HealthStream announced results for the first quarter ended March 31, 2012.
-- Revenues of $23.7 million in the first quarter of 2012, up 28% over the first quarter of 2011
-- Operating income of $2.3 million in the first quarter of 2012, compared to $2.6 million in the first quarter of 2011: annual customer Summit net costs of approximately $520,000 incurred in the first quarter of 2012 versus the second quarter of 2011
-- Net income of $1.4 million in the first quarter of 2012, compared to net income of $1.5 million in the first quarter of 2011, and earnings per share (EPS) of $0.05 per share in the first quarter of 2012, compared to EPS of $0.07 per share in the first quarter of 2011
-- Adjusted EBITDA(1) of $4.1 million in the first quarter of 2012, up 8% from $3.8 million in the first quarter of 2011
First Quarter 2012 Compared to First Quarter 2011
Revenues for the first quarter of 2012 increased $5.2 million, or 28 percent, to $23.7 million, compared to $18.5 million for the first quarter of 2011. Revenues for HealthStream Learning and HealthStream Research grew by 37 percent and six percent, respectively, over the prior year first quarter.
Revenues from HealthStream Learning increased by $4.9 million, or 37 percent, when compared to the first quarter of 2011. Revenues from our Internet-based subscription products increased by approximately $3.5 million, or 28 percent, over the prior year quarter due to a higher number of subscribers and more courseware consumption by subscribers. Revenues from project-based services increased $595,000 over the prior year quarter. SimVentures, our collaborative arrangement with Laerdal Medical A/S, delivered $374,000 in revenues in the first quarter of 2012, which compares to no revenue in the first quarter of 2011.
Revenues from HealthStream Research increased by $357,000, or six percent, when compared to the first quarter of 2011. Revenues from Patient Insights surveys--a survey research product that generates recurring revenues--increased by $556,000, or 13 percent, when compared to the first quarter of 2011. Revenues from other surveys, which are conducted on annual or bi-annual cycles, decreased by $199,000, or 16 percent, when compared to the first quarter of 2011.
Operating income for the first quarter of 2012 was $2.3 million, compared to $2.6 million for the first quarter of 2011. This decrease was influenced by the timing of our annual customer Summit, which occurred during the second quarter of 2011. In the first quarter of 2012, our holding of the Summit decreased operating income by approximately $520,000. In addition, because of record sales performance, the Company experienced higher commissions expense compared with the prior year first quarter.
Net income for the first quarter of 2012 was $1.4 million, compared to $1.5 million in the first quarter of 2011. Earnings per share (EPS) were $0.05 per share (diluted) in the first quarter of 2012, compared to $0.07 per share (diluted) for the first quarter of 2011. Key factors impacting EPS in the first quarter of 2012 were the effect of additional shares outstanding from the Company's fourth quarter 2011 follow-on stock offering and the timing of the Summit. The impact of the follow-on offering added approximately 3.6 million shares to the first quarter 2012 fully diluted EPS calculation.
Adjusted EBITDA (which we define as net income before interest, income taxes, share-based compensation, and depreciation and amortization) was $4.1 million for the first quarter of 2012 compared to $3.8 million for the first quarter of 2011.
At March 31, 2012, the Company had cash and marketable securities of $91.6 million, compared to $89.5 million at December 31, 2011. Capital expenditures totaled $1.8 million for the first quarter of 2012.
Other Business Updates
At March 31, 2012, approximately 2,659,000 healthcare professionals were fully implemented to use our Internet-based HLC for training and education. Revenue recognition commences when a contract is fully implemented. This number is up from approximately 2,400,000 at March 31, 2011. The total number of contracted subscribers at March 31, 2012 was approximately 2,790,000, up from approximately 2,523,000 at March 31, 2011. "Contracted subscribers" include both the 2,659,000 subscribers already implemented and the 131,000 subscribers in the process of implementation.
Customers representing approximately 96 percent of subscribers that were up for renewal did renew in the first quarter of 2012, while our renewal rate based on the annual contract value was approximately 102 percent. Our renewal rates reflect the addition of subscribers compared to previously contracted amounts combined with any pricing adjustments that may occur at renewal. The renewal rates for the first quarter of 2012 compare to a subscriber renewal rate of 100 percent and an annual contract value renewal rate of 105 percent during the first quarter of 2011.
For the trailing four quarters ended March 31, 2012, customers representing approximately 97 percent of subscribers that were up for renewal did renew during the trailing four quarter period, while our renewal rate based on the annual contract value was approximately 105 percent. The trailing four quarter renewal measurements are calculated on the same basis as the quarter results.
On March 6-9, 2012, we welcomed approximately 600 of our customers and 40 prospects from across the nation to our Summit 2012, held in Nashville. At this annual event, workshops and presentations focused on the sharing of best practices for developing the healthcare workforce and on improving healthcare organizations. Sessions were provided along four tracks: Leadership & Strategy, Human Resources, Education, and Quality. In collaboration with our partners--with about half of our content partners in attendance at the Summit--we introduced new products for talent development, including Lippincott Williams & Wilkins' Professional Development Programs. Together with our partner, Laerdal Medical A/S, we showcased our innovative SimCenter platform and associated products for making simulation-based learning easier and more accessible. Attendees also had the chance to participate in continuing education opportunities; collectively, over 380 learning activities were completed.
In March 2012, HealthStream announced the launch of the HealthStream Performance Center (HPC), an innovative software-as-a-service (SaaS) based performance management solution for hospitals. The HPC provides an automated, paperless performance appraisal process, which increases completion rates and consistency with all aspects of hospitals' workforce appraisal processes--enterprise-wide. The launch of the HPC further contributes to our larger suite of talent management and development solutions for hospitals.
In January 2012, HealthStream launched two new Physician Insights surveys to complement our traditional medical staff survey. The new surveys allow our hospital customers to obtain input from two different sectors of the physician community: referring physicians, physicians who actively refer to the hospital but do not regularly admit patients, and employed physicians, physicians who are employed by a hospital or healthcare system.
The Company also reiterated its previous guidance and anticipates that consolidated revenues for the full year 2012 will grow by 21 percent to 25 percent when compared to the full year 2011. We anticipate revenue growth in the Learning segment to be in the 28 percent to 32 percent range and the Research segment's revenue to increase by approximately six percent to nine percent.
We expect that operating income will increase between 20 percent and 26 percent for the full year of 2012 versus our 2011 results.
We believe that equivalent shares for purposes of calculating diluted earnings per share will be between 27.4 million and 27.6 million as a result of our follow-on offering in November 2011. We anticipate that our effective book income tax rate will be between 39 percent and 40 percent. Actual tax payments will be substantially less than our income tax provision as we continue to utilize our federal and state net operating loss carry-forwards of approximately $14.5 million and $12.6 million, respectively, to offset taxable income.
We expect that capital expenditures, including hardware, software, capitalized software development and additional office space will range between $8.0 and $9.0 million during the full year of 2012.
"With first quarter revenues up 28 percent over the prior year quarter and record quarterly sales, HealthStream is starting the year strong," said Robert A. Frist, Jr., chairman and chief executive officer. "To support our healthcare organization customers develop their workforce and improve their outcomes, we are investing in our products and workforce, while we continue to innovate new solutions--such as the HealthStream Performance Center launched in the first quarter. I believe we are well positioned for sustained growth in 2012."