Special Cautionary Notice Regarding ForwardLooking Statements
You should read the following discussion and analysis in conjunction with our
Condensed Consolidated Financial Statements and related Notes included elsewhere
in this report and our audited Consolidated Financial Statements and the Notes
thereto for the year ended December 31, 2021, appearing in our Annual Report on
Form 10-K that was filed with the Securities and Exchange Commission ("SEC") on
February 28, 2022 (the "2021 Form 10-K"). Statements contained in this Quarterly
Report on Form 10-Q that are not historical facts are forward-looking statements
that the Company intends to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. Statements that are predictive in nature, that depend on or refer
to future events or conditions, or that include words such as "anticipates,"
"believes," "could," "estimates," "expects," "intends," "may," "plans,"
"potential," "predicts," "projects," "should," "will," "would," and similar
expressions are forward-looking statements.
The Company cautions that forward-looking statements involve known and unknown
risks, uncertainties, and other factors that may cause actual results,
performance, or achievements to be materially different from any future results,
performance, or achievements expressed or implied by the forward-looking
statements. Forward-looking statements reflect our current views with respect to
future events and are based on assumptions and subject to risks and
uncertainties. Given these uncertainties, you should not place undue reliance on
these forward-looking statements.
In evaluating any forward-looking statement, you should specifically consider
the information regarding forward-looking statements set forth above and the
risks set forth under the caption Part I, Item 1A. Risk Factors in our 2021 Form
10-K and other disclosures in our 2021 Form 10-K, earnings releases and other
filings with the SEC from time to time, as well as other cautionary statements
contained elsewhere in this report, including our critical accounting policies
and estimates as discussed in this report and our 2021 Form 10-K. We undertake
no obligation to update or revise any forward-looking statements. You should
read this report and the documents that we reference in this report and have
filed as exhibits to this report completely and with the understanding that our
actual future results may be materially different from what we currently expect.
Business Overview
HealthStream provides primarily SaaS based applications for healthcare
organizations-all designed to improve business and clinical outcomes by
supporting the people who deliver patient care.
We are in the process of more completely unifying the Company under a single
platform strategy that will serve as the foundation for the entire
enterprise. By enabling our applications through a common technology platform
known as hStream, we believe that stand-alone applications, which already
provide a powerful value proposition, will begin to leverage each other to more
efficiently and effectively empower our customers to manage their businesses and
improve their outcomes. As we continue to achieve this goal of orienting
multiple applications in relation to a single technology platform, distinctions
between our current reporting segments of Workforce Solutions and Provider
Solutions may become less applicable, or even obsolete, in terms of how we
operate and report on the Company's business. At the current time, what we
characterize and report on as Workforce Solutions products are used by
healthcare organizations to meet a broad range of their clinical development,
learning and performance, certification, scheduling, safety and compliance, and
competency assessment needs. Provider Solutions products are used by healthcare
organizations for provider credentialing, privileging, and enrollment needs.
HealthStream's primary customers include healthcare organizations and other
participants in the healthcare industry.
Significant financial metrics for the first quarter of 2022 are set forth in the
bullets below.
• Revenues of $65.4 million in the first quarter of 2022, an increase of
3% from $63.5 million in the first quarter of 2021.
• Operating income of $4.0 million in the first quarter of 2022, up 22% from
$3.3 million in the first quarter of 2021.
• Net income of $2.9 million in the first quarter of 2022, up 26% from
$2.3 million in the first quarter of 2021.
• Earnings per share ("EPS") of $0.09 per share (diluted) in the first quarter of
2022 compared to $0.07 per share (diluted) in the first quarter of 2021.
• Adjusted EBITDA1 of $14.0 million in the first quarter of 2022,
up 3% from $13.6 million in the first quarter of 2021.
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 report.
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Impact of and Response to COVID-19 Pandemic
While the COVID-19 pandemic persists and remains a cause of uncertainty and
potential volatility, conditions related to the pandemic have generally improved
in the United States in recent months, with the number of daily hospitalizations
in the United States reaching a pandemic-era low during this period according to
the Centers for Disease Control and Prevention. In general, this means that the
healthcare organizations we serve are no longer under the immediate threat of
having their operations overrun by an overwhelming influx of COVID patients. As
the inflow of COVID patients with respect to healthcare organizations has become
more manageable, certain areas of our business, such as our compliance and
learning solutions, have begun to return to and, in some cases, even eclipse
pre-pandemic norms. However, other parts of our business have continued to be
negatively impacted by the lingering as well as the after-effects of the
pandemic. One of the more pronounced after-effects for our healthcare customers
involves staffing challenges such as burnout and labor shortages. The pressures
associated with these challenges continue to result in delayed sales for certain
of our products, particularly those that are more elective in nature.
Ultimately, we believe that our product offerings are well-positioned to help
our healthcare customers successfully manage issues associated with onboarding,
training, developing, engaging, and retaining employees-nurses in particular-and
we remain dedicated to helping our customers overcome both the direct and
indirect challenges associated with the pandemic.
During the height of the pandemic, including in 2021, we experienced delayed and
reduced bookings and renewals due to the pandemic. Given that we sell multiple
year subscriptions to our solutions, the revenue impact of lost or delayed sales
in a given period generally does not manifest until future periods, just as the
revenue we recognize in a given period is generally the result of sales from a
prior period. We believe that the delay in bookings from the height of the
pandemic negatively impacted our revenue growth in the first quarter of 2022,
and will continue to negatively impact our revenue, at least through the second
quarter of 2022 and potentially throughout the remainder of the year. However,
we also experienced increased bookings in the first quarter of 2022, which we
believe will begin to benefit revenue that we will recognize in the latter half
of 2022.
We continue to closely monitor developments related to the pandemic that may
have an adverse impact on our operational and financial performance and we
remain prepared to the best of our ability to adjust to such developments as
they may arise. We also continue to take actions focused on the safety and
well-being of our employees, assisting our customers in this time of need, and
mitigating operational and financial impacts to our business.
We recognize that some of the uncertainties and impact that are currently being
experienced in the United States on a macro-level and in healthcare more
specifically may be both directly and indirectly related to the pandemic. For
example, the U.S. economy has recently experienced various disruptions,
including inflationary pressures, significant disruptions to global supply
networks, and challenging labor market conditions. In this regard, we have
recently experienced, and believe that some of our customers have experienced,
increased labor, supply chain, capital, and other expenditures associated with
current inflationary pressures. These conditions impacting the U.S. economy and
our customers in the healthcare industry may adversely impact our business and
results of operations. However, as discussed above, we also believe that our
product offerings are well positioned to help customers mitigate some of the
negative impacts otherwise associated with these challenges as we continue to
fulfill our vision of improving healthcare by developing the people who provide
care.
Key Business Metrics
Our management utilizes the following financial and non-financial metrics in
connection with managing our business.
• Revenues, net. Revenues, net, reflect income generated by the sales of goods
and services related to our operations and, prior to the adoption of ASU
2021-08 on January 1, 2022, reflects deferred revenue write-downs associated
with fair value accounting for acquired businesses. Revenues, net, were
$65.4 million for the three months ended March 31, 2022, compared to
$63.5 million for the three months ended March 31, 2021. Management utilizes
revenue in connection with managing our business and believes that this metric
provides useful information to investors as a key indicator of the growth and
success of our products.
• Operating Income. Operating income represents the amount of profit realized
from our operations and is calculated as the difference between revenues, net
and operating costs and expenses. Operating income was $4.0 million for the
three months ended March 31, 2022, compared to $3.3 million for the three
months ended March 31, 2021. Management utilizes operating income in
connection with managing our business and believes that our operating income
provides useful information to investors as a key indicator of profitability.
• Adjusted EBITDA. Adjusted EBITDA, calculated as set forth below under
"Reconciliation of Non-GAAP Financial Measures," is utilized by our management
in connection with managing our business and provides useful information to
investors because adjusted EBITDA reflects net income adjusted for certain
GAAP accounting, non-cash and non-operating items, as more specifically set
forth below, which may not fully reflect the underlying operating performance
of our business. We also believe that adjusted EBITDA is useful to investors
to assess the Company's ongoing operations. Additionally, short-term cash
incentive bonuses and certain performance-based equity award grants are based
on the achievement of adjusted EBITDA (as defined in applicable bonus and
equity grant documentation) targets. Adjusted EBITDA was $14.0 million for
the three months ended March 31, 2022, compared to $13.6 million for the three
months ended March 31, 2021.
• hStream Subscriptions. hStream subscriptions are determined as the number of
subscriptions under contract for hStream, our emerging technology platform
that enables healthcare organizations and their respective workforces to
easily connect to and gain value from the growing HealthStream ecosystem of
applications, tools, and content. Management utilizes hStream subscriptions in
connection with managing our business and believes that this metric provides
useful information to investors as a measure of our progress in growing the
value of our customer base. At March 31, 2022, we had approximately
5.13 million contracted subscriptions to hStream, compared to 4.34 million as
of March 31, 2021.
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Critical Accounting Policies and Estimates
The Company's Condensed Consolidated Financial Statements are prepared in
accordance with US GAAP. These accounting principles require us to make certain
estimates, judgments, and assumptions during the preparation of our Financial
Statements. We believe the estimates, judgments, and assumptions upon which we
rely are reasonable based upon information available to us at the time they are
made. These estimates, judgments, and assumptions can affect the reported
amounts of assets and liabilities as of the date of the Financial Statements, as
well as the reported amounts of revenues and expenses during the periods
presented and related disclosures. To the extent there are material differences
between these estimates, judgments, or assumptions and actual results, our
Financial Statements will be affected.
The accounting policies and estimates that we believe are the most critical in
fully understanding and evaluating our reported financial results include the
following:
• Revenue recognition
• Accounting for income taxes
• Goodwill
In many cases, the accounting treatment of a particular transaction is
specifically dictated by US GAAP and does not require management's judgment in
its application. There are also areas where management's judgment in selecting
among available alternatives would not produce a materially different result.
See Notes to the Consolidated Financial Statements in our 2021 Form 10-K and the
Notes to the Condensed Consolidated Financial Statements herein which contain
additional information regarding our accounting policies and other disclosures
required by US GAAP. There have been no changes in our critical accounting
policies and estimates from those reported in our 2021 Form 10-K.
Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021
Revenues, net. Revenues increased approximately $1.9 million, or 3%, to
$65.4 million for the three months ended March 31, 2022 from $63.5 million for
the three months ended March 31, 2021.
A comparison of revenues by business segment is as follows (in thousands):
Three Months Ended March 31,
Revenues by Business Segment: 2022 2021 Percentage Change
Workforce Solutions $ 52,039 $ 51,247 2 %
Provider Solutions 13,328 12,221 9 %
Total revenues, net $ 65,367 $ 63,468 3 %
% of Revenues
Workforce Solutions 80 % 81 %
Provider Solutions 20 % 19 %
Revenues for Workforce Solutions increased $0.8 million, or 2%, to $52.0 million
for the three months ended March 31, 2022, from $51.2 million for the
three months ended March 31, 2021. The Workforce Solutions segment achieved this
2% growth while overcoming a $1.7 million decline from the legacy resuscitation
business. Revenues from other solutions more than offset the decline in legacy
resuscitation revenues.
Revenues for Provider Solutions increased $1.1 million, or 9%, to $13.3 million
for the three months ended March 31, 2022, from $12.2 million for the
three months ended March 31, 2021. Revenue growth was primarily attributable to
new subscription revenues.
Cost of Revenues (excluding Depreciation and Amortization). Cost of revenues
decreased $0.7 million, or 3%, to $22.0 million for the three months ended March
31, 2022, from $22.7 million for the three months ended March 31, 2021. Cost of
revenues as a percentage of revenues was 34% and 36% for the three months ended
March 31, 2022 and 2021, respectively.
Cost of revenues for Workforce Solutions decreased $1.0 million to $17.6 million
for the three months ended March 31, 2022, compared to the prior year period and
approximated 34% and 36% of revenues for Workforce Solutions for the
three months ended March 31, 2022 and 2021, respectively. The decrease is
primarily attributable to a lower royalties payable by us related to legacy
resuscitation products, consistent with the reduction in these revenues. Cost of
revenues for Provider Solutions increased $0.3 million to $4.4 million for the
three months ended March 31, 2022, compared to the prior year period and
approximated 33% of Provider Solutions revenues for both the three months ended
March 31, 2022 and 2021. The increase in amount is primarily associated with an
increase in personnel costs during the three months ended March 31, 2022.
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Product Development. Product development expenses increased $0.9 million, or 9%,
to $10.4 million for the three months ended March 31, 2022, from $9.5 million
for the three months ended March 31, 2021. Product development expenses as a
percentage of revenues were 16% and 15% for the three months ended March 31,
2022 and 2021, respectively.
Product development expenses for Workforce Solutions increased $0.6 million to
$8.8 million for the three months ended March 31, 2022, compared to the prior
year period and approximated 17% and 16% of revenues for Workforce Solutions for
the three months ended March 31, 2022 and 2021, respectively. The increase is
primarily associated with an increase in personnel costs and contract labor,
which was partially offset by an increase in labor capitalized for internally
developed software. Additionally, the first quarter of 2021 included a
non-recurring, non-cash benefit related to the reduction of paid time off
("PTO") expense as a result of modifications to the Company's PTO policy.
Product development expenses for Provider Solutions increased $0.3 million to
$1.6 million for the three months ended March 31, 2022, compared to the prior
year period and approximated 12% and 11% of revenues for Provider Solutions for
the three months ended March 31, 2022 and 2021, respectively. The increase in
product development expenses is primarily due to an increase in personnel costs
compared to the prior year period.
Sales and Marketing. Sales and marketing expenses, including personnel costs,
increased $1.4 million, or 16%, to $10.4 million for the three months ended
March 31, 2022, from $9.0 million for the three months ended March 31, 2021.
Sales and marketing expenses were 16% and 14% of revenues for the
three months ended March 31, 2022 and 2021, respectively.
Sales and marketing expenses for Workforce Solutions increased $1.2 million to
$8.4 million for the three months ended March 31, 2022, compared to the prior
year period and approximated 16% and 14% of revenues for Workforce Solutions for
the three months ended March 31, 2022 and 2021, respectively. The increase is
primarily due to additional personnel expenses, increased sales commissions, and
higher marketing expenses. Sales and marketing expenses for Provider Solutions
increased $0.2 million to $1.8 million for the three months ended March 31,
2022, compared to the prior year period and approximated 13% of revenues for
Provider Solutions for both the three months ended March 31, 2022 and 2021. The
increase is due to an increase in personnel expenses and general marketing
expenses. The unallocated corporate portion of sales and marketing expenses
decreased $46,000 to $0.2 million for the three months ended March 31, 2022,
compared to the prior year period.
Other General and Administrative Expenses. Other general and administrative
expenses decreased $0.5 million, or 6%, to $9.2 million for the
three months ended March 31, 2022, from $9.7 million for the three months
ended March 31, 2021. Other general and administrative expenses were 14% and 15%
of revenues for the three months ended March 31, 2022 and 2021, respectively.
Other general and administrative expenses for Workforce Solutions
decreased $1.0 million to $2.1 million for the three months ended March 31,
2022, compared to the prior year period and approximated 4% and 6% of Workforce
Solutions revenues for the three months ended March 31, 2022 and 2021,
respectively. The decrease is primarily due to lower transition service
costs associated with prior acquisitions and reductions in facilities costs
associated with closing certain leased satellite offices. Other general and
administrative expenses for Provider Solutions increased $45,000 to $0.9 million
for the three months ended March 31, 2022, compared to the prior year period and
approximated 7% of Provider Solutions revenues for both the three months ended
March 31, 2022 and 2021. The unallocated corporate portion of other general and
administrative expenses increased $0.4 million to $6.2 million for the
three months ended March 31, 2022, compared to the prior year period primarily
due to increased personnel costs and employee recruitment expenses.
Depreciation and Amortization. Depreciation and amortization
expense increased $0.1 million, or 2%, to $9.3 million for the three months
ended March 31, 2022, from $9.2 million for the three months ended March 31,
2021. This increase is primarily a result of an increase in amortization
associated with capitalized software.
Other Loss, Net. Other loss, net was $0.3 million for the three months ended
March 31, 2022, compared to $0.1 million for the three months ended March 31,
2021. The decrease is primarily a result of a greater loss from equity method
investments for the three months ended March 31, 2022, compared to the prior
year period.
Income Tax Provision. The Company recorded a provision for income taxes of
$0.9 million for both the three months ended March 31, 2022 and 2021. The
Company's effective tax rate was 23% for the three months ended March 31, 2022,
compared to 29% for the three months ended March 31, 2021. The Company's
effective tax rate primarily reflects the statutory corporate income tax rate,
the net effect of state taxes, foreign income taxes, the effect of various
permanent tax differences, and recognition of discrete tax items. During the
three months ended March 31, 2022, the Company recorded discrete tax expense of
$0.1 million, which consisted primarily of tax deficiencies associated with
stock-based awards. During the three months ended March 31, 2021, the Company
recorded discrete tax expense a $0.1 million related primarily to a permanent
difference related to purchase accounting adjustments and the impact of a state
tax rate change enacted during the period.
Net Income. Net income was approximately $2.9 million and $2.3 million for the
three months ended March 31, 2022 and 2021, respectively. Earnings per share
(EPS) was $0.09 per share (diluted) and $0.07 per share (diluted) for the
three months ended March 31, 2022 and 2021, respectively.
Adjusted EBITDA was $14.0 million for the three months ended March 31, 2022,
compared to $13.6 million for the three months ended March 31, 2021. See
"Reconciliation of Non-GAAP Financial Measures" below for our reconciliation of
adjusted EBITDA to the most directly comparable measures under US GAAP and
disclosure regarding why we believe adjusted EBITDA provides useful information
to investors.
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Reconciliation of Non-GAAP Financial Measures
This Quarterly Report on Form 10-Q presents adjusted EBITDA, which is a non-GAAP
financial measure used by management in analyzing our 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, changes in fair value of
non-marketable equity investments, and the de-recognition of non-cash expense
resulting from the paid time off expense reduction in the first quarter of
2021 ("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 non-operating items which may not, in
any such case, fully reflect the underlying operating performance of our
business. We also believe that adjusted EBITDA is useful to many investors to
assess the Company's ongoing operating performance and to compare the Company's
operating performance between periods. Additionally, 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 will be 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 will no longer record deferred revenue write-downs
associated with acquired businesses (for acquisitions completed prior to January
1, 2022, the Company will continue to record deferred revenue write-downs
associated with fair value accounting for periods on and after January 1, 2022
consistent with past practice). At the current time, the Company intends to
continue 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 ongoing 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 analytical tools.
A reconciliation of adjusted EBITDA to the most directly comparable GAAP measure
is set forth below (in thousands).
Three Months Ended March 31,
2022 2021
GAAP net income $ 2,893 $ 2,291
Deferred revenue write-down 94 1,622
Interest income (15 ) (18 )
Interest expense 32 32
Income tax provision 866 922
Stock-based compensation expense 774 616
Depreciation and amortization 9,322 9,153
Non-cash paid time off expense - (1,011 )
Adjusted EBITDA $ 13,966 $ 13,607
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Liquidity and Capital Resources
Net cash provided by operating activities increased by $1.6 million to
$20.7 million during the three months ended March 31, 2022, from $19.1 million
during the three months ended March 31, 2021. Such increase was primarily due to
lower royalties paid by us compared to the prior year period and was partially
offset by lower cash receipts and increased labor costs. Our DSO was 45 days for
the first quarter of 2022 compared to 52 days for the first quarter of 2021. The
Company calculates DSO by dividing the average accounts receivable balance for
the quarter by average daily revenues for the quarter. The Company's primary
sources of cash were receipts generated from the sales of our products and
services. The primary uses of cash to fund operations included personnel
expenses, sales commissions, royalty payments, payments for contract labor and
other direct expenses associated with delivery of our products and services, and
general corporate expenses.
Net cash used in investing activities was $4.0 million for the three months
ended March 31, 2022, compared to $9.7 million for the three months ended March
31, 2021. During the three months ended March 31, 2022, the Company spent
$22,000 related to a post-closing adjustment for a prior acquisition, invested
in marketable securities of $2.0 million, made payments for capitalized software
development of $6.3 million, and purchased property and equipment of
$0.6 million. These uses of cash were partially offset by $5.0 million in
maturities of marketable securities. During the three months ended March 31,
2021, the Company spent $2.0 million to acquire ComplyALIGN and on a net cash
basis received $1.3 million of proceeds upon settling post-closing adjustments
related to ANSOS and ShiftWizard acquisitions for a net cash outflow of $0.7
million for business combinations, invested in marketable securities of
$5.2 million, made payments for capitalized software development of
$5.3 million, purchased property and equipment of $2.0 million, and invested
$1.0 million in non-marketable equity investments. These uses of cash were
partially offset by $4.5 million in maturities of marketable securities.
Net cash used in financing activities was approximately $20.2 million for the
three months ended March 31, 2022, compared to $0.4 million for the three months
ended March 31, 2021. The uses of cash for the three months ended March 31,
2022 included $19.7 million for repurchases of common stock and $0.5 million for
the payment of employee payroll taxes in relation to the vesting of restricted
share units. The uses of cash for the three months ended March 31,
2021 primarily included $0.4 million for the payment of employee payroll taxes
in relation to the vesting of restricted share units.
Our balance sheet reflects negative working capital of $7.3 million at March 31,
2022, compared to positive working capital of $6.5 million at December 31, 2021.
The decrease in working capital is primarily a result of a reduction in cash to
fund the repurchases of common stock and an increase in deferred revenue. The
Company's primary source of liquidity as of March 31, 2022 was $43.4 million of
cash and cash equivalents and $2.0 million of marketable securities. The Company
also has a $65.0 million revolving credit facility, all of which was available
for additional borrowing at March 31, 2022. The revolving credit facility
expires on October 28, 2023, unless earlier renewed or amended.
On November 30, 2021, the Company's Board of Directors authorized a share
repurchase program to repurchase up to $20.0 million of the Company's
outstanding shares of common stock. The share repurchase program concluded on
March 8, 2022, when the maximum dollar amount authorized under the program was
expended. Under this program, the Company repurchased a total of 853,023 shares
in open market purchases at an aggregate value of $20.0 million, reflecting an
average price per share of $23.45 (excluding the cost of broker commissions).
During the three months ended March 31, 2022, the Company repurchased 649,739
shares pursuant to this share repurchase program at an aggregate fair value of
$14.9 million, based on an average price per share of $22.92 (excluding the cost
of broker commissions).
On March 14, 2022, the Company's Board of Directors approved an expansion of the
Company's share repurchase program by authorizing the repurchase of up to an
additional $10.0 million of the Company's outstanding shares of common stock.
The share repurchase program will terminate on the earlier of March 13, 2023, or
when the maximum dollar amount has been expended. During the three months ended
March 31, 2022, the Company repurchased 242,647 shares pursuant to this share
repurchase program at an aggregate fair value of $5.0 million, based on an
average price per share of $20.52 (excluding the cost of broker commissions).
We believe that our existing cash and cash equivalents, marketable securities,
cash generated from operations, and available borrowings under our revolving
credit facility will be sufficient to meet anticipated working capital needs,
new product development, and capital expenditures for at least the next 12
months and for the foreseeable future thereafter.
In addition, the Company's growth strategy includes acquiring businesses or
making strategic investments in businesses that complement or enhance our
business. It is anticipated that future acquisitions or strategic investments,
if any, would be effected through cash consideration, stock consideration, or a
combination of both. The issuance of our stock as consideration for an
acquisition or to raise additional capital could have a dilutive effect on
earnings per share and could adversely affect our stock price. Our revolving
credit facility contains financial covenants and availability calculations
designed to set a maximum leverage ratio of outstanding debt to adjusted EBITDA
and an interest coverage ratio of adjusted EBITDA to interest expense.
Therefore, the maximum borrowings against our revolving credit facility would be
dependent on the covenant calculations at the time of borrowing. As of March 31,
2022, we were in compliance with all covenants. There can be no assurance that
amounts available for borrowing under our revolving credit facility will be
sufficient to consummate any possible acquisitions, and we cannot assure you
that if we need additional financing that it will be available on terms
favorable to us, or at all. Failure to generate sufficient cash flow from
operations or raise additional capital when required in sufficient amounts and
on terms acceptable to us could harm our business, financial condition, and
results of operations.
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