Q2 2021 HealthStream Inc Earnings Call
[music].
Okay.
Good morning, and thank you for standing by welcome to the health streams second quarter 2021 earnings conference call.
At this time all.
All participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
Please be advised that today's conference is being recorded.
If you acquire any further assistance. Please press star Zero I would now like to hand, the conference over to your speaker today Molly.
Condra, Vice President Investor Relations and communications Ms Country, you may begin.
Thank you and good morning, Thank you for joining us today to discuss our second quarter 'twenty 'twenty 1 result.
Also on the conference call with me today are Robert a frist junior CEO and chairman of health stream.
And Scotty Roberts CFO.
Oh and senior Vice President.
I would also like to remind you that this conference call may contain forward looking statements regarding future events and the future performance of health stream that involve risks and uncertainties that could cause the actual results to differ materially from those projected in the forward looking statements.
Information concerning those 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 measures such as adjusted EBITDA, which is a non-GAAP financial measure.
A table, providing supplemental information on adjusted EBITDA and reconciling to net income attributable to health Dream is included in the earnings release that we issued yesterday and they refer to in this call.
So with that in mind at this time I'll turn the call over to Bobby Frist.
Thank you Mollie good morning, everyone.
So our second quarter 2021 earnings call a lot to cover a day, but I think first contact is important and I want to remind everybody that as a nation moves forward through the pandemic. It's it's clear that this long journey has grown bumpier and the recent price of the Delta variant, which is causing a 36% increase in the number of hospitalizations.
According to the CDC nearly half of adult from the U S have been fully vaccinated and as that number rises we at health stream remained hopeful that progress towards beating the pandemic will continue but we must keep in mind that as our customers are our customers that are the ones on the front lines responding to this new spike and the cases and as we start today's call.
Well I'll tell you that our commitment to helping them improve the quality of health care has never been stronger we were trying to align our interest and energies with our hospital customers and our continuum customers.
All I can comment on financial performance for the quarter and the first half of the year.
We remain laser focused on growing the company, which is why we.
We were able to deliver another strong quarter with top line revenues, increasing 7% and adjusted EBITDA, increasing 20% over the same period last year to a record $14.5 million.
And based on those results we have updated our financial guidance. We wanted to hit that early in the conference call. We now expect revenue.
Revenue for the full year 2021 to be in the range of $253 million to $257 million for.
<unk> the midpoint of the new range is $5 million higher than the midpoint of our previous range I believe 1 of the most remarkable things about this guidance is that we are projecting revenue growth. Despite a $38.4 million dollar decline.
And revenue associated with our legacy resuscitation products from 2020 to 2021, and a 4 million to $4.3 million negative impact of acquisition related deferred revenue write downs. So our teams have done a great job, both organically and through acquisitions of backfill in.
Those.
Does the revenue challenges that I've just articulated.
Additionally, we now expect adjusted EBITDA for the full year 2021 to increase to be in the range of $48 million to $50 million and that's compared to a range of $40 million to $44 million that was announced last just last quarter.
There was some unique factors however that.
Helped contribute to the record setting adjusted EBITDA in the first half of the year, which are not expected to repeat during the second half of the year. For example in the first half of the year there wasn't much travel at all and we do expect and have projected a return to travel expenses now not at the full level.
Pre pandemic, but we do expect to see trial.
We'll begin to recover for health streamers across the country and so we'll begin to see travel expenses come into the modeling.
As a return in the second half of the year. Additionally, macro workforce trends have made recruiting retention and hiring much more complex basically all of those are more difficult in the last day 6 months.
As the macro trends support everybody picking up from the from the pandemic and looking around to see if there's new opportunities and no exception. The <unk> when we bought them, it's been a detriment and a benefit benefit sales team. This trend of everybody is looking for something new.
So.
Catch up on our planned hiring we were definitely.
Behind our plan in hiring in the first half of the year, which resulted in improved EBITDA, but we need to reserve the right.
To catch up on hiring we need to get the people in place that we had planned to have in place in the second half of the year.
And so we're doing everything we can in our new VP of HR and our recruiting teams are doing a great.
Job, adding new people, but our turnover has increased so second half of the year it'll be we expect additional costs and personnel that we were unable to net add in the first half of the year.
We did have net at but just not where we plan to be and finally, we're committed to increasing our investment in our newly acquired.
Scheduling businesses.
Making it into 1 business or 1 focus area in the second half of 2021 and we'll talk a bit about that here at the end of the conference call, but our new guidance reflects all 3 of these things for example.
And and captures them and the guidance ranges I provided above.
So, let's take a moment to common.
Acquired NASA goals for 2022, because in the last earnings call for the first time, we looked for beyond 2021. As you know we had expected 2021 to be 1 of our toughest years of the $38 million decline.
And 1 of our product lines, but as you can tell we found a way through that in the first half.
And so we wanted to get some view into 'twenty 'twenty, 2 or at least our goals for 2022, and so here's what I can say about those now building on anticipated resolved now for 2021, our goals for 2022 are first to deliver organic high single digit revenue growth rates and for us, that's probably 7% to 9%.
Second.
To achieve approximately 65 per cent gross margin profile, which is fantastic because you know we have been delivering on that in the last 2 quarters at 65 per cent gross margin profile, which was the point of several of our transitional business.
The transitional business work, we've been doing the last 3 years that we've been talking about.
So essentially we feel.
Achieve that that general approximate level of gross margin profile, which is a meaningful improvement from our.
Our historical gross margin profile, and we expect <unk> to continue to deliver that at 65% approximately into 2022 and.
And third we want to deliver adjusted EBITDA.
<unk> 21 per cent.
Which is an increase over our previously stated goal of 15% to 20%. So a little bump in our expected are taking off the bottom of the range essentially and bumping it up a little bit on our expected EBITDA margins into 2022.
Up to 17 to 21.
And that would be an improvement over our historical norms.
Hover in the 17 to 18 per cent. So we hope to be able to at least maintain historical.
But hopefully have some upside to that and this new range of 17% to 21% EBITDA margins into 2020 to remember these are our goals.
So they're short of guidance, meaning that the models are all influx and we want.
The targets out there we want people to understand that we're working to be a growth oriented company improve our profitability profile and establish.
What looks to be now slightly higher EBITDA margins as well.
So we will stay at those as goals not guidance for 2022.
But we thought we'd give some context as we look forward.
It's not only the contributions of our longstanding product portfolios that give us confidence, but it's the market's enthusiastic response to our newer solutions.
That have given us the confidence to put forward those those kind of objectives and goals for 2022.
And it's the market's embrace of our resuscitation solutions from the American Red Cross and many.
The other exciting innovative products that are contributing to our growth with a unique outcomes driven approaches I want to talk a bit about 1 of those we've talked pretty extensively and we'll talk more about the American Red Cross resuscitation suite, but today I'll spend a minute on Jane.
So Jane is 1 of these new products. It was first of a kind first.
It's kind of in the market changes and AI driven clinical development solution that uses natural language processing powered by IBM Watson and that's a mouthful, but basically it is a cutting edge solution for helping assess the competency profile of staff and give them individualized intelligent plans on how to improve.
Many of them not only their knowledge of their work.
But their critical thinking ability. So Jane is truly a state of the art kind of breakthrough expert system, it's kind of like a digital coach, particularly focused on our nursing population.
And Jane has been recognized industry wide with 6 prestigious awards.
From Brandon Hall in last year.
And our unique approach.
Through its newly awarded patent.
So we couldnt be more excited about the position of our game application set.
And so a bit of business progress as well in 2020, when we first began offering Jain at scale. Our goal is to average 1 sales.
Sale of Jane per week.
And as we reported last quarter, we did achieve that throughout 2020. So I believe there's about 52 sales of Jane that were that were.
In the books last year.
But.
This year, we continuous good momentum in the second quarter. For example, we have 23, new sales so more than 1.
During the second quarter alone. So it's good to see that new product are gaining some traction in the market and as customer utilization growth James capabilities expand we.
Look forward to updating you on how <unk> is changing the industry.
It's a really exciting product and it's more than just a singular product just kind of a framework that we can attack.
A week more and more capabilities to so we're excited about about Jane.
An important part of our strategic and tactical focus.
Now and in the last several years as has involved these key transitions. We've articulated these 3 transitions and we use the word transition.
Kind of in a way to infer a risk that we.
We're transitioning our business to achieve higher margins and we articulated a story of 3 transitions over the last 3 years and each of them had some what I guess I would characterize as major business risk and the great thing about today is I believe we've crossed the inflection point, where the major business risks what are kind of coined the existential risk the threat to our.
<unk> is gone and we're really in the phase now.
We're trying to assess what's the opportunity behind each of these transactions in other words.
Think we're through some of the questions for example.
When we launched the Red Cross Resuscitation suite program would it be accepted well we're beyond acceptance now where we're in all 50 states.
Hundreds and hundreds of contracts system adoption and so we're just beyond the kind of the existential threat of launch new product and it fails in the market now. The question is how good can it be.
It's a better place to be right now.
In addition, the product adoption of Verity stream. So we built a new platform.
Business stream platform called credential stream our application set.
And we launched it we were excited about it but you never know how that's going to go and now again with over 400 contracts on Verity stream. The new credential stream platform I think the acceptance of the market or the market adoption.
And acceptance.
And so it is a cutting edge platform or kind of beyond questioning that now it's just a matter of how much market share can we get and our teams are really excited that they seem to be winning.
Really well in the market with the new credential stream SaaS.
SaaS based application and then finally the third transition.
Time to retire the word transition I just gave you operational updates.
From here forward, but the third transition.
It was about the H stream platform and while it is still an immature platform.
It is starting to be the interconnection kind of tissue between all of our application sets.
And we've proven that that some of the core functionality of the platform works.
For.
While the Red Cross Resuscitation suite program takes advantage of the Paas architecture.
To use the identity management and logging infrastructure in the past architecture. So we know it works.
And we're excited to kind of past this point of talking about as a transitional risk in and.
Just start to provide more normalized opera.
Operational updates on these 3 business initiatives now then I'll call them.
So a little more detail on each of those but I've covered some already but on the Red Cross resuscitation suite, we thought we'd share a few milestones on it as I mentioned, we're in all 50 states now so again product adoption not or not.
Not a question anymore and then.
For example, we've amassed well over a half a million subscriptions at this point for the new product, which is really quite staggering.
That we've been able to move that much market share to the American Red Cross Resuscitation suite program.
Really in a very short time period since its launch in and.
February of 19, and so we.
Continue to be excited about the product and in fact, as we think about it.
What's really great too is that the portfolio around resuscitation has also expanded.
So in February of 2020, we announced the additional product called stable program and it's a leading neonatal education program around stabilizing.
Rising neonates and.
And resuscitation is a component of it and it's highly expect that program is now available online exclusively through health stream and we've had strong sales in the second quarter, adding to our thousands of subscriptions for the stable program and again. This is in the portfolio of resuscitation. So not only have we found success.
Access with American Red Cross Resuscitation suite program, but.
Complementary products that can be built around surround and supportive of that program are beginning to gain traction in the market.
And so organizations like <unk>.
<unk> children's hospital of Spirit healthcare and Ascension health are adopting that stable program.
It's really fantastic to see so I am pleased to see diversification of that portfolio area of our company.
As well as successes, the core product, which again American Red Cross.
I've talked about already about the operational update on Verity stream, but I thought a little more color would be useful during the second.
With a 2021 in fact 42, new customer accounts contracted for the Verity stream application suite, which is called credential stream and that brings our cumulative total to well over 400 accounts.
These accounts represent a mix of new customers and existing customers, who are choosing to migrate from our legacy Credentialing and privileging platform.
Platforms to the new Verity stream application suite.
And so some of these.
Customers that we contract from the second quarter. Our main brands that people may represent in high quality health systems like Sentara Health Channel Health care at the University of Florida, and even Mercy health system has selected the credential.
Stream application set.
And importantly, just it's good to know that all of our new customers, including the ones I just mentioned coming on to the enterprise solutions the credential stream enterprise solution.
So it's our top solution than the 1 that we built as a result of studying and building from the acquisitions we've.
Made over the last day 8 years.
We're excited to be gaining traction with that application set.
And then finally, the ice cream platform.
Is getting exciting now.
We think of it as connective tissue almost like an operating system that can help us improve data mobility between.
Applications that al stream offers help us improve portability of data about the people in our ecosystem.
And so it's exciting to see that we added 180000 net new H stream subscriptions by.
By embedding some access to those technologies into the contracts that we're signing new contracts, we're signing so that brings our cumulative.
With a total of $4.5.2 million subscriptions to the H Dream technologies capabilities and solutions, which we're really really excited about.
At this time I'd like to turn over to Scotty Roberts for more detailed look at the financials and then we'll swing back around at the end and talk about our.
The investments, we want to make and some of the strategy and philosophy around.
Our relatively new we call it the third leg of our stool that are relatively new scheduling and capacity management business. So Scotty I'll turn it over to you.
Okay, Thanks, Bobby and good morning, everyone.
Like to begin my discussion with a highlight of the quarter, which is our achievement.
Of our new record adjusted EBITDA.
<unk> thousand $14.5 million.
Which is after setting the previous record of $13.6 million during the first quarter.
Having stepped back to back records of adjusted EBITDA, We're raising the full year guidance to now range between 48 and $50 million.
Which is up from.
This range of $40 million to $44 million.
Before I go over the day to get it in more detail, though let me first speak to the results for the quarter.
Revenues were $64.8 million, which is up 7% over last year.
It included balanced growth within both segments.
For 2020.
21 were impacted by $1.2 million reduction.
As I stated with deferred revenue write downs, which is primarily from acquisitions that were completed during the fourth quarter of last year.
Operating income was $3.4 million or down 20%.
Net income was $2.4 million or down 29%.
And EPS was 8 cents per diluted share down from 11 cents per diluted share in the prior year.
While these GAAP based financial measures experienced declines.
Our non-GAAP performance measure adjusted EBITDA improved to $14.5 million, which was up 20%.
Yeah.
Both of our business segments are contributing to the revenue growth over the prior year.
Workforce solutions revenues were $52.2 million and were up 6.7% and.
And revenues from provider solutions were $12.7 million and were up 8.5 per cent.
We overcame a nearly $10 million headwind from the legacy.
Specification business during the quarter and delivered year over year growth of 7%.
Revenues from our recent acquisitions and organic growth from both segments contributed to this year over year improvement.
Work Force revenues included $1 million of legacy resuscitation in the quarter and also.
So net.
From some non recurring software license and professional services from our scheduling and capacity management products.
When you exclude revenues from the legacy resuscitation business, our consolidated revenues grew by 28%.
Which was comprised of 13% organic and 15% from acquisitions.
Our gross margin was 65 per cent, which is consistent with our objective to be in the mid 60 per cent range for the year.
As our revenue mix has shifted away from the legacy resuscitation products revenues from higher margin products are back filling the top line.
And providing improved economics to us.
We're on track to maintain gross margins in the mid 60 per cent range for this year and expect to continue doing so for next year.
Operating expenses, excluding cost of revenues were up 16% or $5.4 million. This.
This increase reflects investments in our core business and the incremental expenses associated.
Businesses net.
We acquired over the past year, including the cost for integration and transition services, which are expected to conclude by year end.
Additionally, we began classifying software expenses related to our production environments under cost of revenues, while they had historically been classified as the G&A expense.
Our EBITDA margins improved as well coming in at $22.4 per cent compared to 20 per cent last year.
Now switching to the balance sheet and cash flows.
Our cash flows from operations improved to $24.3 million this year compared to $13.5 million last year.
D.
So for the quarter also improved to 43 day as compared to 47 days last year.
Our free cash flows.
Year to date were $11.6 million compared to $4.6 million last year.
We ended the quarter with cash and investment balances of $55.1 million, which was down slightly for the quarter.
Working capital improved by over $6 million.
Capital expenditures incurred which includes capitalized software development was $6.9 million for the quarter.
And our $11.2 million year to date.
Now, let's go over our updated financial expectations for 2021.
We are increasing our revenue ranges and now forecast consolidated revenues to range between 253 and $257 million.
With work force revenue is forecasted to range between 203, and a half and $206.5 million and provider revenues.
Forecasted to range between 49.
And a half and $55 million.
We also raised our adjusted EBITDA range to be between 48 and $50 million.
We continue to anticipate that capital expenditures expenditures will range between 25 and $27 million.
As we think about expectations for the second half.
We anticipate continued year over year to revenue growth from both segments.
As you'll see in our revenue guidance, we expect some leveling to occur in the second half of the year.
Mainly because the first half of the year included some non recurring revenues that we did not expect to occur at the same levels.
Specifically this includes the $2.
$8 million of legacy resuscitation revenues and about $2 million nonrecurring software license sales and professional services projects delivered in the first half of the year from our scheduling and capacity management solutions, which.
Which was forecasted to be down in the second half of the year.
Looking at adjusted EBITDA.
We had a record first half of 2021, which was partially due to some of the nonrecurring revenue items I just mentioned.
And because we were delayed in making some meaningful investments in sales marketing and product development that we had anticipated doing earlier in the year and this includes investments in the scheduling and capacity management businesses. We've recently acquired.
1 of the reasons for the delayed expenses is that we experienced a higher employee vacancy rate than expected.
Which created some short term savings relative to our plan.
We've been successful, bringing on net employees, but the net additions to staffing that we factored into our previous guidance have not materialized. According to our expectations.
Our second half outlook assumes that these investments began to ramp up which will result in lower EBITDA relative to the first half of the year.
We also expect certain expenses that were halted by Covid will also come back into our run rate such as employee travel and trade shows.
For context, our travel and trade show.
And she was before COVID-19 were approximately $6 million per year.
Finally, our forecast does not include the impact of any potential acquisitions that we may complete during.
During the remainder of 2021.
Now I'll wrap up with a few other updates.
Our forecast assumed continued.
So expect movement in sales and renewables, which we've begun to see in our bookings over the past 2 quarters.
Our new sales bookings are up compared to the same quarter last year, which was at the height of COVID-19, and renewals are also performing better than last year, both of which are helping us achieve growth in a year with a known 38 million dollar.
The revenue decline from the legacy resuscitation business.
While there continue to be signs of improving conditions.
There remains a degree of uncertainty as we still see some delayed purchasing decisions, especially for products that are discretionary and our work force segment.
On the other hand demand for our Credentialing products has been.
<unk>, Inc, and provider solutions segment had another strong sales quarter.
While we are seeing modest improvements, we realized the conditions could change due to COVID-19.
And finally like finally like many companies we've been operating for the past 6 quarters without significant business travel and our employees have been working remotely.
We are eager to reopen our offices in Tennessee, Colorado, and California later, this quarter and our employees and for our employees to have the opportunity to see their colleagues in person again.
Because our remote working arrangement has been a success, we'll be adopting a hybrid work policy going forward, meaning employees will be able to work from.
From home or the office.
And with our larger virtual workforce, we've evaluated our office space needs.
And determined that we will not be renewing several of our office leases when they expire over the next 12 months.
In fact, we took this approach with 2 leases last year.
And 2 others already this year.
While reducing our office space needs will create expense savings, we do expect having more employees moving away from a city that contains an office will necessitate more travel bothers employees been had in the past.
We will continue to monitor our office space needs and make adjustments that we deem appropriate.
Thank you and that concludes my comments for today, Bobby I'll turn it back over to you.
Thanks, Scotty what I'd like to do is talk a little bit about our plan.
Investments in kind of philosophy and approach to building the scheduling and capacity management business, which is right now the result of 3 recent acquisitions and so kind of a little lessons from.
From history, if we look back and think about what we've been able to do creating the Verdi stream application suite.
Through 4 acquisitions over 8 years, and if you think back 6 years ago, We took these.
For for Verity stream, we took these 4 standalone companies, we combine them into a new business group.
We essentially created.
A new platform a fifth application set to migrate those customers too and that's a multiyear journey and it's a story of time and investment.
Wired to take these wholly separate assets and evolved into something that is market, leading and more than the sum of their parts.
And so you know we have a very successful playbook for doing that.
And if you look at the the kind of the 5 year trajectory of birdie stream and really excited to see it emerging out of that kind of storming informing phase and into a market leading phase and of course, we hope to repeat that with our with our capacity.
Capacity management and scheduling business, we've recently acquired.
Businesses are really during the pandemic are 3 of them just from the last say 12 months, we've appointed a leadership team.
They've begun identifying where they want to invest so we didn't acquire too costly and buyer to acquire to innovate and invest and so we're fortunate to have a team at our at Verde stream that has.
Wired playbook, the detailed playbook on how to make this work and we think we can do it now with our scheduling and capacity management business more quickly, but it is important to remind everybody that it was a journey it required increasing our investments in people. So again, we didn't acquire and create synergies or just the opposite we we acquired.
Created a vested in some cases doubling the tech teams and doubling the sales teams and then you know many years later.
Which is this last say 18 months 12 months, we began to see real traction on what we've built and the Verity stream business the credential stream application.
And my goal is to repeat that playbook almost.
Most play by play studies, the timelines to try to do it faster we've learned a lot of lessons and take these 3 businesses that we've acquired which our nurse grid shipped wizard and and sauce and turn them into a market, leading scheduling capacity management solutions and.
To do that will require investment. So that's why you see in scotty's guidance.
Kind of reserving the right to increase head count.
Best in sales and product development.
Heavily in the in this area of scheduling capacity management.
And hopefully sometime sooner than 3 to 5 years will began to see market, leading innovations emerge in that area and market leading products emerge.
Yeah.
And in fact, we have strategies already in place to achieve some early technical integration between the acquisitions that will give them each competitive advantage, but.
But that's why it's important to really study the second half of the year.
Because well the 3 transitions are turning into just operational updates and more normalized business risk.
Now that we're kind of now entering the investment phase and this creation of this new business focus area scheduling capacity management. So we're trying to reserve the right to increase our investments.
And those people and products to repeat that playbook Verity stream.
So I couldn't be more excited about where we're positioned and we expect to provide opera.
Some updates on the business from here forward talk a lot less about transitions and traveling transitional risk.
And give you updates on our progress with nurse grid shippers Rand sources, they become kind of a unified product suite.
And we introduced market, leading innovations in that area as well.
So as we wrap up I'd like to.
From our employees to our new hybrid workplace.
We're kind of transitioning from this nomenclature of offices and I think over 11 or 12.
Leases that are now being reduced down to about 4.
And we're kind of reclining our offices to be become resource centers that are employees from.
All over the world can visit and leverage this kind of work anywhere approach.
But the intent belief in the power of collaboration and human interaction. So we expect to have all employees travel more to gather celebrate planned strategic planning in some of these resource centers, but we planned out fewer.
Well the leases.
And more kind of resource centers and a much more mobile kind of work anywhere approach to health stream, we've been so successful.
Throughout the pandemic of operating in fact, none of our offices have been officially open for over 14 months or maybe 16 months now.
And I feel like.
I haven't missed a beat and I know they are exhausted and working hard.
And hopefully we.
Come up with new policies to reflect the flexibility that they desire, but also generate market leading solutions that we desire as an organization to deliver.
So I want to thank our employees for navigating these challenges I'm pushing as part of the last 16 months.
And their commitment to improving the quality of health care by developing the people to deliver care continues to be demonstrated consistently and the challenge of pandemic seem to have brought out the best in everyone at health stream and so I'm excited to be the reporter on their progress and accomplishments patents and awards, new work styles and new customers.
Our teams again, it's all very exciting too to recognize would be the person who can report on the progress of our now nearly 1100 person team.
I'd like to turn it over for questions at this time.
Thank you Sir the question and answer session will begin at this time.
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Your first question comes the line of Richard close with Canaccord Genuity <unk> Genuity.
Yes.
Yeah. Thanks.
For the time and taking my question congratulations on the results.
Just curious on the hiring.
Investing in hiring.
And you guys discussing turnover.
As well a little bit higher than your were expecting in the first half can you talk a little bit about the hiring environment.
Honestly specifically here.
Nashville.
I assume you guys are looking for technology people or it seems like a pretty competitive.
Marketplace, a lot of tech moving into the city here.
With Amazon and eventually Oracle and whatnot, but just curious.
And yes in terms of if that's increasing the <unk>.
Wages that you guys would typically bring on tech people here in Nashville.
Sure sure glad to comment on that and so you're right to observe that.
Subject to the same macro forces.
So that everyone seems to be discussing and what I think is happening and we look at our own workforces.
Everyone is kind of now raising their head up after 16 months of this new work style.
And some are just want.
<unk> for the sake of change and we have people, saying you know, we love how stream, but we want to try something new and.
We've had a lot.
Cure leave and come back over the last decade. So we're encouraging people to find places that they really like.
And so we are seeing an increased turnover rate that that said, we're the benefactor because I think we have this peripheral culture that people have read about and want to be a part of and so we've been able to also win the hearts and minds of lots of new employees.
It's kind of a net additions hasnt been as high because the turnover and so it's just an interesting dynamic we're getting all of these new highly energetic employees coming into the company well some of our employees are also seeking new and exciting experiences for themselves. So we haven't been able to net add.
Meaning more obviously more people coming in and going out.
But it.
It has been a little bit more tumultuous than than in the past really decades, and we think it is just a natural outcropping of of kind of the.
The nature of the last 16 months, if people want to look at new and pressure items.
That said, we think we have this wonderful attractive culture people come through now on the cost standpoint were talking about this.
This what's really fascinating is right now if you take the last hundred that have left and the Hunter. We've added we haven't seen a material increase in the cost of adding 100 back which means we're largely at market and our job offers we've seen a few areas of pressure. We've seen some people leave that are taking on more responsibility in new roles.
And they're they're telling us they're getting higher pay when they leave.
But we've been able to fill the positions they are departing from similar salaries.
I do expect just broadly upward pressure on costs and compensation.
But so far we haven't seen significant changes for any given position.
If someone departing with being able to fill them in a reasonably tight window within the salary bands.
Hum.
And the Tech work, specifically Youre right Nashville is a kind of a booming tech hub with Oracle announcing a major campus expansion here in middle Tennessee or in Nashville, specifically.
And I think though the.
Tech Workforces evolving to keep up with the number of people moving to Nashville.
Because it's a great place to be is improving and so we've had lots of good applicants into our positions.
We need to slow down the people that are picking their head up to look into opportunity.
I do expect I guess I'd call it at this.
Point slight upward pressure on compensation.
In some roles.
But largely I think when people are leaving are leaving to take on increased responsibility at a new workplace and therefore, making more money.
Haven't seen necessarily wage inflation in specific roles.
That may change as we work through the cycles.
What's happening in the economy here locally and.
Cross the company across the country.
But right now you know I guess I'd characterize it as slight increases in costs on a per position basis.
Okay, and just a couple of questions maybe for Scotty.
With respect to the comment on the 6.
A billion.
Travel and trade show expense and the pre Covid world.
And you're talking about second half some of that's going to come back.
Is there any way to ballpark that I mean are you going to be half of that 6.
6 million or <unk>.
Then also just I don't know about the trade shows yet, but if we were talking about trap and we've budgeted essentially very incremental return. So for example, I think we have about 250000 in the third quarter and about half a million in the fourth quarter. So you can see there kind of a growing run rate.
We.
Smell any way off we could convene all of our employees in November and then that could cost more but do you see going from kind of nearly zero and zero or the first half I think it was several hundred thousand whole first half and travel alone.
Returning to now kind of our targeted budget would be around 750000 to 50 in the third quarter and 500 in the fourth.
Could so.
Again, those are kind of.
Placeholders and we don't know exactly what the new normal is.
Eventually I expect travel budgets to exceed where they were because the new mobile work force. We may require employees to commute in to 1 of these resource center Slash headquarters to have strategic planning retreat.
And that could be more costly.
But hopefully the offsetting reduced rent will will help pay for that so that's what we mean by kind of scaling it up in the second half.
And again those are just kind of placeholder numbers, but wanted to give you I wanted to give you a sense for where we're headed or what were thinking and of course, we'll tell you.
Core spending more or less than that but that's kind of where our heads are right now.
Okay. That's helpful and then Scotty I think mentioned.
Some sort of shift in expenses up into cost of services.
If you guys could just go over that again and was that something that happened.
If we end up in the second quarter.
Hmm.
I'm just trying to understand why the gross margin was a little bit higher 66 ish, if I'm not mistaken in the first quarter and then ticked down to the 65, obviously 65 is is great and all that but.
Happened was it that shift in expenses that was the primary contributor to that.
I'll, let you handle that.
Yeah.
Now they don't the head Richard that's kind of exactly what happened there is that kind of are.
And what does it really have frankly.
Yeah.
Software Okay.
Software ex alright isn't it.
We kind of covered it as production environment related.
Software licenses.
That's helpful.
That's helpful. Thank you I'll jump back in the queue.
Thank you.
Your next question.
Yeah, Ryan Daniels with William Blair.
Yes. Good morning, this is Jared haase.
Ryan Thanks for taking my questions.
Just wanted to stick with this theme of headwinds on that the hiring entertaining front and I imagine specifically that that is a similar theme within your client base in terms of hospitals, having kind of the same.
Issue around attracting or retaining talent as well. So just curious if there've been any changes from <unk> perspective, either from a product development side or maybe on the marketing side with how you message to your value proposition to hospitals that are trying to help them deal with the hiring issues or maybe provider burn out some of those teams.
Because I think it's a great point I mean, we are positioned as being supportive of developing and retaining and.
The work force and so we.
Believe and try to demonstrate that our product and services, resulting in higher engagement of employees and that we also believe fundamentally that offering health systems that offer.
Our employees kind of career development, and new skills and capabilities and assessment tools will be favorite employers. So.
Some of them are seeing that light and beginning to invest in.
That's back in their employees through their develop continued development.
We also see opportunities maybe around things that are focused on the psychological wellbeing.
Being and have some products in that category.
Kind of newly offered related to helping employers that hospitals and health systems and home Health then.
The continuum of care providers that we have in our customer base build their relationship with their employees.
Through their continued development.
And so we do use that as a form of positioning.
And we believe that our products have those impacts.
Got it yeah that makes sense.
And I think I just wanted another quick follow up and Scotty I think you mentioned in your prepared remarks.
Kind of calling out an improvement both in.
And bookings as well as renewals I'm curious would you kind of characterize that as sort of.
Market based growth sort of along that theme of hospitals looking for solutions like this or do you feel like that's more indicative of maybe some competitive takeaways or.
Maybe some things are more competitive solutions marketplace, just given all the investments.
Moving over the past couple of years.
I think it's probably all day above I mean, it's.
I think we did experience some growth over last year, but last year, you got to keep in mind was that.
Beginning at Covid in the second quarter of last year or so.
The comparisons are.
Difficult to interpret because of that.
Covid factor, but yeah.
Yeah, we had some nice wins in the quarterly announced.
In our press release, a nice American Red Cross line.
Prime healthcare, so I think we're seeing some.
Good wins across the board, but I think if you're looking.
That comparisons are still kind of getting back into the pre COVID-19 levels of sales production.
Okay. Thanks that makes sense I'll hop back in the queue.
Your next question comes from the line of Matt Hewitt with Craig Hallum Capital.
Good.
Good morning, and congratulations on the quarter a few different topics.
Got a couple of questions on <unk> first up regarding the guidance the revenue guidance for the year I'm looking at the first half of the year you beat your guidance essentially at the high end implies that it's basically flat.
Second half versus first half so not seeing a lot of lift is that a function of where we're at with the pandemic and the delta variant and everything that's going on and maybe hospitals not being able to hire at the pace, but as we look at next year.
I would assume that hospitals are going to need to start hiring again, and hopefully we're able to find.
Voice so that in itself should drive some incremental growth is that a fair way to think about it.
Yeah.
Yeah.
Hey, Matt I would probably.
So you know 1 of the factors that's going to result in some of the leveling is just those declines that we discussed.
There's the legacy resuscitation that was $2.8 million.
Pretty confidently, that's not going to be anywhere near that kind of day almost zero in the second half of the year.
And then we also have some nonrecurring or what we call you know 1 time revenues from the scheduling and capacity management business that we just don't have enough history of a kind of projecting.
The them from those onetime software sales, which are almost immediate revenue recognition as they are delivered to the customer. So that's some of the kind of the the change in some of our second half outlook I think you know.
Some of the factors that you mentioned more broadly speaking about the customer.
Turnover in some of their challenges.
So I don't know if that's factored into the way we are projecting our sales production necessarily but it could be something that either.
It could be a detriment or a benefit to us depending on which direction.
The challenges they face.
Okay Fair enough and then Jean it sounds like you had a really good quarter with.
The new additions I'm, just curious if you could update us on the pipeline. There obviously, that's been years in development and seeing that starting to ramp is pretty exciting so any update on there on gene that is.
I don't know if you want to take that question.
The number and I don't know Bobby is on but I.
I think you know just.
Just the kind of the story there is we continue to see you know that 1 sale at least that's been our.
Objective deal sizes vary you know we had a nice win in Q1, I would say that we had a repeat of that in Q2, but we continued to gain.
Traction, we'd like to see more adoption and penetration of it but it's 1 of those products that I would put in that discretionary bucket and so I mentioned that we see.
They'll see delayed purchasing decisions from customers kind of in that type of category, it's not mandatory it's not required.
So we still see some hesitancy.
Hesitancy in some of the buying decisions there.
And I put that product in that category, but even with that as a challenge we're still able to accomplish our objective of 1 cell at week.
Okay. That's great and then 1 last 1 from me as you were talking about some of the incremental expenses coming back at you you talked about the travel given the new workforce environment, but I'm curious as you start to think about.
About.
Frances historically, how stream has held up pretty big user event.
They are in Nashville.
Maybe not so much this year, maybe it will but more likely in fiscal 'twenty..2 if we get some somewhat back to normal would would you expect that and what quarter would that would that fallen and I only.
Because it is typically a larger expense that kind of stands out. Thank you.
Hey, Matt.
Somehow I got booted up now but.
That conference, we actually stop having pre pre pandemic and went to smaller and more regionalized conferences or meetings of different scale, and so and spread them out more over the year.
And across our different business lines and business solutions group. So we have we abandon that singular large conference model, even pre pandemic and don't currently have any plans to return to it and have built into our marketing budgets.
I guess I would call smaller regional conferences.
And what we call our user group meetings.
So it kind of strategically shifted several years ago and don't plan to return to the single large conference model.
Got it thank you so much.
Regards to other costs I wanted to kind of update my thinking on the cost of turnover and new positions because I don't want to understate it.
Yes.
I'd characterize it as slight increases.
And pay I, just had to change that to moderate and want to think about it in certain roles.
Different forms of compensation than we've had so for example in our sales organization. We're finding that other people are paying higher basis, we don't think that they're going to make more money because they have strong commission plans, but we have had departures in sales reporting.
Higher base salaries, then we pay it helps stream again, our sales teams are typically delivered great sales results and their total compensation based on variable non commission, there's always been really strong. So we actually doubt they'll make more money going into new roles, but we have heard a report from that and then I would just say I would upgrade from slight.
<unk> moderate increased pressure on hiring everywhere else on price cost and it is true that we did discuss this at the last hundred hires we have largely been able to fill most of those roles within a similar band of course as we had previously had some staff and so that statement remains true, but I would upgrade my pressure on.
Pay to go from slight to moderate.
And I would say that in some areas, we're experiencing maybe a changing nature of compensation.
Maybe less variable comp and more base seems to be where the market's headed and in sales sales structure. So we'll see how that plays out we've always thinks again, our teams have been well rewarded.
The amount of total compensation based on really strong Commission earnings, but we'll see where the market takes us on that so hope that helps just contextualize the questions around labor and Labor force because I don't want to understate. It there's a lot more turmoil in the market with people just generally getting up and looking for new experiences.
We think <unk> treme is going to be a net benefactor.
<unk>.
Benefit from those trends, but but still it's just it's hard to ignore the amount of people that are looking for kind of new trajectory in life.
Yes.
Understood. Thank you.
Your next question comes line of Steve Halper with Cantor Fitzgerald.
Yeah.
Hi, good morning, just.
A housekeeping question you talked about $2 million of 1 time software license that was in the first half correct can you give us what the impact was in the quarter.
Hey, Steve you have the $2 million references a combination of.
Software licenses and price some larger professional services projects that had milestones completed in the first half.
Looking at the split between Q1, and Q2 is pretty evenly split almost $1 billion in each quarter.
Great. Thank you.
Yeah.
Again, if you'd like to ask a question press star 1.
Our next question comes the line of.
Vincent Colicchio with Barrington research.
Yeah.
Yes, Bobby are you seeing.
Any signs or pockets of caution on spending.
Due to the new variant.
Or is it too early to see that.
It's it's too early I mean, we've heard reports of course of the spikes and we've heard that they are getting busier, what I would say is that the larger health systems and hospital systems in University systems, they've learned to operate in a crisis mode and have learned to resource better and so it's not.
Not like the first few ways, where all elective surgeries were shut down and so while there is disruption with a surge or spike I don't think it's the same as what was round 1 and 2 when there are surges that through people out of operating mode and shutting down elective surgeries. So while we have claimed we see some deferred.
<unk> purchasing a little less focus on elective things products from from vendors I just.
In general people are trying to define the new normal in the normal includes handling.
Surges and patient cases related to Covid.
That doesn't mean, there won't be pockets of the country that are overwhelmed by it I do think.
It will happen some are not as prepared as others to handle it.
And so we will see some that will have to shift their full attention, but broadly I would say, particularly the bigger health systems. The University health systems are much more prepared to handle spikes in COVID-19 cases.
And a couple of questions on Jan you guys said I think Jan is largely used for nursing is it solely used from nursing. That's 1 clarification and then what are some of the other opportunities you talked about with Jane.
Well I think you just hit it that.
It is largely focused on.
Nursing skilled nursing careers.
Different departments of nursing help them transition from 1 department to another.
There are other assessments and tools built into Jane, but expanding them to cover other types of positions.
All the way down to home health aides.
B kind of expansion.
Mansion opportunity, but in addition ex.
Spanish to handle more of the.
Other functionality that that could be important nurses reminding them of their schedule Theres. Just so many things we can do with Jane and the technology around it is it kind of an open platform open framework that we can extend.
Net adding.
New types of assessments in new categories per new types of employees would be kind of more immediate ideas for expanding <unk> capabilities. It is largely and most appropriate for the nursing workforce, which has represented about 40% 40 plus percent of the subscriptions and our <unk> network.
Okay. That's my last.
Nice quarter.
<unk>.
There are no further questions at this time I would now like to turn the conference back to management.
Thank you look forward to reporting.
These operational updates in.
In the near future and thanks to our employees for delivery.
And a great a great first half result.
This concludes today's conference call. Thank you for participating you may now disconnect.
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Last question.
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Yeah.
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Good morning, and thank you for standing by welcome to the health streams second quarter 'twenty 'twenty 1 earnings conference call at this time.
All participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
Please be advised.
Today's conference is being recorded.
If you require any further assistance please press star zero.
I would now like to hand, the conference over to your Speaker today, Mollie Condra, Vice President Investor Relations and Communications Ms. Condra, you may begin.
Thank you and good morning, Thank you.
For joining us today to discuss our second quarter 'twenty 'twenty 1 results.
Also on the conference call with me today are Robert a Frist, Jr. CEO and chairman upheld stream and Scotty Roberts, CFO and senior Vice President.
I would also like to remind you that this conference call may contain forward looking statements.
Regarding future events and the future performance of Gulfstream, but involve risks and uncertainties that could cause the actual results to differ materially from those projected in the forward looking statements.
Information concerning those risks and other factors that could cause the results to differ materially from those forward looking statements are contained in the company's filings.
As with the SEC, including forms 10-K, 10-Q, and our earnings release.
Additionally, we may reference measures such as adjusted EBITDA, which is a non-GAAP financial measure.
Table, providing supplemental information on adjusted EBITDA and reconciling to net income attributable to health Dream is included in the earnings.
So we issued yesterday and they refer to in this call so with that in mind at this time I'll turn the call over to Bobby Frist.
Thank you Mollie good morning, everyone welcome to our second quarter 2021 earnings call a lot to cover a day, but I think first contact is important and I wanted to remind everybody that.
[laughter] relation moves forward through the pandemic. It's it's clear that this long journey has grown bumpier than the recent rise of the Delta variant, which is causing a 36% increase in the number of hospitalizations. According to the CDC nearly half of adult from the U S have been fully vaccinated and does that number rises we at <unk> remain hopeful that progress.
Is the name of beating the pandemic will continue but we must keep in mind that as our customers are our customers that are the ones on the front lines responding to this new spike and the cases and as we start today's call I can tell you that our commitment to helping them improve the quality of health care has never been stronger we were trying to align our interest and energies with our hospital.
Total customers and our continuum customers.
Well I can comment on financial performance for the quarter and the first half of the year.
We remain laser focused on growing the company, which is why we were able to deliver another strong quarter with top line revenues, increasing 7% and adjusted EBITDA, increasing 20% over the same.
Period last year to a record $14.5 million and based on those results. We have updated our financial guidance. We wanted to hit that early in the conference call. We now expect revenue for the full year 2021 to be in the range of $253 million to $257 million for context, the midpoint of the new range is.
$10 higher than the midpoint of our previous range I believe 1 of the most remarkable things about this guidance is that we are projecting revenue growth. Despite a $38.4 million decline in revenue associated with our legacy resuscitation products from 2020 to 2021 and a force.
Additionally, we now expect adjusted EBITDA for the full year 'twenty 'twenty 1 to increase.
For them to be in the range of $48 million to $50 million and thats compared to a range of $40 million to $44 million that was announced last just last quarter.
There was some unique factors however that helped contribute to the record setting adjusted EBITDA in the first half of the year, which are not expected to repeat during the second half of the year for example.
In the first half of the year there wasn't much travel at all and we do expect and have projected a return to travel expenses now not at the full level of pre pre pandemic, but we do expect to see travel begin to recover for health streamers across the country and so we'll begin to see travel expenses come into the modeling is returned.
<unk> in the second half of the year.
Additionally, macro workforce trends have made recruiting retention and hiring much more complex.
Basically all of those are more difficult in the last say 6 months as the macro trends support everybody picking up from the from the pandemic and looking around to see if there's new opportunities and no.
Exceptional Gulfstream, we both then it's been a detriment and a benefit benefit sales stream. This trend of everybody looking for something new.
So.
Catch up on our planned hiring we were definitely behind our plan in hiring in the first half of the year, which resulted in improved EBITDA, but we need to reserve the right.
To catch up on hiring we need to get the people in place that we had planned to have in place in the second half of the year and.
And so we're doing everything we can in our new VP of HR and our recruiting teams are doing a great job.
Adding new people, but our turnover has increased so second half of the year it'll be we expect additional costs and personnel.
All that we were unable to.
A net add in the first half of the year.
We did have net out, but just not where we plan to be and finally, we're committed to increasing our investment in our newly acquired scheduling businesses.
Making it into 1 business or 1 focus area in the second half of 2021, and we'll talk a bit about that.
At the end of the conference call, but our new guidance reflects all 3 of these things for example, and and captures them and the guidance ranges I provided above.
So take a moment to comment on our financial goals for 2022, because in the last earnings call for the first time, we looked for beyond 2021.
That we had expected 2021 to be 1 of our toughest years of the $38 million decline.
And 1 of our product lines, but as you can tell we've found a way through that in the first half.
And so we wanted to get some view into 2022 or at least our goals for 2022, and so here's what I can say about those now building on anticipate.
As you know the results now for 2021, our goals for 2022 are first to deliver organic high single digit revenue growth rates and for us, that's probably 7% to 9%.
Second to achieve approximately 65% gross margin profile, which is fantastic because we have been delivering on that in the last 2 quarters.
Quarters at 65% gross margin profile, which was the point of several of our transitional business.
The transitional business work, we've been doing the last 3 years that we've been talking about and so essentially we feel we've achieved that that general approximate level of gross margin profile, which is a meaningful improvement from our say our.
Oracle.
<unk> gross margin profile.
And we expect <unk> to continue to deliver that at 65 per cent of consistently into 2022.
And third we want to deliver adjusted EBITDA margins of 17% to 21%.
Which is an increase over our previously stated goal of 15% to 20% so a little bump in our expected.
Taking off the bottom of the range essentially and bumping it up a little bit on our expected EBITDA margins into 2022.
The 17 to 21.
And that would be an improvement over our historical norms, which hover in the 17% to 18%. So we hope to be able to at least maintain historical but hopefully have some upside to that.
And this new range of 17% to 21% EBITDA margins into 2020 to remember these are our goals.
So they're short of guidance, meaning that the models are all in flux.
And we want to have targets out there we want people to understand that we're working to be a growth oriented company improve our profitability profile and established.
What looks to be now slightly higher EBITDA margins as well.
So we will stay at those as goals not guidance for 2022.
But we thought we'd give some context as we look forward.
It's not only the contributions of our longstanding product portfolios that give us confidence, but it's the market's enthusiastic response to our newer solutions.
That have given us the confidence to put forward those those kind of objectives and goals for 2022.
And it's the market's embrace of our resuscitation solutions from the American Red Cross and many of our other exciting innovative products that are contributing to our growth with their unique outcomes driven approaches. So I wanted to talk a bit about 1 of those.
We've talked pretty extensively and we'll talk more about the American Red Cross resuscitation suite, but today I'll spend a minute on Jane.
So Jane is 1 of these new products. It was first of a kind first of its kind in the market changes and AI driven clinical development solution that uses natural language processing powered by IBM Watson.
And that's a mouthful, but basically it is a cutting edge solutions for helping assess the competency profile of staff and give them individualized intelligent plans on how to improve not only their knowledge of their work.
But their critical thinking ability so Jane is truly a state of the art kind of.
Breakthrough expert system, it's kind of like a digital coach, particularly focused on our nursing population.
And Jane has been recognized industry wide was 6 prestigious awards from Bandon Hall in last year and our unique approach through its newly awarded patent.
So we couldn't.
Excited about the position of our game application set.
And so a bit of business progress as well in 2020, when we first began offering Jain at scale. Our goal is to average 1 sale of Jane per week and as we reported last quarter. We did achieve that throughout 2020. So I believe it was about 52 sales of <unk>.
Be more ore that were.
In the books last year.
But.
This year, we continuous good momentum in the second quarter. For example, we have 23, new sales so more than 1 a week during the second quarter alone. So it's good to see that new product are gaining some traction in the market.
And as customer utilization.
Jane there wasn't James capabilities expand we look forward to updating you on how James is changing the industry. It's just it's a really exciting product and it's more than just a singular product just kind of a framework that we can attach more and more capabilities to so we're excited about about Jane.
An important part of our strategic and tactical focus.
Now and in the last several years as has involved these key transitions. We've articulated these 3 transitions and we use the word transition.
Kind of in a way to infer a risk that we were transitioning our business to achieve higher margins and we articulated a story of 3 transitions over the last 3 years and each of them had some.
I guess I would characterize as major business risk and the great thing about today is I believe we've crossed the inflection point, where the major business risks what are kind of coined the existential risk the threat to our business is gone and we're really in the phase now.
We're trying to assess what's the opportunity behind each of these transactions in other words.
I think we're through some of the questions for example.
When we launched the Red Cross Resuscitation suite program would it be accepted well we're beyond the acceptance now where we're in all 50 states hundreds and hundreds of contracts system adoption and so we're just beyond the kind of the existential threat of launch new product and it fails.
In the market now the question is.
How good can it be in a better place to be right now in.
In addition, the product adoption of Verity stream. So we built a new platform.
Linearity stream platform called credential stream our application set.
And we launched it we were excited about it but you never know how that's going to go in now.
Over 400 contracts on Verity stream, the new credential stream platform I think the the acceptance of the market or the market adoption.
And acceptance of it as a cutting edge platform or kind of beyond questioning that now it's just a matter of how much market share can we get and our teams are really excited.
Again, they seem to be winning a really well in the market with the new credential stream sah.
SaaS based application and then finally the third transition.
To retire the word transition I'm just give your operational updates from here forward, but the third transition.
It was about the the 8 stream platform and while it is still an immature platform.
It is starting to be the interconnection kind of tissue between all of our application sets and we've proven that that some of the core functionality of the platform works.
For example, the Red Cross Resuscitation suite program takes advantage of the Paas architecture.
To use the identity management and logging.
Cited structure in the past architecture. So we know it works.
And we're excited to kind of past this point of talking about as a transitional risk and interest start to provide more normalized operational updates on these 3 business initiatives now then I'll call them.
So a little more detail on each of those but I've covered some already but on.
If this red Cross resuscitation suite, we thought we'd share a few milestones on it as I mentioned, we're in all 50 states now so again product adoption not at not at all.
Not a question anymore.
And in fact, we've amassed well over a half a million subscriptions at this point for the new product, which is really quite staggering.
That we've.
Relative move that much market share to the American Red Cross Resuscitation suite program.
Really in a very short time period since its launch in February of 19, and so we continue to be excited about the product and in fact, as we think about it.
What's really great too is that the portfolio around resuscitation.
<unk> has also expanded and so in February of 2020, we announced the additional product called the stable program and it's a leading neonatal education program around stabilizing.
Stabilizing neonates and in resuscitation is a component of it and it's highly expected program is now available online exclusives.
Lee through health stream, and we've had strong sales in the second quarter, adding to our thousands of subscriptions for the stable program.
And again this is in the portfolio of resuscitation. So not only have we found success with American Red Cross Resuscitation suite program, but the complementary products that can be built around surround and supportive of that program.
We're beginning to gain traction in the market.
And so organizations like.
Akron Children's hospital of Spirit Health care, and Ascension health are adopting but stable program.
Which is really fantastic to see.
I am pleased to see diversification of that portfolio area of our company as well as successes.
The core product, which again American Red Cross.
So.
I've talked a bit already about the operational update on Verity stream, but I thought a little more color would be useful during the second quarter of 2021 in fact 42, new customer accounts contracted for the Verity stream application suite, which is called credential stream.
And that brings our cumulative total to well over 400 accounts. These accounts represent a mix of new customers and existing customers, who are choosing to migrate from our legacy Credentialing and privileging platforms.
So the new Verity stream application suite.
So some of these customers that we contract from a second second quarter our.
Name brand that people may representing high quality health systems like Sentara Health Channel Health care at the University of Florida, and even Mercy Health system has selected the credential stream application set.
And importantly it.
Good day know that all of our new customers, including the ones I just mentioned.
Coming on to the enterprise solutions, the credential stream enterprise solution. So.
So it's our top solution than the 1 that we built.
Result of studying and building from the acquisitions, we made over the last day 8 years.
We're excited to be gaining traction with that.
Application set.
And then finally, the H stream platform.
Is getting exciting now it's a we think of it as connective tissue almost like an operating system that can help us improve data mobility between applications health stream offers help us improve portability of data about the people in our ecosystem.
And so it was exciting to.
We added 180000 net new 8 streams subscriptions by embedding some access to those technologies into the contracts that we're signing the new contract or something so that brings our cumulative total to $4.5 2 million subscriptions to the 8 stream technologies capabilities and solutions.
See that really really excited about.
Yeah.
At this time I'd like to turn it over to Scotty Roberts for more detailed look at the financials and then we'll swing back around at the end and talk about are.
The investments, we want to make and some of the strategy and philosophy around are a relatively new we call. It the third leg of our stool.
Which we knew our scheduling and capacity management business, So Scotty I'll turn it over to you.
Okay, Thanks, Bob and good morning, everyone.
To begin my discussion with a highlight of the quarter, which is our achievement of a new record adjusted EBITDA.
$14.5 million.
Which is after setting the previous record of $13.6.
But our rally during the first quarter.
Having stepped back to back records of adjusted EBITDA, We are raising the full year guidance to now range between 48 and $50 million.
Which is up from the previous range of $40 million to $44 million.
Before I go over the day to guidance in more detail, though let me first speak to the results for the quarter.
<unk> revenues were $64.8 million, which is up 7% over last year.
And included balanced growth within both segments.
Revenues for 2021 were impacted by $1.2 million reduction associated with deferred revenue write downs, which was primarily from acquisitions that we completed during the fourth quarter of last.
6 months.
Operating income was $3.4 million or down 20%.
Net income was $2.4 million or down 29%.
And EPS was 8 cents per diluted share down from 11 cents per diluted share in the prior year.
While these GAAP based financial measures.
Last year declines our non-GAAP performance measure adjusted EBITDA improved to $14.5 million, which was up 20%.
Both of our business segments are contributing to the revenue growth over the prior year.
Workforce solutions revenues were $52.2 million and were up 6.7.
<unk> net.
And revenues from provider solutions were $12.7 million and were up 8.5 per cent.
We overcame a nearly $10 million headwind from the legacy resuscitation business during the quarter and delivered year over year growth of 7%.
Revenues from our recent acquisitions and organic growth from <unk>.
Both segments contributed to this year over year improvement.
Work force revenues included $1 million.
Dollars of legacy resuscitation in the quarter and also benefited from some non recurring software license and professional services from our scheduling and capacity management products.
When you exclude revenues.
From the legacy resuscitation business, our consolidated revenues grew by 28%, which.
Which was comprised of 13% organic and 15% from acquisitions.
Our gross margin was 65%, which is consistent with our objective to be in the mid 60 per cent range for the year.
As our revenue mix has shifted away from the legacy resuscitation products revenues from higher margin products are back filling the top line.
And providing improved economics.
We're on track to maintain gross margins in the mid 60 per cent range for this year and expect to continue doing so for next year.
Operating expenses, excluding cost of revenues were up 16% or $5.4 million. This.
This increase reflects investments in our core business and the incremental expenses associated with businesses that.
We acquired over the past year, including the cost for integration and transition services, which are expected.
Conclude by year end.
Additionally, we began classifying software expenses related to our production environments under cost of revenues, while they had historically been classified at the G&A expense.
Our EBITDA margins improved as well coming in at $22.4 per cent compared to 20% last year.
Okay.
Now switching to the balance sheet and cash flows.
Cash flows from operations improved to $24.3 million this year compared to $13.5 million last year.
DSO for the quarter also improved to 43 day as compared to 47 days last year.
Our free cash flows.
It took a year to date were $11.6 million compared to $4.6 million last year.
And we ended the quarter with cash and investment balances of $55.1 million, which was down slightly for the quarter.
Working capital improved by over $6 million.
Capital expenditures incurred which includes capitalized software.
Development were $6.9 million for the quarter, and our $11.2 million year to date.
Now, let's go over our updated financial expectations for 2021.
We are increasing our revenue ranges and now forecast consolidated revenues to range between 253 and 200.
Software $11 million.
With work force revenue is forecasted to range between 203, and a half and $206.5 million and provider revenues.
<unk> forecasted to range between 49, and a half and $55 million.
We also raised our adjusted EBITDA range to be between 48 and $50 million.
We continue to anticipate that capital expenditures expenditures will range between 25 and $27 million.
As we think about expectations for the second half of the year, we anticipate continued year over year to revenue growth from both segments.
As you'll see in our revenue guidance, we expect some leveling to occur in.
55 half of the year.
Mainly because the first half of the year included some non recurring revenues that we did not expect to occur at the same levels.
Specifically this includes the $2.8 million of legacy resuscitation revenues and about $2 million nonrecurring software license sales and professional services projects delivered.
The Liberty and the first half of the year from our scheduling and capacity management solutions, which.
Which we forecasted to be down in the second half of the year.
Looking at adjusted EBITDA, We had a record first half of 2021, which was partially due to some of the nonrecurring revenue items I just mentioned.
And because we were delayed in making.
From meaningful investments in sales marketing and product development that we had anticipated doing earlier in the year and this includes investments in the scheduling and capacity management businesses. We've recently acquired.
Yeah.
1 of the reasons for the delayed expenses is that we experienced a higher employee vacancy rate than expected.
It has created some short term savings relative to our plan.
We've been successful, bringing on new employees, but the net additions to staffing that we factored into our previous guidance have not materialized. According to our expectations.
Our second half outlook assumes that these investments began to ramp up which will result in lower.
EBITDA relative to the first half of the year.
We also expect certain expenses that were halted by Covid will also come back into our run rate such as employee travel and trade shows.
For context, our travel and trade show expenses before Covid were approximately $6 million per year.
Finally, our forecast does not include the impact of any potential acquisitions that we may complete.
During the remainder of 2021.
Now I'll wrap up with a few other updates.
Our forecast assumed continued improvement in sales and renewables, which we've begun to see in our bookings over the past 2 quarters.
Our new sales bookings are up compared to the same quarter last year, which was at the heightened COVID-19, and renewals are also performing better than last year, both of which are helping us achieve growth in a year with a known 38 million dollar revenue decline from the legacy resuscitation business.
While there continue to be signs of improved.
Addition.
It remains a degree of uncertainty as we still see some delayed purchasing decisions, especially for products that are discretionary and our work force segment.
On the other hand demand for our Credentialing products has been growing and provider solutions segment had another strong sales quarter.
Again, while we are seeing modest.
Modest improvements, we realized that conditions could change due to COVID-19.
And finally like finally like many companies we've been operating for the past 6 quarters without significant business travel and our employees have been working remotely.
We are eager to reopen our offices in Tennessee, Colorado and California.
Moving into this quarter and our employees and for our employees to have the opportunity to see their colleagues in person again.
Because our remote working arrangement has been a success, we'll be adopting a hybrid work policy going forward, meaning employees will be able to work from home or the office.
And with our larger virtual workforce.
We've evaluated our office space needs.
And determined that we will not be renewing several of our office leases when they expire over the next 12 months.
In fact, we took this approach with 2 leases last year.
And 2 others already this year.
While reducing our office space needs will create expense savings we do expect.
Later and more employees moving away from a city.
Turning to the office will necessitate more travel bothers employees been had in the past.
We will continue to monitor our office space needs and make adjustments that we deem appropriate.
Thank you and that concludes my comments for today, Bobby I'll turn it back over to you.
Uh huh.
Thanks, Scotty what I'd like to do is talk a little bit about our plan.
Investments in kind of philosophy and approach to building the scheduling and capacity management business, which is right. Now the result of 3 recent acquisitions and so kind of a little lessons from history. If we look back and think about what we've been able to do creating the Verde stream.
Application suite.
Through 4 acquisitions over 8 years, and if you think back 6 years ago. We took these preferred for Verity stream. We took these 4 standalone companies, we combined them into a new business group.
We essentially created a new platform a fifth application set to migrate those customers too.
Dream, It's a multi year journey and it's a story of time and investment.
Required to take these wholly separate assets and evolved into something that is market, leading and more than the sum of their parts and so we have a very successful playbook for doing that and if you look at the kind of the 5 year trajectory of Verity stream and really excited.
Sad to see it emerging out of that kind of storming informing phase and into a market leading phase.
And of course, we hope to repeat that with our with our.
Capacity management and scheduling business, we recently acquired 3 businesses really during the pandemic.
3 of them just in Alaska.
Last say 12 months and we've appointed a leadership team.
Begun identifying where they want to invest so we didn't acquire too caught we invited to a required to innovate and invest and so we're fortunate to have a team at our at Verde stream that has created a playbook the detailed playbook on how to make this work.
And we think.
Can do it now with our scheduling and capacity management business more quickly, but it is important to remind everybody that it wasn't journey it required increasing our investments in people. So again, we didn't acquire and create synergies or just the opposite.
We acquired and invested in some cases doubling the tech teams and doubling the sales teams.
Think we can.
Many years later, which is this last day 18 months 12 months, we began to see real traction on what we've built and the Verity stream business the credential stream application.
And my goal is to repeat that playbook almost play by play studies, the timelines to try to do it faster we've learned a lot of lessons.
And take these 3 businesses that we've acquired which our nurse grid shift wizard and and sauce and turned them into a market, leading scheduling and capacity management solution.
To do that will require investment. So that's why you see in scotty's guidance.
Kind of reserving the right to increase head count.
Best Inc.
Sales and product development.
Heavily in the in this area of scheduling capacity management.
And hopefully sometime sooner than 3 to 5 years will began to see market, leading innovations emerge in that area and market leading products emerge in that area.
And in fact, we have strategies already in place to achieve.
Some early technical integration between the acquisitions that will give them each competitive advantage.
But that's why it's important to really study the second half of the year.
Because while the 3 transitions are turning into just operational updates and more normalized business risk.
We're kind of now entering the investment phase and this creation of this new business focus.
Share in scheduling capacity management, so we're trying to reserve the right to increase our investments.
And those people and products to repeat the playbook Verity stream so.
So I couldnt be more excited about where we're positioned and we expect to provide operational updates on the business from here forward talk a lot less about transitions and traveling transitional rich.
Risk.
And give you updates on our progress with nurse grid shipped was ran sources they become kind of a unified product suite.
And we introduced market, leading innovations in that area as well.
Uh huh.
As we wrap up I'd like to welcome our employees to our new hybrid workplace.
Kind of transitioning from.
This nomenclature of offices I think over 11 or 12.
Leases that are now being reduced down to about 4.
And we're kind of reclining our offices to be become resource centers that are employees from all over the world can visit and leverage this.
Kind of work anywhere approach.
Approach.
But the intent belief in the power of collaboration and human interaction. So we expect to have all employee travel more to gather celebrate planned strategic planning and some of these resource centers, but we planned out fewer leases.
And more kind of resource centers.
Much more mobile kind of work anywhere approach to health stream, we've been so successful.
The pandemic of operating in fact, none of our offices have been officially open for over 14 months or maybe 16 months now.
And I feel like our teams haven't missed a beat and I know they are exhausted and working hard.
And hopefully we.
Come up with new policies to reflect the flexibility that they desire, but also generate market leading solutions that we desire as an organization to deliver.
So I want to thank our employees for navigating these challenges I'm pushing as part of the last 16 months and their commitment to improving the quality of health care by developing the people to deliver care.
Continues to be demonstrated consistently and the challenge of pandemic seem to have brought out the best in everyone health stream and so I'm excited to be the reporter on their progress and accomplishments patents and awards.
New work styles and new customers that we're bringing in it's all very exciting too to recognize.
Person, who can report on the progress of our now nearly 1100 person team.
Thank you I'd like to turn it over for questions at this time.
Thank you Sir the question and answer session will begin at this time.
If you're on a speakerphone, please pick up the handset before pressing any numbers.
Should you have a question. Please press star 1 on your Touchtone phone to withdraw your question press, the pound or How's ski.
We will take questions in the order that they are received please standby for your first question.
Yeah.
Your first question comes.
Richard close with Canaccord Genuity <unk> Genuity.
Yes.
Yes. Thanks.
For the time and taking my question congratulations on the results.
Just curious on the hiring.
Investing in hiring.
And you guys discussing turnover.
As well a little bit higher than your were expecting in the first half can you talk a little bit about the hiring environment.
Specifically here in Nashville, I mean, I assume you guys are looking for.
For technology people.
It seems like a pretty competitive.
Marketplace, a lot of tech moving into the city here.
With Amazon and eventually Oracle and whatnot, but just curious in terms of if that increase.
Seeing the wages that you guys would typically bring on tech people here in Nashville.
Sure sure glad to comment on that and so you're right to observe that.
Subject to the same macro forces that everyone seems to be discussing and what I think is happening and we look.
Workforces, everyone is kind of now raising their head up after 16 months of this new work style and some just want a change for the sake of change and we have people, saying, we love how stream, but we wanted to try something new and.
We've had a lot of people leave and come back over the last decade. So we're encouraging.
Look at our own but to find places that they really like.
And so we are seeing an increased turnover rate that that said, we're the benefactor because I think we have this virtual culture that people read about want to be a part of and so we've been able to also win the hearts and minds of lots of new employees. This is kind of the net additions hasnt been as high because the turnover.
So it's just an interesting dynamic we're getting all of these new highly energetic employees coming into the company.
Some of our employees are also seeking new and exciting experiences for themselves. So we have been able to net add meaning more obviously more people coming in and going out.
But it has been a little bit more tumultuous than in past.
Really decades, and we think it's just the natural outcropping of kind of the.
The nature of the last 16 months, if people want to look at new and pressure items.
That said, we think we have this wonderful attractive culture people come to you now on the cost standpoint, we're talking about this what's.
What's really fascinating is right now if you take.
The last 100 that are left in the Hunter. We've added we haven't seen a material increase in the cost of adding 100 back which means we're largely at market.
And our job offers we've seen a few areas of pressure we've seen some people leave that are taking on more responsibility in new roles and they're telling us they're getting higher pay when they leave.
We've been able to fill the positions theyre departing from.
Similar salaries.
Do you expect just broadly upward pressure on costs and compensation.
But so far we haven't seen significant changes for any given position if someone departing with being able to fill them in a reasonably tight window.
But then the salary bands.
And the Tech work, specifically Youre right Nashville is a kind of a booming tech hub with Oracle announcing a major campus expansion here in middle Tennessee or in Nashville, specifically.
And I think the other tech workforces evolving to keep up with it.
Number.
People moving to Nashville.
Because it's a great place to be is improving and so we've had lots of good applicants into our positions.
Again, we need to slow down the people that are picking their head out to look at new opportunity I do expect I guess I'd call. It at this point a slight upward pressure on compensation.
Window in some roles.
But largely I think when people are leaving are leaving to take on increased responsibility at a new workplace and therefore, making more money.
It seem necessarily wage inflation in specific roles that may change as we worked through the cycles of what's happening in the economy here locally.
And across the company.
Across the country.
But right now I guess I'd.
Characterize it as slight increases in cost on a per position basis.
Okay.
Just a couple of questions maybe for Scotty.
With respect to the comment on the $6 million.
Travel and trade.
Company go ex spends in the pre Covid world.
And you're talking about second half some of that's going to come back.
Is there any way to ballpark that I mean are you going to be a half of that 6 million or <unk>.
And then also.
<unk> I don't know about the trade shows yet, but if we were talking about trap and we've budgeted essentially very incremental return. So for example, I think we have about 250000 in the third quarter.
About half a million in the fourth quarter. So you can see there kind of a growing run rate.
We could be way off we could convene all of our employees in November.
November and then that could cost more but do you see going from kind of nearly zero and zero or the first half I think it was several hundred thousand whole first half and travel alone.
Turning to now kind of our targeted budget would be around 750250 in the third quarter and 500 in the fourth quarter. So.
Again, those are kind of.
Budget Placeholders, and we don't know exactly what the new normal is.
Eventually I expect travel budgets to exceed where they were because the new mobile work force. We may require employees to commute in to 1 of these resource center Slash headquarters have strategic planning retreat and that could be more costly.
But hopefully.
Hopefully the offsetting reduced rent will will help pay for that so that's what we mean by kind of scaling it up in the second half.
And again those are just kind of placeholder numbers, but we wanted to give you I wanted to give you a sense for where we're headed or what were thinking and of course book will tell you. If we end up spending more or less than that but that's kind of where our heads are right now.
Okay. That's helpful. And then Scotty I think mentioned some sort of shift in expenses up into cost of services if.
If you guys could just go over that again and was that something that happened in the second quarter.
Yeah, I'm just trying to understand why the gross margin was a little bit higher 66 ish, if I'm not mistaken in the first quarter and then ticked down to the 65, obviously 65 is is great and all that but.
Is it that shift in expenses that.
Was the primary contributor to that.
All right.
Net income.
On the head Richard that's kind of exactly what happened there is that kind of our allocation of expenses from G&A to cost of revenues.
And what specifically was that.
Software okay suffering.
Alright isn't it.
We kind of covered it protection environment related.
For licenses.
Okay. That's helpful.
That's helpful. Thank you I'll jump back in the queue.
Thank you.
Your next question comes out of Ryan Daniels with William Blair.
Yeah. Good morning. This is Jared Haase Ankur Ryan Thanks for taking my question I just wanted to stick with this theme of headwinds on that the hiring entertaining front and I imagine specifically that that is a similar theme within your client base in terms of hospitals, having kind of the same issue around attracting or retaining talent as well. So just curious if there've.
Changes from <unk> perspective, either from a product development side or maybe on the marketing side with how you message your value proposition to hospitals that you know trying to help them deal with their hiring issues or maybe provider burn out some of those themes.
Yeah, I think it's a great point I mean, we are positioned as being.
But any board of developing and retaining.
The work force and so we.
Believe and try to demonstrate that our products and services, resulting in higher engagement of employees and then we also believe fundamentally that offering health systems that offer their employees kind of career development and new skills and capabilities and assessment tools.
<unk> will be a favorite employers so.
Some of them are seeing that light and beginning to invest in and that's back in there in place through their develop continued development.
We also see opportunities maybe around things, they're focused on the psychological wellbeing and have some products in that category.
Uh huh.
Or kind of newly offered related to 2 helping employers that hospitals and health systems and home Health then.
Continuum of care providers that we have in our customer base build their relationship with their employees.
Through their continued development and so we do use that as a form of positioning.
And we believe that our products have those impacts.
Got it yeah that makes sense.
And I think I just wanted another quick follow up and Scotty I think you mentioned in your prepared remarks.
You know kind of calling out an improvement both in bookings as well as renewals I'm curious would you kind of character.
Characterize that as sort of market based growth sort of along that theme of hospitals looking for solutions like this or do you feel like thats more indicative, but maybe some competitive takeaways or.
Maybe some things are more competitive solutions in the marketplace just given all the investments that you've made over the past couple of years.
I think it's probably all the above I mean, it's I think we did experience some growth over last year, but last year you got to keep in mind was in the beginning of Covid in the second quarter of last year or so.
The comparisons are difficult to interpret because of that.
Covid factor.
But.
Yeah, we had some nice wins in the quarter, we've announced that.
In our press release, a nice American Red Cross.
And with Prime healthcare, So I think we're seeing you know some some good wins across the board, but I think if youre looking at comparisons were still kind of getting back into the pre COVID-19 levels of sales.
Production.
Okay. Thanks that makes sense I'll hop back in the queue.
Your next question comes from the line of Matt Hewitt with Craig Hallum Capital.
Good morning, and congratulations on the quarter a few different topic.
Topics I got a couple of questions on first off regarding the guidance the revenue guidance for the year I'm looking at the first half of the year you beat your guidance essentially at the high end implies that it's basically flat.
First half versus first half so not seeing a lot of lift is that a function.
Sales of where we're at with the pandemic and in the Delta variant and everything that's going on and maybe hospitals not being able to hire at the pace, but as we look at next year.
I would assume that hospitals are going to need to start hiring again and hopefully we're able to find the employees. So that are in line.
[noise] itself should drive some incremental growth as that.
Function or a way to think about it.
Yeah.
Yeah.
Hey, Matt I would probably.
So you know 1 of the factors that's going to result in some of the leveling. It's just those declines that we discussed.
The legacy resuscitation that was $2.8 million.
Pretty confidently.
It's not going to be anywhere near that it's gonna be at almost zero in the second half of the year.
Also have some nonrecurring what we call you know 1 time revenues from the scheduling and capacity management business that we just don't have enough history.
It was kind of projecting some of those onetime software sales, which are almost immediate revenue recognition as they are delivered.
That customer so that's some of the kind of the the change in some of our second half outlook I think so yeah.
Some of the factors that you mentioned more broadly speaking about customer.
Turnover in some of their challenges and I don't know if that's factored into kind of the way the way we are projecting our sales production net.
So say early but it could be something that.
There can be a detriment or benefit to us depending on which direction.
Yes.
Challenges they face.
Okay Fair enough and then Jim It sounds like you had a really good quarter with the number of new additions I'm. Just curious if you could update us on the pipeline there obviously.
It's been years in development and seeing that starting to ramp as it's pretty exciting so any update on there on gene that is.
I don't know if you want to take that question.
Okay.
Bobby is on but.
I think you know just.
Just the kind of the story there is we continue to see.
You know about once the L. A week that has been our objective.
Deal sizes vary you know we had a.
Nice win in Q1.
We had a repeat of that in Q2, but we continued to gain traction we'd like.
To see more adoption and penetration of it but it's 1 of those products that I would put net discretionary bucket and so I mentioned that we still see delayed purchasing decisions from customers just kind of in that type of category, it's not mandatory it's not required.
So we still see some.
Hesitancy in some of the buying decisions, there and I'd put that product in that category.
Worried but even with that as a challenge we're still able to accomplish our objective of once a week.
Okay. That's great and then 1 last 1 from me as you were talking about some of the incremental expenses coming back are you you talked about the travel given the new work force environment, but I'm curious as you start to think about conference.
Frances Historically health stream has held up pretty big user event.
In Nashville.
Maybe not so much this year, maybe it will but more likely in fiscal 'twenty..2 if we get some somewhat back to normal would would you expect that and what quarter would that would that fallen and I only asked because it is typically.
A larger expense that kind of stands out thank you.
Hey, Matt.
Somehow I got booted up somehow.
That conference, we actually stopped having pre pre pandemic and went to smaller and more regionalized conferences or meetings different scale, and so and spread them out more over the year and across our different business units.
Business solutions group so we.
We have we abandon that singular large conference model, even pre pandemic and don't currently have any plans to return to it and have built into our marketing budgets.
I guess I would call smaller regional conferences.
And what we call our user group meetings.
So it kind of.
Your line is hugely shifted several years ago and don't plan to return to a single large conference model.
Got it thank you so much.
Regards to other costs I wanted to kind of update my thinking on the cost of turnover and new positions because I don't want to understate it.
I'd.
Or is it a slight increases in pay I guess I would change that.
Trigger it and want to think about it in certain roles.
Different forms of compensation than we've had so for example in our sales organization. We're finding that other people are paying higher basis, we don't think that they're going to make more money because we have strong commission plans, but we have had departures in sales reporting higher base salaries.
The amount we pay it helps stream again, our sales teams.
<unk> delivered great sales results and their total compensation based on variables on commission. There has always been really strong. So we actually doubt they'll make more money going into new roles, but we have heard reports of that and then I would just say I would upgrade from slight to moderate increased pressure.
Her on hiring everywhere else on price cost and it is true that we did discuss this of the last hundred hires we have largely been able to fill most of those roles within a similar band of costs. As we had previously had some staff and so that statement remains true, but I would upgrade my pressure on pay to go from slightly.
There isn't a moderate and I would say that in some areas, we're experiencing maybe a changing nature of compensation.
Maybe less variable comp and more base seems to be where the market's headed and sales sales structure. So we'll see how that plays out we've always thinks again, our teams have been well rewarded and a total compensation.
<unk> based on a really strong commission earnings, but we will see where the market takes us on that so hope that helps just contextualize the questions around labor and Labor force because I don't want to understate. It there's a lot more turmoil in the market with people just generally getting up and looking for new experiences. We think <unk> treme is going to be a net benefactor of benefit.
Flight from those trends, but but still it's just it's hard to ignore the amount of people that are looking for kind of new trajectory in life.
Understood. Thank you.
Your next question comes the line of Steve Halper with Cantor Fitzgerald.
Hi, good morning, just.
A housekeeping question you talked about $2 million of 1 time software license that was in the first half correct can you give us what the impact was in the quarter.
They say you got a $2 million of references combination of software licenses and.
I'm from larger professional services projects that had milestones completed in the first half.
Looking at the split between Q1, and Q2 is pretty evenly split almost $1 million in each quarter.
Great. Thank you.
Yeah.
Okay.
Again, if you'd like.
To ask a question press star 1.
Our next question comes the line of.
Since colicchio with Barrington research.
Yes, Bobby you are you seeing.
Any signs or pockets of caution on spending.
Due to the new variant or is it too early to.
Yep.
It's too early I mean, we've heard reports of course.
Spikes and we've heard that they are getting busier, what I would say is that the larger health systems and hospital systems and University of firms they've learned to operate in a crisis mode and have learned to resource better and so it's not like the first.
Few ways, where all elective surgeries were shut down and so while there is disruption with a surge or spike I don't think it's the same as round wanted to when there are surges that through people out of operating mode and shutting down elective surgeries. So while we have claimed we see some deferred purchasing a little.
Less focus on elective things.
<unk> from from vendors.
I'd just say in general people are trying to define the new normal the new normal includes handling.
Surges and patient cases related to Covid.
That doesn't mean, there won't be pockets of the country that are overwhelmed by it I do think that will happen.
Some are not as prepared as others to handle it.
And so we will see some that will have to ship their full attention, but broadly I would say.
The bigger health systems, the University health systems are much more prepared to handle spikes.
<unk> put in Covid cases.
And a couple.
Questions on Jan you had said I think Jan is largely used for nursing is it solely used for nursing. That's 1 clarification and then where does some of the other opportunities you talked about with James.
Well I think you just hit it it.
It is largely focused on nursing skilled.
Nursing careers.
Different departments of nursing help them transition from 1 department to another.
There are other assessments and tools built into Jane, but expanding them to cover other types of positions.
Or all the way down to take home health aides wood.
It would be kind of expansion opportunity but.
Cash and expanding it to handle more of the.
Other functionality that that could be important nurses reminding them of their schedule Theres. Just so many things we can do with James and the technology. We built around it is it kind of an open platform open.
Framework that we can extend.
That you know, adding new types of assessments.
In new categories per new types of employees would be kind of more immediate ideas for expanding <unk> capabilities. It is largely and most appropriate for the nursing workforce, which has represented about 40% 40 plus percent of the subscriptions and our <unk> network.
Okay. That's my last question nice quarter.
Thank you.
There are no further questions at this time I would now like to turn the conference back to management.
Thank you look forward to reporting to all these operational updates in the near future and thanks to our employees for delivering a great a great first half result.
This concludes today's conference call. Thank you for participating you may now disconnect.