What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-24 compared with 2024-07-25 · 89 added, 85 removed, 142 unchanged (55% of the section changed)

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Further, the Company’s internal structure and executive leadership are likewise shaped by the organizing principle of a single platform, including with regard to technology, operations, accounting, internal reporting (including the nature of information reviewed by our key decision makers), organizational structure, compensation, performance assessment, and resource allocation.

Significant financial metrics for the second quarter of 2024 are set forth in the bullets below.

Revenues of $71.6 million in the second quarter of 2024, up 3.4% from $69.2 million in the second quarter of 2023

Operating income of $4.4 million in the second quarter of 2024, up 10.1% from $4.0 million in the second quarter of 2023

Net income of $4.2 million in the second quarter of 2024, up 0.8% from $4.1 million in the second quarter of 2023

Earnings per share (“EPS”) of $0.14 per share (diluted) in the second quarter of 2024, up from $0.13 per share (diluted) in the second quarter of 2023

Adjusted EBITDA 1 of $15.8 million in the second quarter of 2024, up 3.3% from $15.3 million in the second quarter of 2023

Significant financial metrics for the third quarter of 2024 are set forth in the bullets below.

Revenues of $73.1 million in the third quarter of 2024, up 3.9% from $70.3 million in the third quarter of 2023

Operating income of $6.5 million in the third quarter of 2024, up 33.6% from $4.9 million in the third quarter of 2023

Net income of $5.7 million in the third quarter of 2024, up 48.0% from $3.9 million in the third quarter of 2023

Earnings per share (“EPS”) of $0.19 per share (diluted) in the third quarter of 2024, up from $0.13 per share (diluted) in the third quarter of 2023

Adjusted EBITDA 1 of $17.7 million in the third quarter of 2024, up 9.0% from $16.2 million in the third quarter of 2023

Adjusted EBITDA is a non-GAAP financial measure.

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Macroeconomic conditions in the U.S.

continue to be challenging in various respects, including as the result of inflationary conditions, elevated interest rate levels, and uncertain geopolitical conditions.

continue to be challenging in various respects, including as the result of inflationary pressures, interest rate levels, which, despite recent declines, remain elevated, and uncertain geopolitical conditions.

In this regard, we have experienced in certain recent periods, and believe that many of our customers have experienced, increased labor, supply chain, capital, and other expenditures associated with inflationary conditions.

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While the COVID-19 pandemic continues to cause some level of uncertainty, the impact of the pandemic itself on public health and economic conditions has significantly lessened and normalized to the point of reaching an endemic stage.

As our business is focused on providing solutions to healthcare organizations, we continue to closely monitor any developments related to COVID-19 and remain prepared to modify our operating approaches to address COVID 19-related developments or other public health related events as they may arise.

As our business is focused on providing solutions to healthcare organizations, we continue to closely monitor any developments related to COVID-19 or other public health related events and remain prepared to modify our operating approaches to address COVID 19-related developments or other public health related events as they may arise.

Key Financial Metrics

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Revenues, net, reflect income generated by the sales of goods and services related to our operations and, for businesses acquired prior to the adoption of ASU 2021-08 on January 1, 2022, reflects deferred revenue write-downs associated with fair value accounting for such acquired businesses.

Revenues, net, were $71.6 million and $144.3 million for the three and six months ended June 30, 2024, respectively, compared to $69.2 million and $138.1 million for the three and six months ended June 30, 2023, respectively.

Revenues, net, were $73.1 million and $217.4 million for the three and nine months ended September 30, 2024, respectively, compared to $70.3 million and $208.5 million for the three and nine months ended September 30, 2023, respectively.

Management utilizes revenue in connection with managing our business and believes that this metric provides useful information to investors as a key indicator of the growth and success of our products.

Net income represents revenues, net, less all expenses.

Net income was $5.7 million and $15.1 million for the three and nine months ended September 30, 2024, respectively, compared to $3.9 million and $10.6 million for the three and nine months ended September 30, 2023.

Management utilizes net income in connection with managing our business, including with regard to our capital deployment strategies.

Adjusted EBITDA .

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Additionally, certain short-term cash incentive bonuses and performance-based equity award grants are based on the achievement of adjusted EBITDA (as defined in applicable bonus and equity grant documentation) targets.

Adjusted EBITDA was $15.8 million and $32.9 million for the three and six months ended June 30, 2024, respectively, compared to $15.3 million and $29.1 million for the three and six months ended June 30, 2023, respectively.

Adjusted EBITDA was $17.7 million and $50.6 million for the three and nine months ended September 30, 2024, respectively, compared to $16.2 million and $45.3 million for the three and nine months ended September 30, 2023, respectively.

Capital Expenditures .

Capital expenditures represent cash payments incurred for purchases of property and equipment and during the development phase for projects to develop software and content.

Capital expenditures were $6.7 million and $14.5 million for the three and six months ended June 30, 2024, respectively, compared to $6.2 million and $14.7 million for the three and six months ended June 30, 2023, respectively.

Capital expenditures were $6.8 million and $21.3 million for the three and nine months ended September 30, 2024, respectively, compared to $6.7 million and $21.4 million for the three and nine months ended September 30, 2023, respectively.

Management utilizes this metric in connection with managing the allocation of capitalized expenditures in which the Company invests related to the development of its products and believes that this metric is a key indicator of investment in products relative to their current and expected performance.

Net income represents revenues, net less all expenses.

Net income was $4.2 million and $9.4 million for the three and six months ended June 30, 2024, respectively, compared to $4.1 million and $6.8 million for the three and six months ended June 30, 2023.

Management utilizes net income in connection with managing our business, including with regard to our capital deployment strategies.

Critical Accounting Policies and Estimates

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There have been no changes in our critical accounting policies and estimates from those reported in our 2023 Form 10-K.

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

Revenues, net.

Revenues increased $2.4 million, or 3%, to $71.6 million for the three months ended June 30, 2024 from $69.2 million for the three months ended June 30, 2023.

Subscription revenues increased $2.5 million, or 4%, but were partially offset by $0.1 million of declines from professional services revenues.

Revenues increased $2.8 million, or 4%, to $73.1 million for the three months ended September 30, 2024 from $70.3 million for the three months ended September 30, 2023.

Subscription revenues increased $2.5 million, or 4%, and professional services revenues increased by $0.3 million, or 11%, compared to the third quarter of 2023.

The increase in professional services revenues is primarily due to a one-time payment as a result of a customer acquisition.

A comparison of revenues by revenue source is as follows (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Percentage Change

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Cost of Revenues (excluding Depreciation and Amortization).

Cost of revenues increased $0.1 million, or 1%, to $23.7 million for the three months ended June 30, 2024, from $23.6 million for the three months ended June 30, 2023.

Cost of revenues as a percentage of revenues were 33% and 34% for the three months ended June 30, 2024 and 2023, respectively.

The increase in expense is primarily associated with higher costs for software and cloud hosting, which were partially offset by a reduction in royalties and labor costs.

Cost of revenues increased $0.9 million, or 4%, to $24.5 million for the three months ended September 30, 2024, from $23.6 million for the three months ended September 30, 2023.

Cost of revenues as a percentage of revenues were 33% and 34% for the three months ended September 30, 2024 and 2023, respectively.

The increase in expense is primarily associated with higher costs for software and cloud hosting as well as an increase in labor costs and royalties.

Product Development.

Product development expenses increased $1.1 million, or 9%, to $12.1 million for the three months ended June 30, 2024, from $11.0 million for the three months ended June 30, 2023.

Product development expenses as a percentage of revenues were 17% and 16% for the three months ended June 30, 2024 and 2023, respectively.

The increase is primarily due to an increase in labor costs, partially offset by an increase in labor capitalized for internally developed software.

Product development expenses increased $1.2 million, or 11%, to $12.1 million for the three months ended September 30, 2024, from $10.9 million for the three months ended September 30, 2023.

Product development expenses as a percentage of revenues were 17% and 15% for the three months ended September 30, 2024 and 2023, respectively.

The increase is primarily due to an increase in labor costs, partially offset by an increase in capitalized labor associated with software development activities.

Sales and Marketing.

Sales and marketing expenses, including personnel costs, increased $0.1 million, or 1%, to $11.4 million for the three months ended June 30, 2024, from $11.3 million for the three months ended June 30, 2023.

Sales and marketing expenses were 16% of revenues for both the three months ended June 30, 2024 and 2023.

The increase in expense is primarily due to increases in general marketing expenses, travel expenses, and commissions, which were partially offset by a decrease in labor costs.

Sales and marketing expenses, including personnel costs, increased $0.2 million, or 2%, to $11.5 million for the three months ended September 30, 2024, from $11.3 million for the three months ended September 30, 2023.

Sales and marketing expenses were 16% of revenues for both the three months ended September 30, 2024 and 2023.

The increase in expense is primarily due to increases in commissions and software expense, which were partially offset by a decrease in labor costs.

Other General and Administrative Expenses.

Other general and administrative expenses increased $0.5 million, or 5%, to $9.6 million for the three months ended June 30, 2024, from $9.1 million for the three months ended June 30, 2023.

Other general and administrative expenses were 13% of revenues for both the three months ended June 30, 2024 and 2023, respectively.

The increase in expense is primarily due to a $1.5 million increase in bad debt expense during the three months ended June 30, 2024 associated primarily with a customer bankruptcy, partially offset by lower labor costs and rent expense.

Other general and administrative expenses decreased $0.8 million, or 9%, to $8.5 million for the three months ended September 30, 2024, from $9.3 million for the three months ended September 30, 2023.

Other general and administrative expenses were 12% and 13% of revenues for the three months ended September 30, 2024 and 2023, respectively.

The decrease is primarily due to a $0.4 million recovery of sales taxes from prior software expense payments, partially offset by increased share-based compensation.

Depreciation and Amortization.

Depreciation and amortization expense increased $0.2 million, or 1%, to $10.4 million for the three months ended June 30, 2024, from $10.2 million for the three months ended June 30, 2023.

This increase is primarily a result of an increase in amortization associated with capitalized software.

Depreciation and amortization expense decreased $0.3 million, or 3%, to $10.1 million for the three months ended September 30, 2024, from $10.4 million for the three months ended September 30, 2023.

This decrease is primarily a result of a decrease in amortization associated with capitalized software resulting from the recovery of sales taxes from prior capitalized payments related to contract labor associated with software development activities.

Other Income, Net .

Other income, net was $0.9 million for the three months ended June 30, 2024, compared to $0.5 million for the three months ended June 30, 2023.

The increase is primarily the result of an increase in interest income earned on cash and investments during the three months ended June 30, 2024.

Other income, net was $1.0 million for the three months ended September 30, 2024, compared to $0.6 million for the three months ended September 30, 2023.

The increase is primarily the result of an increase in interest income earned on cash and investments during the three months ended September 30, 2024.

Income Tax Provision.

The Company recorded a provision for income taxes of $1.1 million for the three months ended June 30, 2024, compared to $0.4 million for the three months ended June 30, 2023.

The Company’s effective tax rate was 21% for the three months ended June 30, 2024, compared to 8% for the three months ended June 30, 2023.

The Company recorded a provision for income taxes of $1.8 million for the three months ended September 30, 2024, compared to $1.6 million for the three months ended September 30, 2023.

The Company’s effective tax rate was 23% for the three months ended September 30, 2024, compared to 29% for the three months ended September 30, 2023.

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.

During the three months ended June 30, 2024, the Company recorded discrete tax expense of $31,000, which consisted primarily of discrete tax expense related to reserves for uncertain tax positions.

During the three months ended June 30, 2023, the Company recorded discrete tax benefits of $0.5 million, which consisted primarily of tax benefits in the amount of $0.6 million resulting from changes in apportionment rules in Tennessee upon the enactment of the Tennessee Works Tax Act, partially offset by $0.1 million of discrete tax expense related to reserves for uncertain tax positions.

Net income was $4.2 million and $4.1 million for the three months ended June 30, 2024 and 2023, respectively.

EPS was $0.14 per share (diluted) and $0.13 per share (diluted) for the three months ended June 30, 2024 and 2023, respectively.

Adjusted EBITDA was $15.8 million for the three months ended June 30, 2024, compared to $15.3 million for the three months ended June 30, 2023.

During the three months ended September 30, 2024, the Company recorded discrete tax expense of $88,000, which consisted primarily of discrete tax expense related to reserves for uncertain tax positions.

During the three months ended September 30, 2023, the Company recorded discrete tax expense of $0.5 million, which consisted primarily of tax expense in the amount of $0.3 million resulting from the impact of merging VerityStream into HealthStream and $0.1 million related to reserves for uncertain tax positions.

Net income was $5.7 million and $3.9 million for the three months ended September 30, 2024 and 2023, respectively.

EPS was $0.19 per share (diluted) and $0.13 per share (diluted) for the three months ended September 30, 2024 and 2023, respectively.

Adjusted EBITDA was $17.7 million for the three months ended September 30, 2024, compared to $16.2 million for the three months ended September 30, 2023.

See “Reconciliation of Non-GAAP Financial Measures” below for our reconciliation of adjusted EBITDA to the most directly comparable measure under US GAAP and disclosure regarding why we believe adjusted EBITDA provides useful information to investors.

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

Revenues, net.

Revenues increased $6.2 million, or 4%, to $144.3 million for the six months ended June 30, 2024 from $138.1 million for the six months ended June 30, 2023.

Revenues increased $8.9 million, or 4%, to $217.4 million for the nine months ended September 30, 2024 from $208.5 million for the nine months ended September 30, 2023.

Subscription revenues increased $9.1 million, or 5%, but were partially offset by $0.2 million of declines from professional services revenues.

A comparison of revenues by revenue source is as follows (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Percentage Change

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Cost of Revenues (excluding Depreciation and Amortization).

Cost of revenues increased $1.0 million, or 2%, to $48.4 million for the six months ended June 30, 2024, from $47.4 million for the six months ended June 30, 2023.

Cost of revenues as a percentage of revenues were 34% for both the six months ended June 30, 2024 and 2023.

Cost of revenues increased $1.8 million, or 3%, to $72.8 million for the nine months ended September 30, 2024, from $71.0 million for the nine months ended September 30, 2023.

Cost of revenues as a percentage of revenues were 33% and 34% the nine months ended September 30, 2024 and 2023, respectively.

The increase in expense is primarily associated with higher software expenses and cloud hosting costs, partially offset by lower labor costs.

Labor costs recognized during the six months ended June 30, 2023 included severance costs incurred in connection with the Company's previously disclosed restructuring under a single platform strategy.

Labor costs recognized during the nine months ended September 30, 2023 included severance costs incurred in connection with the Company's previously disclosed restructuring under a single platform strategy.

Product Development.

Product development expenses increased $1.4 million, or 6%, to $24.1 million for the six months ended June 30, 2024, from $22.7 million for the six months ended June 30, 2023.

Product development expenses as a percentage of revenues were 17% and 16% for the six months ended June 30, 2024 and 2023, respectively.

The increase is primarily due to an increase in labor costs, partially offset by an increase in labor capitalized for internally developed software.

Product development expenses increased $2.6 million, or 8%, to $36.2 million for the nine months ended September 30, 2024, from $33.6 million for the nine months ended September 30, 2023.

Product development expenses as a percentage of revenues were 17% and 16% for the nine months ended September 30, 2024 and 2023, respectively.

The increase is primarily due to an increase in labor costs, partially offset by an increase in capitalized labor associated with software development activities.

Sales and Marketing.

Sales and marketing expenses, including personnel costs, increased $0.2 million, or 1%, to $23.2 million for the six months ended June 30, 2024, from $23.0 million for the six months ended June 30, 2023.

Sales and marketing expenses were 16% and 17% of revenues for the six months ended June 30, 2024 and 2023, respectively.

Sales and marketing expenses, including personnel costs, increased $0.4 million, or 1%, to $34.7 million for the nine months ended September 30, 2024, from $34.3 million for the nine months ended September 30, 2023.

Sales and marketing expenses were 16% of revenues for both the nine months ended September 30, 2024 and 2023.

The increase in expense is primarily due to increases in general marketing expenses, commissions, and travel expenses, which were partially offset by a decrease in labor costs.

Other General and Administrative Expenses.

Other general and administrative expenses decreased $60,000 to $17.9 million for the six months ended June 30, 2024, from $17.9 million for the six months ended June 30, 2023.

Other general and administrative expenses were 12% and 13% of revenues for the six months ended June 30, 2024 and 2023, respectively.

The decrease is primarily due to lower labor costs, professional service fees, and rent expense, which were partially offset by an increase in bad debt expense of $1.4 million, which was primarily associated with a customer bankruptcy.

Other general and administrative expenses decreased $0.9 million, or 3%, to $26.3 million for the nine months ended September 30, 2024, from $27.2 million for the nine months ended September 30, 2023.

Other general and administrative expenses were 12% and 13% of revenues for the nine months ended September 30, 2024 and 2023, respectively.

The decrease is primarily due to lower labor costs, professional service fees, and a $0.4 million recovery of sales taxes from prior software expense payments, which were partially offset by an increase in bad debt expense of $1.4 million, which was primarily associated with a single-customer bankruptcy.

Depreciation and Amortization.

Depreciation and amortization expense increased $0.6 million, or 3%, to $20.7 million for the six months ended June 30, 2024, from $20.1 million for the six months ended June 30, 2023.

Depreciation and amortization expense increased $0.2 million, or 1%, to $30.8 million for the nine months ended September 30, 2024, from $30.6 million for the nine months ended September 30, 2023.

This increase is primarily a result of an increase in amortization associated with capitalized software.

Other Income, Net .

Other income, net was $1.7 million for the six months ended June 30, 2024, compared to $0.7 million for the six months ended June 30, 2023.

The increase is primarily the result of an increase in interest income earned on cash and investments during the six months ended June 30, 2024.

Other income, net was $2.7 million for the nine months ended September 30, 2024, compared to $1.3 million for the nine months ended September 30, 2023.

The increase is primarily the result of an increase in interest income earned on cash and investments during the nine months ended September 30, 2024.

Income Tax Provision.

The Company recorded a provision for income taxes of $2.4 million for the six months ended June 30, 2024, compared to $0.9 million for the six months ended June 30, 2023.

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

The Company recorded a provision for income taxes of $4.2 million for the nine months ended September 30, 2024, compared to $2.5 million for the nine months ended September 30, 2023.

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

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 was partially offset by $0.2 million of discrete tax expense related to reserves for uncertain tax positions.

Net income was $9.4 million and $6.8 million for the six months ended June 30, 2024 and 2023, respectively.

EPS was $0.31 per share (diluted) and $0.22 per share (diluted) for the six months ended June 30, 2024 and 2023, respectively.

Adjusted EBITDA was $32.9 million for the six months ended June 30, 2024, compared to $29.1 million for the six months ended June 30, 2023.

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 in the amount of $0.6 million resulting from changes in state apportionment rules in Tennessee upon the enactment of the Tennessee Works Tax Act and stock-based awards in the amount of $0.1 million.

This tax benefit 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 expenses related to the impact of merging VerityStream into HealthStream.

Net income was $15.1 million and $10.6 million for the nine months ended September 30, 2024 and 2023, respectively.

EPS was $0.50 per share (diluted) and $0.35 per share (diluted) for the nine months ended September 30, 2024 and 2023, respectively.

Adjusted EBITDA was $50.6 million for the nine months ended September 30, 2024, compared to $45.3 million for the nine months ended September 30, 2023.

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As previously disclosed, prior to the Company early adopting ASU 2021-08 effective January 1, 2022, following the completion of any acquisition by the Company, the Company was required to record the acquired deferred revenue at fair value as defined in GAAP, which typically resulted in a write-down of the acquired deferred revenue.

In connection therewith, management determined that including an adjustment in the definition of adjusted EBITDA for the impact of the deferred revenue write-downs associated with fair value accounting for businesses acquired prior to the January 1, 2022 effective date of the Company's adoption of ASU 2021-08 (the “Pre-2022 Acquisitions”) provided useful information to investors because the deferred revenue write-down recognized in periods after any such Pre-2022 Acquisition could, given the nature of this non-cash accounting impact, cause our GAAP financial results during such periods to not fully reflect our underlying operating performance.

In connection therewith, management determined that including an adjustment in the definition of adjusted EBITDA for the impact of the deferred revenue write-downs associated with fair value accounting for businesses acquired prior to the January 1, 2022 effective date of the Company's adoption of ASU 2021-08 (the “Pre-2022 Acquisitions”) provided useful information to investors because the deferred revenue write-down recognized in periods after any such Pre-2022 Acquisitions could, given the nature of this non-cash accounting impact, cause our GAAP financial results during such periods to not fully reflect our underlying operating performance.

Following the adoption of ASU 2021-08, contracts acquired in an acquisition completed on or after January 1, 2022 have been measured as if the Company had originated the contract (rather than the contract being measured at fair value) such that, for such acquisitions, the Company no longer records deferred revenue write-downs associated with acquired businesses.

With respect to periods ended on or prior to December 31, 2023, the Company has included an adjustment in the calculation of adjusted EBITDA for the impact of deferred revenue write-downs associated with the Pre-2022 Acquisitions consistent with this prior accounting standard, given the ongoing impact of such deferred revenue on the Company's financial results under GAAP over this time period.

With respect to periods beginning on or after January 1, 2024, the Company no longer recognizes any deferred revenue write-downs associated with the Pre-2022 Acquisitions under GAAP, and accordingly such deferred revenue write-downs are not an adjustment in connection with the calculation of adjusted EBITDA for periods on and after January 1, 2024.

With respect to periods beginning on and after January 1, 2024, the Company no longer recognizes any deferred revenue write-downs associated with the Pre-2022 Acquisitions under GAAP, and accordingly such deferred revenue write-downs are not an adjustment in connection with the calculation of adjusted EBITDA for periods on and after January 1, 2024.

Adjusted EBITDA is a non-GAAP financial measure and should not be considered as a measure of financial performance under GAAP.

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A reconciliation of adjusted EBITDA to the most directly comparable GAAP measure, net income, is set forth below (in thousands).

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

GAAP net income

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Depreciation and amortization

Change in fair value of non-marketable equity investments

Adjusted EBITDA

Liquidity and Capital Resources

Net cash provided by operating activities increased by $1.9 million to $27.4 million during the six months ended June 30, 2024, from $25.5 million during the six months ended June 30, 2023.

The increase in net cash provided by operating activities is primarily due to higher cash collections compared to the prior year period, but was partially offset by a $3.0 million increase in income tax payments.

Our days sales outstanding (“DSO”) was 45 days for the second quarter of 2024 compared to 50 days for the second quarter of 2023.

Net cash provided by operating activities decreased by $3.7 million to $46.5 million during the nine months ended September 30, 2024, from $50.2 million during the nine months ended September 30, 2023.

The decrease in net cash provided by operating activities is primarily due to a $3.6 million increase in income tax payments, while cash receipts increased modestly compared to the prior year.

Our days sales outstanding (“DSO”) was 37 days for the third quarter of 2024 compared to 43 days for the third quarter of 2023.

The Company calculates DSO by dividing the average accounts receivable balance for the quarter by average daily revenues for the quarter.

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The primary uses of cash to fund operations included personnel expenses, sales commissions, royalty payments, payments for contract labor and other direct expenses associated with delivery of our products and services, income tax payments, and general corporate expenses.

Net cash used in investing activities was $19.0 million for the six months ended June 30, 2024, compared to $43.3 million for the six months ended June 30, 2023.

During the six months ended June 30, 2024, the Company invested in marketable securities of $34.5 million, made payments for capitalized software development of $13.6 million, and purchased property and equipment of $0.9 million.

Net cash used in investing activities was $25.9 million for the nine months ended September 30, 2024, compared to $47.2 million for the nine months ended September 30, 2023.

During the nine months ended September 30, 2024, the Company invested in marketable securities of $51.5 million, made payments for capitalized software development of $20.1 million, and purchased property and equipment of $1.2 million.

These uses of cash were partially offset by $46.2 million in maturities of marketable securities and $0.8 million received upon the settlement and release of escrowed proceeds related to a prior sale of a non-marketable equity investment.

During the six months ended June 30, 2023, the Company spent $6.6 million for the acquisition of substantially all of the assets of Electronic Education Documentation System, LLC (“eeds”) (note:

the eeds acquisition was consummated on December 31, 2022, but was funded in January 2023 such that the purchase price for eeds impacted net cash used in investing activities during the six months ended June 30, 2023), invested in marketable securities of $32.0 million, made payments for capitalized software development of $13.3 million, and purchased property and equipment of $1.4 million.

These uses of cash were partially offset by $10.0 million in maturities of marketable securities.

Net cash used in financing activities was $2.6 million for the six months ended June 30, 2024, compared to $2.3 million for the six months ended June 30, 2023.

The uses of cash for the six months ended June 30, 2024 included $1.7 million for the payment of cash dividends and $0.9 million for the payment of employee payroll taxes in relation to the vesting of RSUs.

The uses of cash for the six months ended June 30, 2023 included $1.5 million for the payment of cash dividends and $0.8 million for the payment of employee payroll taxes in relation to the vesting of RSUs.

Our balance sheet reflects working capital of $27.2 million at June 30, 2024, compared to $11.8 million at December 31, 2023.

During the nine months ended September 30, 2023, the Company spent $6.6 million for the acquisition of substantially all of the assets of Electronic Education Documentation System, LLC (“eeds”) (note:

the eeds acquisition was consummated on December 31, 2022, but was funded in January 2023 such that the purchase price for eeds impacted net cash used in investing activities during the nine months ended September 30, 2023), invested in marketable securities of $38.2 million, made payments for capitalized software development of $19.6 million, and purchased property and equipment of $1.9 million.

These uses of cash were partially offset by $19.0 million in maturities of marketable securities and $45,000 in proceeds from the sales of non-marketable equity investments.

Net cash used in financing activities was $3.5 million for the nine months ended September 30, 2024, compared to $4.8 million for the nine months ended September 30, 2023.

The uses of cash for the nine months ended September 30, 2024 included $2.6 million for the payment of cash dividends and $0.9 million for the payment of employee payroll taxes in relation to the vesting of restricted share units.

The uses of cash for the nine months ended September 30, 2023 included $2.3 million for the payment of cash dividends, $1.6 million for repurchases of common stock (note:

share repurchases totaled $2.1 million during the nine months ended September 30, 2023, with $1.6 million paid in cash and $0.5 million included in accrued expenses in the Company's Condensed Consolidated Balance Sheet as of September 30, 2023), and $0.8 million for the payment of employee payroll taxes in relation to the vesting of restricted share units.

Our balance sheet reflects working capital of $35.1 million at September 30, 2024, compared to $11.8 million at December 31, 2023.

The increase in working capital is primarily a result of an increase in cash and cash equivalents.

The Company’s primary source of liquidity as of June 30, 2024 was $46.1 million of cash and cash equivalents and $36.9 million of marketable securities.

The Company’s primary source of liquidity as of September 30, 2024 was $57.5 million of cash and cash equivalents and $37.4 million of marketable securities.

The Company also has a $50.0 million revolving credit facility.

10 unchanged sentences

On April 22, 2024, the Board approved a quarterly cash dividend of $0.028 per share, which was paid on May 17, 2024 to holders of record of our common stock on May 6, 2024.

Moreover, on July 22, 2024, the Board approved a quarterly cash dividend of $0.028 per share, which will be payable on August 16, 2024 to holders of record of our common stock on August 5, 2024.

On July 22, 2024, the Board approved a quarterly cash dividend of $0.028 per share, which was paid on August 16, 2024 to holders of record of our common stock on August 5, 2024.

On October 21, 2024, the Board approved a quarterly cash dividend of $0.028 per share, which will be payable on November 15, 2024 to holders of record of our common stock on November 4, 2024.

T he dividend policy and the declaration and payment of each quarterly cash dividend will be subject to our Board’s continuing determination that the policy and the declaration and payment of dividends thereunder are in the best interests of our shareholders and are in compliance with applicable law and our credit agreement.

6 unchanged sentences

Therefore, the maximum borrowings against our new revolving credit facility would be dependent on the covenant calculations at the time of borrowing.

As of June 30, 2024, we were in compliance with all covenants under our revolving credit facility.

As of September 30, 2024, we were in compliance with all covenants under our revolving credit facility.

There can be no assurance that amounts available for borrowing under our revolving credit facility will be sufficient to consummate any possible acquisitions, and we cannot provide assurance that if we need additional financing that it will be available on terms favorable to us, or at all.

1 unchanged sentence

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 2. Management’s Discussion and Analysis