hstm-10q_20180630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2018

Commission File No.: 000‑27701

HealthStream, Inc.

(Exact name of registrant as specified in its charter)

 

Tennessee

62‑1443555

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

209 10th Avenue South, Suite 450

 

Nashville, Tennessee

37203

(Address of principal executive offices)

(Zip Code)

 

(615) 301‑3100

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

(Do not check if a smaller reporting company)

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No

As of August 3, 2018, there were 32,322,804 shares of the registrant’s common stock outstanding.

 

 

 

 

 

 


Index to Form 10‑Q

HEALTHSTREAM, INC.

 

 

 

 

 

Page

Number

 

 

 

 

 

Part I.

 

Financial Information

 

1

 

 

 

 

 

Item 1.

 

Financial Statements

 

1

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets (Unaudited) – June 30, 2018 and December 31, 2017

 

1

 

 

 

 

 

 

 

Condensed Consolidated Statements of Income (Unaudited) ‑ Three and Six Months Ended June 30, 2018 and 2017

 

2

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Unaudited) - Three and Six Months Ended June 30, 2018 and 2017

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statement of Shareholders' Equity (Unaudited) – Six Months Ended June 30, 2018

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) ‑ Six Months Ended June 30, 2018 and 2017

 

5

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

6

 

 

 

 

 

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

16

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

24

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

24

 

 

 

 

 

Part II.

 

Other Information

 

25

 

 

 

 

 

Item 6.

 

Exhibits

 

25

 

 

 

 

 

 

 

Signature

 

26

 

 

 

 

 

 


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HEALTHSTREAM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands)

 

 

 

June 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

122,577

 

 

$

84,768

 

Marketable securities

 

 

42,958

 

 

 

46,350

 

Accounts receivable, net of allowance for doubtful accounts of $1,314 and

   $1,979 at June 30, 2018 and December 31, 2017, respectively

 

 

30,850

 

 

 

36,691

 

Accounts receivable - unbilled

 

 

2,842

 

 

 

1,327

 

Prepaid royalties, net of amortization

 

 

13,874

 

 

 

16,137

 

Other prepaid expenses and other current assets

 

 

11,965

 

 

 

8,330

 

Current assets of discontinued operations

 

 

 

 

 

6,125

 

Total current assets

 

 

225,066

 

 

 

199,728

 

 

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $27,171 and

   $24,392 at June 30, 2018 and December 31, 2017, respectively

 

 

8,770

 

 

 

8,092

 

Capitalized software development, net of accumulated amortization of $41,908 and

   $37,174 at June 30, 2018 and December 31, 2017, respectively

 

 

16,300

 

 

 

16,014

 

Goodwill

 

 

86,144

 

 

 

86,144

 

Customer-related intangibles, net of accumulated amortization of $20,139 and

   $17,033 at June 30, 2018 and December 31, 2017, respectively

 

 

56,575

 

 

 

59,681

 

Other intangible assets, net of accumulated amortization of $9,177 and

   $7,708 at June 30, 2018 and December 31, 2017, respectively

 

 

7,347

 

 

 

8,816

 

Deferred tax assets

 

 

 

 

 

45

 

Deferred commissions

 

 

12,962

 

 

 

 

Non-marketable equity investments

 

 

3,777

 

 

 

3,772

 

Other assets

 

 

747

 

 

 

754

 

Long-term assets of discontinued operations

 

 

 

 

 

28,073

 

Total assets

 

$

417,688

 

 

$

411,119

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

22,021

 

 

$

16,507

 

Accrued royalties

 

 

10,552

 

 

 

12,849

 

Deferred revenue

 

 

64,126

 

 

 

64,938

 

Current liabilities of discontinued operations

 

 

 

 

 

6,772

 

Total current liabilities

 

 

96,699

 

 

 

101,066

 

 

 

 

 

 

 

 

 

 

Deferred tax liabilities

 

 

5,171

 

 

 

 

Deferred revenue, noncurrent

 

 

2,978

 

 

 

6,287

 

Other long term liabilities

 

 

652

 

 

 

1,048

 

Long-term liabilities of discontinued operations

 

 

 

 

 

2,548

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Common stock, no par value, 75,000 shares authorized; 32,317 and 31,908 shares

   issued and outstanding at June 30, 2018 and December 31, 2017, respectively

 

 

285,673

 

 

 

282,666

 

Retained earnings

 

 

26,548

 

 

 

17,542

 

Accumulated other comprehensive loss

 

 

(33

)

 

 

(38

)

Total shareholders’ equity

 

 

312,188

 

 

 

300,170

 

Total liabilities and shareholders’ equity

 

$

417,688

 

 

$

411,119

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

1

 


 

HEALTHSTREAM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

2018

 

 

June 30,

2017

 

 

June 30,

2018

 

 

June 30,

2017

 

Revenues, net

 

$

57,008

 

 

$

52,920

 

 

$

111,866

 

 

$

104,887

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues (excluding depreciation and amortization)

 

 

23,236

 

 

 

21,223

 

 

 

45,484

 

 

 

42,376

 

Product development

 

 

6,547

 

 

 

6,151

 

 

 

12,548

 

 

 

11,926

 

Sales and marketing

 

 

8,913

 

 

 

9,062

 

 

 

17,977

 

 

 

18,618

 

Other general and administrative expenses

 

 

8,029

 

 

 

7,682

 

 

 

15,772

 

 

 

14,899

 

Depreciation and amortization

 

 

6,019

 

 

 

6,001

 

 

 

12,091

 

 

 

11,903

 

Total operating costs and expenses

 

 

52,744

 

 

 

50,119

 

 

 

103,872

 

 

 

99,722

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

4,264

 

 

 

2,801

 

 

 

7,994

 

 

 

5,165

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

 

476

 

 

 

165

 

 

 

789

 

 

 

295

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income tax provision

 

 

4,740

 

 

 

2,966

 

 

 

8,783

 

 

 

5,460

 

Income tax provision

 

 

1,084

 

 

 

741

 

 

 

1,498

 

 

 

1,527

 

Income from continuing operations

 

 

3,656

 

 

 

2,225

 

 

 

7,285

 

 

 

3,933

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations before income tax provision

 

 

 

 

 

54

 

 

 

(64

)

 

 

(476

)

(Loss) gain on sale of discontinued operations

 

 

(1,502

)

 

 

 

 

 

29,490

 

 

 

 

Income tax (benefit) provision

 

 

(391

)

 

 

13

 

 

 

10,319

 

 

 

(95

)

(Loss) income from discontinued operations

 

 

(1,111

)

 

 

41

 

 

 

19,107

 

 

 

(381

)

Net Income

 

$

2,545

 

 

$

2,266

 

 

$

26,392

 

 

$

3,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share – basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.11

 

 

$

0.07

 

 

$

0.23

 

 

$

0.12

 

Discontinued operations

 

 

(0.03

)

 

 

 

 

 

0.59

 

 

 

(0.01

)

Earnings per share - basic

 

$

0.08

 

 

$

0.07

 

 

$

0.82

 

 

$

0.11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.11

 

 

$

0.07

 

 

$

0.23

 

 

$

0.12

 

Discontinued operations

 

 

(0.03

)

 

 

 

 

 

0.59

 

 

 

(0.01

)

Earnings per share - diluted

 

$

0.08

 

 

$

0.07

 

 

$

0.82

 

 

$

0.11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

32,312

 

 

 

31,876

 

 

 

32,205

 

 

 

31,825

 

Diluted

 

 

32,378

 

 

 

32,229

 

 

 

32,255

 

 

 

32,166

 

Dividends declared per share

 

$

 

 

$

 

 

$

1.00

 

 

$

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

2

 


 

HEALTHSTREAM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2018

 

 

June 30, 2017

 

 

June 30, 2018

 

 

June 30, 2017

 

Net income

 

$

2,545

 

 

$

2,266

 

 

$

26,392

 

 

$

3,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on marketable securities

 

 

(10

)

 

 

13

 

 

 

5

 

 

 

15

 

Total other comprehensive (loss) income

 

 

(10

)

 

 

13

 

 

 

5

 

 

 

15

 

Comprehensive income

 

$

2,535

 

 

$

2,279

 

 

$

26,397

 

 

$

3,567

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

3

 


 

HEALTHSTREAM, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)

Six Months Ended June 30, 2018

(In thousands)

 

 

 

Common Stock

 

 

Retained

 

 

Accumulated Other Comprehensive

 

 

Total Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balance at December 31, 2017

 

 

31,908

 

 

$

282,666

 

 

$

17,542

 

 

$

(38

)

 

$

300,170

 

Cumulative effect of accounting change

 

 

 

 

 

 

 

 

15,132

 

 

 

 

 

 

15,132

 

Net income

 

 

 

 

 

 

 

 

26,392

 

 

 

 

 

 

26,392

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

5

 

Dividends declared on common stock ($1.00 per share)

 

 

 

 

 

 

 

 

(32,518

)

 

 

 

 

 

(32,518

)

Stock based compensation

 

 

 

 

 

755

 

 

 

 

 

 

 

 

 

755

 

Common stock issued under stock plans, net of shares

   withheld for employee taxes

 

 

409

 

 

 

2,252

 

 

 

 

 

 

 

 

 

2,252

 

Balance at June 30, 2018

 

 

32,317

 

 

$

285,673

 

 

$

26,548

 

 

$

(33

)

 

$

312,188

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

4

 


 

HEALTHSTREAM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2018

 

 

2017

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

26,392

 

 

$

3,552

 

(Income) loss from discontinued operations

 

 

(19,107

)

 

 

381

 

Adjustments:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

12,091

 

 

 

11,903

 

Stock based compensation expense

 

 

846

 

 

 

840

 

Provision for doubtful accounts

 

 

390

 

 

 

470

 

Deferred income taxes

 

 

636

 

 

 

416

 

(Gain) loss on non-marketable equity investments

 

 

(5

)

 

 

5

 

Other

 

 

 

 

 

263

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts and unbilled receivables

 

 

3,905

 

 

 

7,934

 

Prepaid royalties

 

 

1,361

 

 

 

1,280

 

Other prepaid expenses and other current assets

 

 

(6,532

)

 

 

(726

)

Other assets

 

 

3,336

 

 

 

(206

)

Accounts payable and accrued expenses

 

 

(8,087

)

 

 

572

 

Accrued royalties

 

 

(2,298

)

 

 

(1,959

)

Deferred revenue

 

 

3,277

 

 

 

(3,560

)

Net cash provided by continuing operating activities

 

 

16,205

 

 

 

21,165

 

Net cash (used in) provided by discontinued operating activities

 

 

(1,003

)

 

 

1,879

 

Net cash provided by operating activities

 

 

15,202

 

 

 

23,044

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from sale of discontinued operations

 

 

57,828

 

 

 

 

Proceeds from maturities of marketable securities

 

 

44,663

 

 

 

41,010

 

Purchases of marketable securities

 

 

(41,266

)

 

 

(48,861

)

Payments associated with capitalized software development

 

 

(5,094

)

 

 

(4,980

)

Purchases of property and equipment

 

 

(3,270

)

 

 

(3,658

)

Net cash provided by (used in) continuing investing activities

 

 

52,861

 

 

 

(16,489

)

Net cash used in discontinued investing activities

 

 

(116

)

 

 

(1,476

)

Net cash provided by (used in) investing activities

 

 

52,745

 

 

 

(17,965

)

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

2,552

 

 

 

230

 

Taxes paid related to net settlement of equity awards

 

 

(300

)

 

 

(392

)

Payment of earn-outs related to acquisitions

 

 

(37

)

 

 

 

Payment of cash dividends

 

 

(32,353

)

 

 

 

Net cash used in continuing financing activities

 

 

(30,138

)

 

 

(162

)

Net cash used in discontinued financing activities

 

 

 

 

 

 

Net cash used in financing activities

 

 

(30,138

)

 

 

(162

)

 

 

 

 

 

 

 

 

 

Net increase  in cash and cash equivalents

 

 

37,809

 

 

 

4,917

 

Cash and cash equivalents at beginning of period

 

 

84,768

 

 

 

49,634

 

Cash and cash equivalents at end of period

 

$

122,577

 

 

$

54,551

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

5

 


HEALTHSTREAM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.  BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and with the instructions to Form 10‑Q and Article 10 of Regulation S‑X. Accordingly, condensed consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. All intercompany transactions have been eliminated in consolidation. Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

On February 12, 2018, the Company divested its Patient Experience (“PX”) business to Press Ganey Associates, Inc. (“Press Ganey”). This sale of the PX business resulted in the Company’s divestiture of the Company’s patient experience solutions business segment. The Company has classified the results of its PX segment as discontinued operations in its condensed consolidated statements of income and cash flows for all periods presented. Additionally, the related assets and liabilities have been reported as assets and liabilities of discontinued operations in the Company’s condensed consolidated balance sheet as of December 31, 2017. See Note 8 for additional information.

The condensed consolidated balance sheet at December 31, 2017 has been derived from the audited consolidated financial statements at that date and adjusted for discontinued operations as noted above but does not include all of the information and footnotes required by US GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2017 (included in the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 26, 2018).

2. RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Recently Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (referred to as Accounting Standards Codification (“ASC”) Topic 606, or “ASC 606”). This guidance supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition (“ASC 605”), and most industry-specific revenue recognition guidance throughout the Industry Topics of the Accounting Standards Codification. The updated guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 also includes Subtopic 340-40, Other Assets and Deferred Costs – Contracts with Customers, which requires deferral of incremental costs of obtaining a contract with a customer. Collectively, ASC 606 and Subtopic 340-40 are referred to as the “new standard.”

The Company adopted the new standard effective January 1, 2018 utilizing the modified retrospective approach. Adoption of the new standard resulted in changes to the Company’s accounting policies for revenue recognition, trade and other receivables, and deferred commissions. See Note 3 for additional information regarding ASC 606 and its impact on the Company’s balance sheet and statement of income.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10), which addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The guidance, among other things, requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. The Company adopted ASU 2016-01 effective January 1, 2018 on a prospective basis.

Accounting Standards Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (“ASC 842”), which requires lessees to recognize assets and liabilities for most leases. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee is not expected to significantly change under such guidance. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2018. The Company will adopt this ASU on January 1, 2019 and is currently evaluating the impact that adoption of this ASU will have on the Company’s consolidated financial position and results of operations.

In June 2016, the FASB issued ASU 2016-03, Financial Instruments—Credit Losses (“ASC 326”): Measurement of Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, ASC 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2019. The Company will adopt this ASU on January 1, 2020 and is currently evaluating the impact that adoption of this ASU will have on the Company’s consolidated financial position and results of operations.

6

 


HEALTHSTREAM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3. REVENUE RECOGNITION AND SALES COMMISSIONS

Adoption of ASC 606, Revenue from Contracts with Customers

On January 1, 2018, the Company adopted the new standard using the modified retrospective approach applied to those contracts which were not completed as of January 1, 2018. As such, results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts continue to be reported in accordance with ASC 605.

The cumulative effect of the changes made to the Company’s consolidated January 1, 2018 balance sheet in connection with the adoption of ASC 606 was as follows (in thousands):

Balance Sheet

 

Balance at

December 31, 2017

 

 

ASC 606

Adjustments

 

 

Balance at

January 1, 2018

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Unbilled receivables

 

$

1,327

 

 

$

31

 

 

$

1,358

 

Prepaid royalties, net

 

 

16,137

 

 

 

(902

)

 

 

15,235

 

Other prepaid expenses and other current assets

 

 

8,330

 

 

 

(2,900

)

 

 

5,430

 

Current assets of discontinued operations

 

 

6,125

 

 

 

(274

)

 

 

5,851

 

Deferred commissions

 

 

 

 

 

12,552

 

 

 

12,552

 

Deferred tax assets

 

 

45

 

 

 

(45

)

 

 

 

Non-current assets of discontinued operations

 

 

28,073

 

 

 

3,166

 

 

 

31,239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue, current

 

 

64,938

 

 

 

(4,488

)

 

 

60,450

 

Current liabilities of discontinued operations

 

 

6,772

 

 

 

(1,374

)

 

 

5,398

 

Deferred tax liabilities

 

 

 

 

 

5,205

 

 

 

5,205

 

Deferred revenue, noncurrent

 

 

6,287

 

 

 

(2,848

)

 

 

3,439

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

Retained earnings

 

 

17,542

 

 

 

15,132

 

 

 

32,674

 

 

The impact of the adoption of ASC 606 on the Company’s condensed consolidated balance sheet as of June 30, 2018 and statement of income for the three and six months ended June 30, 2018 was as follows (in thousands):

 

 

June 30, 2018

 

Balance Sheet

 

As

reported

 

 

Balances without

Adoption of

ASC 606

 

 

Effect of Change

Higher/(Lower)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Unbilled receivables

 

$

2,842

 

 

$

2,758

 

 

$

84

 

Prepaid royalties, net

 

 

13,874

 

 

 

15,096

 

 

 

(1,222

)

Other prepaid expenses and other current assets

 

 

11,965

 

 

 

13,615

 

 

 

(1,650

)

Deferred commissions

 

 

12,962

 

 

 

 

 

 

12,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue, current

 

 

64,126

 

 

 

68,764

 

 

 

(4,638

)

Deferred revenue, noncurrent

 

 

2,978

 

 

 

6,125

 

 

 

(3,147

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

Retained earnings

 

 

26,548

 

 

 

25,255

 

 

 

1,293

 

7

 


HEALTHSTREAM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3. REVENUE RECOGNITION AND SALES COMMISSIONS (continued)

 

 

 

Three Months Ended June 30,2018

 

Income Statement

 

As

reported

 

 

Balances without

Adoption of

ASC 606

 

 

Effect of Change

Higher/(Lower)

 

Revenue, net

 

$

57,008

 

 

$

56,552

 

 

$

456

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues (excluding depreciation and amortization)

 

 

23,236

 

 

 

22,983

 

 

 

253

 

Sales and marketing

 

 

8,913

 

 

 

9,049

 

 

 

(136

)

Operating income

 

 

4,264

 

 

 

3,925

 

 

 

339

 

Income from continuing operations before income tax provision

 

 

4,740

 

 

 

4,401

 

 

 

339

 

Income tax provision

 

 

1,084

 

 

 

1,001

 

 

 

83

 

Income from continuing operations

 

 

3,656

 

 

 

3,400

 

 

 

256

 

Net income

 

 

2,545

 

 

 

2,289

 

 

 

256

 

 

 

 

Six Months Ended June 30,2018

 

Income Statement

 

As

reported

 

 

Balances without

Adoption of

ASC 606

 

 

Effect of Change

Higher/(Lower)

 

Revenue, net

 

$

111,866

 

 

$

111,418

 

 

$

448

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues (excluding depreciation and amortization)

 

 

45,484

 

 

 

45,164

 

 

 

320

 

Sales and marketing

 

 

17,977

 

 

 

19,590

 

 

 

(1,613

)

Operating income

 

 

7,994

 

 

 

6,253

 

 

 

1,741