by management in analyzing
its financial results and ongoing operational performance.
In order to better assess the Company’s financial results, management
believes that income before interest, income taxes, share-based
compensation, depreciation and amortization (“adjusted EBITDA”) is an
appropriate measure for evaluating the operating performance of the
Company because adjusted EBITDA reflects net income adjusted for
non-cash and non-operating items. Adjusted EBITDA is also used by many
investors to assess the Company’s results from current operations.
Adjusted EBITDA is a non-GAAP financial measure and should not be
considered as a measure of financial performance under generally
accepted accounting principles. Because adjusted EBITDA is not a
measurement determined in accordance with generally accepted accounting
principles, it is susceptible to varying calculations. Accordingly,
adjusted EBITDA, as presented, may not be comparable to other similarly
titled measures of other companies.
Recently the Company has acquired several businesses whose net tangible
assets include deferred revenue. In accordance with GAAP reporting
requirements, the Company may record a write down of deferred revenue to
fair value as defined in GAAP. If the Company is required to record a
write-down of deferred revenue, it may result in lower recognized
revenue. In order to provide more accurate trends and comparisons of the
Company’s revenues, operating income, and net income, management
believes that adding back the deferred revenue write-down associated
with fair value accounting for acquired businesses provides a better
indication of the ongoing performance of the Company. Both on a
quarterly and year-to-date basis, the revenue for the acquired contracts
is deferred and typically recognized over a one-year period, so our US
GAAP revenues for the one-year period after the acquisition will not
reflect the full amount of revenues that would have been reported if the
acquired deferred revenue was not written down to fair value.
These non-GAAP financial measures should not be considered as a
substitute for, or superior to, measures of financial performance which
are prepared in accordance with US GAAP and may be different from
non-GAAP financial measures used by other companies. Investors are
encouraged to review the reconciliations of our GAAP to non-GAAP
financial measures, which are set forth below in this release.
About HealthStream
HealthStream (NASDAQ: HSTM) is dedicated to improving patient outcomes
through the development of healthcare organizations’ greatest asset:
their people. Our unified suite of software-as-a-service (SaaS)
solutions are used by, collectively, over three million healthcare
employees in the U.S. for training & learning management, talent
management, performance assessment, and managing simulation-based
education programs. Our research solutions provide valuable insight to
healthcare providers to meet HCAHPS requirements, engage their
workforce, and enhance physician alignment. Based in Nashville,
Tennessee, HealthStream has additional offices in Laurel, Maryland,
Austin, Texas, and Brentwood, Tennessee. For more information, visit http://www.healthstream.com
or call 800-933-9293.
1 Adjusted EBITDA is a non-GAAP financial measure. A
reconciliation of adjusted EBITDA to net income is included in this
release.
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HEALTHSTREAM, INC.
Summary Financial Data
(In
thousands, except per share data)
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Unaudited
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Three Months Ended
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March 31,
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2013
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|
2012
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Revenues
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$
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29,646
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$
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23,674
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Operating expenses:
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Cost of revenues (excluding depreciation and amortization)
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12,520
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9,575
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Product development
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2,606
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1,869
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Sales and marketing(1) |
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5,199
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5,536
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Other general and administrative
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4,272
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2,819
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Depreciation and amortization
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1,876
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1,534
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Total operating expenses
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26,473
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21,333
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Operating income
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3,173
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2,341
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Other income, net
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47
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19
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Income before income taxes
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3,220
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2,360
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Income tax provision
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1,279
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940
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Net income
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$
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1,941
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$
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1,420
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Net income per share:
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Net income per share, basic
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$
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0.07
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$
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0.05
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Net income per share, diluted
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$
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0.07
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$
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0.05
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Weighted average shares outstanding:
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Basic
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26,340
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25,999
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Diluted
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27,409
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27,335
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(1) Includes approximately $870,000 of expenses associated with
the Summit during the three months ended March 31, 2012.
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HEALTHSTREAM, INC.
Condensed Consolidated Balance
Sheets
(In thousands)
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Unaudited
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March 31,
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December 31,
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2013
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2012(1)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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43,888
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$
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41,365
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Marketable securities – short term
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51,711
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51,952
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Accounts and unbilled receivables, net
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23,972
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16,511
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Prepaid and other current assets
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4,582
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6,004
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Deferred tax assets, current
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1,180
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2,459
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Total current assets
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125,333
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118,291
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Capitalized software development, net
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10,182
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9,732
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Property and equipment, net
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7,784
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7,820
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Goodwill and intangible assets, net
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37,802
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|
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38,104
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Other assets
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555
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|
|
581
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Total assets
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$
|
181,656
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$
|
174,528
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Current liabilities:
|
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Accounts payable, accrued and other liabilities
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$
|
10,863
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$
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11,886
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Deferred revenue
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28,432
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23,146
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Total current liabilities
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39,295
|
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35,032
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|
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Deferred tax liabilities, non-current
|
|
|
6,474
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|
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6,474
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Other long-term liabilities
|
|
|
708
|
|
|
|
826
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Total liabilities
|
|
|
46,477
|
|
|
|
42,332
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|
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|
|
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Shareholders’ equity:
|
|
|
|
|
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Common stock
|
|
|
159,072
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|
|
|
158,020
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|
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Comprehensive income
|
|
|
8
|
|
|
|
18
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|
|
Accumulated deficit
|
|
|
(23,901
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)
|
|
|
(25,842
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)
|
|
Total shareholders’ equity
|
|
|
135,179
|
|
|
|
132,196
|
|
|
Total liabilities and shareholders' equity
|
|
$
|
181,656
|
|
|
$
|
174,528
|
|
|
|
|
|
|
|
|
|
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|
(1) Derived from audited financial statements contained in the
Company’s filing on Form 10-K for the year ended December 31, 2012.
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HEALTHSTREAM, INC.
Condensed Consolidated Statement
of Cash Flows
(In thousands)
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|
|
|
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|
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Unaudited
|
|
|
|
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Three Months Ended
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
1,941
|
|
|
|
$
|
1,420
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
1,876
|
|
|
|
|
1,534
|
|
|
Deferred income taxes
|
|
|
|
1,279
|
|
|
|
|
940
|
|
|
Share-based compensation
|
|
|
|
310
|
|
|
|
|
242
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|
|
Bad debt expense
|
|
|
|
20
|
|
|
|
|
--
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|
|
Changes in assets and liabilities:
|
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|
|
|
|
|
|
Accounts and unbilled receivables
|
|
|
|
(7,487
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)
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|
|
(40
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)
|
|
Prepaid and other assets
|
|
|
|
1,717
|
|
|
|
|
1,463
|
|
|
Accounts payable, accrued and other liabilities
|
|
|
|
(1,080
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)
|
|
|
|
(3,620
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)
|
|
Deferred revenue
|
|
|
|
5,279
|
|
|
|
|
1,475
|
|
|
Net cash provided by operating activities
|
|
|
|
3,855
|
|
|
|
|
3,414
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
Business combinations, net of cash acquired
|
|
|
|
(181
|
)
|
|
|
|
--
|
|
|
Changes in marketable securities
|
|
|
|
(77
|
)
|
|
|
|
(54,883
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)
|
|
Purchases of property and equipment
|
|
|
|
(744
|
)
|
|
|
|
(763
|
)
|
|
Payments associated with capitalized software development
|
|
|
|
(1,072
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)
|
|
|
|
(1,000
|
)
|
|
Net cash used in investing activities
|
|
|
|
(2,074
|
)
|
|
|
|
(56,646
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)
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
|
900
|
|
|
|
|
596
|
|
|
Taxes paid related to net settlement of equity awards
|
|
|
|
(158
|
)
|
|
|
|
--
|
|
|
Net cash provided by financing activities
|
|
|
|
742
|
|
|
|
|
596
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
|
2,523
|
|
|
|
|
(52,636
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)
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
41,365
|
|
|
|
|
76,904
|
|
|
Cash and cash equivalents at end of period
|
|
|
$
|
43,888
|
|
|
|
$
|
24,268
|
|
|
|
|
|
|
Reconciliation of GAAP to Non-GAAP Financial Measures(1)
(In thousands, except per share data)
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2013
|
|
2012
|
|
GAAP net income
|
|
$
|
1,941
|
|
|
$
|
1,420
|
|
|
Interest income
|
|
|
(59
|
)
|
|
|
(31
|
)
|
|
Interest expense
|
|
|
12
|
|
|
|
12
|
|
|
Income tax provision
|
|
|
1,279
|
|
|
|
940
|
|
|
Share-based compensation expense
|
|
|
310
|
|
|
|
242
|
|
|
Depreciation and amortization
|
|
|
1,876
|
|
|
|
1,534
|
|
|
Adjusted EBITDA
|
|
$
|
5,359
|
|
|
$
|
4,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP revenues
|
|
$
|
29,646
|
|
|
$
|
23,674
|
|
|
Add: deferred revenue write-down
|
|
|
331
|
|
|
|
--
|
|
|
Non-GAAP revenues
|
|
$
|
29,977
|
|
|
$
|
23,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating income
|
|
$
|
3,173
|
|
|
$
|
2,341
|
|
|
Add: deferred revenue write-down
|
|
|
331
|
|
|
|
--
|
|
|
Non-GAAP operating income
|
|
$
|
3,504
|
|
|
$
|
2,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
|
|
$
|
1,941
|
|
|
$
|
1,420
|
|
|
Add: deferred revenue write-down, net of tax
|
|
|
200
|
|
|
|
--
|
|
|
Non-GAAP net income
|
|
$
|
2,141
|
|
|
$
|
1,420
|
|
|
|
|
|
|
|
|
(1) This press release contains certain non-GAAP financial
measures, including non-GAAP net income, non-GAAP operating
income, non-GAAP revenue, and adjusted EBITDA, which are used by
management in analyzing its financial results and ongoing
operational performance.
|
|
|
|
|
|
|
This press release includes certain forward-looking statements
(statements other than solely with respect to historical fact),
including statements regarding expectations for the financial
performance for 2013 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. Investors are cautioned that such results or events
predicted in these statements may differ materially from actual future
events or results. The forward-looking statements are subject to
significant uncertainties and other risks referenced in the Company’s
Annual Report on Form 10-K and in the Company’s other filings with the
Securities and Exchange Commission. Consequently, such forward-looking
information should not be regarded as a representation or warranty 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.
