HealthStream(HSTM) - 2024 Q2 - Quarterly Report

Financial Performance - Operating income increased to $4.4 million in Q2 2024, up 10.1% from$ 4.0 million in Q2 2023[84] - Earnings per share (EPS) rose to $0.14 (diluted) in Q2 2024, up from$ 0.13 (diluted) in Q2 2023[84] - Adjusted EBITDA reached $15.8 million for Q2 2024, up 3.3% from$ 15.3 million in Q2 2023[106] - Net income increased to $4.2 million in Q2 2024, up 0.8% from$ 4.1 million in Q2 2023[106] - Revenues grew to $71.6 million in Q2 2024, up 3.4% from$ 69.2 million in Q2 2023[106] - Subscription revenues increased by $2.5 million (4%) in Q2 2024, partially offset by a$ 0.1 million decline in professional services revenues[112] - Subscription services revenue increased by 4% to $69.013 million in 2024 compared to$ 66.506 million in 2023[113] - Total revenues increased by 3% to $71.556 million in 2024 from$ 69.198 million in 2023[113] - Adjusted EBITDA increased to $32.9 million for the six months ended June 30, 2024, compared to$ 29.1 million in the same period in 2023[122] Expenses and Costs - Cost of revenues increased by $0.1 million (1%) to$ 23.7 million in Q2 2024, primarily due to higher software and cloud hosting costs[91] - Sales and marketing expenses rose by $0.1 million (1%) to$ 11.4 million in Q2 2024, driven by increased marketing and travel expenses[93] - Depreciation and amortization expense increased by $0.2 million (1%) to$ 10.4 million in Q2 2024, mainly due to higher amortization of capitalized software[94] - Product development expenses increased by 9% to $12.1 million in Q2 2024, representing 17% of revenues[115] - Cost of revenues increased by 2% to$ 48.4 million for the six months ended June 30, 2024[118] Capital and Investments - Capital expenditures were $6.7 million in Q2 2024, compared to$ 6.2 million in Q2 2023[109] - Net cash used in investing activities decreased to $19.0 million for the six months ended June 30, 2024, from$ 43.3 million in the same period in 2023[127] - Working capital increased to $27.2 million at June 30, 2024, from$ 11.8 million at December 31, 2023[128] - The company repurchased 404,188 shares at an aggregate fair value of $8.9 million under the share repurchase program[129] - The company's cash and investment balances were$ 83.0 million at June 30, 2024, with potential interest income impact of $0.4 million from a hypothetical 10% decrease in interest rates[160] - The company has an investment portfolio including strategic investments in early-stage healthcare technology companies, which could lead to volatility in its Consolidated Financial Statements due to market price changes and impairments[175] Growth Strategy and Risks - The company's growth strategy includes acquiring businesses or making strategic investments to complement or enhance its business, potentially using cash, stock, or a combination of both[172] - The issuance of stock for acquisitions or capital raising could have a dilutive effect on earnings per share and adversely affect the stock price[172] - The company's international operations face risks from currency fluctuations, which could increase costs, and it may consider foreign currency hedging contracts in the future[174] Financial Covenants and Compliance - The company's revolving credit facility has financial covenants setting a maximum leverage ratio of outstanding debt to adjusted EBITDA and an interest coverage ratio of adjusted EBITDA to interest expense[172] - As of June 30, 2024, the company was in compliance with all covenants under its revolving credit facility[172] Tax and Other Provisions - Income tax provision increased to$ 1.1 million in Q2 2024, with an effective tax rate of 21% compared to 8% in Q2 2023[116]