HealthStream (HSTM) Q2 2026 Earnings Call Transcript

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DATE

Monday, Aug. 3, 2026 at 9:00 a.m. ET

CALL PARTICIPANTS

• Head of Investor Relations and Corporate Communications - Mollie Condra
• Chief Executive Officer and Chairman - Robert A. Frist, Jr.
• Chief Financial Officer and Senior Vice President of Finance and Accounting - Scotty Roberts

TAKEAWAYS

• Revenue -- $83.7 million for HealthStream, Inc. (NASDAQ:HSTM), an increase of 12.5% driven by organic growth and contributions from recent acquisitions.
• Adjusted EBITDA -- $20.6 million, a record for the company and an increase of 16.9% compared to the prior year.
• Net Income -- $6.7 million, representing growth of 23.8% due to increased revenue scale and margin expansion.
• EPS -- $0.23, an increase from $0.18 in the prior year second quarter.
• Subscription Revenue -- $80.2 million, growing 11.2% reflecting core product momentum in credentialing and scheduling.
• Organic Revenue Growth -- 8.3%, led by demand for the CredentialStream and ShiftWizard platforms.
• Inorganic Revenue Growth -- 4.2%, contributing $3.1 million in revenue from the Virsys12 and MissionCare Collective acquisitions.
• Remaining Performance Obligations (RPO) -- $685 million, an increase from $618 million in the prior year period.
• Gross Margin -- 65.3%, compared to 64.6% in the prior year, primarily due to higher revenue scale and cumulative catch-up payments.
• Cash Balance -- $66.7 million, providing liquidity for potential mergers and acquisitions and capital deployment strategies.
• Share Repurchases -- $2.6 million, executed during the quarter under a $10 million authorization program.
• Full Year Revenue Guidance -- $327 million to $332 million, an increase from previous expectations of $323 million to $330 million.
• Full Year Adjusted EBITDA Guidance -- $74 million to $78 million, raised from the previous range of $73 million to $77 million.
• Full Year Net Income Guidance -- $19.5 million to $22.2 million, a slight decrease from the previous range of $20.4 million to $22.8 million to reflect increased investments in career networks.
• Capital Expenditures Guidance -- $31 million to $34 million, focused on software development and platform extensibility.
• ShiftWizard Revenue -- growing 30% year over year, driven by large health system go-lives and competitive takeouts.
• CredentialStream Revenue -- growing 14% year over year, reflecting increased adoption of modules like Enroll.
• myClinicalExchange Revenue -- growing 29% year over year, supported by increased engagement with medical and nursing students.
• Contingent Fee Revenue -- $2 million, recognized as a non-recurring cumulative catch-up payment associated with shared cost savings from an legacy contract.
• Insights Active Users -- reaching 2,600 users, an increase from 100 users in the previous year following the migration to a unified data lake.

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RISKS

• Frist stated, "Several of our larger hospital system customers have described headwinds associated with the expiration of the enhanced ACA premium tax credits at the end of last year," noting that the company is tracking potential spending impacts on customers.
• Frist stated, "A few have also noted future Medicaid reimbursement pressure related to the One Big Beautiful Bill Act," identifying potential macroeconomic stressors for the healthcare provider market.

SUMMARY

Management reported a strategic transition toward a platform-centric business model that emphasizes data interoperability and bundled software solutions. The company indicated that its hStream technology platform now functions as a unified system of record, enabling healthcare organizations to consolidate workforce management, credentialing, and clinical learning. Management stated that increased investments in personnel for its career networks segment are intended to address healthcare staffing shortages by engaging medical students earlier in their professional development. The company reported that its financial position remains stable with no long-term debt, supporting a disciplined approach to organic investment and potential acquisitions. Management also addressed a recently disclosed cybersecurity incident, stating that no material financial impact is anticipated and no customer-facing systems were compromised.

• CEO Frist highlighted the scalability of scheduling solutions, noting that ShiftWizard wins are often "competitive takeouts of a horizontally focused competitor that serves multiple industries rather than healthcare specifically."
• Management reported that the Insights reporting pillar now spans seven applications and utilizes a Snowflake-powered data lake to provide longitudinal reviews of workforce development.
• CEO Frist stated that healthcare employment is projected to remain a major growth source and that "AI will help caregivers spend more time with patients and less time on administrative work."
• The company disclosed a $10 million total order value win for its Resuscitation Suite, demonstrating a trend toward larger, multiyear system-level commitments.
• Management noted that all core product renewals now include inflationary price escalators, which intended to smooth budget planning for customers and provide consistent revenue drivers.
• Chief Financial Officer Roberts indicated that revenue growth in the third quarter is expected to be approximately 8% with an adjusted EBITDA margin of 22%.
• Management described the payer credentialing market as a "whale hunting" environment involving longer development cycles for larger potential contracts.

INDUSTRY GLOSSARY

• hStream: A foundational technology platform that provides interoperability, identity management, and data analytics across HealthStream applications.
• myClinicalExchange: A career network application that manages clinical internships and rotations for nursing and medical students.
• CredentialStream: A SaaS-based enterprise platform for healthcare provider credentialing, privileging, and enrollment.
• ShiftWizard: A workforce management and scheduling solution specifically designed for healthcare clinical workflows.
• RPO (Remaining Performance Obligations): The total amount of contracted revenue that has not yet been recognized as income.
• DSO (Days Sales Outstanding): A measure of the average number of days it takes a company to collect payment after a sale has been made.
• Snowflake: A cloud-based data platform used for data storage, processing, and analytics solutions.

Full Conference Call Transcript

Operator: Good morning, ladies and gentlemen, and welcome to HealthStream's Second Quarter 2026 Earnings Conference Call. At this time, I'd like to inform you that this conference is being recorded. I will now turn the conference over to Ms. Mollie Condra, Head of Investor Relations and Corporate Communications. Please go ahead, Ms. Condra.

Mollie Condra: Okay. Thank you. Good morning, and thank you for joining us today to discuss our second quarter 2026 results. Also on the conference call with me today is Robert A. Frist, Jr., CEO and Chairman of HealthStream; and Scotty Roberts, CFO and Senior Vice President of Finance and Accounting. I would also like to remind you that this conference call may contain forward-looking statements regarding future events and the future performance of HealthStream that involve risks and uncertainties that could cause the actual results to differ materially from those projected in the forward-looking statements.

Information concerning these risks and other factors that could cause the results to differ materially from those forward-looking statements are contained in the company's filings with the SEC, including Forms 10-K, 10-Q and our earnings release. Additionally, we may reference certain non-GAAP financial measures related to the company's past and future expected performance on this call. The most directly comparable GAAP financial metrics and reconciliations are included in the earnings release that we issued yesterday. So with that start, I'll now turn the call over to CEO, Bobby Frist.

Robert Frist: Good morning, everyone. Welcome to our second quarter 2026 earnings call. We do have a lot to discuss, as always, and it's fun when we can start with strong financial growth that we delivered during the quarter. So I'll dive into some of the numbers. The quarter included record-setting revenues of $83.7 million, up 12.5% year-over-year and record-setting adjusted EBITDA, which was $20.6 million, up 16.9% year-over-year. Operating income also grew 41.4% year-over-year. Based on our performance for the first half of the year, we increased our expectations for revenue and adjusted EBITDA for the full year 2026 and our financial guidance.

Remind you of a strong cash balance of $66.7 million and untapped line of credit and no long-term debt, we do remain well positioned to pursue M&A opportunities as they arise and other capital deployment strategies that we believe will benefit shareholders. Our successful execution and financial performance in the first half of the year is allowing us to invest more aggressively in key areas than we had planned at the outset of the year. We believe these investments, which I'll speak to throughout today's call, will help broaden our reach into healthcare and help us deliver long-term growth in the future. This investment strategy is a primary reason we are slightly trimming net income guidance for 2026.

The first area of investment I want to highlight is our career networks. Our career networks help healthcare organizations find the most qualified and competent employees while helping individual healthcare professionals develop and navigate their careers. Remember, HealthStream is already helping healthcare organizations develop, retain, engage, credential and schedule the healthcare workforce. So our career networks provide another dimension to our capabilities, that of finding the best employees. We are now investing in personnel, approving 15 new positions beyond our original budget to develop our career networks, and they include a nice mix of sales, operations and support for this growing part of our business.

Career network applications such as myClinicalExchange, help us do this by interfacing directly with students as they prepare for their first job in healthcare. Already, we are seeing some of our largest and most progressive customers utilize myClinicalExchange to help them find the best students for clinical internships and rotations to develop those individuals in ways that make their transition to practice more efficient and effective and to help ensure that they are able to successfully hire those students upon graduation.

By moving upstream into the nursing and medical student market, HealthStream is beginning to help our customers solve their staffing problems and improve the quality and readiness of these new hires. myClinicalExchange, one of our 3 career networks, grew 29% in the quarter versus the same period last year, which gives us confidence that we're on the right track with this investment strategy, again, incremental to our original budget plans at the beginning of the year. So to summarize, and due to the strength of the first half performance, we have decided electively to increase our investment in our career networks and added 15 new positions that we're rapidly hiring and onboarding.

So we expect them to begin contributing during the second half of the year. But also we'll have the new payroll, new expenses. As we look ahead, we continue to monitor a number of external factors that may influence the operating environment for both HealthStream and our customers. Several of our larger hospital system customers have described headwinds associated with the expiration of the enhanced ACA premium tax credits at the end of last year. A few have also noted future Medicaid reimbursement pressure related to the One Big Beautiful Bill Act. We'll continue to track these developments, including any spending impact they may have on our customers.

To date, because of how we're positioned, we have not seen a negative impact on our business. And that's partially because our solutions are specifically designed to help health systems save money associated with their operations. So we'll continue to focus on enabling our customers to operate more efficiently regardless of the macroeconomic conditions. And I think that's why our solutions are well-positioned even in this tighter money environment for our customers. As a reminder, in the last couple of calls, I outlined 4 reasons why HealthStream sees significant opportunities in the rapidly evolving AI landscape. As AI continues to advance, we're even more confident in each of these reasons that we've articulated in the past.

So let me reiterate them. First, our healthcare user base continues to grow. Unlike industries that may experience seat compression from AI, healthcare employment is largely projected and expected to remain a major source of job growth in our country, with nurses, our largest user base for HealthStream at the center of that trend. We believe AI will help caregivers spend more time with patients and less time on administrative work. And so just a general characterization is that we see a lot of job growth in healthcare and particularly in the nursing base. Second, our data remains a key differentiator.

As we enter the AI area and the era, our enterprise applications serve as systems of record for learning, credentialing and scheduling, while our career networks generate proprietary workforce data. NurseGrid alone now reaches approximately 1 in 5 U.S. nurses, providing valuable insight into the nurses' preferences and work life. Third, our HealthStream platform is designed to incorporate AI as a core capability and assets such as our hStream ID and our expanding API footprint provide foundational infrastructure to support AI-driven innovation across healthcare workforce technology. We already, for example, have over 780 registered users of our developer portal, building dozens of customer-built applications and integrations using our API. I think this is solid footing for the AI-driven future.

Fourth, our ecosystem brings these advantages together. Thousands of healthcare organizations, millions of caregivers, dozens of industry partners and more than 30 years of expertise create a differentiated platform that is difficult to replicate. While AI cannot create an ecosystem like ours, we believe it can make that ecosystem even more valuable. Before we go further in the call, and I turn it over to Scotty, I want to summarize for those of you new to the HealthStream story, kind of a business overview, the business description.

So for anyone new to the story, first and foremost, HealthStream is a healthcare technology company dedicated to finding, developing, retaining, engaging, credentialing and scheduling the healthcare workforce through technology solutions, each of which we believe are becoming more valuable because of the interoperability they are achieving through our hStream technology platform. The company holds 21 patents on its innovative products, which have been awarded over 40 Brandon Hall Awards. Historically, we sell our solutions on a subscription basis under contracts that average 3 to 5 years in length, which makes our revenues recurring and predictable. In fact, 97% of our revenues are subscription-based.

We are profitable, have no interest-bearing debt and report a strong cash balance of $66.7 million at the end of the second quarter of 2026. The strong cash balance allows us to allocate capital to product development, M&A, share repurchases and dividends. We are solely focused on healthcare and more specifically, the healthcare workforce and those preparing to enter it. The 12.6 million healthcare professionals and nursing students in the United States comprise the core total addressable market for our solutions. Later in the call today, I'll describe some of the exciting developments in each of our areas of learning, credentialing and scheduling primarily.

But first, let's turn the mic over to Scotty Roberts, our CFO, who will provide a more detailed discussion of the financial metrics for the second quarter of 2026, along with further comments about how we view our financial outlook for the remainder of 2026. Scotty, I'll turn it over to you.

Scott Roberts: All right. Thank you, Bobby, and good morning, everyone. I'll go ahead and dive into the numbers for the quarter. Our revenues were a record of $83.7 million and were up 12.5%. Operating income was $8.3 million, which was up 41.4%. Net income was $6.7 million, up 23.8%. Earnings per share was $0.23 per share, up from $0.18 per share, and adjusted EBITDA was also a record, coming in at $20.6 million and was up 16.9%. Our revenues increased by $9.3 million or 12.5% and were $83.7 million compared to $74.4 million in the prior year. Revenues from subscription products were up $8 million or 11.2% and professional service revenues were up $1.3 million or 52.6%.

Let me touch on the revenue growth drivers for the quarter. First, our core subscription solutions continued to provide solid growth. With an organic revenue growth rate of 8.3%, led by products like CredentialStream, which grew by 14%; ShiftWizard, which grew by 30%, our Competency Suite product grew by 12% and myClinicalExchange grew by 29%. In addition to the growth in our core subscription products, I want to point out that approximately $2 million of our revenue came from a contract that contains contingent fees. It's a contract that we acquired back in 2020 as part of our acquisition of ANSOS.

And from an accounting perspective, the $2 million of revenue was recognized as a cumulative catch-up in accordance with ASC 606 and resulted from the resolution of previously constrained estimates of variable consideration under the customer's contract. Approximately $1.2 million of the $2 million catch-up was recorded as subscription revenue and $0.8 million was recorded as professional services revenue. To provide a little more plain English explanation around this, the $2 million of revenue that I just mentioned was associated with shared cost savings that we helped one of our customers achieve in the first half of the year.

We do not have any other contracts that contain this type of contingent payments and do not consider this revenue to be recurring in nature. The third component of our growth was the Virsys12 and MissionCare Collective acquisitions that we completed in the fourth quarter of 2025. Our inorganic revenue growth rate was 4.2% in the second quarter. Together, these 2 acquisitions contributed $3.1 million in revenue in the second quarter.

Lastly, revenues from our legacy credentialing and scheduling products, excluding the impact of the $2 million catch-up, approximated $7.4 million of our second quarter revenues and declined by $1.3 million or 15% compared to the second quarter of last year as we continue our efforts to migrate customers from those solutions. Our remaining performance obligations were $685 million as of the end of the second quarter, which compares to $618 million for the same period of last year. We expect approximately 40% of the remaining performance obligations will be converted to revenue over the next 12 months and that 68% will be converted to revenue over the next 24 months.

Gross margin was 65.3% compared to 64.6% in the prior year quarter. This improvement was primarily related to the growth in revenues, including contributions from the recent acquisitions and revenue catch-up I just described and was partially offset by higher labor, software, royalties and hosting costs. Operating expenses, excluding cost of revenues, increased by 10.1% or $4.2 million. Product development increased by $1.5 million or 12.5%. Sales and marketing increased by $1.7 million or 14.3% and depreciation and amortization increased by $0.4 million or 3.8%. And lastly, our G&A costs increased by $0.6 million or 8.6%. Net income for the second quarter was $6.7 million and was up 23.8% over the prior year.

And finally, our adjusted EBITDA improved to a record of $20.6 million and was up 16.9%, and adjusted EBITDA margin was 24.6% compared to 23.7% last year. Now let's review the balance sheet and cash flows. Our cash and investment balances were $66.7 million compared to $66.5 million last quarter. And during the second quarter, we paid $8.4 million for capital expenditures, returned $1 million to shareholders through our dividend program and repurchased $2.6 million of our common stock under the share repurchase program that we announced in March of 2026.

In addition, we made $0.8 million of minority investments in companies that we expect to leverage our ecosystem and platform and paid $0.4 million in earn-outs associated with the prior acquisition. Some of the growth investments that Bobby mentioned in the first half of the call are geared towards making our hStream technology platform more extensible to companies, including those that we invest in, can begin to build on our platform in ways that benefit everyone involved. It was another good quarter of collections efficiency for us as days sales outstanding were 38 days for the quarter compared to 35 days in the prior year second quarter.

And from a cash flow perspective, on a year-to-date basis, our cash flows from operations were $40.6 million, which is up from $32.1 million last year or a 26% increase. Free cash flow was $24.7 million compared to $14.2 million last year, which is up 73%. And our capital expenditures were $8.4 million this quarter compared to $9 million last year's second quarter. Ending the quarter with $66.7 million of cash and investments, free cash flows and no debt, we are well positioned to deploy capital to improve shareholder value. As a reminder, we maintain a disciplined approach to capital allocation and how we prioritize our use of capital.

Our utmost priority is making organic investments back into the business, which is evident by our annual capital expenditure and R&D plans. The second is pursuing acquisition opportunities, which we have a long track record of executing. The third is returning a portion of profits back to shareholders in the form of cash dividends. And the fourth priority is that our Board may authorize share repurchase programs. Yesterday, as announced in our earnings release, our Board of Directors declared a quarterly cash dividend of $0.035 per share to be paid on August 28 to holders of record on August 17. Also in March of 2026, our Board of Directors authorized a $10 million share repurchase program.

And during the second quarter, we repurchased $2.6 million of our common stock under this share repurchase program, and we currently have $5.7 million remaining. This program will terminate on the earlier of September 12, 2026, or when the maximum dollar amount under the program has been expended. We may suspend or discontinue making purchases under the program at any time. Now let me turn over to our financial expectations for '26, which we updated yesterday. We expect consolidated revenues to range between $327 million and $332 million. The bottom of the new range is now above the midpoint of our previous guidance range and the new range equates to a growth rate between 7.5% and 9.2% over 2025.

We expect our net income range to be between $19.5 million and $22.2 million, adjusted EBITDA to range between $74 million and $78 million and capital expenditures to range between $31 million and $34 million. Consistent with our previous guidance, we expect lower revenue growth rates in the second half of the year versus the first half due in part to the acquisitions that we completed in 2025. We expect our revenue growth rate for the third quarter will be approximately 8%. We expect adjusted EBITDA margin will approximate 22% for the third quarter.

Our adjusted EBITDA for the first half of the year was very strong, which was partially due to the $2 million of revenue catch-up in the second quarter. And for the second half of the year, our forecast assumes higher operating expenses compared to the first half of the year, higher trade show costs and higher professional service fees. As Bobby discussed earlier, we're also planning to expand our product development and sales and marketing efforts in our career network solutions. And those solutions include myCNAjobs, myClinicalExchange and NurseGrid. We're also investing more aggressively with regard to our hStream technology platform.

These guidance expectations do not include the impact of any acquisitions or dispositions that we may complete during the year, gains or losses from changes in the fair value of nonmarketable equity investments or contingent consideration or impairment of long-lived assets that we may complete during the year. So that wraps up my portion of the call this morning. Thanks for your time, and I'll now turn it back over to Bobby for some more updates.

Robert Frist: Thanks, Scotty. Increasingly, our customers view HealthStream as a partner for solutions across their entire enterprise rather than a single application or a single point solution, as we say. That broader view is showing up in what customers buy and how they buy it. This is where our bundling strategies are beginning to take hold. Stronger go-to-market curation among our solutions allows customers to purchase product bundles designed to manage end-to-end clinical workflows. Our conferencing suite is a good example of this. We are beginning -- we are also beginning to sell market-specific bundles that are tailored to meet unique needs of different types of healthcare organizations. We call these our market bundles.

They are designed for areas such as post-acute care, physician offices and ambulatory surgery centers. I'll say a bit more about how each of these 2 bundling strategies work. When customers purchase a subscription to our Competency Suite, all of their applicable employees gain unlimited access to the content and applications in that bundle. This gives customers a more complete, more economical solution while simplifying what would otherwise be a series of separate piecemeal purchasing decisions. We saw continued momentum in the quarter with Competency Suite. Revenue is up approximately 12% over the same period last year, and it remains one of our largest revenue drivers within our Workforce Development business. That brings us to market bundles.

At HealthStream, we want to be positioned to serve all types of healthcare organizations, and we believe that our market bundles can help us do just that. We recognize that the mix of solutions a large health system requires may be different than what a smaller long-term care facility needs. That is why we are beginning to build out our market bundles for the skilled nursing space, the long-term care space and small hospitals often called critical access hospitals. For example, our critical access bundle combines software and content into a single decision rather than several incremental ones, giving smaller facilities a more complete set of applications at a better price per unit.

In the second quarter, we saw uptake in these market bundles with new critical access, skilled nursing and long-term care customers signing on for these market bundles. Earlier in the call, I mentioned more aggressive investment in growth initiatives. Part of that investment is to bolster and expand our sales team in order to get these product and market bundles more widely adopted. To do this, we've already started hiring more sales representatives because we believe that increase in sales coverage is likely to result in future revenues over time. Switching gears. On Wednesday of last week, we electively filed an 8-K disclosing a cybersecurity incident, the investigation of which is ongoing.

Rather than reading that disclosure to you, I'll simply direct you to that filing. I'll reiterate our statement that we do not believe any customer-facing systems such as our platforms or applications were accessed or compromised. Additionally, we have not experienced any interruption in our product service or service delivery to customers or to our business operations. Based on what we know, I also want to reiterate that we do not anticipate this incident to have a material impact on our financial results. All right. Let's get back to our business updates, beginning with an update about how we are becoming a platform company through our emerging hStream technology platform.

The reporting and analytics layer of our hStream platform is known as Insights. Insights made real tangible progress in the quarter. I'm really proud of the teams that have been building this part of our platform. It's really starting to show its capabilities. Insights made real tangible progress in the quarter, largely because of the work we've done to ensure that our individual applications are now feeding their data into a common Snowflake-powered data lake.

Once the data is in one place, our developers can then create standard data sets, standard reports, often using new AI tools and then customers can use the Insights infrastructure to do everyday standard reporting, build their own customer reports and turn that data into action through live analytics dashboards. What makes this strategically important is that it only becomes more valuable as more of our applications participate, and that is exactly what we're seeing. Insights, our reporting application or pillar of our platform, now spans 7 of our applications, including Learning Center, Learning Experience, ShiftWizard, several quality and compliance and clinical development solutions.

In its first full year, active users of Insights grew from 100 to more than 2,600, and we expect the catalog to continue expanding meaningfully as additional products, including CredentialStream in the upcoming quarter, Policy Manager, Workforce Validate to come online in the next 2 quarters. So it's really exciting to watch all of our data get pushed into one unified data lake tied to one unified reporting architecture. It's allowing large system customers and small ones to create really unique insights into the data coming off multiple of our applications through one data lake and one set of access tools that are part of the platform. So really excited about our progress there.

Let's move on to our learning solutions, which are demonstrating the power of our ecosystem. We continue to see customers consolidate learning purchases instead of just running isolated point solutions. This is helping drive larger contract values for our solutions like our Resuscitation Suite, where we closed a deal with over $10 million of total order value in the quarter, Competency Suite, where we closed a $5 million total order value deal and Quality OB, where we closed a $1.5 million plus total order value deal. So it feels like some of the deals are getting bigger and they're more inclusive and they leverage our platform and technologies in new and exciting ways.

More importantly, it is helping our customers understand the strategic value of consolidating their purchases with HealthStream as we transition into a platform to handle all of their clinical workforce needs. These types of transformations do not happen overnight, which is why we have been investing in our solutions and our platform strategy for the last many years. And while we are accelerating investment as results begin to manifest in terms of customer benefit and company growth. Let's move on to credentialing. Revenues from sales of our flagship credentialing product, we call CredentialStream were up approximately 14% in the second quarter compared to the same quarter last year.

We also saw growth meaningful -- from meaningful competitive takeouts, systems that are standardizing all of their facilities on to CredentialStream and the additional purchase of modules like Enroll, which allows customers to manage their enrollment processing directly through CredentialStream instead of through separate nonintegrated system. I'm also pleased that we saw some conversions from our legacy credentialing solutions into CredentialStream. Conversion from legacy solutions, particularly older versions of legacy solutions is something we plan to focus on more as we move into next year. Let's move on to scheduling, where our core product, ShiftWizard, revenues were up approximately 30% in the second quarter versus second quarter of the previous year.

Two large health system go-lives during the quarter, together representing approximately $1.7 million in combined new order value or contract value reflect our expanding ability to implement ShiftWizard at scale within complex multi-facility healthcare organizations. As in prior quarters, our largest ShiftWizard wins were once again competitive takeouts of a horizontally focused competitor that serves multiple industries rather than healthcare specifically. And our sales leaders continue to attribute these wins to customers recognizing that scheduling and staffing clinicians is simply different from scheduling a labor pool for retail or factory shifts. Stepping back from the quarterly results for a moment, I'd like to recognize something that reflects the day-to-day work of our teams rather than a single quarter's numbers.

This past quarter, G2 named ShiftWizard a leader in medical staff scheduling and our learning management system, ComplyQ and SafetyQ and Jane were all recognized among the top performers in healthcare learning management on G2's latest report. Across our full portfolio, HealthStream now ranks #1 in 5 separate G2 categories and holds an overall grid leader designation as based entirely on the feedback from people who use our solutions every day. It's a good reminder that the work of our teams that they do to serve these organizations and the clinical workforce is resonating in a very tangible way, and we're grateful to our customers for continuing to tell us so.

And now I want to close with the same reminder I share with you every quarter. If you're interested in a profitable, highly recurring revenue healthcare technology company that expects to deliver growth, then HealthStream may be the right investment for you. If you're interested in a company whose core user base, the clinical healthcare workforce is expanding faster than any other sector of the job market, then maybe HealthStream is the right investment for you. If you like a company whose software serves as a system of record on behalf of healthcare customers, then HealthStream may be a company for you. If you favor ecosystems over point solutions, then maybe HealthStream is the right investment for you.

For all of these reasons, HealthStream is positioned for another exciting year helping the nation's top health systems find, develop, schedule, credential, onboard and retain this growing healthcare workforce. Maybe HealthStream is the right investment for you. I'll now turn it over to the operator to begin the Q&A session.

Matthew Hewitt: Congratulations on the strong quarter. A couple of questions. First, obviously, you announced several competitive wins across the portfolio of applications. I'm just curious what's driving that? Is this maybe a heightened focus by the customers to kind of get to that one throat to choke? Is it because you have the better platform versus maybe a legacy platform that you've displaced? Just any color that you can provide on the competition side.

Robert Frist: Well, it's a little bit of all those things, of course. I think a little bit of our bundling strategy, I feel like it's starting to take hold. We're able to put more products together. They're more interoperable. We're able to get better unit pricing, but for more complete solutions under larger contracts. I do think our products are advancing their capabilities. The platform itself essentially powers up the applications and gives them new capabilities. And I talked today about the Insights reporting. It's really just a different experience if a large enterprise has access to all of the core data sets from all of the myriad of our applications that they've licensed access to in one data lake.

And so they're just -- I think our customers are starting to hopefully view the shift from buying several independent nondisconnected or stand-alone point solutions distinguishing that from investing in a platform technology that they're starting to wake up and see like, oh, wow, if I use the myClinicalExchange network and we also use the learning system from HealthStream, all that data now goes into kind of a mix and match reporting engine that gives incredible flexibility to gain insights about your workforce.

So that's an example as that platform pillar of reporting and analytics matures and customers wake up instead of getting a set of canned reports that are separate and distinct, they can now relate data across applications through our Insights reporting and analytics platform, bringing information about students that applied that are now being onboarded in the learning system, for example, so you can now track people better across time and look at onboarding efficiency is maybe a good example of the blend of data across the students as they become professionals and take jobs in organizations. Again, the data from both those applications pushed the same data lake allows you to create more insightful use of that data.

So the maturity of the platform, the bundling strategy, I think, are 2 contributors to the access we're getting to the buy-in. We're also doing a better job of assembling our products for specific market verticals, and that's part of the market bundles we talked about. So it's not just bundling the other more products, it's more products that are kind of filtered for each clinical setting environment, which I think we're just getting a little better at curating our product sets into these bundles for specific markets. I think that may be helping as well. Thanks for the question. I hope that helped answer.

Matthew Hewitt: It did. And maybe as a follow-up, and that was kind of a little bit of a lead in, but you noted the long-term care market this morning. I feel like a lot of times we get focused on the hospital environment, given the size and the opportunity there. But in the long-term care market, it's a little bit different. It's a little more fragmented, smaller facilities, those types of things. Where do you sit from a penetration standpoint? Where do you see that as maybe a driver or an opportunity as we look out over the coming years?

Robert Frist: Matt, it's a great question. I think we -- in our slide deck for investors, we've kind of aggregated the number of people working across these clinical settings. We haven't broken out market share per setting yet. We're starting to -- actually our Board asked us to do a lot more work on that at our upcoming -- our next Board meeting. And so maybe that's something we can follow up on. We've aggregated into this kind of this demand circle about 12.5 million or 12.6 million healthcare workers.

A little more than half of those are in the acute care settings, as you know, and then spread across the other settings like -- but where we're seeing traction now, the skilled nursing market, which if you think about it kind of structurally the most similar to the acute care market. But we're also seeing some traction ironically in the smaller critical access hospitals. And again, I think the bundles are helping there. So I don't have any specific numbers for you. I would say we have a footprint in each of those markets, long-term care, skilled nursing, home health. We see expanding -- some expanding footprint in home health, the critical access hospitals.

I view those as kind of 4. We now have market bundles for each of those and beginning to get better at messaging those into the market. So they are more fragmented. They come in smaller pieces. So it's a slightly different structure to the sales organization to achieve market share in there, a little bit more of the inside, outside tag-team sales force, less traveling, of course, more phone and Webex work to communicate with those smaller customers. The contracts are smaller, but what's important, I think, as we think about the total market as those 12 million people, they have a lifetime value of each person.

And so one may be working in skilled nursing facility, but find themselves a few years later moving into a bigger city and working in an acute care hospital. And in our new model, this platform approach allows us to track them kind of horizontally across their career as they move between jobs and they land in different places that have the HealthStream platform. So I'm talking about some of our kind of platform benefits as we try to get more specific in how we penetrate those verticals.

Of the verticals we mentioned or the segments -- market segments, we're seeing good uptake right now and skilled nursing is probably the one that has the most uptake as opposed to long-term care. But we have a good strong footprint in long-term care as well.

Dustin Scaringe: This is Dustin on the line for Ryan. Regarding your guidance update, just wondering if that now includes the $2 million catch-up? Or was that kind of previously in the guide? And also, did that flow through directly to the bottom line? Or were there some expenses associated with that?

Robert Frist: Scotty, I'll let you address that first.

Scott Roberts: Yes, yes, yes. So the $2 million that we saw come through in the second quarter was incremental to our previous expectations. So it's now flowed through our updated revenue guidance for the full year. And then from its impact on kind of profitability for the second quarter, it was meaningfully impactful. So just a small cost to kind of realize that revenue. So you could probably flow most of it to the profitability line items from an EBITDA perspective, for sure.

Richard Close: Congratulations on the results. I jumped on late, so I apologize. Did you guys talk about the legacy revenue impact in the quarter? I just want to do that from a housekeeping to begin with.

Scott Roberts: Yes, Richard, it was I think, $7.4 million of revenue in the second quarter, which is down $1.3 million or 15% versus the same period last year.

Richard Close: Okay. Okay. That's good. Just wanted to cover that in a public forum to get that number. Okay. So questions. Bobby, you talked about some larger contract values. And I just want to put them in a little bit of perspective. You mentioned a $10 million one, I think a $5 million contract value. So are those different like terms of contracts in terms of length? Maybe you could like talk about, is the annualized revenue coming through with respect to these larger contracts? Or is that more extended timelines?

Robert Frist: Generally, they're kind of bigger bundles over longer periods of time. So they're bigger strategic commitments to our company, which we're excited about. But you're right to point out that the terms on those are sometimes 4 years or more. And so that's the total contract value, which is kind of a bigger number because there's usually more in the bundle. But it's also -- typically, they tend to be a little bit longer-term agreement. And then as far as coming to revenue, it just depends on the mix of what's in that bundle. The first one we called out, which was the biggest number was for resuscitation competitive win.

And then that revenue tends to come in a little faster, but has a little lower gross margin because of the partnership and the royalties associated with our Resuscitation Suites that we take to market. So it's exciting. They're bigger. It's kind of a system-level commitment in that case. We can usually get to the revenue a little faster in that particular case. And so in those ways, it's good. And -- but on the negative side, it has a little lower gross margin because it involves content products, which have royalties.

The second bundle we mentioned, I think, was a Competency Suite, which was another great example of -- historically, that would have been 5 separate sales of kind of products that are in this Competency Suite now. And so the value of the contract gets bigger, and I think in that case, $5 million because it includes several of our products in that bundle, which I think is going to help with both -- I mean, it's a little longer sales process because it's a bigger financial commitment, and it is a multiyear agreement. But it takes the decision down to like one decision instead of 6 separate decisions over many years.

They just say, "Is HealthStream have the right tool set to develop the competency of our clinical workforce." So if the answer to that is yes, then it's a bigger commitment, but it's the mix of the products instead of picking one tool and then adding another tool a year later and then another tool. It's all bundled together into the Competency Suite. And so again, bigger contract value over more time. But I think it's going to help with renewal rates over time, too, because what would happen is you'd sell 4 or 5 point solutions over 4 or 5 years, and they would get to the bigger contract value.

But as each of those separate contracts for one of the components of the suite came up for renewal, they would adjust it based on actual utilization. And so some of it adjust up or down if they subscribe for too many or they used it less than they expected. And now I think in these bundles, it's kind of all or none, like you get your phone and you don't use all the features of the phone, but you don't give any of them back. You keep the phone. And so I think the bundles ultimately will also help with renewal rates. I hope that answers. But yes, bigger deals, typically bundles and over a longer term period.

So the NOV, we call the contract order value, the new order value is the total 5-year value or 4-year value of those contracts.

Richard Close: Okay. That's great. And then just clarification, when you were talking about CredentialStream, you said sales up 14% in the second quarter, I believe the number was. Is that new bookings? And I just want to -- because when you talked about ShiftWizard...

Robert Frist: Yes, yes. That's the revenue that's coming in from implementations of contracts. So that's not necessarily sales. That's the revenue as it's materializing. It was up 14%. The revenue was up, which means kind of contract go-lives. We're taking customers live and that's adding to the total revenue of that product.

Richard Close: Okay. That's perfect. Just wanted to clarify because ShiftWizard, you said 30% revenue. Is the 14% year-over-year growth?

Robert Frist: I believe that's -- Scotty will clarify. I believe that is year-over-year growth, and I think that's also true of the ShiftWizard number, which is year-over-year growth. There's a couple of bigger, as we mentioned in the script, the bigger ShiftWizard accounts went live. And so that starts to turn into revenue rec. And then the result of that was a 30% year-over-year revenue growth quarter to prior year quarter. And so I think that's the same format for the credentialing. Scotty, can you verify?

Scott Roberts: Yes, that's exactly right, Bobby. And those are the growth rates for the second quarter of the prior year second quarter.

Richard Close: Perfect. I just wanted to make sure apples and not -- or apples and oranges there. So good to be on the right page there. And then my last question, I guess, is with respect to ShiftWizard and those larger system go-lives, is that relatively new in terms of seeing the success with larger systems that like ShiftWizard is ready for prime time in these larger accounts now? Because that's something that I know you've gotten questions on over the last couple of years.

Robert Frist: Yes. We're definitely feeling better about it. I mean I made that statement. I said that I thought that these -- I mean, they're not huge, huge systems, but they're definitely larger, more complex multi-facility systems. And so we did comment that I think that it does reflect our expanding ability to service at scale, more complex multi-facility health systems. So I think that's good news. I don't know if it's ready when you say prime time. I mean there are a few giant systems. And we have some larger implementations now.

And I just -- I think we're -- the product is maturing, and we're getting more capabilities on the board, which I think makes a broader audience possible for that set of applications.

Richard Close: Okay. Can I slip one more in or?

Robert Frist: Yes, yes, sure.

Richard Close: Okay. With respect to the Insights that you talked about and making tangible progress there, the data lake and Snowflake. Is that a revenue contributor? Do you charge for all of that? Or what's the revenue model there? Or is it more like ROI, making the client understand they're getting the ROI out of all your products?

Robert Frist: Yes, yes, it's a little of all those. So there is an Insights+ buy-up. And there are -- so there are things to buy there. There's an analytics tool set that's more advanced that you purchase. And so if you want to take full advantage of this, there are things you purchase. And so it does grow revenue. The Insights and there's Insights and then there's Insights+ and there's kind of an analytics framework. And so there are some buy-ups there, and we're selling them very well.

But what's really cool is when you -- if you license 2 or 3 of our applications, and we've mentioned about 5 of them now that are participating in the Insights infrastructure, you literally can go in and you see the data sets presented as check boxes from each of our applications on one screen. And so you go in and say, "Okay, I want to see the tenure of students on myClinicalExchange that we happen to also then onboard." So they were students doing rotations. A year later, we onboarded them as employees, and we did some learning and training and transition to practice training.

And now we want to pull together that as a longitudinal review of how students were selected and onboarded and trained and ready to work. That was really, really, really difficult a year ago. And now you can literally just go in and you -- because we've talked myClinicalExchange for the students is on the hStream ID. A lot of our large health systems have used the hStream ID as a sign-on model. And so when that's the case, those data sets are not just available in one environment, they're also relatable. And so now you can ask questions of the data, these growing data sets.

I think that's very much more indicative of being a platform company where, hey, yes, the IT staff at these larger health systems are realizing that we're a data partner now. Like if you think about learning systems bought in HR and they generate these little reports for HR about compliance training, for example. But now you go in and you can literally configure data across 5 of our applications to one set of reports. And it just -- it opens up the ability to view us as a platform-level data partner in the journey of managing your workforce. So we have several more applications. We'll go online with Insights reporting.

The other thing it does is it allows us to refactor older applications. So the reporting engines of the older applications can start to retire as the data lake and the Insights reporting framework manifests. And so if you think about it, one of the complexities of all of our dozens of applications is managing the data, reporting on it and getting people kind of custom reports on each point solution. Well, now you just subscribe to Insights platform and you start to build your own reports. We can help you with that. Custom, you can schedule them. There's just so much more you can do with the data now that we're in Snowflake.

And that manifests in the tool sets customers can use to extract, maneuver and analyze the data coming across dozens of applications in one unified environment. o it's one of our 10 pillars of our platform was this data aggregation, data analytics. And so yes, it should enhance revenue. It will have our customers view us more as a platform. It will lower our refactoring costs as we modernize each application as we move them to the reporting Insights platform. So we're not kind of managing all these separate reporting environments. So I think it has benefits for everyone, and we're super excited to report our progress there.

Vincent Colicchio: Yes. Most of my questions were asked. Bobby, I'm curious, the payer side and the credentialing business, how is that performing? And what's the pipeline look like there?

Robert Frist: Yes. We've had a good couple -- the wins -- the payer side are fewer and bigger wins. And so the good news is we've had one of those. We're targeting another one in the second half of the year. They take longer, but they're bigger contracts and some of these payers are bigger than health systems. So they're coming. Our acquisition of Virsys12 has given us a more complete tool set to offer to the payers around credentialing. And so we're excited. It's early, early. We're just half a year into it, but strengthening our positioning there.

And I feel like there's a good pipeline, but they are kind of more like, I guess, you'd say in the old parlance of kind of whale hunting, you're developing relationships that take time to develop. But when you win them, they're bigger, and we did have a nice win in the first half of the year.

Vincent Colicchio: And then lastly, how are price accelerators taking hold? Any pushback there or are things going smoothly?

Robert Frist: Steady as she goes. All the core products now as a standard part of the renewals include pricing escalators. And so that took a while to roll out, change our legal templates, educate our sales team to roll it out, and we did it kind of in steps over 2 years. But now essentially every contract renewal includes. That's related to the core 3 application suites includes accelerators or -- they're kind of inflationary level. They're not big, but they're nice consistent drivers, and we find the market accepting of them as a component. And in many ways, it helps them plan better, so they don't get to the end of a 4-year renewal and have a big price jump.

They've kind of moved along with kind of inflation. And so it helps them budget better their renewals, I think. So ironically, I think it's going to help smooth over renewals when people get the end of contracts because there won't be these big kind of pricing adjustments that we're trying to get. We will have steadily grown to a higher price.

Robert Frist: Thank you, everyone, for participating in the call, especially our nearly 1,150 employees who are making all this happen. It's my privilege to report on their progress. We look forward to reporting the next quarter. And remember, if you're an analyst, we were very careful to talk about -- we don't want to get overexcited. We had a great solid quarter. We're celebrating it, but we also had a few things like the $2 million onetime revenue rec, and we are increasing our investments. So we were very careful to emphasize that as you look at our second half guidance, take it seriously.

As you rebuild your models, we think we've done our best to be accurate in how we plan to increase investments which will result in a little lower net income. But again, we're upping our revenue forecast and upping our several components as providing guidance. So be careful, listen to our guidance as always, we try to make it as strong as accurate as we can. Thanks to our employees. We'll see you guys on the next call.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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