HealthStream(HSTM) - 2024 Q3 - Quarterly Report

Financial Performance - Revenues of $73.1 million in Q3 2024, up 3.9$70.3 million in Q3 2023[48] - Operating income of $6.5 million in Q3 2024, up 33.6$4.9 million in Q3 2023[48] - Net income of $5.7 million in Q3 2024, up 48.0$3.9 million in Q3 2023[48] - Adjusted EBITDA of $17.7 million in Q3 2024, up 9.0$16.2 million in Q3 2023[48] - Revenues increased by $8.9 million, or 4$217.4 million for the nine months ended September 30, 2024, compared to $208.5 million for the same period in 2023[67] - Net income for the nine months ended September 30, 2024, was$15.1 million, compared to $10.6 million for the same period in 2023, with diluted EPS increasing from$0.35 to $0.50[73] - Adjusted EBITDA rose to$50.6 million for the nine months ended September 30, 2024, compared to $45.3 million for the same period in 2023[73] Revenue Breakdown - Subscription revenues increased by$2.5 million, or 4%, to $69.9 million in Q3 2024[59] - Professional services revenues increased by$0.3 million, or 11%, to $3.2 million in Q3 2024[59] - Subscription revenues rose by$9.1 million, or 5%, while professional services revenues declined by $0.2 million, or 3$1.2 million, or 11%, to $12.1 million in Q3 2024[60] - Cost of revenues increased by$1.8 million, or 3%, to $72.8 million, with cost of revenues as a percentage of total revenues decreasing from 34$2.6 million, or 8%, to $36.2 million, representing 17$0.8 million, or 9%, to $8.5 million in Q3 2024[61] Cash Flow and Capital Expenditures - Net cash provided by operating activities decreased by$3.7 million to $46.5 million, primarily due to a$3.6 million increase in income tax payments[81] - Net cash used in investing activities was $25.9 million, a decrease from$47.2 million in the prior year, with significant investments in marketable securities and capitalized software development[82] - Capital expenditures were $6.8 million for Q3 2024, compared to$6.7 million for Q3 2023[54] Shareholder Returns and Dividends - The Company announced a share repurchase program with authorization to purchase up to $10.0 million of outstanding shares, repurchasing a total of 404,188 shares at an aggregate fair value of$8.9 million, averaging $22.07 per share[85] - The Board declared a quarterly cash dividend of$0.025 per share for the year ended December 31, 2023, increasing to $0.028 per share starting February 19, 2024[86] Financial Position and Strategy - The company reported working capital of$35.1 million as of September 30, 2024, up from $11.8 million at the end of 2023, primarily due to increased cash and cash equivalents[84] - The Company believes existing cash, cash equivalents, and marketable securities will be sufficient for working capital needs, new product development, dividend payments, and potential share repurchases for at least the next 12 months[87] - The growth strategy includes acquiring businesses or making strategic investments, with potential cash or stock consideration, which may dilute earnings per share[89] - As of September 30, 2024, the Company had no outstanding debt and$94.9 million in cash and investments, with a hypothetical 10% decrease in interest rates potentially reducing annual interest income by $0.4 million[91] Risk Factors - The Company is exposed to foreign currency risks related to revenue and operating expenses in currencies other than the US dollar, including Canadian, New Zealand, and Australian dollars[92] - The investment policy focuses on highly rated securities to minimize principal loss risk, with strategic investments primarily in healthcare technology companies[93] Internal Controls - There were no changes in internal control over financial reporting during the third quarter of 2024 that materially affected the Company's controls[97] - The Company did not have any share repurchase program in effect during the three months ended September 30, 2024[98]