HealthStream Announces First Quarter 2020 Results
-
Revenues of
$61.6 million in the first quarter of 2020, down 6% from$65.2 million in the first quarter of 2019. -
Operating income of
$7.2 million in the first quarter of 2020, up 35% from$5.4 million in the first quarter of 2019, which comparison was positively impacted by a favorable contractual adjustment to cost of revenues in the amount of$3.4 million during the first quarter of 2020. -
Income from continuing operations of
$7.1 million in the first quarter of 2020, up 48% from$4.8 million in the first quarter of 2019, which comparison was positively impacted by$2.6 million from the favorable adjustment referenced above. -
Earnings per share (EPS) from continuing operations of
$0.22 per share (diluted) in the first quarter of 2020, which was positively impacted by$0.08 from the favorable adjustment referenced above, compared to$0.15 per share (diluted) in the first quarter of 2019. -
Adjusted EBITDA1 from continuing operations of
$11.8 million in the first quarter of 2020, down 6% from$12.5 million in the first quarter of 2019. -
Completed the acquisition of NurseGrid, a
Portland -based healthcare technology company that developed NurseGrid Mobile, the #1 rated and top downloaded app for nurses, onMarch 9, 2020 for$25 million . -
Authorized a share repurchase program to repurchase up to
$30.0 million of outstanding shares of common stock onMarch 13, 2020 , with shares valued at approximately$10.0 million having been repurchased to date.
1 Adjusted EBITDA from continuing operations is a non-GAAP financial measure. A reconciliation of adjusted EBITDA from continuing operations to income from continuing operations and disclosure regarding why we believe adjusted EBITDA from continuing operations provides useful information to investors is included later in this release. |
“During this time of great uncertainty and rapidly changing conditions, our mission to support healthcare providers remains resolute,” said
Frist continued, “In the meantime, our entire workforce has been working from home for over a month now, and our customers are experiencing a range of conditions, including being subject to excessive demand to address the needs of COVID-19 patients to being closed due to a discontinuance of or a substantial reduction in elective procedures. While the pandemic did not have a significant impact on our first quarter results and we continue to see strong utilization of our platform—particularly around the free bundle of COVID-19 courses, we are seeing and expect to continue to see a negative impact on our financial results beginning in the second quarter. We are not reasonably able to quantify the anticipated impact on our results in 2020 at this time, which is why we are withdrawing our previously issued 2020 guidance until further notice. As we enter into the uncharted territory of the COVID-19 landscape, we are fortunate to do so with a solid balance sheet and strong resolve to help our customers improve the quality of healthcare.”
Financial Results:
First Quarter 2020 Compared to First Quarter 2019
Revenues for the first quarter of 2020 decreased by
Revenues from our Workforce Solutions segment were
Revenues from our Provider Solutions segment were
Operating income was
Other income includes a
Income from continuing operations was
Adjusted EBITDA from continuing operations was
Adjusted EBITDA (from continuing and discontinued operations) was
At
Other Business Updates
At
On
On
Financial Outlook for 2020
The Company believes the extent of COVID-19’s negative impact on its operating results and financial condition will be driven by many factors, including the length and severity of the COVID-19 pandemic and the impact of the pandemic on economic activity, particularly with respect to healthcare organizations. As a result of the unpredictable and rapidly evolving environment related to the COVID-19 pandemic, at this time the Company cannot reasonably quantify the impact that the pandemic will have on its operating and financial results in 2020. Due to this continued uncertainty, the Company is withdrawing its 2020 guidance previously issued in its earnings release dated
The Company expects to continue providing its full range of workforce and provider solutions to its customers and to continue supporting all healthcare providers in their efforts to overcome the COVID-19 pandemic.
A conference call with
Use of Non-GAAP Financial Measures
This press release presents adjusted EBITDA from continuing operations and adjusted EBITDA, both of which are non-GAAP financial measures 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, changes in fair value of non-marketable equity investments, and the de-recognition of non-cash royalty expense resulting from our resolution of a mutual disagreement related to various elements of a past partnership which resulted in a reduction to costs of revenues in the first quarter of 2020 as described above (“adjusted EBITDA”) is a useful measure for evaluating the operating performance of the Company because adjusted EBITDA reflects net income adjusted for certain non-cash and non-operating items. Management also believes that adjusted EBITDA from continuing operations is a useful measure for evaluating the operating performance of the Company because such measure excludes the gain on sale in connection with the sale of the PX business in
These non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance, which are prepared in accordance with 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
Condensed Consolidated Statements of Income (In thousands, except per share data) (Unaudited) |
||||||||
|
|
Three Months Ended |
|
|||||
|
|
2020 |
|
|
2019 |
|
||
Revenues, net |
|
$ |
61,572 |
|
|
$ |
65,187 |
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
Cost of revenues (excluding depreciation and amortization) (1) |
|
|
20,359 |
|
|
|
26,861 |
|
Product development |
|
|
7,468 |
|
|
|
6,927 |
|
Sales and marketing |
|
|
9,188 |
|
|
|
9,521 |
|
Other general and administrative expenses |
|
|
9,864 |
|
|
|
9,970 |
|
Depreciation and amortization |
|
|
7,449 |
|
|
|
6,539 |
|
Total operating costs and expenses |
|
|
54,328 |
|
|
|
59,818 |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
7,244 |
|
|
|
5,369 |
|
|
|
|
|
|
|
|
|
|
Other income, net |
|
|
1,706 |
|
|
|
822 |
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax provision |
|
|
8,950 |
|
|
|
6,191 |
|
Income tax provision |
|
|
1,858 |
|
|
|
1,411 |
|
Income from continuing operations |
|
|
7,092 |
|
|
|
4,780 |
|
Discontinued operations: |
|
|
|
|
|
|
|
|
Gain on sale of discontinued operations |
|
|
— |
|
|
|
1,620 |
|
Income tax provision |
|
|
— |
|
|
|
426 |
|
Income from discontinued operations |
|
|
— |
|
|
|
1,194 |
|
Net income |
|
$ |
7,092 |
|
|
$ |
5,974 |
|
|
|
|
|
|
|
|
|
|
Net income per share - basic: |
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
0.22 |
|
|
$ |
0.15 |
|
Discontinued operations |
|
|
— |
|
|
|
0.03 |
|
Net income per share - basic |
|
$ |
0.22 |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
Net income per share - diluted: |
|
|
|
|
|
|
|
|
Continuing operations |
|
$ |
0.22 |
|
|
$ |
0.15 |
|
Discontinued operations |
|
|
— |
|
|
|
0.03 |
|
Net income per share - diluted |
|
$ |
0.22 |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
32,334 |
|
|
|
32,337 |
|
Diluted |
|
|
32,357 |
|
|
|
32,377 |
|
(1) - Includes |
|
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets (In thousands) (Unaudited) |
||||||||
|
|
|
|
|
|
|
||
|
|
2020 |
|
|
2019 |
|
||
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
107,425 |
|
|
$ |
131,538 |
|
Marketable securities |
|
|
34,585 |
|
|
|
41,328 |
|
Accounts and unbilled receivables, net |
|
|
34,755 |
|
|
|
30,376 |
|
Prepaid and other current assets |
|
|
23,891 |
|
|
|
21,330 |
|
Total current assets |
|
|
200,656 |
|
|
|
224,572 |
|
|
|
|
|
|
|
|
|
|
Capitalized software development, net |
|
|
22,209 |
|
|
|
21,445 |
|
Property and equipment, net |
|
|
24,425 |
|
|
|
26,065 |
|
Operating lease right of use assets, net |
|
|
29,135 |
|
|
|
29,615 |
|
|
|
|
182,608 |
|
|
|
162,277 |
|
Deferred tax assets |
|
|
269 |
|
|
|
269 |
|
Deferred commissions |
|
|
17,088 |
|
|
|
17,645 |
|
Other assets |
|
|
5,121 |
|
|
|
7,656 |
|
Total assets |
|
$ |
481,511 |
|
|
$ |
489,544 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable, accrued and other liabilities |
|
$ |
30,104 |
|
|
$ |
39,674 |
|
Deferred revenue |
|
|
72,370 |
|
|
|
65,511 |
|
Total current liabilities |
|
|
102,474 |
|
|
|
105,185 |
|
Deferred tax liabilities |
|
|
11,565 |
|
|
|
13,183 |
|
Deferred revenue, non-current |
|
|
1,591 |
|
|
|
1,918 |
|
Operating lease liability, noncurrent |
|
|
30,108 |
|
|
|
30,733 |
|
Other long-term liabilities |
|
|
357 |
|
|
|
357 |
|
Total liabilities |
|
|
146,095 |
|
|
|
151,376 |
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
Common stock |
|
|
280,322 |
|
|
|
290,021 |
|
Accumulated other comprehensive (loss) income |
|
|
(141 |
) |
|
|
4 |
|
Retained earnings |
|
|
55,235 |
|
|
|
48,143 |
|
Total shareholders’ equity |
|
|
335,416 |
|
|
|
338,168 |
|
Total liabilities and shareholders' equity |
|
$ |
481,511 |
|
|
$ |
489,544 |
|
Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) |
||||||||
|
|
Three Months Ended |
|
|||||
|
|
|
|
|
|
|
||
|
|
2020 |
|
|
2019 |
|
||
Operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
7,092 |
|
|
$ |
5,974 |
|
Income from discontinued operations |
|
|
— |
|
|
|
(1,194 |
) |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
7,449 |
|
|
|
6,539 |
|
Share-based compensation |
|
|
550 |
|
|
|
516 |
|
Amortization of deferred commissions |
|
|
2,159 |
|
|
|
2,121 |
|
Deferred income taxes |
|
|
500 |
|
|
|
433 |
|
Provision for doubtful accounts |
|
|
288 |
|
|
|
2 |
|
Loss (gain) on equity method investments |
|
|
11 |
|
|
|
(54 |
) |
Non-cash royalty expense |
|
|
(3,440 |
) |
|
|
— |
|
Change in fair value of non-marketable equity investments |
|
|
(1,152 |
) |
|
|
— |
|
Other |
|
|
47 |
|
|
|
(28 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts and unbilled receivables |
|
|
(4,573 |
) |
|
|
1,387 |
|
Prepaid and other assets |
|
|
(3,935 |
) |
|
|
(3,967 |
) |
Accounts payable, accrued and other liabilities |
|
|
(5,333 |
) |
|
|
(2,044 |
) |
Deferred revenue |
|
|
6,453 |
|
|
|
6,400 |
|
Net cash provided by operating activities |
|
|
6,116 |
|
|
|
16,085 |
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Business combinations, net of cash acquired |
|
|
(21,421 |
) |
|
|
(18,002 |
) |
Changes in marketable securities |
|
|
6,595 |
|
|
|
(1,764 |
) |
Payments to acquire non-marketable equity investments |
|
|
— |
|
|
|
(3,342 |
) |
Purchases of property and equipment |
|
|
(1,010 |
) |
|
|
(11,338 |
) |
Payments associated with capitalized software development |
|
|
(4,068 |
) |
|
|
(4,933 |
) |
Net cash used in investing activities |
|
|
(19,904 |
) |
|
|
(39,379 |
) |
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
— |
|
|
|
31 |
|
Taxes paid related to net settlement of equity awards |
|
|
(373 |
) |
|
|
(359 |
) |
Payment of earn-outs related to prior acquisitions |
|
|
— |
|
|
|
(37 |
) |
Repurchases of common stock |
|
|
(9,876 |
) |
|
|
— |
|
Payment of cash dividends |
|
|
(30 |
) |
|
|
(52 |
) |
Net cash used in financing activities |
|
|
(10,279 |
) |
|
|
(417 |
) |
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(46 |
) |
|
|
— |
|
Net decrease in cash and cash equivalents |
|
|
(24,113 |
) |
|
|
(23,711 |
) |
Cash and cash equivalents at beginning of period |
|
|
131,538 |
|
|
|
134,321 |
|
Cash and cash equivalents at end of period |
|
$ |
107,425 |
|
|
$ |
110,610 |
|
Reconciliation of GAAP to Non-GAAP Financial Measures(1) (In thousands) (Unaudited) |
||||||||
|
|
Three Months Ended
|
|
|||||
|
|
2020 |
|
|
2019 |
|
||
GAAP income from continuing operations |
|
$ |
7,092 |
|
|
$ |
4,780 |
|
Interest income |
|
|
(594 |
) |
|
|
(790 |
) |
Interest expense |
|
|
25 |
|
|
|
21 |
|
Income tax provision |
|
|
1,858 |
|
|
|
1,411 |
|
Stock based compensation expense |
|
|
550 |
|
|
|
516 |
|
Depreciation and amortization |
|
|
7,449 |
|
|
|
6,539 |
|
Change in fair value of non-marketable equity investments |
|
|
(1,152 |
) |
|
|
— |
|
Non-cash royalty expense |
|
|
(3,440 |
) |
|
|
— |
|
Adjusted EBITDA from continuing operations |
|
$ |
11,788 |
|
|
$ |
12,477 |
|
|
|
|
|
|
|
|
|
|
GAAP net income |
|
$ |
7,092 |
|
|
$ |
5,974 |
|
Interest income |
|
|
(594 |
) |
|
|
(790 |
) |
Interest expense |
|
|
25 |
|
|
|
21 |
|
Income tax provision |
|
|
1,858 |
|
|
|
1,837 |
|
Stock based compensation expense |
|
|
550 |
|
|
|
516 |
|
Depreciation and amortization |
|
|
7,449 |
|
|
|
6,539 |
|
Change in fair value of non-marketable equity investments |
|
|
(1,152 |
) |
|
|
— |
|
Non-cash royalty expense |
|
|
(3,440 |
) |
|
|
— |
|
Adjusted EBITDA |
|
$ |
11,788 |
|
|
$ |
14,097 |
|
(1) This press release contains certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA from continuing operations, 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 financial performance for 2020 as well as the anticipated impact of the COVID-19 pandemic on our financial results, that involve risks and uncertainties regarding
View source version on businesswire.com: https://www.businesswire.com/news/home/20200427005614/en/
Chief Financial Officer
(615) 301-3182
ir@healthstream.com
Media:
Vice President,
Investor Relations &
Communications
(615) 301-3237
mollie.condra@healthstream.com
Source: