What changed in this filing

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Item 1. Financial Statements

2024-10-24 compared with 2024-07-25 · 102 added, 59 removed, 311 unchanged (34% of the section changed)

3 unchanged sentences

(In thousands)

September 30,

Current assets:

3 unchanged sentences

37,404 30,800

Accounts receivable, net of allowance for doubtful accounts of $ 978 and $ 781 at June 30, 2024 and December 31, 2023, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 949 and $ 781 at September 30, 2024 and December 31, 2023, respectively

26,326 34,346

5 unchanged sentences

145,648 130,210

Property and equipment, net of accumulated depreciation of $ 21,423 and $ 19,503 at June 30, 2024 and December 31, 2023, respectively

Property and equipment, net of accumulated depreciation of $ 22,362 and $ 19,503 at September 30, 2024 and December 31, 2023, respectively

11,086 13,005

Capitalized software development, net of accumulated amortization of $ 139,063 and $ 127,009 at June 30, 2024 and December 31, 2023, respectively

Capitalized software development, net of accumulated amortization of $ 144,894 and $ 127,009 at September 30, 2024 and December 31, 2023, respectively

42,472 40,643

2 unchanged sentences

191,139 191,379

Customer-related intangibles, net of accumulated amortization of $ 61,107 and $ 57,095 at June 30, 2024 and December 31, 2023, respectively

50,569 54,742

Other intangible assets, net of accumulated amortization of $ 17,084 and $ 16,603 at June 30, 2024 and December 31, 2023, respectively

Customer-related intangibles, net of accumulated amortization of $ 56,676 and $ 57,095 at September 30, 2024 and December 31, 2023, respectively

48,700 54,742

Other intangible assets, net of accumulated amortization of $ 18,420 and $ 16,603 at September 30, 2024 and December 31, 2023, respectively

Deferred commissions

21 unchanged sentences

Common stock, no par value, 75,000 shares authorized;

30,408 and 30,298 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

30,415 and 30,298 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

251,428 249,075

12 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Nine Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Revenues, net

18 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Other comprehensive (loss) income, net of taxes:

Nine Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Other comprehensive income (loss), net of taxes:

Foreign currency translation adjustments

Unrealized loss on marketable securities

Total other comprehensive (loss) income

Unrealized gain (loss) on marketable securities

Total other comprehensive income (loss)

Comprehensive income

3 unchanged sentences

(In thousands, except per share data)

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Accumulated Other Comprehensive

Total Shareholders’

(Loss)/Income

Balance at December 31, 2023

22 unchanged sentences

30,408 $ 250,368 $ 100,063 $ ( 1,217 ) $ 349,214

Six Months Ended June 30, 2023

— — 5,725 — 5,725

Comprehensive income

— — — 333 333

Dividends declared on common stock ($ 0.028 per share)

— — ( 851 ) — ( 851 )

Stock-based compensation

— 1,131 — — 1,131

Common stock issued under stock plans, net of shares withheld for employee taxes

7 ( 71 ) — — ( 71 )

Balance at September 30, 2024

30,415 $ 251,428 $ 104,937 $ ( 884 ) $ 355,481

Nine Months Ended September 30, 2023

Accumulated Other Comprehensive

Total Shareholders’

(Loss)/Income

Balance at December 31, 2022

22 unchanged sentences

30,686 $ 256,073 $ 85,435 $ ( 889 ) $ 340,619

— — 3,867 — 3,867

Comprehensive loss

— — — ( 350 ) ( 350 )

Dividends declared on common stock ($ 0.025 per share)

— — ( 767 ) — ( 767 )

Stock-based compensation

— 1,038 — — 1,038

Common stock issued under stock plans, net of shares withheld for employee taxes

3 ( 20 ) — — ( 20 )

Repurchase of common stock

( 99 ) ( 2,141 ) — — ( 2,141 )

Balance at September 30, 2023

30,590 $ 254,950 $ 88,535 $ ( 1,239 ) $ 342,246

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

OPERATING ACTIVITIES:

6 unchanged sentences

Loss on equity method investments

Change in fair value of non-marketable equity investments

Changes in operating assets and liabilities:

17 unchanged sentences

Taxes paid related to net settlement of equity awards

Repurchases of common stock

Payment of cash dividends

21 unchanged sentences

All intercompany transactions have been eliminated in consolidation.

Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

The Condensed Consolidated Balance Sheet at December 31, 2023 was derived from the audited Consolidated Financial Statements at that date but does not include all of the information and footnotes required by US GAAP for a complete set of financial statements.

6 unchanged sentences

ASU 2023 - 07 will be effective for the Company for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

The Company is currently evaluating the impact of adopting ASU 2023 - 07.

The Company is currently evaluating the standard;

however, it is not expected to have a material impact on the Company's financial statements.

In December 2023, FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures , which requires public entities to provide disclosure of disaggregated information in the entity’s tax rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction.

ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of adopting ASU 2023 - 09.

ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024.

The Company is currently evaluating the standard;

however, it is not expected to have a material impact on the Company's financial statements.

HEALTHSTREAM, INC.

11 unchanged sentences

Sales taxes are excluded from revenues.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Subscription services

4 unchanged sentences

$ 73,095 $ 70,339 $ 217,411 $ 208,482

three months ended June 30, 2024 and 2023 , the Company recognized

three months ended September 30, 2024 and 2023 , the Company recognized

$ 0.2 million and

$ 0.3 million in impairment losses on receivables and contract assets arising from the Company's contracts with customers, respectively.

six months ended

June 30, 2024 and

nine months ended

September 30, 2024 and

2023, the Company recognized

1 unchanged sentence

$ 0.7 million in impairment losses on receivables and contract assets arising from the Company's contracts with customers, respectively.

During the three months ended June 30, 2024 and 2023 , the Company recognized revenues of $ 47.2 million and $ 43.6 million, respectively, from amounts included in deferred revenue at the beginning of the respective periods.

During the six months ended June 30, 2024 and 2023, the Company recognized revenues of $ 65.2 million and $ 62.1 million, respectively, from amounts included in deferred revenue at the beginning of the respective periods.

As of June 30, 2024 , approximately $ 538 million of revenue is expected to be recognized from remaining performance obligations under contracts with customers.

During the three months ended September 30, 2024 and 2023 , the Company recognized revenues of $ 45.0 million and $ 42.2 million, respectively, from amounts included in deferred revenue at the beginning of the respective periods.

During the nine months ended September 30, 2024 and 2023, the Company recognized revenues of $ 79.4 million and $ 76.0 million, respectively, from amounts included in deferred revenue at the beginning of the respective periods.

As of September 30, 2024 , approximately $ 549 million of revenue is expected to be recognized from remaining performance obligations under contracts with customers.

The Company expects to recognize revenue related to approximately 43 % of these remaining performance obligations over the next 12 months, with the remaining amounts recognized thereafter.

1 unchanged sentence

Sales commissions earned by the Company's sales employees are considered incremental and recoverable costs of obtaining a contract with a customer.

The Company recorded amortization of deferred commissions of $ 3.0 million and $ 2.8 million for the three months ended June 30, 2024 and 2023 , respectively, and $ 6.0 million and $ 5.5 million for the six months ended June 30, 2024 and 2023, respectively, which is included in sales and marketing expenses in the accompanying Condensed Consolidated Statements of Income.

The Company recorded amortization of deferred commissions of $ 3.1 million and $ 3.0 million for the three months ended September 30, 2024 and 2023 , respectively, and $ 9.1 million and $ 8.5 million for the nine months ended September 30, 2024 and 2023, respectively, which is included in sales and marketing expenses in the accompanying Condensed Consolidated Statements of Income.

HEALTHSTREAM, INC.

2 unchanged sentences

The Company computes its interim period provision for income taxes by applying the estimated annual effective tax rate to year-to-date pretax income or loss and adjusts the provision for discrete tax items recorded in the period.

During the three months ended June 30, 2024 and 2023 , the Company recorded a provision for income taxes of $ 1.1 million and $ 0.4 million, respectively.

During the six months ended June 30, 2024 and 2023, the Company recorded a provision for income taxes of $ 2.4 million and $ 0.9 million, respectively.

The Company’s effective tax rate was 21 % and 12 % for the six months ended June 30, 2024 and 2023 , respectively.

During the three months ended September 30, 2024 and 2023 , the Company recorded a provision for income taxes of $ 1.8 million and $ 1.6 million, respectively.

During the nine months ended September 30, 2024 and 2023, the Company recorded a provision for income taxes of $ 4.2 million and $ 2.5 million, respectively.

The Company’s effective tax rate was 22 % and 19 % for the nine months ended September 30, 2024 and 2023 , respectively.

The Company’s effective tax rate primarily reflects the statutory corporate income tax rate, the net effect of state taxes, foreign income taxes, the effect of various permanent tax differences, and recognition of discrete tax items.

The Company recognizes excess tax benefits and tax deficiencies associated with stock-based awards as a component of its provision for income taxes.

During the six months ended June 30, 2024 , the Company recorded discrete tax expense of $ 14,000 , which consisted primarily of discrete tax expense of $ 0.2 million related to reserves for uncertain tax positions, partially offset by a $ 0.1 million discrete tax benefit associated with stock-based awards.

During the six months ended June 30, 2023 , the Company recorded discrete tax benefits of $ 0.5 million, which consisted primarily of tax benefits associated with changes in state apportionment rules in Tennessee upon the enactment of the Tennessee Works Tax Act in the amount of $ 0.6 million, and stock-based awards, in the amount of $ 0.1 million.

This tax benefit for the six months ended June 30, 2023 was partially offset by $ 0.2 million of discrete tax expense related to reserves for uncertain tax positions.

During the nine months ended September 30, 2024 , the Company recorded discrete tax expense of $ 0.1 million, which consisted primarily of discrete tax expense of $ 0.2 million related to reserves for uncertain tax positions, partially offset by a $ 0.1 million discrete tax benefit associated with stock-based awards.

During the nine months ended September 30, 2023 , the Company recorded discrete tax benefits of $ 0.1 million, which consisted primarily of tax benefits associated with changes in state apportionment rules in Tennessee upon the enactment of the Tennessee Works Tax Act in the amount of $ 0.6 million, and stock-based awards in the amount of $ 0.1 million.

This tax benefit for the nine months ended September 30, 2023 was partially offset by $ 0.3 million of discrete tax expense related to reserves for uncertain tax positions and $ 0.3 million of discrete tax expense associated with the Company merging VerityStream, Inc.

("VerityStream") into HealthStream.

SHAREHOLDERS ’ EQUITY

Dividends on Common Stock

During the six months ended June 30, 2024, the Company's Board of Directors (“Board”) declared the following quarterly dividends under the Company's dividend policy:

During the nine months ended September 30, 2024, the Company's Board of Directors (“Board”) declared the following quarterly dividends under the Company's dividend policy:

Dividend Payment Date Dividend Declaration Date Dividend Per Share Record Date Cash Outlay

1 unchanged sentence

May 17, 2024 April 22, 2024 0.028 May 6, 2024 851,000

August 16, 2024 July 22, 2024 0.028 August 5, 2024 851,000

Total dividends $ 0.084 $ 2,551,000

Additionally, o n July 22, 2024, the Board declared a quarterly cash dividend of $ 0.028 per share, payable on August 16, 2024 to holders of record on August 5, 2024 .

Additionally, o n October 21, 2024, the Board declared a quarterly cash dividend of $ 0.028 per share, payable on November 15, 2024 to holders of record on November 4, 2024 .

Stock-Based Compensation

1 unchanged sentence

The Company accounts for its stock-based compensation plans using the fair-value based method for costs related to share-based payments, including restricted share units (“RSUs”) and stock options.

During the six months ended June 30, 2024 , the Company issued 69,784 RSUs subject to service-based time vesting, with a weighted average grant date fair value of $ 26.92 per share, measured based on the closing fair market value of the Company's stock on the date of the grant.

During the six months ended June 30, 2023 , the Company issued 72,923 RSUs subject to service-based time vesting, with a weighted average grant date fair value of $ 25.36 per share, measured based on the closing fair market value of the Company’s stock on the date of grant.

During the nine months ended September 30, 2024 , the Company issued 110,573 RSUs subject to service-based time vesting, with a weighted average grant date fair value of $ 27.80 per share, measured based on the closing fair market value of the Company's stock on the date of the grant.

During the nine months ended September 30, 2023 , the Company issued 128,942 RSUs subject to service-based time vesting, with a weighted average grant date fair value of $ 23.61 per share, measured based on the closing fair market value of the Company’s stock on the date of grant.

HEALTHSTREAM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

During the six months ended June 30, 2023, the Company granted 138,000 performance-based RSUs, the vesting of which occurs over a five -year period in increments of 15 %, 20 %, 20 %, 20 %, and 25 % and is contingent upon continued service and achieving certain performance criteria established by the compensation committee of the Board (the “Compensation Committee”) on an annual basis based on performance in 2023, 2024, 2025, 2026, and 2027, respectively.

During the nine months ended September 30, 2024, the Company granted 6,100 performance-based RSUs, the vesting of which occurs over a five -year period in increments of 10 %, 15 %, 20 %, 25 %, and 30 % and is contingent upon continued service and achieving certain performance criteria established by the compensation committee of the Board (the “Compensation Committee”) on an annual basis based on performance in 2024, 2025, 2026, 2027, and 2028, respectively.

The performance criteria for the first -year tranche, or 610 of these performance-based RSUs, is based on 2024 adjusted EBITDA.

The measurement date for these 610 performance-based RSUs was established during the nine months ended September 30, 2024 with a weighted average grant date fair value of $ 28.79 per share, measured based on the closing fair market value of the Company's stock on the date the performance criteria was established.

The performance criteria for the remaining 5,490 performance-based RSUs has not yet been determined and will be established on an annual basis in 2025, 2026, 2027, and 2028, as applicable;

therefore, the measurement date for these remaining 5,490 performance-based RSUs cannot be determined until the performance criteria have been established.

During the nine months ended September 30, 2023, the Company granted 138,000 performance-based RSUs, the vesting of which occurs over a five -year period in increments of 15 %, 20 %, 20 %, 20 %, and 25 % and is contingent upon continued service and achieving certain performance criteria established by the compensation committee of the Board (the “Compensation Committee”) on an annual basis based on performance in 2023, 2024, 2025, 2026, and 2027, respectively.

The performance criteria for the second -year tranche, or 27,600 of these performance-based RSUs, is based on 2024 adjusted EBITDA.

The measurement date for these 27,600 performance-based RSUs was established during the six months ended June 30, 2024 with a weighted average grant date fair value of $ 26.79 per share, measured based on the closing fair market value of the Company's stock on the date the performance criteria was established.

The measurement date for these 27,600 performance-based RSUs was established during the nine months ended September 30, 2024 with a weighted average grant date fair value of $ 26.79 per share, measured based on the closing fair market value of the Company's stock on the date the performance criteria was established.

The performance criteria for the remaining 89,700 performance-based RSUs has not yet been determined and will be established on an annual basis in 2025, 2026, and 2027, as applicable;

therefore, the measurement date for these remaining 89,700 performance-based RSUs cannot be determined until the performance criteria have been established.

During the six months ended June 30, 2022, the Company approved the grant of 91,042 performance-based RSUs, the vesting of which occurs over a five -year period in increments of 15 %, 20 %, 20 %, 20 %, and 25 % and is contingent upon continued service and achieving certain performance criteria established by the Compensation Committee on an annual basis based on performance in 2022, 2023, 2024, 2025, and 2026, respectively.

The performance criteria and measurement date for the third -year tranche, or 18,211 of these performance-based RSUs, is based on 2024 adjusted EBITDA and was established during the six months ended June 30, 2024 with a grant date fair value of $ 26.79 per share, measured based on the closing fair market value of the Company's stock on the date the performance criteria was established.

During the nine months ended September 30, 2022, the Company granted 91,042 performance-based RSUs, the vesting of which occurs over a five -year period in increments of 15 %, 20 %, 20 %, 20 %, and 25 % and is contingent upon continued service and achieving certain performance criteria established by the Compensation Committee on an annual basis based on performance in 2022, 2023, 2024, 2025, and 2026, respectively.

The performance criteria and measurement date for the third -year tranche, or 18,211 of these performance-based RSUs, is based on 2024 adjusted EBITDA and was established during the nine months ended September 30, 2024 with a grant date fair value of $ 26.79 per share, measured based on the closing fair market value of the Company's stock on the date the performance criteria was established.

The performance criteria for the remaining 40,967 performance-based RSUs has not yet been determined and will be established on an annual basis in 2025 and 2026, as applicable;

1 unchanged sentence

Total stock-based compensation expense recognized in the Condensed Consolidated Statements of Income is as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenues (excluding depreciation and amortization)

15 unchanged sentences

The dilutive effect of common equivalent shares is included in diluted earnings per share by application of the treasury stock method.

The total number of common equivalent shares excluded from the calculations of diluted earnings per share, due to their anti-dilutive effect or contingent performance conditions, was approximately 155,000 and 225,000 for the three months ended June 30, 2024 and 2023 , respectively, and 166,000 and 246,000 for the six months ended June 30, 2024 and 2023, respectively.

The total number of common equivalent shares excluded from the calculations of diluted earnings per share, due to their anti-dilutive effect or contingent performance conditions, was approximately 177,000 and 340,000 for the three months ended September 30, 2024 and 2023 , respectively, and 169,000 and 278,000 for the nine months ended September 30, 2024 and 2023, respectively.

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

$ 5,725 $ 3,867 $ 15,118 $ 10,623

Weighted-average shares outstanding

30,409 30,683 30,374 30,653

Effect of dilutive shares

181 86 138 81

Weighted-average diluted shares

30,590 30,769 30,512 30,734

Net income per share:

$ 0.19 $ 0.13 $ 0.50 $ 0.35

MARKETABLE SECURITIES

The fair value of marketable securities, which were all classified as available for sale and which the Company does not intend to sell nor will the Company be required to sell prior to recovery of their amortized cost basis, included the following (in thousands):

June 30, 2024

September 30, 2024

Adjusted Cost

12 unchanged sentences

The carrying amounts reported in the Condensed Consolidated Balance Sheets approximate fair value based on quoted market prices or alternative pricing sources and models utilizing market observable inputs.

As of June 30, 2024 , the Company did not recognize any allowance for credit impairments on its available for sale securities.

As of September 30, 2024 , the Company did not recognize any allowance for credit impairments on its available for sale securities.

All investments in marketable securities are classified as current assets on the Condensed Consolidated Balance Sheets because the underlying securities mature within one year from the balance sheet date.

20 unchanged sentences

In addition, the Revolving Credit Facility contains certain customary affirmative and negative covenants that, among other things, restrict additional indebtedness, liens and encumbrances, changes to the character of the Company’s business, acquisitions, asset dispositions, mergers and consolidations, sale or discount of receivables, creation or acquisitions of additional subsidiaries, and other matters customarily restricted in such agreements.

As of June 30, 2024 , the Company was in compliance with all covenants.

There were no balances outstanding on the Revolving Credit Facility as of or during the three and six months ended June 30, 2024 .

As of September 30, 2024 , the Company was in compliance with all covenants.

There were no balances outstanding on the Revolving Credit Facility as of or during the three and nine months ended September 30, 2024 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements