Despite the revenue boost, HealthStream's net income remained stagnant at $1.9 million for the first quarter, the same as it was in the first quarter of 2013. Management in part blamed increased operating expenses associated with higher royalties, personnel additions, sales commissions, depreciation and amortization for the flat earnings.
Another $350,000 in one-time transaction costs associated with HealthStream's recent acquisition of Health Care Compliance Strategies further cut into the company's bottom line. Those acquisition costs translated into a penny per share earnings impact, the company said. “Thus, earnings per share were even stronger than they appear at first blush, in our view,” William Blair & Co. analyst Ryan Daniels wrote. Earnings per share stood at $0.07 for the quarter.
HealthStream purchased HCCS in March for approximately $13 million in cash and $2.4 million in shares of HealthStream's common stock, plus an additional $750,000 in cash that is subject to the achievement of certain performance milestones.
Despite Congress' decision to postpone ICD-10 implementation until at least 2015, Daniels thinks the company's revenue should continue to climb.
“We expect this growth to remain fairly solid through the recently pushed-out deadline for the new coding initiative,” Daniels wrote in a note to investors. “In fact, we believe the deadline pushout might allow the company to capture additional sales and renewal revenue, while smoothing out the eventual tapering of ICD-10-related revenue.”
The company itself is projecting revenue growth of 25 to 29 percent in 2014 compared with 2013 levels. Also projected is a decrease in operating income of between two and 11% because of costs associated with the acquisition, it said in its earnings release.
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