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HealthStream Announces First Quarter 2018 Results
-
Revenues of
$54.9 million in the first quarter of 2018, up 6% from$52.0 million in the first quarter of 2017; with$8,000 negative impact in the first quarter of 2018 from the application of ASC 606 -
Operating income of
$3.7 million in the first quarter of 2018, up 58% from$2.4 million in the first quarter of 2017; with$1.4 million positive impact in the first quarter of 2018 from the application of ASC 606 -
Net income from continuing operations of
$3.6 million in the first quarter of 2018, up from$1.7 million in the first quarter of 2017; with$1.0 million positive impact in the first quarter of 2018 from the application of ASC 606 -
Earnings per share (EPS) from continuing operations of
$0.11 per share (diluted) in the first quarter of 2018, compared to EPS from continuing operations of$0.05 per share (diluted) in the first quarter of 2017 -
Adjusted EBITDA1 from continuing operations of
$10.2 million in the first quarter of 2018, up from$8.7 million in the first quarter of 2017; with$1.4 million positive impact in the first quarter of 2018 from the application of ASC 606 -
Patient Experience (PX) business segment divested on
February 12, 2018 for$65.5 million in cash, resulting in a gain, net of tax, of$20.3 million -
Board of Directors declared special dividend of approximately
$32.5 million , or$1.00 per share, from proceeds of divestiture of PX business, which was paid onApril 3, 2018 to shareholders of record onMarch 6, 2018
Financial Results:
First Quarter 2018 Compared to First
Quarter 2017
On
Revenues for the first quarter of 2018 increased by
|
1 |
Adjusted EBITDA from continuing operations is a non-GAAP financial measure. A reconciliation of adjusted EBITDA to income from continuing operations and disclosure regarding why we believe Adjusted EBITDA from continuing operations provides useful information to investors is included later in this release. | |
Revenues from our HealthStream Workforce Solutions segment, which are
primarily subscription-based, were approximately
Revenues from our HealthStream Provider Solutions segment were
approximately
Generally accepted accounting principles (GAAP) require companies to
write down beginning balances of acquired deferred revenue balances as
part of “fair value” accounting as defined by GAAP. During the first
quarter of 2018,
Operating income was
Net income from continuing operations was
Net income was
Adjusted EBITDA (which we define as net income before interest, income
taxes, share-based compensation, and depreciation and amortization) from
continuing operations increased to
Adjusted EBITDA was
At
At
Financial Impact of Adopting ASC 606
The chart below on page
nine under the heading of “Impact of Adoption of ASC 606” sets forth
what the revenues, operating income, net income from continuing
operations, adjusted EBITDA from continuing operations, and non-GAAP
operating income for the first quarter of 2018 would have been if the
prior revenue recognition standard were applied (ASC 605).
2018 Events
On
Financial Outlook for 2018
The Company adopted the new
revenue recognition standard (ASC 606) utilizing the modified
retrospective approach effective
The historical financial results of the PX business for periods prior to
the closing of this transaction are now reflected in the Company’s
consolidated financial statements as discontinued operations.
Accordingly, this financial outlook for 2018 is for continuing
operations only and does not include (a) the gain on the sale of our PX
business, which we completed on
The Company presented its original 2018 guidance utilizing ASC 605. We are continuing to present 2018 guidance this quarter utilizing ASC 605 to provide continuity with our guidance provided last quarter. In addition, we are supplementing this guidance utilizing ASC 605 with 2018 guidance utilizing ASC 606 in light of the fact that our 2018 results are now being presented under ASC 606. In the case of both ASC 605 and ASC 606 2018 guidance, the 2017 results against which 2018 guidance is being compared on a percentage comparative basis are based on our 2017 results under ASC 605 as described above.
For 2018 we continue to anticipate that consolidated revenues will increase six to eight percent as compared to 2017. We continue to anticipate that revenue growth in our Workforce Solutions segment will be in the four to six percent range and our Provider Solutions segment to grow 10 to 20 percent when compared to 2017. We believe that these revenue guidance ranges are applicable under both ASC 605 and ASC 606.
We continue to anticipate operating income for 2018 to increase between 20 and 30 percent as compared to 2017 under ASC 605. Under ASC 606 we anticipate that operating income will increase between 25 percent and 40 percent. The primary reason for the different ranges pertains to the capitalization of commissions under ASC 606, which has the impact of deferring commissions over an extended period versus its current period expense treatment under ASC 605.
We continue to anticipate that capital expenditures will be
approximately
This guidance does not include the impact of any acquisitions that we may complete during 2018.
A conference call with
Use of Non-GAAP Financial Measures
This press release contains certain non-GAAP financial measures, including non-GAAP net income, non-GAAP operating income, adjusted EBITDA from continuing operations, and adjusted EBITDA, which are used by management in analyzing the Company’s financial results and ongoing operational performance.
In order to better assess the Company’s financial results, management believes that net income before interest, income taxes, share-based compensation, depreciation and amortization (“adjusted EBITDA”) is a useful measure for evaluating the operating performance of the Company because adjusted EBITDA reflects net income adjusted for certain non-cash and non-operating items. Management also believes that adjusted EBITDA from continuing operations is a useful measure for evaluating the operating performance of the Company because such measure excludes the results of operations of the PX business that we no longer own and thus reflects the Company’s ongoing business operations and assists in comparing the Company’s results of operations between periods. We also believe that adjusted EBITDA and adjusted EBITDA from continuing operations are also useful to many investors to assess the Company’s ongoing results from current operations. Adjusted EBITDA and Adjusted EBITDA from continuing operations are non-GAAP financial measures and should not be considered as measures of financial performance under GAAP. Because adjusted EBITDA and adjusted EBITDA from continuing operations are not measurements determined in accordance with GAAP, such non-GAAP financial measures are susceptible to varying calculations. Accordingly, adjusted EBITDA and adjusted EBITDA from continuing operations, as presented, may not be comparable to other similarly titled measures of other companies.
In recent years, the Company has acquired businesses whose net tangible assets include deferred revenue. In accordance with GAAP reporting requirements, following the completion of any such acquisition, the Company may record a write-down of deferred revenue to fair value as defined by GAAP. If the Company is required to record a write-down of deferred revenue, it may result in lower recognized revenue, operating income, and net income in subsequent periods.
In connection therewith, this release presents below non-GAAP operating income and non-GAAP net income, which in each case reflects the corresponding GAAP figures adjusted to exclude the impact of the deferred revenue write-down associated with fair value accounting for acquired businesses as referenced above. Management believes that the presentation of these non-GAAP financial measures assists investors in understanding the Company’s performance between periods, excluding the impact of this deferred revenue write-down, and provides a useful measure of the ongoing performance of the Company. Both on a quarterly and year-to-date basis, the revenue for any acquired business is deferred and typically recognized over a one-to-two year period following the completion of an acquisition, so our GAAP revenues for this one-to-two year period will not reflect the full amount of revenues that would have been reported if the acquired deferred revenue had not been written down to fair value.
These non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance, which are prepared in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. Investors are encouraged to review the reconciliations of our GAAP to non-GAAP financial measures, which are set forth below in this release.
About
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HEALTHSTREAM, INC. Condensed Consolidated Statements of Income (In thousands, except per share data) |
|||||||||
| Three Months Ended March 31, |
|||||||||
| 2018 | 2017 | ||||||||
| Revenues | $ | 54,858 | $ | 51,967 | |||||
| Operating expenses: | |||||||||
| Cost of revenues (excluding depreciation and amortization) | 22,248 | 21,152 | |||||||
| Product development | 6,001 | 5,775 | |||||||
| Sales and marketing | 9,064 | 9,556 | |||||||
| Other general and administrative | 7,742 | 7,217 | |||||||
| Depreciation and amortization | 6,073 | 5,902 | |||||||
| Total operating expenses | 51,128 | 49,602 | |||||||
| Operating income | 3,730 | 2,365 | |||||||
| Other income, net | 313 | 130 | |||||||
| Income from continuing operations before income taxes | 4,043 | 2,495 | |||||||
| Income tax provision | 414 | 786 | |||||||
| Income from continuing operations | 3,629 | 1,709 | |||||||
| Discontinued operations | |||||||||
| Income (loss) from discontinued operations, including gain recognized on disposal net of tax of $20,281, net of tax |
20,217 |
(424 |
) |
||||||
| Net income | $ | 23,846 | $ | 1,285 | |||||
| Earnings (loss) per share - basic: | |||||||||
| Continuing operations | $ | 0.11 | $ | 0.05 | |||||
| Discontinued operations | 0.63 | (0.01 | ) | ||||||
| Earnings per share - basic | $ | 0.74 | $ | 0.04 | |||||
| Earnings (loss) per share - diluted: | |||||||||
| Continuing operations | $ | 0.11 | $ | 0.05 | |||||
| Discontinued operations | 0.63 | (0.01 | ) | ||||||
| Earnings per share - diluted | $ | 0.74 | $ | 0.04 | |||||
| Weighted average shares outstanding: | |||||||||
| Basic | 32,097 | 31,774 | |||||||
| Diluted | 32,132 | 32,104 | |||||||
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HEALTHSTREAM, INC. Condensed Consolidated Balance Sheets (In thousands) |
||||||||||
| March 31, | December 31, | |||||||||
| 2018 |
2017(1) |
|||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 156,028 | $ | 84,768 | ||||||
| Marketable securities | 39,346 | 46,350 | ||||||||
| Accounts and unbilled receivables, net | 39,461 | 38,018 | ||||||||
| Prepaid and other current assets | 23,664 | 24,467 | ||||||||
| Current assets held for sale | -- | 6,125 | ||||||||
| Total current assets | 258,499 | 199,728 | ||||||||
| Capitalized software development, net | 16,130 | 16,014 | ||||||||
| Property and equipment, net | 8,297 | 8,092 | ||||||||
| Goodwill and intangible assets, net | 152,354 | 154,641 | ||||||||
| Deferred tax assets | -- | 45 | ||||||||
| Deferred commissions | 12,378 | -- | ||||||||
| Other assets | 9,525 | 4,526 | ||||||||
| Long-term assets held for sale | -- | 28,073 | ||||||||
| Total assets | $ | 457,183 | $ | 411,119 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable, accrued and other liabilities | $ | 37,875 | $ | 29,356 | ||||||
| Accrued dividends | 32,518 | -- | ||||||||
| Deferred revenue | 69,238 | 64,938 | ||||||||
| Current liabilities held for sale | -- | 6,772 | ||||||||
| Total current liabilities | 139,631 | 101,066 | ||||||||
| Deferred tax liabilities | 4,833 | -- | ||||||||
| Deferred revenue, non-current | 3,005 | 6,287 | ||||||||
| Other long-term liabilities | 670 | 1,048 | ||||||||
| Long-term liabilities held for sale | -- | 2,548 | ||||||||
| Total liabilities | 148,139 | 110,949 | ||||||||
| Shareholders’ equity: | ||||||||||
| Common stock | 285,065 | 282,666 | ||||||||
| Accumulated other comprehensive loss | (23 | ) | (38 | ) | ||||||
| Retained earnings | 24,002 | 17,542 | ||||||||
| Total shareholders’ equity | 309,044 | 300,170 | ||||||||
| Total liabilities and shareholders' equity | $ | 457,183 | $ | 411,119 | ||||||
| (1) | Derived from audited financial statements contained in the Company’s filing on Form 10-K for the year ended December 31, 2017, adjusted for the divestiture of the PX business segment. | |
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HEALTHSTREAM, INC. Condensed Consolidated Statements of Cash Flows (In thousands) |
||||||||||
| Three Months Ended | ||||||||||
| March 31, | March 31, | |||||||||
| 2018 | 2017 | |||||||||
| Operating activities: | ||||||||||
| Net income | $ | 23,846 | $ | 1,285 | ||||||
| (Income) loss from discontinued operations | (20,217 | ) | 424 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
| Depreciation and amortization | 6,073 | 5,902 | ||||||||
| Share-based compensation | 419 | 404 | ||||||||
| Deferred income taxes | 608 | 526 | ||||||||
| Provision for doubtful accounts | 390 | 200 | ||||||||
| (Gain) loss on equity method investments | (7 | ) | 5 | |||||||
| Other | 30 | 148 | ||||||||
| Changes in assets and liabilities: | ||||||||||
| Accounts and unbilled receivables | (1,864 | ) | 4,558 | |||||||
| Prepaid and other assets | (2,576 | ) | 64 | |||||||
| Accounts payable, accrued and other liabilities | (5,568 | ) | (2,000 | ) | ||||||
| Deferred revenue | 8,417 | 3,541 | ||||||||
| Net cash provided by continuing operating activities | 9,551 | 15,057 | ||||||||
| Net cash (used in) provided by discontinued operating activities | (1,002 | ) | 1,470 | |||||||
| Net cash provided by operating activities | 8,549 | 16,527 | ||||||||
| Investing activities: | ||||||||||
| Gross proceeds from sale of discontinued operations | 58,203 | -- | ||||||||
| Changes in marketable securities | 6,988 | (8,871 | ) | |||||||
| Purchases of property and equipment | (1,858 | ) | (931 | ) | ||||||
| Payments associated with capitalized software development | (2,541 | ) | (2,420 | ) | ||||||
| Net cash provided by (used in) continuing investing activities | 60,792 | (12,222 | ) | |||||||
| Net cash used in discontinued investing activities | (115 | ) | (637 | ) | ||||||
| Net cash provided by (used in) investing activities | 60,677 | (12,859 | ) | |||||||
| Financing activities: | ||||||||||
| Proceeds from exercise of stock options | 2,368 | 99 | ||||||||
| Taxes paid related to net settlement of equity awards | (297 | ) | (367 | ) | ||||||
| Payment of earn-outs related to acquisitions | (37 | ) | -- | |||||||
| Net cash provided by (used in) continuing financing activities | 2,034 | (268 | ) | |||||||
| Net cash provided by (used in) discontinued financing activities | -- | -- | ||||||||
| Net cash provided by (used in) financing activities | 2,034 | (268 | ) | |||||||
| Net increase in cash and cash equivalents | 71,260 | 3,400 | ||||||||
| Cash and cash equivalents at beginning of period | 84,768 | 49,634 | ||||||||
| Cash and cash equivalents at end of period | $ | 156,028 | $ | 53,034 | ||||||
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Reconciliation of GAAP to Non-GAAP Financial Measures(1) (In thousands) |
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Three Months Ended |
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| 2018 | 2017 | ||||||||||||||||||
| GAAP income from continuing operations | $ | 3,629 | $ | 1,709 | |||||||||||||||
| Interest income | (340 | ) | (160 | ) | |||||||||||||||
| Interest expense | 34 | 25 | |||||||||||||||||
| Income tax provision | 414 | 786 | |||||||||||||||||
| Share-based compensation expense | 419 | 404 | |||||||||||||||||
| Depreciation and amortization | 6,073 | 5,902 | |||||||||||||||||
| Adjusted EBITDA from continuing operations | $ | 10,229 | $ | 8,666 | |||||||||||||||
| GAAP net income | $ | 23,846 | $ | 1,285 | |||||||||||||||
| Interest income | (340 | ) | (160 | ) | |||||||||||||||
| Interest expense | 34 | 25 | |||||||||||||||||
| Income tax provision | 414 | 786 | |||||||||||||||||
| Share-based compensation expense | 419 | 404 | |||||||||||||||||
| Depreciation and amortization | 6,073 | 5,902 | |||||||||||||||||
| Adjusted EBITDA | $ | 30,446 | $ | 8,242 | |||||||||||||||
| GAAP operating income | $ | 3,730 | $ | 2,365 | |||||||||||||||
| Add: deferred revenue write-down | 45 | 844 | |||||||||||||||||
| Non-GAAP operating income | $ | 3,775 | $ | 3,209 | |||||||||||||||
| GAAP net income | $ | 23,846 | $ | 1,285 | |||||||||||||||
| Add: deferred revenue write-down, net of tax | 41 | 578 | |||||||||||||||||
| Non-GAAP net income | $ | 23,887 | $ | 1,863 | |||||||||||||||
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Impact of Adoption of ASC 606 |
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| Three Months Ended March 31, | |||||||||||||||||||
| 2018 | 2017 | ||||||||||||||||||
|
ASC 606 |
Adjustments |
ASC 605 | ASC 605 | ||||||||||||||||
| Revenue | $ | 54,858 | $ | 8 | $ | 54,866 | $ | 51,967 | |||||||||||
| Operating income | 3,730 | (1,402 | ) | 2,328 | 2,365 | ||||||||||||||
| Net income from continuing operations | 3,629 | (1,037 | ) | 2,592 | 1,709 | ||||||||||||||
| Adjusted EBITDA from continuing operations | 10,229 | (1,402 | ) | 8,827 | 8,666 | ||||||||||||||
| Non-GAAP operating income | 3,775 | (1,402 | ) | 2,373 | 3,209 | ||||||||||||||
| (1) | This press release contains certain non-GAAP financial measures, including non-GAAP net income, non-GAAP operating income, and adjusted EBITDA, which are used by management in analyzing its financial results and ongoing operational performance. | |
This press release includes certain forward-looking statements
(statements other than solely with respect to historical fact),
including statements regarding expectations for the financial
performance for 2018, that involve risks and uncertainties regarding
View source version on businesswire.com: https://www.businesswire.com/news/home/20180430006337/en/
Source:
HealthStream, Inc.
Gerard M. Hayden, Jr., 615-301-3163
Chief
Financial Officer
ir@healthstream.com
or
Media:
Mollie
Condra, Ph.D., 615-301-3237
Vice President, Investor Relations &
Communications
mollie.condra@healthstream.com