Jul 27, 2020

HealthStream Announces Second Quarter 2020 Results

NASHVILLE, Tenn.--(BUSINESS WIRE)--Jul. 27, 2020-- HealthStream, Inc. (Nasdaq: HSTM), a leading provider of workforce and provider solutions for the healthcare industry, announced today results for the second quarter ended June 30, 2020. In this earnings release, results for the six months ended June 30, 2020 and 2019 are presented for continuing operations only, unless otherwise indicated, as our results for the six months ended June 30, 2019 reflect a gain on the sale of our previously divested Patient Experience business included in discontinued operations. In contrast, our results for the three months ended June 30, 2020 and 2019 do not include any discontinued operations.

  • Revenues of $60.6 million in the second quarter of 2020, down 5% from $63.8 million in the second quarter of 2019.
  • Operating income of $4.3 million in the second quarter of 2020 compared to $2.3 million in the second quarter of 2019.
  • Net income of $3.4 million in the second quarter of 2020, up 43% from $2.4 million in the second quarter of 2019.
  • Earnings per share (EPS) of $0.11 per share (diluted) in the second quarter of 2020 compared to $0.07 per share (diluted) in the second quarter of 2019.
  • Adjusted EBITDA1 of $12.0 million in the second quarter of 2020, up 2% from $11.8 million in the second quarter of 2019.

Financial Results:

Second Quarter 2020 Compared to Second Quarter 2019

Revenues for the second quarter of 2020 decreased by $3.2 million, or 5 percent, to $60.6 million, compared to $63.8 million for the second quarter of 2019.

Revenues from our Workforce Solutions segment were $48.9 million for the second quarter of 2020, compared to $52.4 million for the second quarter of 2019. Revenues from legacy resuscitation products accounted for this decline, as such products decreased by $4.8 million and were $10.7 million in the second quarter of 2020 compared to $15.5 million in the second quarter of 2019. Other workforce revenues increased by $1.3 million, representing an increase in platform and content subscriptions of $1.8 million, or 5 percent, offset by a decline in professional services revenues of $0.5 million, or 34 percent.

Revenues from our Provider Solutions segment were $11.7 million for the second quarter of 2020, compared to $11.4 million for the second quarter of 2019. Revenue growth of $0.3 million was primarily attributable to revenues from the CredentialMyDoc acquisition, which was completed in December 2019.

Operating income was $4.3 million for the second quarter of 2020 compared to $2.3 million from the second quarter of 2019. Operating costs and expenses were favorable compared to last year, primarily due to a $2.2 million charge for stock-based compensation and related expense recorded in the second quarter of 2019 related to a stock grant to employees facilitated by our CEO. Also, certain operating expenses declined during the second quarter in response to the COVID-19 pandemic. Notably, operating expenses related to travel declined by $1.1 million and operating expenses related to the cancellation of tradeshows declined $0.2 million, each when compared to the second quarter of 2019. Although these reductions to expense were favorable to operating income results during the second quarter of 2020, they also are indicative of the negative impact the pandemic is having on our ability to market and sell our products through traditional, in-person means, which resulted in lower sales volumes during the second quarter of 2020 compared to the prior year quarter. These favorable expense reductions were offset in part by higher personnel costs due to increased staffing levels and higher amortization associated with capitalized software and acquired intangibles.

Net income was $3.4 million in the second quarter of 2020, up 43 percent from $2.4 million in the second quarter of 2019, and EPS was $0.11 per share (diluted) in the second quarter of 2020, compared to $0.07 per share (diluted) for the second quarter of 2019.

Adjusted EBITDA was $12.0 million for the second quarter of 2020, up 2 percent from $11.8 million in the second quarter of 2019.

At June 30, 2020, the Company had cash and cash equivalents and marketable securities of $144.5 million. Capital expenditures incurred during the second quarter of 2020 were $4.3 million.

Year-to-Date 2020 Compared to Year-to-Date 2019

For the first six months of 2020, revenues were $122.1 million, a decrease of 5 percent over revenues of $129.0 million for the first six months of 2019. Operating income for the first six months of 2020 increased by 51 percent to $11.5 million, compared to $7.6 million for the first six months of 2019. Income from continuing operations for the first six months of 2020 was $10.5 million, up 47 percent from $7.2 million for the first six months of 2019. The first six months of 2019 were negatively impacted by the $2.2 million expense associated with the stock grant to employees facilitated by our CEO as noted above. Earnings per share from continuing operations were $0.33 per share (diluted) for the first six months of 2020, compared to $0.22 per share (diluted) for the first six months of 2019. Net income for the first six months of 2020 increased to $10.5 million, compared to $8.4 million for the first six months of 2019. Earnings per share were $0.33 per share (diluted) for the first six months of 2020, compared to $0.26 per share (diluted) for the first six months of 2019. Adjusted EBITDA from continuing operations decreased by 2 percent to $23.8 million for the first six months of 2020, compared to $24.2 million for the first six months of 2019. Adjusted EBITDA (from continuing and discontinued operations) decreased to $23.8 million for the first six months of 2020, compared to $25.9 million for the first six months of 2019.

Other Business Updates

At June 30, 2020, we had approximately 3.48 million contracted subscriptions to hStream™, our Platform-as-a-Service technology. hStream technology enables healthcare organizations and their respective workforces to easily connect to and gain value from the growing HealthStream ecosystem of applications, tools, and content.

Financial Outlook for 2020

The Company continues to believe that the extent, timing, and duration 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 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 for the remainder of 2020. Due to this continued uncertainty, the Company is not providing 2020 guidance in this earnings release.

“At mid-year 2020, it appears that the coronavirus pandemic is on a dramatic upswing in the U.S., pressing healthcare providers with continued excessive demand to address the needs of COVID-19 patients,” said Robert A. Frist, Jr., Chief Executive Officer, HealthStream. “Our commitment to support them remains strong as everyone faces great uncertainty, which I believe is understandably resulting in some delayed purchasing decisions.”

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, July 28, 2020, at 9:00 a.m. (ET). 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 #8148633) for U.S. and Canadian callers and 404-537-3406 (conference ID #8148633) for international callers.

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 cost of sales in the first quarter of 2020 (“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 results of operations of the PX business that we no longer own and the gain on sale in connection with the sale of such business in February 2018 and thus reflects the Company’s ongoing business operations and assists in comparing the Company’s results of operations between periods. We also believe that adjusted EBITDA and adjusted EBITDA from continuing operations are useful to many investors to assess the Company’s ongoing results from current operations. Adjusted EBITDA and adjusted EBITDA from continuing operations are non-GAAP financial measures and should not be considered as measures of financial performance under GAAP. Because adjusted EBITDA and adjusted EBITDA from continuing operations are not measurements determined in accordance with GAAP, such non-GAAP financial measures are susceptible to varying calculations. Accordingly, adjusted EBITDA and adjusted EBITDA from continuing operations, as presented, may not be comparable to other similarly titled measures of other companies and have limitations as analytical tools.

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 HealthStream

HealthStream (Nasdaq: HSTM) is dedicated to improving patient outcomes through the development of healthcare organizations’ greatest asset: their people. Our unified suite of solutions is contracted by healthcare organizations across the U.S. for workforce development, training & learning management, talent management, credentialing, privileging, provider enrollment, performance assessment, and managing simulation-based education programs. Based in Nashville, Tennessee, HealthStream has additional offices in Jericho, New York; Boulder, Colorado; Denver, Colorado; San Diego, California; Chicago, Illinois; and Portland, Oregon. For more information, visit http://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

 

 

Six Months Ended

 

 

 

June 30,

2020

 

 

June 30,

2019

 

 

June 30,

2020

 

 

June 30,

2019

 

Revenues, net

 

$

60,553

 

 

$

63,781

 

 

$

122,125

 

 

$

128,967

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues (excluding depreciation and amortization)

 

 

22,935

 

 

 

26,806

 

 

 

43,294

 

 

 

53,667

 

Product development

 

 

7,830

 

 

 

7,640

 

 

 

15,298

 

 

 

14,567

 

Sales and marketing

 

 

8,236

 

 

 

9,819

 

 

 

17,424

 

 

 

19,340

 

Other general and administrative expenses

 

 

10,098

 

 

 

10,306

 

 

 

19,963

 

 

 

20,276

 

Depreciation and amortization

 

 

7,150

 

 

 

6,942

 

 

 

14,599

 

 

 

13,480

 

Total operating costs and expenses

 

 

56,249

 

 

 

61,513

 

 

 

110,578

 

 

 

121,330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

4,304

 

 

 

2,268

 

 

 

11,547

 

 

 

7,637

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

 

199

 

 

 

852

 

 

 

1,906

 

 

 

1,674

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income tax provision

 

 

4,503

 

 

 

3,120

 

 

 

13,453

 

 

 

9,311

 

Income tax provision

 

 

1,061

 

 

 

719

 

 

 

2,920

 

 

 

2,130

 

Income from continuing operations

 

 

3,442

 

 

 

2,401

 

 

 

10,533

 

 

 

7,181

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of discontinued operations

 

 

 

 

 

 

 

 

 

 

 

1,620

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

426

 

Income from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

1,194

 

Net income

 

$

3,442

 

 

$

2,401

 

 

$

10,533

 

 

$

8,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share – basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.11

 

 

$

0.07

 

 

$

0.33

 

 

$

0.22

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

0.04

 

Net income per share - basic

 

$

0.11

 

 

$

0.07

 

 

$

0.33

 

 

$

0.26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.11

 

 

$

0.07

 

 

$

0.33

 

 

$

0.22

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

0.04

 

Net income per share - diluted

 

$

0.11

 

 

$

0.07

 

 

$

0.33

 

 

$

0.26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

31,997

 

 

 

32,394

 

 

 

32,166

 

 

 

32,366

 

Diluted

 

 

32,025

 

 

 

32,434

 

 

 

32,191

 

 

 

32,406

 

 

HEALTHSTREAM, INC.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

112,534

 

 

$

131,538

 

Marketable securities

 

 

31,989

 

 

 

41,328

 

Accounts and unbilled receivables, net

 

 

33,865

 

 

 

30,376

 

Prepaid and other current assets

 

 

20,292

 

 

 

21,330

 

Total current assets

 

 

198,680

 

 

 

224,572

 

 

 

 

 

 

 

 

 

 

Capitalized software development, net

 

 

23,250

 

 

 

21,445

 

Property and equipment, net

 

 

22,936

 

 

 

26,065

 

Operating lease right of use assets, net

 

 

28,422

 

 

 

29,615

 

Goodwill and intangible assets, net

 

 

180,213

 

 

 

162,277

 

Deferred tax assets

 

 

269

 

 

 

269

 

Deferred commissions

 

 

17,024

 

 

 

17,645

 

Other assets

 

 

7,031

 

 

 

7,656

 

Total assets

 

$

477,825

 

 

$

489,544

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable, accrued and other liabilities

 

$

26,316

 

 

$

39,674

 

Deferred revenue

 

 

66,126

 

 

 

65,511

 

Total current liabilities

 

 

92,442

 

 

 

105,185

 

Deferred tax liabilities

 

 

13,491

 

 

 

13,183

 

Deferred revenue, non-current

 

 

1,609

 

 

 

1,918

 

Operating lease liability, noncurrent

 

 

29,388

 

 

 

30,733

 

Other long-term liabilities

 

 

1,471

 

 

 

357

 

Total liabilities

 

 

138,401

 

 

 

151,376

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Common stock

 

 

280,746

 

 

 

290,021

 

Accumulated other comprehensive income

 

 

1

 

 

 

4

 

Retained earnings

 

 

58,677

 

 

 

48,143

 

Total shareholders’ equity

 

 

339,424

 

 

 

338,168

 

Total liabilities and shareholders' equity

 

$

477,825

 

 

$

489,544

 

 

HEALTHSTREAM, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

Operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

10,533

 

 

$

8,375

 

Income from discontinued operations

 

 

 

 

 

(1,194

)

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

14,599

 

 

 

13,480

 

Stock based compensation

 

 

1,107

 

 

 

3,074

 

Amortization of deferred commissions

 

 

4,254

 

 

 

4,201

 

Deferred income taxes

 

 

2,427

 

 

 

2,066

 

Provision for doubtful accounts

 

 

351

 

 

 

48

 

Loss (gain) on equity method investments

 

 

50

 

 

 

(69

)

Non-cash royalty expense

 

 

(3,440

)

 

 

 

Change in fair value of non-marketable equity investments

 

 

(1,181

)

 

 

 

Other

 

 

121

 

 

 

(84

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts and unbilled receivables

 

 

(3,759

)

 

 

12,019

 

Prepaid and other assets

 

 

(2,006

)

 

 

716

 

Accounts payable, accrued and other liabilities

 

 

(9,755

)

 

 

(6,354

)

Deferred revenue

 

 

231

 

 

 

329

 

Net cash provided by operating activities

 

 

13,532

 

 

 

36,607

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Business combinations, net of cash acquired

 

 

(21,449

)

 

 

(18,018

)

Proceeds from sale of discontinued operations

 

 

 

 

 

6,222

 

Changes in marketable securities

 

 

9,241

 

 

 

(6,121

)

Proceeds from sale of fixed assets

 

 

 

 

 

12

 

Payments to acquire non-marketable equity investments

 

 

(1,000

)

 

 

(3,342

)

Purchases of property and equipment

 

 

(1,268

)

 

 

(19,598

)

Payments associated with capitalized software development

 

 

(7,619

)

 

 

(8,374

)

Net cash used in investing activities

 

 

(22,095

)

 

 

(49,219

)

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

 

 

 

214

 

Taxes paid related to net settlement of equity awards

 

 

(373

)

 

 

(985

)

Payment of earn-outs related to prior acquisitions

 

 

 

 

 

(37

)

Repurchases of common stock

 

 

(10,009

)

 

 

 

Payment of cash dividends

 

 

(31

)

 

 

(52

)

Net cash used in financing activities

 

 

(10,413

)

 

 

(860

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(28

)

 

 

 

Net decrease in cash and cash equivalents

 

 

(19,004

)

 

 

(13,472

)

Cash and cash equivalents at beginning of period

 

 

131,538

 

 

 

134,321

 

Cash and cash equivalents at end of period

 

$

112,534

 

 

$

120,849

 

 

Reconciliation of GAAP to Non-GAAP Financial Measures(1)

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

GAAP income from continuing operations

 

$

3,442

 

 

$

2,401

 

 

$

10,533

 

 

$

7,181

 

Interest income

 

 

(237

)

 

 

(884

)

 

 

(831

)

 

 

(1,674

)

Interest expense

 

 

25

 

 

 

30

 

 

 

50

 

 

 

51

 

Income tax provision

 

 

1,061

 

 

 

719

 

 

 

2,920

 

 

 

2,130

 

Stock based compensation expense

 

 

557

 

 

 

2,558

 

 

 

1,107

 

 

 

3,074

 

Depreciation and amortization

 

 

7,150

 

 

 

6,942

 

 

 

14,599

 

 

 

13,480

 

Change in fair value of non-marketable equity investments

 

 

(29

)

 

 

 

 

 

(1,181

)

 

 

 

Non-cash royalty expense

 

 

 

 

 

 

 

 

(3,440

)

 

 

 

Adjusted EBITDA from continuing operations

 

$

11,969

 

 

$

11,766

 

 

$

23,757

 

 

$

24,242

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income

 

$

3,442

 

 

$

2,401

 

 

$

10,533

 

 

$

8,375

 

Interest income

 

 

(237

)

 

 

(884

)

 

 

(831

)

 

 

(1,674

)

Interest expense

 

 

25

 

 

 

30

 

 

 

50

 

 

 

51

 

Income tax provision

 

 

1,061

 

 

 

719

 

 

 

2,920

 

 

 

2,556

 

Stock based compensation expense

 

 

557

 

 

 

2,558

 

 

 

1,107

 

 

 

3,074

 

Depreciation and amortization

 

 

7,150

 

 

 

6,942

 

 

 

14,599

 

 

 

13,480

 

Change in fair value of non-marketable equity investments

 

 

(29

)

 

 

 

 

 

(1,181

)

 

 

 

Non-cash royalty expense

 

 

 

 

 

 

 

 

(3,440

)

 

 

 

Adjusted EBITDA

 

$

11,969

 

 

$

11,766

 

 

$

23,757

 

 

$

25,862

 

(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 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, without limitation, as the result of developments related to the COVID-19 pandemic, such as the length and severity of the pandemic; business and economic conditions resulting from the pandemic; the impact on the pandemic on healthcare organizations; measures we are taking to respond to the pandemic; the impact of governmental action and regulation in connection with the pandemic (including the CARES Act); the timing and availability of effective medical treatments and vaccines; potential workforce disruptions; and the disruption in capital and financial markets; as well as risks referenced in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed on February 26, 2020 and the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2020 filed on April 30, 2020, 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.

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

Source: HealthStream, Inc.

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