EXHIBIT 99
Contact: Arthur Newman
Chief Financial Officer
(615) 301-3300
ir@healthstream.com
Media
Mollie Elizabeth Condra
Communications & Investor Relations
(615) 301-3237
mollie.condra@healthstream.com
HEALTHSTREAM ANNOUNCES SECOND QUARTER 2003 RESULTS
HIGHLIGHTS:
- Revenues of $4.7 million in second quarter 2003, up 13% over
second quarter 2002 and 6% over first quarter 2003
- Net loss of $1.0 million, an improvement of $2.2 million
(69%) over the same quarter in 2002
- EBITDA improves by $2.0 million (87%) to a loss of $259,000,
resulting in cash and investments of $17.5 million
- 700,000 healthcare professional subscribers now fully
implemented on Internet-based learning network, up from
650,000 in prior quarter
- Two new products launched: HospitalDirect(TM) and the
HealthStream Authoring Center(TM)
- Third Annual e-Learning Summit held with 250 healthcare
education management attendees
- Ron Hinds elected to board of directors
NASHVILLE, TENN. (JULY 29, 2003)--HealthStream, Inc. (NASDAQ/NM: HSTM), a
leading provider of learning solutions for the healthcare industry, announced
today results for the second quarter ended June 30, 2003.
FINANCIAL RESULTS:
SECOND QUARTER 2003 COMPARED TO SECOND QUARTER 2002
Revenues for the second quarter of 2003 increased by $540,000, or 13 percent,
to $4.7 million, compared to $4.1 million for the second quarter of 2002. This
year over year revenue growth is the result of our continued success in
executing our core strategy, led by growth in the subscriber base of our
Healthcare Learning Center(TM) of $610,000 and $350,000 of growth in add-on
courseware, primarily HIPAA-related. These revenue increases were partially
offset by anticipated lower licensing and maintenance fees of $280,000 related
to our installed learning management products, decreases in content development
services of $80,000, and declines in our live event activities of $60,000. The
proportion of revenues derived from our Internet-based
subscription products increased to 56 percent of total revenues for the second
quarter of 2003 from 40 percent during the same quarter in 2002.
Gross margins (which we define as revenues less cost of revenues divided by
revenues) improved to approximately 66 percent for the second quarter of 2003
from 62 percent in the second quarter of 2002. The improvement is primarily a
result of the revenue increases mentioned above. Net loss for the second
quarter of 2003 was $1.0 million, or ($0.05) per share, compared to a net loss
of $3.2 million, or ($0.16) per share, for the second quarter of 2002. The
improvement in net loss over the prior year quarter resulted primarily from
increased revenues, reductions in personnel and related expenses, reduced
commission expense due to revised commission structures, reductions in other
operating expenses, as well as lower amortization of intangibles. These expense
improvements were partially offset by increased royalties associated with sales
of HIPAA-related courseware subscriptions.
EBITDA (which we define as loss excluding cumulative effect of change in
accounting principle and before interest, taxes, depreciation, and
amortization) improved to a loss of $259,000 for the second quarter of 2003,
compared to a loss of $2.3 million for the second quarter of 2002. This
improvement is consistent with the factors mentioned above.
SECOND QUARTER 2003 COMPARED TO FIRST QUARTER 2003
Revenues were $4.7 million for the second quarter ended June 30, 2003 as
compared with $4.4 million for the first quarter ended March 31, 2003. The
increases in revenues were attributable to our Internet-based Healthcare
Learning Center(TM), which increased by $100,000, add-on courseware (led by our
HIPAA curriculum), which increased by $120,000, and increases associated with
content development services of $150,000. Revenues from our live event
activities increased slightly, driven by the completion of event development,
coordination, and registration services associated with the AORN Congress.
These increases were partially offset by an anticipated decline in maintenance
fees from our installed learning management products of $100,000.
Gross margins were comparable to the first quarter of 2003, at 66 percent. Net
loss for the second quarter ended June 30, 2003 was $1.0 million, or ($0.05)
per share, compared to the first quarter 2003 loss of $1.4 million, or ($0.07)
per share. The improvement in net loss was primarily a result of the increases
in revenues and lower operating expenses and personnel expense reductions,
while sales and marketing expense increases were associated with hosting our
third annual e-Learning Summit in April 2003.
At June 30, 2003, the Company had cash, investments, and related interest
receivable of $17.5 million, compared to $18.8 million at March 31, 2003. The
$1.3 million reduction for the second quarter of 2003 improved from the $2.1
million reduction during the same period during 2002, and from the $1.6 million
reduction experienced during the first quarter of 2003. The improvement over
the same period in the prior year and over the prior quarter is consistent with
the trends noted above. Capital expenditures during the second quarter of 2003
and 2002 both
approximated $0.2 million. Capital expenditures on a year to date basis totaled
$0.5 million in 2003 and $0.4 million in 2002.
HOSPITAL-BASED CUSTOMER CHANNEL (HCO) UPDATE
Our learning solutions are helping healthcare organizations improve their
compliance with regulatory training that is mandated by the Occupational Safety
& Health Administration (OSHA), complete training that is required for
accreditation by the Joint Commission on Accreditation of Healthcare
Organizations (JCAHO), and meet training requirements created by the Healthcare
Insurance Portability and Accountability Act (HIPAA). In addition, our
solutions offer customers the opportunity to train their employees in multiple
clinical areas and assign training that reduces their organization's risk and
improves patient safety, while recognizing significant cost-savings over
traditional, classroom-based training.
At June 30, 2003, approximately 700,000 healthcare professionals were fully
implemented to use HealthStream's Internet-based Healthcare Learning Center(TM)
(HLC) for training and education, up from approximately 650,000 at the end of
first quarter 2003. The total number of contracted subscribers--both
implemented (700,000) and in the process of being implemented (38,000)--is
738,000, up from approximately 690,000 contracted subscribers at the end of
first quarter 2003.
HealthStream continues to actively transition its customers using one of its
installed learning management systems to the Internet-based Healthcare Learning
Center. In the second quarter, approximately 40 percent of the newly contracted
subscriptions, representing approximately 19,000 healthcare professional
subscribers, were among those who chose to make this transition.
During the second quarter, HealthStream launched the HealthStream Authoring
Center(TM), an integrated suite of authoring services, available exclusively
through HealthStream's Internet-based learning platform. By the end of the
second quarter, 70 days after its launch, 70 hospital customers contracted to
add the Authoring Center to their learning solutions provided by HealthStream,
representing a total order value of approximately $168,000 over the length of
the contracts. This authoring solution is offered to our HLC customers on a
subscription basis, and the terms are based on the size of the customer's
organization. Among the 70 contracts, 25 were upgrades of our previous
authoring tool and will not generate additional revenues until services are
renewed. Forty-five contracts are for new services, resulting in an annual
revenue expectation of approximately $72,000.
In support of effective implementation and practical use of online learning in
healthcare organizations, HealthStream held its third annual "e-Learning
Summit" for its existing and prospective customers on April 22 - April 25,
2003. Attended by approximately 250 participants, representing healthcare
organizations from every region in the country, the Summit offered insight from
thought leaders in healthcare education, industry trends, and practical
solutions to everyday challenges in training. Tim Porter O'Grady, a widely
acknowledged expert consultant to the healthcare industry, delivered the
keynote address at the conference.
PHARMACEUTICAL AND MEDICAL DEVICE CUSTOMER CHANNEL (PMD) UPDATE
HealthStream works with its pharmaceutical and medical device company customers
to develop education initiatives that reach hospital-based healthcare
professionals. Our innovative learning solutions are also used by these
customers in their product launch plans and in support of their sales training
efforts. Representative of our long-term customers, Medtronic, Inc. contracted
for two workshops and a series of study guides and clinical education programs
during the second quarter 2003. The first of the two workshops, "Advanced Pain
Management," will be held in September 2003.
On June 30, 2003, HospitalDirect(TM), a new software application for training
hospital-based healthcare professionals about medical devices and/or
pharmaceuticals, was launched on an introductory basis to HealthStream's
learning network of hospitals. By subscribing to HospitalDirect, we believe
medical device and pharmaceutical companies will be able to accelerate the
process of educating the market about their products, while reducing their
product launch and training expenses. The recipients of training on
HospitalDirect--hospitals in HealthStream's learning network--will be provided
with leading edge product training that is readily accessible to employees from
any workstation with an Internet connection, adding value to their subscription
to the Healthcare Learning Center.
To introduce the new application to hospital-based healthcare professionals,
HealthStream provided four courses through HospitalDirect to its customers. As
part of our product education in launching HospitalDirect, we formed "Team
HospitalDirect," an advisory group comprised of 130 hospitals that have
volunteered to provide the Company with feedback on their training needs
related to medical devices. At this introductory stage, we do not yet have
medical device company customers that have purchased this product. We are
actively educating this market of the value proposition that HospitalDirect
offers them, while, concurrently, introducing this new application to
hospital-based healthcare professionals.
CORPORATE UPDATE
Mr. Ron Hinds was elected to serve on the Company's board of directors, and he
will serve on the audit committee. As a certified public accountant who has
worked in public accounting for over 25 years, Mr. Hinds brings a wide breadth
of experience to HealthStream--including 12 years as an audit partner at
Deloitte & Touche. More recently, Mr. Hinds served as executive vice president
and chief financial officer at Renal Care Group, Inc. and was a founding member
of its management group in 1995. His financial expertise and business
leadership will be valued as he joins the board in overseeing HealthStream's
corporate and strategic initiatives.
FINANCIAL EXPECTATIONS
Third quarter revenues are expected to approximate $4.5 million, down 3 percent
from second quarter 2003. Revenues from our Internet-based Healthcare Learning
Center are anticipated to grow over the second quarter results, as are add-on
courseware and additional content development contracts. We expect live event
and clinical education revenues to decline during
the third quarter for the pharmaceutical and medical device business,
consistent with our historical seasonal trend of fewer sales of these products
during the summer months. Revenues associated with our installed learning
management products will also continue to decline due to transitions to the
Healthcare Learning Center. We expect that gross margins will be comparable
with the second quarter as a result of the increase in subscription revenues,
offset by the impact of the decline in live event and development revenues
noted above. While we expect that other general and administrative expenses
will be comparable with the second quarter, we anticipate that product
development expenses will increase as a result of development of additional
features and reporting capabilities associated with our Healthcare Learning
Center(TM) product. We expect sales and marketing expenses to decline,
primarily as a result of lower marketing spending. Marketing expenses peaked
during the second quarter of 2003, as related to the e-Learning Summit that we
held in April. We expect our net loss for the third quarter of 2003 to improve
moderately from the second quarter.
We expect revenue growth for the full year to approximate 16-18% over 2002. We
continue to expect that we will achieve our cash flow positive objective, as
measured by EBITDA results in September and in the fourth quarter of 2003. We
anticipate maintaining significant cash and investment balances, approximating
$16.5 million at year-end 2003.
Commenting on second quarter results, Robert A. Frist, Jr., chief executive
officer, said, "Our results include record quarterly revenues of $4.7 million,
an 87 percent improvement in EBITDA, and a customer base of 700,000 fully
implemented subscribers to our Internet-based learning platform. Alongside
these markers, we launched two innovative products during the second quarter,
HospitalDirect and the Authoring Center, that we believe will add long-term
value to our customers and, in turn, further support our market leadership.
With these metrics, we believe we will achieve positive cash flow--as measured
by EBITDA--within the next 60 days and that we are well positioned for growth
in the coming months and years."
A conference call with Robert A. Frist, Jr., chief executive officer, Arthur
Newman, chief financial officer, and Susan Brownie, vice president of finance
and corporate controller, will be held on Wednesday, July 30, 2003 at 9:00 a.m.
(EST). To listen to the conference, please dial 800-915-4836 if you are calling
within the domestic U.S. If you are an international caller, please dial
973-317-5319. The conference may also be accessed by going to
www.healthstream.com/investor for the simultaneous Webcast of the call, which
will subsequently be available for replay.
ABOUT HEALTHSTREAM
HealthStream (NASDAQ: HSTM) is a leading provider of learning solutions for the
healthcare industry. Approximately 700,000 healthcare professionals currently
subscribe to the Internet-based Healthcare Learning Center(TM), HealthStream's
learning platform. The Company's learning products and services are used by
healthcare organizations to meet the full range of their training needs, while,
concurrently, supporting business objectives. Once subscribed to the Healthcare
Learning Center(TM), customers benefit from increased compliance, reduced
risks, and improved learning effectiveness. In addition, HealthStream has
pioneered a new collaboration with pharmaceutical and medical device companies
to assist them in product launch and market education initiatives within the
Company's nationwide network of hospital customers. Nine of the top ten medical
device companies and eight of the top ten pharmaceutical companies are among
the organizations in HealthStream's growing customer base.
(www.healthstream.com)
HEALTHSTREAM, INC.
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
2003 2002 2003 2002
-------- -------- -------- --------
Revenues $ 4,670 $ 4,134 $ 9,087 $ 7,669
Operating expenses:
Cost of revenues 1,604 1,558 3,099 3,390
Product development 811 1,217 1,766 2,226
Sales and marketing 1,236 1,658 2,365 3,219
Depreciation and amortization 857 1,132 1,754 2,293
Other general and administrative 1,279 1,881 2,702 3,530
Office consolidation charge -- 97 -- 97
-------- -------- -------- --------
Total operating expenses 5,787 7,543 11,686 14,755
Operating loss (1,117) (3,409) (2,599) (7,086)
Other income, net 106 169 229 417
-------- -------- -------- --------
Net loss, before cumulative effect of a
change in accounting principle (1,011) (3,240) (2,370) (6,669)
Cumulative effect of a change in
accounting principle(1) -- -- -- (5,000)
-------- -------- -------- --------
Net loss $ (1,011) $ (3,240) $ (2,370) $(11,669)
======== ======== ======== ========
Net loss per share:
Basic and diluted, before cumulative effect
of a change in accounting principle $ (0.05) $ (0.16) $ (0.12) $ (0.33)
Cumulative effect of a change in accounting
principle(1) -- -- -- (0.25)
-------- -------- -------- --------
Net loss per share, basic and diluted $ (0.05) $ (0.16) $ (0.12) $ (0.58)
======== ======== ======== ========
Weighted average shares outstanding:
Basic and diluted 20,361 20,251 20,334 20,224
======== ======== ======== ========
LOSS EXCLUDING CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE AND BEFORE INTEREST, TAXES, DEPRECIATION AND
AMORTIZATION, EBITDA(2):
Net loss $ (1,011) $ (3,240) $ (2,370) $(11,669)
Interest income (109) (199) (238) (456)
Interest expense 4 8 9 15
Income taxes -- -- -- --
Depreciation and amortization 857 1,132 1,753 2,292
-------- -------- -------- --------
Loss before interest, taxes, depreciation and
amortization (259) (2,299) (846) (9,818)
Cumulative effect of a change in accounting principle -- -- -- 5,000
-------- -------- -------- --------
Loss, excluding cumulative effect of change in
accounting principle and before interest, taxes,
depreciation and amortization $ (259) $ (2,299) $ (846) $ (4,818)
======== ======== ======== ========
Loss per share, excluding cumulative effect of
change in accounting principle and before interest,
taxes, depreciation and amortization $ (0.01) $ (0.11) $ (0.04) $ (0.24)
======== ======== ======== ========
(1) Effective January 1, 2002, we adopted a new accounting
standard, which resulted in the discontinuation of
amortization of goodwill and certain other intangible assets.
(2) In order to fully assess the Company's financial results,
management believes that EBITDA is an appropriate measure for
evaluating the operating and liquidity performance of the
Company at this stage in its life cycle because EBITDA
reflects net loss adjusted for non-cash and non-operating
items. EBITDA is also used by many investors to assess the
Company's results from current operations. EBITDA should not
be considered as a measure of financial performance under
generally accepted accounting principles because EBITDA is
not a measurement determined in accordance with generally
accepted accounting principles and is thus susceptible to
varying calculations. EBITDA, as presented, may not be
comparable to other similarly titled measures of other
companies.
HEALTHSTREAM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JUNE 30, DECEMBER 31,
2003 2002(1)
-------- ------------
ASSETS
Current assets:
Cash, short term investments and related interest receivable $ 17,468 $ 17,299
Accounts and unbilled receivables, net 3,612 3,595
Prepaid and other current assets 1,242 994
-------- --------
Total current assets 22,322 21,888
Investments -- 3,066
Property and equipment, net 2,383 2,668
Goodwill and intangible assets, net 4,229 4,957
Other assets 302 334
-------- --------
Total assets $ 29,236 $ 32,913
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued and other liabilities $ 2,136 $ 3,563
Deferred revenue 3,435 3,346
Current portion of long-term liabilities 51 67
-------- --------
Total current liabilities 5,622 6,976
Long-term liabilities, net of current portion 14 41
-------- --------
Total liabilities 5,636 7,017
Shareholders' equity:
Common stock 91,351 91,223
Accumulated deficit and other comprehensive income (67,751) (65,327)
-------- --------
Total shareholders' equity 23,600 25,896
Total liabilities and shareholders' equity $ 29,236 $ 32,913
======== ========
Total cash, investments, and related interest receivable $ 17,468 $ 20,365
======== ========
(1) Derived from audited financial statements contained in the Company's
filing on Form 10-K for the year ended December 31, 2002.
This report on Form 8-K includes certain forward-looking statements (statements
other than solely with respect to historical fact), including statements
regarding expectations for the financial performance for 2003 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. Investors are cautioned that such results or
events predicted in these statements may differ materially from actual future
events or results. The Company's preliminary financial results, while presented
with numerical specificity, are forward-looking statements which are based on a
variety of assumptions regarding the Company's operating performance that may
not be realized, and which are subject to significant uncertainties and
potential contingencies associated with the Company's year-end financial and
accounting procedures and other matters referenced from time to time in the
Company's filings with the Securities and Exchange Commission. Consequently,
such forward-looking information should not be regarded as a representation or
warranty 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.