Full Press Release Details
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On February 12, 2018, HealthStream, Inc. (the Company ), completed the sale of its Patient Experience business (the PX
Business ) to Press Ganey, Inc. ( Press Ganey ) in connection with the closing of the transactions contemplated by that certain membership interest purchase agreement dated as of February 12, 2018 (the Purchase Agreement ),
by and between the Company and Press Ganey, pursuant to which the Company sold to Press Ganey all of the outstanding equity interests of Improve PX, LLC, a wholly-owned subsidiary of the Company. This sale of the PX Business resulted in the
Company s complete divestiture of the Company s patient experience solutions business segment.
The following unaudited pro
forma condensed consolidated financial information is based on the historical financial statements of the Company, with pro forma adjustments to reflect the disposition of the PX Business pursuant to the Purchase Agreement. Beginning with the
quarter ending March 31, 2018, the historical financial results of the PX Business for periods prior to the closing of the transactions under the Purchase Agreement will be reflected in the Company s consolidated financial statements as
discontinued operations.
The unaudited pro forma condensed consolidated balance sheet of the Company as of September 30, 2017 is
presented as if the disposition of the PX Business had occurred on September 30, 2017. The unaudited pro forma condensed consolidated statements of income for the nine months ended September 30, 2017 and the years ended December 31,
2016, 2015, and 2014, are presented as if the disposition of the PX Business had occurred on January 1, 2014, the beginning of the earliest period presented. The unaudited pro forma condensed consolidated financial information and the related
notes should be read in conjunction with the Company s audited financial statements and the notes thereto included in the Company s Annual Report on Form 10-K for the year ended
December 31, 2016, and the Company s unaudited financial statements and the notes thereto included in the Company s Quarterly Report on Form 10-Q for the three and nine months ended
The unaudited pro forma condensed consolidated financial information has been prepared in conformity with
Article 11 of Regulation S-X. In addition, this unaudited pro forma condensed consolidated financial information is based on currently available information and assumptions that the Company believes are
reasonable. This unaudited pro forma condensed consolidated financial information is presented for informational purposes only, and does not purport to represent what the Company s results of operations or financial position would have been had
the disposition of the PX Business occurred on the dates indicated, or to project the results of operations for any future periods.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
| (A) | ||||||||||||
| As Reported | Pro Forma Adjustments | Pro Forma | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 60,460 | $ | 57,350 | $ | 117,810 | ||||||
| Marketable securities | 62,943 | 62,943 | ||||||||||
| Accounts receivable, net of allowance for doubtful accounts | 38,379 | (3,979 | ) | 34,400 | ||||||||
| Accounts receivable unbilled | 1,746 | (677 | ) | 1,069 | ||||||||
| Prepaid royalties, net of amortization | 17,221 | (44 | ) | 17,177 | ||||||||
| Other prepaid expenses and other current assets | 8,526 | (293 | ) | 8,233 | ||||||||
| Total current assets | 189,275 | 52,357 | 241,632 | |||||||||
| Property and equipment, net of accumulated depreciation | 9,923 | (1,215 | ) | 8,708 | ||||||||
| Capitalized software development, net of accumulated amortization | 18,685 | (2,511 | ) | 16,174 | ||||||||
| Goodwill | 110,298 | (24,154 | ) | 86,144 | ||||||||
| Customer-related intangibles, net of accumulated amortization | 61,580 | (345 | ) | 61,235 | ||||||||
| Other intangible assets, net of accumulated amortization | 9,609 | (57 | ) | 9,552 | ||||||||
| Non-marketable equity investments | 3,771 | 3,771 | ||||||||||
| Other assets | 699 | 6,532 | 7,231 | |||||||||
| Total assets | $ | 403,840 | $ | 30,607 | $ | 434,447 | ||||||
| LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable and accrued expenses | $ | 15,235 | $ | 11,417 | $ | 26,652 | ||||||
| Accrued royalties | 12,997 | (25 | ) | 12,972 | ||||||||
| Deferred revenue | 66,509 | (3,257 | ) | 63,252 | ||||||||
| Total current liabilities | 94,741 | 8,135 | 102,876 | |||||||||
| Deferred tax liabilities | 4,871 | (2,311 | ) | 2,560 | ||||||||
| Deferred revenue, noncurrent | 7,074 | (17 | ) | 7,057 | ||||||||
| Other long term liabilities | 1,497 | (603 | ) | 894 | ||||||||
| Commitments and contingencies | ||||||||||||
| Total liabilities | 108,183 | 5,204 | 113,387 | |||||||||
| Shareholders equity: | ||||||||||||
| Common stock | 282,083 | 282,083 | ||||||||||
| Retained earnings | 13,594 | 25,403 | 38,997 | |||||||||
| Accumulated other comprehensive loss | (20 | ) | (20 | ) | ||||||||
| Total shareholders equity | 295,657 | 25,403 | 321,060 | |||||||||
| Total liabilities and shareholders equity | $ | 403,840 | $ | 30,607 | $ | 434,447 |
See notes to the unaudited pro forma condensed consolidated financial information.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2017
(in thousands, except per share data)
| (B) | ||||||||||||
| As Reported | Pro Forma Adjustments | Pro Forma | ||||||||||
| Revenues, net | $ | 184,904 | $ | (25,274 | ) | $ | 159,630 | |||||
| Operating costs and expenses: | ||||||||||||
| Cost of revenues (excluding depreciation and amortization) | 79,382 | (14,484 | ) | 64,898 | ||||||||
| Product development | 20,630 | (2,701 | ) | 17,929 | ||||||||
| Sales and marketing | 31,111 | (3,347 | ) | 27,764 | ||||||||
| Other general and administrative expenses | 25,622 | (2,353 | ) | 23,269 | ||||||||
| Depreciation and amortization | 19,488 | (1,615 | ) | 17,873 | ||||||||
| Total operating costs and expenses | 176,233 | (24,500 | ) | 151,733 | ||||||||
| Operating income | 8,671 | (774 | ) | 7,897 | ||||||||
| Other income, net | 468 | 12 | 480 | |||||||||
| Income from continuing operations before income tax provision | 9,139 | (762 | ) | 8,377 | ||||||||
| Income tax provision | 3,083 | (305 | ) | 2,778 | ||||||||
| Income from continuing operations | $ | 6,056 | $ | (457 | ) | $ | 5,599 | |||||
| Earnings per share: | ||||||||||||
| Basic | $ | 0.19 | $ | 0.18 | ||||||||
| Diluted | $ | 0.19 | $ | 0.17 | ||||||||
| Weighted average shares of common stock outstanding: | ||||||||||||
| Basic | 31,848 | 31,848 | ||||||||||
| Diluted | 32,183 | 32,183 |
See notes to the unaudited pro forma condensed consolidated financial information
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2016
(in thousands, except per share data)
| (B) | ||||||||||||
| As Reported | Pro Forma Adjustments | Pro Forma | ||||||||||
| Revenues, net | $ | 225,974 | $ | (33,850 | ) | $ | 192,124 | |||||
| Operating costs and expenses: | ||||||||||||
| Cost of revenues (excluding depreciation and amortization) | 96,634 | (21,668 | ) | 74,966 | ||||||||
| Product development | 28,897 | (4,664 | ) | 24,233 | ||||||||
| Sales and marketing | 39,004 | (4,074 | ) | 34,930 | ||||||||
| Other general and administrative expenses | 33,665 | (3,208 | ) | 30,457 | ||||||||
| Depreciation and amortization | 22,207 | (1,840 | ) | 20,367 | ||||||||
| Total operating costs and expenses | 220,407 | (35,454 | ) | 184,953 | ||||||||
| Operating income | 5,567 | 1,604 | 7,171 | |||||||||
| Other income, net | 581 | 581 | ||||||||||
| Income from continuing operations before income tax provision | 6,148 | 1,604 | 7,752 | |||||||||
| Income tax provision | 2,393 | 642 | 3,035 | |||||||||
| Income from continuing operations | $ | 3,755 | $ | 962 | $ | 4,717 | ||||||
| Earnings per share: | ||||||||||||
| Basic | $ | 0.12 | $ | 0.15 | ||||||||
| Diluted | $ | 0.12 | $ | 0.15 | ||||||||
| Weighted average shares of common stock outstanding: | ||||||||||||
| Basic | 31,721 | 31,721 | ||||||||||
| Diluted | 32,068 | 32,068 |
See notes to the unaudited pro forma condensed consolidated financial information
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2015
(in thousands, except per share data)
| (B) | ||||||||||||
| As Reported | Pro Forma Adjustments | Pro Forma | ||||||||||
| Revenues, net | $ | 209,002 | $ | (34,193 | ) | $ | 174,809 | |||||
| Operating costs and expenses: | ||||||||||||
| Cost of revenues (excluding depreciation and amortization) | 89,386 | (22,446 | ) | 66,940 | ||||||||
| Product development | 24,214 | (2,520 | ) | 21,694 | ||||||||
| Sales and marketing | 35,589 | (4,521 | ) | 31,068 | ||||||||
| Other general and administrative expenses | 29,259 | (2,772 | ) | 26,487 | ||||||||
| Depreciation and amortization | 16,997 | (1,545 | ) | 15,452 | ||||||||
| Total operating costs and expenses | 195,445 | (33,804 | ) | 161,641 | ||||||||
| Operating income | 13,557 | (389 | ) | 13,168 | ||||||||
| Other income, net | 162 | 6 | 168 | |||||||||
| Income from continuing operations before income tax provision | 13,719 | (383 | ) | 13,336 | ||||||||
| Income tax provision | 5,098 | (153 | ) | 4,945 | ||||||||
| Income from continuing operations | $ | 8,621 | $ | (230 | ) | $ | 8,391 | |||||
| Earnings per share: | ||||||||||||
| Basic | $ | 0.29 | $ | 0.28 | ||||||||
| Diluted | $ | 0.28 | $ | 0.28 | ||||||||
| Weighted average shares of common stock outstanding: | ||||||||||||
| Basic | 30,057 | 30,057 | ||||||||||
| Diluted | 30,436 | 30,436 |
See notes to the unaudited pro forma condensed consolidated financial information
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2014
(in thousands, except per share data)
| (B) | ||||||||||||
| As Reported | Pro Forma Adjustments | Pro Forma | ||||||||||
| Revenues, net | $ | 170,690 | $ | (31,901 | ) | $ | 138,789 | |||||
| Operating costs and expenses: | ||||||||||||
| Cost of revenues (excluding depreciation and amortization) | 74,145 | (20,277 | ) | 53,868 | ||||||||
| Product development | 16,463 | (1,544 | ) | 14,919 | ||||||||
| Sales and marketing | 29,867 | (6,183 | ) | 23,684 | ||||||||
| Other general and administrative expenses | 22,909 | (2,453 | ) | 20,456 | ||||||||
| Depreciation and amortization | 10,931 | (1,474 | ) | 9,457 | ||||||||
| Total operating costs and expenses | 154,315 | (31,931 | ) | 122,384 | ||||||||
| Operating income | 16,375 | 30 | 16,405 | |||||||||
| Other income, net | 146 | 146 | ||||||||||
| Income from continuing operations before income tax provision | 16,521 | 30 | 16,551 | |||||||||
| Income tax provision | 6,127 | 12 | 6,139 | |||||||||
| Income from continuing operations | $ | 10,394 | $ | 18 | $ | 10,412 | ||||||
| Earnings per share: | ||||||||||||
| Basic | $ | 0.38 | $ | 0.38 | ||||||||
| Diluted | $ | 0.37 | $ | 0.37 | ||||||||
| Weighted average shares of common stock outstanding: | ||||||||||||
| Basic | 27,570 | 27,570 | ||||||||||
| Diluted | 28,023 | 28,023 |
See notes to the unaudited pro forma condensed consolidated financial information.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1. BASIS OF PRESENTATION
The Company s historical
consolidated financial statements have been adjusted in the unaudited pro forma condensed consolidated financial information to present events that are (i) directly attributable to the PX Business, (ii) factually supportable and
(iii) are expected to have a continuing impact on the Company s consolidated results following the PX Business disposition. The pro forma condensed consolidated statements of income do not reflect the estimated gain on the sale of the PX
2. PRO FORMA ADJUSTMENTS
pro forma adjustments are included in the Company s unaudited pro forma condensed consolidated financial information: