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 SECOND QUARTER 2005 RESULTS
HIGHLIGHTS:
o Revenues of $6.8 million in the second quarter of 2005, up 45% over the
second quarter of 2004, or an increase of 19%, excluding $1.2 million
resulting from the acquisition of DMR on March 28, 2005.
o Net income of $23,000 in the second quarter of 2005, compared to a net
loss of $529,000 in the second quarter of 2004
o EBITDA earnings of $739,000 in the second quarter of 2005, compared to
a loss of $69,000 in the second quarter of 2004
o 1,113,000 healthcare professional subscribers fully implemented on our
Internet-based learning network at June 30, 2005, up from 864,000 at
June 30, 2004, a 29% increase
o 99% renewal rate in the second quarter of 2005 for HealthStream
Learning Center, based on number of subscribers
o Fifth Annual eLearning Summit held with over 500 healthcare education
management attendees
NASHVILLE, TENN. (JULY 26, 2005)--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, 2005.
FINANCIAL RESULTS:
SECOND QUARTER 2005 COMPARED TO SECOND QUARTER 2004
Revenues for the second quarter of 2005 increased by $2.1 million, or 45
percent, to $6.8 million, compared to $4.7 million for the second quarter of
2004. Revenue increases of $1.2 million resulted from the March 28, 2005
acquisition of Data Management and Research, Inc. ("DMR"). Our HealthStream
Learning Center(TM) subscriber base also grew by $590,000, or 25 percent, while
content subscription revenues increased by $270,000. These revenue increases
were partially offset by lower maintenance fees related to our installed
learning management products of approximately $100,000. Revenues from our
pharmaceutical and medical device business increased modestly compared to the
prior year quarter, however the mix of revenues changed. Revenues from live
events and online content subscriptions increased, but were partially offset by
declines in online development, clinicals, and study guide activities.
While the dollar amount of revenues derived from our Internet-based subscription
products increased, the percentage of total revenues for the second quarter of
2005 approximated 59 percent, down from 65 percent during the same quarter in
2004. This percentage decrease resulted from the addition of DMR's revenues,
which are not included within our Internet-based subscription product offering.
Gross margins (which we define as revenues less cost of revenues divided by
revenues) improved to 64 percent for the second quarter of 2005 from
approximately 63 percent for the second quarter of 2004. This improvement is
primarily a result of the increased revenues from both the HealthStream Learning
Center(TM) and DMR, and was partially offset by increased royalties paid by us
associated with content subscription revenues.
Net income for the second quarter of 2005 was $23,000, or $0.00 per share,
compared to a net loss of $529,000, or ($0.03) per share, for the second quarter
of 2004. The improvement over 2004 primarily resulted from increased revenues
and related gross margin from both our historic business and from the DMR
acquisition. This improvement was partially offset by an increase in marketing
spending associated with our eLearning Summit, held in April of 2005, as well as
increased personnel, depreciation, and amortization expenses associated with the
acquisition of DMR. Spending on the eLearning Summit during the second quarter
of 2005 approximated $350,000.
EBITDA (which we define as earnings or loss before interest, taxes,
depreciation, and amortization) improved to earnings of $739,000 for the second
quarter of 2005, compared to a loss of $69,000 for the second quarter of 2004.
This improvement is consistent with the factors mentioned above.
OTHER FINANCIAL INDICATORS
At June 30, 2005, the Company had cash, investments, and related interest
receivable of $8.4 million, compared to $8.1 million at March 31, 2005. Capital
expenditures and content purchases for the second quarter were $0.4 million.
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) decreased to 54 days for the second quarter of 2005
from approximately 66 days for the first quarter of 2005. This improvement
resulted from stronger collections and the inclusion of DMR revenue for the full
quarter.
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 June 30, 2005, approximately 1,113,000 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 864,000 at June 30, 2004, a 29
percent increase. The total number of contracted subscribers at June 30, 2005
was approximately 1,222,000, up from 997,000 at June 30, 2004, a 23 percent
increase. "Contracted subscribers" include both those already implemented
(1,113,000) and those in the process of implementation (109,000).
The volume of our HealthStream Learning Center customers' accounts up for
renewal during the second quarter continued to increase over historical levels.
We measure our renewal rates by the number of full time equivalents (FTEs)
renewed and by the annual contract value renewed. For the quarter ended June 30,
2005, over 99 percent of FTEs renewed, and the annual contract value renewal
rate was 105 percent, reflecting growth in both volume and pricing for our
renewal accounts. The increased volume of renewal activity will continue during
the third quarter of 2005 and the remainder of the year. In addition, we are
actively pursuing an extension of our relationship with HCA since the current
agreement is up for renewal at the end of September 2005.
Since the acquisition of DMR on March 28, 2005, the quality and satisfaction
survey and data analyses business has continued to grow. Second quarter revenues
reflect growth over the comparable quarter in the prior year of more than
$300,000, resulting from both new accounts and renewals of existing business
relationships. This business has experienced seasonal fluctuations based on
client participation, with the fourth calendar quarter comprising approximately
30 percent of annual revenues. We have initiated cross-selling opportunities and
are working to integrate operations.
In support of online learning in healthcare organizations, HealthStream held its
fifth Annual eLearning Summit for its existing and prospective customers on
April 25 - 28, 2005. Attended by a record 540 participants, representing 42
states, the Summit offered insight from thought leaders in healthcare education,
provided updates on industry trends, and provided a forum for participants to
exchange ideas with their peers. Sessions were held with key accounts, while
HealthStream's senior relationship mangers held customer meetings throughout the
event. Seventeen prospective customers joined the Summit participants at this
unique gathering of healthcare educators--the largest of its kind in the
healthcare industry.
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 June 30, 2005, medical device companies have contracted to train
hospital-based healthcare professionals on 38 devices, up from 33 devices at
March 31, 2005, representing year-to-date contract value of $200,000.
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.
Our association business continues to grow. Commercially supported by 45
pharmaceutical and medical device company customers, HealthStream offered 69
continuing education programs for OR nurses at the Association of periOperative
Registered Nurses (AORN) Congress, held April 3-7, 2005 in New Orleans,
Louisiana. Total registrations for the continuing education programs numbered
approximately 35,000, with approximately one-third occurring online.
FINANCIAL EXPECTATIONS
Revenues for the third quarter of 2005 are expected to approximate $7.1 to $7.3
million, an increase of approximately $2.0 to $2.2 million over the same quarter
in the prior year, with growth split between the DMR acquisition and growth from
our historical hospital-based business and, to a lesser degree, modest increases
in our pharmaceutical and medical device business.
We anticipate somewhat lower gross margins for the third quarter as a result of
changes in revenue mix. Product development and sales expenses are expected to
increase, while marketing expenses are expected to decline from levels
experienced during the second quarter as a result of the eLearning Summit. We
expect to achieve a modest improvement in both net income and EBITDA during the
third quarter of 2005, compared to the second quarter of 2005.
Our guidance for the full-year 2005 remains unchanged, with revenue growth
approximating 35 to 40 percent, including the impact of DMR, and net income of
approximately $400,000 to $600,000.
Commenting on second quarter results, Robert A. Frist, Jr., chief executive
officer, said, "HealthStream's results mark our third consecutive profitable
quarter and a 45 percent growth in revenues over the same quarter last year.
Contributing to this growth, DMR performed well--as expected--in their first
full quarter with HealthStream. We are pleased to see that our performance is
gaining increased attention by the financial community, as demonstrated by
Avondale Partners' decision to initiate research coverage of HealthStream and by
our inclusion in the new Russell Microcap(TM) Index. We believe both of these
developments will increase investor awareness of the Company, helping to broaden
our shareholder base."
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, July 27 at 9:00
a.m. (EST). To listen to the conference, please dial 888-695-0609 (passcode
#7403837) if you are calling within the domestic U.S. If you are an
international caller, please dial 719-457-2660 (passcode #7403837). 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. The replay telephone
numbers are 888-203-1112 (passcode #7403837) for domestic callers and
719-457-0820 (passcode #7403837) for international callers.
ABOUT HEALTHSTREAM
HealthStream (NASDAQ: HSTM) is a leading provider of learning solutions for the
healthcare industry. Approximately 1,222,000 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)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ -------------------------------
2005 2004 2005 2004
------------- ------------- ------------- -------------
Revenues $ 6,806 $ 4,691 $ 12,489 $ 9,599
Operating expenses:
Cost of revenues 2,460 1,751 4,495 3,641
Product development 743 634 1,380 1,281
Sales and marketing 1,601 1,205 2,792 2,361
Depreciation and amortization 760 505 1,378 992
Other general and administrative 1,287 1,170 2,443 2,366
------------- ------------- ------------- -------------
Total operating expenses 6,851 5,265 12,488 10,641
------------- ------------- ------------- -------------
Operating income (loss) (45) (574) 1 (1,042)
Other income, net 68 45 166 94
------------- ------------- ------------ -------------
Net income (loss) $ 23 $ (529) $ 167 $ (948)
============= ============= ============= =============
Net income (loss) per share:
Net income (loss) per share, basic $ 0.00 $ (0.03) $ 0.01 $ (0.05)
============= ============= ============= =============
Net income (loss) per share, diluted $ 0.00 $ (0.03) $ 0.01 $ (0.05)
============= ============= ============= =============
Weighted average shares outstanding:
Basic 21,035 20,581 20,860 20,514
============= ============= ============= =============
Diluted 22,045 20,581 21,756 20,514
============= ============= ============= =============
</Table>
SUMMARY FINANCIAL DATA - CONTINUED
(IN THOUSANDS)
INCOME (LOSS) BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION OR
EBITDA(1):
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- ------------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net income (loss) $ 23 $ (529) $ 167 $ (948)
Interest income (62) (48) (168) (103)
Interest expense 4 3 8 7
Income taxes 14 -- 29 --
Depreciation and amortization 760 505 1,378 992
------------ ------------ ------------ ------------
Income (loss) before interest, taxes, depreciation and
amortization $ 739 $ (69) $ 1,414 $ (52)
============ ============ ============ ============
</Table>
(1) In order to better assess the Company's financial results, management
believes that income (loss) 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)
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2005 2004(1)
------------- -------------
ASSETS
Current assets:
Cash, short term investments and related interest receivable $ 8,374 $ 16,492
Accounts and unbilled receivables, net (2) 4,813 4,588
Prepaid and other current assets 1,687 1,393
------------- -------------
Total current assets 14,874 22,473
Property and equipment, net 2,493 2,319
Goodwill and intangible assets, net 13,822 3,473
Other assets 330 292
------------- -------------
Total assets $ 31,519 $ 28,557
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued and other liabilities $ 3,218 $ 2,786
Deferred revenue 4,085 3,988
Current portion of long-term liabilities 124 24
------------- -------------
Total current liabilities 7,427 6,798
Long-term liabilities, net of current portion 214 30
------------- -------------
Total liabilities 7,641 6,828
Shareholders' equity:
Common stock 93,624 91,642
Accumulated deficit (69,746) (69,913)
------------- -------------
Total shareholders' equity 23,878 21,729
------------- -------------
Total liabilities and shareholders' equity $ 31,519 $ 28,557
============= =============
</Table>
(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 $790 and $597 and other receivables of $6
and $20 at June 30, 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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