[10-Q] HealthStream Inc Quarterly Earnings Report
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended
| | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File No.:
HealthStream, Inc.
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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| (Address of principal executive offices) | (Zip Code) |
(
(Registrant's telephone number, including area code)
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | | ☒ | ||
| Non-accelerated filer | ☐ | Smaller reporting company | | ||
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 4, 2025, there were
Index to Form 10‑Q
HEALTHSTREAM, INC.
| Page Number |
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| Part I. |
Financial Information |
1 |
| Item 1. |
Financial Statements |
1 |
| Condensed Consolidated Balance Sheets (Unaudited) – June 30, 2025 and December 31, 2024 |
1 |
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| Condensed Consolidated Statements of Income (Unaudited) – Three and Six Months ended June 30, 2025 and 2024 |
2 |
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| Condensed Consolidated Statements of Comprehensive Income (Unaudited) – Three and Six Months ended June 30, 2025 and 2024 |
3 |
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| Condensed Consolidated Statement of Shareholders' Equity (Unaudited) – Three and Six Months ended June 30, 2025 and 2024 |
4 |
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| Condensed Consolidated Statements of Cash Flows (Unaudited) – Six Months ended June 30, 2025 and 2024 |
5 |
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| Notes to Condensed Consolidated Financial Statements (Unaudited) |
6 |
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| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
12 |
| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
18 |
| Item 4. |
Controls and Procedures |
18 |
| Part II. |
Other Information |
19 |
| Item 1. | Legal Proceedings | 19 |
| Item 1A. |
Risk Factors |
19 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 20 |
| Item 5. | Other Information | 20 |
| Item 6. |
Exhibits |
21 |
| SIGNATURE |
22 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HEALTHSTREAM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Marketable securities | ||||||||
| Accounts receivable, net | ||||||||
| Accounts receivable - unbilled | ||||||||
| Prepaid and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Capitalized software development, net | ||||||||
| Operating lease right of use assets, net | ||||||||
| Goodwill | ||||||||
| Intangibles, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued royalties | ||||||||
| Accrued liabilities | ||||||||
| Accrued compensation | ||||||||
| Deferred revenue | ||||||||
| Total current liabilities | ||||||||
| Deferred tax liabilities | ||||||||
| Deferred revenue, noncurrent | ||||||||
| Operating lease liability, noncurrent | ||||||||
| Other long-term liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred Stock, no par value, 10,000 shares authorized, no shares issued or outstanding | ||||||||
| Common stock, no par value, 75,000 shares authorized; 29,897 and 30,432 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.
HEALTHSTREAM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2025 | June 30, 2024 | June 30, 2025 | June 30, 2024 | |||||||||||||
| Revenues, net | $ | $ | $ | $ | ||||||||||||
| Operating costs and expenses: | ||||||||||||||||
| Cost of revenues (excluding depreciation and amortization) | ||||||||||||||||
| Product development | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating costs and expenses | ||||||||||||||||
| Operating income | ||||||||||||||||
| Interest income | ||||||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ( | ) | ||||||||||
| Income before income tax provision | ||||||||||||||||
| Income tax provision | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Net income per share: | ||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||
| Weighted average shares of common stock outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| Dividends declared per share | $ | $ | $ | $ | ||||||||||||
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.
HEALTHSTREAM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(In thousands)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2025 | June 30, 2024 | June 30, 2025 | June 30, 2024 | |||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Other comprehensive income (loss), net of taxes: | ||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ||||||||||||
| Unrealized loss on marketable securities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||
| Comprehensive income | $ | $ | $ | $ | ||||||||||||
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.
HEALTHSTREAM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
(In thousands, except per share data)
| Six Months Ended June 30, 2025 | ||||||||||||||||||||
| Common Stock | Retained | Accumulated Other Comprehensive | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Earnings | (Loss)/Income | Equity | ||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income | — | |||||||||||||||||||
| Comprehensive income | — | |||||||||||||||||||
| Dividends declared on common stock ($0.031 per share) | — | ( | ) | ( | ) | |||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||
| Common stock issued under stock plans, net of shares withheld for employee taxes | ( | ) | — | ( | ) | |||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income | — | |||||||||||||||||||
| Comprehensive income | — | |||||||||||||||||||
| Dividends declared on common stock ($0.031 per share) | — | ( | ) | ( | ) | |||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||
| Common stock issued under stock plans, net of shares withheld for employee taxes | ( | ) | ( | ) | ||||||||||||||||
| Excise tax on repurchases of common stock | ( | ) | ( | ) | ||||||||||||||||
| Repurchases of common stock | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Six Months Ended June 30, 2024 | ||||||||||||||||||||
| Common Stock | Retained | Accumulated Other Comprehensive | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Earnings | Loss | Equity | ||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income | — | |||||||||||||||||||
| Comprehensive loss | — | ( | ) | ( | ) | |||||||||||||||
| Dividends declared on common stock ($0.028 per share) | — | ( | ) | ( | ) | |||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||
| Common stock issued under stock plans, net of shares withheld for employee taxes | ( | ) | — | ( | ) | |||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net income | — | |||||||||||||||||||
| Comprehensive loss | — | ( | ) | ( | ) | |||||||||||||||
| Dividends declared on common stock ($0.028 per share) | — | ( | ) | ( | ) | |||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||
| Common stock issued under stock plans, net of shares withheld for employee taxes | ( | ) | ( | ) | ||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.
HEALTHSTREAM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
| Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Amortization of deferred commissions | ||||||||
| Provision for credit losses | ||||||||
| Deferred income taxes | ( | ) | ||||||
| Loss on equity method investments | ||||||||
| Other | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts and unbilled receivables | ||||||||
| Prepaid and other current assets | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Accrued royalties | ( | ) | ( | ) | ||||
| Deferred revenue | ||||||||
| Net cash provided by operating activities | ||||||||
| INVESTING ACTIVITIES: | ||||||||
| Proceeds from maturities of marketable securities | ||||||||
| Purchases of marketable securities | ( | ) | ( | ) | ||||
| Proceeds from sale of non-marketable equity investments | ||||||||
| Purchase of other investments | ( | ) | ||||||
| Payments associated with capitalized software development | ( | ) | ( | ) | ||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Taxes paid related to net settlement of equity awards | ( | ) | ( | ) | ||||
| Payment of cash dividends | ( | ) | ( | ) | ||||
| Repurchases of common stock | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | ||||||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| NONCASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Purchases of property and equipment, accrued but not paid | $ | $ | ||||||
| Capitalized software development, accrued but not paid | $ | $ | ||||||
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.
HEALTHSTREAM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. OVERVIEW AND BASIS OF PRESENTATION
Company Overview
HealthStream provides primarily Software-as-a-Service ("SaaS") based applications for healthcare organizations—all designed to improve business and clinical outcomes by supporting the people who deliver patient care. The Company is focused on helping individuals and organizations in healthcare meet their ongoing learning, clinical development, credentialing, and scheduling needs. The Company also provides its solutions to nursing schools and nursing students.
The Company is organized and operated according to its One HealthStream approach, with its hStream technology platform at the center of that approach. Increasingly, SaaS-based applications in the Company's diverse ecosystem of solutions utilize the Company's proprietary hStream technology platform to enhance the value proposition for customers by creating interoperability with and among other applications. We believe that our single platform strategy, as represented by hStream, is the best way to realize our mission of improving the quality of care by developing the people who deliver care and the best way to create value for our shareholders in the process. As used in this Quarterly Report on Form 10-Q (“Form 10-Q”), “HealthStream,” “Company,” “we,” “us,” and “our” mean HealthStream, Inc. and its subsidiaries, unless the context indicates otherwise.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and with the instructions to Form 10‑Q and Article 10 of Regulation S‑X. Accordingly, condensed consolidated financial statements do not include all of the information and footnotes required by US GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. All intercompany transactions have been eliminated in consolidation and certain prior period amounts have been reclassified to conform to the current period presentation. Operating results for the three and six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.
The Condensed Consolidated Balance Sheet at December 31, 2024 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. For further information, refer to the Consolidated Financial Statements and Notes thereto for the year ended December 31, 2024 (included in the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 28, 2025).
Business Segments
The Company’s chief operating decision maker ("CODM") is its Chief Executive Officer. Since January 1, 2023, the Company’s business has been organized and managed around a consolidated, enterprise approach, including with regard to technology, operations, accounting, internal reporting (including the nature of information reviewed by the CODM), organization structure, compensation, performance assessment, and resource allocation. The Company’s CODM uses consolidated net income to make operating decisions, assess financial performance, and allocate resources. Further, the CODM reviews and utilizes functional expenses (cost of revenues, product development, sales and marketing, general and administrative, and depreciation and amortization) at the consolidated level to manage the Company's operations. Other segment items included in consolidated net income are interest income, other income (expense), net, and income tax provision, which are reflected in the Condensed Consolidated Statements of Income. Expenditures for additions to long-lived assets for the consolidated entity were $
Non-Marketable Equity Investments
The aggregate carrying amount of non-marketable equity investments accounted for using the measurement alternative for equity investments that do not have readily determinable fair values was $
HEALTHSTREAM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
2. RECENT ACCOUNTING PRONOUNCEMENTS
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The new guidance requires disclosures of significant reportable segment expenses that are regularly provided to the CODM and other segment items on an interim and annual basis. Entities with a single reportable segment will also be required to apply the disclosure requirements in ASU 2023-07 on an interim and annual basis. ASU 2023-07 was 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 adopted this standard effective January 1, 2024 using a retrospective method.
In December 2023, the 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. The Company is currently evaluating the effect of this standard on its disclosures and will adopt the standard effective for the annual period ending December 31, 2025.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures: Disaggregation of Income Statement Expenses, which requires disclosure of disaggregated information about specific categories underlying certain income statement expense line items in the footnotes to the financial statements for both annual and interim periods. This ASU is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this standard.
3. REVENUE RECOGNITION
Revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled in exchange for transferring those goods or services. Revenue is recognized based on the following five step model:
| • | Identification of the contract with a customer |
| • | Identification of the performance obligations in the contract |
| • | Determination of the transaction price |
| • | Allocation of the transaction price to the performance obligations in the contract |
| • | Recognition of revenue when, or as, the Company satisfies a performance obligation |
The following table represents revenues disaggregated by revenue source (in thousands). Sales taxes are excluded from revenues.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Subscription services | $ | $ | $ | $ | ||||||||||||
| Professional services | ||||||||||||||||
| Total revenues, net | $ | $ | $ | $ | ||||||||||||
During the three months ended June 30, 2025 and 2024, the Company recognized revenues of $
4. INCOME TAXES
Income taxes are accounted for using the asset and liability method, whereby deferred tax assets and liabilities are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities measured at tax rates that will be in effect for the year in which the differences are expected to affect taxable income. 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. The Company’s effective tax rate was
HEALTHSTREAM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
On July 4, 2025, the federal budget reconciliation legislation, commonly referred to as the One Big Beautiful Bill ("OBBB”), was signed into law. The OBBB includes significant changes to federal tax law and other regulatory provisions that may impact the Company, including modifications to capitalization of research and development expenses, limitations on deductions for interest expense, and accelerated fixed asset depreciation. The Company is currently evaluating the provisions of the new law and the potential effects on its financial position, results of operations, and cash flows. As of the date of these financial statements, the Company has not completed its assessment, and, therefore, no adjustments have been made. Additional disclosures will be provided in future periods as the impact of the legislation is determined.
5. SHAREHOLDERS' EQUITY
Dividends on Common Stock
During the six months ended June 30, 2025, the Company's Board of Directors (“Board”) declared the following quarterly dividends under the Company's dividend policy (in thousands, except per share data):
| Dividend Payment Date | Dividend Declaration Date | Dividend Per Share | Record Date | Cash Outlay | |||||||
| March 21, 2025 | $ | $ | |||||||||
| May 30, 2025 | $ | $ | |||||||||
Additionally, on August 4, 2025, the Board declared a quarterly cash dividend of $
Stock-Based Compensation
The Company has stock awards outstanding under its 2016 Omnibus Incentive Plan and 2022 Omnibus Incentive Plan.
Stock Option Activity
A summary of stock option activity for the three months ended June 30, 2025 is as follows (in thousands, except weighted-average exercise price).
| Weighted- | ||||||||||||
| Common | Average | Aggregate | ||||||||||
| Shares | Exercise Price | Intrinsic Value | ||||||||||
| Outstanding at beginning of period | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Expired | ||||||||||||
| Forfeited | ||||||||||||
| Outstanding at end of period | $ | $ | ||||||||||
| Exercisable at end of period | $ | $ | ||||||||||
The weighted average remaining contractual term of options outstanding at June 30, 2025 was
Restricted Share Unit Activity
A summary of Restricted Share Unit ("RSU") activity for the three months ended June 30, 2025 is as follows (in thousands, except weighted-average grant date fair value):
| Weighted- | ||||||||||||
| Number of | Average Grant Date | Aggregate | ||||||||||
| RSU’s | Fair Value | Intrinsic Value | ||||||||||
| Outstanding at beginning of period | $ | |||||||||||
| Granted | ||||||||||||
| Vested | ( | ) | ||||||||||
| Forfeited | ( | ) | ||||||||||
| Outstanding at end of period | $ | $ | ||||||||||
As of June 30, 2025, total unrecognized compensation expense related to non-vested RSUs was $
HEALTHSTREAM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Cost of revenues (excluding depreciation and amortization) | $ | $ | $ | $ | ||||||||||||
| Product development | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
Share Repurchase Plan
On May 8, 2025, the Company announced a share repurchase program approved by the Company’s Board of Directors under which the Company is authorized to repurchase up to $
6. EARNINGS PER SHARE
Basic earnings per share is computed by dividing the net income available to common shareholders for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the net income available to common shareholders for the period by the weighted average number of potentially dilutive common and common equivalent shares outstanding during the period. Common equivalent shares are composed of incremental common shares issuable upon the exercise of stock options and RSUs subject to vesting. 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
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, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Weighted-average shares outstanding | ||||||||||||||||
| Effect of dilutive shares | ||||||||||||||||
| Weighted-average diluted shares | ||||||||||||||||
| Net income per share: | ||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||
HEALTHSTREAM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
7. 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, 2025 | ||||||||||||||||
| Adjusted Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
| Level 2: | ||||||||||||||||
| U.S. treasury securities | $ | $ | $ | ( | ) | $ | ||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
| December 31, 2024 | ||||||||||||||||
| Adjusted Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
| Level 2: | ||||||||||||||||
| U.S. treasury securities | $ | $ | $ | ( | ) | $ | ||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
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, 2025 and December 31, 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.
HEALTHSTREAM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8. DEBT
Revolving Credit Facility
On October 6, 2023, the Company entered into an Amended and Restated Revolving Credit Agreement (“Revolving Credit Facility”), amending the Revolving Credit Facility dated as of November 24, 2014, as amended, with certain lenders party thereto from time to time, and Truist, as Administrative Agent for the lenders. Under the Revolving Credit Facility, the Company may borrow up to $
The Company's obligations under the Revolving Credit Facility are unsecured. In addition, if the Company forms or acquires any domestic subsidiaries, the loans and other obligations under the Revolving Credit Facility will be guaranteed by such domestic subsidiaries.
At the Company’s election, the borrowings under the Revolving Credit Facility, other than the swingline loans, bear interest at either (1) a base rate defined as the highest of (a) the rate which the Administrative Agent announces from time to time as its prime lending rate, as in effect from time to time, or (b) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (
Principal is payable in full at maturity on October 6, 2026, and there are no scheduled principal payments prior to maturity. Interest on base rate loans and swingline loans is payable quarterly in arrears, and interest on SOFR loans is payable at the end of each interest period, and in the case of interest periods longer than three months, on each day which occurs every three months after the initial date of such interest period.
The purpose of the Revolving Credit Facility is for general working capital needs, permitted acquisitions (as defined in the Amended and Restated Revolving Credit Agreement), and for stock repurchase and/or redemption transactions that the Company may authorize.
In addition, the Revolving Credit Facility required the Company to meet certain financial tests, including, without limitation:
| • | a funded debt leverage ratio (consolidated debt/consolidated EBITDA) of not greater than |
| • | an interest coverage ratio (consolidated EBITDA/consolidated interest expense) of not less than |
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, 2025, the Company was in compliance with all covenants. There were
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Special Cautionary Notice Regarding Forward‑Looking Statements
You should read the following discussion and analysis in conjunction with our Condensed Consolidated Financial Statements and related Notes included elsewhere in this Form 10-Q and our audited Consolidated Financial Statements and the Notes thereto for the year ended December 31, 2024, appearing in our Annual Report on Form 10-K that was filed with the Securities and Exchange Commission (“SEC”) on February 28, 2025 (the “2024 Form 10-K”). Statements contained in this Form 10-Q that are not historical facts are forward-looking statements that the Company intends to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend on or refer to future events or conditions, or that include words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions are forward-looking statements.
The Company cautions that forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
In evaluating any forward-looking statement, you should specifically consider the information regarding forward-looking statements set forth above and the risks set forth under the caption Part I, Item 1A. Risk Factors in our 2024 Form 10-K and other disclosures in our 2024 Form 10-K, earnings releases, and other filings with the SEC from time to time, as well as other cautionary statements contained elsewhere in this Form 10-Q, including our critical accounting policies and estimates as discussed in this Form 10-Q and our 2024 Form 10-K. We undertake no obligation to update or revise any forward-looking statements. You should read this Form 10-Q and the documents that we reference in this Form 10-Q and have filed as exhibits to this Form 10-Q completely and with the understanding that our actual future results may be materially different from what we currently expect.
Business Overview
HealthStream provides primarily SaaS based applications for healthcare organizations—all designed to improve business and clinical outcomes by supporting the people who deliver patient care. We are focused on helping individuals and organizations in healthcare meet their ongoing learning, clinical development, credentialing, and scheduling needs. We also provide our solutions to nursing schools and nursing students.
Our business is managed and organized around a single platform strategy, also referred to as our One HealthStream approach. At the center of this single platform strategy is our hStream technology platform. By enabling our applications through hStream, we believe that stand-alone applications, which already provide a powerful value proposition on their own, are beginning to leverage each other to more efficiently and effectively empower our customers to manage their business and improve their outcomes. 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 2025 are set forth in the bullets below.
| • |
Revenues of $74.4 million in the second quarter of 2025, up 4.0% from $71.6 million in the second quarter of 2024 |
| • |
Operating income of $5.9 million in the second quarter of 2025, up 33.4% from $4.4 million in the second quarter of 2024 |
| • |
Net income of $5.4 million in the second quarter of 2025, up 29.3% from $4.2 million in the second quarter of 2024 |
| • |
Earnings per share (“EPS”) of $0.18 per share (diluted) in the second quarter of 2025, up from $0.14 per share (diluted) in the second quarter of 2024 |
| • |
Adjusted EBITDA1 of $17.6 million in the second quarter of 2025, up 11.3% from $15.8 million in the second quarter of 2024 |
| 1 |
Adjusted EBITDA is a non-GAAP financial measure. A reconciliation of adjusted EBITDA to net income and disclosure regarding why we believe adjusted EBITDA provides useful information to investors is included later in this Form 10-Q. |
During the first quarter of 2025, we entered into an agreement to sublease a portion of our office space in the Capitol View building in Nashville, Tennessee to optimize our workforce performance to deliver positive results for customers, employees, and shareholders. HealthStream’s corporate headquarters remains in Nashville in the Capitol View building, while we continue to hire new employees both locally and nationally to support our growth. The sublease commenced in April 2025 and will expire in October 2031. We recorded sublease income, net of initial direct cost amortization, of $0.7 million during the three months ended June 30, 2025. In addition, we expect to record sublease income, net, of approximately $1.6 million during the last six months of 2025 and $3.2 million annually thereafter for the remaining term of the sublease under the caption General and Administrative.
Recent Developments
Macroeconomic and other conditions in the U.S. that directly or indirectly impact the healthcare industry are challenging in certain respects and may become more challenging based on recent and contemplated changes to various policies and regulations. While healthcare costs continue to grow, government cuts or reimbursement rate reductions to funding for programs and organizations such as Federally Qualified Health Centers and academic medical institutions, the impact of tariffs on goods and services utilized by healthcare provider organizations, as well as uncertainty surrounding potential policy, regulatory, and economic shifts continue to be challenging for our healthcare customers. In particular, the federal reconciliation legislation enacted on July 4, 2025 includes significant policy changes that may adversely impact healthcare provider organizations, including changes that are expected to decrease access to health insurance and result in significant cuts to federal healthcare spending, particularly within the Medicaid program. We believe that these challenges and uncertainties, particularly among healthcare provider organizations with patient populations more dependent on government-funded reimbursement, have caused, and may in the future cause, some delays in purchasing and non-renewals of existing products and services, particularly in relation to elective or non-mandatory products and services.
Additionally, challenges persist in terms of inflationary pressures, ongoing elevated interest rate levels, lower consumer sentiment levels compared to recent periods, and heightened geopolitical tensions, including various ongoing and threatened conflicts abroad and strained global trade relations. We have experienced in certain recent periods, and believe that many of our customers have experienced, increased labor, supply chain, capital, and other expenditures and budgetary pressures associated with such conditions and challenges. These conditions and challenges impacting the U.S. economy and our customers in the healthcare industry have adversely affected, and may continue to adversely impact, our business and results of operations. Additionally, given our focus on customers in the healthcare industry, adverse developments impacting the healthcare industry, including as a result of the developments described above, may adversely impact our business and financial results, although we are unable to fully assess the impact to which we may be impacted by any such developments.
Key Financial Metrics
Our management utilizes the following financial metrics in connection with managing our business.
| • |
Revenues, net. Revenues, net, reflect income generated by the sales of goods and services related to our operations. Revenues, net, were $74.4 million and $147.9 million for the three and six months ended June 30, 2025, respectively, compared to $71.6 million and $144.3 million for the three and six months ended June 30, 2024, 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. Net income represents revenues, net, less all expenses. Net income was $5.4 million and $9.7 million for the three and six months ended June 30, 2025, respectively, compared to $4.2 million and $9.4 million for the three and six months ended June 30, 2024, respectively. Management utilizes net income in connection with managing our business, including with regard to our capital deployment strategies. |
| • |
Adjusted EBITDA. Adjusted EBITDA, calculated as set forth below under “Reconciliation of Non-GAAP Financial Measures,” is utilized by our management in connection with managing our business and provides useful information to investors because adjusted EBITDA reflects net income adjusted for certain GAAP accounting, non-cash, and/or non-operating items, as more specifically set forth below, which may not fully reflect the underlying operating performance of our business. We also believe that adjusted EBITDA is useful to investors to assess the Company’s ongoing operations. Additionally, certain short-term cash incentive bonuses and performance-based equity award grants are based, in whole or in part, on the achievement of adjusted EBITDA (as defined in applicable bonus and equity grant documentation) targets. Adjusted EBITDA was $17.6 million and $33.8 million for the three and six months ended June 30, 2025, respectively, compared to $15.8 million and $32.9 million for the three and six months ended June 30, 2024, 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 $9.0 million and $17.9 million for the three and six months ended June 30, 2025, respectively, compared to $6.7 million and $14.5 million for the three and six months ended June 30, 2024, 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. |
Critical Accounting Policies and Estimates
See Notes to the Consolidated Financial Statements in our 2024 Form 10-K and the Notes to the Condensed Consolidated Financial Statements herein which contain additional information regarding our accounting policies and other disclosures required by US GAAP. There have been no changes in our critical accounting policies and estimates from those reported in our 2024 Form 10-K.
Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024
Revenues, net. Revenues increased $2.8 million, or 4%, to $74.4 million for the three months ended June 30, 2025 from $71.6 million for the three months ended June 30, 2024. Subscription revenues increased $2.9 million, or 4%, and professional services revenues decreased by $0.1 million, or 3%, compared to the second quarter of 2024.
A comparison of revenues by revenue source is as follows (in thousands):
| Three Months Ended June 30, |
||||||||||||
| 2025 |
2024 |
Percentage Change |
||||||||||
| Subscription services |
$ | 71,941 | $ | 69,013 | 4 | % | ||||||
| Professional services |
2,455 | 2,543 | -3 | % | ||||||||
| Total revenues, net |
$ | 74,396 | $ | 71,556 | 4 | % | ||||||
| % of Revenues |
||||||||||||
| Subscription services |
97 | % | 96 | % | ||||||||
| Professional services |
3 | % | 4 | % | ||||||||
Cost of Revenues (excluding Depreciation and Amortization). Cost of revenues increased $2.7 million, or 11%, to $26.4 million for the three months ended June 30, 2025, from $23.7 million for the three months ended June 30, 2024. Cost of revenues as a percentage of revenues were 35% and 33% for the three months ended June 30, 2025 and 2024, respectively. The increase in amount is primarily associated with investments in several areas of our business, primarily in our platform and SaaS applications, resulting in higher costs for third-party software and cloud hosting as well as an increase in labor costs and royalties.
Product Development. Product development expenses was $12.1 million for both the three months ended June 30, 2025 and 2024. Product development expenses as a percentage of revenues were 16% and 17% for the three months ended June 30, 2025 and 2024, respectively.
Sales and Marketing. Sales and marketing expenses, including personnel costs, increased $0.4 million, or 4%, to $11.8 million for the three months ended June 30, 2025, from $11.4 million for the three months ended June 30, 2024. Sales and marketing expenses were 16% of revenues for both the three months ended June 30, 2025 and 2024. The increase in amount is primarily due to higher labor costs and increased staffing levels.
General and Administrative. General and administrative expenses decreased $2.2 million, or 23%, to $7.4 million for the three months ended June 30, 2025, from $9.6 million for the three months ended June 30, 2024. General and administrative expenses were 10% and 13% of revenues for the three months ended June 30, 2025 and 2024, respectively. The decrease in amount is primarily due to a decrease in bad debt expense associated with a customer bankruptcy that occurred during the three months ended June 30, 2024, coupled with sublease income associated with the sublease that commenced during the second quarter of 2025 as noted above.
Depreciation and Amortization. Depreciation and amortization expense increased $0.5 million, or 5%, to $10.9 million for the three months ended June 30, 2025, from $10.4 million for the three months ended June 30, 2024. This increase in amount is primarily a result of an increase in amortization associated with capitalized software.
Interest Income. Interest income was $1.0 million and $0.9 million for the three months ended June 30, 2025 and 2024, respectively. This increase is a result of an increase in cash and investment balances.
Other Income (Expense), Net. Other income (expense), net was income of $23,000 and expense of $55,000 for the three months ended June 30, 2025 and 2024, respectively. The change is primarily a result of foreign currency gains.
Income Tax Provision. The Company recorded a provision for income taxes of $1.5 million for the three months ended June 30, 2025, compared to $1.1 million for the three months ended June 30, 2024. The Company’s effective tax rate was 22% for the three months ended June 30, 2025, compared to 21% for the three months ended June 30, 2024. 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.
Net Income. Net income was $5.4 million and $4.2 million for the three months ended June 30, 2025 and 2024, respectively. EPS was $0.18 per share (diluted) and $0.14 per share (diluted) for the three months ended June 30, 2025 and 2024, respectively.
Adjusted EBITDA was $17.6 million for the three months ended June 30, 2025, compared to $15.8 million for the three months ended June 30, 2024. 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, 2025 Compared to Six Months Ended June 30, 2024
Revenues, net. Revenues increased $3.6 million, or 2%, to $147.9 million for the six months ended June 30, 2025 from $144.3 million for the six months ended June 30, 2024. Subscription revenues increased $3.5 million, or 3%, compared to the six months ended June 30, 2024. Compared to the six months ended June 30, 2024, revenues for the six months ended June 30, 2025 were negatively impacted by several factors, including a $3.5 million reduction from attrition in legacy applications, a $1.1 million reduction from customer bankruptcies, and a $0.9 million reduction in perpetual license sales. These reductions to revenue were more than offset by $9.1 million of revenue growth across our portfolio of solutions.
A comparison of revenues by revenue source is as follows (in thousands):
| Six Months Ended June 30, |
||||||||||||
| 2025 |
2024 |
Percentage Change |
||||||||||
| Subscription services |
$ | 142,730 | $ | 139,218 | 3 | % | ||||||
| Professional services |
5,151 | 5,098 | 1 | % | ||||||||
| Total revenues, net |
$ | 147,881 | $ | 144,316 | 2 | % | ||||||
| % of Revenues |
||||||||||||
| Subscription services |
97 | % | 96 | % | ||||||||
| Professional services |
3 | % | 4 | % | ||||||||
Cost of Revenues (excluding Depreciation and Amortization). Cost of revenues increased $3.5 million, or 7%, to $51.9 million for the six months ended June 30, 2025, from $48.4 million for the six months ended June 30, 2024. Cost of revenues as a percentage of revenues were 35% and 34% for the six months ended June 30, 2025 and 2024, respectively. The increase in amount is primarily associated with investments in several areas of our business, primarily in our platform and SaaS applications, resulting in higher costs for cloud hosting and third-party software as well as an increase in labor costs.
Product Development. Product development expenses was $24.1 million for both the six months ended June 30, 2025 and 2024. Product development expenses as a percentage of revenues were 16% and 17% for the six months ended June 30, 2025 and 2024, respectively.
Sales and Marketing. Sales and marketing expenses, including personnel costs, increased $0.8 million, or 3%, to $24.0 million for the six months ended June 30, 2025, from $23.2 million for the six months ended June 30, 2024. Sales and marketing expenses were 16% of revenues for both the six months ended June 30, 2025 and 2024. The increase in amount is primarily due to higher labor costs and sales commissions.
General and Administrative. General and administrative expenses decreased $1.8 million, or 10%, to $16.1 million for the six months ended June 30, 2025, from $17.9 million for the six months ended June 30, 2024. General and administrative expenses were 11% and 12% of revenues for the six months ended June 30, 2025 and 2024, respectively. The decrease in amount is primarily due to a decrease in bad debt expense associated with a customer bankruptcy that occurred during the six months ended June 30, 2024, coupled with sublease income associated with the sublease that commenced during the second quarter of 2025 as noted above.
Depreciation and Amortization. Depreciation and amortization expense increased $0.9 million, or 4%, to $21.6 million for the six months ended June 30, 2025, from $20.7 million for the six months ended June 30, 2024. This increase in amount is primarily a result of an increase in amortization associated with capitalized software.
Interest Income. Interest income was $1.9 million and $1.8 million for the six months ended June 30, 2025 and 2024, respectively. This increase is a result of an increase in cash and investment balances.
Other Income (Expense), Net. Other income (expense), net was expense of $39,000 and $107,000 for the six months ended June 30, 2025 and 2024, respectively. The change is primarily a result of foreign currency gains.
Income Tax Provision. The Company recorded a provision for income taxes of $2.4 million for both the six months ended June 30, 2025 and June 30, 2024. The Company’s effective tax rate was 20% for the six months ended June 30, 2025, compared to 21% for the six months ended June 30, 2024. 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.
Net Income. Net income was $9.7 million and $9.4 million for the six months ended June 30, 2025 and 2024, respectively. EPS was $0.32 per share (diluted) and $0.31 per share (diluted) for the six months ended June 30, 2025 and 2024, respectively.
Adjusted EBITDA was $33.8 million for the six months ended June 30, 2025, compared to $32.9 million for the six months ended June 30, 2024. 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.
Reconciliation of Non-GAAP Financial Measures
This Form 10-Q presents adjusted EBITDA, which is a non-GAAP financial measure used by management in analyzing our financial results and ongoing operational performance.
In order to better assess the Company’s financial results, management believes that net income before interest, income taxes, stock-based compensation, depreciation and amortization, and changes in fair value of, including gains (losses) on the sale of, non-marketable equity investments (“adjusted EBITDA”) is a useful measure for evaluating the operating performance of the Company because adjusted EBITDA reflects net income adjusted for certain GAAP accounting, non-cash, and/or non-operating items which may not, in any such case, fully reflect the underlying operating performance of our business. We believe that adjusted EBITDA is useful to investors to assess the Company’s ongoing operating performance and to compare the Company’s operating performance between periods. Additionally, certain short-term cash incentive bonuses and performance-based equity awards are based on the achievement of adjusted EBITDA (as defined in applicable bonus and equity grant documentation) targets.
Adjusted EBITDA is a non-GAAP financial measure and should not be considered as a measure of financial performance under GAAP. Because adjusted EBITDA is not a measurement determined in accordance with GAAP, adjusted EBITDA is susceptible to varying calculations. Accordingly, adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies and has limitations as an analytical tool.
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, |
|||||||||||||||
| 2025 |
2024 |
2025 |
2024 |
|||||||||||||
| GAAP net income |
$ | 5,389 | $ | 4,168 | $ | 9,721 | $ | 9,394 | ||||||||
| Interest income |
(958 | ) | (944 | ) | (1,889 | ) | (1,848 | ) | ||||||||
| Interest expense |
25 | 25 | 50 | 49 | ||||||||||||
| Income tax provision |
1,478 | 1,132 | 2,393 | 2,448 | ||||||||||||
| Stock-based compensation expense |
836 | 1,094 | 1,940 | 2,154 | ||||||||||||
| Depreciation and amortization |
10,867 | 10,370 | 21,621 | 20,706 | ||||||||||||
| Adjusted EBITDA |
$ | 17,637 | $ | 15,845 | $ | 33,836 | $ | 32,903 | ||||||||
Liquidity and Capital Resources
Net cash provided by operating activities increased by $4.7 million to $32.1 million during the six months ended June 30, 2025, from $27.4 million during the six months ended June 30, 2024. The increase in net cash provided by operating activities is primarily due to higher cash receipts from customers during the period, resulting in a reduction to our days sales outstanding ("DSO"). Our DSO was 35 days for the second quarter of 2025 compared to 45 days for the second quarter of 2024. The Company calculates DSO by dividing the average accounts receivable balance for the quarter by average daily revenues for the quarter. The Company’s primary sources of cash were receipts generated from the sales of our products and services. 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, general corporate expenses, and initial direct costs related to the sublease.
Net cash used in investing activities was $18.4 million for the six months ended June 30, 2025, compared to $19.0 million for the six months ended June 30, 2024. During the six months ended June 30, 2025, the Company invested in marketable securities of $26.1 million, made payments for capitalized software development of $14.5 million, purchased property and equipment of $3.4 million, and purchased an investment of $0.5 million. These uses of cash were partially offset by $26.1 million in maturities of marketable securities. 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. These uses of cash were partially offset by $29.2 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.
Net cash used in financing activities was $21.1 million for the six months ended June 30, 2025, compared to $2.6 million for the six months ended June 30, 2024. The uses of cash for the six months ended June 30, 2025 included $18.1 million for repurchases of common stock, $1.9 million for the payment of cash dividends, and $1.1 million for the payment of employee payroll taxes in relation to the vesting of restricted share units. 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.
Our balance sheet reflects working capital of $29.0 million at June 30, 2025, compared to $37.4 million at December 31, 2024. The decrease in working capital is primarily a result of a decrease in cash and cash equivalents to fund share repurchases. The Company’s primary source of liquidity as of June 30, 2025 was $52.1 million of cash and cash equivalents and $38.5 million of marketable securities.
The Company also has a $50.0 million revolving credit facility, the availability of which is subject to certain covenants and minimum liquidity requirements. There currently are no outstanding borrowings under the revolving credit facility. The revolving credit facility expires on October 6, 2026, unless earlier renewed or amended. For additional information regarding our revolving credit facility, see Note 8 to the Condensed Consolidated Financial Statements included herein.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risk from changes in interest rates, foreign currency risk, and investment risk. We do not have any commodity price risk.
Interest Rate Risk
As of June 30, 2025, and during the three months then ended, the Company had no outstanding debt. We may become subject to interest rate market risk associated with any future borrowings under our revolving credit facility. The interest rate under the revolving credit facility varies depending on the interest rate option selected by the Company plus a margin determined in accordance with a pricing grid. We are also exposed to market risk with respect to our cash and investment balances, which were $90.6 million at June 30, 2025. Assuming a hypothetical 10% decrease in interest rates for invested balances, interest income from cash and investments would decrease on an annualized basis by $0.3 million.
Foreign Currency Risk
We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the US dollar, including Canadian dollar, New Zealand dollar, and Australian dollar. Increases or decreases in our foreign-denominated revenue from movements in foreign exchange rates are often partially offset by the corresponding increases or decreases in our foreign-denominated operating expenses.
To the extent that our international operations grow, our risks associated with fluctuation in currency rates will become greater, and we will continue to assess our approach to managing this risk. In addition, currency fluctuations or a weakening US dollar can increase the costs of our international operations. To date, we have not entered into any foreign currency hedging contracts although we may do so in the future.
Investment Risk
The Company’s investment policy and strategy is focused on investing in highly rated securities with the objective of minimizing the potential risk of principal loss. The Company’s policy limits the amount of credit exposure to any single issuer and sets limits on the average portfolio maturity.
We have an investment portfolio that includes strategic investments in privately held companies, which primarily include early-stage companies. We primarily invest in healthcare technology companies that we believe can help expand our ecosystem. We may continue to make these types of strategic investments as opportunities arise that we find attractive. We may experience additional volatility to our Condensed Consolidated Financial Statements due to changes in market prices, observable price changes, and impairments to our strategic investments. These changes could be material based on market conditions and events.
The above market risk discussion and the estimated amounts presented are forward-looking statements of market risk assuming the occurrence of certain adverse market conditions. Actual results in the future may differ materially from those projected as a result of actual developments in the market.
Item 4. Controls and Procedures
Evaluation of Controls and Procedures
HealthStream’s chief executive officer and principal financial officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this Form 10-Q. Based on that evaluation, the chief executive officer and principal financial officer have concluded that HealthStream’s disclosure controls and procedures were effective to ensure that the information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and the information required to be disclosed in the reports the Company files or submits under the Exchange Act was accumulated and communicated to the Company’s management, including its chief executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in HealthStream’s internal control over financial reporting that occurred during the second quarter of 2025 that has materially affected, or that is reasonably likely to materially affect, HealthStream’s internal control over financial reporting.
PART II ‑ OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed in Part I, Item 1A of the 2024 Form 10-K, except as set forth below:
Risks Related to Our Business Model
We have been impacted, and may continue to be adversely impacted, by unfavorable conditions and uncertainty impacting the healthcare industry and the U.S. economy more generally.
Macroeconomic conditions in the U.S. continue to be challenging in certain respects, driven by, among other things, persistent inflationary pressures, elevated interest rate levels, ongoing policy-related uncertainty, lower consumer sentiment levels compared to recent periods, heightened geopolitical tensions, including as a result of ongoing conflicts abroad and strained global trade relations. Additional challenges related to macroeconomic conditions in the U.S. that are impacting or may impact healthcare more directly include current or potential policy and regulatory decisions to reduce government funding for certain healthcare provider organizations or programs, tariff-related policies that impact goods and services on which healthcare organizations rely, and uncertainty around reduction to payment rates, including through cuts to Medicaid or other payment programs, and loss of insurance coverage by individuals. These conditions have, among other things, limited our ability to forecast future demand for our products and services, contributed to increased volatility in customer demand, and could constrain future access to capital for ourselves, our suppliers, customers, and partners. Moreover, while inflation has decreased in comparison to recent periods, we have experienced, and believe that many of our customers have experienced, increased labor, supply chain, capital, and other expenditures associated with inflationary conditions.
We sell our products and services to large, mid-sized, and small healthcare organizations whose businesses fluctuate based on general economic and business conditions. As such, our operating results may vary based on the level of demand for our solutions by healthcare organizations and the impact of changes in our industry or the economy on us or our clients. For example, we have recently experienced a decrease in demand for certain of our solutions, such as health equity and belonging content, that may be viewed as a more elective type of offering by some of our customers. In addition, a portion of our revenue is attributable to the number of users of our products at each of our clients, which in turn is influenced by the employment and hiring patterns of our clients and potential clients. To the extent that economic uncertainty or weak economic conditions cause our clients and potential clients to freeze or reduce their headcount or operations, demand for our products may be negatively affected. Moreover, current economic conditions and uncertainty have resulted in and may continue to result in overall reductions in spending by some healthcare providers as well as pressure from some clients and potential clients for extended payment terms. If current economic conditions deteriorate, our clients and potential clients may elect to decrease their budgets for our solutions by deferring or reconsidering purchases or could file for bankruptcy, which has occurred from time to time. Such budget decreases or bankruptcy filings would limit our ability to grow our business and negatively affect our operating results.
Economic, regulatory, policy, or other recent developments that adversely or disproportionately impact the healthcare industry may reduce spending on information technology by healthcare organizations and otherwise adversely affect our customer base and our financial results. Healthcare organizations continue to face persistent labor shortages, elevated wage and operating costs, and ongoing uncertainty regarding reimbursement levels. Furthermore, the margins of many healthcare providers are modest, and potential decreases in reimbursement for healthcare costs – whether due to federal or state budgetary constraints, deficit reduction initiatives, reduction or elimination of programs such the 340B Drug Pricing Program, reduction of insurance coverage readily available to individuals, or changes to Medicare and/or Medicaid policy – may reduce the overall solvency of our customers or cause further deterioration in their financial or business condition.
In addition, the U.S. government has recently imposed tariffs on certain foreign goods and has raised the possibility of imposing significant additional tariff increases or expanding the tariffs to capture other countries and types of foreign goods. Trade policies and tariffs affecting imported medical equipment, technology components, and other healthcare-related infrastructure have the potential to increase costs for healthcare organizations, which may reduce demand for our products and adversely impact financial results.
Moreover, budget pressures at the federal and state levels have had and may continue to have a negative impact on spending for many health and human services programs, including Medicare and Medicaid, which represent significant payor sources for our customers. In particular, the federal budget reconciliation legislation enacted on July 4, 2025 includes significant policy changes that may adversely impact healthcare provider organizations, including changes that are expected to decrease access to health insurance and result in significant cuts to federal healthcare spending, particularly within the Medicaid program. Moreover, we anticipate that federal and state budget deficits combined with growing governmental healthcare expenditures will continue to place pressure on governmental healthcare programs. Any actual or potential reductions in government healthcare spending or reduction to readily available health insurance coverage for individuals could result in reduced demand for our products or heightened pricing pressure.
Further, there is ongoing uncertainty regarding the federal budget and federal spending levels, including the possible impacts of a failure to increase the “debt ceiling” and any possible U.S. governmental default on its debt. Additionally, the current presidential administration has implemented the "Department of Government Efficiency" ("DOGE"), an advisory commission focused on restructuring and streamlining government agencies and reducing or eliminating regulations and federal government programs and other expenditures, which has also given rise to separate efforts at the state level to reduce government spending. In March 2025, in accordance with the DOGE Workforce Optimization Initiative, HHS announced a significant agency restructuring, reducing the HHS workforce and consolidating divisions of the agency. Pressures on and uncertainty surrounding the U.S. federal and state annual appropriations, holds on congressionally authorized spending, or interruptions in the distribution of governmental funds, could adversely affect our financial results due to the reliance of many of our customers on payments from third-party healthcare payors, including Medicare, Medicaid, and other government-sponsored programs.
We believe that conditions and uncertainties impacting the healthcare industry and our healthcare customers as described above have adversely affected, and may continue to adversely impact, our business and results of operations, including by lengthening sales cycles, increasing pricing sensitivity, and delaying investment decisions among our customers and potential customers. Moreover, if economic or conditions impacting the healthcare industry or U.S. economy significantly deteriorate, our results of operations, financial position, and/or cash flows could be materially and adversely affected.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On May 8, 2025, the Company’s Board of Directors approved a new share repurchase program for the Company’s common stock, under which the Company may repurchase up to $25.0 million of outstanding shares of common stock. Pursuant to the authorization, repurchases may be made from time to time in the open market, including under a Rule 10b5-1 plan, through privately negotiated transactions, or otherwise. In addition, any repurchases under the authorization will be subject to prevailing market conditions, liquidity and cash flow considerations, applicable securities laws requirements (including under Rule 10b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934, as applicable), and other factors. Under this program, during the three months ended June 30, 2025, the Company repurchased and subsequently retired 649,953 shares of common stock at an aggregate fair value of $18.1 million, reflecting an average price per share of $27.86 (excluding the cost of broker commissions), and the Company continued to repurchase shares pursuant to this authorization during the third quarter, completing the program in July by repurchasing and retiring 255,833 shares valued at $6.9 million, reflecting an average price per share of $26.94 (excluding the cost of broker commissions). The share repurchase program terminated in July when the maximum dollar amount was expended.
The following table presents information with respect to HealthStream's repurchases of common stock during the quarter ended June 30, 2025.
| Period |
(a) Total number of shares (or units) purchased |
(b) Average price paid per share (or unit)(1) |
(c) Total number of shares (or units) purchased as part of publicly announced plans or programs |
(d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs |
||||||||||||
| Month #1 (April 1 - April 30) |
— | $ | — | — | $ | — | ||||||||||
| Month #2 (May 1 - May 31) |
393,959 | 28.16 | 11,094,372 | 13,905,628 | ||||||||||||
| Month #3 (June 1 - June 30) |
255,994 | 27.40 | 7,013,708 | 6,891,920 | ||||||||||||
| Total |
649,953 | $ | 27.86 | 18,108,080 | $ | 6,891,920 | ||||||||||
(1) The weighted average price paid per share of common stock does not include the cost of broker commissions.
Item 5. Other Information
None. Without limiting the generality of the foregoing, during the six months ended June 30, 2025, no director or officer of the Company adopted or terminated any “Rule 10b5-1 trading arrangement,” or any “non-Rule 10b-5 trading arrangement,” as such terms are defined in Item 408 of Regulation S-K.
Item 6. Exhibits
| (a) |
Exhibits |
| 31.1 |
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 |
Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 |
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2 |
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.1 INS |
Inline XBRL Instance Document – The instant document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.1 SCH |
Inline XBRL Taxonomy Extension Schema |
| 101.1 CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase |
| 101.1 DEF |
Inline XBRL Taxonomy Extension Definition Linkbase |
| 101.1 LAB |
Inline XBRL Taxonomy Extension Label Linkbase |
| 101.1 PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase |
| 104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, has been formatted in Inline XBRL |
| ^ | Management contract or compensatory plan or arrangement |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| HEALTHSTREAM, INC. |
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| August 7, 2025 | By: |
/s/ Scott A. Roberts |
|
| Scott A. Roberts |
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| Chief Financial Officer |
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