Q1 2022 HealthStream Inc Earnings Call

Good morning, and welcome to held streams first quarter 2022 earnings conference call.

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

All participants are in a listen only mode.

At the request of the company.

Open the conference up for question and answers after the presentation.

I will now turn the conference over to Mollie Condra.

<unk> precedent Investor Relations and communications.

Please go ahead Ms Congress.

Thank you and good morning, Thank you for joining us today to discuss our first quarter 'twenty 'twenty. Two results also in the conference call with me are Robert a frist Junior CEO and chairman of health strain 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 health 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 risks and other factors that could cause the results.

Materially from those forward looking statements.

The company's filings with the SEC, including Form 10-K , 10-Q, and our earnings release.

Additionally, we may reference measures such as adjusted EBITDA, which is a non-GAAP financial measure.

A table, providing supplemental information on adjusted EBITDA and reconciling to net income attributable to help stream is included in the earnings release that we issued yesterday and they referred to in this call.

So with that start I'll now turn the call over to CEO Bobby Frist.

Thank you Mollie good morning, everyone and welcome to our first quarter 2022 earnings call.

As I reflect on the first quarter.

In the first quarter management delivered several key results I'd like to review.

First we did deliver record topline revenue in the first quarter lapping previous high watermarks set in Q1 of 2019 when legacy resuscitation revenue reached a peak of $17 3 million in Q1 of 2019, we have now replaced and grown through that amount with a nearly even mix of organic and inorganic growth.

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Second I told you that one of our multi year goals was to become a higher gross margin company. Our gross margins for Q1 of 2022 were 66, 3% a 750 basis point improvement over Q1 of 2019.

Third our ecosystem an ecosystem strategy as reflected in the eight stream platform strategy continues to expand with H Dream subscriptions now at 513 million, we believe that our platform strategy is well positioned for the future.

I believe we are delivering on some of the key.

Our promises that we've made on our key operational commitments of last several years rigs.

Regarding the macro context for health care in the United States. It appears that Covid has significantly tapering off.

Last week, the White House Covid Saar said the data doesn't point toward another full on Covid surge because hospitalizations are currently the lowest they've been in the entire pandemic.

According to the CDC in the U S is currently averaging just over 13 hospitalizations 1300 hospitalizations per day, which is a pandemic era low point.

This means that our customers are no longer facing the threat of being overrun by Covid patients. This is good news for everyone in.

In fact, some of our customers are starting to invite sales representatives back on site is a return to more normalized operations.

That said the longer term impact of Covid on our customers and in turn our businesses are being experienced in ways still being determined which I'd like to elaborate on.

In several areas of our business, we see improving sales environments, and our learning and development application suite. For example, the need for a regulatory compliant solutions appears to have rebounded from pandemic, our pre pandemic and pandemic era levels can be steadily increasing we have a strong sales pipeline in this area and it's fully.

Staff sales team to meet the solid market demand.

Same time, we're seeing some purchasing hesitancy among chief nursing officers to contract for our elective clinical education products right now.

As the stresses on the health care professionals persists.

Everyone's heard about the unprecedented.

Burnout amongst staff.

According to a recent Fitch ratings report resignations in health care and social services sector reached unprecedented levels. In 2021 was overall resignations up more than 50% since the start of the pandemic in the U S.

As many hospital Ceos, and Cfos are realizing onboarding, retaining and engaging the health care workforce has never been more important we believe that <unk> products are well positioned help solve these problems and delays based on the need to alleviate burnout and increase retention will ultimately drive sales for the company.

As you think about our results it's important to remember that our revenue is not expected to be linear over the course of the year.

To point out that overall bookings in the first quarter exceeded our internal expectations.

Even though our revenue growth for the quarter was just below our annual guidance range and a subscription.

<unk> SaaS model like ours, the slower bookings we experienced during the height of the pandemic are now showing up in revenue. After the fact, and we expect that to persist into the second quarter.

That said, we expect our first quarter bookings to be in helping revenues in last half of the year.

Which is a key reason that we believe our full year revenue growth rate will be within our guidance range.

The longer term impact of Covid is also being experienced in our provider solutions business with our credential stream application while sales have been strong the revenue stream for these sales has lagged due to implementation backlog, which has occurred in part due to customers' recent preferences to minimize more change for their staff.

Keep in mind that revenue recognition occurs after the credential stream application has been fully implemented.

Now that our customers are beginning to pick up.

Some of their delayed initiatives, we are hiring more employees to respond to this backlog.

For these reasons, we are optimistic that revenue provider solutions will be back loaded in the second half of the year.

Our CFO Scottie Roberts will talk more about our financial results soon but I'd first like to talk about how management has been able to implement initiatives to reduce expenses, while driving employee satisfaction.

Given the encouraging developments regarding the siting of code in the United States, We announced to our employees on March 14th that everyone is welcome to voluntarily work from one of our offices, which we now call our resource centers.

They want to do that whether they'd been vaccinated or not.

<unk> transitioned to a hybrid workplace was initially announced last July and has since that time proven to work very effectively and appears to be highly appreciated by our employees we.

We determined that our smaller office leases that we inherited through acquisitions were underutilized and we decided to sunset. These offices in favor of the hybrid work practice.

This has allowed us to reduce our number of leases from 14 to five thus, reducing our annual G&A expense by approximately $900000 on annual basis.

Hello stream like most other companies experienced high turnover in the last several quarters, but we've been able to out higher the losses, which has resulted in a net gain of our employee base of over 1100 employees at the end of the first quarter. We had a net gain of 20 employees in the first quarter of 2022, and a net gain of 15 employees and.

The fourth quarter of 2021.

Strong corporate culture, our employees built this helping us attract and hire fantastic talent. We've also invested in our current employee base and develop qualify and promising employees for higher levels of responsibility and new career trajectories in fact, I believe and last.

2014, or 15 months, we've had over 150 internal promotions I think there's a really exciting for our workforce and has resulted in generally very high stability amongst our leadership team.

Before turning over to Scott I'd like to comment on our ongoing share repurchase program. We continue to believe that this program is an excellent way to return capital to shareholders. On November 30 of 2021, we announced a $20 million share repurchase program and in March 2022, we completed the full 20 million of repurchases authorized under that program.

We then determined to expand our repurchase program and our board of directors approved an additional $10 million of share buy backs on March 14th 2020 to begin.

Beginning on March 14th through the end of the quarter, we purchased $5 million worth of shares during the second authorization that means we entered the second quarter with 5 million still authorized repurchase under the second plan.

Based on our confidence in the company.

And the value of the buybacks are bringing to shareholders I am pleased that our share repurchase program continues to remain in place and active as we progressed through the year.

And the last segment of the call I'll elaborate on several exciting business developments.

Before I do that let's turn it over to Scotty Roberts for a more detailed look at the financials.

Good morning, and thanks to everyone listening on todays call.

We delivered another solid quarter, achieving year over year improvements across the board on our key financial metrics.

Revenues were $65 4 million up 3%.

Operating income was $4 million up 22%.

Net income was $2 9 million up 26%.

Earnings per share was nine cents per share up 29% and adjusted EBITDA improved to $14 million up 3%.

Workforce solutions revenues were $52 million.

And we're up one 5% and revenues from provider solutions were $13 3 million and were up nine 1%.

Excluding the impact of legacy resuscitation revenues are consolidated revenue growth was five 8%.

And workforce solutions revenue growth was five 1%.

The impact of the legacy resuscitation revenues with a decline of $1 $7 million this quarter.

For the remainder of the year, we expect the year over year declines from legacy Resuscitate resuscitation revenues of one 1 million in the second quarter.

<unk> hundred thousand in the third quarter and 300000 in the fourth quarter.

Offsetting this decline, though are several other products in our portfolio that are contributing to revenue growth.

Such as the American Red Cross Resuscitation suite, Prudential stream, Jane and eight stream.

With steady growth from products such as these combined with our M&A investments quarterly revenues have now lapped the previous high point.

On the legacy resuscitation products peaked at $17 3 million in the first quarter of 2019.

This back filling of lost revenues with nearly evenly split between organic and inorganic growth.

Our gross margin was 66, 3% compared to 64, 2% last year.

Coming in ahead of our forecasted gross margin of 65%.

Operating expenses, excluding cost of revenues were up 5% or $1 9 million.

And reflect several areas of investment and some expense reductions, which I'll go over.

Our investments in product development increased by 9%, which is net of costs capitalized for software development.

These investments span, our growing product portfolio, including the <unk> platform and our three primary application suites sort of learning and development.

Installing equivalent genes and scheduling and capacity management.

We've also increased investments in sales and marketing grew by 16%.

This includes additions to staffing higher sales commissions and increased marketing expenses.

We've previously stated one of our objectives has been to fully staff, our scheduling and capacity management sales team.

We have grown the sales team from 10 to 26 over the past year, which provides more coverage to grow this new product category for us.

General and administrative expenses declined by 6%.

Likely some planned cost reductions.

During the second half of last year, we exited several office leases as Bob already mentioned, which are expected to result in about 900000 of annual savings.

In addition last year, we operated under a transition services agreement SL.

Associated with the <unk> acquisition.

And it was no longer in effect during the first quarter.

Finally, another factor that we overcame with a $1 million expense reduction in last year's first quarter.

Shade with changing our paid time off policy.

Yeah.

Our adjusted EBITDA was $14 million, increasing by 3% and adjusted EBITDA margin held constant at 21, 4%.

We ended the quarter with cash and investment balances of 45, 4 million, which was down by $6 6 million since last quarter.

During the quarter, we deployed $19 7 million of cash for share repurchases and $6 9 million for capital expenditures.

DSO improved to 45 days compared to 52 days last year.

Cash flows from operations were $20 7 million compared.

Compared to $19 1 million last year.

Free cash flows were $13 7 million.

Compared to $11 9 million last year, improving by 15%.

It's worth pointing out that we have a higher concentration of billings and collections during the first quarter, causing seasonality and our free cash flows meaning our free cash was in the first quarter.

Likely to be higher than other quarters during the year.

The free cash flows that we generated in the quarter were primarily utilized to fund share repurchases.

In total we spent $19 $7 million in cash on share repurchases during the quarter.

<unk> of $20 million repurchase program that began during the fourth quarter of last year.

We also expanded the program of $10 million last month and have approximately 5 million remaining as of March 31.

This program will terminate on the earlier of March 13th.

23.

And the maximum dollar amount.

The program has been extended.

They suspend or discontinue making purchases under the program at any time.

Now a quick update on our guidance expectations, we are reiterating our financial guidance issued in February which is as follows.

<unk> revenues are forecasted to range between $267 five and $273 million.

Adjusted EBITDA is forecasted to range.

<unk> 50, and $53 5 million and capital expenditures are forecasted to range between 26 and $29 million.

As I close my comments. This morning, I want to reiterate that our planned investments back into the business or are central to our strategy.

Becoming a single platform company capable of integrating proprietary and third party applications in a way that increases their value to and adoption by the health care market.

We look forward to updating you on our progress over the coming quarters.

Thanks for your time this morning, Bobby I'll turn the call back over to you now.

Thank you Scotty as part of our business updates I want to remind you of how we talk about our business today, we've come a long way since pioneering internet based training to fill governance risk and compliance needs in health care.

Obviously still do that and actually talked about the strong demand for those services as we speak.

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But we also many many new services that we offer and that is the business model continues to evolve as you know we have been developing a platform strategy is the foundation for our entire enterprise we call. The technology underlying this platform H stream and increasingly it will enable applications and the platform strategy we all.

We have three primary application suites, they are learning and development, Credentialing and privileging and scheduling and capacity management, let's walk through some updates on H stream and then I'll give an update on one of the three application areas.

So earlier I mentioned that we grew eight streams subscription count to $513 million during the quarter.

Another important way that we grow H dream ecosystem is through adding partners.

K Cup match remind you of the various ways H stream platform enables us to add partners.

We have a long history of utilizing our 200 person sales team to sell our partners products, which we then deliver through our applications and increasingly through our emerging platform directly historically, we also handle all of the contract negotiations billing and collections and customer support on behalf of our partners in this model, which I'll.

Call, our traditional partnership model, both customers and partners allow us to consolidate all of their needs through a single full service platform.

As a thriving model with over 75 active partnerships and we believe it brings unparalleled benefits to each of those partners and of course with the customers to a recipient of that benefit of 75 fully integrated partners.

In recent years, we've expanded our platform approach by offering a new way to partner. This form of partnership is well suited for organizations that prefer to sell and support their own products, but want to take advantage of the benefits of enhancing in delivering their products through our applications and through our emerging platform.

We call. These H tree certified partners because they must meet certification standards, we established for integrating with the H stream platform.

As of the date, we currently have eight H Dream certified partners and we expect this number to grow.

H streams certified partners typically generate lower top line revenue, but higher margins than traditional partners I initially described.

This is because H trained certified partners bill and collect for their own sales, which means they recognize all the topline revenue for those sales before remitting a portion of that revenue to help stream.

The margin to health stream on this revenue share generally high since our service costs are low.

Because the H Dream certified partner not health stream is responsible for all the sales and support costs associated with their products.

Offering both our traditional and eight stream certified partner models has allowed us to grow our marketplace and better serve our customers.

It has also allowed us to expand and retain our growing list of partners now.

Now, let's move to a quick update on one of our three application suites provider solutions Approx.

Approximately three years ago, we announced the launch of credential stream, our new SaaS based application for managing a full spectrum of Credentialing privileging and enrollment needs in health care organizations for the first quarter of 2022 42 customer accounts contracted for credential stream averaging about three two.

New contracts per week these.

These accounts represent a mix of new customers add and existing customers, who chose to migrate from our legacy Credentialing and privileging platforms to the new course credential stream application suite.

Some of the customers we contracted in the first quarter included the University of Iowa Medical Center.

Washington University of physician network Privy at Health and Colorado Care partners, we're excited to be gaining adoption of the best in class solution. Our team has built after taking the time to understand and improve the best parts of the legacy solutions, we acquired through M&A.

On April 13th.

We announced the promotion of Michael Collier to executive Vice President corporate strategy and development in this role he will focus on our organic and inorganic.

Our organic and inorganic growth strategies, particularly in relation to our <unk> platform model.

During his 10 year tenure at <unk>, Michael and successfully sourced negotiated close and help integrate 14 acquisitions.

This is helped originate business models like the eight stream certified partner program.

And I discussed earlier and has done so while serving as the company's general counsel and Chief compliance officer. His record of accomplishments is impressive and we're honored to have them step up to this new role on the Gulfstream executive team Congratulations Michael.

We also made an important addition to our board of directors in the quarter.

Bringing a high level of healthcare industry expertise and fresh perspective for our growing business Terry Allison Reprove joined the <unk> Board on January 11th she.

He's already making an impact with her ideas and insights into the health care industry. She also happens to serve as a member of our audit Committee. Her extensive board level experience, which includes serving on six boards would have been primarily in health care and our executive level financial expertise, which includes serving as CFO for Quorum Health group make her an outstanding addition to the.

<unk> and I can promise you as shareholders holders a lot of our questions are about right return return on invested capital and free cash flows.

So.

In addition to her insights to the health care industry, and how we can grow our business.

In closing I'd like to acknowledge our employees dedication to our corporate value of streaming good.

Corporate social responsibility program, which goes by the same name of streaming. Good is currently actively supporting the American cancer Society with several engaging activities at this time, which including a virtual five K walk run and executive Challenge. Our program is currently raised over $13000, so far and we expect to raise even more.

More so the American cancer Society, it's programs like streaming good differentiate our culture, let us know, who we are and how we serve our customers and what the purpose is to our work it unifies our workforce and gives us a great energy and going forward to continue to grow the great programs of health stream build great applications like.

History.

Our streaming good program is employ driven and we all strive to create positive impact in the communities, we serve including the health care industry at large at.

At this time I'd like to turn it over for questions from the Investor community.

Okay.

Lauren who make sure that I was.

This broadcast.

Let's go ahead and open it up for questions if there already.

At this time I would like to remind everyone in order to ask a question. Please press star one on your telephone keypad.

Again that is star one on your telephone keypad.

Your first question comes from the line of Ryan Daniels. Your line is open you may ask your question.

Yes. Good morning. This is Jared haase in for Ryan Thanks for taking the question.

I wanted to follow up on one of the comments from the prepared remarks, specifically that youre seeing some hesitancy around some of the more elective clinical training products.

And I think burnout.

Decided as the reason, they're given a burn out as both I think a year and a longer term issue for clinical staff do you think that some of those headwinds.

That are impacting that those products.

We will be temporary or is that kind of more reflective of the longer term cadence going forward.

I think they are temporary and we did try to.

Suck that out in the discussion it's kind of hard because you look at the temporary impact is just kind of like well, let's just not rollout change if we don't need to but the even the medium or long term. In fact is kind of a broader realization that retaining and developing the workforce can be a key differentiator to your competitive advantage or even your survival.

Growth and so we tried to hint at well, there's kind of a temporary kind of overwhelmed.

High turnover.

Let's let's change only what we have to mentality I think.

The products that can make a difference.

Either at a lower cost or return time to patient's bedside like we believe our Red Cross program does or our <unk> program. These are a little bit higher cost programs. They do require change management process and we have seen some hesitancy and deploying them at the rate that we had seen kind of earlier that said I think those are the kinds of solutions.

<unk> that create higher engagement and long run solve the workforce issues instead of contributing to them, but just kind of an increased sensitivity to to burn out and change management right now and some of these elective areas and I do think there are temporary so I think in fact, I think the more enlightened customers have already begun the investing.

That journey, some even acquiring nursing schools for example, as part of their development strategy. So I think in the long run the roles of education and development and training will be strengthened but.

But temporarily I think theres just this.

All read about here about but this.

Just general fatigue, and those have gone through this COVID-19 battle and.

Face that kind of work fatigue.

Got it yeah, I think that makes sense.

And then just maybe a quick follow up would love to just get general sort of comment on the health of the end market.

You kind of alluded to sort of progressing to this new phase of the pandemic, but the labor cost still remains elevated and that's certainly a problem for hospitals and I think we saw a report last week from one of the large public hospital operating change that really kind of magnified that issue and pointing to those labor costs remaining elevated and that taking longer to normalize so just.

Would love to kind of get any more color on what youre seeing more broadly in the client base and how youre kind of working with with hospitals to help address the sort of continued problem of elevated costs.

Certainly the elevated costs are a real issue.

<unk> of the enlighten health systems or are addressing it they realize they may have to actually.

Invest more to create better retention strategies and pay more to be competitive with say the travel agency, but at the heart of all this is figure out how to put these employees at the center of their journey and a lot of our products like our scheduling program are being built with that as a philosophy. If you look at our nurse grid application.

<unk> really taking off organically in the Apple App store as the number one rated app in the Apple App store.

Ink because it allows the nurse to put their work schedule into an app, but also put their social calendar in there.

Their desired time off into the App and so then they can coordinate with their friends times to meet and greet so what's happening there is that the nurse is becoming the center of the scheduling process.

Not only driven by say business or financial incomes, maybe as in the past and so I do think that.

That the labor issues are real the cost issue is real the turnover issues are real but the philosophy that health team has is that you have to.

Hackett head on develop your workforce promote them more frequently invest in their career.

And then build smart applications that incorporate their desired personal outcomes into your work and business outcomes like our new scheduling approached with the nurse grid application.

So I think the more of those organizations can do that the better they will fight this battle and they like everyone's face inflation.

And these burned out nurses that realize they can make a lot more and have more flexible lives by working on a travel concept, they're just having to rehire them and invest more in them. So it's a really interesting dynamic of kind of recalibrating around higher labor costs.

But necessarily investing and that labor cost Meanwhile, products that save time and money and do it more effectively like a red Cross resuscitation suite I think can be a feature of how they combat higher labor cost I mean, the objective of these organizations to get their employees more time in front of patients now they want them to be confident.

When they're with patients and so you're trading out and you're trying to assess the minimum amount to get the maximum competency at the lowest cost and I think again philosophically. That's the point of <unk> being a workforce ally to Credentialing and privileging, making sure the right people are in the jobs.

Our scheduling helping put the nurse at the center of the scheduling process and our learning and development helps retain and develop over time I think all three of our core applications, which are geared for a future where rising labor costs are a factor, but these are the strategies to combat that to these organizations.

That's perfect I appreciate all the detail there and I'll go ahead and hop back in the queue.

And your next question comes from the line of Matt Hewitt. Your line is open you may ask your question.

Good morning, and congratulations on your progress on several fronts maybe.

Maybe the first question for me.

It sounds like there is going to be some savings, particularly on the lease side, but it also appears that some of your other operating expense lines came in a little bit floor at least than we were anticipating particularly.

Particularly in product development was that just a timing issue or.

Now that you've kind of gotten these three major platforms launched in kind of out in the market over the past year to two years.

Have we kind of fallen back maybe to a little bit lower level.

Well no we still have some hiring to do so I don't want to I don't want to say that they're kind of permanently lowered but I would say we've had much more attention on G&A, we had a cycle now kind of focusing on how we want to operate post pandemic as you heard me say, we shifted from this concept of offices to resource centers that people can visit and worked from but.

It's just a different mentality. So we're beginning to do our kind of post COVID-19 adjustments to how we want to operate and finding the areas, where we can save money. So.

Another area for example is travel costs so.

Pre pandemic, we spent about $5 nine year on travel we do think.

Currently we are not putting any policy level restrictions on travel.

We are asking our teams to use the newer technology. So instead of sending say for people on site to help close the deal we may send one senior person.

On site and everyone else thousands by conference and everyone. Now is equipped to do that so we've seen them more intentionality and our selling strategies that don't prohibit travel, but encourage most of blended selling approach and so and again, we havent put restrictions anybody that wants to go and build relationship with the customer we're encouraging that but.

Were also encouraging but think smarter so in areas like travel and lease expenses were seeing a set settle in on our post pandemic kind of operating strategies, which we think can have inherently lower cost.

In the area of product development.

You can see that we started to be more successful in hiring we still have high.

Departure rates like everyone else right now all the great resignation is still going on but I'm hearing them, a little more language about the great regret or theres, new phrases being bantered about about maybe so much change isn't good for people.

But we're still in the middle of that so there's still the departures again, we've had stability in our leadership ranks and not just relative to what we've had real stability in our leadership ranks our cockpit yours so officers.

But we're combating turnover.

And like everyone. We're investing in our workforce. So this I've mentioned 150 promotions.

And so the last two quarters, you've had net gains in hiring after several quarters of either flat or down kind of net losses in our in our total number of employees.

And we do need to hire more in tech and you heard us so some success in sales.

For example, we are building the future application suites, and our scheduling capacity management.

Area right now and I'm trying to do more tech hiring in that area.

That said and credential stream, we've seen a relative stabilization of our R&D investments is that application suite takes hold in the market and turns into more regular release cadence, which by the way is really impressive. Our teams are released this morning I saw a set of nearly 400 enhancements to the credential stream platform. These are some minor fixes repair.

So the R&D investments in <unk>.

Credential stream has stabilized or not.

Our growth rate on them.

But they are steady and they are effective in that product category is winning market share right. Now. So we feel really good about those investments so Matt overall, it's a blend of smarter management of G&A.

Management of a new model for traveling in cells, we are investing in targeted areas like Ah.

<unk> product development and scheduled capacity management will continue to grow in that area, but in other areas that are really important like credentialing, where as you pointed the applications now.

<unk> the launch phase, it's being the acceptance phase, we've been able to stabilize or even slightly reduce our R&D levels on those products. So the blend of all of that is very exciting it feels like some parts of the portfolio are maturing and their market availability and acceptance and so we can stabilize our our capex in those areas, but we.

Investing in content development, we remain investing and growing investments in schedule and capacity management. So there's just a lot of ins and outs on that but I hope that helps provide color on where we're investing in where we're saving.

Very much that was very helpful. Thank you and then.

One separate question.

Given the the portfolio and in the platforms that you have today and all of the and it was a combination of internal development as well as M&A over the past several years as you look out over the next couple of years do you feel like you have the right pieces in place at least.

From a platform perspective, where M&A, maybe isn't going to be as play as big of a role in kind of billing out some of them are building out some of these areas or.

As you look out over the next couple of years and given the balance sheet and the strong cash flow that youre going to continue to kind of find those tuck in opportunities to kind of build out some of your platforms a little bit broader thank you.

Sure I think.

The what I would call.

Stabilizing each of our three application areas getting the investments the components, we need to be successful.

We don't feel there's anything missing so there's nothing that we have to do from M&A standpoint, two two.

Fulfill the vision for each of those three primary application areas. So again theres nothing we have to do that said that the new platform strategy allows for new business opportunities. It allows for the smoother integration of third party apps, so maybe minority investments or acquiring an app that has a unique competitive advantage and integrating it with our H.

<unk> platform would make sense.

And so.

M&A will continue to be a part of our strategy and we also talked about ways like our new partnering can be expanded through the platform strategy. So we've introduced now and defined.

Boeing partnering program with call. It eight streams certified partners and so what I would say is that the opportunity for organic and inorganic growth has expanded by our our platform capabilities as they expand and it'll be a judgment call on each case on whether it makes sense to build versus buy or or launch and develop.

Versus adapt to or integrate with.

And so I guess I would leave all those chips on the table, but say just make it clear there is nothing that we feel we need to chase or have to do and so we'll be thoughtful and careful about the times, we choose to build and the times we choose to buy.

That's very helpful. Thank you.

Again, if he would like to ask a question. Please press star one on your telephone keypad.

That is star one on your telephone keypad.

Your next question comes from the line of Vincent Colicchio. Your line is open.

Yes, Bobby So I'm curious on the health stream certified partner program.

What does your pipeline look like and do you expect it to continue to grow in the near term.

We do it's an active program.

The first promote the what we now call the traditional integration program, where we take responsible for sales marketing customer support fulfillment.

And have a higher margin higher revenue and then and then keep and pay a royalty.

But the integrated partner program is increasingly interesting because it allows partners to kind of choose where they want to be on that spectrum. If they want us to help shift market share to their product.

They may want to fully engage with us and let our sales team do their magic and taking their message to market or if they just want to reach our network. Our end users are $5 1 million users. They may choose to do their own selling marketing and support and just simply use our growing ecosystem as a delivery vehicle and so yes.

Partner program is now eight the integrated partner program it is growing.

So I expect additional announcements throughout the year and the revenue streams are growing from that as well and we're solidifying our service model and our growth model. There so without specifically, commenting I would say, we intend to grow the number of partners.

From eight a M.

And we think it expands one of the things. It does it allows us to reinforce the marketplace concept because not a lot of times. These partners will compete in any given category and so it allows them to choose how they want it they can use us for distribution.

Or they can hire kind of effectively hire our sales and marketing teams to help them move market share and and so it allows for multiple products per category makes us more like a marketplace. When we can offer integrated partnerships H dream certified partnerships.

So hope that helps understand without specifically reporting yes, we expect them to grow and in both categories frankly, as our marketplace strategies take hold.

And what are you what are you seeing in terms of pricing on contract renewals.

Is the pricing help you offset a meaningful portion of your.

You wait the wage pressures youre seeing.

It's interesting we have a mixture of pricing strategies.

You know, where we have proprietary advantage.

Like Jane and we have patents and we have.

Really a market differentiated highly differentiated products, we will we have a premium value placed on that product and I think they deliver premium value to customers and other areas, where it's more important to maintain or bundle.

You'll have a little bit of an Amazon trying like strategy with our H stream infrastructure, where the idea is to just get it in place.

And so sometimes we'll bundle and provide discounts instead of price increases.

And so it's a judgment call, but we have lots of places where we can drive both types of value kind of more reach which expands the ecosystem and then premium products, which have high margins.

And just importantly to.

Some of our new product concepts like our workforce validate arent very inherently high margin products. So we can actually achieve both in that case, we can have a lower market price and still be well positioned for market share gains because our cost of delivering that product is very very low.

So again I know that doesn't give you an exact answer but both strategies or our pursuit.

And for different products and applications in our ecosystem.

Thanks for the color and thanks for answering my questions.

Thank you Vince.

Your next question comes from the line of Richard close your line is open.

Yeah. Thank you can you hear me okay.

Yeah Richard.

Great. Thanks, Congratulations on the report.

Bobby.

I apologize I had to jump off the call for a little bit, but I did hear you talk about privy as a new customer.

That seems to be somewhat of a new channel customer channel for you. Obviously, there's been a lot of activity in a primary care physician market place can you talk a little bit about the previous announcement and your thoughts on is that a.

Good channel for you guys to expand into.

Yeah I'll, we obviously created the list to show some diversity of types of customers, we bring in we have <unk>.

<unk> team is developing and what we call our continuum markets, which are kind of the non acute market for for an oversimplification and so for most of our product sets. We're beginning to figure out their applicability in additional channels, but we havent really changed our channel definitions that would expand our audience beyond the $10 5 million that were.

Previously defined as opportunities for us.

And so I and I'm waiting for see if I get a text from the the person over that area to see if they want me to add more color about how much they're focusing on that channel.

It may or may not get one I think they're listening in but I.

I would just say that in general we're constantly examining the audience and we're adding sales channel expertise from for example, we've just found that a few of our products are applicable in the nursing school market and.

So we're targeting a couple of hires to begin to test our products into nursing school moderate market when we when we acquired.

Clinical exchange, we got access to the student market as they onboard into hospitals for their rotations.

Now reaching people when they're at school and so that would be kind of yet another new onboarding channel way people come into our ecosystem and so in each of these cases like trivia or the application like my clinical exchange, which addresses students. We are beginning to hire a few dedicated salespeople in these areas to test them as channel. So.

I'll kind of leave it as that.

Testing expanded channels like nursing schools and organizations like trivia without giving specifics.

They're they're not the bulk of our sales organization, yet, but we're testing new channels.

Well you beat me to the punch on that one I was going to ask you about nursing and in nursing schools and you have one right across the street from you there so.

I was curious on that can you talk a little bit about nursing in terms of obviously that that's been a hard area.

What are customers, telling you in terms of their thoughts maybe.

How the nursing labor situation sort of plays out maybe over the next year or so.

Oh Gosh, you know just continued.

Pressure on nursing schools to to help create more in interest people in the industry. So.

More creative models for for inducing people to become nurses and its hard game, because if you talk to any existing nurses theyre all burned out even though they're making more money and they're traveling.

They make more money.

Theres less.

Team feeling to their jobs and they're just more stress and so I think each organization is trying to be creative in addressing these the true true labor challenges of a of an engaged workforce with mature teams you know when you have a team that's <unk>.

60, 70% travel and they're all new your clinical effectiveness goes down. So I think it also they are beginning to recognize that labor isn't just a cost issue it could become a quality issue.

With so much change in the workforce and so again the light organizations are trying to find path to actually invest to correct that so while there is temporary hesitancy in products like we mentioned like Jane at scale. We again, we still see buying like so we're still selling one gene contract a week, but the scale isn't as big they may powered it.

More instead of rolling out in the whole workforce.

They're looking for strategies like Jane to get people cross trained more rapidly engage them in our career development journey.

There as I mentioned, some are buying nursing schools, they're forming partnership with nursing schools.

They're launching creative well being curriculum, we we started to incorporate into some of our programming some of the the wellbeing topics and curriculum that the that we have found effective so they're taking more interest in that dimension of their staff wellbeing.

And so I think it's a clinical.

Efficacy.

Patient outcome oriented problem and a labor cost problem as well they may have articulated the labor cost problem, but does it persist for a couple of years, they're going to also I think have quality problems.

And so that's what.

They are coming back around and saying why I think this is all a tailwind for us because it.

At the end of the day, you have to get staff, even staff. That's gonna turnover faster you have to get them competent quicker like it's not an excuse so I won't invest and train them because if you're only going to be their nine months you better make them an effective team member in two months instead of six months and so I think our programs are well positioned to solve these labor problem.

But the but they're real and and.

When I talk to Ceos of health systems, they're trying to find ways to compete with the travel agencies. One other thing. We've seen is it's ironic, but the travel agencies are starting to buy our education products and invest in the travel nurses careers and development. So we have a growing list speaking of another channel.

Some of the bigger travel organizations are now customers of our education products. There they are actually a little bit more enlightened two the need to train and develop staff and maybe they can afford more because they are paying more and building more to the hospitals, but it's an interesting cycle and I don't have obviously, a whole solution, but I think these trends provide tailwind so a lot of our <unk>.

<unk> overtime.

Okay. That's very helpful and then on the partnerships.

That you talked about obviously you have you guys are attractive from just the sheer scale of your customer list I'm. Just curious is there any opportunity for you to cross sell into your partners existing.

The existing book of business is there.

From that from that perspective.

Oh, yes.

I don't think I've really thought about it like that but.

But I would say that.

We are developing capabilities at the platform level that gives us a lot more flexibility on how to provision.

Services and so if you used to think of a service as a whole application.

Like United had built features interface a front end to the application as we increasingly enhance the H Dream platform to include for example, a growing library of a P is it does change the engagement model potential and so you might find that some of our databases someday.

Become licensed are all assets that are available through through a P is where people can integrate.

Some of our unique data into their applications or into their intranet or into their EHR and so I do think part of Michael Colliers promotion is to help think through.

How to monetize some of these new capabilities as they come on board I don't want to Overrepresent their maturity Theres still.

Relatively immature.

But just in general.

As we bring for example, our platform level license service into play not only enables products like workforce validate it may enable an organization like a like a workday I guess I'll throw that to Peel out there to directly access the data that underlies that product on a transactional basis. So.

Sure.

No I think the platform strategy opens up the possibilities I do want to be careful not overrepresent, where we are on that curve, where we're actively investing to build those.

We're working on launching.

Hopefully this year or what we would call our developer portal for the API is that come with the H stream platform and once that's open is a tool kit.

<unk> economic models for our business, we think evolve and so really excited about that but again I don't want get too far in front of it. It's a it's a later this year kind of thing not a right now thing.

Okay. Thank you.

Again, if he would like to ask a question. Please press star one on your telephone keypad again that is star one on your telephone keypad.

And we have a follow up question from return close your line is open.

Great. Thanks, Scott maybe a question for you.

I mentioned I jumped off the call for a little bit. So if you answered this I apologize, but can you talk a little bit about the EBITDA guidance, obviously, the strong performance in the first quarter.

Just your thoughts in terms of maintaining that.

Guidance for the year.

Sure sure I'll try to speak to that.

Richard the Crystal, obviously first quarter kind of fairly strong relative to where we kind of tailed off last year. So you look at sequential improvements.

I think what and you compare that to what we guided to.

Yeah.

Most of the year, we're expecting some of the investments that we've continued to make.

Increasing our staffing levels returning to travel just those are some of the factors that lease.

And included in our.

Our expectations for the remainder of the year, So I think.

Hey, It would play out is continued pressure on the on the EBITDA, let's say pressure from a negative perspective, it's intended.

<unk> so.

We'll likely.

Smoothed out and kind of land in the range that we forecasted but.

And then another kind of factor that we.

Have each year, it's just the labor cost increases that we expect for ourselves that will play out over the course of the year as well.

Okay and then is there any are you guys planning your user conference.

Bringing that back or is that included at all or just thoughts there.

I'll have to double check and we did have a conference last year, although it was virtual so it did bring it back last year in the fourth quarter.

Virtual I'm not sure what our plans for this year, but we can check on that.

Okay.

Thank you.

Excuse me for centers there are no more phone questions you may continue.

Thank you. This concludes our earnings conference call. We look forward to our next report to all of you.

Coming up soon thank you very much goodbye.

This concludes today's conference call you may now disconnect.

Okay.

Okay.

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