Q3 2021 HealthStream Inc Earnings Call

Good morning, and welcome to the health streams third quarter 2021 earnings Conference call.

At this time I would like to inform you that this conference is being recorded and that all participants.

Listen only mode.

At the request of the company, we will open the conference up for question and answers. After the presentation I will now turn the conference over to Mount a contract that's present Investor Relations and Communications. Please go ahead Ms Condra.

Thank you and good morning, Thank you for joining us today to discuss our third quarter 'twenty 'twenty. One results also in the conference call with me are Robert a Frist, Jr. CEO and Chairman Powell Street, 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 chemistry that could involve risks and uncertainties that could cause the actual results to differ materially from those projected in the forward looking statements.

Information concerning these risk 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.

Table, providing supplemental information on adjusted EBIDTA and reconciling to net income attributable to L. L. Street is included in the earnings release that we issued yesterday and they referred to in this call.

So with that start with it at this time I'll turn the call over to Bobby Frist.

Thank you Mollie good morning, everyone and welcome to our third quarter 2021 earnings call I think contact is important as we start the earnings call. So I'm going to give a brief update on our perspective on Corona virus. The coronavirus pandemic in United States appears for the moment to be in retreat.

And particularly in the markets, where we practice and end up in the business, where we operate.

<unk> September daily cases have dropped by a third in daily hospitalizations have fallen by more than a quarter and according to the CDC approximately 58% of eligible adults in the U S had been fully vaccinated as of October 22nd is that number.

As of October 22nd is that number rises we are hopeful that progress towards beating this pandemic will continue I shared some of those statistics to just think through the impact on businesses and and a meaningful part of other context is the the long medium and short run impact of Covid on our business behavior.

And therefore, how we plan and our expenses and allocate our sales organization. So I want to speak to that for a bit the long run impact of Covid on all business is still being determined but we can already see some of the permanent changes that are taking effect inside of our company, but like many companies. For example, we have adopted a hybrid workplace approach.

Officially and this is from a company that was really an in person company for for most of our existence and now we have a full on hybrid workplace approach in fact, all of our offices and resource centers remain closed at this time, but we expect open them by year end.

Officers will function as as a resource centers to employees, which is a little different than taking them as a place to work and in those resource centers will hold the strategic planning meetings events and other special meetings recognitions for employees. The things that helped define our culture that are important and will ask employees to travel for those events. So it would be a little dip.

Then in the past a world where work from an office would be elective.

But but travel for events might be required to be part of developing our culture as a company.

We've learned new ways of selling that incorporate virtual technology to a greater extent and our customers have embraced this approach as well so while travel for our sales teams will pick up from the near zero levels of the last 16 months I wouldn't anticipate that they would occur at the pre pandemic level I believe our travel expenses pre pandemic where nearly.

<unk> 5 million a year.

And I, just don't see them getting back to that levels. However, as we noted the impact of Covid on our Workstyle. We may see travel expenses go up for business related to what I'll call cultural building and goal setting and performance management meetings by teams team leaders and managers across <unk> and so it's an interesting dynamic.

We're maybe a sales business travel may go down but.

Because we're a fully remote workforce are we might have some mandatory meetings that are cultural development oriented bringing on new employees.

<unk> gathering employees to celebrate accomplishments.

So travel expenses May go up and in those more elective categories historically.

So it could be an interesting dynamic to figure out how that all plays out and to what level. Each returns based on the new work styles.

And so another impact its raw assessing now across each company is the I.

I guess, what's been dubbed the great resignation I think Covid has made many people, including health streamers reevaluate their personal and work life.

And for a variety of reasons.

Most of which are indirectly attributed to the events of the last 18 months or Covid.

Companies are seeing turnover at record levels and these are companies of all types of other Ceos I speak with are experiencing very similar turnover issues and.

And so how stream is no exception to that but what's interesting is that as people look up a heads up from other industries. They find health stream and enticing place to work and so we've experienced record levels of hiring in the last 12 months, but also very high levels of turnover and the net impact of that is a nearly only slightly positive.

Head count increase across our organization and I think you know earlier in the year, we had anticipated being able to have the net increases net of turnover to be much higher maybe as much as much as 100 more employees than where <unk> been able to achieve through our hiring in the first three quarters.

And so that has resulted in lower expenses than maybe we had hoped to have in other words lower investment levels and people.

We have had net hiring positives.

But they're almost marginal compared to our expectations as we entered the year and that has a direct impact of what I guess, what I'll call. The great resignation, along with others that have written about it.

And so again, it's just really strange dynamic where we've.

We've never had more people interested in working at how stream because they're reevaluating their work life from other places and we've got these highly energetic new employees coming into Austrians are ready to start a new career, but also some of our our employees are evaluating their work life and health stream and Theyre changing locations, what's really exciting to me is I've seen several of them are already on the way back.

Gulfstream after six months away and so the great designation is something that we all have to work out and the result has been higher turnover and lower expenses than we had originally planned and so a little better financial performance attributable not necessarily to good things, but two things like turnover and an end.

Also some maybe longer run challenges.

Ah created by not having the staffing levels that we had expected to have and we kept every quarter trying to increase the hiring rates and again incredibly successful at hiring but now what we need to see is that the turnover rate slowdown and I'm hopeful that in the next quarter or two this will settle out a little bit and we'll continue to get hiring a head back in the right direction.

Hiring.

So I wanted to talk about those short medium and long term impacts on Taylor, they create quite a challenge for forecasting even though they're there.

Because of the nature of work has changed the nature of travel will change.

The nature of where people want to work and how they wanted to work is changing and I think <unk> will be in the long run a net benefactor of all these changes the virtualization of the workforce, we've been highly successful at running our operations and building our business.

But.

Like all of you know when major challenges a car like this pandemic create.

It creates different gaps and how you're operating your learning curve and and and can resolve them operational challenges over time. So we're working through all those and at the present time.

So I'd like to spend a few minutes.

Talking about our financial performance and turn it over to Scotty and maybe some context for our financial performance.

First I have just a few of the highlights.

The.

So instead of AD Lib somebody said modal off scripts and I'm back on.

Top line revenues increased by 5% increase in adjusted EBITDA and 15% over the first nine months of last year. So revenues, 5% adjusted EBITDA, 15% over the first nine months of last year. So again solid financial performance again in the third quarter. The third quarter revenues were $64 1 billion, which is.

5% of the same period last year. This quarterly increase reflects the substantial growth that was necessary to offset and rise above the previously announced anticipated headline of the $9 $2 million decline in the quarter and legacy resuscitation revenues and so again, we've talked about this for almost three years or more.

The decline of the of a partnership in this legacy resuscitation revenues. So in the quarter, a negative $9 2 million and that's one of the last quarters of material impacts for these declines.

But.

But we were able to overcome that and deliver 5% growth from a mixture of organic and inorganic work over the last year or so fantastic to deliver growth in the face of such headwinds.

Based on these results we've updated our financial guidance for the full year. We now expect revenue for the full year 2021 to be in the range of $255 5 million to $257 $5 million.

So we've kind of lowered we've increased the bottom of the range would have a little more confidence in the range and the higher end of the range I believe one of the most remarkable things about this guidance we are projecting revenue growth. Despite a anticipated full year impact of $38 4 million in revenue decline from the legacy resuscitation products. So we began the year knowing that didn't have a.

$38 4 million dollar hole to fill and I'm really proud of our teams are the types of growth. We delivered on lots of exciting new products acquired products as well has been really fantastic. So again I'm excited about that result.

We also had a negative impact of $4 million of acquisition related deferred revenue write down so we overcame that as well and I guess that revenue.

The deferred revenue write downs would happen that'll come back in over the course of the next 12 months into our revenue. So that's a good thing help put a little growth into the future.

Additionally, we now expect EBITDA for full year, 'twenty or 'twenty, one to be in the range of 51 to 53 million that's up from our last expectation of $48 million to $50 million does announced last corner now some of that continued outperformance is based on our inability to hire again, we do have a net positive hiring.

So we are not growing our head count just not at the levels. We had expected. So I'll just kind of comment again that there's kind of this lag effect of COVID-19 as we work through the great resignation and again I want to emphasize.

Really a record setting levels of hiring new excited employees and the health stream and the outcome is a net positive add head count. So we're not declining I mean by any means but we're also not adding as many as we had hoped.

So some of that outperformance is attributable to that change and and net hiring.

There are some new factors that have helped contribute to the increase in adjusted EBITDA and I'll comment on those.

For example year to date revenues benefited from legacy resuscitation of perpetual software sales, which we expect will be less impactful during the fourth quarter. So there's a little bit of leftover legacy revenue that was maybe more than expected and a little bit of perpetual software sales from some of the acquired products.

We're trying to move to SaaS and subscription selling hopefully soon in the next year.

And so some of that would be not repeating in the fourth quarter. Additionally, the macro workforce trends, which I've covered in great detail made it difficult to increase head count as quickly as we'd planned.

So we we now anticipate that in spite of three quarters. We're trying we're going to just say, we expect that trend to continue through the end of the year. So we probably won't be able to make up all the hiring plan throughout the year and the remaining quarter in our new guidance reflects that that assumption.

So.

We'll continue.

The head count increase we projected as I, just mentioned to be essentially flat or slightly up for the for the fourth quarter. So only a slight labor increased cost during the fourth quarter in our new guidance reflects all of these things that I've talked about.

Now I wanted to shift gears and talk a little bit about what we've talked about the last three years, we've talked about these key transitions and the transitions were all define an effort to create a higher growth and higher margin profile company that it'll be more profitable for shareholders and the great News is this is I believe the last call.

Which I'm going to.

I'll talk about in detail the transitions and the reason for that is I feel that over the course of this year. We have really worked through the transitions and the word transition imply some kind of maybe exceptional operational risk or business risk and I feel we're through the exceptional period of risk on these transitions in other words each of the three transit.

And as we've talked about has hit a milestone in my mind, but I'm comfortable saying you know their business risks associated with the growth of these new product lines and end undertakings by the company. These transitions, but they're no longer existential risk major risks of the company and the way that they might have been say 18 months ago. When there were so many unknowns.

About these so let's look at each of those real quick and put them to bed. So that we don't have to talk about them anymore and in App.

After Scotty presents the financials I'm going to spend a little time talking about the new go forward paradigm of talking about the company instead of this older paradigm of explaining these three transitions.

So let's look at them one at a time.

First of course was kind of proving the market's acceptance of the the new resuscitation suite program with the American Red Cross and it and the second was the establishment of a new functional area with the Verity streamed SaaS based applications as you remember we acquired several companies over the last several.

For years, and we had launched a new set of applications for Credentialing privileging and enrollment and there's a lot of question, we launched new products about the market acceptance and.

I'm here to declare that the market has accepted the new Verity stream SaaS based application we call credential stream.

And so.

And the third is the technical viability of our new platform architecture known as H stream. So here. We go let's put all three of them about the market acceptance of a new innovative resuscitation solution has been established as evidenced by our sales and American Red Cross suite to customers in each of the 50 states of the United States of America. So the program has established the credential is accepted.

The sales team are closing new business every week and and you know this concept that maybe the market wouldn't accept the second solution is gone now we've moved material market share to the American Red Cross and we will continue to sell that product in the coming years and months under a long term partnership with American Red Cross and will continue to innovate.

But it's no longer a question. The same question, we had two years ago was well anybody by it.

Well anybody except a credential or professional credential from American Red Cross and I guess I'm here to say today that that there's not only been except theres been embraced and the cutting edge organizations are moving to this newer more adaptable technology that we've introduced with American Red Cross and it continues to win new business.

In a market, so I'm going to put that transitional risk to bed. The risk now is just how much can we sell and then can we continue on a great trajectory with this partner and I think the answer to both of those as I'm excited to get there.

Is gonna be a great product into the future.

The second.

Adoption of our market, leading SaaS based credentialing privileging and enrollment application.

And I think now with nearly 440 customers under contract and many of them are implemented and live and many of them are referenced are all accounts.

We've established that this newer platform, we built which was the best of breed from our four acquisitions is both accepted as customers migrate to it from the legacy platforms and as new customers selected an open RFP bids and competitive bids where I think we've built now that the application set of choice.

And the industry as it relates to Credentialing privileging and enrollment so again the risk clubs, we acquired four companies, we built a new product and try to move customers to and it didn't succeed I'm here to say that that that that level of risk is behind us of course, theres, a normal market risk to competition and and can we continue with this leadership position, but with four.

<unk> hundred 40 contracts.

Customers migrating and most importantly, the new Rfps being issued we think we're going to win a disproportionate share if a if an organization of scales is bidding out a privileging enrolment and Credentialing services, we think our new credential stream platform is going to win the day.

The third is the technical viability, we've been talking for quite some time now and hired a new CTO four years ago to lead the charge on building a new technical infrastructure that will make all of our applications more interrelated will make data more portable across our application offerings.

And allow us to do really wonderful new service and application development as the platform gets established and so I'm here today to declare that the platform is real it's operational we're releasing new functionality at the platform level and that platform level capabilities being extended into our application sets.

At an increasing rate and so I think the concept of well you've been building an R&D. This this underlying platform will it be viable.

I'm here to say today that it is a viable platform and there's always more to build is a giant a great vision in front of us of what we want to do with it but I believe we're well along our way to having both a new platform underneath health stream that unifies many of our capabilities and gives customers more reasons to acquire our applications.

And unifies instead of a single platform company with multiple applications linking to it and also makes her architecture more extensible to third parties.

So I'm here to declare I'll tell more detail about it but the platform is real we won't be talking about it as a transitional risk we are selling in licenses when someone acquires an application for Gulfstream, we're embedding a license to the platform.

And again I'll talk more about what's exciting about that in a few minutes.

This concludes a nearly three year journey of talking about the three transitional business risks. We can now start to talk about our new applications. The new markets. We want to proceed with and end up in a new paradigm for talking about our company, which I'll cover after I turn it over to Scotty Roberts for a detailed look at.

The number of Scotty.

Yeah. Thanks body I'm happy to report, we had another solid quarter of financial performance.

And we're firmly on pace to achieve record annual revenues and adjusted EBITDA for the year.

While overcoming a $38 million revenue headwind as we entered into the year.

On a year to date basis, we've been able to grow revenues by 5% and grow adjusted EBITDA by 15%.

For the third quarter revenues were $64 1 million, which is up 5% over last year and includes an $800000 reduction associated with deferred revenue write downs.

Operating income was $1 8 million were down 43%.

Net income was $1 5 million also down 43% and EPS was five cents per diluted share down from eight cents per diluted share in the prior year.

Adjusted EBITDA improved to $12 5 million, which is up 11, 5%.

Workforce solutions revenues were $51 2 million.

We're up 4% and revenues from provider solutions with $12 9 million and were up 10, 7%.

On a consolidated basis, we grew revenues by 5%, while overcoming a $9 $2 million decline from the legacy resuscitation business.

Revenues from recent acquisitions and growth in our core business more than offset this decline.

When you exclude revenues from the legacy resuscitation business.

Consolidated revenues grew by approximately 24%, which was comprised of 10, 5% organic and 13, 7% from acquisitions.

Our gross margin performed as we expected coming in at just under 65% for the quarter.

And our operating expenses, excluding cost of revenues were up 15% or $5 3 million over last year.

And about two thirds of this increase relates to the operating expenses from the acquisitions that we completed.

Early in the fourth quarter of last year.

Our G&A expense during the quarter also includes a charge of about $350000 related to closing several leased satellite offices that we have that will expire next year.

Yeah.

Our adjusted EBITDA was $12 5 million, which is an increase of 11, 5% over last year.

And its EBITDA margin was 19, 5% compared to 18, 4% last year.

Yeah.

Cash flows from operations improved to $36 4 million this year compared to $30 8 million last year.

DSO also improved to 40 days compared to 43 days last year.

And free cash flows were $17 3 million versus $16 7 million last year.

Our cash and investment balances increased by $5 4 million in the quarter.

And were $60 6 million at quarter end.

Capital expenditures incurred for $5 6 million for the quarter.

At the $16 8 million year to date.

After another strong quarter of financial performance, we have updated our finance.

Guidance ranges as follows.

With workforce revenues forecasted to range between 205 and $206 5 million.

And provider revenue is forecasted to range between 55 and $51 million.

Adjusted EBITDA is now expected to range between 51, and $53 million and we expect capital expenditures to range between 25 and $26 million.

Our financial results continued to benefit from lower expenses than our previous guidance had anticipated.

As was the case in the first half of the year employee turnover remained higher than our normal experience, which we believe is consistent with employment trends facing most companies across the country.

Although turnover has been higher than anticipated we've been able to successfully fill open positions, but total head count has remained relatively flat over the course of the year.

Which has led to lower staffing levels and personnel and personnel costs than we had planned.

Yeah.

Sales performance was also steady during the quarter.

We started to experience some challenges related to the resurgence of Covid and.

And the impact of employee turnover that I just mentioned.

Consistent with past experiences the ongoing impact of Covid on our customers continues to cause some delays and uncertainty in their purchasing decisions with us.

So it's not across the board.

We have experience longer sales cycles and delayed decisions from customers without COVID-19 patient admissions.

We're also monitoring several other challenges our customers may be facing such as vaccine mandates.

Nursing shortages and overall staff turnover.

Which could impact their operations and their financial condition.

And that's before the impact of employee turnover on our sales production.

Losing quota carrying reps mid year, and Onboarding, new hires presents challenges to achieving our goals for the year.

Although as we enter our busiest sales quarter. Our teams are focused on finishing the year strong.

That concludes my comments for this morning. Thank you for your time.

I look forward to providing updates on our full year 2021 results and guidance for 2022 on our next call.

Bobby I'll turn it back over to you.

Yeah.

Thank you Scotty, it's kind of an exciting pivot point for me now talk so long about transitions to all of you that have followed along our store, including our car T analysts and now want to kind of begin the orientation process to the future and how we're going to talk about the business as we go forward and so let's get oriented a little bit the first is overtime.

Over a long period of time, we have talked a lot about our learning platform and our Credentialing platform and.

Inside our company and now to the outside World, we're going to communicate differently, we're going to.

<unk> correctly identify all of those as a software applications or application suites, and there's only going to be one platform at health stream is H screening and so on a go forward basis, let's think of health stream health stream. The company as a one platform company eight stream is the platform and we have developed multiple sets of applications.

Is that run and ultimately over time will increasingly connect to and leverage the single platform and so you'll see us correct ourselves off into the next year or two as we changed from calling it the learning platform to the learning application set but the learning application suite or the learning application in the Credentialing platform.

Become the Credentialing application suite or the Credentialing application and the scheduling applications. So there'll be a shift but it's important because it indicates the intent of why we're building H trimmed the underlie interconnect and enter late all of the application sets that we offer.

So we feel we've made enough progress now to make that declaration and begin to change our own internal language <unk> Treme and therefore, the the way we talk about it with you. So we will have three primary application suites. They are learning and development. So we have a whole suite of applications to help manage on learning and development processes.

Health care organizations.

Second as Credentialing and privileging and again, it's a suite of products and a growing suite of products that includes products like credentialing, privileging and enrollment, but it'll be known as Credentialing and privileging application suite.

And then scheduling and capacity management some of our newly acquired companies.

We've talked a lot about the scheduling application area and so the third area would be scheduling and capacity management. So interview learning and development Credentialing and privileging and scheduling and capacity management are the three different at one point and called them legs of the stool, but now I'll call them application suites, and the reason we call them applications because increasingly.

We expect them to connect to each other through the platform and connect to the platform and leverage platform level services that were built into the new core H stream platform. So we're excited to kind of make that transitional begin that transitional journey now in this important dialogue.

Also many years ago as you remember we dropped our metrics that we had when we measured the subscribers and subscriptions to the them learning platform.

Because we had new set of applications that we're growing and we've begun reporting the number of subscriptions sold to eight stream and it's my expectation in the coming year or two.

That every application will sell with a license or a membership to the platform and we've begun that journey by bundling every sale of the learning architectures on learning application with an H stream license and we've begun that journey by selling every new credential stream sale.

Within our subscription or a license to the H dream for Verity stream platform and so it's very exciting that those two applications. We feel are interconnected enough or reliant upon or providing that value from the platform level that that we can add and sell those subscriptions. So we.

Had been reporting subscriptions data stream and we added 400 in 2008 streams subscriptions in the third quarter, bringing our total to 492 million subscriptions.

This represents an increase of 29% over the same period last year and the growth in subscription is encouraging.

But I wanted to talk a little bit about the growing power of the eight stream platform itself like what is it going to enable us to do.

So I thought I'd walk you through an example.

And so you can understand how it's evolving and what what we hope to do with it.

Remember each of our applications already works well on its own it's an independent application, but with H dream or applications are beginning to work even more powerfully together one critical reason for this is our new identity management service, we call. The H stream I D. Again, it's part of the H Dream platform as the H Dream I D increasingly the extreme idea allows.

Data about an individual to be used across our various applications instead of remaining stuck inside of a single application.

New level of mobility and identity management adds value to the applications and also adds value to the data itself.

If you think about all the time and expense our customers go through maintaining license data on their employees. For example, you can start to appreciate the value of the H Dream I D.

So the eight stream platform license data on an employee can now enter through the H L. C. The learning application be validated by a verity stream application and trigger our.

My team application to inform managers when their employees licenses about to inspire expired. So what you see here is by linking that Daddy of people in the various parts of our ecosystem on the different applications. We can provide a service for example are validating our license only existed in one set of applications.

To where the data is maintaining and stored in another application. So the example, I just gave that portability creates kind of an interchangeable service validating licenses.

Using some of the features and functions of Verity stream and some of the distribution and access to the resultant data and the learning Center application.

Coming here, we look forward to providing you additional updates about the growing power of H stream as our definitive platform.

So now I'd like to provide some business updates regarding the three application suites, let's start with learning and development are most well established application suite.

It's our oldest but also in many ways some of our precious things are coming out of learning and development like the <unk> platform.

The company's origins trace back to improving learning and development through technology.

What these applications focus on today the past two years have been characterized by a great deal of innovation across this area, including the release of our patented AI driven clinical competency application known as Jane.

The establishment of a new industry standard in resuscitation certification with the American Red Cross Resuscitation suite.

Dan.

The combination of our knowledge queue and safety solutions to form what we believe is the most dynamic governance risk and compliance solution in the market today.

So we're really excited about the continued evolution of the core <unk>.

Applications and products of the learning and development area of our business and it's exciting to enter the next year with the innovations either in the market or entering the market as we speak the Red Cross innovations.

Our fantastic we created special technologies to empower the Red Cross program like our interval technology.

Which which allows organizations.

Unprecedented level of flexibility in deploying the Red Cross resuscitation applications and programming set.

We built platforms of applications like Jane that are bringing.

Bring in the dimension of AI into the decision, making and critical review of critical thinking ability of nurses.

And we've updated what was once our core business and regulatory compliance to the new standard of micro learning.

And assessments and benchmarking services that can exist anywhere else by definition, because we have the largest network over 2 million subscriptions to our our our legacy.

And now our newly refined.

Our compliance products and mandatory training products. So really excited to have such a complete solution set.

We think can have an impact across the governance risk and compliance areas of health care organizations across the country.

I'd like to focus on two of our resuscitation offerings, maybe a little more detail about two of the products that are in this learning and development category The American Red Cross resuscitation suite.

We already mentioned that we've sold to health care facilities of all types and all sizes from across the continuum of care in all 50 states.

Some of the industry's largest acute care health care systems and organizations have made wholesale switches to the American Red Cross.

Patient suite, and we think it's because of the combination of the technologies <unk> has built to enable flexibility in the program and the incredible investment and high clinical quality of the program itself built credential Latin American Red Cross.

So it's the combination of our platform and our applications with their content and certification. That's resulted in this industry changing our program.

In fact since as of September 30th we have over 334 340000 certifications have been delivered to the platform. So remember we just began selling this 24 months ago and it took time to implement and switch customers over but now the rate of completions of this red Cross program as well.

Really quite staggering and we just passed the 340000 certifications delivered and again with the rate of consumption is just fantastic. So that's going to continue to climb up very very rapidly.

And what's fascinating is that the solution required that we deploy over 7000, new high Tech Internet connected mannequins.

By a company called in the Sony and the brain Pro mannequins.

And what's great about those Atkins is that they're they're they're they're modern they provide visual feedback to the user of the internet connected and they use the H Dream I D. So we mentioned earlier about the power of the <unk>. So the data collected through those those applications and those mannequins that there's kind of skills reporting data on.

On the employees goes into the eight screen cloud services and becomes mobile and portable in that way and so.

Anytime someone anywhere in the world logs into the App that connects to that Braden pro Madigan by Amazonian, they're logging in with the H Dream I D, which creates.

This record this portable record on the individuals'. So we're really excited about both the new technology like the Minnesota, Embrighten Chrome Atkins of which Theyre not 7000 deployed across the globe.

And and how they utilize the eight screen platform to give them, a new power and flexibility.

So I just I believe it's just remarkable that an option that didn't exist. Two years ago has gained such widespread adoption. That's a testament to the strength of our sales organization.

Innovations with the Red Cross and the innovations of our technical teams to build this market leading product.

From a technical standpoint, it's just outstanding in fact are our scores for pointed out of five stars from our own customers on the implementation process to the change management processes new applications. So we're focused on the operations of the quality of the transition and.

Our customers are giving us four point out of out of four eight out of five stars during the third quarter on the quality of those transition services. So great job by our teams that are focused on that solution.

Let's shift gears and giving us great update on on the Credentialing and privileging, where three years ago, We announced the launch of Verity stream and at the time that was our new SaaS based application for managing the full spectrum of Credentialing privileging and enrollment enrollment needs in health care organizations. During the third quarter of 2021 40 <unk>.

Seven customer account contracted for credential stream the new platform 47, I believe in the second quarter. It was around 42 in the first quarter around 45, maybe 46.

So really the adoption rate is is is quite staggering of the new credential stream platform, where we're really excited about its progress now implementation cycles on this product it's more complex than say some of our other application set so it takes longer to get to revenue and there's a bit of a what I'll call them air gap or a bubble from the selling.

That was imposed by Covid to the implementing and so we'll see a little bit more growth coming out of all of those sales in the second half of next year and a little a little bit of what I'll call. These are got bubbles, where we made a lot of sales and then there was a delay in implementing and the implementation cycle is already fairly long on that product say up to up to 12 months.

So we're going to see some of the impacts of Covid and the growth rates for the next few quarters, but the sales have gone unabated, which is fantastic.

And it takes a little longer to get to the revenue. So I would expect to see the some of the growth from from all of those sales to really start showing up again, it's a we did have a nice growth rate in the third quarter on the on Verity stream.

But I think what we'll see is even a better growth rate in the second half of next year. So that's really exciting and I wanted to give you the context for how and why the 47, new we call them, new logos, new customer accounts contracted for that credential stream application.

Just 90 days, so it's really a fantastic the sales rate that's happening there and the new win so some of the wins include.

Well known organizations like Hackensack Meridian health mainline help Medstar health system up in Washington D. C. Cooper University Health care are just a few of the exciting organizations that are realizing that we have a best in class solution for.

For Credentialing privileging and enrollment.

Now let's.

Let's start application set that we want to talk about is our scheduling and justice. We acquired four stand alone companies and Credentialing and privileging and we built a new solution, we plan to use that playbook and do it again and scheduling and so our acquired organizations nurse grid in last nine months shipped Wizard and Ann sauce.

It all happened in the last say 12 or so months.

We're assembling that into the leadership team with a vision to build a market leading scheduling system and we believe we have some innovations in store for the industry that will help make that vision become reality.

And we're early in the early in the journey to this to building. This part of the business out. These this application suite. We're early in the journey. So we don't want to get ahead of ourselves we've got a lot of R&D to do.

But we're getting a clearer roadmap I want to share some of that with the transition and integration of the businesses themselves. The operations of the Gulfstream is nearing completion. So the transition services agreements from the parent companies, we acquired them from or winding down which means we shifted all the relaunched our own servers on capacity. So the basic business integrations are done.

On and the organization itself is beginning to grow and assembled a leadership team and growth leadership team. So a lot of progress on the business front on the software front. We've now internally published our kind of our vision and roadmap and our tenants for success, where we're going to begin building and testing the hypothesis that we thought were strategic.

Vantage in the first place.

And it's great because we have over 380 customers to work with especially the acquired companies. We inherited about 380 customers along with some new ones. We won this year and we plan to show those 380 customers under contract a lot of innovation in the coming 12 months, where we'll be doing exciting things like connecting some of the best in class capabilities.

Nurse grid Ah <unk>.

Mobile experience into the customers of the and sauce and ship lizard platform. So a cat.

Can't wait to show more about that but we're making great progress. We are working on those integrations for a while and I think the first wave of innovation out of our scheduling and capacity management business will come as we announce the connectivity of the nurse grid applications that both and source and shift blizzard in the coming months.

Now, what's really exciting about that is the nature of those products is a little different than nurse grid application is actually a beta see app available in the Apple App store.

And we thought that it just kind of a growing community of nurses that love this app, which blend their social personal light schedule with their work schedule and we just thought there was something special about how that was happening and in fact, we've seen nurse grid community continued to grow since we acquired it and now we're up to nearly 300.

Third 50000 monthly active users that's up 90000 active users are 35% since our acquisition in March 2020, so that applications continued to grow in its adoption and remember that's elective adoption, that's a nurse going into the Apple App store downloading the app and using it on at least a monthly basis 300.

50000 M. A us monthly active users.

46% of those nurses log in every day, that's up 40% from the time of acquisition, which means they use nurse good often and consider it to be a valuable resource for managing their personal and professional schedule.

<unk> continues to be the number one rated app for nurses in the Apple App store, that's a four nine star rating, but 70000 reviews. That's up 40000 reviews from the time of acquisition.

So this growing network of nurses that that blends their social and personal calendar with their work counter we think is something special and we think that network that growing network now 350000 monthly active users.

As it is linked into the business applications that man scheduling from the business side is going to be a powerful competitive advantage. In fact, we have a vision for how it can enhance the functionality that will be sharing in the coming months as we release that functionality.

So during the third quarter. So some final updates here some events are happening across the company and we'll wrap it up for questions I know I've gone long, but this is an important transition costs I wanted to spend some time on it but there are two kind of events that we want to talk about that so our employees can hear and customers can celebrate during the third quarter, we hosted our second annual nurse well being weak.

This amazing a virtual event that was held September 27th of October 1st and it's a week of engaging activities on the topic of nurse well being it's kind of our service back to industry to recognize all of that our nurses across the country have been through and over 6500 nurses registered for the nurse well being weak Act.

<unk> that we're focused on practical advice from peers and experts on enhancing wellbeing speakers and activities in session. So if part of giving back at health stream.

Very successful and focused on the well being of nurses are just a way to engage.

Our future customers and current customers and the nurses that are serving our country. So well through this effort, we called nurse wellbeing weekend. Thank you to the teams. It ran at very strained customers also participate we'll be participating in a virtual to date users group conference called thrive 2021 event will be on November 2nd and third include keynote.

Presentations and full track sessions for each Verity stream application, including of course credentials trained that we've been talking about so this is an exciting conference.

That where we often released data from our proprietary market research about the credentialing industry overall and the trends in it and so thrive 2021 right around the corner November 2nd and third for the customers are very strained health stream severity stream.

And finally, I couldn't miss the opportunity to shout out national customer service week, we have over 100 employees and health stream focused on customer service of our over 1060 or so employees.

And are those customers those employees differentiate our company every day by the way they manage our customer relations and I'm really proud of how they handle them and our customers love the service they get from health stream will continue to improve our service continuously and innovate how we service the customers.

But on National customer service, we the first full week of October. It gives me a chance to say thank you to the nearly 100 employees that are customer facing that really try to do everything they can to get rapid response done in high marks for quality, both of which they're achieving on a daily basis. So thank you to our customer service personnel cross sell stream they serve as the face of health.

Dream and we're grateful for the work that they do to build customer relationships.

You can sell another application to a customer unless you're satisfied with the service they get and I think our teams are best in class and best in the country is taking care of people quickly and get them the answers they need at.

At this time I'd like to turn it over to analysts for questions.

The question answer session will begin at this time, if youre using a speakerphone. Please pick up the handset before pressing any numbers. So do you have a question. Please press Star then one on your push button telephone.

If you wish to withdraw your question. Please press star two.

Your questions will be taken over that theory safe. Please standby for your first question.

Our first question will come from the line of Ryan Daniels from William Blair You may begin.

Hey, guys. This is Jackson on for Ryan Daniels first off congrats on the quarter and thanks for taking my question I guess, maybe if you can provide just a broader update on the health of your client base I guess, we've seen some early data points from publicly traded hospitals.

Your volumes are coming back and I know in your prepared remarks, you did touch on the pandemic and seeing that subside a bit.

Possibly translating into a potential devaluation. So just kind of curious if thats something youre seeing broadly and any other color you can share amongst our client base.

Sure.

Certain areas of our client base, so it's kind of a regional impact.

And I'd say their operations through the different waves of Covid had been interrupted which kind of put I know refrigerants little air gap. So if you sold the system and you wanted to begin implementation in certain part of the company country. They may have delayed implementation for 30 60 days as they work through capacity issues and staffing issues and then they get it back on but it kind of put.

All of these will air bubbles into our business with them, but that said they keep our research in other words, they learned to manage the new norm fairly quickly.

They're more adaptable and how they've managed to say this the delta variant Serge.

More sponsored the good news is they're more treatments out so I think they exactly as I talked to that run the big health systems have a little more confidence in their ability to handle the pandemic and maybe as you are now the dialogue of moving towards an endemic situation for the pandemic and I. That's my observation is that.

Particularly in the bigger systems to their learning to operate.

In a mode that can be successful now they do face unprecedented and I hear this over and over challenges with their workforce, we talked about the great resignation impact on stream and end, but in hospitals and nursing.

It's incredible the mobility of nurses are reevaluating their lives they've been through a lot of hard work there, both resigning and changing careers and the executive I talked to talk about the need to find ways to retain develop we even see some large health system acquiring nursing schools, because they know they have to get into really talent development and written.

And growth I think that does bode well for our positioning in the future.

But needless to say, it's a current challenge is tremendous has both financial implications if you're a smaller organization, how do you recruit retain and pay competitively.

And if you're a large one how do you reduce your reliance on contingency labor pools, which are are just too expensive.

So I think over time and the three year window.

Our results in more health systems being more involved in the development of their own workforces.

More than they ever have in the past, which is a positive but in the short run cost pressures and turnover issues on quality are all going to be real.

So.

Generally I see recovery.

And with a few remaining pockets that are still dealing with issues I talked about.

Yeah.

Perfect. Thank you and just kind of a quick follow up and I know you just talked about a little bit of a burnout and staffing issues and stuff, but if you could touch on that a little bit how helps them is kind of helping the providers deal with these issues.

Can you provide any additional labor on or.

No color on the labor market pressures that'd be really appreciate it. Thanks.

Sure well I think I think that turned out just noted was it's kind of a belief than maybe a current reality, but I do see and have seen some of the market leading large organizations began to address the issue of their workforce by doing things like I mentioned like buying a nursing school to me that's a symbol of the willingness.

Of the market leaders to to invest in the future of their workforce.

And of course that bodes well for us because we're all about the tank.

Painting developing credentialing.

And port that workforce to be more successful in their in their role and.

I would just say that they'll need to awaken to the need to the extent that they haven't already to invest to invest in their workforce and it doesn't mean, just education that means all things related to the benefits flexibility. So theres a path, but also in the outright training and development of their skills and development of the career path.

We're past for nurses have been fairly flat over time.

Become a nurse and you're a nurse your whole life.

Business, where you become maybe a director senior director at AVP of V. P and I think the organization, we need to find new ways of recognizing.

Skill promotion and.

Differentiating our core.

Holly and good decision, making by their staff and then that resulting in better pay models and paying the talented people more so all of that.

Bodes well for <unk> as we help distinguish the high quality nurses that are able to think on their feet and get better patient outcomes.

Able to identify gaps with our gene technology and their skills and their thinking processes, and then remediate them with intelligence AI driven recommendations. So I think we're well positioned for the future as organizations wake up the need to invest in our workforce.

And the shortages are acute.

We've seen a boom in the travel nurse industry because.

The the inability to retain and attract will keep full staff. So the staff bed counts have gone down.

And only the largest organizations are able to kind of keep everything running the way they want to so there's a lot of staffing issues that they have to work through and mainly theyre going to see price inflation.

Their staff in the coming year, if they don't find ways to develop their own staff and retain them.

Okay.

Perfect. Thank you I'll jump back in queue.

Yeah.

Our next.

It'll come from the line of Matt Hewitt from Craig Hallum, You may begin.

Yes.

Good morning, and thank you for the broad base to update. This morning. My first question relates to your employees some of the challenges that you've been finding but now that you've moved to more of a hybrid model or in many cases, maybe even just a fully remote with the occasional travel to meet up as a team is that allowing you to recruit nationally.

Italy and if so.

What types of barriers or challenges does that present.

Well there are just so many things.

It was it was.

A culture, where we got together a lot and of course worked out of offices almost.

We are a majority focused in the office and we.

I spent a lot of money and time through our teams to celebrate successes recognized peers onboard new employees in a face to face setting and of course, the last 16 or more months that we haven't done that and so what we're kind of declaring while we've closed leases. We've gone from like 11 leases will be down to like three or four here soon.

We're doubling down on the big resource centers in San Diego Bolder and Nashville.

And which are well positioned across the country to convene employees, but the cost of convening, let's say each division gets their division together for a three day retreat now annually, we didn't do that before.

But we want everybody to come in and centered around one of our resource centers have a three day retreat, where they would recognize new employees.

Awards to those.

Hit milestones.

So onboarding new employees do a day of strategic planning and the cost of that will be higher like it is like a national sales meeting several times a year for each division.

As we think differently about convening, but but I think it's essentially investments like that to maintain our culture and our culture is what's attracting talent to our company. So we have experienced higher turnover of departures I just think that people that had been somewhere for four or five years or more they put their head up and thought maybe they want a life change and they look out.

Try to see if they can find greener grass, even if you're part of a great company. I think there are variables that are beyond just even if you love your colleagues and peers and we hear that a lot and someone says well I just wanted to try something different.

Bloodhounds stream loved the colleagues great news there is I've seen a couple come back already and they kind of went up went astray in my view and decided to come back. So I think that turnover will settle out I think we'll be positioned to be in a better vision than other companies as it does and as I mentioned in the call earlier.

Will you continue to hire an incredible rate. So as people are leaving we have excited people wanted to join our vision because they want to they think health care is a great place to service humanity and kind of live out of personal life mission, along with the work life mission and so we've attracted great new talent, but the net effect of all of that.

It's been a fairly flat head count.

And.

One of the reasons for our financial outperformance is because because of that we had expected to add a net of over 100 employees throughout the course of the year.

To do that with kind of a hard one one and a half lost one and so you know.

I hope that the turnover reduces so that the new hires take hold and we can get our staffing levels up a little higher but I think we've determined at this 0.3 quarters in that we're not going to catch up in our numbers. This year. We're just maybe look the slowdown in the turnover rates as we enter next year and continue the hiring and and have some people will start to return to help stream without do fully.

Expect them and get out of this loop of the great resignation.

Understood. Thank you for that color, maybe one other one.

Additional question here.

Trying to nitpick, obviously it was overall very good quarter.

Look for solutions was down sequentially.

Was there anything that hit in Q2 that was maybe more onetime in nature that we.

We didn't see recur here in Q3, or what kind of drove that.

Albeit very small, but it just normally used to seeing a sequentially up you used to seeing a sequentially up for workforce.

I'll, let Scott he got out.

I'll comment on that for you. So I think in the maybe the last call.

A couple one time items that were benefiting our revenues in the first half of the year. So we saw less of that benefit in the third quarter.

I think you know each quarter, we saw a little bit of that occur.

Less of an impact in Q3 than we had in Q1 and Q2 and mainly that's the legacy resuscitation continues to.

Dwindle down.

And then the second one is just some onetime software for or perpetual license sales benefited from some of those in Q2.

In Q1, but.

Less of that in Q3. So those are primarily the two two driving forces behind the sequential decline that you saw.

Got it alright, thank you very much and.

Keep up the good work thanks.

Yeah.

Our next question will come from the line of Richard close from Canaccord you may begin.

Yes. Thank you Scotty can you go over the acquired and organic percentages again.

Just a clarity that was total revenue that you gave it for.

Yes, Richard I.

Like I spoke about consolidated revenue growth once you back out the impact of the legacy resuscitation long lived.

When they get to the number real quick and I'll repeat it for you I think it was.

Yes.

What 10, and a half on workforce I'm, sorry, 10, and a half the total.

That was organic and then $13 seven from acquisitions, so roughly 24% thereabouts in total.

Okay, and then on schedule winds all in workforce right correct.

Yeah, that's where it is okay great.

Great.

Thanks for the clarification there so are we.

Bobby maybe with respect to turnover could you give.

Sort of maybe characteristics of the individuals that are leaving in terms of is it any one department like sales product development.

And then like the experience level.

Are these like long tenured whole streamers or have they been.

Been there a short period of time anything along those lines.

Sure I would say.

And our group of what I guess I would call our a b piece Vps and senior Vps, So the top 50 employees.

I am extremely low like I think.

The one that I can identify it just there's just indicated the desire to come back for the company.

So that's the good news there on the leadership front now maybe leaders take longer to reevaluate opportunities and decided to leave so I don't want to say that that's a done deal that we've kept all of our leaders.

But but that is the fact currently right now in the leadership group, that's it's very very low.

And as I mentioned, the one that I can think of that left is is indicating a dialogue to come back already so.

What's fascinating and then but but saying that so that's 50 or 1060 employees. The other thousand employees I would say, it's just across the board its turnover in the new employees that came in for a few months I'm going to try something different I don't know that just made it more mobile younger workforce at some.

The veterans.

In all departments.

You'll see it like if it's one person gets recruited away to work somewhere in a department then maybe they they.

That recruiter and that team comes back in and grabbed a few more from that department.

And sometimes this resulted from a pay raise or a rumor that's going to be a better more flexible job. So I think it's just kind of broad based and it's a result of people reevaluating their work life and try and decided to try something new and I can't identify any single area, but I would say it's kind of.

Equally high in all areas from sales operations and across all experience levels. So we'll introduce a challenge right. When you have that much change in all of those levels of experience.

Now what it's resulting in there there's a lot of internal promotions, which is exciting. So people are willing to stay with us are assuming new roles like if there are five project managers and one of them leaves then they might be a new team lead out of the four that remain and then we backfill them higher new project lead.

Tremendous amount of promotion coming out of our service groups as we promote.

Someone who has been three to five years in our customer service areas and the operation support so there's upward mobility, that's resulting in new employees coming in but there's also that outflow and it's balanced Richard I'd have to say.

It's hitting every operations function of the business.

Kind of in little ways like a couple of salespeople lead in a couple of operation people leave.

And so it's just balanced.

And if I could just slip one another housekeeping just for clarification. The 47 customers on Credentialing are those totally new credentialing customers or does that also include the conversion of the legacy.

It's both and I think the ratio of half and half and so it's those that are upgrading to and those that are brand new too and.

I'm going to watch my text from some of my officers he makes sense, but.

Hopefully you still listen although this called long.

I think it's split across the 2% to 47, there they're new to the credential stream platform, but some are migrating them kind of make it correct on that next few seconds, but if not we'll stay with that.

Okay. Thank you.

Have a good day.

Yeah.

Thanks.

Our next question on complying with Vincent <unk> from Barrington Research you may begin.

Yes, Bobby a follow up on the last question.

The transition to the various scream from existing clients.

That does that make you meet your expectations in the quarter.

Yeah.

Hang on I'm text me at all if you get a better answer so yes.

They exceed expectations I think.

A couple of things we've learned is that it.

As long as the customer stay on the older platforms until they're ready to migrate theres not a huge huge cost benefit from the migration. So we're really happy if they stay happy and they migrate when they're ready to store. There's no forced conversions here. These are elective when they see enough features to move and so what I would say.

Seeing a material number of them decide that theres enough reasons to move such dues.

I'm excited about that and then of course, the new accounts that we're winning are fantastic because they are in rfps and we're competing and we're winning.

Proportionate share of the open pit.

And so we're really excited to see that trend and so both of those trends are encouraging we're not forcing transitions, but we're getting them.

And and we're winning in the open market.

And.

On the labor side.

We continue to see.

Moderate wage inflation.

Well, so so far.

It has not been tremendous wage inflation in other words, we've been able to promote internally to fill a position loss. So someone may get a raise because they moved from a team participant to a team leader a team leader leaves the company, but overall, we've been able to reasonably fill the open positions at the similar salary bands previously which is ironic.

At some point, we're going to see wage inflation because people that are leaving are leaving to get a promotion or a market themselves into maybe a better higher paying more spot job with more responsibility.

And if we bring them back they'll come back and be more expensive, but right.

Right now on the whole I'd say, we're filling and only slight increases in the total net cost.

Okay. That's it for me thanks.

I think that's because of our approach to promoting from within so so as a manager leaves.

Often are able to pick someone to promote into the manager position then backfill to the lesser experienced position with a new person and so I think that upward mobility has helped us a lot in kind of maintaining our cost structure, but what it means though is you got to do a lot more hiring at the entry level and you have to rely on the entry level and.

One thing that might be happening a bit as we as we drain the entry level pool in other words, if you'd been in customer service for two years, you are eligible for motion to a manager.

And we passed all the people it gets harder to fill the experience levels at the same cost as it makes sense and so.

Our first with our first wave, we've been able to maintain flat costs, but I do expect things to maybe start to creep up on us in the next year and then a quick update on the question that Richard close has 47 31 of them were new customers and 16 were migrations. So two thirds of the 47.

We're.

New a brand new accounts to help stream on the Credentialing platform and 16 of them more migrations.

Yeah.

Yeah.

This information thank you.

Thanks, Matt Thank you.

Now I'll turn it over to Robert Frist for any closing remarks, since we don't have any more questions into Q.

Well I imagine, we scared off the questions by going for an hour I appreciate anybody stuck it out this long hopefully the detail was informative and we look forward to put the transitions behind us and speak to the three application sets in a single platform company, we're becoming in the Paas architecture, we're deploying couldn't be more excited and thank you all for participating look forward at the next earnings call.

Yeah.

And this will conclude today's conference call.

You may now disconnect have a good day.

Yeah.

[music].

[music].

[music].

Good morning, and welcome to the house streams third quarter 2021 earnings conference call. At this time I would like to inform you that this conference is being recorded and that all participants.

In listen only mode.

So the company, we will open the conference up for question and answers. After the presentation I will now turn the conference over to Margaret Kaczor, Vice President Investor Relations and Communications. Please go ahead Ms Condra.

Thank you and good morning, Thank you for joining us today to discuss our third quarter 'twenty 'twenty. One results also in the conference call with me are Robert a Frist, Jr. CEO and chairman of Hill stream, and Scotty Roberts, CFO and senior Vice President.

Also I'd like to remind you that this conference call may contain forward looking statements regarding future events and the future performance of Gulf stream that could involve risks and uncertainties that could cause the actual results to differ materially from those projected in the forward looking statements.

Information concerning these risk and other factors that could cause the results to differ materially from those formal 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.

Abel providing supplemental information on adjusted EBITDA and reconciling to net income attributable to L. L. Street is included in the earnings release that we issued yesterday and they referred to in this call.

So with that start with at this time I'll turn the call over to Bobby Frist.

Thank you Mollie good morning, everyone and welcome to our third quarter 2021 earnings call.

Contact is important as we start the earnings call. So I'm going to give a brief update on our perspective on Corona virus, the coronavirus pandemic United States appears for the moment to be in retreat.

And particularly in the markets, where we practice.

And in the business, where we operate since the start of September daily cases have dropped by a third in daily hospitalizations have fallen by more than a quarter and according to the CDC approximately 58% of eligible adults you guys had been fully vaccinated.

As of October 22nd is that number.

As of October 22nd half is that number rises we are hopeful that progress towards beating this pandemic will continue I shared some of those logistics to just think through the impact on businesses and.

A meaningful part of the context is the the long medium and short run impact of Covid on our business behaviors and therefore, how we plan and our expenses and allocate our sales organization. So I want to speak to that for a bit the long run impact of Covid on all business is still being determined but we can already see some of the permanent changes that are taking.

[noise] effect inside of our company.

Like many companies for example, we have adopted a hybrid workplace approach, especially in this is from a company that was really an in person company for for most of our existence and now we have a full on hybrid workplace approach in fact, all of our offices and resource centers remain closed at this time, but we expect open them.

By year end.

Office will function as as a resource centers to employees, which is a little different than taking them as a place to work.

And in those resource centers will hold the strategic planning meetings events and other special meetings recognitions for employees. The things that helped define our culture that are important and will ask employees to travel for those events. So it would be a little different than in the past.

But where work from an office will be elective.

But travel for events might be required to be part of developing our culture as a company.

We have learned new ways of selling that incorporate virtual technology to a greater extent and our customers have embraced this approach as well so while travel for our sales teams will pick up from the near zero levels of the last 16 months I wouldn't anticipate that they would occur at the pre pandemic level I believe our travel expenses pre pandemic word near.

$5 million, a year and I, just don't see them getting back to that levels. However, as we noted the impact of Covid on our Workstyle. We may see travel expenses go up for business related to what I'll call cultural building and goal setting and performance management meetings by teams team leaders and managers across <unk>.

And so it's an interesting dynamic where maybe a sales business travel may go down but.

Because we're a fully remote workforce are we.

It might have some mandatory meetings that are cultural development oriented bringing on new employees.

Gathering employees celebrate accomplishments.

So travel expenses May go up and it knows more elective categories historically.

So it could be interesting dynamic they figure out how that all plays out and what level each returns based on the new work styles.

And so another impact it's we're all assessing now across each company is.

I guess, what's been dubbed the great resignation I think Covid has made many people, including health streamers reevaluate their personal and work life.

And for a variety of reasons.

Most of which are indirectly attributed to the events of the last 18 months or Covid.

Companies are seeing turnover at record levels and these are companies of all types of other Ceos I speak with are experiencing very similar turnover issues.

So how stream is no exception to that but what's interesting is that as people look up a heads up from other industries. They find health stream and enticing place to work and so we've experienced record levels of hiring in the last 12 months, but also very high levels of turnover and the net impact of that is a nearly only slightly positive head.

Count increase across our organization and I think earlier in the year, we had anticipated being able to have the net increases net of turnover to be much higher maybe as much as 100 more employees than where <unk> been able to achieve through our hiring in the first three quarters.

So that's resulted in lower expenses than maybe we had hoped to have in other words lower investment levels and people.

We have had net hiring positives.

But they're almost marginal compared to our expectations as we entered the year and that has a direct impact of I guess, what I'll call. The great resignation, along with others that have written about it.

And so again, it's just really strange dynamic where are we.

We've never had more people interested in working at how stream because they're reevaluating their work life from other places and we've got these highly energetic new employees coming into health stream that are ready to start a new career, but also some of our employees are evaluating their work life and health stream and Theyre changing locations, what's really exciting to me is I've seen several of them are.

On the way back downstream after six months.

And so the great designation is something that we all have to work out and the result has been higher turnover and lower expenses than we had originally planned and so a little better financial performance attributable not necessarily to good things, but two things like turnover and and and also some maybe longer run challenges.

That are created by not having the staffing levels that we had expected to have and we kept every quarter trying to increase the hiring rates and again incredibly successful at hiring but now what we need to see is that the turnover rate slowdown and I'm hopeful that in the next quarter or two this will settle out a little bit and we will continue to get hiring a head.

Back in the right direction on hiring.

So I wanted to talk about those short medium and long term impacts on Kerala, they create quite a challenge for forecasting even though they're there.

Because of the nature of work has changed the nature of travel will change.

The nature of where people want to work and how they want to work is changing and I think <unk> will be in the long run a net benefactor of all these changes the virtualization of the workforce, we've been highly successful at running our operations and building our business.

But.

Like all of you know when major challenges a car like this pandemic creates.

Creates different gaps and how you're operating your learning curve and can result in an operational challenges over time. So we're working through all those.

Present time.

So I'd like to spend a few minutes.

Talking about our financial performance and turn it over to Scotty and maybe some context for our financial performance.

First I have just a few of the highlights.

Yeah.

So to AD lib somebody's modal off scripts and I'm back on.

Top line revenues increased by 5% increase in adjusted EBITDA and a 15% over the first nine months of last year. So revenues, 5% adjusted EBITDA, 15% over the first nine months of last year. So again solid financial performance again in the third quarter. The third quarter revenues were $64 1 billion, which is.

5% of the same period last year. This quarterly increase reflects the substantial growth that was necessary to offset and rise above the previously announced anticipated headline of the $9 $2 million decline in the quarter and legacy resuscitation revenues and so again, we've talked about this for almost three years or more.

The decline of the of a partnership in this legacy resuscitation revenues. So in the quarter, a negative $9 2 million and that's one of the last quarters of material impacts for these declines.

But.

But we were able to overcome that and deliver 5% growth from a mixture of organic and inorganic work over the last year or so fantastic to deliver growth in the face of such headwinds.

Based on these results we've updated our financial guidance for the full year. We now expect revenue for the full year 2021 to be in the range of $255 5 million to $257 5 million.

So we've kind of lower we've increased the bottom of the range would have a little more confidence in the range than the higher end of the range I believe one of the most remarkable things about this guidance we are projecting revenue growth. Despite a anticipated full year impact of $38 4 million in revenue decline from the legacy resuscitation products. So we began the year knowing they would have a.

$38 4 million dollar hole to fill and I'm really proud of our teams.

The types of growth we've delivered on lots of exciting new products acquired products as well has been really fantastic. So again I'm excited about that result.

We also had a negative impact of $4 million of acquisition related deferred revenue write down so we overcame that as well and I guess that revenue.

Deferred revenue write downs that happened that'll come back in over the course of the next 12 months into our revenue. So that's a good thing help put a little growth into the future.

Additionally, we now expect EBITDA for the full year 2021 to be in the range of 51 to 53 million that's up from our last expectation of $48 million to $50 million does announce last corner now some of that continued outperformance is based on our inability to hire again, we do have a net positive hiring.

So we are not growing our head count just not at the levels. We had expected. So I'll just kind of comment again that there's kind of this lag effect of Covid as we worked through the great resignation and again I want to emphasize.

Really a record setting levels of hiring new excited employees and the health stream and the outcome is a net positive add head count. So we're not declining by any means but we're also not adding as many as we had hoped.

So some of that outperformance is attributable to that change.

Net hiring.

There are some unique factors that have helped contribute to the increase in adjusted EBITDA and I'll comment on those.

For example year to date revenues benefited from legacy resuscitation of perpetual software sales, which we expect will be less impactful during the fourth quarter. So there's a little bit of leftover legacy revenue that was maybe more than expected and a little bit of perpetual software sales from some of the acquired products that we're trying to move to SaaS and subscription.

<unk> selling hopefully soon in the next year.

And so some of that will be not repeating in the fourth quarter. Additionally, the macro workforce trends, which I've covered in great detail made it difficult to increase head count as quickly as we had planned.

So we now anticipate that in spite of three quarters. We're trying we're going to just say, we expect that trend to continue through the end of the year. So we probably won't be able to make up all the hiring plan throughout the year and the remaining quarter in our new guidance reflects that that assumption.

So.

We will continue.

The head count increase we projected as I, just mentioned to be essentially flat or slightly up for the for the fourth quarter. So only a slight labor increased costs during the fourth quarter in our new guidance reflects all of these things that I've talked about.

Now I want to shift gears and talk a little bit about what we've talked about the last three years, we talked about these key transitions and the transitions were all define an effort to create a higher growth and higher margin profile company that'll be more profitable to shareholders and the great News is this is I believe the last call.

Which I'm going to.

Ill talk about in detail the transitions and the reason for that is that I feel that.

Over the course of this year, we have really worked through the transitions and the word transition implies some kind of maybe exceptional operational risk or business risk and I feel we're through the exceptional period of risk on these transitions in other words each of the three transitions. We've talked about has hit a milestone in my mind I'm comfortable saying you know.

Their business risks associated with the growth of these new product lines and undertaking by the company these transitions, but theyre no longer.

Essential risks major risk to the company and the way that they might have been say 18 months ago. When there were so many unknowns about these so let's look at each of those real quick and put them to bed. So we don't have to talk about them anymore and after Scotty presents the financials I'm going to spend a little time talking about the new go forward paradigm of talking about the company instead of this older paradigm of.

Planing these three transitions.

So let's look at them one at a time.

First of course was kind of proving the market's acceptance of the the new resuscitation suite program with the American Red Cross and it and the second was the establishment of a new functional area with the Verity stream SaaS based applications as you remember we acquired several companies over the last several.

Years, and we had launched a new set of applications for Credentialing, privileging and enrollment and Theres a lot of question, we launched new products about the market acceptance.

I'm here to declare that the market has accepted the new Verity stream SaaS based application we call credential stream.

So.

And the third is the technical viability of our new platform architecture known as H Dream. So here. We go let's put all three of them about the market acceptance of our new innovative resuscitation solution has been established as evidenced by our sales of the American Red Cross suite to customers in each of the 50 states of the United States of America. So the program has established the credential is accepted.

The sales team are closing new business every week and and you know this concept that maybe the market wouldn't accept the second solution is gone now we've moved material market share to the American Red Cross and we will continue to sell that product in the coming years and months under a long term partnership with American Red Cross and we will continue to innovate.

But it's no longer a question. The same question, we had two years ago was well anybody by it.

Well anybody except the credential of professional credentials from the American Red Cross and I guess I'm here to say today that.

That does not only been accept that's been embraced and the cutting edge organizations are moving to this newer more adaptable technology that we've introduced with American Red Cross and it continues to win new business in our market. So I'm going to put that transitional risk Tibet. The risk now is just how much can we sell and then can we continue on.

A great trajectory with this partner and I think the answer to both of those is I'm excited that.

It's gonna be a great product into the future.

The second.

Adoption of our market, leading SaaS based credentialing privileging and enrollment application.

And I think now with nearly 440 customers under contract and many of them are implemented and live and many of them are referenced are all accounts I think we've established that this newer platform, we built which was the best of breed from our four acquisitions is both accepted as customers migrate to them from the legacy platforms and.

It is new customers selected an open RFP bids and competitive bids where I think we've built now.

Application set of choice in the industry as it relates to Credentialing privileging and enrollment so again the risk clubs, we acquired four companies, we built a new product and try to move customers to and it didn't succeed I'm here to say that that that that level of risk is behind us of course, theres a normal market risk to competition and can we continue with this.

<unk> position, but with 440 contracts.

Customers migrating and most importantly, the new Rfps being issued we think we're gonna Atlanta disproportionate share if a if an organization of scales as bidding out privileging enrolment and Credentialing services, we think our new credential stream platform is going to win the day.

The third is the technical viability, we've been talking for quite some time now and hired a new CTO four years ago to lead the charge on building a new technical infrastructure that will make all of our applications more interrelated will make data more portable across our application offerings.

And allow us to do really wonderful new service and application development as the platform gets established and so I'm here today to declare that the platform is real it's operational we're releasing new functionality at the platform level and.

That platform level capabilities being extended into our application sets.

At an increasing rate and so I think the concept of well <unk> been building an R&D. This this underlying platform will it be viable.

I'm here to say today that it is a viable platform and there's always more to build a giant a great vision in front of us of what we want to do with it but I believe we're well along our way to having both a new platform underneath health stream that unifies many of our capabilities and gives customers more reasons to acquire our applications.

Yeah.

And unifies us as a single platform company with multiple applications linking to it and it also makes our architecture more extensible to third parties and so im here to declare I'll tell more detail about it but the platform is real we won't be talking about it as a transitional risk we are selling in licenses when.

Someone acquires an application for Gulfstream, we're embedding a license to the platform.

And again I'll talk more about what's exciting about that in a few minutes.

This concludes a nearly three year journey of talking about the three transitional business risks. We can now start to talk about our new applications. The new markets. We want to proceed with.

And in a new paradigm for talking about our company, which I'll cover after I turn it over to Scotty Roberts for a detailed look at the numbers Scotty.

Yes, Thanks Bobby.

Happy to report, we had another solid quarter of financial performance and we're firmly on pace to achieve record annual revenues and adjusted EBITDA for the year, both while overcoming a $38 million revenue headwind as we entered into the year.

On a year to date basis, we've been able to grow revenues by 5% and grow adjusted EBITDA by 15%.

For the third quarter revenues were $64 1 million, which is up 5% over last year and includes an $800000 reduction associated with deferred revenue write downs.

Operating income was $1 $8 million were down 43%.

Net income was $1 5 million also down 43% and EPS was five cents per diluted share down from eight cents per diluted.

Share in the prior year.

Adjusted EBITDA improved to $12 5 million, which is up 11, 5%.

Workforce solutions revenues were $51 2 million.

We're up 4% and revenues from our provider solutions were $12 9 million and were up 10, 7%.

On a consolidated basis, we grew revenues by 5%, while overcoming a $9 $2 million decline from the legacy resuscitation business.

Revenues from recent acquisitions and growth in our core business more than offset this decline.

When you exclude revenues from the legacy resuscitation business Consol.

Consolidated revenues grew by approximately 24%, which was comprised of 10, 5% organic and 13, 7% from acquisitions.

Our gross margin performed as we expected coming in at just under 65% for the quarter.

And our operating expenses, excluding cost of revenues were up 15% or $5 3 million over last year.

And about two thirds of this increase relates to the operating expenses from the acquisitions that we completed but primarily in the fourth quarter of last year.

Our G&A expense during the quarter also includes a charge of about $350000 related to closing several leased satellite offices that we have that will expire next year.

Okay.

Our adjusted EBITDA was $12 5 million, which is an increase of 11, 5% over last year.

And the EBITDA margin was 19, 5% compared to 18, 4% last year.

Cash flows from operations improved to $36 4 million this year compared to $30 8 million last year.

DSO also improved to 40 days compared to 43 days last year.

And free cash flows were $17 3 million versus $16 7 million last year.

Our cash and investment balances increased by $5 4 million in the quarter and.

And were $60 6 million at quarter end.

Capital expenditures incurred for $5 6 million for the quarter.

Up to $16 $8 million year to date.

After another strong quarter of financial performance, we have updated our financial guidance ranges as follows.

We expect consolidated revenues to range between $255, five and $257 5 million.

With workforce revenues forecasted to range between 205.

$206 5 million.

Provider revenue is forecasted to range between 55 and $51 million.

Adjusted EBITDA is now expected to range between 51, and $53 million and we expect capital expenditures to range between 25 and 26 million.

Our financial results continued to benefit from lower expenses than our previous guidance had anticipated.

As was the case in the first half of the year employee turnover remained higher than our normal experience, which we believe is consistent with employment trends facing most companies across the country.

Although turnover has been higher than anticipated we've been able to successfully fill open positions. The total head count has remained relatively flat over the course of the year.

Which has led to lower staffing levels and personnel personnel costs than we had planned.

Sales performance was also steady during the quarter.

Started to experience some challenges related to the resurgence of Covid.

And the impact of employee turnover that I just mentioned.

Consistent with past experiences the ongoing impact of Covid on our customers continues to cause some delays and uncertainty in their purchasing decisions with us.

So it's not across the board.

We have experienced longer sales cycles and delayed decisions from customers with high Covid patient admissions.

We're also monitoring several other challenges our customers may be facing such as vaccine mandate.

Nursing shortages and overall staff turnover.

Which could impact their operations and their financial condition.

And as for the impact of employee turnover on our sales production.

Losing quota carrying reps midyear and Onboarding, new hires presents challenges to achieving our goals for the year.

Although as we enter our busiest sales quarter. Our teams are focused on finishing the year strong.

That concludes my comments for this morning. Thank you for your time.

I look forward to providing updates on our full year 2021 results and guidance for 2022 on our next call.

Bobby I'll turn it back over to you.

Yeah.

Thank you Scotty, it's kind of an exciting pivot point for me now talk so long about transitions to all of you that have followed along our store, including our key analyst and now want to kind of begin the orientation process to the future and how we're going to talk about the business as we go forward and so let's get oriented a little bit the first is overtime.

Over a long period of time, we have talked a lot about.

<unk> platform and the Credentialing platform and.

Inside our company and now to the outside World, we're going to communicate differently, we're going to.

Correctly identify all of those as a software applications or application suites, and there's only going to be one platform at health stream, that's H screening and so on a go forward basis, let's think of health stream helps stream the company as a one platform company eight stream is the platform and we have developed multiple sets of applications.

Is that run and ultimately over time will increasingly connect to and leverage the single platform and so you'll see US correct ourselves often in the next year or two as we changed from calling it the learning platform to the learning application set or the learning application suite or the learning application in the Credentialing platform.

I'll become the Credentialing application suite or the Credentialing application and the scheduling applications. So there'll be a shift but it's important because it indicates the intent of why we're building H trimmed to underlie interconnect and enter late all of the application sets that we offer.

And so we feel we've made enough progress now to make that declaration and begin to change our own internal language health stream and therefore, the way we talk about it with you. So we will have three primary application suites. They are learning and development. So we have a whole suite of applications to help manage the learning development processes.

Health care organizations, the second is Credentialing and privileging and again, it's a suite of products and a growing suite of products that includes products like credentialing, privileging and enrollment, but it'll be known as Credentialing and privileging application suite.

And then scheduling and capacity management some of our newly acquired companies.

We've talked a lot about the scheduling application area and so the 30 year old scheduling and capacity management, So interview learning and development Credentialing and privileging and scheduling and capacity management are the three different at one point and called them legs of the stool, but now I'll call them application suites, and the reason we called him applications because increasingly.

We expect them to connect to each other through the platform and connected to the platform and leverage platform level of services that were built into the new core H stream platform. So we're excited to kind of make that transitional began that transitional journey now in this important dialogue.

Also many years ago as you remember we dropped a metric that we had when we measured the subscribers and subscriptions to the them learning platform.

Because we had new set of applications that are growing and we began reporting the number of subscriptions sold to H stream and it's my expectation in the coming year or two.

That every application will sell with a license or a membership to the platform and we've begun that journey by bundling. Our every sale of the learning architecture. The learning application with an H stream license and we've begun that journey by selling every new credential stream sale.

A subscription or a license to the H dream for Verity stream platform and so it's very exciting that those two applications. We feel are interconnected enough or reliant upon or providing that value from the platform level that that we can add and sell those subscriptions. So we <unk>.

Been reporting subscriptions data stream and we added 400 in 2008 stream subscriptions in the third quarter, bringing our total to 492 million subscriptions.

This represents an increase of 29% over the same period last year and the growth in subscription is encouraging.

But I wanted to talk a little bit about the growing power of the eight stream platform itself like what is it going to enable us to do.

So I thought I'd walk you through an example.

And so you can understand how it's evolving and what what we hope to do with it.

Remember each of our applications already works well on its own it's an independent application, but with H dream or applications are beginning to work even more powerfully together one critical reason for this is our new identity management service, we call. The H stream IV again, thats part of the H Dream platform as the H Dream I'd increased.

Increasingly the extreme idea allows data about an individual to be used across our various applications instead of remaining stuck inside of a single application.

New level of mobility and identity management adds value to the applications and also adds value to the data itself.

If you think about all the time and expense our customers go through maintaining license data on their employees. For example, you can start to appreciate the value of the H Dream I D.

So the eight stream platform license data unemployed can now enter through the H L. C. The learning application be validated by a verity stream application and trigger our.

My team application to inform managers when their employees licenses about to inspire expired. So what you see here is by linking the identity of people in the various parts of our ecosystem on the different applications. We can provide a service for example are validating our license only existed in one set of applications.

To where the data is maintaining and stored in another application. So the example, I just gave that portability creates kind of an interchangeable service validating licenses.

Using some of the features and functions of Verity stream and some of the distribution and access to the resultant data.

Center application.

So in this example, the learning Department, a compliance department and the HR Department all benefit from the extreme Ids ability to move an individual's licensed data across applications and enhance the quality and value of the data throughout the journey.

Coming here and we look forward to providing additional updates about the growing power of H stream as our definitive platform.

So now I'd like to provide some business updates regarding the three application suites, let's start with learning and development are most well established application suite.

Our oldest but also in many ways some of our precious things are coming out of the learning and development like the <unk> platform.

The company's origins trace back to improving learning and development through technology.

Which is what these applications focus on today the past two years have been characterized by a great deal of innovation across this area, including the release of our patented AI driven clinical competency application known as Jane Istar.

The establishment of a new industry standard in resuscitation certification with the American Red Cross Resuscitation suite.

<unk>.

The combination of our knowledge Q and safety Q solutions to form what we believe is the most dynamic governance risk and compliance solution in the market today.

So we're really excited about the continued evolution of the core <unk>.

<unk> and products of the learning and development area of our business and it's exciting to enter the next year with the innovations either in the market or entering the market as we speak the Red Cross innovations.

Our fantastic we created special technologies to empower the Red Cross program like our interval technology.

Which allows organizations.

Unprecedented level of flexibility in deploying the Red Cross resuscitation application and programming set.

We built platforms are applications like Jane that bring.

Bring in the dimension of AI into the decision, making and critical review of critical thinking ability of nurses.

And we've updated what was once our core business and regulatory compliance to the new standard of micro learning.

And assessments and benchmarking services that can exist anywhere else by definition, because we have the largest network over 2 million subscriptions to our our legacy.

And now our newly refined.

Compliance products and <unk>.

<unk> training products, so really excited to have such a complete solution set.

That we think can have an impact of course, the governance risk and compliance areas of health care organizations across the country.

I'd like to focus on two of our resuscitation offerings, maybe a little more detail about two of the products that are in this learning and development category The American Red Cross resuscitation suite.

We already mentioned that we've sold to health care facilities of all types and all sizes from across the continuum of care in all 50 states.

The industry's largest acute care health care systems and organizations have made wholesale switches to the American Red Cross resuscitation suite, and we think it's because of the combination of the technologies <unk> has built to enable flexibility in the program and the incredible investment and high clinical quality of the program itself built credential by the American Red Cross.

So it's a combination of our platform and our applications with their content and certification that has resulted in this industry changing.

Our program.

In fact since as of September 30th we have over 334 340000 certifications have been delivered to the platform. So remember we just began selling this 24 months ago.

And it took time to implement and switch customers over but now the rate of completions of this Red Cross program is really quite staggering and we just passed the 340000 certifications delivered and again with the rate of consumption is just fantastic. So that's going to continue to climb very very rapidly.

And what's fascinating is the solution required that we deploy over 7000, new high Tech Internet connected mannequins.

Company called in the Sony and the Braden Pro mannequins and what's great about those Americans is that they're they're they're they're modern they provide visual feedback to the user of the internet connected and they use the ice cream I D. So we mentioned earlier about the power of the <unk>. So the data collected through those those applications.

Mannequins that is kind of skills reporting data on the employees goes into the eight screen cloud services and becomes mobile and portable in that way and so anytime.

Anytime someone anywhere in the world logs into the App that connects to that Braden probiotic and by Amazonian, they're logging in with the H Dream I D, which creates.

This record this portable record on the individuals'. So we're really excited about both the new technology like the Minnesota, Embrighten Chrome Atkins of which there are now 7000 deployed across the globe.

And and how they utilize the eight screen platform to give them, a new power and flexibility.

So I just I believe it is just remarkable.

Option that didn't exist two years ago has gained such widespread adoption. That's a testament to the strength of our sales organization.

The innovations of the Red Cross and innovations of our technical teams to build this market leading product.

From a technical standpoint is just outstanding.

Fact, our scores for pointed out of five stars from our own customers on the implementation process to the change management processes new applications. So we're focused on the operations of the quality of the transition.

And our customers are giving us full pointed out of out of four eight out of five stars during the third quarter on the quality of those transition services. So great job by our our teams that are focused on that solution.

Let's shift gears and giving us great update on on the Credentialing privileging and three years ago, We announced the launch of Verity stream and at the time that was our new SaaS based application for managing the full spectrum of Credentialing privileging and enrollment enrollment needs in health care organizations during the third quarter of 2021 four.

<unk> seven customer accounts contracted for credential stream the new platform 47, I believe in the second quarter. It was around 42% in the first quarter around 45% maybe 46. So really the adoption rate is is is quite staggering of the new credential stream platform, where we're really excited about its progress.

Now the implementation cycles on this product that's more complex than say some of our other application set so it takes longer to get to revenue and there is a bit of a what I'll call them air gap or a bubble from the selling.

That was imposed by Covid to the implementing and so we'll see a little bit more growth coming out of all of those sales in the second half of next year and a little a little bit of what I'll call. These are got bubbles, where we've made a lot of sales and then there was a delay in implementing and the implementation cycle is already fairly long on that product say up to up to 12 months.

And so we're going to see some of the impacts of Covid and the growth rates in the next few quarters.

But the sales have gone unabated, which is fantastic but.

But it shouldn't take us little longer to get to the revenue. So I would expect to see the some of the growth from from all of those sales to really start showing up again, it's a we did a nice growth rate in the third quarter on the on Verity stream and but I think what we'll see is even a better growth rate in the second half of next year. So that's really exciting and I wanted to give you the context for how and why.

But 47, new we call them, new logos, new customer accounts contracted for that credential stream application.

In just 90 days, so it's really a fantastic the sales rate that's happening there and the new wins. So some of the wins include.

Well known organizations like Hackensack Meridian health mainline help Medstar health system up in Washington D. C. Cooper University Health care are just a few of the exciting organizations that are realizing that we have a best in class solution.

For Credentialing privileging and enrollment.

Now.

Let's start application set that we want to talk about is our scheduling and just as we acquired four stand alone companies and Credentialing and privileging and we built a new solution, we plan to use that playbook and do it again and scheduling and so our acquired organizations nurse grid in last nine months shipped Wizard and Ann sauce.

It all happened in the last say 12 or so months.

We're assembling that into the leadership team with a vision to build a market leading scheduling system and we believe we have some innovations in store for the industry that will help make that vision become reality.

And we're early in the early in the journey to this to building. This part of the business at least this application suite. We're early in the journey. So we don't want to get ahead of ourselves. We've got a lot of R&D to do but we're getting a clearer roadmap and I want to share some of that with the transition and integration of the businesses themselves. The operations of the health stream is nearing completion.

So the transition services agreements from the parent companies, we acquired in pharma are winding down which means we've shifted all the relaunched our own servers on capacity. So the basic business integrations are done.

And the organization itself is beginning to grow and assembled a leadership team and growth leadership team. So a lot of progress on the business front on the software front. We've now internally published our kind of our vision and roadmap and our tenants for success, where we're going to begin building and testing the hypothesis that we thought were strategic advantage in the first place.

<unk>.

And it's great because we have over 380 customers to work with associated the acquired companies, we inherited about 380 customers along with some new ones. We won this year.

We plan to show those 380 customers under contract a lot of innovation in the coming 12 months, where we'll be doing exciting things like connecting some of the best in class capabilities of the nurse grid mobile experience into the customers of the and sauce and ship lizard platform. So cat.

Can't wait to show more about that but we're making great progress. We are working on those integration for a while and I think the first wave of innovation out of our scheduling and capacity management business will come as we announced the connectivity of the nurse grid applications that both and source and shift wizard in coming months.

Now, what's really exciting about that is the nature of those products is a little different the nurse grid application is actually a beat us he app available in the Apple App store.

And we thought that its just kind of a growing community of nurses that love this app, which blends their social personal light schedule with their work schedule and we just thought there was something special about how that was happening and in fact, we've seen nurse grid community continued to grow since we acquired it and now we're up to nearly 300.

Third 50000 monthly active users that's up 90000 active users are 35% since our acquisition in March 2020, So that applications continued to grow in its adoption and I remember that's elective adoption, that's a nurse going into the Apple App store download an app and using it on at least a monthly basis 300.

50000, MAA use monthly active users.

46% of those nurses log in every day, that's up 40% from the time of acquisition, which means they use nurse good often and considered to be a valuable resource for managing their personal and professional schedule.

<unk> continues to be the number one rated app for nurses.

The Apple App store, that's a four nine star rating, but 70000 reviews. That's up 40000 reviews from the time of acquisition and so this growing network of nurses that that blends their social and personal calendar with their work counter we think is something special and we think that network that growing.

Network now 350000 monthly active users.

As its linked into the business applications that man scheduling from the business side is going to be a powerful competitive advantage. In fact, we have a vision for how it can enhance the functionality that will be sharing in the coming months as we released that functionality.

So during the third quarter. So some final updates here some events are happening across the company and we'll wrap it up for questions I know I've gone long, but this is an important transition costs I wanted to spend some time on it but there are two kind of events that we wanted to talk about that so our employees can hear and customers can celebrate during the third quarter, we hosted our second annual nurse well being weak.

<unk>.

This amazing a virtual event that was held September 27th of October one and it's a week of engaging activities on the topic of nurse well being is kind of our service back to industry to recognize.

All of that our nurses across the country have been through and over 6500 nurses registered for the nurse well being like activities that we're focused on practical advice from peers and experts on enhancing wellbeing speakers and activities in session. So if part of giving back at health stream.

Very successful and focused on the well being of nurses just a way to engage.

Our future customers and current customers and the nurses that are serving our country. So well through this effort we call a nurse wellbeing weekend. Thank you to the teams. It ran at very strained customers also participate we'll be participating in a virtual two day users Group conference call Drive 2021 event will be on November 2nd and third include keynote.

Presentations and full track sessions for each Verity stream application, including of course credential strain that we've been talking about so this is an exciting conference.

That where we often released data from our proprietary market research about the credentialing industry overall and the trends in it and so thrive 2021 right around the corner November 2nd and third.

The customers are verity stream and <unk> stream.

And finally, I couldn't miss the opportunity to shout out national customer service week, we have over 100 employees and health stream focused on customer service of our over 1060 or so employees.

And those customers those employees differentiate our company every day by the way they manage our customer relations and I'm really proud of how they handle them and our customers love the service they get from health stream will continue to improve our service continuously and innovate how we service the customers, but on national customer service Lee.

The first full week of October It gives me a chance to say thank you to the nearly 100 employees that are customer facing that really try to do everything they can to get rapid response done in high marks for quality both of which they are achieving on a daily basis. So thank you to our customer service personnel cross sell stream they serve as the face of the upstream and we're grateful for the work that they do.

To build customer relations I, you know I don't think you can sell another application to a customer unless you're satisfied with the service they get and.

And I think our teams are best in class and best in the country is taking care of people quickly and get them the answers they need at.

At this time I'd like to turn it over to the analysts for questions.

The question answer session will begin at this time, if youre using a speakerphone. Please pick up the handset before pressing any numbers should you have a question. Please press Star then one on your push button telephone.

If you wish to withdraw your question. Please press star two.

Your questions will be taken over that theory safe. Please standby for your first question.

Our first question will come from the line of Ryan Daniels from William Blair You may begin.

Hey, guys. This is Jack <unk> on for Ryan Daniels first off congrats on the quarter and thanks for taking my question I guess, maybe if you can provide just a broader update on the health of your client base I guess, we've seen some early data points from publicly traded hospitals.

Your volumes are coming back and I know in your prepared remarks, you did touch on the pandemic and seeing that subside a bit.

Possibly translating into a potential devaluation. So just kind of curious if thats something youre seeing broadly and any other color you can share amongst our client base.

Sure.

Certain areas of our client base, so it's kind of a regional impact.

And I'd say their operations through the different waves of Covid had been interrupted which kind of put I know refrigerants little air gap. So if you saw the system and you wanted to begin implementation in certain part of the company country. They may have delayed implementation for 30 60 days as they work through capacity issues and staffing issues and then they get it back on but it kind of put.

All of these little air bubbles into our business with them that said they keep our research in other words, they learned to manage the new norm fairly quickly.

They're more adaptable and how they've managed to say this the delta variant Serge.

More sponsored the good news is they're more treatments out so I think they the exactly as I talked to that run the big health systems have a little more confidence in their ability to handle the pandemic and maybe as you are now in dialogue or moving towards an endemic situation for the pandemic and I that's.

That's my observation is that.

And particularly in the bigger system to their learning to operate.

In a mode that can be successful now they do face unprecedented and I hear this over and over challenges with their workforce, we talked about the great resignation impact on health stream and but in hospitals and nursing.

It's incredible the mobility of nurses are reevaluating their lives they've been through a lot of hard work there, both resigning and changing careers and the executives I've talked to talk about the need to find ways to retain develop we even see some large health system acquiring nursing schools, because they know they have to get into really talent development and retention.

And growth I think that does bode well for our positioning in the future.

But needless to say, it's a current challenge is tremendous has both financial implications.

We're a smaller organization, how do you recruit retain and pay competitively.

And if you're a large one and how do you reduce your reliance on contingency labor pools, which are just too expensive.

So I think over time and the three year window.

The result in more health systems being more involved in the development of their own workforces.

More than they ever have in the past there's deposit but in the short run cost pressures and turnover issues on quality are all going to be real.

So.

Generally I see recovery.

And.

With a few remaining pockets that are still dealing with issues I talked about.

Perfect. Thank you and just kind of a quick follow up and I know you just talked about a little bit of the burn out and staffing issues and stuff, but if you could touch on that a little bit how helps them is kind of helping the providers deal with these issues.

And provide any additional labor on or.

No color on the labor market pressures.

Really appreciate it thanks.

Sure well I think I think that trend I. Just noted was it's kind of a belief than maybe a current reality, but.

I do see and I've seen some of the market leading large organizations began to address the issue of their workforce by doing things like I've mentioned like buying a nursing school to me that's a symbol of the willingness of the market leaders to to invest in the future of their workforce and of course that bodes well for us because we're all about the tank.

Retaining developing.

Credentialing.

And the port that workforce to be more successful in their in their role and so I would just say that they'll need to awaken the need to the extent that they haven't already to investors to invest in their workforce and it doesn't mean just education. It means all things related to the benefits flexibility. So there's a cost but also in the outright.

Training and development of their skills and development of their career path.

Greer passed for nurses have been fairly flat over time.

Kind of become a nurse and you're a nurse your whole life.

Businesses, where you become maybe a director senior director at AVP of V. P and I think the organization, we need to find new ways of recognizing.

Skill promotion.

And differentiating.

Holly and good decision, making by their staff and then that resulting in better pay models and paying the talented people more so all of that.

Bodes well for <unk> as we help distinguish the high quality nurses that are able to think on their feet and get better patient outcomes.

Well to identify gaps with our gene technology and their skills and their thinking processes, and then remediate them with intelligence AI driven recommendations. So I think we're well positioned for the future as organizations wake up the need to invest in our workforce.

And the shortages are acute.

We've seen a boom in the travel nurse industry because.

The the inability to retain and attract will keep full staff. So the staff bed counts have gone down.

And only the largest organizations are able to kind of keep everything running the way they want to so there's a lot of staffing issues that they have to work through and mainly theyre going to see price inflation.

Their staff in the coming year, if they don't find ways to develop their own staff and retain them.

Okay.

Yeah.

Perfect. Thank you I'll jump back in queue.

Okay.

Our next.

It'll come from the line of Matt Hewitt from Craig Hallum, You may begin.

Good morning, and thank you for the broad base to update. This morning. My first question relates to your employees some of the challenges that you've been finding but now that you've moved to more of a hybrid model or in many cases, maybe even just a fully remote with occasional travel to meet up as a team is that allowing you to recruit nationally.

Holly and if so what.

What types of barriers or challenges does that present.

Well there are just so many things.

It was it was a.

A culture, where we got together a lot and of course worked out of offices almost.

We are a majority focused in the office and we.

We spend a lot of money and time to our teams to celebrate successes recognized peers onboard new employees in a face to face setting and of course, the last 16 or more months that we haven't done that and so what we're kind of declaring while we've closed leases. We've gone from like 11 leases will be down to like three or four here soon.

We're doubling down on the big resource centers in San Diego Bolder and Nashville.

And which are well positioned across the country to convene employees, but the cost of convening, let's say each division gets their division together for a three day retreat now annually, we didn't do that before.

But we want everybody to come in and centered around one of our resource centers have a three day retreat with a recognized new employees.

Awards to those.

Milestones.

So onboarding new employees do they have strategic planning and the cost for that will be higher like it's like a national sales meeting several times a year for each division.

As we think differently about convening, but but I think it's essentially investments like that to maintain our culture and our culture is whats attracted talent to our company. So we have experienced higher turnover of departures I just think that people that had been somewhere for four or five years or more they put their hand up and thought maybe they wanted to life change and they look out there.

Try to see if they can find greener grass, even if you're part of a great company. I think there are variables that are beyond just even if you love your colleagues and peers and we hear that a lot and someone says well I just wanted to try something different.

I Love how stream loved the colleagues great news there is I've seen a couple come back already and they kind of limp Linda Lin astray in my view, and then decided to come back. So I think that turnover will settle out I think we'll be positioned to be in a better vision than other companies as it does and as I mentioned in the call earlier.

Will you continue to hire an incredible rate. So as people are leaving we have excited people wanted to join our vision because they want to they think health care is a great place to service humanity and kind of live out of personal life mission, along with the work life mission and so we are attracting great new talent, but the net effect of all that is.

There's been a fairly flat head count.

<unk>.

One of the reasons for our financial outperformance is because because of that we had expected to add a net of over 100 employees throughout the course of the year.

To do that we've kind of hired one one and a half lost one and so.

I hope that the turnover reduces so that the new hires take hold and we can get our staffing levels up a little higher but I think we've determined at this 0.3 quarters in that we're not going to catch up in our numbers. This year will just maybe look to slow down the turnover rates as we enter next year and continue the hiring and and have some people will start to return to health stream without do fully.

We expect.

And get out of this loop of the great resignation.

Understood. Thank you for that color, maybe one other one.

Additional question here.

Not trying to nitpick, obviously it was overall very good quarter workforce solutions was down sequentially.

Was there anything that hit in Q2 that was maybe more onetime in nature that is that.

We didn't see recur here in Q3, or what kind of drove that.

Very small, but it just normally used to seeing a sequentially up who used to seeing a sequentially up for workforce.

I'll, let Scott he's got out.

Okay I'll comment on that for you. So I think in the maybe the last call.

You alluded to a couple one time items that weren't benefiting our revenues in the first half of the year. So we saw less of that benefit in the third quarter.

I think each quarter, we saw a little bit of that occur, but just less of an impact in Q3 than we had in Q1 and Q2 and mainly that's the legacy resuscitation continues to dwindle down.

And then the second one is just some one time software perpetual license sales benefited from some of those in Q2.

In Q1, but.

Less of that in Q3. So those are primarily the two two driving forces behind the sequential decline that you saw.

Got it alright, thank you very much and.

Keep up the good work thanks.

Yeah.

Our next question will come from the line of Richard close from Canaccord you may begin.

Yes. Thank you Scotty can you go over the acquired and organic percentages again.

Just a clarity that was total revenue that you gave it for.

Yes, Richard.

I think I spoke about consolidated revenue growth once you back out the impact of the legacy resuscitation losses.

Let me get to the number real quick and I'll repeat it for you I think it was.

10, and a half on workforce I'm, sorry, 10, and a half the total.

That was organic and then 13, 7% from acquisitions.

24% thereabouts in total.

Okay.

And then just.

Schedule winds all in workforce right correct.

Yeah, that's where it is okay.

Great.

Thanks for the clarification, there so with Bobby maybe with respect to turnover could you give.

Sort of maybe characteristics of the individuals that are leaving in terms of is it any one department like sales product development.

And then like the experience level are.

Are these like long tenured whole streamers or have they been there a short period of time anything along those lines.

Sure I would say.

And our group of what I guess I would call our Avp's Vps and senior Vps, So the top 50 employees.

I is extremely low like I think.

The one that I can identify.

Just indicated the desire to come back when the company.

So that's the good news there on the leadership front now maybe leaders take longer to reevaluate opportunities and decide to leave so I don't want to say that that's a done deal that we've kept all of our leaders.

But that is the fact currently right now in the leadership group, that's very very low.

And as I mentioned, the one that I can think of that left is is indicating a dialogue to come back already so.

What's fascinating and then but but saying that so that's 50060 employees. The other thousand employees I would say it's just.

Across the board.

Turnover in the new employees that came in for a few months I want to try something different I don't know that just maybe a more mobile younger workforce at some of the veterans it's in all departments.

Youll see it like if it's one person gets recruited away to work somewhere in a department than maybe they did.

Is that a recruiter and that team comes back in and grabbed a few more from that department.

Somehow this resulted from a pay raise or a rumor that's going to be a better more flexible job.

So I think it's just kind of broad based and it's a result of people reevaluating their work life and try and decided to try something new and I can't identify any single area, but I would say it's kind of.

Equally high in all areas from sales operations and across all experience levels. So it will introduce a challenge right. When you have that much change at all those levels of experience.

Now what it's resulting in there was a lot of internal promotions, which is exciting. So people are willing to stay with us are assuming new roles like if there are five project managers and one of them leaves then there might be a new team lead out of the four that remain and then we backfill them higher new project lead.

A tremendous amount of promotion coming out of our service groups as we promote.

Someone who has been three to five years in our customer service areas and the operation support.

Theres upward mobility that is resulting in new employees coming in but there's also that outflow and it's balanced Richard I'd have to say.

Hitting every operations function of the business and kind of in little ways like a couple of salespeople lead and then a couple of operation people leave.

And so it's just balanced.

And if I could just slip one another housekeeping just for clarification. The 47 customers on Credentialing are those totally new credentialing customers or does that also include the conversion of the leg.

It's.

It's both and I think the ratio of half and half and so it's those that are upgrading to and those that are brand new to and I think.

I'm going to watch my texts from some of my officers he makes sense, but.

Hopefully you still listen although this called long.

I think it is split across the 2% to 47, there theyre new to the credential stream platform, but some are migrating them kind of make it correct on that next few seconds, but if not we'll stay with that.

Okay. Thank you.

Have a good day.

Thanks.

Our next question on complying with Vincent <unk> from Barrington Research you may begin.

Yes, Bobby a follow up on the last question.

The transition to the various scream from existing clients.

Does that make your meet your expectations for the quarter.

Hang on I'm text me on off should get a better answer so yes.

They exceed expectations I think.

A couple of things we've learned is that it.

As long as the customer stay on the older platforms until they're ready to migrate theres not a huge huge cost benefit from the migration. So we're really happy if they stay happy and they migrate when theyre ready to store. There's no forced convergence here. These are elective when they see enough features to move and so what I would say is at risk.

Seeing a material number of them decide that theres enough reasons to move to introduce them and I'm excited about that and then of course, the new accounts that we're winning are fantastic because they are in rfps and we're competing and we're winning a disproportionate share of the open pit.

And so we're really excited to see that trend and so both of those trends are encouraging we are not forcing transitions, but we're getting them.

And we're winning in the open market.

And.

On the labor side.

We continue to see.

Moderate wage inflation.

Well, so so far.

Has not been tremendous wage inflation in other words, we've been able to promote internally to fill a position loss. So someone may get a raise because they moved from a team participant to a team leader a team leader leaves the company, but overall, we've been able to reasonably fill the open positions at the similar salary bands previously which is ironic no I don't.

At some point, we're going to see wage inflation because people are leaving are leaving to get a promotion or a market themselves into maybe a better higher paying more spot job of more sponsor ability.

And if we bring them back they'll come back and be more expensive but.

Right now on the whole I'd say, we're filling it only slight increases in the total net cost.

Okay. That's it for me, Thanks, and I think that's because of our approach to promoting from within so so as a manager leaves will often are able to pick someone to promote into the manager positions and backfill the the lesser experienced position with a new person and so I think that upward mobility.

US a lot in kind of maintaining our cost structure, but what it means those you have to do a lot more hiring at the entry level and you have to rely on entry level and one thing that might be happening a bit as we as we drain the entry level pool in other words, if you'd been in customer service for two years you are eligible for most of the manager and we've tapped all the people to get harder to fill.

Experienced levels at the same cost as it makes sense and so.

Our first with our first wave, we've been able to maintain flat costs, but I do expect things to maybe start to creep up on us in the next year and then a quick update on the question that Richard close has 47 31 of them were new customers and 16 were migrations. So two thirds of the 47.

We're we're new a brand new accounts to help stream on the Credentialing platform and 16 of them are migrations.

Uh huh.

Yeah.

This information thank you.

Thanks, Matt Thank you.

Now I'll turn it over to Robert Frist for any closing remarks, since we don't have any more questions into Q.

Well I imagine, we scared off the questions by going for an hour I appreciate anybody that stuck out this long hopefully the detail was informative and we look forward to put the transitions behind us and speak to the three application sets in a single platform company, we are becoming and pass architecture, we're deploying couldn't be more excited and thank you all for participating look forward. The next earnings call.

Okay.

This will conclude today's conference call.

You may now disconnect have a good day.