Document and Entity Information - USD ($) $ in Millions	12 Months Ended
Document and Entity Information - USD ($) $ in Millions	Dec. 31, 2016	Feb. 24, 2017	Jun. 30, 2016
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Trading Symbol	HSTM
Entity Registrant Name	HEALTHSTREAM INC
Entity Central Index Key	0001095565
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		31,777,141
Entity Public Float			$ 674.6

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 49,634	$ 82,010
Marketable securities	53,540	66,976
Accounts receivable, net of allowance for doubtful accounts of $863 and $303 at December 31, 2016 and 2015, respectively	44,805	36,348
Accounts receivable - unbilled	2,581	1,998
Prepaid royalties, net of amortization	18,183	14,036
Other prepaid expenses and other current assets	8,694	8,169
Total current assets	177,437	209,537
Property and equipment, net	10,245	12,471
Capitalized software development, net of accumulated amortization of $31,787 and $24,130 at December 31, 2016 and 2015, respectively	16,310	13,955
Goodwill	109,765	83,073
Intangible assets, net of accumulated amortization of $16,445 and $8,685 at December 31, 2016 and 2015, respectively	78,364	55,966
Non-marketable equity investments	3,276	3,640
Other assets	603	927
Total assets	396,000	379,569
Current liabilities:
Accounts payable	3,127	4,616
Accrued royalties	13,161	9,053
Accrued liabilities	8,146	7,003
Accrued compensation and related expenses	1,994	3,308
Deferred revenue	68,542	65,098
Total current liabilities	94,970	89,078
Deferred tax liabilities	5,968	4,763
Deferred revenue, noncurrent	7,859	4,350
Other long term liabilities	1,095	1,058
Commitments and contingencies
Shareholders' equity:
Common stock, no par value, 75,000 shares authorized; 31,748 and 31,647 shares issued and outstanding at December 31, 2016 and 2015, respectively	280,813	278,799
Retained earnings	5,346	1,591
Accumulated other comprehensive loss	(51)	(70)
Total shareholders' equity	286,108	280,320
Total liabilities and shareholders' equity	$ 396,000	$ 379,569

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Allowance for doubtful accounts, net	$ 863	$ 303
Accumulated amortization on capitalized software development	31,787	24,130
Accumulated amortization on intangible assets	$ 16,445	$ 8,685
Common stock, no par value
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	31,748,000	31,647,000
Common stock, shares outstanding	31,748,000	31,647,000

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Statement [Abstract]
Revenues, net	$ 225,974	$ 209,002	$ 170,690
Operating costs and expenses:
Cost of revenues (excluding depreciation and amortization)	96,634	89,386	74,145
Product development	28,897	24,214	16,463
Sales and marketing	39,004	35,589	29,867
Other general and administrative expenses	33,665	29,259	22,909
Depreciation and amortization	22,207	16,997	10,931
Total operating costs and expenses	220,407	195,445	154,315
Operating income	5,567	13,557	16,375
Other income, net	581	162	146
Income before income tax provision	6,148	13,719	16,521
Income tax provision	2,393	5,098	6,127
Net income	$ 3,755	$ 8,621	$ 10,394
Net income per share:
Basic	$ 0.12	$ 0.29	$ 0.38
Diluted	$ 0.12	$ 0.28	$ 0.37
Weighted average shares of common stock outstanding:
Basic	31,721	30,057	27,570
Diluted	32,068	30,436	28,023

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Statement of Comprehensive Income [Abstract]
Net income	$ 3,755	$ 8,621	$ 10,394
Other comprehensive income, net of taxes:
Unrealized gain (loss) on marketable securities	19	(33)	(6)
Total other comprehensive income (loss)	19	(33)	(6)
Comprehensive income	$ 3,774	$ 8,588	$ 10,388

Consolidated Statements of Shareholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Retained Earnings (Accumulated Deficit) [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Beginning balance at Dec. 31, 2013	$ 149,433	$ 166,888	$ (17,424)	$ (31)
Beginning balance, shares at Dec. 31, 2013		27,327
Net income	10,394		10,394
Comprehensive income (loss)	(6)			(6)
Issuance of common stock in acquisition	2,246	$ 2,246
Issuance of common stock in acquisition, shares		82
Stock based compensation	1,625	$ 1,625
Tax benefits from equity awards	3,234	3,234
Common stock issued under stock plans, net of shares withheld for employee taxes	933	$ 933
Common stock issued under stock plans, net of shares withheld for employee taxes, shares		268
Ending balance at Dec. 31, 2014	167,859	$ 174,926	(7,030)	(37)
Ending balance, shares at Dec. 31, 2014		27,677
Net income	8,621		8,621
Comprehensive income (loss)	(33)			(33)
Issuance of common stock	98,014	$ 98,014
Issuance of common stock, shares		3,870
Stock donated to Company	0
Stock donated to Company, shares		(54)
Stock based compensation	3,280	$ 3,280
Tax benefits from equity awards	3,008	3,008
Common stock issued under stock plans, net of shares withheld for employee taxes	(429)	$ (429)
Common stock issued under stock plans, net of shares withheld for employee taxes, shares		154
Ending balance at Dec. 31, 2015	$ 280,320	$ 278,799	1,591	(70)
Ending balance, shares at Dec. 31, 2015	31,647	31,647
Net income	$ 3,755		3,755
Comprehensive income (loss)	19			19
Stock based compensation	1,968	$ 1,968
Stock based compensation , shares		101
Tax benefits from equity awards	217	$ 217
Common stock issued under stock plans, net of shares withheld for employee taxes	(171)	(171)
Ending balance at Dec. 31, 2016	$ 286,108	$ 280,813	$ 5,346	$ (51)
Ending balance, shares at Dec. 31, 2016	31,748	31,748

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
OPERATING ACTIVITIES:
Net income	$ 3,755	$ 8,621	$ 10,394
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	22,207	16,997	10,931
Deferred income taxes	1,786	392	1,324
Share based compensation expense	1,968	3,280	1,625
Excess tax benefits from equity awards	(217)	(3,008)	(3,234)
Provision for doubtful accounts	640	284	237
(Gain) loss on non-marketable equity investments	(121)	117	65
Gain on sale of long-lived assets		(72)
Other	1,026	1,401	1,394
Changes in assets and liabilities, net of business combinations:
Accounts and unbilled receivables	(6,079)	(736)	(6,690)
Prepaid royalties	(4,008)	(1,006)	(4,174)
Other prepaid expenses and other current assets	(1,462)	(1,372)	(2,022)
Other assets	305	1,110	(1,761)
Accounts payable	(1,319)	(137)	2,442
Accrued royalties	3,691	(202)	820
Accrued liabilities, accrued compensation and related expenses, and other long-term liabilities	(884)	3,075	5,434
Deferred revenue	2,946	6,173	17,471
Net cash provided by operating activities	24,234	34,917	34,256
INVESTING ACTIVITIES:
Business combinations, net of cash acquired	(55,255)	(88,075)	(12,298)
Proceeds from maturities of marketable securities	119,395	54,799	52,625
Purchases of marketable securities	(106,965)	(84,228)	(44,341)
Payments to acquire equity method investments		(1,000)	(325)
Payments to acquire cost method investments		(1,000)	(1,000)
Proceeds for sale of long lived assets	975
Payments associated with capitalized software development	(9,721)	(7,265)	(5,658)
Purchases of property and equipment	(5,085)	(8,094)	(4,544)
Net cash used in investing activities	(56,656)	(134,863)	(15,541)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock		98,014
Proceeds from exercise of stock options	145	328	1,094
Proceeds from borrowings under revolving line of credit facility		28,000
Repayments under revolving line of credit facility		(28,000)
Taxes paid related to net settlement of equity awards	(316)	(756)	(161)
Excess tax benefits from equity awards	217	3,008	3,234
Payment of earn-outs related to business combinations		(633)	(424)
Net cash provided by financing activities	46	99,961	3,743
Net increase (decrease) in cash and cash equivalents	(32,376)	15	22,458
Cash and cash equivalents at beginning of year	82,010	81,995	59,537
Cash and cash equivalents at end of year	49,634	82,010	81,995
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	76	190	56
Income taxes paid	$ 2,496	2,648	1,641
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Receivable from sale of long-lived assets		$ 975	0
Issuance of common stock in connection with business combinations			$ 2,246

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reporting Entity and Segments

HealthStream, Inc. (the “Company”) was incorporated in 1990 as a Tennessee corporation and is headquartered in Nashville, Tennessee. The Company operates in three segments: HealthStream Workforce Solutions, HealthStream Patient Experience Solutions, and HealthStream Provider Solutions. Workforce Solutions products consist of SaaS-based services and subscription-based solutions to meet the ongoing training, certification, assessment and development needs of the healthcare community. These solutions provide, deliver and track computer based education for our customers in the United States through our software-as-a-service (SaaS) model. Patient Experience products offer healthcare organizations a wide range of quality and satisfaction surveys, consulting services, analyses of survey results, and other research-based services. Provider Solutions products offer healthcare organizations software applications for administering and tracking provider credentialing, privileging, call center and enrollment.

Recently Adopted Accounting Standards

The Company adopted Accounting Standards Update (“ASU”) 2015-16, Business Combinations (Topic 805) in January 2016. Under the provisions of the revised guidance, acquirers in a business combination must recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The acquirer must record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The Company recorded a measurement period adjustment during the period ended March 31, 2016. See Note 5 Business Combinations for further discussion.

Recognition of Revenue

Revenues are derived from providing services through our SaaS-based workforce development platform products, courseware subscriptions, provision of survey and research services, sales of software licensing arrangements, software maintenance and support, professional services, custom courseware development and other education and training services.

The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when persuasive evidence of an arrangement exists, prices are fixed or determinable, services and products are provided to the customer and collectability is probable or reasonably assured.

Revenue recognized from software and other arrangements is allocated to each element of the arrangement based on the relative fair values of the elements. While elements include software products and post contract customer support, the fair value of each element is based on vendor specific objective evidence (VSOE). For installed software products, if fair value cannot be determined for each undelivered element of the arrangement, all revenue from the arrangement is deferred until fair value can be determined or until all elements of the arrangement are delivered and customer acceptance has occurred. Sales of the Company’s SaaS-based workforce development platform products include customer support, implementation services, and training; therefore all revenues are deferred until the SaaS-based product is implemented, at which time revenues are recognized ratably over the subscription service period. In the event that circumstances occur, which give rise to uncertainty regarding the collectibility of contracted amounts, revenue recognition is suspended until such uncertainty is resolved. Fees for these services are billed on either a monthly, quarterly, or annual basis.

Revenues derived from the delivery of services through the Company’s SaaS-based workforce development platform products and courseware subscriptions are recognized ratably over the term of the subscription service agreement or over the historical usage period, if usage typically differs from the subscription period. Other training revenues are generally recognized upon the completion of training.

Revenues derived from the license of installed software products are recognized using the residual method upon delivery of the software, when VSOE of fair value for the undelivered elements within the contract can be established. If the Company cannot objectively determine the fair value of each undelivered element based on the VSOE of fair value, the Company defers revenue recognition until all elements are delivered, all services have been performed, or until fair value can be objectively determined. Software support and maintenance revenues are recognized ratably over the term of the related agreement.

Revenues recognized from the Company’s survey and research services are determined using both the proportional performance method and the completed contract method. Revenues are generally earned over the estimated survey cycle, which typically ranges from less than one month to up to five months. The survey cycle is generally initiated based on the receipt of the first survey response and runs through provision of related survey reports to the customer. If survey results are not available to the customer during the survey fielding cycle, revenues are recognized at time of report delivery. Revenues for coaching and consulting engagements are recognized using the proportional performance method over the term of the underlying contract. Fees for survey services are billed upon initiation of the survey cycle, with progress billings made throughout the survey cycle. Fees for coaching and consulting engagements are billed upon initiation of the engagement with progress billings throughout the term of the contract.

Revenues from professional services and courseware development services are recognized upon the completion of performance milestones and deliverables using the proportional performance method. All other revenues are recognized as the related services are performed or products are delivered. Fees for these services are generally billed at project initiation and upon completion of various milestones.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. These accounting principles require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and such differences could be material to the consolidated financial statements.

Cash Equivalents

The Company considers cash equivalents to be unrestricted, highly liquid investments with initial maturities of less than three months.

Marketable Securities

Marketable securities are classified as available for sale and are stated at fair market value, with the unrealized gains and losses, net of tax, reported in other comprehensive income (loss) on the accompanying consolidated balance sheets. Realized gains and losses and declines in market value judged to be other than temporary on investments in marketable securities are included in interest and other income on the accompanying consolidated statements of income. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available for sale are included in other income (expense) on the accompanying consolidated statements of income. Premiums and discounts are amortized over the life of the related available for sale security as an adjustment to yield using the effective interest method.

Accounts Receivable-Unbilled

Accounts receivable-unbilled represents the following: 1) revenue earned and recognized on contracts accounted for using the proportional performance method for which invoices have not been generated or contractual billing dates have not been reached; and 2) the difference between billings for contracts containing escalated pricing over the term of the agreement and the recognition of revenue ratably over the subscription period.

Deferred Revenue

Deferred revenue represents amounts that have been billed or collected in advance of revenue recognition. The Company typically invoices customers in quarterly, bi-annual, or annual installments, and occasionally customers will pay for multi-year contracts in advance. Deferred revenue is reduced as the revenue recognition criteria are met.

Prepaid Royalties

Prepaid royalties represents advance payments associated with the sale of third party products, such as courseware subscriptions. Royalties are typically paid in advance at the commencement of the revenue cycle, or periodically throughout the revenue cycle, such as quarterly, bi-annual, or annual installments. Royalty payments are amortized over the term of the underlying contracts, which generally range from 12 to 36 months, in order to match the direct royalty costs to the same period the subscription revenue is recognized. Amortization of royalties is included under the caption “cost of revenues (excluding depreciation and amortization)” in the accompanying consolidated statements of income.

Allowance for Doubtful Accounts

The Company estimates its allowance for doubtful accounts using a specific identification method in which management considers the facts and circumstances surrounding each potentially uncollectible receivable. An allowance is also maintained for accounts that are not specifically identified that may become uncollectible in the future. Uncollectible receivables are written-off in the period management believes it has exhausted every opportunity to collect payment from the customer. Bad debt expense is recorded when events or circumstances indicate an additional allowance is required based on the Company’s specific identification approach.

Changes in the allowance for doubtful accounts and the amounts charged to bad debt expense for the years ended December 31, were as follows (in thousands):


	Allowance Balance at Beginning of Period		Charged to Costs and Expenses		Write-offs			Allowance Balance at End of Period
2016	$	303	$	640	$	(80	)	$	863
2015	$	331	$	284	$	(312	)	$	303
2014	$	211	$	237	$	(117	)	$	331

Capitalized Software Development

Capitalized software development is stated on the basis of cost, and is presented net of accumulated amortization. The Company capitalizes costs incurred during the software development phase for projects when such costs are material. These assets are amortized using the straight-line method, generally ranging between three to five years. The Company capitalized approximately $10.0 million and $7.3 million during 2016 and 2015, respectively. Amortization of capitalized software development was approximately $7.7 million and $6.2 million during 2016 and 2015, respectively. Maintenance and operating costs are expensed as incurred. As of December 31, 2016 and 2015, there were no capitalized software development costs for computer software developed for resale.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs to valuation techniques used in measuring fair value. There are three levels to the fair value hierarchy based on the reliability of inputs, as follows:

Level 1 –

Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 –

Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 –

Unobservable inputs in which little or no market data exists, therefore requiring the Company to develop its own assumptions.

The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them for each reporting period. This determination requires significant judgments to be made by the Company. At December 31, 2016 and 2015, our assets measured at fair value on a recurring basis consisted of marketable securities, which are classified as available for sale (see Note 4 – Marketable Securities). The Company did not have any financial liabilities that were subject to fair value measurements as of such dates.

Property and Equipment

Property and equipment are stated on the basis of cost. Depreciation and amortization are provided on the straight-line method over the following estimated useful lives, except for assets under capital leases and leasehold improvements, which are amortized over the shorter of the estimated useful life or their respective lease term.


	Years
Furniture and fixtures		5-10
Equipment		3-5

Goodwill and Intangible Assets

Goodwill represents the excess of purchase price in a business combination over the fair value of the net identifiable assets acquired. The carrying amount of our goodwill is evaluated for impairment at least annually during the fourth quarter and whenever events or changes in facts or circumstances indicate that impairment may exist. In accordance with ASC 350, Intangibles – Goodwill and Other, companies may opt to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. A qualitative assessment includes factors such as financial performance, industry and market metrics, and other factors affecting the reporting unit. If this assessment concludes that is more likely than not that the fair value of a reporting unit exceeds its carrying value, then goodwill is not considered impaired and no further impairment testing is required. Conversely, if the qualitative assessment concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we must then compare the fair value of the reporting unit to its carrying value. The Company determines fair value of the reporting units using both income and market based models. These models require the use of various assumptions relating to cash flow projections, growth rates, discount rates and terminal value calculations. The Company did not recognize any impairment charges for the years ended December 31, 2016, 2015 or 2014.

As of December 31, 2016, intangible assets with remaining unamortized balances include contract rights and customer relationships, internally-developed technology and patents, non-competition agreements, and trade names. These intangible assets are considered to have definite useful lives and are being amortized on a straight line basis over periods typically ranging between three and fifteen years. The weighted average amortization period for definite lived intangible assets as of December 31, 2016 was 11.1 years. Intangible assets are reviewed for impairment whenever events or changes in facts or circumstances indicate that the carrying amount of the assets may not be recoverable. There were no impairments identified or recorded for the years ended December 31, 2016, 2015, or 2014.

Long-Lived Assets

Long-lived assets to be held for use are reviewed for events or changes in facts and circumstances, both internally and externally, which may indicate that an impairment of long-lived assets held for use is present. The Company measures any impairment using observable market values or discounted future cash flows from the related long-lived assets. The cash flow estimates and discount rates incorporate management’s best estimates, using appropriate and customary assumptions and projections at the date of evaluation. Management periodically evaluates whether the carrying value of long-lived assets, including intangible assets, property and equipment, capitalized software development, and other assets will be recoverable. There were no impairments identified or recorded for the years ended December 31, 2016, 2015, or 2014.

Non-Marketable Equity Investments

Non-marketable equity investments are accounted for using the equity method when the Company can exercise significant influence over the investee. Investments for which the Company is not able to exercise significant influence over the investee are accounted for under the cost method. The proportionate share of income or loss from equity method investments are recorded under the caption “other income, net” in the accompanying consolidated statements of income.

Financial Instruments

The Company has various financial instruments, including cash and cash equivalents, accounts receivable, accounts receivable-unbilled, accounts payable, accrued liabilities, and deferred revenue. The carrying amounts of these financial instruments approximate fair value because of the short term maturity or short term nature of such instruments. The Company also has marketable securities, which are recorded at approximate fair value based on quoted market prices or alternative pricing sources (see Note 4 – Marketable Securities).

Advertising

The Company expenses the costs of advertising as incurred. Advertising expense for the years ended December 31, 2016, 2015, and 2014 was approximately $1.0 million, $1.1 million, and $0.7 million, respectively.

Shipping and Handling Costs

Shipping and handling costs that are associated with our products and services are included in cost of revenues.

Income Taxes

Income taxes are accounted for using the asset and liability method, whereby deferred tax assets and liabilities are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities measured at tax rates that will be in effect for the year in which the differences are expected to affect taxable income. Management evaluates all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is needed. Future realization of the tax benefit of an existing deductible temporary difference or carryforward ultimately depends on the existence of sufficient taxable income of the appropriate character within the carryback or carryforward period available under the tax law. There are four possible sources of taxable income that may be available under the tax law to realize a tax benefit for deductible temporary differences and carryforwards: 1) future reversals of existing taxable temporary differences, 2) future taxable income exclusive of reversing temporary differences and carryforwards, 3) taxable income in prior carryback year(s) if carryback is permitted under the tax law, and 4) tax-planning strategies that would, if necessary, be implemented to realize deductible temporary differences or carryforwards prior to their expiration. Management reviews the realizability of its deferred tax assets each reporting period to identify whether any significant changes in circumstances or assumptions have occurred that could materially affect the realizability of deferred tax assets. As of December 31, 2016, the Company had established a valuation allowance of $654,000 for the portion of its net deferred tax assets that are not more likely than not expected to be realized.

The Company accounts for income tax uncertainties using a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not recognition threshold are measured in order to determine the tax benefit to be recognized in the financial statements. The Company expenses any penalties or interest associated with tax obligations as general and administrative expenses and interest expense, respectively.

Earnings Per Share

Basic earnings per share is computed by dividing the net income available to common shareholders for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the net income for the period by the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares are composed of incremental common shares issuable upon the exercise of stock options and restricted share units subject to vesting. The dilutive effect of common equivalent shares is included in diluted earnings per share by application of the treasury stock method. Common equivalent shares that have an anti-dilutive effect on diluted net income per share have been excluded from the calculation of diluted weighted average shares outstanding for the years ended December 31, 2016, 2015, and 2014.

Concentrations of Credit Risk and Significant Customers

The Company’s credit risks relate primarily to cash and cash equivalents, marketable securities and accounts receivable. The Company places its temporary excess cash investments in high quality, short-term money market instruments. At times, such investments may be in excess of the FDIC insurance limits. Marketable securities consists primarily of investment grade corporate debt securities and certificates of deposit.

The Company sells its products and services to various companies in the healthcare industry that are located in the United States. We perform ongoing credit evaluations of our customers’ financial condition and generally require no collateral from customers. An allowance for doubtful accounts is maintained for potentially uncollectible accounts receivable. The Company did not have any single customer representing over 10% of net revenues or accounts receivable during 2016, 2015, or 2014.

Stock Based Compensation

As of December 31, 2016, the Company maintains three stock based compensation plans under which awards are outstanding, which are described in Note 11. The Company accounts for stock based compensation using the fair-value based method for costs related to share-based payments, including stock options and restricted share units. The Company uses the Black Scholes option pricing model for calculating the fair value of option awards issued under its stock based compensation plan. The Company measures compensation cost of restricted share units based on the closing fair market value of the Company’s stock on the date of grant. Stock based compensation cost is measured at the grant date, based on the fair value of the award that is ultimately expected to vest, and is recognized as an expense over the requisite service period. The Company recognizes tax benefits from stock based compensation if an excess tax benefit is realized. Excess tax benefits are recorded as an increase to common stock when realized.

Newly Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, 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. The guidance also provides for additional disclosures with respect to revenues and cash flows arising from contracts with customers. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2017, and the Company currently anticipates adopting the standard using the modified retrospective approach effective January 1, 2018. The Company is in the process of implementing the standard, and has identified several key provisions that may result in changes to current accounting policies, systems and processes, and internal controls, including but not limited to the following: 1) Determining the relative selling price for software-as-a-service agreements, software licenses, software maintenance, and professional services in order to assign value to the separate performance obligations within a contract. Certain existing right to use arrangements are recognized over time because VSOE cannot be established, but may result in earlier revenue recognition under the new standard. 2) Capitalizing costs to acquire contracts, such as sales commissions, is not a current accounting policy, therefore we expect historical sales commissions, which have been expensed as incurred, will need to be evaluated for capitalization; 3) Ensuring the Company’s financial systems can record, calculate, summarize, and report the necessary information required by the standard, which will require additional investments in technology and resources. The Company is not currently able to quantify the financial impact of the Company’s adoption of this accounting standard on its future consolidated financial statements, but does anticipate adjustments to retained earnings upon adoption.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 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; however, the Company is currently reviewing this standard to determine the method of adoption and to assess the impact on its future consolidated financial statements. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2018, and early adoption is permitted.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718), which serves to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016, and early adoption is permitted in any interim or annual period. The Company does not expect the adoption will have a material effect on its future consolidated financial statements.

In March 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Sub Topic 825-10), which addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The guidance will, among other things, require equity method 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 standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2017, and early adoption is permitted for only limited aspects of such guidance. The Company is currently reviewing this standard to determine the method of adoption and to assess the impact on its future consolidated financial statements.

Shareholders' Equity	12 Months Ended
Shareholders' Equity	Dec. 31, 2016
Equity [Abstract]
Shareholders' Equity	2. SHAREHOLDERS’ EQUITY Common Stock The Company is authorized to issue up to 75 million shares of common stock. The number of common shares issued and outstanding as of December 31, 2016 and 2015 was approximately 31.7 million and 31.6 million, respectively. The Company issued approximately 3.9 million shares of common stock in connection with an underwritten public offering, which was completed in May 2015, raising approximately $98.0 million of cash. Preferred Stock The Company is authorized to issue up to 10 million shares of preferred stock in one or more series, having the relative voting powers, designations, preferences, rights and qualifications, limitations or restrictions, and other terms as the Board of Directors may fix in providing for the issuance of such series, without any vote or action of the shareholders.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

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-Name Accounting Standards Codification
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
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Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 15: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
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+ Details

Earnings Per Share

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Earnings Per Share

3. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share for the three years ended December 31, 2016 (in thousands, except per share amounts):


	2016		2015		2014
Numerator:
Net income	$	3,755	$	8,621	$	10,394

Denominator:
Weighted-average shares outstanding		31,721		30,057		27,570
Effect of dilutive shares		347		379		453

Weighted-average diluted shares		32,068		30,436		28,023

Basic earnings per share	$	0.12	$	0.29	$	0.38

Diluted earnings per share	$	0.12	$	0.28	$	0.37

Potentially dilutive shares representing approximately 38,000, 16,000, and 70,000 shares of common stock for 2016, 2015, and 2014, respectively, were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive.

Marketable Securities

12 Months Ended

Dec. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Marketable Securities

4. MARKETABLE SECURITIES

At December 31, 2016 and 2015, the fair value of marketable securities, which were all classified as available for sale, included the following (in thousands):


	December 31, 2016
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value
Level 2:
Corporate debt securities	$	44,486	$	—	$	(50	)	$	44,436
Government-sponsored enterprise debt securities		9,105		1		(2	)		9,104

Total	$	53,591	$	1	$	(52	)	$	53,540


	December 31, 2015
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value
Level 2:
Certificates of deposit	$	1,000	$	0	$	0		$	1,000
Corporate debt securities		66,046		0		(70	)		65,976

Total	$	67,046	$	0	$	(70	)	$	66,976

The carrying amounts of the marketable securities reported in the consolidated balance sheets approximate fair value based on quoted market prices or alternative pricing sources and models utilizing market observable inputs. As of December 31, 2016, the Company does not consider any of its marketable securities to be other than temporarily impaired. During the years ended December 31, 2016 and 2015, the Company did not reclassify any items out of accumulated other comprehensive income to net income. All investments in marketable securities are classified as a current asset on the balance sheet because the underlying securities mature within one year from the balance sheet date.

- Definition

The entire disclosure for investments in certain debt and equity securities.

+ References + Details

Business Combinations

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

Business Combinations

5. BUSINESS COMBINATIONS

Morrisey Associates, Inc.

On August 8, 2016, Echo, Inc. (“Echo”), a wholly owned subsidiary of the Company, acquired all of the outstanding stock of Morrisey Associates, Inc. (“MAI”), a Chicago, Illinois based company that provides credentialing and privileging software to healthcare organizations. The acquisition of MAI allows the Company to expand its credentialing and privileging product offerings and solutions to healthcare organizations. The consideration paid for MAI consisted of approximately $48.0 million in cash, which the Company funded with cash on hand, and was not subject to any post-closing working capital or similar adjustment. The Company incurred approximately $953,000 in transaction costs, all of which were incurred during the year ended December 31, 2016. The transaction costs were recorded in other general and administrative expenses in the consolidated statements of income. The results of operations for MAI have been included in the Company’s consolidated financial statements from the date of acquisition, and are also included in the HealthStream Provider Solutions segment.

A summary of the purchase price is as follows (in thousands):


Cash paid at closing	$	44,120
Cash held in escrow		3,880

Total consideration paid	$	48,000

The following table summarizes the fair value of the assets acquired and liabilities assumed as of the date of acquisition (in thousands):


Accounts receivable, net		3,402
Prepaid royalties and other prepaid assets		187
Property and equipment		75
Deferred tax assets		1,507
Goodwill		20,467
Intangible assets		27,400
Accounts payable and accrued liabilities		(1,031	)
Deferred revenue		(4,007	)

Net assets acquired	$	48,000

The excess purchase price over the fair values of net tangible and intangible assets has been recorded as goodwill. The fair values of tangible and identifiable intangible assets and deferred revenue are based on management’s estimates and assumptions. The fair values of assets acquired and liabilities assumed are based on based on management’s estimates and assumptions. The goodwill balance is primarily attributed to the assembled workforce, additional market opportunities from offering MAI’s products, and expected synergies from integrating MAI with other products or other combined functional areas within the Company. The goodwill balance is deductible for U.S. income tax purposes. The net tangible assets include deferred revenue, which was adjusted down from a book value at the acquisition date of $8.8 million to an estimated fair value of $4.0 million. The $4.8 million write-down of deferred revenue will result in lower revenues than would have otherwise been recognized for such services.

The following table sets forth the components of identifiable intangible assets and their estimated useful lives as of the acquisition date (in thousands):


	Fair value		Useful life
Customer relationships	$	21,400		13 years
Developed technology		5,400		5 years
Trade name		600		6 years

Total intangible assets subject to amortization	$	27,400

The amounts of revenue and operating loss of MAI included in the Company’s consolidated statement of income from the date of acquisition of August 8, 2016 to the period ending December 31, 2016 are as follows (in thousands):


Total revenues	$	2,581
Operating loss	$	(2,358	)

The following unaudited pro forma financial information summarizes the combined results of operations of the Company and MAI, which was significant for purposes of the unaudited pro forma financial information disclosure, as though the companies were combined as of January 1, 2015 (in thousands, except per share data):


	Year Ended December 31,
	2016		2015
Total revenues	$	236,205	$	218,042

Net income	$	6,610	$	7,533

Basic earnings per share	$	0.21	$	0.25

Diluted earnings per share	$	0.21	$	0.25

These unaudited pro forma combined results of operations include certain adjustments arising from the acquisition such as adjustment for amortization of intangible assets, depreciation of property and equipment, and fair value adjustments of acquired deferred revenue balances. The unaudited pro forma combined results of operations is for informational purposes only and is not indicative of what the Company’s results of operations would have been had the transaction occurred at the beginning of the period presented or to project the Company’s results of operations in any future period.

The unaudited pro forma financial information for the years ended December 31, 2016 and 2015 combines the historical results of the Company and MAI for the years ended December 31, 2016 and 2015 and the pro forma adjustments listed above.

HealthLine Systems

On March 16, 2015, the Company acquired all of the membership interests of HealthLine Systems, LLC (“HLS”), a San Diego, California based company that specializes in credentialing, privileging, call center, and quality management solutions for the healthcare industry. The acquisition of HLS enabled the Company to provide a comprehensive solution set for healthcare provider credentialing, privileging, enrollment, referral, onboarding, and analytics in support of HealthStream’s approach to talent management for healthcare organizations. The consideration paid for HLS consisted of approximately $90.5 million in cash (taking into account an estimated closing working capital adjustment and the payment of an incremental tax indemnification claim by the Company as noted below). The Company incurred approximately $1.3 million in transaction costs associated with the acquisition, of which $965,000 were incurred during the year ended December 31, 2015 and $329,000 were incurred during the year ended December 31, 2014. The transaction costs were recorded in other general and administrative expenses in the consolidated statements of income for such periods. The results of operations for HLS have been included in the Company’s consolidated financial statements from the date of acquisition, and are also included in the HealthStream Provider Solutions segment.

A summary of the purchase price is as follows (in thousands):


Cash paid	$	89,850
Cash held in escrow		679

Total consideration paid	$	90,529

The following table summarizes the fair value of the assets acquired and liabilities assumed as of the date of acquisition (in thousands):


Cash	$	54
Accounts receivable, net		3,052
Prepaid assets		546
Property and equipment		200
Deferred tax assets		2,523
Goodwill		43,798
Intangible assets		47,200
Accounts payable and accrued liabilities		(1,085	)
Deferred revenue		(5,979	)

Net assets acquired	$	90,309

The total consideration paid does not equal the fair value of assets acquired and liabilities assumed due to the post measurement period adjustment discussed below. The excess of purchase price over the fair values of net tangible and intangible assets has been recorded as goodwill. The fair values of tangible and identifiable intangible assets, deferred tax assets, deferred revenue, and other liabilities are based on management’s estimates and assumptions. Included in the assets and liabilities assumed is an estimated indemnification asset of $300,000 and a contingent liability of $700,000, both of which are associated with tax liabilities. The contingent liability is measured based on management’s estimate of a range of probable outcomes. The goodwill balance is primarily attributed to the assembled workforce, additional market opportunities from offering HLS’s products, and expected synergies from integrating HLS with other products or other combined functional areas within the Company. During the three months ended March 31, 2016, the Company received notice of an indemnification claim from the former owners of HLS pursuant to the terms of the membership interest purchase agreement. The terms of such agreement require the Company to indemnify such owners for incremental taxes incurred as the result of the structure of the acquisition, which had favorable tax aspects to the Company. The Company recorded a measurement period adjustment in relation to the claim that increased goodwill by approximately $2.2 million during the three months ended March 31, 2016. The additional goodwill is deductible for U.S. income tax purposes. The goodwill balance excluding such measurement period adjustment is also deductible for U.S. income tax purposes. During the three months ended September 30, 2016, the Company agreed to settle this indemnification claim for approximately $2.4 million in respect of such tax indemnification provision in the membership interest purchase agreement, a difference of approximately $200,000 from the $2.2 million measurement period adjustment. The Company surpassed the one year measurement period as of the period ended March 31, 2016; accordingly, in accordance with requisite accounting guidance, the $200,000 difference has been reflected as a charge against net income for the year ended December 31, 2016. The net tangible assets include deferred revenue, which was adjusted down from a book value at the acquisition date of $15.0 million to an estimated fair value of $6.0 million. The $9.0 million write-down of deferred revenue will result in lower revenues than would have otherwise been recognized for such services.

The following table sets forth the components of identifiable intangible assets and their estimated useful lives as of the acquisition date (in thousands):


	Fair value		Useful life
Customer relationships	$	42,600		13 years

Developed technology		3,700		5 years
Trade names		900		6 years

Total intangible assets subject to amortization	$	47,200

The amounts of revenue and operating income (loss) of HLS included in the Company’s consolidated statement of income from the date of acquisition of March 16, 2015 to the period ending December 31, 2015 are as follows (in thousands):


Total revenues	$	8,543

Operating loss	$	(2,541	)

The following unaudited pro forma financial information summarizes the combined results of operations of the Company and HLS, which was significant for purposes of the unaudited pro forma financial information disclosure, as though the companies were combined as of January 1, 2015 (in thousands, except per share data):


	Year Ended December 31,
	2016		2015
Total revenues	$	227,834	$	219,108

Net income	$	4,924	$	13,551

Basic earnings per share	$	0.16	$	0.45

Diluted earnings per share	$	0.15	$	0.44

These unaudited pro forma combined results of operations include certain adjustments arising from the acquisition such as adjustment for amortization of intangible assets, depreciation of property and equipment, fair value adjustments of acquired deferred revenue balances, and interest expense associated with borrowings under a revolving credit facility by the Company to partially fund the acquisition. The unaudited pro forma combined results of operations is for informational purposes only and is not indicative of what the Company’s results of operations would have been had the transaction occurred at the beginning of the period presented or to project the Company’s results of operations in any future period.

The unaudited pro forma financial information for the years ended December 31, 2016 and 2015 combines the historical results of the Company and HLS for the years ended December 31, 2016 and 2015 and the pro forma adjustments listed above.

Health Care Compliance Strategies

On March 3, 2014, the Company acquired all of the stock of Health Care Compliance Strategies, Inc. (HCCS), a Jericho, New York based company that specializes in healthcare compliance solutions and services. The Company acquired HCCS to further advance its suite of workforce development solutions, including its offering of compliance solutions. The consideration paid for HCCS consisted of approximately $12.8 million in cash (taking into account a post-closing working capital adjustment) and 81,614 shares of our common stock. The Company made an additional payment of $750,000 during the second quarter of 2015, upon the achievement of certain performance milestones within one year post-closing. The Company incurred approximately $515,000 in transaction costs associated with the acquisition, of which $365,000 were incurred during the year ended December 31, 2014 and $150,000 were incurred during the year ended December 31, 2013. The transaction costs were recorded under the caption “other general and administrative” in the consolidated statements of income. In allocating the purchase price, the Company recorded approximately $6.2 million of goodwill, $8.4 million of identifiable intangible assets, $2.6 million of tangible assets, $625,000 of deferred tax assets, and $2.7 million of liabilities. Included in the recorded liabilities was an accrual for contingent consideration of approximately $600,000. The goodwill balance is primarily attributed to assembled workforce, additional market opportunities of HCCS’s compliance solutions, and expected synergies from integrating HCCS’s products into our platform. The goodwill balance is deductible for U.S. income tax purposes. The net tangible assets include deferred revenue, which was adjusted down from a book value at the acquisition date of $3.2 million to an estimated fair value of $1.7 million. The $1.5 million write-down of deferred revenue resulted in lower revenues than would have otherwise been recognized for such services. The results of operations for HCCS have been included in the Company’s consolidated financial statements from the date of acquisition, and are also included in the HealthStream Workforce Development Solutions segment.

Other Business Combinations

On June 30, 2016, the Company acquired all of the stock of Performance Management Services, Inc. (“PMSI”), a Company based in Tustin, California focused on competency-based performance development for nurses, for $4.0 million in cash and up to an additional $500,000 of contingent consideration. The acquisition, including associated transaction costs, is not considered material to the Company’s financial statements. The Company accounted for the acquisition as a business combination and has allocated the purchase consideration based on management’s estimates of fair value. The results of operations for PMSI are included in the Company’s consolidated financial statements from the date of acquisition and are included in the HealthStream Workforce Solutions segment.

On July 25, 2016, the Company purchased all of the outstanding stock of Nursing Registry Consultants Corporation (“Nurse Competency”) not previously held by the Company for approximately $1.0 million in cash and up to an additional $75,000 in contingent consideration. Nurse Competency provides SaaS-based clinical assessment and testing products to the healthcare industry. The Company previously held a 32% minority equity interest in Nurse Competency and had accounted for such interest as an equity method investment. The fair value of the minority equity interest as of the July 25, 2016 acquisition date was approximately $484,000 and was determined in accordance with the fair value of the controlling interest acquired with consideration given to acquisition premiums, where applicable. The Company recorded a gain of approximately $225,000 to account for the difference between the noted acquisition date fair value of the minority equity interest and the carrying value as of such date. The gain is included in other income (expense), net in the consolidated statement of income for the year ended December 31, 2016. The Company accounted for the acquisition as a business combination and has allocated the purchase consideration based on management’s estimates of fair value. The results of operations for Nurse Competency are included in the Company’s consolidated financial statements from the date of acquisition and are included in the HealthStream Workforce Solutions segment.

- Definition

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

+ References

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+ Details

Property and Equipment

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Property and Equipment

6. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:


	December 31,
	2016			2015
Equipment	$	20,885		$	23,057
Leasehold improvements		5,025			4,435
Furniture and fixtures		4,862			4,338

Gross property and equipment		30,772			31,830
Accumulated depreciation and amortization		(20,527	)		(19,359	)

Property and equipment, net	$	10,245		$	12,471

Depreciation of property and equipment totaled approximately $6.8 million and $5.3 million for the years ended December 31, 2016 and 2015, respectively.

Goodwill

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

7. GOODWILL

The changes in the carrying amount of goodwill for the years ended December 31, 2016 and 2015 are as follows (in thousands):


	Workforce		Patient Experience		Provider		Total
Balance at January 1, 2016	$	12,336	$	24,154	$	46,583	$	83,073
Acquisition of HealthLine Systems, LLC.		—		—		2,180		2,180
Acquisition of Morrisey Associates, Inc.		—		—		20,467		20,467
Other business combinations		4,045		—		—		4,045

Balance at December 31, 2016	$	16,381	$	24,154	$	69,230	$	109,765


	Workforce		Patient Experience		Provider			Total
Balance at January 1, 2015	$	12,336	$	24,154	$	5,424		$	41,914
Acquisition of HealthLine Systems, LLC		—		—		41,618			41,618
Disposal of long lived assets		—		—		(459	)		(459	)

Balance at December 31, 2015	$	12,336	$	24,154	$	46,583		$	83,073

During the three months ended March 31, 2016, the Company recorded approximately $2.2 million of additional goodwill in relation to the March 2015 acquisition of HealthLine Systems, LLC. Such amount relates to the measurement period adjustment previously mentioned in Note 5 under the caption “HealthLine Systems.” During the quarter ended December 31, 2015, the Company disposed of certain long lived assets meeting the definition of a business. Accordingly, we have allocated approximately $459,000 of reporting unit goodwill to this disposition of assets pursuant to ASC 350, Intangibles – Goodwill and other.

Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

8. INTANGIBLE ASSETS

Intangible assets other than goodwill are considered to have finite useful lives. Customer related intangibles are amortized over their estimated useful lives ranging from five to thirteen years. Other intangible assets include non-competition agreements, technology and patents, and trade names, and are being amortized over periods ranging from three to nine years. During the quarter ended December 31, 2015, the Company retired approximately $10.7 million of fully amortized identifiable intangible assets. Gross amounts and related accumulated amortization presented below as of December 31, 2015 are reflective of such retirements. Additionally, amounts presented below as of December 31, 2016 and December 31, 2015 are inclusive of identifiable intangible assets recorded in relation to our acquisitions of Morrisey Associates, Inc. and HealthLine Systems, LLC, as well as other business combinations (see Note 5 – Business Combinations). Amortization of intangible assets was approximately $7.8 million and $5.6 million for the years ended December 31, 2016 and 2015, respectively.

Identifiable intangible assets are comprised of the following (in thousands):


	As of December 31, 2016							As of December 31, 2015
	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Customer related	$	77,985	$	(11,539	)	$	66,446	$	55,571	$	(6,068	)	$	49,503
Other		16,824		(4,906	)		11,918		9,080		(2,617	)		6,463

Total	$	94,809	$	(16,445	)	$	78,364	$	64,651	$	(8,685	)	$	55,966

The expected future annual amortization expense for the years ending December 31, is as follows (in thousands):


2017	$	9,549
2018		9,437
2019		8,792
2020		8,139
2021		7,356
Thereafter		35,091

Total	$	78,364

Business Segments

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Business Segments

9. BUSINESS SEGMENTS

The Company provides services to healthcare organizations and other members within the healthcare industry. The Company’s services are focused on the delivery of workforce development products and services (HealthStream Workforce Solutions), survey and research services (HealthStream Patient Experience Solutions), and provider credentialing, privileging, call center and enrollment products and services (HealthStream Provider Solutions).

The Company measures segment performance based on operating income before income taxes and prior to the allocation of certain corporate overhead expenses, interest income, interest expense, gains and losses from equity investments, and depreciation. The Unallocated component below includes corporate functions, such as accounting, human resources, legal, investor relations, administrative and executive personnel, depreciation, a portion of amortization, and certain other expenses, which are not currently allocated in measuring segment performance. The following is the Company’s business segment information as of and for the years ended December 31, 2016, 2015 and 2014 (in thousands).


Revenues, net:	2016		2015		2014
Workforce	$	168,040	$	161,289	$	134,242
Patient Experience		33,850		34,193		31,901
Provider		24,084		13,520		4,547

Total revenues, net	$	225,974	$	209,002	$	170,690


Operating income:	2016			2015			2014
Workforce	$	37,329		$	39,986		$	35,374
Patient Experience		(522	)		1,548			810
Provider		(2,443	)		(2,559	)		826
Unallocated		(28,797	)		(25,418	)		(20,635	)

Total operating income	$	5,567		$	13,557		$	16,375


	Assets *						Purchases of long-lived assets						Depreciation and amortization
	2016		2015		2014		2016		2015		2014		2016		2015		2014
Workforce	$	96,323	$	82,375	$	81,116	$	9,266	$	11,403	$	7,179	$	8,243	$	6,693	$	4,813
Patient Experience		35,988		34,902		34,536		1,123		2,007		1,277		1,144		1,061		1,272
Provider		155,011		100,948		10,976		2,026		332		200		6,061		3,986		683
Unallocated		108,678		161,344		130,634		2,135		1,617		1,546		6,759		5,257		4,163

Total	$	396,000	$	379,569	$	257,262	$	14,550	$	15,359	$	10,202	$	22,207	$	16,997	$	10,931

Segment assets include accounts and unbilled receivables, prepaid royalties, prepaid and other current assets, other assets, capitalized software development, certain property and equipment, and intangible assets. Cash and cash equivalents and marketable securities are not allocated to individual segments, and are included within Unallocated. A significant portion of property and equipment assets are included within Unallocated.

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
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Reference 2: http://www.xbrl.org/2003/role/presentationRef
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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-Paragraph 40
-URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e9031-108599

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Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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+ Details

Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

10. INCOME TAXES

The provision (benefit) for income taxes is comprised of the following (in thousands):


	Year Ended December 31,
	2016			2015			2014
Current federal	$	(271	)	$	3,608		$	3,198
Current state		877			1,098			1,605
Deferred federal		1,489			501			1,092
Deferred state		298			(109	)		232

Provision for income taxes	$	2,393		$	5,098		$	6,127

A reconciliation of income taxes at the statutory federal income tax rate to the provision for income taxes included in the accompanying consolidated statements of income is as follows (in thousands):


	Year Ended December 31,
	2016			2015			2014
Federal tax provision at the statutory rate	$	2,152		$	4,802		$	5,782
State income tax provision, net of federal benefit		539			673			1,350
Tax credits		(560	)		(425	)		(1,160	)
Change in state valuation allowance		308			(8	)		37
Other		(46	)		56			118

Provision for income taxes	$	2,393		$	5,098		$	6,127

Management periodically assesses the realizability of its deferred tax assets, and to the extent that a recovery is not likely, a valuation allowance is established to reduce the deferred tax asset to the amount estimated to be recoverable. At December 31, 2016, a valuation allowance of $654,000 exists.

As of December 31, 2016, the Company had federal and state net operating loss carryforwards of $478,000 and $17.6 million, respectively. These loss carryforwards will expire in years 2017 through 2026. The Company is subject to income taxation at the federal and various state levels. The Company is subject to U.S. federal tax examinations for tax years 2015 through 2016. Loss carryforwards and credit carryforwards generated or utilized in years earlier than 2015 are also subject to examination and adjustment. The Company has completed examinations with the Internal Revenue Service for tax years 2013 and 2014. The Company has research and development tax credit carryforwards of $2.7 million that expire in varying amounts through 2036. As of December 31, 2016, the Company had alternative minimum tax credit carryforwards of $837,000 that are available to offset future regular tax liabilities and they do not expire.

A reconciliation of the beginning and ending liability for gross unrecognized tax benefits at December 31, 2016 and 2015, are as follows (in thousands):


	December 31,
	2016			2015
Balance at beginning of year	$	658		$	2,168
Additions for tax positions in the current year		64			351
Reductions for tax positions of prior years		(325	)		(1,861	)

Balance at end of year	$	397		$	658

The Company recognized approximately $18,000 and $14,000 for interest and penalties related to unrecognized tax benefits within the provision for income taxes during the years ended December 31, 2016 and 2015, respectively. Unrecognized tax benefits included tax positions of approximately $350,000 and $308,000 at December 31, 2016 and 2015, respectively, that if recognized would impact the Company’s effective tax rate. The reduction for tax positions of prior years reflected in the table above as of December 31, 2016 relates to an amended return filed with the IRS. The Company estimates that it is reasonably possible the liability for unrecognized tax benefits could decrease up to $46,000 within the next 12 months.

Deferred federal and state income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax assets and deferred tax liabilities are as follows (in thousands):


	December 31,
	2016			2015
Deferred tax assets:
Allowance for doubtful accounts	$	332		$	122
Accrued liabilities		1,275			2,062
Tax credits		1,397			816
Stock based compensation		1,171			1,107
Deferred revenue		1,818			1,563
Depreciation		1,119			348
Basis difference on investments		316			80
Net operating loss carryforwards		743			407

Total deferred tax assets		8,171			6,505
Less: Valuation allowance		(654	)		(346	)

Deferred tax assets, net of valuation allowance		7,517			6,159
Deferred tax liabilities:
Deductible goodwill		3,267			2,646
Nondeductible intangible assets		2,523			1,806
Prepaid assets		1,894			1,911
Capitalized software development		5,801			4,559

Total deferred tax liabilities		13,485			10,922

Net deferred tax liabilities	$	(5,968	)	$	(4,763	)

Stock Based Compensation

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Based Compensation

11. STOCK BASED COMPENSATION

Stock Incentive Plans

The Company’s 2016 Omnibus Incentive Plan (2016 Plan), 2010 Stock Incentive Plan (2010 Plan) and 2000 Stock Incentive Plan (2000 Plan; collectively, the 2016 Plan, the 2010 Plan and the 2000 Plan referred to as the Plan) authorize the grant of options, restricted share units (RSU), or other forms of stock based compensation to employees, officers, directors and others, and such grants must be approved by the Compensation Committee of the Board of Directors. Options granted under the Plan have terms of no more than ten years, with certain restrictions. The Plan allows the Compensation Committee of the Board of Directors to determine the vesting period and parameters of each grant. The vesting period of the options and RSUs granted has historically ranged from immediate vesting to annual vesting up to four years, generally beginning one year after the grant date. As of December 31, 2016, approximately 1.5 million shares of unissued common stock remained reserved for future stock incentive grants under the 2016 Plan. The Company issues new shares of common stock when options are exercised or when RSUs become vested.

Stock Option Activity

A summary of activity and various other information relative to stock options for the year ended December 31, 2016 is presented in the tables below (in thousands, except exercise price).


	Common Shares			Weighted- Average Exercise Price		Aggregate Intrinsic Value
Outstanding at beginning of period		520		$	6.41
Granted		—			—
Exercised		(44	)		3.33
Expired		—			—
Forfeited		—			—

Outstanding at end of period		476		$	6.74	$	8,716

Exercisable at end of period.		476		$	6.74	$	8,716

The aggregate intrinsic value for stock options in the table above represents the total difference between the Company’s closing stock price on December 30, 2016 (the last trading day of the year) of $25.05 per share and the option exercise price, multiplied by the number of in-the-money options as of December 31, 2016. The weighted average remaining contractual term of options outstanding at December 31, 2016 was 1.6 years. Options exercisable at December 31, 2016 have a weighted average remaining contractual term of 1.6 years.

Other information relative to option activity during the three years ended December 31, 2016 is as follows (in thousands):


	2016		2015		2014
Total grant date fair value of stock options vested	$	—	$	232	$	630

Total intrinsic value of stock options exercised	$	820	$	1,662	$	5,912

Cash proceeds from exercise of stock options	$	146	$	328	$	1,094

Restricted Share Unit Activity

A summary of activity relative to RSUs for the year ended December 31, 2016 is as follows (in thousands, except weighted average grant date fair value):


	Number of RSU’s			Weighted- Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at beginning of period		218		$	25.21
Granted		116			20.72
Vested		(74	)		24.54

Forfeited		(7	)		24.50

Outstanding at end of period		253		$	23.36	$	6,331

The aggregate fair value of RSU awards that vested in 2016 and 2015, as of the respective vesting dates, was approximately $1.5 million and $1.4 million, respectively. A portion of RSUs that vested in 2016 and 2015 were net-share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld for RSUs during 2016 and 2015 were 15,373 and 8,922, respectively, and were based on the value of the RSUs on their respective settlement dates as determined by the Company’s closing stock price. Total payments related to RSUs for the employees’ tax obligations to taxing authorities were approximately $316,000 in 2016 and $230,000 in 2015, and are reflected as a financing activity within the consolidated statements of cash flows. These net-share settlements had the effect of share repurchases by the Company as they reduced and retired the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company.

Stock Based Compensation

Total stock based compensation expense, which is recorded in our consolidated statements of income, recorded for the years ended December 31, is as follows (in thousands):


	Years Ended December 31,
	2016		2015		2014
Cost of revenues (excluding depreciation and amortization)	$	144	$	824	$	86
Product development		178		569		201
Sales and marketing		239		547		224
Other general and administrative		1,407		1,340		1,114

Total stock based compensation expense	$	1,968	$	3,280	$	1,625

The Company amortizes the fair value of all stock based awards, net of estimated forfeitures, on a straight-line basis over the requisite service period, which generally is the vesting period. As of December 31, 2016, total unrecognized compensation expense related to non-vested stock options and RSUs was approximately $3.1 million, net of estimated forfeitures, with a weighted average expense recognition period remaining of 2.4 years. The Company realized approximately $217,000 of excess tax benefits related to stock based awards during the year ended December 31, 2016, which was recorded as an increase to common stock.

Stock based compensation cost for RSUs is measured based on the closing fair market value of the Company’s stock on the date of grant. Stock based compensation cost for stock options is estimated at the grant date based on the fair value calculated using the Black-Scholes method. The Company did not grant any stock options during 2016, 2015, or 2014.

Stock Awards

During June 2015, the Company’s Chief Executive Officer (“CEO”), Robert A. Frist, Jr., entered into an agreement with the Company pursuant to which he contributed 54,241 of his personally owned shares of HealthStream, Inc. common stock to the Company, without any consideration paid to him. In connection with this contribution, the Company approved the grant of 49,310 shares of HealthStream, Inc. common stock to over 600 employees who were not otherwise eligible to receive equity awards and had at least one year of service with the Company. The Company recognized approximately $1.5 million of stock based compensation expense for these stock awards during the three months ended June 30, 2015 based on the closing fair market value of the Company’s stock on the date of the Company’s approval of these grants. In connection with these equity awards, effective in the second quarter of 2015, the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld were 17,279, and were based on the value of the stock awards on the date of the Company’s approval of these grants, as determined by the Company’s closing stock price on that date. Total payments related to the employees’ tax obligations to taxing authorities for these stock awards were approximately $526,000, and are reflected as a financing activity within the consolidated statements of cash flows for the year ended December 31, 2015. These share withholdings had the effect of share repurchases by the Company as they reduced and retired the number of shares otherwise issuable as a result of the stock awards and did not represent an expense to the Company.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References + Details

Employee Benefit Plan	12 Months Ended
Employee Benefit Plan	Dec. 31, 2016
Compensation and Retirement Disclosure [Abstract]
Employee Benefit Plan	12. EMPLOYEE BENEFIT PLAN 401(k) Plan The Company has a defined-contribution employee benefit plan (401(k) Plan) incorporating provisions of Section 401(k) of the Internal Revenue Code. Employees must have attained the age of 21 and have completed thirty days of service to be eligible to participate in the 401(k) Plan. Under the provisions of the 401(k) Plan, a plan member may make contributions, on a tax-deferred basis, subject to IRS limitations. The Company elected to provide eligible employees with matching contributions totaling approximately $391,000 and $645,000 for the years ended December 31, 2016 and 2015, respectively.

Debt

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Debt

13. DEBT

At December 31, 2016 and 2015, the Company had no debt outstanding.

Revolving Credit Facility

The Company maintains a Loan Agreement (the “Revolving Credit Facility”) with SunTrust Bank (“SunTrust”) in the aggregate principal amount of $50.0 million, which matures on November 24, 2017. Under the Revolving Credit Facility, the Company may borrow up to $50.0 million, which includes a $5.0 million swing line subfacility and a $5.0 million letter of credit subfacility, as well as an accordion feature that allows the Company to increase the Revolving Credit Facility by a total of up to $25.0 million, subject to securing additional commitments from existing lenders or new lending institutions. The obligations under the Revolving Credit Facility are guaranteed by each of the Company’s subsidiaries. At the Company’s election, the borrowings under the Revolving Credit Facility bear interest at either (1) a rate per annum equal to the highest of SunTrust’s prime rate or 0.5% in excess of the Federal Funds Rate or 1.0% in excess of one-month LIBOR (the “Base Rate”), plus an applicable margin, or (2) the one, two, three, or six-month per annum LIBOR for deposits in the applicable currency (the “Eurocurrency Rate”), as selected by the Company, plus an applicable margin. The applicable margin for Eurocurrency Rate loans depends on the Company’s funded debt leverage ratio and varies from 1.50% to 2.00%. The applicable margin for Base Rate loans depends on the Company’s funded debt leverage ratio and varies from 0.50% to 1.50%. Commitment fees and letter of credit fees are also payable under the Revolving Credit Facility. Principal is payable in full at maturity on November 24, 2017, and there are no scheduled principal payments prior to maturity. The Company is required to pay a commitment fee ranging between 20 and 30 basis points per annum of the average daily unused portion of the Revolving Credit Facility, depending on the Company’s funded debt leverage ratio.

The purpose of the Revolving Credit Facility is for general working capital needs, permitted acquisitions (as defined in the Loan Agreement), and for stock repurchase and/or redemption transactions that the Company may authorize.

The Revolving Credit Facility contains certain covenants that, among other things, restrict additional indebtedness, liens and encumbrances, changes to the character of the Company’s business, acquisitions, asset dispositions, mergers and consolidations, sale or discount of receivables, creation or acquisitions of additional subsidiaries, and other matters customarily restricted in such agreements.

In addition, the Revolving Credit Facility requires the Company to meet certain financial tests, including, without limitation:

•

a funded debt leverage ratio (consolidated debt/consolidated EBITDA) of not greater than 3.0 to 1.0; and

•

an interest coverage ratio (consolidated EBITDA/consolidated interest expense) of not less than 3.0 to 1.0.

As of December 31, 2016, the Company was in material compliance with all covenants. There were no balances outstanding on the Revolving Credit Facility as of December 31, 2016 and there were no borrowings under the Revolving Credit Facility during the year ended December 31, 2016. During the three months ended March 31, 2015, the Company borrowed approximately $28.0 million under the Revolving Credit Facility. During the three months ended June 30, 2015, the Company repaid approximately $28.0 million of balances previously outstanding under the Revolving Credit Facility from proceeds received in the Company’s public offering of 3,869,750 shares which closed on May 28, 2015.

Leases

12 Months Ended

Dec. 31, 2016

Leases [Abstract]

Leases

14. LEASES

The Company has non-cancellable operating leases primarily for office space, hosting facilities, and office equipment. Some lease agreements contain provisions for escalating rent payments over the initial terms of the lease. The Company accounts for these leases by recognizing rent expense on a straight-line basis and adjusting the deferred rent expense liability for the difference between the straight-line rent expense and the amount of rent paid. The terms of the lease agreements generally provide the Company the option to renew. The Company also leases certain office equipment under operating leases. Total rent expense under all operating leases was approximately $5.6 million, $4.3 million, and $3.1 million, for the years ended December 31, 2016, 2015, and 2014, respectively.

Future rental payment commitments at December 31, 2016 under non-cancelable operating leases, with initial terms of one year or more, are as follows (in thousands):


2017	$	5,044
2018		4,034
2019		2,208
2020		1,027
2021		826
Thereafter		2,748

Total minimum lease payments	$	15,887

The Company subleases certain of its office space included above under non-cancellable leases and is due to receive future minimum rental payments of approximately $157,000 and $148,000 for the years ended December 31, 2017 and

Collaborative Arrangement	12 Months Ended
Collaborative Arrangement	Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Collaborative Arrangement	15. COLLABORATIVE ARRANGEMENT The Company participates in a collaborative arrangement, SimVentures^TM, with Laerdal Medical A/S (Laerdal Medical). The Company receives 50 percent of the profits or losses generated from this collaborative arrangement. The parties did not form a separate legal entity as part of the collaborative arrangement; therefore, the Company accounts for SimVentures as a collaborative arrangement in accordance with applicable accounting guidance. For the year ended December 31, 2016, the Company recorded approximately $2.7 million of revenues and $1.4 million of expenses related to the collaborative arrangement. For the year ended December 31, 2015, the Company recorded approximately $2.2 million of revenues and $1.8 million of expenses related to the collaborative arrangement.

Litigation	12 Months Ended
Litigation	Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
Litigation	16. LITIGATION In connection with its business, the Company is from time to time involved in various legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon the financial condition and/or results of operations of the Company. However, in the opinion of the Company’s management, matters currently pending or threatened against the Company are not expected to have a material adverse effect on the financial position or results of operations of the Company.

Related Party Transactions	12 Months Ended
Related Party Transactions	Dec. 31, 2016
Related Party Transactions [Abstract]
Related Party Transactions	17. RELATED PARTY TRANSACTIONS During the three months ended June 30, 2015, the Company’s CEO, Robert A. Frist, Jr., entered into an agreement with the Company pursuant to which he contributed 54,241 of his personally owned shares of HealthStream, Inc. common stock to the Company, without any consideration paid to him. In connection with this contribution, the Company approved the grant of 49,310 shares of common stock to over 600 employees, with a fair market value of approximately $1.5 million. Mr. Frist contributed 4,931 of the contributed shares noted above to take into account the estimated Company costs, such as administrative expenses and employer payroll taxes associated with the grants. (See Note 11).