EXHIBIT 99.1
Contact: Arthur Newman
Chief Financial Officer
(615) 301-3178
ir@healthstream.com
Media
Mollie Elizabeth Condra
Communications & Investor Relations
(615) 301-3237
mollie.condra@healthstream.com
HEALTHSTREAM ANNOUNCES FIRST QUARTER 2005 RESULTS
HIGHLIGHTS:
o Revenues of $5.7 million in the first quarter of 2005, up 16% over the
first quarter of 2004
o Net income of $144,000 in the first quarter of 2005, compared to a net
loss of $419,000 in the first quarter of 2004
o EBITDA of $676,000 in the first quarter of 2005, compared to $17,000 in
the first quarter of 2004
o 1,084,000 healthcare professional subscribers fully implemented on our
Internet-based learning network at March 31, 2005, up from 831,000 at
March 31, 2004, a 30% increase
o Acquisition of Data Management & Research, Inc. (DMR) completed on
March 28, 2005
NASHVILLE, TENN. (APRIL 26, 2005) -- HealthStream, Inc. (NASDAQ/NM: HSTM), a
leading provider of learning solutions for the healthcare industry, announced
today results for the first quarter ended March 31, 2005.
FINANCIAL RESULTS:
FIRST QUARTER 2005 COMPARED TO FIRST QUARTER 2004
Revenues for the first quarter of 2005 increased by $774,000, or 16 percent, to
$5.7 million, compared to $4.9 million for the first quarter of 2004. Revenue
increases resulted from growth in our HealthStream Learning Center(TM)
subscriber base of $650,000, or 29 percent, and growth in content subscription
revenues of $160,000. These revenue increases were partially offset by lower
maintenance fees related to our installed learning management products of
$180,000 and lower live event revenues. The portion of revenues derived from our
Internet-based subscription products increased to 68 percent of total revenues
for the first quarter of 2005 from 60 percent during the same quarter in 2004.
Gross margins (which we define as revenues less cost of revenues divided by
revenues) improved to 64 percent for the first quarter of 2005 from
approximately 62 percent for the first quarter of 2004. This improvement is
primarily a result of the increased revenues from the HealthStream Learning
Center(TM), and was partially offset by increased royalties paid by us
associated with content subscription revenues.
Net income for the first quarter of 2005 was $144,000, or $0.01 per share,
compared to a net loss of $419,000, or ($0.02) per share, for the first quarter
of 2004. The achievement of net income in the first quarter of 2005 resulted
from increased revenues (net of related cost of revenues) and lower marketing
expenses, in part associated with the timing of our eLearning Summit. During
2004 our eLearning Summit was split between the first and second quarters. We
anticipate spending approximately $350,000 during the second quarter of 2005 for
this event. These favorable improvements were partially offset by an increase in
sales personnel and related commissions, as well as increased depreciation and
amortization.
EBITDA (which we define as earnings or loss before interest, taxes,
depreciation, and amortization) improved to earnings of $676,000 for the first
quarter of 2005, compared to $17,000 for the first quarter of 2004. This
improvement is consistent with the factors mentioned above.
OTHER FINANCIAL INDICATORS
At March 31, 2005, the Company had cash, investments, and related interest
receivable of $8.1 million, compared to $16.5 million at December 31, 2004. Cash
paid for Data Management and Research, Inc. (DMR) approximated $9.3 million, and
capital expenditures and content purchases for the first quarter were $0.6
million. Cash generated from operations helped to partially offset our
utilization of cash. Days sales outstanding (DSO, which we calculate by dividing
the accounts receivable balance, excluding unbilled and other receivables, by
average daily revenues for the quarter) increased to 66 days for the first
quarter of 2005 from approximately 55 days for the first quarter of 2004. This
increase is associated with both the acquired accounts receivable from the DMR
acquisition, as well as slower collections from our pharmaceutical and medical
device customers.
HOSPITAL-BASED CUSTOMER CHANNEL (HCO) UPDATE
Our learning solutions are helping healthcare organizations improve their
required regulatory training, while also offering an opportunity to train their
employees in multiple clinical areas. In addition, our products are designed to
improve knowledge of medical devices, thereby improving patient safety and
reducing organizational risks.
At March 31, 2005, approximately 1,084,000 healthcare professionals were fully
implemented to use our Internet-based HealthStream Learning Center(TM) for
training and education. Revenue recognition commences when a contract is fully
implemented. This number is up from approximately 831,000 at March 31, 2004, a
30 percent increase. The total number of contracted subscribers at March 31,
2005 was approximately 1,170,000, up from 875,000 at March 31, 2004, a 34
percent increase. "Contracted subscribers" include both those already
implemented (1,084,000) and those in the process of implementation (86,000).
During the first quarter, HealthStream launched HealthStream Connect(TM), a new
platform extension. HealthStream Connect expands our opportunity to penetrate
healthcare organization accounts on competitors' platforms by providing
connection to a selection of HealthStream's
content offerings. Upon launch, HealthStream Connect was already contracted for
approximately 8,000 employees by a healthcare organization to provide training
through this new platform.
During the first quarter, we experienced a significant increase in the volume of
our HealthStream Learning Center customers' accounts that have come up for
renewal. We measure our renewal rates by both the number of customer accounts
that are renewed and by the annual contract value renewed. For the quarter ended
March 31, 2005, the account renewal rate was 80 percent (52 out of 65) and the
annual contract value renewal rate was 77 percent. The increased volume of
renewal activity is expected to continue during both the second quarter of 2005
and the remainder of the year.
In March of 2005, HealthStream acquired Data Management and Research, Inc.
(DMR). DMR is exclusively focused on offering healthcare organizations a wide
range of quality and satisfaction surveys, data analyses of survey results, and
other research-based measurement tools. In particular, DMR's series of Quality
Check (R) surveys covers organizational development issues, including questions
about learning opportunities, communication, and the clarity of organizational
goals. With DMR, HealthStream is positioned to become a more valuable strategic
partner in helping healthcare organizations train and develop their workforce.
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.
At March 31, 2005, medical device companies have contracted to train
hospital-based healthcare professionals on 33 devices, up from 28 devices at
year-end 2004. HospitalDirect is our innovative software tool set that provides
medical device companies a unique gateway into the nation's single largest
network of hospitals on a common, online learning platform. During the first
quarter of 2005, approximately 11,700 courses were completed through
HospitalDirect, with the cumulative number topping 43,700 since its launch. In
addition, over 300 healthcare organizations that are outside of HealthStream's
network of customers had, collectively, approximately 1,500 hospital-based
healthcare professionals that took at least one course through HospitalDirect in
the first quarter.
FINANCIAL EXPECTATIONS
Revenues for the second quarter of 2005 are expected to approximate $6.8 to $7.0
million, an increase of approximately $2.1 to $2.3 million over the same quarter
in the prior year, and include approximately $1.1 to $1.3 million from the DMR
acquisition. Consistent with our historic trends, we expect our pharmaceutical
and medical device business to be down slightly during the second quarter, while
our hospital-based business will increase slightly on an organic basis.
We anticipate lower gross margins for the second quarter as a result of changes
in revenue mix. In addition to the incremental impact of DMR, we expect
increases during the second quarter in sales and marketing expenses associated
with our annual eLearning Summit. We also expect quarterly amortization of
certain intangible assets related to the DMR acquisition to approximate
$125,000. As noted in our previous guidance, we anticipate a modest net loss for
the second quarter of 2005.
We anticipate full year revenue growth approximating 35 to 40 percent, including
the incremental impact of DMR. Profitability is expected during both the third
and fourth quarters of 2005. Our estimate of the incremental impact of DMR has
been reduced to reflect the allocation of a higher portion of intangible asset
value to definite lived intangibles such as customer lists and contract rights.
Our consolidated full-year net income is expected to approximate $400,000 to
$600,000.
Robert A. Frist, Jr., chief executive officer, said, "Ending the first quarter
of 2005 with net income of $144,000, EBITDA of $676,000, and projecting the
positive impact of our acquisition of DMR gives us confidence that we will
achieve our targeted 2005 revenue growth rate of 35-40 percent and full-year
profitability."
A conference call with Robert A. Frist, Jr., chief executive officer, Arthur
Newman, senior vice president and chief financial officer, Susan Brownie, senior
vice president of finance and human resources, and Mollie Condra, director of
communications and investor relations will be held on Wednesday, April 27 at
9:00 a.m. (EST). To listen to the conference, please dial 800-289-0730 (passcode
#1646436) if you are calling within the domestic U.S. If you are an
international caller, please dial 913-981-5509 (passcode #1646436). The
conference may also be accessed by going to
http://www.healthstream.com/Investors/index.htm 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 1,170,000 contracted healthcare professionals
have selected the Internet-based HealthStream 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, including training and assessment. Once subscribed to the HealthStream
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. (www.healthstream.com)
HEALTHSTREAM, INC.
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
2005 2004
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Revenues $ 5,682 $ 4,908
Operating expenses:
Cost of revenues 2,036 1,890
Product development 636 647
Sales and marketing 1,190 1,157
Depreciation and amortization 618 488
Other general and administrative 1,156 1,195
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Total operating expenses 5,636 5,377
Operating income (loss) 46 (469)
Other income, net 98 50
------------- -------------
Net income (loss) $ 144 $ (419)
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Net income (loss) per share:
Net income (loss) per share, basic $ 0.01 $ (0.02)
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Net income (loss) per share, diluted $ 0.01 $ (0.02)
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Weighted average shares outstanding:
Basic 20,686 20,447
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Diluted 21,772 20,447
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SUMMARY FINANCIAL DATA - CONTINUED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION OR EBITDA(1):
THREE MONTHS ENDED
MARCH 31,
--------------------------------
2005 2004
------------ ------------
Net income (loss) $ 144 $ (419)
Interest income (105) (55)
Interest expense 4 3
Income taxes 15 --
Depreciation and amortization 618 488
------------ ------------
Income before interest, taxes, depreciation and amortization
$ 676 $ 17
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(1) In order to better assess the Company's financial results, management
believes that income before interest, taxes, depreciation and amortization
("EBITDA") is an appropriate measure for evaluating the operating
performance of the Company at this stage in its life cycle because EBITDA
reflects net income (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 is a non-GAAP financial measure and 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, it
is susceptible to varying calculations. Accordingly, EBITDA, as presented,
may not be comparable to other similarly titled measures of other
companies.
HEALTHSTREAM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31, DECEMBER 31,
2005 2004(1)
------------- -------------
ASSETS
Current assets:
Cash, short term investments and related interest receivable $ 8,080 $ 16,492
Accounts and unbilled receivables, net (2) 4,797 4,588
Prepaid and other current assets 1,720 1,393
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Total current assets 14,597 22,473
Property and equipment, net 2,586 2,319
Goodwill and intangible assets, net 13,989 3,473
Other assets 250 292
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Total assets $ 31,422 $ 28,557
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued and other liabilities $ 3,957 $ 2,786
Deferred revenue 4,079 3,988
Current portion of long-term liabilities 60 24
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Total current liabilities 8,096 6,798
Long-term liabilities, net of current portion 94 30
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Total liabilities 8,190 6,828
Shareholders' equity:
Common stock 93,001 91,642
Accumulated deficit (69,769) (69,913)
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Total shareholders' equity 23,232 21,729
Total liabilities and shareholders' equity $ 31,422 $ 28,557
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(1) Derived from audited financial statements contained in the Company's
filing on Form 10-K for the year ended December 31, 2004.
(2) Includes unbilled receivables of $601 and $597 and other receivables of
$10 and $20 at March 31, 2005 and December 31, 2004, respectively.
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 2005 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 forward-looking statements are subject to significant
uncertainties and other matters referenced in the Company's Annual Report on
Form 10-K and in the Company's other 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.
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