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HealthStream Announces Fourth Quarter & Full-Year 2018 Results
Fourth Quarter 2018
-
Revenues of
$59.8 million in the fourth quarter of 2018, up 8% from$55.3 million in the fourth quarter of 2017 with$342,000 negative impact in the fourth quarter of 2018 from the application of ASC 606 -
Operating income of
$2.8 million in the fourth quarter of 2018, up 88% from$1.5 million in the fourth quarter of 2017 with$897,000 positive impact in the fourth quarter of 2018 from the application of ASC 606 -
Income from continuing operations of
$2.9 million in the fourth quarter of 2018, down 8% from$3.2 million in the fourth quarter of 2017 with$877,000 positive impact in the fourth quarter of 2018 from the application of ASC 606 -
Earnings per share (EPS) from continuing operations of
$0.09 per share (diluted) in the fourth quarter of 2018, compared to$0.10 per share (diluted) in the fourth quarter of 2017 -
Adjusted EBITDA1 from continuing operations of
$9.5 million in the fourth quarter of 2018, up 16% from$8.2 million in the fourth quarter of 2017 with$897,000 positive impact in the fourth quarter of 2018 from the application of ASC 606
Full-Year 2018
-
Revenues of
$231.6 million in 2018, up 8% from$214.9 million in 2017 with$740,000 positive impact in 2018 from the application of ASC 606 -
Operating income of
$15.5 million in 2018, up 65% from$9.4 million in 2017 with$3.7 million positive impact in 2018 from the application of ASC 606 -
Income from continuing operations of
$13.3 million in 2018, up 50% from$8.8 million in 2017 with$3.0 million positive impact in 2018 from the application of ASC 606 -
EPS from continuing operations of
$0.41 per share (diluted) in 2018, compared to$0.27 per share (diluted) in 2017 -
Adjusted EBITDA1 from continuing operations of
$41.5 million in 2018, up 18% from$35.2 million in 2017 with$3.7 million positive impact in 2018 from the application of ASC 606
2019 Event
-
On
January 10, 2019 , acquiredProvidigm, LLC , aDenver -based company focused on quality assurance and performance improvement in healthcare, primarily serving skilled nursing facilities
|
1 Adjusted EBITDA from continuing operations is a non-GAAP financial measure. A reconciliation of adjusted EBITDA 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. |
Financial Results:
Fourth Quarter 2018 Compared to Fourth
Quarter 2017
On
Revenues for the fourth quarter of 2018 increased by
Revenues from our HealthStream Workforce Solutions segment were
approximately
Revenues from our HealthStream Provider Solutions segment were
approximately
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 fourth
quarter of 2018,
Operating income was
Income from continuing operations was
Net income (from continuing and discontinued operations) was
Adjusted EBITDA from continuing operations increased to
At
As discussed in our last earnings conference call, we are retiring the
metrics of “implemented and contracted subscribers.” These metrics do
not span our entire business and this will be the last time we report
them. At
We are introducing a new measure of our progress in growing the value of
our customer base, “hStream subscriptions.” As of
Full-Year 2018 Compared to Full-Year 2017
For 2018, revenues
were
Financial Impact of Adopting ASC 606
The chart on page 11
under the heading of “Impact of Adoption of ASC 606” sets forth what the
revenues, operating income, net income from continuing operations,
adjusted EBITDA from continuing operations, and non-GAAP operating
income would have been for the fourth quarter of 2018 and full-year 2018
if the prior revenue recognition standard was applied (ASC 605).
2019 Event
On
Financial Outlook for 2019
We are providing 2019 financial
guidance as set forth below:
|
Full Year 2019 Guidance |
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| Revenue: | |||||||||||||||||||
| Workforce Solutions | $ | 207 | - | $ | 213 | million | |||||||||||||
| Provider Solutions | $ | 44 | - | $ | 45 | million | |||||||||||||
| Consolidated | $ | 251 | - | $ | 258 | million | |||||||||||||
| Operating Income | $ | 10.0 | - | $ | 12.4 | million | |||||||||||||
| Capital Expenditures | $ | 35 | million | ||||||||||||||||
| Annual Effective Income Tax Rate | 26 | - | 28 | percent | |||||||||||||||
The above guidance includes the acquisition of Providigm, which was
consummated on
During 2019, we anticipate higher operating expenses associated with our
new corporate office, which consolidates our middle
We anticipate that capital expenditures associated with our office
consolidation to a central location in
“Our full-year 2018 financial results reflect a year of solid
performance over the prior year with revenues up 8 percent, operating
income up 65 percent, and adjusted EBITDA up 18 percent to
A conference call with
Use of Non-GAAP Financial Measures
This press release
contains certain non-GAAP financial measures, including non-GAAP net
income, non-GAAP operating income, adjusted EBITDA from continuing
operations, and adjusted EBITDA, which are 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, share-based
compensation, depreciation and amortization, and changes in fair value
of cost method investments (“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. Effective
In recent years, the Company has acquired businesses whose net tangible assets include deferred revenue. In accordance with GAAP reporting requirements, following the completion of any such acquisition, the Company may record a write-down of deferred revenue to fair value as defined by GAAP. If the Company is required to record a write-down of deferred revenue, it may result in lower recognized revenue, operating income, and net income in subsequent periods.
In connection therewith, this release presents below non-GAAP operating income and non-GAAP net income, which in each case reflects the corresponding GAAP figures adjusted to exclude the impact of the deferred revenue write-down associated with fair value accounting for acquired businesses as referenced above. Management believes that the presentation of these non-GAAP financial measures assists investors in understanding the Company’s performance between periods, excluding the impact of this deferred revenue write-down, and provides a useful measure of the ongoing performance of the Company. Both on a quarterly and year-to-date basis, the revenue for any acquired business is deferred and typically recognized over a one-to-two year period following the completion of an acquisition, so our GAAP revenues for this one-to-two year period will not reflect the full amount of revenues that would have been reported if the acquired deferred revenue had not been written down to fair value.
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
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HEALTHSTREAM, INC. |
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| Three Months Ended December 31, |
Year Ended December 31, |
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| 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
| Revenues, net | $ | 59,825 | $ | 55,269 | $ | 231,616 | $ | 214,899 | |||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||
| Cost of revenues (excluding depreciation and amortization) | 25,429 | 22,310 | 96,014 | 87,208 | |||||||||||||||||
| Product development | 6,586 | 6,219 | 25,735 | 24,148 | |||||||||||||||||
| Sales and marketing | 9,161 | 10,842 | 35,698 | 38,606 | |||||||||||||||||
| Other general and administrative expenses | 9,678 | 8,214 | 34,447 | 31,483 | |||||||||||||||||
| Depreciation and amortization | 6,134 | 6,173 | 24,231 | 24,047 | |||||||||||||||||
| Total operating costs and expenses | 56,988 | 53,758 | 216,125 | 205,492 | |||||||||||||||||
| Operating income | 2,837 | 1,511 | 15,491 | 9,407 | |||||||||||||||||
| Other income, net | 842 | 252 | 1,084 | 733 | |||||||||||||||||
| Income from continuing operations before income tax provision | 3,679 | 1,763 | 16,575 | 10,140 | |||||||||||||||||
| Income tax provision (benefit) | 748 | (1,407 | ) | 3,324 | 1,302 | ||||||||||||||||
| Income from continuing operations | 2,931 | 3,170 | 13,251 | 8,838 | |||||||||||||||||
| Discontinued operations | |||||||||||||||||||||
| (Loss) income from discontinued operations before income tax provision | — | (369 | ) | (64 | ) | 393 | |||||||||||||||
| Gain on sale of discontinued operations | — | — | 29,489 | — | |||||||||||||||||
| Income tax provision (benefit) | 141 | (1,147 | ) | 10,459 | (773 | ) | |||||||||||||||
| (Loss) income from discontinued operations | (141 | ) | 778 | 18,966 | 1,166 | ||||||||||||||||
| Net Income | $ | 2,790 | $ | 3,948 | $ | 32,217 | $ | 10,004 | |||||||||||||
|
Earnings per share – basic: |
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| Continuing operations | $ | 0.09 | $ | 0.10 | $ | 0.41 | $ | 0.27 | |||||||||||||
| Discontinued operations | — | 0.02 | 0.59 | 0.04 | |||||||||||||||||
|
Earnings per share – basic |
$ | 0.09 | $ | 0.12 | $ | 1.00 | $ | 0.31 | |||||||||||||
|
Earnings per share – diluted: |
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| Continuing operations | $ | 0.09 | $ | 0.10 | $ | 0.41 | $ | 0.27 | |||||||||||||
| Discontinued operations | — | 0.02 | 0.59 | 0.04 | |||||||||||||||||
|
Earnings per share – diluted |
$ | 0.09 | $ | 0.12 | $ | 1.00 | $ | 0.31 | |||||||||||||
| Weighted average shares of common stock outstanding: | |||||||||||||||||||||
| Basic | 32,325 | 31,902 | 32,264 | 31,861 | |||||||||||||||||
| Diluted | 32,416 | 32,236 | 32,335 | 32,196 | |||||||||||||||||
| Dividends declared per share | $ | — | $ | — | $ | 1.00 | $ | — | |||||||||||||
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HEALTHSTREAM, INC. |
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| December 31, |
December 31, |
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| 2018 |
2017(1) |
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| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 134,321 | $ | 84,768 | |||||
| Marketable securities | 34,497 | 46,350 | |||||||
| Accounts and unbilled receivables, net | 41,004 | 38,018 | |||||||
| Prepaid and other current assets | 31,612 | 24,467 | |||||||
| Current assets of discontinued operations | — | 6,125 | |||||||
| Total current assets | 241,434 | 199,728 | |||||||
| Capitalized software development, net | 18,352 | 16,014 | |||||||
| Property and equipment, net | 14,084 | 8,092 | |||||||
| Goodwill and intangible assets, net | 145,522 | 154,641 | |||||||
| Deferred tax assets | 145 | 45 | |||||||
| Deferred commissions | 16,470 | — | |||||||
| Other assets | 4,159 | 4,526 | |||||||
| Long-term assets of discontinued operations | — | 28,073 | |||||||
| Total assets | $ | 440,166 | $ | 411,119 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable, accrued and other liabilities | $ | 39,011 | $ | 29,356 | |||||
| Deferred revenue | 66,061 | 64,938 | |||||||
| Current liabilities of discontinued operations | — | 6,772 | |||||||
| Total current liabilities | 105,072 | 101,066 | |||||||
| Deferred tax liabilities | 11,068 | — | |||||||
| Deferred revenue, non-current | 2,868 | 6,287 | |||||||
| Other long-term liabilities | 2,211 | 1,048 | |||||||
| Long-term liabilities of discontinued operations | — | 2,548 | |||||||
| Total liabilities | 121,219 | 110,949 | |||||||
| Shareholders’ equity: | |||||||||
| Common stock | 286,597 | 282,666 | |||||||
| Accumulated other comprehensive loss | (23 | ) | (38 | ) | |||||
| Retained earnings | 32,373 | 17,542 | |||||||
| Total shareholders’ equity | 318,947 | 300,170 | |||||||
| Total liabilities and shareholders' equity | $ | 440,166 | $ | 411,119 | |||||
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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, 2017, adjusted for the divestiture of the Patient Experience business segment. |
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HEALTHSTREAM, INC. |
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| Year Ended | ||||||||||||
| December 31, | December 31, | |||||||||||
| 2018 | 2017 | |||||||||||
| Operating activities: | ||||||||||||
| Net income | $ | 32,217 | $ | 10,004 | ||||||||
| Income from discontinued operations | (18,966 | ) | (1,166 | ) | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Depreciation and amortization | 24,231 | 24,047 | ||||||||||
| Amortization of deferred commissions | 7,659 | — | ||||||||||
| Share-based compensation | 1,777 | 1,736 | ||||||||||
| Deferred income taxes | 3,017 | (2,144 | ) | |||||||||
| Provision for doubtful accounts | 1,033 | 1,568 | ||||||||||
| (Gain) loss on equity method investments | (42 | ) | 5 | |||||||||
| Change in fair value of cost method investments | 1,271 | — | ||||||||||
| Other | (9 | ) | 409 | |||||||||
| Changes in assets and liabilities: | ||||||||||||
| Accounts and unbilled receivables | (4,050 | ) | 1,125 | |||||||||
| Deferred commissions | (11,577 | ) | — | |||||||||
| Prepaid and other assets | (2,329 | ) | 1,820 | |||||||||
| Accounts payable, accrued and other liabilities | 4,915 | 5,752 | ||||||||||
| Deferred revenue | 5,103 | (552 | ) | |||||||||
| Net cash provided by continuing operating activities | 44,250 | 42,604 | ||||||||||
| Net cash (used in) provided by discontinued operating activities | (1,004 | ) | 4,108 | |||||||||
| Net cash provided by operating activities | 43,246 | 46,712 | ||||||||||
| Investing activities: | ||||||||||||
| Proceeds from sale of discontinued operations, net of tax | 44,049 | — | ||||||||||
| Changes in marketable securities | 11,907 | 6,794 | ||||||||||
| Payments to acquire cost method investments | (833 | ) | (500 | ) | ||||||||
| Purchases of property and equipment | (7,166 | ) | (5,515 | ) | ||||||||
| Payments associated with capitalized software development | (11,284 | ) | (9,597 | ) | ||||||||
| Net cash provided by (used in) continuing investing activities | 36,673 | (8,818 | ) | |||||||||
| Net cash used in discontinued investing activities | (115 | ) | (2,761 | ) | ||||||||
| Net cash provided by (used in) investing activities | 36,558 | (11,579 | ) | |||||||||
| Financing activities: | ||||||||||||
| Proceeds from exercise of stock options | 2,582 | 413 | ||||||||||
| Taxes paid related to net settlement of equity awards | (338 | ) | (412 | ) | ||||||||
| Payment of earn-out related to prior acquisitions | (38 | ) | — | |||||||||
| Payment of debt issuance costs | (100 | ) | — | |||||||||
| Payment of cash dividends | (32,357 | ) | — | |||||||||
| Net cash (used in) provided by financing activities | (30,251 | ) | 1 | |||||||||
| Net increase in cash and cash equivalents | 49,553 | 35,134 | ||||||||||
| Cash and cash equivalents at beginning of period | 84,768 | 49,634 | ||||||||||
| Cash and cash equivalents at end of period | $ | 134,321 | $ | 84,768 | ||||||||
|
Reconciliation of GAAP to Non-GAAP Financial Measures(1) |
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| Three Months Ended December 31, |
Year Ended December 31, |
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| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| GAAP income from continuing operations | $ | 2,931 | $ | 3,170 | $ | 13,251 | $ | 8,838 | |||||||||
| Interest income | (859 | ) | (287 | ) | (2,444 | ) | (870 | ) | |||||||||
| Interest expense | 32 | 35 | 130 | 132 | |||||||||||||
| Income tax provision (benefit) | 748 | (1,407 | ) | 3,324 | 1,302 | ||||||||||||
| Stock based compensation expense | 472 | 495 | 1,777 | 1,736 | |||||||||||||
| Depreciation and amortization | 6,134 | 6,173 | 24,231 | 24,047 | |||||||||||||
| Change in fair value of cost method investments | — | — | 1,271 | — | |||||||||||||
| Adjusted EBITDA from continuing operations | $ | 9,458 | $ | 8,179 | $ | 41,540 | $ | 35,185 | |||||||||
| GAAP net income | $ | 2,790 | $ | 3,948 | $ | 32,217 | $ | 10,004 | |||||||||
| Interest income | (859 | ) | (287 | ) | (2,444 | ) | (870 | ) | |||||||||
| Interest expense | 32 | 35 | 130 | 131 | |||||||||||||
| Income tax provision (benefit) | 889 | (2,554 | ) | 13,783 | 529 | ||||||||||||
| Stock based compensation expense | 472 | 493 | 1,686 | 1,852 | |||||||||||||
| Depreciation and amortization | 6,134 | 6,794 | 24,412 | 26,283 | |||||||||||||
| Change in fair value of cost method investments | — | — | 1,271 | — | |||||||||||||
| Adjusted EBITDA | $ | 9,458 | $ | 8,429 | $ | 71,055 | $ | 37,929 | |||||||||
| GAAP operating income | $ | 2,837 | $ | 1,511 | $ | 15,491 | $ | 9,407 | |||||||||
| Adjustment for deferred revenue write-down | 108 | 82 | 887 | 1,621 | |||||||||||||
| Non-GAAP operating income | $ | 2,945 | $ | 1,593 | $ | 16,378 | $ | 11,028 | |||||||||
| GAAP net income | $ | 2,790 | $ | 3,948 | $ | 32,217 | $ | 10,004 | |||||||||
| Adjustment for deferred revenue write-down, net of tax | 86 | 148 | 709 | 1,413 | |||||||||||||
| Non-GAAP net income | $ | 2,876 | $ | 4,096 | $ | 32,926 | $ | 11,417 | |||||||||
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(1) This press release contains certain non-GAAP financial measures, including non-GAAP net income, non-GAAP operating income, adjusted EBITDA, and adjusted EBITDA from continuing operations, which are used by management in analyzing its financial results and ongoing operational performance. |
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Impact of Adoption of ASC 606 (Unaudited) |
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| Three Months Ended December 31, |
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| 2018 | 2017 | |||||||||||||||||
|
ASC 606 As reported |
Adjustments from ASC 606 to ASC 605 |
ASC 605 As adjusted |
ASC 605 | |||||||||||||||
| Revenue | $ | 59,825 | $ | (342 | ) | $ | 60,167 | $ | 55,269 | |||||||||
| Operating income | 2,837 | 897 | 1,940 | 1,511 | ||||||||||||||
| Income from continuing operations | 2,931 | 877 | 2,054 | 3,170 | ||||||||||||||
| Adjusted EBITDA from continuing operations | 9,458 | 897 | 8,561 | 8,179 | ||||||||||||||
| Non-GAAP operating income | 2,945 | 897 | 2,048 | 1,593 | ||||||||||||||
| Year Ended December 31, |
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| 2018 | 2017 | |||||||||||||||||
|
ASC 606 As reported |
Adjustments from ASC 606 to ASC 605 |
ASC 605 As adjusted |
ASC 605 |
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| Revenue | $ | 231,616 | $ | 740 | $ | 230,876 | $ | 214,899 | ||||||||||
| Operating income | 15,491 | 3,747 | 11,744 | 9,407 | ||||||||||||||
| Income from continuing operations | 13,251 | 2,991 | 10,260 | 8,838 | ||||||||||||||
| Adjusted EBITDA from continuing operations | 41,540 | 3,747 | 37,793 | 35,185 | ||||||||||||||
| Non-GAAP operating income | 16,378 | 3,747 | 12,631 | 11,028 | ||||||||||||||
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 2019, that involve risks and uncertainties regarding
View source version on businesswire.com: https://www.businesswire.com/news/home/20190219005938/en/
Source:
Gerard M. Hayden, Jr.
Chief Financial Officer
(615) 301-3163
ir@healthstream.com
Media:
Mollie Condra, Ph.D.
Vice President,
Investor Relations & Communications
(615) 301-3237
mollie.condra@healthstream.com