NASHVILLE - 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
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.
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.
Contact:
Scott A. Roberts
Tel: (615) 301-3182
Email: ir@healthstream.com
HEALTHSTREAM, INC. 
