HealthStream, Inc. (the "Company") (Nasdaq: HSTM), a leading
healthcare technology platform for workforce solutions, announced
today results for the fourth quarter and full-year ended December
31, 2023.
Fourth Quarter 2023
- Revenues of $70.6 million, up 3% from $68.5 million in the
fourth quarter of 2022
- Operating income of $4.3 million, up 38% from $3.1 million in
the fourth quarter of 2022
- Net income of $4.6 million, up 87% from $2.5 million in the
fourth quarter of 2022
- Earnings per share (EPS) of $0.15 per share (diluted), up from
$0.08 per share (diluted) in the fourth quarter of 2022
- Adjusted EBITDA1 of $16.0 million, up 17% from $13.6 million in
the fourth quarter of 2022
- Board of Directors has declared a quarterly cash dividend of
$0.028 per share, an increase of 12% over the previous quarter’s
dividend of $0.025 per share
Full-Year 2023
- Revenues of $279.1 million, up 5% from $266.8 million in
2022
- Operating income of $16.0 million, up 29% from $12.4 million in
2022
- Net income of $15.2 million, up 26% from $12.1 million in
2022
- Earnings per share (EPS) of $0.50 per share (diluted) in 2023,
compared to $0.39 per share (diluted) in 2022
- Adjusted EBITDA of $61.3 million, up 15% from $53.4 million in
2022
1 Adjusted EBITDA is a non-GAAP financial
measure. A reconciliation of adjusted EBITDA to net income and
disclosure regarding why we believe adjusted EBITDA provides useful
information to investors is included later in this release.
Financial Results: Fourth Quarter 2023 Compared to
Fourth Quarter 2022 Revenues for the fourth quarter of 2023
increased by $2.1 million, or three percent, to $70.6 million,
compared to $68.5 million for the fourth quarter of 2022.
Subscription revenues increased $2.6 million, or four percent, and
professional services revenues declined by $0.5 million.
Operating income was $4.3 million for the fourth quarter of
2023, up 38% from $3.1 million for the fourth quarter of 2022. The
improvement in operating income was primarily attributable to the
growth in revenues, a reduction in labor costs, and an increase in
labor capitalized for software development activities. Partially
offsetting these improvements were higher costs for software, cloud
hosting, sales commissions, and bad debt, and an increase in
amortization associated with capitalized software. Other income
during the fourth quarter of 2023 included a $0.4 million gain
associated with the sale of a company in which we owned a minority
equity interest.
Net income was $4.6 million in the fourth quarter of 2023, up
87% from $2.5 million in the fourth quarter of 2022, and EPS was
$0.15 per share (diluted) in the fourth quarter of 2023, up from
$0.08 per share (diluted) for the fourth quarter of 2022.
Adjusted EBITDA was $16.0 million for the fourth quarter of
2023, up 17 percent from $13.6 million in the fourth quarter of
2022.
At December 31, 2023, the Company had cash and cash equivalents
and marketable securities of $71.1 million. Capital expenditures
incurred during the fourth quarter of 2023 were $7.2 million.
Full-Year 2023 Compared to Full-Year 2022 For 2023,
revenues were $279.1 million, an increase of five percent from
revenues of $266.8 million for 2022. Operating income for 2023
increased by 29 percent to $16.0 million, compared to $12.4 million
for 2022. The increase in operating income was primarily
attributable to higher revenues and an increase in capitalized
labor associated with software development activities. Operating
income was also impacted by higher amortization, software, cloud
hosting, commissions, royalties, travel, and bad debt expenses, as
well as severance charges incurred during 2023 in connection with
the Company’s restructuring under a single platform strategy. Net
income for 2023 was $15.2 million, compared to $12.1 million for
2022. Earnings per share were $0.50 per share (diluted) for 2023,
compared to $0.39 per share (diluted) for 2022. Adjusted EBITDA
increased by 15 percent to $61.3 million for 2023, compared to
$53.4 million for 2022.
Other Business Updates As of December 31, 2023, we had
approximately 5.79 million contracted subscriptions to hStream, our
Platform-as-a-Service technology, which characterizes our single
platform approach. By establishing interoperability, the hStream
platform enables healthcare organizations and their respective
workforces to easily connect to and gain value from the growing
HealthStream ecosystem of applications, tools, and content.
On September 13, 2023, the Company announced a share repurchase
program approved by the Company's Board of Directors under which
the Company is authorized to repurchase of up to $10.0 million of
its outstanding shares of common stock. Pursuant to this
authorization, the Company has repurchased shares valued at $8.9
million through December 31, 2023, with $6.8 million repurchased
during the fourth quarter. The share repurchase program is
scheduled to terminate on the earlier of March 31, 2024 or when the
maximum dollar amount has been expended. The share repurchase
program does not require the Company to acquire any amount of
shares and may be suspended, discontinued, or terminated at any
time.
On February 19, 2024, the Board approved a quarterly cash
dividend under the Company's dividend policy of $0.028 per share,
reflecting an increase of 12% over the previous quarter’s dividend
of $0.025 per share. The dividend is payable on March 22, 2024 to
holders of record on March 11, 2024.
Financial Outlook for 2024 The Company is providing
guidance for 2024 for the measures set forth below, including
adjusted EBITDA, a non-GAAP financial measure as defined later in
this release. For a reconciliation of projected adjusted EBITDA to
projected net income (the most comparable GAAP measure) for 2024,
see the table included on page nine of this release.
Full-Year 2024
Guidance
Low
High
Revenue
$
292.0
-
$
296.0
million
Adjusted EBITDA1
$
64.5
-
$
67.5
million
Capital Expenditures
$
28.0
-
$
30.0
million
1 Adjusted EBITDA is a non-GAAP financial
measure. A reconciliation of projected adjusted EBITDA to projected
net income (the most comparable GAAP measure) is included later in
this release.
The Company’s guidance for 2024 as set forth above reflects the
Company’s assumptions regarding, among other things, expectations
for new sales and renewals, and assumes that general economic
conditions, including inflationary pressures, do not deteriorate.
This consolidated guidance does not include the impact of any
acquisitions that we may complete during 2024, gains or losses from
changes in the fair value of minority investments, or impairment of
long-lived assets.
Commenting on fourth quarter & full-year 2023 results,
Robert A. Frist, Jr., Chief Executive Officer, HealthStream, said,
“Our financial performance for full-year 2023 was strong. Compared
to the prior year, in 2023 our revenues were up five percent,
adjusted EBITDA was up 15 percent, operating income was up 29
percent, and net income was up 26 percent. Based on our projections
and guidance, I believe we will set new records again in 2024.”
“In 2023, we expanded our addressable market to include the
nation’s nursing schools and their one million nursing students.
Powered by advances in our hStream platform, we also launched new
e-commerce capabilities, enabling us to make direct sales to
physicians, nurses, and nursing students—where we saw early
positive results. These exciting developments attest to the unique
value proposition that HealthStream is delivering to
customers.”
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, February 20,
2024, at 9:00 a.m. (ET). Participants may access the conference
call live via webcast using this link:
https://edge.media-server.com/mmc/p/wjbaqrsi. To participate via
telephone, please register in advance using this link: :
https://register.vevent.com/register/BI9a139cdfdfda40be87c2909549ffa8ce.
A replay of the conference call and webcast will be archived on the
Company’s website in the Investor Relations section under “Events
& Presentations.”
Use of Non-GAAP Financial Measures This press release
presents adjusted EBITDA, a non-GAAP financial measure 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 excluding
the impact of the deferred revenue write-downs associated with fair
value accounting for acquired businesses (as discussed in greater
detail below) and before interest, income taxes, stock-based
compensation, depreciation and amortization, and changes in fair
value of, including gains (losses) on the sale of, non-marketable
equity investments (“adjusted EBITDA”) is a useful measure for
evaluating the operating performance of the Company because
adjusted EBITDA reflects net income adjusted for certain GAAP
accounting, non-cash and/or non-operating items which we believe,
in any such case, are not fully reflective of the underlying
operating performance of our business. We also believe that
adjusted EBITDA is useful to investors to assess the Company’s
ongoing operating performance and to compare the Company's
operating performance between periods. In addition, short-term cash
incentive bonuses and certain performance-based equity awards are
based on the achievement of adjusted EBITDA (as defined in
applicable bonus and equity grant documentation) targets.
As noted above, the definition of adjusted EBITDA includes an
adjustment for the impact of the deferred revenue write-downs
associated with fair value accounting for acquired businesses.
Prior to the Company early adopting ASU 2021-08 effective January
1, 2022, following the completion of any acquisition by the
Company, the Company was required to record the acquired deferred
revenue at fair value as defined in GAAP, which typically resulted
in a write-down of the acquired deferred revenue. When the Company
was required to record a write-down of deferred revenue, it
resulted in lower recognized revenue, operating income, and net
income in subsequent periods. Revenue for any such acquired
business was deferred and was typically recognized over a
one-to-two-year period following the completion of any particular
acquisition, so our GAAP revenues for this one-to-two-year period
would not reflect the full amount of revenues that would have been
reported if the acquired deferred revenue was not written down to
fair value. Management believes that including an adjustment in the
definition of adjusted EBITDA for the impact of the deferred
write-downs associated with fair value accounting for businesses
acquired prior to the January 1, 2022 effective date of the
Company's adoption of ASU 2021-08 provides useful information to
investors because the deferred revenue write-down recognized in
periods after an acquisition may, given the nature of this non-cash
accounting impact, cause our GAAP financial results during such
periods to not fully reflect our underlying operating performance
and thus adjusting for this amount may assist in comparing the
Company’s results of operations between periods. Following the
adoption of ASU 2021-08, contracts acquired in an acquisition
completed on or after January 1, 2022 are measured as if the
Company had originated the contract (rather than the contract being
measured at fair value) such that, for such acquisitions, the
Company no longer records deferred revenue write-downs associated
with acquired businesses (for acquisitions completed prior to
January 1, 2022, the Company continues to record deferred revenue
write-downs associated with fair value accounting for periods on
and after January 1, 2022 consistent with this prior standard).
Through December 31, 2023, the Company continued to include an
adjustment in the definition of adjusted EBITDA for the impact of
deferred revenue write-downs from business acquired prior to
January 1, 2022, given the impact of such deferred revenue on our
financial results.
Adjusted EBITDA is a non-GAAP financial measure and should not
be considered as a measure of financial performance under GAAP.
Because adjusted EBITDA is not a measurement determined in
accordance with GAAP, adjusted EBITDA is susceptible to varying
calculations. Accordingly, adjusted EBITDA, as presented, may not
be comparable to other similarly titled measures of other companies
and has limitations as an analytical tool.
This non-GAAP financial measure should not be considered a
substitute for, or superior to, measures of financial performance,
which are prepared in accordance with GAAP. Investors are
encouraged to review the reconciliations of adjusted EBITDA to net
income (the most comparable GAAP measure), which is set forth below
in this release.
About HealthStream HealthStream (Nasdaq: HSTM) is the
healthcare industry’s largest ecosystem of platform-delivered
workforce solutions that empowers healthcare professionals to do
what they do best: deliver excellence in patient care. For more
information about HealthStream, visit 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 December
31,
Year Ended December
31,
2023
2022
2023
2022
Revenues, net
$
70,580
$
68,536
$
279,063
$
266,826
Operating costs and expenses:
Cost of revenues (excluding depreciation
and amortization)
24,010
23,536
95,021
91,143
Product development
11,929
11,807
45,540
44,277
Sales and marketing
11,418
11,494
45,743
44,146
Other general and administrative
expenses
8,441
9,009
35,664
36,866
Depreciation and amortization
10,526
9,611
41,076
37,945
Total operating costs and expenses
66,324
65,457
263,044
254,377
Operating income
4,256
3,079
16,019
12,449
Other income, net
1,162
191
2,492
3,136
Income before income tax provision
5,418
3,270
18,511
15,585
Income tax provision
828
819
3,298
3,494
Net income
$
4,590
$
2,451
$
15,213
$
12,091
Net income per share:
Basic
$
0.15
$
0.08
$
0.50
$
0.39
Diluted
$
0.15
$
0.08
$
0.50
$
0.39
Weighted average shares of common stock
outstanding:
Basic
30,326
30,574
30,571
30,648
Diluted
30,489
30,717
30,673
30,717
Dividends declared per share
$
0.025
$
—
$
0.10
$
—
HEALTHSTREAM, INC.
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
December 31,
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$
40,333
$
46,023
Marketable securities
30,800
7,885
Accounts and unbilled receivables, net
38,446
42,710
Prepaid and other current assets
20,631
17,759
Total current assets
130,210
114,377
Capitalized software development, net
40,643
37,118
Property and equipment, net
13,005
15,483
Operating lease right of use assets,
net
20,114
22,759
Goodwill and intangible assets, net
259,410
273,951
Deferred tax assets
246
383
Deferred commissions
31,700
28,344
Other assets
4,614
5,326
Total assets
$
499,942
$
497,741
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable, accrued, and other
liabilities
$
34,738
$
37,744
Deferred revenue
83,623
79,469
Total current liabilities
118,361
117,213
Deferred tax liabilities
16,132
17,996
Deferred revenue, noncurrent
2,169
2,937
Operating lease liability, noncurrent
20,247
23,321
Other long-term liabilities
2,281
2,210
Total liabilities
159,190
163,677
Shareholders’ equity:
Common stock
249,075
254,832
Accumulated other comprehensive loss
(691
)
(981
)
Retained earnings
92,368
80,213
Total shareholders’ equity
340,752
334,064
Total liabilities and shareholders'
equity
$
499,942
$
497,741
HEALTHSTREAM, INC.
Condensed Consolidated
Statements of Cash Flows
(In thousands)
(Unaudited)
Year Ended
December 31,
December 31,
2023
2022
Operating activities:
Net income
$
15,213
$
12,091
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
41,076
37,945
Amortization of deferred commissions
11,495
10,599
Stock-based compensation
4,153
3,554
Deferred income taxes
(1,725
)
710
Provision for credit losses
1,021
385
Gain on sale of fixed assets
—
(25
)
Loss on equity method investments
384
747
Change in fair value of non-marketable
equity investments
(425
)
(3,596
)
Other
(891
)
3
Changes in assets and liabilities:
Accounts and unbilled receivables
3,243
(7,770
)
Deferred commissions
(14,852
)
(14,931
)
Prepaid and other assets
(2,046
)
2,621
Accounts payable, accrued, and other
liabilities
3,938
4,148
Deferred revenue
3,386
4,707
Net cash provided by operating
activities
63,970
51,188
Investing activities:
Business combinations, net of cash
acquired
(6,621
)
(3,965
)
Changes in marketable securities
(22,018
)
(2,842
)
Proceeds from sale of non-marketable
equity investments
47
3,494
Proceeds from sale of fixed assets
—
26
Purchases of property and equipment
(2,200
)
(1,768
)
Payments associated with capitalized
software development
(25,806
)
(23,334
)
Net cash used in investing activities
(56,598
)
(28,389
)
Financing activities:
Taxes paid related to net settlement of
equity awards
(934
)
(565
)
Payment of debt issuance costs
(118
)
—
Repurchases of common stock
(8,929
)
(23,137
)
Payment of cash dividends
(3,058
)
—
Net cash used in financing activities
(13,039
)
(23,702
)
Effect of exchange rate changes on cash
and cash equivalents
(23
)
21
Net decrease in cash and cash
equivalents
(5,690
)
(882
)
Cash and cash equivalents at beginning of
period
46,023
46,905
Cash and cash equivalents at end of
period
$
40,333
$
46,023
Reconciliation of GAAP to
Non-GAAP Financial Measures(1)
Operating Results
Summary
(In thousands)
(Unaudited)
Three Months Ended December
31,
Year Ended December
31,
2023
2022
2023
2022
GAAP net income
$
4,590
$
2,451
$
15,213
$
12,091
Deferred revenue write-down
84
44
212
267
Interest income
(777
)
(289
)
(2,356
)
(444
)
Interest expense
26
33
124
132
Income tax provision
828
819
3,298
3,494
Stock-based compensation expense
1,077
946
4,153
3,554
Depreciation and amortization
10,526
9,611
41,076
37,945
Change in fair value of non-marketable
equity investments
(379
)
—
(425
)
(3,596
)
Adjusted EBITDA
$
15,975
$
13,615
$
61,295
$
53,443
(1) This press release presents adjusted
EBITDA, which is a non-GAAP financial measure used by management in
analyzing its financial results and ongoing operational
performance.
Reconciliation of GAAP to
Non-GAAP Financial Measures
Financial Outlook for
2024
(In thousands)
(Unaudited)
Low
High
Net income
$
14,500
$
16,500
Interest income
(2,400
)
(2,600
)
Interest expense
100
100
Income tax provision
5,200
5,800
Stock-based compensation expense
4,800
5,000
Depreciation and amortization
42,300
42,700
Adjusted EBITDA
$
64,500
$
67,500
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 2024, our share repurchase program, and our
quarterly dividend policy, 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
as a result of negative economic conditions, ongoing inflationary
and recessionary pressures, geopolitical instability (including as
the result of the Russia/Ukraine conflict, the conflict in the
Middle East, and the potential expansion of such conflicts), legal
requirements and contractual restrictions which may affect
continuation of our quarterly cash dividend policy and the
declaration and/or payment of dividends thereunder, which may be
modified, suspended, or canceled in any manner and at any time that
our Board may deem necessary or appropriate, legal requirements and
contractual restrictions which may impact repurchases under our
share repurchase program, as well as risks referenced in the
Company’s Annual Report on Form 10-K for the year ended December
31, 2022, filed on February 28, 2023, the Company’s Quarterly
Report on Form 10-Q for the three and nine months ended September
30, 2023, filed on October 26, 2023, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240219837664/en/
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
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