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HealthStream Announces First Quarter 2014 Results

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HealthStream Announces First Quarter 2014 Results HealthStream, Inc. (HSTM), a leading provider of workforce development and research / patient experience solutions for the healthcare industry, announced today results for the first quarter ended March 31, 2014.

Highlights:

  • Revenues of $38.3 million in the first quarter of 2014, up 29% from $29.6 million in the first quarter of 2013
  • Operating income of $3.3 million in the first quarter of 2014, up 4% from $3.2 million in the first quarter of 2013
  • Net income of $1.9 million in both the first quarter of 2014 and the first quarter of 2013, and earnings per share (EPS) of $0.07 per share (diluted) in both the first quarter of 2014 and the first quarter of 2013
  • Adjusted EBITDA1 of $6.1 million in the first quarter of 2014, up 13% from $5.4 million in the first quarter of 2013
  • Acquired Health Care Compliance Strategies, Inc. in March 2014

Financial Results:

First Quarter 2014 Compared to First Quarter 2013

Revenues for the first quarter of 2014 increased $8.7 million, or 29 percent, to $38.3 million, compared to $29.6 million for the first quarter of 2013.

Revenues from the HealthStream Workforce Development Solutions segment increased by $7.8 million, or 34 percent, when compared to the first quarter of 2013. Revenues from our subscription-based solutions increased by approximately $7.8 million, or 37 percent, over the prior year first quarter due to a higher number of subscribers and more courseware consumption by subscribers. Revenues in the first quarter of 2014 were positively influenced by courseware subscriptions associated with, among other products, ICD-10 training. Revenues from ICD-10 training products were approximately $6.6 million in the first quarter of 2014, compared to $2.0 million in the prior year first quarter.

Revenues from the HealthStream Research / Patient Experience Solutions segment increased by $887,000, or 14 percent, when compared to the first quarter of 2013. Revenues from Patient Insights surveys—a survey research product that generates recurring revenues—increased by $364,000, or seven percent, when compared to the first quarter of 2013. Revenues from other surveys, which are conducted on annual or bi-annual cycles, decreased $161,000 compared to the first quarter of 2013. Revenues from the Baptist Leadership Group (BLG) acquisition, consummated on September 9, 2013, were $684,000 during the first quarter of 2014.

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 2014, HealthStream reported a $369,000 reduction to GAAP revenues and a corresponding $369,000 reduction to operating income and $215,000 reduction to net income as a result of deferred revenue write-downs for the Health Care Compliance Strategies, Inc. (HCCS) acquisition in March of 2014 and BLG acquisition in September of 2013. During the first quarter of 2013, HealthStream reported a $331,000 reduction to GAAP revenues and a corresponding $331,000 reduction to operating income and $200,000 reduction to net income as a result of deferred revenue write-downs for the Decision Critical and Sy.Med Development acquisitions in June and October of 2012, respectively. The table reconciling GAAP to non-GAAP financial measures included in this release shows the impact of beginning balance deferred revenue write-downs on financial results.

Operating income for the first quarter of 2014 increased by four percent to $3.3 million, compared to $3.2 million for the first quarter of 2013. The growth in revenues was mostly offset by increased operating expense associated with higher royalties, personnel additions, sales commissions, depreciation and amortization, and other general expenses. Also, during the first quarter of 2014, we incurred approximately $350,000 of expenses associated with the HCCS acquisition. The financial results for HCCS have been included in the Company's financial statements from the date of acquisition by the Company (March 3, 2014) and are included in the HealthStream Workforce Development Solutions segment.

Net income for the first quarter of 2014 was $1.9 million in both the first quarter of 2014 and 2013. Earnings per share were $0.07 per share (diluted) for both the first quarter of 2014 and 2013.

Adjusted EBITDA (which we define as net income before interest, income taxes, share-based compensation, and depreciation and amortization) increased by 13 percent to $6.1 million for the first quarter of 2014, compared to $5.4 million for the first quarter of 2013.

At March 31, 2014, the Company had cash and marketable securities of $102.0 million. Capital expenditures totaled $2.6 million for the first quarter of 2014.

Other Business Updates

At March 31, 2014, we had approximately 3,577,000 million total subscribers implemented to use and 3,847,000 million total subscribers contracted to use our subscription-based solutions. “Contracted subscribers” include both those already implemented and those in the process of implementation. Revenue recognition commences when a contract is fully implemented.

Annualized revenue per implemented subscriber: We view “Annualized Revenue per Implemented Subscriber” as a measure of our progress in growing the value of our customer base. Annualized Revenue per Implemented Subscriber represents the quarter's revenue from our subscription-based solutions annualized, then divided by the quarter's average total number of implemented subscribers. The following table shows the metric for the first quarter of 2014 and the preceding seven quarters.

Workforce Development Solutions – Annualized Revenue per Implemented Subscriber

 
Q2 2012       Q3 2012       Q4 2012       Q1 2013       Q2 2013       Q3 2013       Q4 2013       Q1 2014
                                         

$25.95

$26.98

$27.04

$28.47

$29.40

$30.95

$32.41

$33.33

 
 

SOURCE: BUSINESS WIRE


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