HealthStream(HSTM) - 2020 Q1 - Quarterly Report

Financial Performance - Revenues for Q1 2020 were $61.6 million, a decrease of 6% from $65.2 million in Q1 2019[65] - Operating income increased by 35% to $7.2 million in Q1 2020, up from $5.4 million in Q1 2019, aided by a $3.4 million favorable adjustment[65] - Income from continuing operations rose by 48% to $7.1 million in Q1 2020, compared to $4.8 million in Q1 2019[65] - Earnings per share (EPS) from continuing operations were $0.22 (diluted) in Q1 2020, up from $0.15 (diluted) in Q1 2019[65] - Adjusted EBITDA from continuing operations was $11.8 million in Q1 2020, down 6% from $12.5 million in Q1 2019[65] - Net income was approximately $7.1 million for Q1 2020, compared to $6.0 million for Q1 2019, with EPS increasing to $0.22 per share from $0.18 per share[99] - Adjusted EBITDA from continuing operations decreased by 6% to $11.8 million for Q1 2020 from $12.5 million for Q1 2019[100] - Other income increased to $1.7 million for Q1 2020, up from $0.8 million in Q1 2019, primarily due to a gain from the change in fair value of a non-marketable equity investment[94] Revenue Breakdown - Revenues decreased by approximately $3.6 million, or 6%, to $61.6 million for Q1 2020 compared to $65.2 million for Q1 2019[83] - Workforce Solutions revenues decreased by $4.5 million, or 8%, to $49.8 million, while Provider Solutions revenues increased by $0.8 million, or 8%, to $11.7 million[84] - Revenue from legacy resuscitation products declined by $6.1 million, with expectations of continued sequential decline throughout 2020[103] Cash Flow and Working Capital - Net cash provided by operating activities decreased by $10.0 million to $6.1 million in Q1 2020 from $16.1 million in Q1 2019, primarily due to increased accounts receivable[112] - Working capital decreased to $98.2 million as of March 31, 2020, from $119.4 million at December 31, 2019, mainly due to cash reduction for acquisitions and share repurchases[115] - The company has $107.4 million in cash and cash equivalents and $34.6 million in marketable securities as of March 31, 2020, along with a $50.0 million revolving credit facility available for borrowing[115] Acquisitions and Investments - The company acquired NurseGrid for $25.0 million, with a net cash payment of approximately $21.4 million after adjustments[66] - Net cash used in investing activities was approximately $19.9 million in Q1 2020, down from $39.4 million in Q1 2019, with $21.4 million spent on acquiring NurseGrid[113] Cost Management - Expense management initiatives include postponing salary increases and limiting hiring to critical positions[79] - Cost of revenues decreased by $6.5 million, or 24%, to $20.4 million, with cost of revenues as a percentage of revenues improving from 41% in Q1 2019 to 33% in Q1 2020[85] - Product development expenses increased by $0.6 million, or 8%, to $7.5 million, representing 12% of revenues in Q1 2020 compared to 11% in Q1 2019[87] COVID-19 Impact - The COVID-19 pandemic is expected to negatively impact financial results starting in Q2 2020, despite no significant impact in Q1 2020[68] - The company is providing free COVID-19 courses to caregivers and has implemented a COVID-19 Rapid Response Program in partnership with the State of Tennessee[70] - The company plans to continue product development and share repurchases unless the impact of COVID-19 worsens, which may lead to curtailing these activities[117] Share Repurchase Program - A share repurchase program was authorized for up to $30 million, with 438,142 shares repurchased at an average price of $22.52 per share in Q1 2020[116] Strategic Focus - The company is focused on strategic acquisitions to enhance its business, with potential cash or stock consideration, while maintaining compliance with financial covenants[118] - The company is actively engaged in expanding its simulation-related offerings, including the American Red Cross Resuscitation Suite, which is gaining market acceptance[105] Days Sales Outstanding - Days Sales Outstanding (DSO) improved to 44 days in Q1 2020 from 52 days in Q1 2019, but increased from 39 days in Q4 2019[112]