Q3 2023 HealthStream Inc Earnings Call

Yeah.

Speaker 1: Good morning and welcome to Health Stream's third quarter 2023 earnings conference call. At this time, I would like to inform you that this conference call is being recorded and that all participants are in a listen only mode. As a request for the company, we will open the conference up for question and answers after the presentation.

Yeah.

Good morning, and welcome to help streams third quarter 'twenty to 'twenty three earnings conference call. At this time I would like to inform you that this conference call is being recorded and that all participants are in a listen only mode.

At the request of the company, we will open the conference up for question and answers after the presentation.

Speaker 1: I would now turn the conference over to Molly Conner, Vice President of Investor Relations and Communications. Please go ahead Ms. Conner.

I would now turn the conference over to Mollie Condra, Vice President of Investor Relations Like Communications. Please go ahead Ms Condra.

Speaker 2: Thank you and good morning everybody. Thank you for joining us today to discuss our third quarter 2023 result.

Thank you and good morning, everybody. Thank you for joining us today to discuss our third quarter 2023 results.

Speaker 2: Also, in the conference call with me today is Robert A. Prist Jr., CEO and Chairman of Health Stream, and Scottie Roberts, CFO , Senior Vice President of Finance and Accounting.

Also one of the conference call with me today is Robert a Frist, Jr. CEO and chairman of helps stream and Scotty Roberts, CFO and senior Vice President of Finance and accounting.

Speaker 2: But I'd also like to remind you that this conference called may contain forward-looking statements regarding future events and the future performance of health stream that involve risk and uncertainties that could cause the actual results to differ materially from those projected in the forward-looking statement.

I also like to remind you that this conference call may contain forward looking statements regarding future events and the future performance of Gulfstream that involve risks and uncertainties that could cause the actual results to differ materially from those projected in the forward looking statements information concerning these risks and other factors that could cause the results to differ materially.

Speaker 2: Information concerning these risks and other factors that could cause the results to differ materially from those forward looking statements are contained in the company's filings with the SEC, including forms 10k, 10q and our earnings release.

Those forward looking statements are contained in the company's filings with the SEC, including forms 10-K, 10-Q, and our earnings release.

Speaker 2: Additionally, we may reference measures such as a Ducati Vittac, which is a non-Gaup financial measure.

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

Speaker 2: A table providing supplemental information on the just a debit doll and reconciling to net income attributable to health stream is included in the earnings release that we issued yesterday and may refer to in this call.

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

Speaker 2: So with that start, I'll turn the call over to CEO Bobby Priss.

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

Speaker 3: Thank you Molly. Good morning everyone. We have a lot to cover for our third quarter 2023 earnings call.

Thank you Mollie good morning, everyone. We have a lot to cover for our third quarter 2023 earnings call.

Speaker 3: In the third quarter, we achieved record revenue and record adjusted EBITDA. Top line revenue reached 70.3 million in the quarter, which was up 5% over the same period of 2022. And adjusted EBITDA increased to 16.2 million, which is a 28% improvement over the same period of 2022.

In the third quarter, we achieved record revenue and record adjusted EBITDA topline revenue reached $70 3 million in the quarter, which was up 5% over the same period of 2022, and adjusted EBITDA increased to $16 2 million, which is a 28% improvement over the same period of 2022.

Speaker 3: If I reflect back, it was a quarter of financial high water marks. Also, excellent progress on our single platform strategy. Some exciting sales wins I'm going to talk about. But most of all, the quarter was characterized by the strong levers debedo growth we delivered and expect to continue delivering.

If I reflect back it was a quarter of financial high watermarks.

Also excellent progress on our single platform strategy, some exciting sales wins I'm going to talk about but most of all the quarter was characterized by the strong leveraged EBITDA growth, we delivered and expect to continue delivering another way to think about performance is due to the higher margins and greater operating efficiency. We delivered for example through our <unk>.

Speaker 3: Another way to think about performance is through the higher margins and greater operating efficiency we delivered. For example, through our investments in proprietary content and applications, our gross margins have improved to be in line with our medium-term financial goals of 65 to 68%. In addition, our single platform approach continues to streamline how we organize our workforce. For example, we've delivered increasing revenue per employee for the past four consecutive quarters.

Investments in proprietary content and applications, our gross margins have improved to be in line with our medium term financial goals of 65% to 68%.

In addition, our single platform approach continues to streamline how we organize our work force for example, we delivered increasing revenue per employee for the past four consecutive quarters.

Speaker 3: Let's take a minute, just kind of refresh and really define health training for our audience. I think we might have some new folks out there that want to hear how we describe and position our business.

Let's take a minute just kind of refresh and really define gulfstream for our audience I think we might have some new folks out there that want to hear how we describe and position our business first.

Speaker 3: The first and foremost, health stream is a health care technology company dedicated to developing, credentialing and scheduling the health care workforce through fast, based applications and solutions.

First and foremost health stream as a health care technology company dedicated to developing Credentialing and scheduling to health care workforce through SaaS based applications and solutions.

Speaker 3: each of which are becoming more valuable because of the interoperability there achieving through our H-treme technology platform.

Each of which are becoming more valuable because of the interoperability. They are achieving through our H Dream technology platform, we sell our solutions on a subscription basis under contracts, which averaged three to five years in length that means our revenues are recurring and predictable.

Speaker 3: We sell our solutions on a subscription basis under contracts, which average three to five years in length. That means our revenues are recurring and predictable. In fact, and we checked this course yesterday 96% of our revenues are subscription based.

In fact, and we check this of course yesterday, 96% of our revenues are subscription based.

Speaker 3: We are profitable. We have no interest bearing debt. We have a strong cash balance of 71 million.

We are profitable we have no interest bearing debt.

<unk> cash balance of $71 million.

Speaker 3: and we are solely focused on health care, and more specifically, the health care workforce.

And we are solely focused on health care and more specifically to health care workforce.

Speaker 3: In fact, the way we define our addressable market is as the 11.2 million health care professionals working in the United States in health care organizations.

The way, we define our addressable market is as the $11 2 million health care professionals working in the United States and health care organizations. There are market is also beginning to show signs of expansion into the pre professional markets like nursing schools as well and we're going to talk about that in the second half of this presentation. This morning.

Speaker 3: Though our market is also beginning to show signs of expansion into the pre-professional markets, like nursing schools as well, and we're going to talk about that in the second half of this presentation this morning.

Speaker 3: As we enter the fourth quarter, we are confident that Healthstream will continue to provide results in line with our guidance range, importantly, including our increased guidance range for adjusted EBITDA of $59 to $62 million.

As we enter the fourth quarter, we are confident that <unk> will continue to provide results in line with our guidance range importantly, including our increased guidance range for adjusted EBITDA of $59 million to $62 million.

Speaker 3: In addition to expanding in the new markets like nursing schools, this quarter we demonstrated some increasing share of wallet with existing customers. I'm really excited to highlight two examples of that in the quarter.

In addition to expanding into new markets like nursing schools. This quarter, we demonstrated some increasing.

An increasing share of wallet with existing customers and I'm really excited to highlight two examples of that in the quarter.

Speaker 3: First, one of our large customers renewed their HealthStream Learning Center and their HStream subscriptions for learning for 16,000 users, but they didn't stop there.

First one of our large customers renewed their health stream learning center and their H stream subscriptions for learning for 16000 users, but they didn't stop there. They also decided to leverage our marketplace of workforce solutions and they added epsco clinical skills, our checklist product cycled skills.

Speaker 3: They also decided to leverage our marketplace of workforce solutions, and they added EBSCO Clinical Skills, our Checklist product, Psych Hub, Skillsoft, Health Equity and Belonging Curriculum, and Talent Tracks, one of our development programs, as part of their five-year subscription.

Sock health equity and belonging belonging curriculum and talent tracks one of our development programs as part of their five year subscription that six new products add at the time of renewal and as a result. This account is moving from approximately $16 52 per person per year to $30 99 per person.

Speaker 3: So that's six new products added at the time of renewal, and as a result, this account is moving from approximately $16.52 per person per year to $30.99 per person per year.

Speaker 3: This was not an isolated example. Another one of our large accounts expanded their Healthstream Learning Center contract and their HStream subscriptions for learning from $15,000 to $19,000. But while they're expanding the subscription, they also were renewing their safety queue product, their checklist, and their CE unlimited order.

Per year.

And this is not an isolated example, another one of our large accounts expanded their health stream learning center contract and their H stream subscriptions for learning from 15000 to 19000, but while they are expanding the subscription. They also were renewing their safety Q product Theyre checklist and their CE unlimited orders they alt.

Speaker 3: They also added new to the contract, our Quality OB program, and our Jane products, while additionally expanding their subscriptions to our nurse residency program.

<unk> added new to the contract our quality Ob program, a program and our Jane products, while Additionally, expanding their subscriptions to our nurse residency program.

Speaker 3: So for all for a three-year term. So for this account, we're moving from approximately $81.24 per person per year to $108.58 per person per year. And remember, the count went from 15,000 to 19,000 all in the same renewal process.

So for all for a three year term. So for this account, we're moving from approximately $81.24 per person per year to $108.58 per person per year and remember the count went from 15000 to 19000 all in the same renewal process.

Speaker 3: So, you know, we're excited to be demonstrating this expansion of wallet share at the customers that we already have. And obviously, these two examples are customers that are deep into our ecology. They kind of shop within the four walls of Healthstream's ecology. Our partners programs are promoting them and our various applications that are increasingly interoperable become more interesting to them. So these are two great examples.

So you know we're excited to be demonstrating this expansion of wallet share at the customers that we already have and obviously these two examples of customers that are deep into our ecology, they kind of shop with them. The four walls of health streams ecology, our partners' programs or promoted them in our various applications.

That are increasingly interoperable become more interesting to them. So these are two great. Examples we have a strategic accounts program.

Speaker 3: We have a strategic accounts program. The goal is to expand like this at, you know, our top 150 accounts. So we're really excited to see these two great renewals, extensions, and product additions increasing share.

Well as to expand like this that you know our top 150 accounts. So we're really excited to see these two great renewals extensions and product additions increasing share of wallet.

Speaker 3: So we're grateful for the significantly expanding commitments of these customers and others like them that they're making each time they come up for renewal. And we want them to know that HealthStream is committed to ensuring they get even greater leverage out of their HStream membership. That's that underlying infrastructure that's making it all work together. And each time the renewal rolls around, we try to make sure they appreciate the interoperability that every quarter we release new capabilities that show interoperability of our various application suites. There's also a

So we're grateful for the significantly expanded commitment to these customers and others like them.

Theyre, making each time, they come up for renewal and we want them to know that <unk> is committed to ensuring they get even greater leverage out of their H dream membership that that underlying infrastructure, that's making it all work together.

And each time the renewal rolls around we try to make sure. They appreciate the interoperability that every quarter, we released new capabilities that show interoperability of our various application suites.

It's also a strong quarter for our credential stream solutions and this is important because we put a lot of capital into building out our credentials stream solutions and the credential privilege and enroll area of our company and so it's great to see that we're finally seeing and beginning to see really strong growth. So both in terms of competitive takeouts and conversion.

Speaker 3: And this is important because we put a lot of capital into building out our credential stream solutions in the credential privilege and enroll area of our company.

Speaker 3: And so, it's great to see that we're finally seeing and beginning to see really strong growth. So, both in terms of competitive takeouts and conversions from our legacy solutions, in the third quarter, we contracted 32 new customers for our credential stream solution.

From our legacy solutions in the third quarter, we contracted 32, new customers for our credential stream solutions and that importantly represents about 114000 new subscriptions.

Speaker 3: And that, importantly, represents about 114,000 new subscriptions.

Speaker 3: collectively. And remember, when you subscribe to our CredentialStream application suite, you also become a member of our hStream for credentialing and hStream platform technology. So, we're excited to add, you know, through that part of the model, 114,000 new subscriptions.

<unk> and remember when you subscribe to our credential stream application suite you also become a member of our H Dream for Credentialing and H stream platform technology. So we're excited to add through that part of the model of 114000, new subscriptions.

Speaker 3: New customers include highly respected health care organizations like Northwell Health, Aloha Care, and Banner Health.

New customers include highly respected health organizations like North Little health.

Hi care and banner health and revenues from subscriptions to credential stream in the third quarter grew 56% over the same period last year not the smaller product that's still in our our top 10 for sure, but we're really excited to see this application suite that we've been consistently investing in for several years now.

Speaker 3: and revenues from subscription to credential stream in the third quarter grew 56% over the same period last year. Now, that's a smaller product. It's still in our top 10 for sure, but we're really excited to see this application suite that we've been consistently investing in for several years now show this kind of exciting growth level, again, with 32 new takeout or new customers and 56% year-over-year revenue growth.

<unk>.

Showed this kind of exciting growth level again, with 32, new takeout or new customers and 56% year over year revenue growth.

Speaker 3: But, you know, not to be outdone, we have another area of our business that's performing. It's our in the third quarter revenues from ShiftWizard, which is our scheduling business, grew 33 percent over the prior year quarter as customers continue to report high customer satisfaction.

But you know not to be outdone, we have another area of our business is performing it's or in the third quarter revenues from shift Wizard, which is our scheduling business grew 33% over the prior year quarter as customers continued to report high customer satisfaction. So really excited to see this relatively new product as you all know.

Speaker 3: So really excited to see this relatively new product. As you all know, we acquired three companies in the scheduling space, and we're beginning to see some real promise in growth in this area, even though we have a lot of building to do in this area. It's an area of increased investment as well. But we're really excited to deliver 33% year-over-year growth in the Shift Wizard subscription.

We acquired three companies in the scheduling space and we're beginning to see.

Some real promise in growth in this area, even though we have a lot of building with you on the status of <unk>.

Increased investment as well, but we're really excited to deliver 33% year over year growth and the shift Wizard subscriptions.

We have selected shipped wizard as our primary kind of go forward application set and we're significantly expanding its ability to perform at an enterprise scale and so we're working to make our shift wizard application appropriate for our largest customers and we continue to invest to add scale and capacity and new features and capabilities.

Shift Wizard application suite really excited for the team is delivering that and during the quarter. Some of the many new <unk> customers that we added were Palomar health Great claims health enrichment University Medical center, so exciting to see some great new additions to our customers come in and joining the <unk> ecosystem by selecting <unk>.

Speaker 3: really excited for the teams delivering that. During the quarter, some of the many new and customers that we added were Polymer Health, Great Plains Health, and Richmond University Medical Center. So excited to see some great new additions to our customers coming and joining the Healthstream ecosystem by selecting ShiftWizard.

Speaker 3: the application suite. So obviously, really exciting developments during the quarter. And we just, in the back half of this, after I turn it over to Scotty, we're going to talk about, we talked about kind of share of wallet in the first half here. We'll talk about market expansion opportunities in the second half. So let's turn it over to Scotty and do a deep dive in the numbers and then bring it back to me for discussion of market expansion.

<unk> Wizard the application suite, so obviously really exciting developments during the quarter and we just in the back half of this after I turn it over to Scotty when I talk about we talked about kind of share of wallet in the first half here, we'll talk about market expansion opportunities in the second half so lets turn it over to Scott in the deep dive in the numbers.

And then bring it back to me for a discussion of market expansion alright.

Speaker 4: All right. Thank you, Bobby, and good morning. I'll jump right in and hit the financial highlights for the third quarter, and unless otherwise noted, the comparisons will be against the same period of last year.

Alright, Thank you Bobby and good morning, I'll jump right in to hit the financial highlights for the third quarter and unless otherwise noted the comparisons will be against the same period of last year.

Speaker 4: As Bobby mentioned, it was a record quarter in which we achieved new high water marks for revenue and adjusted EBITDA.

As Bobby mentioned it was a record quarter in which we achieved new high watermarks for revenue and adjusted EBITDA.

Speaker 4: We achieved record revenues of $70.3 million, up 5%. Operating income was $4.9 million, up 104%.

We achieved record revenues of $70 3 million up 5%.

Operating income was $4 9 million up 104% net.

Speaker 4: Net income was $3.9 million, up 5%.

Net income was $3 9 million up 5%.

Speaker 4: Earnings per share was $0.13 per share, up from $0.12 per share, and finally, adjusted EBITDA was also a record high, coming in at $16.2 million and was up 28%.

Earnings per share was <unk> 13 per share up from 12 cents per share.

And finally adjusted EBITDA was also a record high coming in at $16 2 million and was up 28%.

Speaker 4: Now, let's start with revenues, which surpassed the 70 million dollar mark for the first time and we're up 3.1 million or approximately 5% compared to last year's third quarter.

Now, let's start with revenues, which surpassed the 70 million dollar Mark for the first time and were up $3 1 million or approximately 5% compared to last year's third quarter.

Speaker 4: Revenues from subscription products accounted for 96% of total revenues and our subscription revenue came in at $67.5 million, or an increase of 5%, while revenues from professional services were $2.9 million and declined by 11%.

Revenue from subscription products accounted for 96% of total revenues.

Subscription revenue came in at 67, and a half million or an increase of 5%.

While revenues from professional services were $2 9 million and declined by 11%.

Speaker 4: As a software company, our focus is on growing subscription revenue versus services revenue and the quarter's performance reflects just that.

As a software company our focus is on growing subscription revenue versus services revenue in the quarters performance reflects just that.

Speaker 4: Gross margin was 66.5%, up from 65.3% last year, and positively benefited from changes in revenue mix, including growth from products that we own.

Gross margin was 66, 5%.

Up from 65, 3% last year.

And positively benefited from changes in revenue mix, including growth from products that we own.

Speaker 4: Additionally, cost of revenues only increased by 0.2 million or 1%, which is due in part to lower compensation expenses, resulting from the organizational changes that we implemented earlier in the year. So these were partially offset by higher hosting and software costs.

Additionally, cost of revenues only increased by <unk> $2 million or 1%, which was due in part to lower compensation expenses.

Resulting from the organizational changes that we implemented earlier in the year.

So these were partially offset by higher hosting and software costs.

Speaker 4: Operating expenses excluding cost of revenues were up 0.4 million or 1% over last year's third quarter.

Operating expenses, excluding cost of revenues.

We're at $4 million or 1% over last year's third quarter.

Speaker 4: Appreciation and amortization were up 8% and G&A was up 2% while product development and sales and marketing were down 5% and 1% respectively.

<unk> and amortization were up 8%.

And G&A was up 2%, our product development and sales and marketing were down 5% and 1% respectively.

Speaker 4: Our product development costs declined by 5%, which is net of labor costs that were capitalized for software development.

Our product development cost declined by 5%, which is net of labor costs that were capitalized for software development.

Speaker 4: We maintain a consistent level of staffing and base compensation compared to last year, while capitalized labor costs increased approximately $600,000 over the prior year quarter.

We will maintain a consistent level of staffing and based compensation compared to last year, our capitalized capitalized labor costs increased approximately 600000 over the prior year quarter.

Speaker 4: Sales and marketing expenses were down 1% or less than $100,000.

Sales and marketing expenses were down 1% or less than 100000.

Speaker 4: Staffing levels were down slightly, resulting in lower base compensation, but this was partially offset by higher sales commissions, which is consistent with the growth in revenue.

Staffing levels were down slightly resulting in lower base compensation, but this was partially offset by higher sales commissions, which is consistent with the growth in revenues.

Speaker 4: G&A expenses increased by 2% or around $200,000 and were mostly a result of higher bad debt charges and professional service fees.

G&A expenses increased by 2% or around $200000 and we're mostly a result of higher bad debt charges and professional services.

Speaker 4: but we're also partially offset by lower staffing costs and other general expenses.

Were also partially offset by lower staffing costs and other general expenses.

Speaker 4: Our adjusted EBITDA was a record high of $16.2 million, which was up 28%, and our adjusted EBITDA margin improved 23.1% compared to 18.9% last year.

Yeah.

Our adjusted EBITDA was a record high of $16 2 million, which was up 28%.

And our adjusted EBITDA margin improved to 23, 1% compared to 18.9% last year.

Speaker 4: The growth in revenues, improved gross margins, and their operational efficiencies from the consolidation efforts we made in the first quarter led to this improvement.

The growth in revenues improved gross margins and their operational efficiency efficiencies from the consolidation efforts. We made in the first quarter led to this improvement.

Speaker 4: Now let me mention our H-Stream subscription count before moving on to the balance sheet.

Now, let me mention our HCM subscription count before moving on to the balance sheet.

Speaker 4: In the third quarter, 8 stream subscriptions increased by 113,000 over the previous quarter to a total of approximately 5,000.

In the third quarter eight strengths subscriptions increased by 113000 over the previous quarter.

So a total of approximately $5 7 million.

Speaker 4: Now let's take a look at the balance sheet metrics. We ended the quarter with cash and investment balances of $71.8 million, which was up from $56 million last quarter.

Now, let's take a look at the balance sheet metrics, we ended the quarter with cash and investment balances of $71 8 million, which was up from $56 million last quarter.

Speaker 4: During the quarter, we deployed 6.7 million for capital expenditures, paid 0.8 million to shareholders through our dividend program, and we repurchased 2.1 million of our common stock under the share repurchase program that we announced in September .

During the quarter, we deployed $6 7 million for capital expenditures paid.

$8 million to shareholders through our dividend program, and we repurchased two point win $1 million of our common stock under the share repurchase program that we announced in September .

Speaker 4: Day sales outstanding increased to 43 days compared to a record low of 38 days last year.

Days sales outstanding increased to 43 days compared to a record low of 38 days last year.

Speaker 4: But DSO came down by seven days when compared to last quarter. As a matter of context, I'm comfortable with our receivables metrics and the improvement that we made during the quarter with cash collection.

But DSO came down by seven days when compared to last quarter.

And as a matter of context, I'm comfortable with our receivables metrics and the improvement that we made during the quarter with cash collections.

Speaker 4: On a year-to-date basis, our cash flows from operations improved by 7.1 million, or 16% versus last year, coming in at 50%.

On a year to date basis, our cash flows from operations improved by $7 1 million or 16% versus last year.

Coming in at $50 2 million.

Speaker 4: And free cash flows also improved to $28.8 million compared to $24.1 million last year.

And free cash flows also improved to $28 8 million compared to $24 1 million last year.

Speaker 4: As for the third quarter, free cash flows were $18 million, another record high for us, which helped boost the cash balance to over $71 million.

As for the third quarter free cash flows were $18 million another record high for us, which is the cash balance to over $71 million.

Speaker 4: Remember, our free cash flows are seasonal, with the first and third quarters generally being the strongest, and cash flows tending to be closer to break even in the second and fourth quarters.

Remember our free cash flows are seasonal with the first and third quarters generally being the strongest and cashless tending to be closer to breakeven in the second and fourth quarters.

Speaker 4: With regard to our capital allocation, aside from the capital investments that we make into our products, we're also deploying capital to improve shareholder value through cash dividends and share repurchase.

With regard to our capital allocation aside from the capital investments that we make into our products. We're also deploying capital to improve shareholder value.

Through cash dividends and share repurchases.

Speaker 4: since the adoption of a dividend policy by our board of directors earlier this year.

Since the adoption of a dividend policy by our board of directors earlier this year.

Speaker 4: We've made three quarterly cash dividend payments so far this year, returning $2.3 million back to shareholders.

We've made three quarterly cash dividend payments, so far this year, returning $2 3 million back to shareholders.

Speaker 4: And yesterday our board of directors declared a fourth quarter of a dividend that will be paid in December .

And yesterday, our board of directors declared a fourth quarter dividend that will be paid in December .

Speaker 4: In respect to share repurchases, last month we announced a $10 million share repurchase program.

In respect to share repurchases last month, we announced a $10 million share repurchase program.

Speaker 4: We made 2.1 million of share repurchases during the third quarter.

And we made $2 1 million of share repurchases share repurchases during the third quarter.

Speaker 4: And through yesterday, we had purchased a total of $8.9 million under the $10 million program.

And through yesterday, we had purchased a total of $8 9 million under the $10 million program.

Speaker 4: This program will terminate on the earlier of March 31st, 2024 or when the maximum dollar amount under the program has been expended. We may suspend or discontinue making purchases under the program at any time.

This program will terminate on the earlier of March 31st 2024, or when the maximum dollar amount under the program has been extended.

We may suspend or discontinue making purchases under the program at anytime.

Speaker 4: Also, earlier this month we entered into an agreement with Truist Bank to renew our line of credit facility for another three years.

Also earlier this month, we entered into an agreement with <unk> bank to renew our line of credit facility for another three years.

Speaker 4: The credit facility terms and conditions are basically the same as before, and you can find out more details about this transaction in the Form 8K we filed on October 10th.

The credit facility terms and conditions are basically the same as before and you can find out more details about this transaction and the form 8-K, we filed on October 10th.

Speaker 4: You'll notice that we kept the facility at $50 million, which we feel is an appropriate size for us given our strong balance sheet and growing free cash flow.

You'll notice that we kept the facility of $50 million.

We still as an appropriate size for us given our strong balance sheet and growing free cash flows.

Speaker 4: Now, as for God and his expectations, we have updated our financial expectations as follows.

Now as for guidance expert expectations, we have updated our financial expectations as follows.

Speaker 4: We continue to expect that consolidated revenues will range between 277.5 and 283 million.

We continue to expect the consolidated revenues will range between 277, and a half and $283 million.

Speaker 4: We have updated Adjusted EBITDA, which is now expected to range between $59 and $62 million compared to the previous range of $57.5 to $60.5 million.

We have updated the adjusted EBITDA, which is now expected to range between 59 and $62 million compared to the previous range of 57, and a half to $60 5 million.

Speaker 4: and capital expenditures are still expected to range between $27 and $29 million.

And capital expenditure expenditures are still expected to range between 27 and $29 million.

Speaker 4: And while our guidance includes the acquisition of EEDS, which occurred late last year, does not include assumptions for any acquisitions that we may complete during the remainder of the year.

While our guidance includes the acquisition of <unk>, which occurred late last year does not include assumptions for any acquisitions that we may complete during.

During the remainder of the year.

Speaker 4: Now let me take a brief moment to provide some additional thoughts on the guidance before returning before turning the call back over to Bobby.

So now let me take a brief moment to provide some additional thoughts on the guidance before return before turning the call back over to Bobby.

Speaker 4: Our forecasted revenues for the year are trending to around the midpoint of the range, which would imply around a 5% growth right over last year.

Our forecasted revenues for the year are trending to around the midpoint of the range, which would imply around a 5% growth rate over last year.

Speaker 4: And as for adjusted EBITDA, our focus on operating efficiency and higher gross margins is translating into financial leverage.

As for adjusted EBITDAR are focused on operating efficiency and higher gross margins is translating into financial leverage and.

Speaker 4: And at the midpoint of our increased guidance range, this would imply around 13% growth over last year.

And at the midpoint of our increased guidance range. This would imply around 13% growth over last year.

Speaker 4: Furthermore, I want to share two other metrics that reinforce our performance.

Furthermore, I want to share two other metrics that reinforce our performance.

Speaker 4: Our annualized revenue per employee has improved from $234,000 to $259,000.

Our annualized revenue per employee has improved from 234000.

259000 in.

Speaker 4: And annualized adjusted EBITDA per employee has improved from 44,000 to 60,000 compared to the third quarter of last year.

And annualized adjusted EBITDA per employee has improved from 44000 to 60000 compared to the third quarter of last year.

Speaker 4: That concludes my comments for this quarter's call. Thanks for your time this morning and I'll now turn the call back over to Bobby for some additional updates. Thank you.

That concludes.

Concludes my comments for this quarters call. Thanks for your time this morning, and I'll now turn the call back over to Bobby for some additional update.

Operator: Good morning and welcome to HealthStream's third quarter 2023 earnings conference call. At this time I would like to inform you that this conference call is being recorded and then all participants are in a listen only mode. At the request of the company, we will open the conference for question and answers after the presentation.

Thank you Scotty.

Speaker 3: And I'm excited to dive into the second portion of my presentation here. In the first half of the call, we focused on how we're selling more products to existing customers. And now I wanna take this portion, focus on some market expansion that we're working on and very excited to see some traction in. So by selling directly to nursing students and nursing schools, we're just beginning to sell our products to a whole new set of customers. And we saw some traction on that.

And excited to dive into the second portion of my.

Presentation here in the first half of the call we focused on how were selling more products to existing customers and now I want to take this this portion focus on some market expansion that we're working on and very excited to see some traction and so by selling directly to nursing students and nursing schools were just beginning to sell our products to a whole new set of.

Molly Condra: I would now turn the conference over to Molly Condra, Vice President of Investor Relations and Communications. Please go ahead Ms. Condra. Thank you and good morning everybody. Thank you for joining us today to discuss our third quarter 2023 results.

<unk> and we saw some traction on that in the third quarter. Some of you may recall that we acquired a company called my clinical exchange in December of 2020, and you can think of my clinical exchange, both the company and the product as a bridge between students. These nursing students and hospitals that hire them and put them into rotation.

Molly Condra: Also, when the conference call with me today is Robert A. Frist Jr., CEO and Chairman of HealthStream and Scottie Roberts, CFO, Senior Vice President of Finance and Accounting. I would also like to remind you that this conference call may contain forward-looking statements regarding future events and the future performance of HealthStream that involve risk and uncertainties that could cause the actual results to differ materially from those projected in the forward-looking statements. Information concerning these risks and other factors that could cause the results to differ materially from those forward-looking statements are contained in the company's filings with the SEC, including forms 10K, 10Q and our earnings release.

Speaker 3: Some of you may recall that we acquired a company called My Clinical Exchange in December of 2020. And you can think of My Clinical Exchange, both the company and the product, as a bridge between students, these nursing students, and the hospitals that hire them and put them into rotations to gain experience to ultimately become a nurse. So My Clinical Exchange is like the connection bridge between the students and those rotations.

The gain experience to ultimately be commoners. So my clinical exchanges like the connection bridge between students and those rotations and it's also used interestingly two kind of credential on profile and onboard these nurses entities internships and rotation. So it has a little dimension to it to kind of qualifying.

Speaker 3: And it's also used, interestingly, to kind of credential and profile and onboard these nurses into these internships and rotations. So it has a little dimension to it to kind of qualifying the applicants as well.

The the applicants as well.

Speaker 3: Year to date, we generated just over $3 million of revenue from this product. Again, kind of a new category for us.

Molly Condra: Additionally, we may reference measures such as a DECIDY VITDAQ, which is a non-GAAP financial measure. A table providing supplemental information on a DECIDY VITDAQ and reconciling to net income attributable to HealthStream is included in the earnings release that we issued yesterday and may refer to in this call.

Year to date, we generated just over $3 million of revenue from this product again kind of a new category for us.

Speaker 3: And that's a 27% increase over the same period last year. So it's an exciting, you know, after we deployed the capital into the acquisition.

It's a 27% increase over the same period last year. So it's an exciting you know after we deploy the capital into the acquisition and kind of declared that we will be entering the market of the students and we just love. This idea because we get to the students even pre professional before their nurses and then they enter the workforce with <unk>.

Speaker 3: kind of declared that we'll be entering the market of these students and we just love this idea because we get to the students even pre-professional before their nurses and then they enter the workforce.

Robert Frist: So with that start, I'll turn the call over to CEO Bobby Frist. Thank you, Molly. Good morning, everyone. We have a lot to cover for our third quarter 2023 earnings call. In the third quarter, we achieved record revenue and record-adjusted EBITDA. Top-line revenue reached 70.3 million in the quarter, which was up 5% over the same period of 2022. And adjusted EBITDAQ increased to 16.2 million, which is a 28% improvement over the same period of 2022.

Speaker 3: with an HDREAM ID and we're just really excited to see progress in their series. So, so far this year, we've placed over 161,000 clinical rotations. So that's placing a student.

Extreme I D and <unk> and we're just really excited to see progress necessary. So so far this year, we placed over 161000 clinical rotation. So that's placing our students of some sort most nurses.

Speaker 3: of some sort most nurses uh... into a rotation in a hospital in a hospital's love this because of course as they become nurses they become candidates to work at that hospital so this product my clinical exchange which grew twenty seven percent of the prior year is doing two great things for us it's helping us be an ally to our hospital customers by bringing them the best nursing students uh... and it's all

Into a rotation in the hospital and the hospitals love this because of course as they become nurses they become candidates to work at that hospital. So this product my clinical expense exchange, which grew 27% over the prior year is doing two great things for us, it's helping us be an ally to our hospital customers by bringing them the best nursing students.

Robert Frist: If I reflect back, it was a quarter of financial high watermarks, also excellent progress on our single platform strategy, some exciting sales wins I'm going to talk about. But most of all, the quarter was characterized by the strong levers EBITDAQ growth we delivered and expect to continue delivering. Another way to think about performance is through the higher margins and greater operating efficiency we delivered. For example, through our investments in proprietary content applications, our gross margins have improved to be in line with our medium term financial goals of 65 to 68%. In addition, our single platform approach continues to streamline how we organize our workforce. For example, we delivered increasing revenue per employee for the past four consecutive quarters.

Speaker 3: you know, allowing us to build a business relationship with these nursing students before they enter the market as professionals. So they're engaging with our technologies and platforms earlier in their career, which we're really excited about.

And it's also.

Allowing us to build a business relationship with these nursing students before they enter the market as professionals. So they are engaging with our technologies and platforms earlier in their career, which really excited about.

Speaker 3: You know, so when they enter into the Myoclinical Exchange application, it gives Healthstream direct access to the students who use it. And with this access, we can better understand what products the students need before they transition into their professional careers. And we can begin selling those products directly to them and importantly, to their schools.

So when they enter into the Microdose exchange application. It gives <unk> direct access to the students who use it and with this access we can better understand what products the students need before they transition into their professional careers and we can begin selling those products directly to them and importantly to their schools.

Speaker 3: So, in addition to targeting the expansion by targeting the nursing students.

So in addition to targeting the expansion by targeting the nursing students.

Speaker 3: We're also expanding the selling to nursing schools. In the third quarter, one of the largest nursing schools in the country completed an enterprise purchase of the American Red Cross resuscitation.

We're also expanding to selling the nursing schools in the third quarter, one of the largest nursing schools in the country completed an enterprise purchase of the American Red Cross Resuscitation suite and we're really excited to see this dynamic because you know how exciting is it for a new nurse while in school to earn this credential and.

Robert Frist: Let's take a minute, just kind of refresh and really define health stream for our audience. I think we might have some new folks out there that want to hear how we describe and position our business. First and foremost, health stream is a healthcare technology company dedicated to developing credentialing and scheduling the healthcare workforce through fast-based applications and solutions, each of which are becoming more valuable because of the interoperability they're achieving through our H-treme technology platforms.

Speaker 3: And we're really excited to see this dynamic because you know how exciting is it for a new nurse while in school to earn this credential and carry it forward into the market.

Robert Frist: We sell our solutions on a subscription basis under contracts, which averaged three to five years in length. That means our revenues are recurring and predictable. In fact, and we checked this course yesterday, 96% of our revenues are subscription based. We are profitable. We have no interest bearing debt. We have a strong cash balance of 71 million. And we are solely focused on healthcare and more specifically the healthcare workforce. In fact, the way we define our adjustable market is as the 11.2 million healthcare professionals working in the United States in healthcare organizations.

Speaker 3: So, you know, after a careful consideration, this customer determined that health stream and the American Red Cross provide the best solution for fulfilling the recessed patient certification needs of the student. And, you know, it's a two year credential, so they enter the market now with that credential. And if they show up at a hospital that uses the H-treme platform, and those credentials automatically populate into the learning application. So again, another example of intraffin-

Carry it forward into the market. So after careful consideration as customer determined that health stream and the American Red Cross provide the best solution for filling the recess for fulfilling the resuscitation certification needs of the student.

Two year credentials. So they entered the market now with that credential and if they show up at a hospital that uses the <unk> platform and those credentials are automatically populate into learning application. So again. Another example of interoperability.

Speaker 3: finding new in this case customers or individual professionals Before they typically would have engaged

Finding new in this case customers or individual professionals before they typically would've engaged with Gulfstream. So we're excited for for us to be engaging earlier, we're excited for these graduates who enter the market with this stronger resume we're excited for the Red Cross who gets to develop the clinical skills.

Speaker 3: So we're excited for us to be engaging earlier. We're excited for these graduates who enter the market with this stronger resume. We're excited for the Red Cross who gets to develop the clinical skills of these nurses at an earlier stage and they might have otherwise. And so all around a lot of excitement about how we're expanding the deafness of our market to include the pre-professional market and specifically nursing schools.

Robert Frist: Though our market is also beginning to show signs of expansion into the pre-professional markets like nursing schools as well. And we're going to talk about that in the second half of this presentation this morning. As we enter the fourth quarter, we are confident that HealthStream will continue to provide results in line with our guidance range, importantly, including our increased guidance range for adjusted EBITDA 59 to 62 million. In addition to expanding in the new markets like nursing schools, this quarter we demonstrated some increasing share of wallet with existing customers.

These nurses at an earlier stage than they might have otherwise.

So all around a lot of excitement about how were expanding redemptions from our market to include the pre professional market.

Specifically, our nursing schools.

Speaker 5: So, we're in the early days of this journey, but you can tell from my clinical exchange traction, the 27% growth, and that we're getting to this new market and they're entering the market with their HStream ID, which is just a really exciting new way to think about how we define our market overall.

So we're in the early days of this journey, but you can tell from my clinical exchange traction that 27% growth.

And that we're getting to this new market and they are entering the market with their extreme I D.

Which is just a really exciting.

Robert Frist: I'm really excited to highlight two examples of that in the quarter. First, one of our large customers removed their HealthStream Learning Center and their HStream subscriptions for learning for 16,000 users. But they didn't stop there. They also decided to leverage our marketplace of workforce solutions and they added EBSCO clinical skills, our checklist product, psych hub, skillsoft, health equity and belonging curriculum, and talent tracks, one of our development programs, as part of their five year subscription.

New way to think about how we define our market overall.

Speaker 3: So I'll shift gears here and just wrap up for our employees by showing how we're demonstrating our streaming good value. We have.

So I'll shift gears here and just wrap up for our employees by my showing how we're demonstrating our streaming good value.

Speaker 5: Constitution we run our business by and streaming good is one of our many important values.

We have this constitution, we run our business by and streaming good as one of our many important values and we're able to demonstrate our streaming good value in this quarter by the way we were able to serve the health care professionals on the front lines and Maui, where the historic fires.

Speaker 5: And we're able to demonstrate our streaming good value in this quarter. By the way, we were able to serve the healthcare professionals on the front line.

Speaker 5: in Maui where the historic fires were really devastating overall. And they include just kind of incredible mental health challenges for the workforce as they tried their best to provide services and care for the survivors of those horrible fires in Hawaii. So, Health Stream was able to team up.

Robert Frist: So that sixth new products added the time of renewal. And as a result, this account is moving from approximately $16.52 per person per year to $30.99 per person per year. And this was not an isolated example. Another one of our large accounts expanded their HealthStream Learning Center contract and their HStream subscriptions for learning from 15,000 to 19,000. But while they're expanding the subscriptions, they also were renewing their safety cue product, their checklist and their CE Unlimited orders.

We're really devastating overall and they include just kind of incredible mental health challenges for the workforce as they tried their best to two.

<unk> provides services and care for the survivors that's horrible fires in Hawaii. So how is the team was able to team up.

With one of our partners Psych hub, and we're able to which we do have an equity investment in <unk>. So that was exciting for that reason as well and we also teamed up with a Y State Nursing Center, Hawaii State Center for nursing and we organized a complete online offering a psychological first aid training and education and we did this free of charge and so.

Robert Frist: They also added new to the contract, our quality OB program, a program and our Jane products while additionally expanding their subscriptions to our nurse residency program. So for all for a three year term. So for this account, we're moving from approximately $81.24 per person per year to $108.58 per person per year. And remember, the account went from 15,000 to 19,000 all in the same renewal process. So, you know, we're excited to be demonstrating this expansion of wallet share at the customers that we already have.

Speaker 5: training and education and we did this free of charge and so we were able to help Hawaii help the nursing the nurses in that state in their recovery mode and kind of process all that they're going

We're able to help Hawaii helped the nursing.

The nurses.

In that state.

And their recovery mode, and kind of process all that theyre going through we're excited that allowed our employees to live their streaming good value and provide this valuable service at a time of need and it's just one more idea of how we can extend our capabilities through our platforms and technologies for the betterment.

Speaker 5: We're excited that allowed our employees to live their streaming good value and provide this viable service at a time of need. And it's just one more idea of how we can extend our capabilities to our platforms and technologies for the betterment, in this case, of the well-being of the nurse population and the healthcare providers that were fighting so hard on the front lines in Hawaii.

In this case of the well being of the nurse population and the health care providers that we're fighting so hard on the front lines in Hawaii.

Robert Frist: And obviously, these two examples are customers that are deep into our ecology. They kind of shop within the four walls of HealthStream's ecology, our partners programs are promoted them and our various applications that are increasingly interoperable become more interesting to them. So these are two great examples. We have a strategic accounts program. The goal is to expand like this at, you know, our top 150 accounts. So we're really excited to see these two great renewals, extensions and product additions, increasing share of wallet.

Speaker 5: So we're honored to be a crucial resource to these healthcare professionals and that we consider them national heroes and we're excited to be a part of that provision.

So we're honored to be a crucial resource to these health care professionals, and we consider them national heroes.

And we're excited to be a part of.

That provision of care.

Speaker 5: So as we close this portion of the call, I want to do a reminder about our dividend policy that began early this year. We made the third payment under this policy about a month ago and just yesterday our board approved what would be the fourth installment of quarterly payments under the plan and that will be paid on December 22nd. We'll please our strong balance sheet and our strong operational performance puts us in a position to return by directly to shareholders to the company's first quarterly cash dividend program.

So as we close this portion of the call I want to remind you about our dividend policy. We began early this year, we made the third payment under this policy about a month ago and just yesterday, our board approved what would be the fourth installment of quarterly payments under the plan and that will be paid on December 22nd we're pleased that our strong balance sheet and our strong operational performance puts us in a position to return.

Robert Frist: So we're grateful for the significantly expanding commitments of these customers, and others like them are that they're making each time they come up for a renewal. And we want them to know that HealthStream is committed to ensuring they get even greater leverage out of their HStream membership. That's that underlying infrastructure that's making it all work together. And each time there are new rules around, we try to make sure they appreciate the interoperability that every quarter we release new capabilities that show interoperability of our various application suites.

I directly to shareholders through the company's first quarterly cash dividend program over the course of the full year 2023, we expect our new dividend policy to return approximately $3 million to shareholders and we are on track to meet that goal and we will consider whether to expand our dividend program next year. So we look forward to taking that up.

Speaker 3: Over the course of the full year 2023, we expect our new dividend policy to return approximately 3 million to shareholders.

Speaker 5: And we're on track to meet that goal, and we will consider whether to expand our dividend program next year. So we look forward to taking that up in future board discussion.

In future board discussions if you're interested in a profitable recurring revenue, 96% subscription SaaS Paas health care technology company that for 2023, we expect to deliver steady growth and is determined to share some of those gains directly shareholders, maybe health stream as a company and the stock for you. If you are listening we'd love to have you guys.

Speaker 5: If you're interested in a profitable recurring revenue, 96% subscription, SaaS, PASS, Healthcare Technology Company that for 2023, expects to deliver steady growth. And as a term to share some of those gains, directly, shareholders may be health stream as a company and a stock for you. If you're here listening, we'd love to have you guys as shareholders to go on this journey with us.

Robert Frist: There's also a strong quarter for our credential stream solutions. And it's important because we put a lot of capital into building out our credential stream solutions in the credential privilege and enroll area of our company. And so it's great to see that we're finally seeing and beginning to see really strong growth. So both in terms of competitive takeouts and conversions from our legacy solutions, in the third quarter we contracted 32 new customers for our credential stream solutions.

Robert Frist: And that, importantly, represents about 114,000 new subscriptions collectively. And remember, when you subscribe to our credential stream application suite, you also become a member of our HStream for credentialing and HStream platform technology. So we're excited to add, you know, through that part of the model, 114,000 new subscriptions. New customers include highly respected health organizations like Northville Health, low-high care, and banner health. And revenues from subscriptions to the credential stream in the third quarter grew 56% over the same period last year.

Shareholders to go on this journey with us.

Speaker 5: Let's turn it back over to the operator and begin the Q&A session with our.

Now, let's turn it back over to the operator and begin the Q&A session with our analysts.

Speaker 1: Thank you, Sarah. The question and answer session will begin at this time. If you're using a speaker phone, please pick up your handset before pressing any numbers. Could you have a question, please press star 111 on your telephone. If you wish to withdraw your question, please press star 111 again. Your question will be taken into order they are received. Please stand by for your first question.

Thank you Sir.

A question and answer session will begin at this time.

Speakerphone, please pick up your handset before pressing any numbers did you have a question. Please press star one on your telephone if you wish to withdraw your question. Please press star one again.

Question will be taken into what are their seat. Please standby for your first question.

Speaker 1: Our first question comes from the line of Matt Hewitt with Craig Hallam, Yolanda Zoe.

Our first question comes from the line of Matt Hewitt with Craig Hallum. Your line is open.

Speaker 6: Good morning, and thank you for all the detailed commentary so far, maybe first up, what are you hearing from hospitals, just the broader market trends. Obviously, you had a couple companies report this morning, talking about procedure volumes up, but still seeing some difficulties or headwinds on the income side of the equation. What are you hearing from customers and how are you able to kind of navigate that?

Good morning, and thank you for all the detailed commentary so far maybe first up what are you hearing from hospitals, just the broader market trends. Obviously you had a couple of companies report this morning.

Robert Frist: Now, at the smaller product, it's still in our top 10 for sure. But we're really excited to see this application suite that we've been consistently investing in for several years now show this kind of exciting growth level. Again, with 32 new customers and 56% year-over-year revenue growth. But, you know, not to be I'm done out done. We have another area of our business is performing. It's our, in the third quarter revenues from shift wizard, which is our scheduling business, grew 33% over the prior year quarter as customers continue to report high customer satisfaction.

Talking about procedure volumes up but still seeing some.

Difficulties or headwinds on.

The income side of the equation what are you hearing from customers and how are you able to kind of navigate that.

Speaker 3: Well, the challenge for them is a lot of their issues around workforce. We do think that our.

Well the challenge for them is a lot of other issues around workforce. We do think that our solutions are a great aid in the development and retention and better management of the workforce. So part of that cost structure that they are working hard to manage is related to workforce retention engagement and development. So I think we're a lot.

Speaker 5: Solutions are a great aid in the development retention and better management of the workforce So you know part of that cost structure that they're working hard to manage is is related to workforce retention engagement and development So I think we're aligned with helping them through the challenges that may be driving some of those the financial challenges that they articulated So I feel aligned with our customers and trying to help them through this period. You know, it's good to see the volumes up We like that as a sign of strength

Lined with helping them through the challenges that may be driving some of those financial challenges that they articulated so I feel aligned with our customers in trying to help them through this period. It's good to see the volumes up we like that as a sign of strength.

Robert Frist: So really excited to see this relatively new product, as you all know, we acquired three companies in the scheduling space, and we're beginning to see some real promise in growth in this area. Even though we have a lot of building to do on this area, it's an area of increased investment as well. But we're really excited to deliver 33% year-over-year growth in the shift wizard subscriptions. We have selected shift wizard as our primary kind of go-forward application set and we're significantly expanding its ability to perform at an enterprise scale.

Speaker 5: for our hospital customers and all of our continuum market customers as well. So there's some signs there that are positive, and I do think the areas they have the biggest challenges in are the topics of the CEOs, which are how do we retain, engage, develop, and better manage our workforce.

For our hospital customers in all of our continuum market customers as well so.

Theres some signs there that are positive and I do think the areas. They have the biggest challenges are the topics of the Ceos, which are how do we retain engage develop and better manage our workforce. So we're.

Speaker 5: You know, we're proud that our 1,100 employees are aligned and when we're called in, we can be a help on everything from a psychological well-being, like we talked about.

Robert Frist: And so we're working to make our shift wizard application appropriate for our largest customers and we continue to invest to add scale and capacity and new features and capabilities to the shift wizard application suite. Really excited for the teams delivering that. And during the quarter, some of the many new and customers that we added were Polymar Health, Great Plains Health, and Richmond University Medical Center. So excited to see some great new additions to our customers coming and joining the health training ecosystem by selecting shift wizard, the application suite.

We're proud that our 1100 employees are aligned and when we're called in we can be help on everything from a psychological wellbeing like we talked about in Hawaii to the skills development like the Red Cross program, which we think is a lower cost higher quality program than the competition and all the way on through to nursing skill development.

Speaker 3: in Hawaii to the skills development like the Red Cross program, which we think is a lower cost, higher quality program than the competition.

Speaker 3: and all the way on through to nursing skill development with our Jane product.

Speaker 5: We think that we're aligned to help them work their way through the challenges that they were talking about in the macro level.

With our gene products. So we think that we're aligned to help them work their way through the challenges that they are talking about on a macro level.

Speaker 6: understood that that's helpful. And then question, that the 11.2 million employees that you, that's your applications.

Understood. That's helpful. And then a question the $11 2 million employees that you.

Robert Frist: So obviously, really exciting developments during the quarter. And we just in the back half of this after we turn it over to Scotty. We're going to talk about, we talked about kind of share of wallet in the first half here.

Your applications.

Speaker 6: Does that include that the nursing schools, the students that you're now kind of opening up this new market?

Address does that include the nursing schools the students.

You're now kind of opening up this new market I don't think it does I'm about 98% sure. It does not we that that metric is defined in our Ks and Qs.

Speaker 5: I don't think it does. I'm about 98% sure it does not. We, that metric is defined in our case and cues. And I'm pretty sure it doesn't include the pre-professional market. And so nursing schools we are believing. And on this call declaring is an expansion of our opportunity. So we may have to adjust that number over time. You know, it's new for us. And our first big sale occurred in the quarter.

Robert Frist: We'll talk about market expansion opportunities in the second half.

Scott Roberts: So let's turn it over to Scotty and do a deep dive in the numbers and then bring it back to me for a discussion of market expansion.

Scott Roberts: All right, thank you Bobby and Good Morning. I'll jump right in and hit the financial highlights for the third quarter and unless otherwise noted the comparisons will be against the same period of last year. As Bobby mentioned, it was a record quarter in which we achieved new high water marks for revenue and adjusted EBITDA. We achieved record revenues of 70.3 million up 5% operating income was 4.9 million up 104%. Net income was 3.9 million up 5%.

And I'm pretty sure. It doesn't include the pre professional market and so nursing schools. We are believing in this call declaring as the expansion of our opportunities. So we may have to adjust that number over time.

It's new for Us and our first big sale occurred in the quarter. So we will look to see how to adjust that definition of market but.

Speaker 3: So we'll look to see how to adjust that definition of market, but.

Speaker 5: You know, we are particularly interested in getting to these right before they become nurses. We don't go all the way down to grade school, but I do think catching them in their last year of nursing school.

We are particularly interested in getting to these right before they become nurses. We don't go all the way down the grade school, but I do think catching them in the last year of nursing school.

Speaker 3: We're clearly now onboarding tens of thousands of new nursing.

Scott Roberts: Earnings per share was 13 cents per share up from 12 cents per share and finally adjusted EBITDA was also a record high coming in at 16.2 million and was up 28%. Now let's start with revenues which surpassed the 70 million dollar mark for the first time and were up 3.1 million or approximately 5% compared to last year's third quarter. Revenues from subscription products accounted for 96% of total revenue. Revenues and our subscription revenue came in at 67.5 million or an increase of 5%. While revenues from professional services were 2.9 million and declined by 11%.

Clearly now onboarding tens of thousands of new nursing students into our network and getting them in.

Speaker 3: into our network and getting them an ID right before they enter the professional market. So we're really excited about that. I think that represents the market expansion definition for us.

Right before the end of the professional market and so we're really excited about that I think that.

It represents a market expansion definition for us.

Speaker 6: or that makes a ton of sense going after that, those potential future nurses. And so maybe one last question, maybe more for Scottie, but gross margins. Obviously another nice step up there, and I know it's within the midpoint of your kind of your three year target, but.

That makes a ton of sense going after that those potential future nurses.

So maybe one last question, maybe more for Scott Scott, but.

Gross margins, obviously, another nice step up there and I know, it's within the midpoint of your kind of your three year target, but what would be the impediment of kind of growing beyond the 67, 68% over the near term I mean is there anything that would stand in the way of that I mean, you've seen you've seen some.

Speaker 3: what would be the impediment of kind of growing beyond the 67, 68% over the near term? I mean, is there anything that would stand in the way of that? I mean, you've seen you've seen some pretty nice growth in that metric over the past few quarters. I'm just curious what would be the what would prevent you from expanding further? Thank you. I'll try first and let Scotty add.

Scott Roberts: As a software company, our focus is on growing subscription revenue versus services revenue and the quarter's performance reflects just that. Gross margin was 66.5% up from 65.3% last year and positively benefited from changes in revenue mix including growth from products that we own. Additionally, cost of revenues only increased by 0.2 million or 1%, which was due in part to lower compensation expenses resulting from the organizational changes that we implemented earlier in the year.

Pretty nice growth in that metric over the past few quarters I'm, just curious what would be the.

What would prevent you from expanding further thank you.

I'll try first and let Scotty add I think one of the things that we're excited about is it almost all of our new products are being built using our platform technologies used some of our API is that gives us a little inherently more leverage and little faster rate of production of new products and introduction of those products. So.

Speaker 3: One of the things that we're excited about is that almost all of our new products are being built using our platform technologies, use some of our APIs that give us a little inherently more leverage and a little faster rate of production of new products and introduction of those products. So, you know, my general sense is that the ideas in the pipeline

Scott Roberts: Though these were partially offset by higher hosting and software costs. Operating expenses excluding cost of revenues were up 0.4 million or 1% over last year's third quarter. Depreciation and amortization were up 8% and GNA was up 2% while product development and sales and marketing were down 5% and 1% respectively. Our product development cost declined by 5%, which is net of labor costs that were capitalized for software development. We maintain the consistent level of staffing and base compensation compared to last year or capitalized labor costs increased approximately 600,000 over the prior year quarter.

Our general sense is that the ideas in the pipeline.

Speaker 3: and the things that we're working on are generally either data driven products where we own the data, our content products, where we own the content, or application suites we're building organically using our new platform technology. So in general over time, I think that that

And the things that we're working on are generally either a data driven products, where we own the data our content products, where we own the content or application suites, we're building organically using our new platform technology. So in general over time.

Speaker 3: The growing parts of our business have inherently higher gross margins, so.

That that.

Growing parts of our business have inherently higher gross margin and so right now we need to stay and define our target within that range, but but I think there should be just kind of continued slight upward pressure on that gross margin opportunity because the nature of what we're building is different than say.

Speaker 5: Right now, we need to stay and define our target within that range. But I think there should be this kind of continued slight upward pressure.

Speaker 3: on that gross margin opportunity because the nature of what we're building is different.

Speaker 3: than say the origins of the company that were built around partner content that had higher cost of

Scott Roberts: Sales and marketing expenses were down 1% for less than 100,000. Staffing levels were down slightly resulting in lower base compensation, but this was partially offset by higher sales commissions, which is consistent with the growth in revenues. GNA expenses increased by 2%, or around $200,000, and were mostly a result of higher bad debt charges and professional services, but were also partially offset by lower staffing costs and other general expenses. Our adjusted EBITDA was a record high of 16.2 million, which was up 28% and our adjusted EBITDA margin improved to 23.1% compared to 18.9% last year. The growth in revenues improved gross margins and their operational efficiencies from the consolidation efforts we made in the first quarter led to this improvement.

The origins of the company that were built around partner content that had.

Speaker 3: I think that that's my general answer is that I don't see what could stop us from continued expansion, but we have outlined these, you know, these three year objectives. And we're really excited to be landing already on that one measure in the range of our multi year objectives. So.

Cost of goods. So I think that that's my general answer is that I don't see what could stop us from continued expansion, but we have outlined these.

Three year objectives, and we're really excited to be landing already on that one measure in the range of our multi year objectives. So.

Speaker 3: We're glad to see that progress year today. It's got to have you want to add anything to that, but hopefully that addresses the question.

We're glad to see that progress year to date, Scott you know if you'd add anything to that but hopefully that addresses. The question. Yes, I think that's obviously, where we're headed is trying to continue to improve on that metric and just for a little additional context, just one thing to keep in mind as we've talked about transitioning to a paas.

Speaker 4: Yeah, I think Matt, that's obviously where we're headed is trying to continue to improve on that metric and

Speaker 4: Just for a little additional context, just one thing to keep in mind is we've talked about transitioning to a past company and

The company and continue into <unk>.

Speaker 4: It progressed down that that road, you know, one of the things that's influencing margins, to some degree, and will likely continue to influence margins is just removed from traditional, you know,

Progress down that road one of the things that's influencing margins to some degree likely continue to influence margins is just a move from a traditional print.

Scott Roberts: Now let me mention our H Dream Suscription Camp before moving on to the balance sheet. In the third quarter, H Dream Suscriptions increased by 113,000 over the previous quarter to a total of approximately 5.7 million.

Speaker 6: hosting environments on a co-location type of environment to cloud hosting. So, our investments in cloud continue to increase, and obviously that's a cost of delivering our service, so it's influencing margins to some degree. But as our, you know, products continue to kind of migrate towards higher margin solutions, we think that will overcome some of those costs that we're seeing increasing related to cloud. So, that's very helpful. Thank you.

Hosting environments on a co location.

The environment to cloud hosting so our investments in cloud continued to increase and obviously, that's a cost and delivering our service that's influencing margins to some degree but as our products continue to.

Scott Roberts: Now let's take a look at the balance sheet metrics. We ended the quarter with cash and investment balances of 71.8 million, which was up from 56 million last quarter. During the quarter, we deployed 6.7 million for capital expenditures, paid 0.8 million to shareholders through our dividend program, and we repurchased 2.1 million of our common stock under the share repurchased program that we announced in September. Day sales outstanding increased the 43 days compared to a record low of 38 days last year, but DSO came down by 7 days when compared to last quarter.

Tend to migrate towards higher margin solutions, we think that will overcome some of those costs that we're seeing increasing related to cloud.

That's very helpful. Thank you.

Thank you one moment please for our next question.

Speaker 1: Our next question comes from the line of Garrett Haas of William Blair. Your line is open.

Our next question comes from the line of Jared Haas of William Blair. Your line is open.

Speaker 7: Yeah, good morning. This is Jared Haas for Ryan Daniels. Thanks for taking our questions. Bobby, maybe just was hoping to get a little bit more color on the credentialing application suite. And specifically, I know you recently announced a couple of new product innovations for that suite of products. So, it would just be great to get your perspective of how you're thinking about the demand environment for the credential stream suite and maybe how you're still thinking about how street position relative to the market.

Yes. Good morning. This is Jared Haase for Ryan Daniels, Thanks for taking our questions. Bob maybe just was hoping to get a little bit more color on the Credentialing application suite and specifically I know you recently announced a couple of new product innovations for that suite of products. So it would just be great.

Scott Roberts: As a matter of context, I'm comfortable with our receivables metrics and the improvement that we made during the quarter with cash collections. On a year-to-date basis, our cash flows from operations improved by 7.1 million or 16% versus last year, coming in at 50.2 million, and free cash flows also improved to 28.8 million compared to 24.1 million last year. As for the third quarter, free cash flows were 18 million, another record high for us, which boost the cash balance to over 71 million. Remember, our free cash flows are seasonal, with the first and third quarters generally being the strongest, and cash flows tend to be closer to break even in the second and fourth quarters.

So your perspective of how youre thinking about the demand environment for the credential streams suite.

And maybe how you're how you're still thinking about how street position relative to the market.

Speaker 3: Sure. On the CredentialStream suite, it is first, you got that right, it is a suite. And so it's a set of modules and capabilities, an application that is increasingly connected to the HStream technologies. It has some really powerful differentiators built into it, like our Privileged Library, which is a curated data asset that we own, and a differentiator in the market. And so it's also, we believe, one of the most complete

Sure on the credential stream suite. It is first you got that right. It is a sweet and so it's a set of modules and capabilities and application.

That is increasingly connected to the H stream.

Acknowledges it has some really powerful differentiators built into it like our privilege library, which is a curated data assets that we own and a differentiator in the market and so it's also we believe one of the most complete.

Speaker 5: application suite in the market, so we think it's highly competitive against the competitive landscape. We find ourselves

Application suites in the market. So we think it's highly competitive against the competitive landscape. We found ourselves a finalist in almost every competition that debt is available to us in the markets that we've defined and so we think it's competitive because it includes capabilities around credentialing privileging the physician.

Speaker 5: a finalist in almost every competition that is available to us in the markets that we've defined. And so we think it's competitive because it includes capabilities around credentialing, privileging the physicians, enrolling them in insurance, and the onboarding processes, both facilitating some of the HR onboarding processes like training and facilitating the

Scott Roberts: With regard to our capital allocation, aside from the capital investments that we make into our products, we're also deploying capital to improve shareholder value through cash dividends and share repurchases. Since the adoption of a dividend policy by our Board of Directors earlier this year, we've made three quarterly cash dividend payments so far this year, returning 2.3 million back to shareholders. In yesterday, our Board of Directors declared a fourth quarter dividend that will be paid in December.

<unk> enrolling them insurance and insurance and the Onboarding process is both.

Militating some of the HR onboarding processes like training and facilitating the.

Speaker 5: the EHR provisioning process by also delivering some of the training to get them ready.

The EHR provisioning process by also delivering some of the training to get them ready to.

Speaker 3: to be provisioned on the electronic health record system. And so we think we just have a very complete definition of the application suite that works together really, really well. Also, one of our philosophical differences in our competition is it's kind of a physician-centered process instead of a back-office process.

To be provisioned on the electronic health record system and so we think we just have a very complete definition of the application suite that works together really really well also one of our philosophical differences in our competition is it's kind of a.

Scott Roberts: In respect to share repurchases, last month we announced the $10 million share repurchase program. We made 2.1 million of share repurchases during the third quarter, and through yesterday, we had purchased a total of $8.9 million under the $10 million program. Now, this program will terminate on the earlier of March 31st, 2024, or when the maximum dollar amount under the program has been expended. We may suspend or discontinue making purchases under the program at any time.

Centered process instead of a back office process are positioned hub is gaining and both popularity we watch its net promoter score which is positive.

Speaker 3: Our physician hub is gaining in both popularity. We watch its net promoter score, which is positive, and with physicians who are taking a little bit more personal control over this credentialing privileging enrollment process. So the physician hub component is also we think a differentiating point of view for us.

And with physicians, who are taking a little bit more personal control over this credentialing privileging and enrollment process. So the physician hub component is also we think a differentiating point of view for us.

Scott Roberts: Also, earlier this month, we entered into an agreement with truest bank to renew our line of credit facility for another three years. The credit facility terms and conditions are basically the same as before, and you can find out more details about this transaction in the form 8K we filed on October 10th. You'll notice that we capped the facility at $50 million, which we feel is an appropriate size for us given our strong balance sheet and growing free cash flows.

Speaker 3: redefining the workflow a little bit around the position. And we're seeing that engagement really be strong with the position hub component of the credential stream application suite.

Redefining the workflows, a little bit around the physician in and we're seeing that engagement.

Really be strong our deposition hub component of the critical stream application suite. So overall, we think well position as demonstrated by adding 32 plus customers across that suite.

Speaker 3: So, overall, we think well-positioned, as demonstrated by adding 32-plus customers across that suite during the quarter, and also it's nice to see the subscription revenues starting

During the quarter.

And also.

It's nice to see the subscription revenues starting to compound a little bit and I think I think the number was 56% when we look back at my note, maybe Scotty what was the the revenue growth rate year over year.

Speaker 3: compound a little bit and I think the number was 56% let me look back at my note maybe Scotty what was the the revenue growth rate year over year on

Scott Roberts: Now, as for guidance expectations, we have updated our financial expectations as follows. We continue to expect that consolidated revenues will range between 277.5 and 283 million. We have updated the adjusted EBITDA, which is now expected to range between 59 and 62 million compared to the previous range of 57.5 to 60.5 million. And capital expenditures are still expected to range between 27 and 29 million. And while our guidance includes the acquisition of EEDS, which occurred late last year, does not include assumptions for any acquisitions that we may complete during the remainder of the year.

On credential stream. Thank.

Speaker 3: I think you got it right, Bobby. Yeah, I think it's 56% and ShiftWizard was 30-something percent. So yeah, I think overall, I hope that answers the question. We feel it's very competitive, a finalist in every deal we look at, and we believe we win more than we lose, so really excited about how well-positioned that application is.

Thank you got it right Bobby I think this thing is 56% and shipped Wizard was 30 something percent. So yes, I think overall I hope that answered. The question, we feel it's very competitive a finalist in every deal we look at and.

And we believe we win more than we lose so really excited about how well positioned that applications with as you know we acquired several companies over over a decade and rebuilt the core application set and.

Speaker 3: You know, we acquired several companies over a decade and rebuilt the core application set, and we have over 700 agreements on that core new application set and expanding, obviously, rapidly. So we're excited.

Over 700 agreements on that core new application set and expanding obviously rapidly. So we're excited.

Scott Roberts: So now let me take a brief moment to provide some additional thoughts on the guidance before returning the call back over to Bobby. Our forecasted revenues for the year are trending to around the midpoint of the range, which would imply around a 5% growth right over the last year. And as for adjusted EBITDA, our focus on operating efficiency and higher growth margins is translating into financial leverage. And at the midpoint of our increased guidance range, this would imply around 13% growth over last year.

Speaker 7: Okay, great. Thank you for that. And then just as a follow up, I wanted to talk about staffing. It sounded like you mentioned labor costs were down a bit year over year. Can you just remind us where you're at kind of relative to your broader hiring needs? I think last quarter, you talked about having a handful of open positions that you were expecting to fill here in the second half of the year. So maybe just a quick update of where we're at and how we should sort of think about kind of a run rate for operating expenses going into 2024.

Okay, great. Thank you for that and then just as a follow up wanted to talk about.

It sounded like you mentioned labor costs were down a bit year over year.

Can you just remind us where you are at kind of relative to your broader hiring needs I think last quarter, you talked about having a handful of open positions that youre expecting to fill here in the second half of the year. So maybe just a quick update of where we're at and how we should sort of think about kind of a run rate for operating expenses going into 2024, Yes, I think we have about 50 open positions.

Speaker 3: Yeah, I think we have about 50 open positions. I think we're recruiting for about 20 of them. We have some new hiring models, which are exciting, where we hire kind of cohorts together and bring them in as a team. For example, we just hired a development cohort for one of our applications, a shift wizard application, which allowed us to move the development of that from an offshore team to a health stream.

Scott Roberts: Furthermore, I want to share two other metrics that reinforce our performance. Our annualized revenue per employee has improved from 234,000 to 259,000. And annualized adjusted EBITDA per employee has improved from 44,000 to 60,000, compared to the third quarter of last year.

<unk> I think we're recruiting for about 20 of them. We have some new hiring models those are exciting where we hire.

Cohorts together and bring them in as a team.

For example, we just hired it development cohort for for one of our applications are shipped Wizard application, which allowed us to move the development of that from an offshore team to the <unk> team. So.

Scott Roberts: That concludes my comments for this quarter's call.

Speaker 3: So, we do have open positions and with the natural turn, we're also using departures and options to reshape the business.

So we do have our positions.

Robert Frist: Thanks for your time this morning, and I'll turn the call back over to Bobby for some additional update.

And with the natural turn we're also using departures and opportunity to reshape the business.

Robert Frist: Thank you, Scotty, and excited to dive into the second portion of my presentation here. In the first half of the call, we focused on how we're selling more products to existing customers. And now I want to take this portion and focus on some market expansion that we're working on and very excited to see some traction. And so by selling directly to nursing students and nursing schools, we're just beginning to sell our products to a whole new set of customers.

Speaker 3: And so we've got all of our managers thinking about that, as if people do elect to leave, we're using that as an opportunity to think about our structure and where our emphasis is. We're trying to put more emphasis on the customer and connectivity and on development. And so those are two areas of relevant investment. Overall, I'd say our employment numbers are fairly stable with the kind of puts and calls of

And so we've got all of our managers thinking about that is if people do elect to leave where are you using that as an opportunity to think about our structure and where our emphasis is we're trying to put more emphasis on the customer and connectivity and on development and so those are two areas of relative investment overall, I'd say, our employment numbers are fairly stay.

<unk> with the kind of puts and calls of natural turn performance base terming and.

Speaker 3: natural turn, performance-based terming, and also the hiring that's going on. So, I think overall around this 1100 number is a good way to think about the scale of our workforce in the coming quarters. Okay, great. Appreciate it.

Robert Frist: And we saw some traction on that in the third quarter. Some of you may recall that we acquired a company called my clinical exchange in December of 2020. And you can think of my clinical exchange, both the company and the product, as a bridge between students, these nursing students, and the hospitals that hire them and put them into rotations to gain experience to ultimately become a nurse. So my clinical exchange is like the connection bridge between the student and those rotations.

And also the hiring thats going on so I think overall around this 1100 number is a good way to think about the scale of our workforce in the coming quarters.

Okay, great appreciate the color. Thanks.

Thank you one moment please.

Speaker 1: Our next question comes from the line of Richard Close. Of Canacord, your line is open.

Our next question comes from the line of Richard close.

Of Canaccord your line is open.

Robert Frist: And it's also used interestingly to kind of credential on profile and onboard these nurses into these internships and rotations. So it has a little dimension to it to kind of qualifying the applicants as well. Year to date, we generated just over 3 million of revenue from this product, again, and kind of a new category for us. And at the 27% increase over the same period last year. So it's an exciting, you know, after we deployed the capital into the acquisition and kind of declared that we'll be entering the market of these students.

Great. Thank you can you hear me okay.

Yes, Richard Yeah, Okay excellent.

Well first of all congratulations on the success here.

Quarter, Richard just curious.

You just mentioned the credential stream.

Revenues grew 56% in the quarter.

Wizard believes you said, 33% over the prior quarter and then just looking at those growth numbers.

Robert Frist: And we just love this idea because we get to the students even pre professional before their nurses. And then they enter the workforce with, you know, an extreme ID. And we're just really excited to see progress in this area. So so far this year, we've placed over 161,000 clinical rotations. So that's placing a student of some sort, most nurses into a rotation in a hospital. And the hospitals love this because of course, as they become nurses, they become candidates to work at that hospital.

Speaker 6: your revenue growth overall was like 5%. So just curious there is some of the growth in credential stream and shift wizard that you reference, is that?

Your revenue growth overall was like 5% so.

Just curious there is is some of the growth in credential stream and shift.

Wizard that you referenced is that.

Speaker 6: some cannibalization of the legacy products. I just thought with those numbers total would be greater.

Some cannibalization of the legacy products.

To start with it is yes numbers total would be greater yeah, yeah. So theres definitely some of that as we know we acquired a lot of applications and some of those we classify as legacy applications and our goal is to move those customers. So that is true some of that comes from migration as we talked about and some of it comes from.

Speaker 5: Yeah, yeah. So there's definitely some of that. As we know, we acquired a lot of applications and some of those we classify as legacy applications and our goal is to move those customers. So that is true. Some of that comes from migration, as we talked about, and some of it comes from new wins out in the market. And it's probably around, for credentialing anyway, around 50-50, I believe. I may be a little off on that, but just historically I think any given quarter is a little bit of, I guess you would call it cannibalization, but we call them successful migrations to a SAS subscription application suite. But some of that growth number is.

Robert Frist: So this product, my clinical exchange, which grew 27% over the prior year, is doing two great things for us. It's helping us be an ally to our hospital customers by bringing them the best nursing students. And it's also, you know, allowing us to build a business relationship with these nursing students before they enter the market as professionals. So they're engaging with our technologies and platforms earlier in their career, which really excited about.

New wins out in the market and its probably around four credentialing anywhere around 50, 50, I believe I may be a little off on that but just historically I think any given quarter or is it a little bit of.

You would call it cannibalization, but we call them successful migrations to a SaaS subscription.

Robert Frist: You know, so when they enter into the my clinical exchange application, it gives health training direct access to the students who use it and with this access, we can better understand what products the students need before they transition into their professional careers. And we can begin selling those products directly to them and importantly to their school. So, in addition to targeting the expansion by targeting the nursing students, we're also expanding to selling to nursing schools.

Application suite so.

But some of that growth number is the migratory migration from a legacy applications over and again, we celebrate those migrations and there are definitely new business on the newer applications.

Speaker 5: the migration from the legacy applications over. And again, we celebrate those migrations.

Speaker 5: And they're definitely new business on the newer applications. And we think on Credential Stream, it's probably about half.

And we think credential stream, it's probably about half and I'll see if anybody text me one of my officers anything different than that but I'm going to say ballpark. The last few quarters is probably around half.

Speaker 3: I'll see if anybody texts me, one of my officers, anything different than that. But I'm gonna say ballpark, the last few quarters is probably around.

Robert Frist: In the third quarter, one of the largest nursing schools in the country completed an enterprise purchase of the American Red Cross resuscitation suite, and we're really excited to see this dynamic because, you know, how exciting is it for a new nurse while in school to earn this credential and carry it forward into the market. So, you know, after a careful consideration, this customer determined that HealthStream and the American Red Cross provide the best solution for filling the recess for fulfilling the resuscitation certification needs of the student.

Speaker 6: Okay, so the lower growth rate overall for total revenue doesn't, you know, doesn't it imply like, you know, customer churn, the learning platform or anything.

Okay. So the lower growth rate overall for total revenue Delta.

Doug.

Implied custom.

Customer churn.

Turning platform or anything significant like that.

Speaker 3: There's always a little that. We've got a lot of market share and so there's always a little coming and going. I think what we're trying to highlight most recently though.

There's always a little of that.

We got a lot of market share and so there's always a little coming and going I think what we're trying to highlight most recently, though is where once we get a customer in for three or four of our products. They seem more likely to go from three or four to eight to 10 than they do to leave.

Speaker 3: is where you know once we get a customer in for three or four of our products they seem more likely to go from three or four to eight to ten.

Robert Frist: And, you know, it's a two-year credential, so the end of the market now with that credential. And if they show up at a hospital that uses the HStream platform, and those credentials automatically populate into the learning application. So, again, another example of interoperability, finding new, in this case, customers or individual professionals before they typically would have engaged with HealthStream. So, we're excited for us to be engaging earlier. We're excited for these graduates who enter the market with this stronger resume.

Speaker 5: than they do to leave. Now when we have just one product, maybe we got a toe in the door a few years ago and maybe they change, they make a different business decision on that product, that's where we lose them on that product and we also lose them on the H-Stream platform. And I think a couple of quarters ago, that happened on a few accounts. We don't consider them like real ecosystem partners, so we're really excited this quarter.

Now when we have just one product maybe got a toe in the door a few years ago and maybe they change they make the different new business decision on that product, that's where we lose them on that product and we also lose them on the <unk> platform and so and I think a couple of quarter ago that happen on a few accounts, we don't consider them like real ecosystem partners.

Robert Frist: We're excited for the Red Cross who gets to develop the clinical skills of these nurses at an earlier stage, and they might have otherwise. And so, all around a lot of excitement about how we're expanding the deafness of our market to include the pre-professional market and specifically nursing schools. So, we're in the early days of this journey, but you can tell from my clinical exchange traction, the 27% growth, and that we're getting to this new market, and they're entering the market with their HStream ID, which is just a really exciting new way to think about how we define our market overall.

So we're really excited this quarter to see the change in a couple of our key big renewals. This quarter went the other way and so we're really excited to watch them go from five products to 11 products and doubling their subscriber revenue per person per year, and obviously, that's more typical because overall, we have growth and we have growth in our newer.

Speaker 5: see the change in a couple of our key big renewals this quarter went the other way. And so we're really excited to watch them go from five products to 11 products and doubling their subscriber revenue per person per year. And obviously, that's more typical cuz overall we have growth and we have growth in our newer product.

Product categories.

Speaker 5: I know you're probably not going to want to answer this question, but is there any way to sort of size as a percentage of overall revenues, like the learning versus credential and shift wizard in terms of, you know, well, I think you're, you're, you're, you are right. Because we're really where we're trying to get Richard and we're just not there. We have this, I'll call it a very immature metric. This H stream subscription. In fact, we're still.

I know youre, probably not going to want to answer. This question, but is there any way to sort of size.

As a percentage of overall revenues like learning versus credential and shift Wizard in terms of well I think you're right because we're really where we're trying to get Richard and we're just not there. We have this I'll call. It a very immature metric. This eight streams subscriptions in fact, there is still some.

Robert Frist: So, shift gears here and just wrap up for our employees by showing how we're demonstrating our streaming good value. We have this constitution we run our business by, and streaming good is one of our many important values, and we're able to demonstrate our streaming good value in this quarter. By the way, we're able to serve the healthcare professionals on the front lines in Maui, where the historic fires were really devastating overall, and they include just kind of incredible mental health challenges for the workforce as they tried their best to provide services and care for the survivors of those horrible fires in Hawaii.

Speaker 3: A lot of work to do to clarify the difference between a subscriber and a subscription. We've broken down this platform, H-Stream, into H-Stream for Learning, almost think of it as a membership in our learning network, H-Stream for Credentialing, and H-Stream for Scheduling. So we've created these value bundles that are kind of infrastructure that are bundled with the sale of each core application.

Lot of work due to clarify have you ever seen a subscriber and a subscription to <unk>.

We have broken down this platform H stream into H dream for learning almost think of it as a membership in our learning.

Work H stream for Credentialing and H stream for scheduling. So we've created these value bundles that are kind of infrastructure that are bundled with the sale of each core application and where we're trying to get obviously is to.

Speaker 5: What we're trying to get, obviously, is to sort out how many unique individual professionals are in our entire network. And I think...

Sort out how many unique individual professionals are in our entire network and I think you know.

Speaker 5: Our goal is to get to a place where we can say, you know, that Bobby the nurse on credentialing is the same Bobby the nurse on NurseGrid is the same Bobby the nurse.

Our goal is to get to a place where we can say that Bobby the nurse on Credentialing is the same Bobby the nurse on nurse grid at the same Bobby the nurse on.

Speaker 5: on our learning application and they spend three hours here and one hour here and 10 minutes there each week.

Robert Frist: So, HStream was able to team up with one of our partners, SyCub, and we're able to, which we do have an equity investment in SyCub, so that was exciting for that reason as well, and we also team up with the Hawaii State Nursing Center, the Hawaii State Center for Nursing, and we organized a complete online offering of psychological first aid training and education, and we did this free of charge, and so we're able to help Hawaii help the nursing the nurses in that state in their recovery mode and kind of process all that they were going through. We're excited that allowed our employees to live their streaming good value and provide this viable service at a time of need, and it's just one more idea of how we can extend our capabilities for our platforms and technologies for the betterment in this case of the well-being of the nurse population and the healthcare providers that were fighting so hard on the front lines in Hawaii. So we're honored to be a crucial resource to these health care professionals and that we consider them national heroes and we're excited to be a part of that provision of care.

Our learning application and they spend three hours here in one hour here in 10 minutes, they're each week.

Speaker 3: And this HDream ID technology that we're rolling out now will help us reconcile all that. And we'll get to a better numerator denominator around this, these subscriber number versus the subscription sold to these kind of applications, suites, and their supporting infrastructure. So.

This <unk> technology that we're rolling out now will help us reconcile all of that and we'll get to a better numerator denominator around this these are the subscriber number versus the subscriptions sold to these kind of applications suites and theyre supporting infrastructure. So that's a long way of saying, we're trying to move to a single platform metric.

Speaker 3: That's a long way of saying we're trying to move this single platform metric kind of goal where we can get to this revenue per person per year. And then, you know, we may or may not break it down by categories like learning and scheduling, but you can see our extreme focus on at the account level.

Goal, where we can get to this revenue per person per year.

And then we may or may not break it down by categories like learning and scheduling, but you can see our extreme focus on at the account level.

Speaker 3: to grow the revenue per person per year. And we're just not quite there yet. The metric itself isn't mature enough and it's not wired to all of our applications so it can't be used yet like a cable company would where you can say revenue per person per year, company-wide per product category.

To grow the revenue per person per year, and we're just not quite there yet the metric itself isn't mature enough and it's not wired to all of our applications. So it can't be used yet like a cable company would where you can say revenue per person per year companywide per product category, but that's where we're headed and we've launched new scorecards entirely so our product managers can start to know like what my product ads.

Speaker 5: But that's where we're headed. And we've launched new scorecards internally so our product managers can start to know like, well, my product adds $2 per person per year to the overall metric.

$2 per person per year to the overall metric.

Speaker 3: So my hope is the next year or so we can refine these metrics further so they'll be a little bit more correlated to the growth trajectory. We'll get them connected technologically to more of the applications so that all applications are contributing to the denominator of that measure, adding hStream subscribers.

And so my hope is next year. So we can we can refine these metrics further so there'll be a little bit more correlated to the growth trajectory, we will get them connected technologically to more of the applications. So that all applications are contributing to the denominator of that measure, adding H dream subscribers and also.

Robert Frist: So as we closed this portion of call, I want to do a reminder about our dividend policy, we began earlier this year, we made the third payment under this policy about a month ago and just yesterday our board approved what will be the fourth installment of quarterly payments under the plan and that will be paid on December 22nd. So please our strong balance sheet and our strong operational performance puts us in a position to return directly to shareholders to the county's first quarterly cash dividend program.

Speaker 5: And also, we've had a team of people working hard to reconcile the unique subscribers so that we know that Bobby on H3M for Learning is the same Bobby on H3M for Scheduling. So, that's a long way of saying, you're right, we don't want to be segmented into these three application suites.

So we've got a team of people working hard to reconcile the unique subscribers. So that we know that Bobby on H Dream for learning is the same Bob Larney stream for scheduling. So that's a long way of saying you're right. We don't want to be segmented into these three application suites will instead, we want to be thought of as a single platform almost the way you think.

Robert Frist: Over the course of the year 2023, we expect our new dividend policy to return approximately 3 million to shareholders and want to check to meet that goal and we will consider whether to expand our dividend program next year. So we look forward to taking that up in future board discussions.

Speaker 3: Instead, we want to be thought of as a single platform, almost the way you think Apple issues a billion Apple IDs, and that's the way they think of a billion users of their ecosystem.

Apple issues 1 billion, Apple Ids and Thats the way they think of a 1 billion users of their ecosystem and then they start to think about where theyre getting them to invest and spend money across that ecosystem. So we're trying to be a single platform company.

Speaker 3: And then they start to think about where they're getting them to invest and spend money across that ecosystem. So we're trying to be a single platform company. And we're working hard at structuring our application suites and our infrastructure to support that form of metric instead of breaking out per product.

Robert Frist: If you're interested in a profitable recurring revenue 96% subscription, SAS, PASS, Health Care Technology Company that for 2023 expected to deliver steady growth and at the term to share some of those gains, directly, shareholders, maybe health stream as a company and a stock for you if you're here listening. We'd love to have you guys as shareholders to go on this journey with us.

And we're working hard at structuring or application suites, and our infrastructure to support that form of metric instead of breaking out per product.

Speaker 5: Cause you know, hope someday we have so many products in the ecosystem that it makes a little less sense, maybe the product managers in my company, they'll know that I have, you know, I have 300,000 subscribers at $2 per person per year on my product, but, but we already have over 50 products that generate a million a year.

Because you know hope someday, we have so many products in the ecosystem that it makes little less sense, maybe the product management company. They all know that I have you now have 300000 subscribers at $2 per person per year on my product, but we already have over 50 products generate a million a year.

Operator: Let's turn it back over to the operator and begin the Q&A session with our analysts. Thank you, Sarah. The question and the session will begin at this time.

Speaker 3: And so, you know, we're thinking much more portfolio-like and then aggregating it around the users. And that's where we want to get with the H3 metric someday. But right now, it's a little bit of a disconnected metric. We've been reporting it for a while, definitely better up than down. But in the coming quarters and years, it's going to be much more meaningful.

Operator: If you're using a speaker phone, please pick up your handset before pressing any numbers. Could you have a question, please press star 1-1 on your telephone. If you wish to withdraw your question, please press star 1-1 again. Your question will be taken into order there received. Please stand by for your first question.

So we're thinking much more of a portfolio like and then aggregating it around the users and that's where we want to get with the <unk> III metrics someday, but right now it's a little bit of a disconnected metric we've been reporting on for awhile definitely better up and down but.

In the coming quarters and years, it's going to be much more meaningful.

Matthew Hewitt: Our first question comes from the line of Matt Hewitt with Craig Hallum. Your line is open. Good morning, and thank you for all the detailed commentary so far. Maybe first up, what are you hearing from hospitals, just the broader market trends. Obviously, a couple of companies report this morning talking about procedure volumes up but still seeing some difficulties or headwinds on the income side of the equation. What are you hearing from customers and how are you able to kind of navigate that?

Speaker 6: Okay, that's very helpful. And then, Scotty, I was going to ask, you know, with the subscription model, I thought the guidance range for revenue seemed a little bit wide, but just wanted to go back in terms of your added commentary. So you're expecting to be roughly at the, you know, trending towards the midpoint of the revenue range?

Okay. That's very helpful and then Scott.

I was going to ask.

With the subscription model.

I thought the guidance range for revenue seemed a little bit wide, but just wanted to go back in terms of your added commentary. So you are expecting to be.

Roughly it trending towards the midpoint of the revenue range.

Speaker 4: Yeah, Richard, that's, yeah, that's where we are forecasting. That's the remarks.

Yeah, Richard that's yes, that's where we are forecasting.

Matthew Hewitt: Well, the challenge for them is a lot of their issues around workforce. We do think that our solutions are a great aid in the development, retention, and better management of the workforce. Part of that cost structure that they're working hard to manage is related to workforce retention, engagement, and development. I think we're aligned with helping them through the challenges that may be driving some of those financial challenges that they articulated. I feel aligned with our customers and trying to help them through this period.

The remarks that I made.

Speaker 6: Okay, I just wanted to clarify that. That's really helpful. Thanks. And then, Scotty, maybe on the product expenses, I was curious, it declined sequentially.

I just wanted to clarify that.

Really helpful. Thanks.

And then Scott maybe on the product.

Expenses I was curious it declined sequentially.

Speaker 6: If I go back to last quarter, I thought you said you're going to continue to invest and whatnot, but I was just curious if there was anything specific from, you know, call it second quarter to third quarter.

Was there.

If I go back to last quarter.

You said youre going to continue to invest in and whatnot, but I was just curious if there was anything specific from call it second quarter to third quarter.

Speaker 6: that led to that, you know, sequential step down from that mistake.

Matthew Hewitt: It's good to see the volumes up. We like that as a sign of strength for our hospital customers and all of our continuum market customers as well. Also, there's some signs there that are positive, and I do think the areas they have the biggest challenges and are the topics of the CEOs, which are how do we retain engaged, developed, and better manage our workforce. We're proud that our 1100 employees are aligned, and when we're called in, we can be help on everything from a psychological well-being, like we talked about in Hawaii to the skills development, like the Red Cross Program, which we think is a lower-cost tire quality program than the competition, and all the way on through to nursing skill development with our Jane products.

That led to that sequential step down from that mistake.

Speaker 4: Yeah, I know. I think relative to last year, it was down. I have to go check my numbers on sequential.

Yes.

I think relative to last year. It was down I have to go check my numbers on sequential.

Speaker 4: But, you know, I think in my remarks, you know, just pointing out that capitalized software development continues to.

But I think.

My remarks, just pointing out that capitalized software development continues to.

Speaker 4: increase for us we're, you know, obviously putting more emphasis on your product development and just the mix of projects that are ongoing and how that translated into what was capital versus expense influence year over year, I'll, I'll go back and look at sequential

The increase for US, we're obviously, putting more emphasis on product development and just the mix of projects that are ongoing and how that translated into what was capital versus expense.

Infants here every year I'll go back and look at the sequential activity, but I think yes.

Speaker 4: You know, as we mentioned, as Bobby mentioned just a few moments ago about staffing and, you know, it was fairly flat in the quarter. And so from a cost perspective, not a lot of movement in the cost structure. And as you know, as Bobby also mentioned, as we have

As I mentioned and as Bobby mentioned, just a few moments ago about staffing and it was fairly flat in the quarter and so from a cost perspective that a lot of movement in the cost structure and as.

Matthew Hewitt: We think that we're aligned to help them work their way through the challenges that they are talking about in the macro level. I understand that that's helpful. And then a question that the 11.2 million employees that you that's your applications address, does that include that the nursing schools, the students that you are now kind of opening up this new market? I don't think it does. I'm about 98% sure it does not.

Bobby also mentioned is we have departures you know were looking strategically at how to.

Speaker 4: Departures, you know, we're looking strategically at how to, you know, reinvest those freed up dollars to put back into the company and may not be an equal.

We invested is freed up dollars to put back into the company may not be an equal.

Speaker 4: trade off on one position leaving and another one coming in. So we're being more strategic about how we deploy those funds back into the business.

Tradeoff on when a physician, leaving in the Netherlands coming in that we're being more strategic about how we deploy those funds back into the business as well.

Speaker 6: Okay, I guess my final question is thought it was interesting on the 3 million of revenue year to date. I believe that's my clinical exchange.

Matthew Hewitt: We that come that metric is defined in our case and cues. And I'm pretty sure it doesn't include the pre-professional market. And so nursing schools, we are believing in this call declaring as an expansion of our opportunities. So we may have to adjust that number over time. You know, it's new for us and our first big sale occurred in the quarter. So we'll look to see how to adjust that definition of market.

Okay.

My final question is thought it was interesting on the 3 million of revenue year to date I believe Thats My clinical exchange and.

Speaker 3: and bobby can you just remind me like who's paying you guys that three million is that the nursing schools or the nursing students themselves um yeah yeah that's a great question it's a really fascinating model we're excited about it here's how it works

Bobby can you just remind me like who's paying you guys that $3 million is that the nursing schools or has been.

We're seeing students themselves.

Yes, that's a great question, it's a really fascinating model, we're excited about it here's how it works.

Matthew Hewitt: But, you know, we are particularly interested in getting to these right before they become nurses. We don't go all the way down to grade school, but I do think, you know, catching them in the last year of nursing school. We're clearly now onboarding tens of thousands of new nursing students into our network and getting them an ID right before they enter the professional market. And so we're really excited about that. I think that represents a market expansion definition for us. Well, that makes a ton of sense going after that, those potential future nurses.

Speaker 5: It's the software, the hospital gets some software as part of the solution set allows them to pick through the students and choose who gets a rotation and also take their preliminary application in for the rotation. So the hospital has some software.

The software the hospital get some software as part of the solution set allows them to pick through the students choose who gets a rotation and also take their preliminary application in for the rotation to the hospital has some software the nursing school get some software. So they can see the profile of their students that theyre push.

Speaker 5: the nursing school gets some software so they can see the profile of their students that they're pushing forward into the hospital network. And the student also has software access. They get access to build their profile, essentially a little bit like LinkedIn, so they can kind of profile themselves.

Going forward into the hospital network and the student also has software access they they they get access to build their profile essentially a little bit like lien dense. So they can kind of profile themselves and the model is set up so that along that chain almost anyone can choose to pay for it and so it's about I believe it's about.

Speaker 3: And the model is set up so that along that chain, almost anyone can choose to pay for it. And so it's about, I believe it's about $30 per person, per applicant essentially. And

Robert Frist: And so maybe one last question, maybe more for Scotty, but gross margins. Obviously another nice step up there. And I know it's within the midpoint of your kind of year, three year target. But what would be the impediment of kind of growing beyond the 67, 68% over the near term. Is there anything that would stand in the way of that? I mean, you've seen, you've seen some pretty nice growth in that metric over the past few quarters.

$30 per person per App for Apple can essentially.

Speaker 3: about half of the market lets the student pay. And so when the student enters their credit card and they pay the $29, they get access to this network and that helps them find a rotation. In some cases, about the other half, I'd say the hospitals choose to pay. It's part of almost recruiting future talent. And so it's about 50-50 of the 3 million, I believe half paid by hospitals and half paid by the student. And in some cases, they make it kind of part of the program at the nursing school. So it would be almost like.

And.

About half of the market, let the student pay and so and the students.

Or is there a credit card and they pay the $29. They get access to this network and that helps them find out rotation in some cases about the other half I would say the hospitals choose to pay as part of almost recruiting future talent and so it's about 50 50 of the 3 million I believe have paid by hospitals and have paid.

Robert Frist: I'm just curious what would be the, what would prevent you from expanding further. Thank you. I'll try first and let Scotty add. I think one of the things that we're excited about is that almost all of our new products are being built using our platform technologies use some of our APIs that give us a little inherently more leverage and a little faster rate of production of new products. And introduction of those products.

Good bye bye the student and in some cases, they make it part of the program at the Nursing school. So it would be almost like.

Speaker 3: the school pays and gets reimbursed. But the easiest way to think about is about 50% is paid self-paid by the student and about 50% percent by the hospital and the hospitals are largely the ones that decide which model to adopt they can save.

The school pays and gets reimbursed, but the easiest way to think about it is about 50% is paid self paid by the students and about 50% by the hospital and the hospitals are largely the ones that decide which model to adopt they can say.

Robert Frist: So, you know, my general sense is that the ideas and the pipeline and the things that we're working on are generally either data driven products where we own the data or content products, where we own the content or application suites, we're building organically using our new platform technology. So, in general, over time, I think that the growing parts of our business have inherently higher gross margins. So, right now we need to stay and define our target within that range.

Speaker 3: push the application fee out to the applicant or they can choose to pay for it for their network.

Pushed the application fee out to the applicant or they can choose to pay for it for their network.

Speaker 6: And then is there any tie-in to like my clinical exchange and

And then is there any tie into like my clinical exchange and.

Speaker 3: the nursing app that, what was it, Nurse Grid? Is there any integration between these two things? Not yet, but we have concepts that they might apply for their, My Clinical Exchange through the Nurse Grid app. We have concepts that we're working on that would allow.

The nursing App that.

It was a nurse nurses.

<unk>.

Is there any integration between these two things are not yet, but we have concepts that they might apply for their nurse my clinical exchange through the nurse grid App, we have concepts that we're working on that would allow.

Robert Frist: But, but I think there should be just kind of continued slight upward pressure on that gross margin opportunity because the nature of what we're building is different than say the origins of the company that we're built around partner content. It had higher cost of goods. So, I think that that's my general answer is that I don't see what could stop us from continued expansion. But we have outlined these, you know, these three year objectives and we're really excited to be landing already on that one measure in the range of our multi year objectives.

Speaker 3: Well, as you know, I think, you know, we're working on offering learning to the nurse grid network and offering learning to the my clinical exchange network. So our new platform gives us commerce capabilities now that we didn't have before.

As you know I think you know, we're working on offering learning to the nurse grid network and offering learning to my clinical exchange network. So our new platform gives us commerce capabilities now that we didn't have before that allows us to make products available in both of those networks and of course.

Speaker 3: that allows us to make products available in both of those networks. My vision would be to have those work together. I know the teams are working on lots of ideas.

My vision would be to have those worked together I know the teams are working on lots of ideas to make them more interoperable, but.

Robert Frist: So, we're glad to see that progress year today. Scott, I don't know if you want to add anything to that, but hopefully that addresses the question. Yeah, I think Matt, that's obviously where we're headed is trying to continue to improve on that metric. And just for a little additional context, just one thing to keep in mind is we've talked about transitioning to a past company and continuing to progress down that road.

Speaker 3: to make them more intraoperable, but right now we essentially are going to infuse commerce into both of those channels.

Right now, we essentially are going to infuse commerce into both of those channels.

By year end in fact, so we're excited that those will become opportunities.

And the next really 60 days.

Speaker 6: Okay. Well, thank you. I've taken up a lot of time, so I'll turn it back over. Thanks, Richard.

Okay. Thank you I've taken up a lot of time, so I'll turn it back over.

Robert Frist: So, you know, one of the things that's influencing margins to some degree and likely continue to influence margins is just a move from a traditional. You know, hosting environments on a co-location type of environment to cloud hosting so our investments in cloud continue to increase and obviously that's the cost of delivering our service that's influencing margins to some degree, but as our products continue to kind of migrate towards higher margin solutions, we think that will overcome some of those costs that we're seeing increasing related to cloud. That's very helpful. Thank you.

Thanks Richard.

Thank you one moment please.

Speaker 1: Our next question comes from the line of Vincent Caliccio of Barrington Research. Your line is open.

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

Operator: One moment, please, for our next question.

Speaker 8: Yes, good morning, Bobby. You have a very healthy growth and average revenue per employee, nice to see. I'm wondering if you have a growth, a comparable data point for the renewals. Maybe that would provide some sort of anecdotal indicator as to where the overall metric may be headed.

Yes, good morning, Bobby.

Good morning.

Very healthy growth in average revenue per employee nice to see.

Wondering if you have.

Growth comparable data point for the renewals.

So maybe that would provide some sort of anecdotal indicators as to where the overall metric may be headed.

Speaker 3: Oh great, you mean at the account level. So we did give two examples. Obviously they're really good examples. And but they were larger. And so it's great to see one account almost double from 16 to 30 plus dollars per person. And the other go from, I think, is around 80 to 108. So, but we don't have that metric wide. Of course, we have about 60 people in account management.

Oh, great you mean at the account level. So we did give two examples obviously there are really good examples and but there are larger and so it's great to see one account almost double from 16 to 30 plus dollars per person and the other go from I think is around 80 to 108, so but we don't have that metric Wyatt of course, we have about 60.

Jared Haase: Our next question comes from a lot of Garrett Haase of William Blair. Your line is open. Yeah, good morning. This is Jared Haase, I'm for Ryan Daniels. Thanks for taking our questions. Bobby, maybe just was hoping to get a little bit more color on the credentialing application Sweden. Specifically, I know you recently announced a couple of new product innovations for that suite of products. So we're just be great to get your perspective of how you're thinking about the demand environment for the credential stream suite and maybe how you're still thinking about how street position relative to the market.

Speaker 3: that manage our top hundreds of accounts, and their goal is to grow revenue per subscriber. And of course, my goal is, as I've mentioned in the coming quarters and years, to get to a place where we can share those numbers.

People and account management that manage our top hundreds of accounts and their goal is to grow revenue per subscriber and of course. My goal is as I've mentioned in the coming quarters and years to get to a place where we can share those numbers globally averages will start to mean things across our eight stream for learning subscription or HCM Credentialing and <unk>.

Speaker 3: globally where where averages will start to mean things across our htream for learning subscription or htream credentialing and htream for scheduling which should launch this

Jared Haase: Sure, on the credential stream suite, it is first you got that right is a suite and so it's a set of modules and capabilities, an application that is increasingly connected to the extreme technologies. It has some really powerful differentiators built into it like our privilege library, which is a curated data assets that we own and a differentiator in the market. And so it's also we believe one of the most complete applications we've in the market.

For scheduling, which should launch this quarter. So I don't have an answer for you know we have a couple of exciting examples and it's directionally, where we're going Vince.

Speaker 5: So I don't have an answer for you now. We have a couple of exciting examples, and it's directly where we're going, Vince. And we have teams of people, count managers, in particular, focused on growing the revenue per person per year. But right now we can kind of only cite.

And we have teams of people count in particular focused on growing that revenue per person per year.

But right now we can kind of only site samples instead of reporting kind of averages across the product sets, but we will get there I think that you've hit the nail on the head about where we're trying to get sort of be even much easier for you guys to model our growth. So you're on the right track you're a little in front of us I need a few more quarters.

Speaker 5: samples instead of reporting kind of averages across the product sets. But we'll get there. I think that you've hit the nail on the head about where we're trying to get, so it'll be even much easier for you guys to model our growth. So you're on the right track. You're a little in front of us. I need a few more questions.

Jared Haase: So we think it's highly competitive against the competitive landscape. If we find ourselves a finalist in almost every competition that is available to us in the markets that we define. And so we think it's competitive because it includes capabilities around credentialing, privileging the physicians, enrolling them, insurance, and insurance, and the onboarding process is both facilitating some of the HR onboarding processes like training and facilitating the. The EHR provisioning process by also delivering some of the training to get them ready to be provisioned on the electronic health record system.

Speaker 8: And then the identity management and license management to products on the HStream platform, are they meeting expectations?

And then.

The identity management and license management products on the eighth stream platform are they meeting expectations.

Jared Haase: And so we think we just have a very complete definition of the application suite that works together really, really well. Also, one of our philosophical differences in our competition is it's kind of a physician centered process instead of a back office process. Our physician hub is gaining in both popularity. We watch its net promoter score, which is positive. And with with physicians who are taking a little bit more personal control over this credentialing, privileging enrollment process.

Speaker 3: Really exciting. You know, we've taken that license verification service, which is a data driven service. We've bundled it in with your H stream for learning subscription. So there's kind of a included kind of concept, almost like Amazon Prime comes with quote free movies. And we all know they're not really free, but they are included.

Really exciting we've taken that license verification service, which is a data driven service we bundled it in with your H stream for learning subscription. So theres kind of included kind of concept almost like Amazon Prime comes with a quote free movies and we all know there are not really free but they are included and so yes, we've just surpassed the half a million.

Speaker 3: And so, yes, we've just surpassed a half a million subscriptions to the license service, which is being activated on behalf of our customers that have the hStream for learning in their contracts. So, we're really excited. And then we're converting some of those to upsell to add the other forms of sanction screening. And so, and meanwhile, because it's an API-driven service, we're infusing those same services into other application sets.

Subscriptions to the license service, which is being activated on behalf of our customers that have the H stream for learning and their contracts. So we're really excited and then were converting some of those to upsell to add the other forms of sanction screening screening and so and Meanwhile, because an API driven service we're infusing those same services.

Speaker 3: And so, we're really excited overall about these new data-driven services. And I don't have the conversion rate in front of me, but we do have upselling happening.

The other application sets.

And so we're really excited overall about these new data driven services and I don't have the conversion rate in front of me, but we do have upselling happening.

Speaker 3: It's probably less than 10% now, but we do have it where they get, quote, the license service included with their H-treme for learning subscription in their contract.

Jared Haase: So the physician hub component is also we think a differentiating point of view for us redefining the workpods a little bit around the position. And we're seeing that engagement or really be strong with the physician hub component of the critical stream application suite. So overall, we think well position as demonstrated by adding 32 plus customers across that suite during the quarter. And also where it's nice to see the subscription revenue starting to compound a little bit.

Probably less than 10% now, but we do have it where they they get quote the license service included with their H Dream for learning subscription in their contract again like Amazon includes movies.

Speaker 3: again like amazon includes movies and then there's a buy-up to have a sales team that calls and offers them the other forms of Sanction screening as a additional purchase and we do have a closure rate on that as well So we're beginning to see revenues come out of those data driven

And then Theres a buyouts, we have a sales team that calls and offers them. The other forms of sanction screening as a additional purchase and we do have a closure rate on that as well. So we're beginning to see revenues come out of those data driven life.

Speaker 5: license verification, office inspector general of sanction screening as well. And so really excited about the long-term implications that and it's great to see the base users surge path to half a million now.

Licensed verification office of Inspector General.

Jared Haase: And I think I think the number was 56% let me look back at my note, maybe Scotty, what was the revenue growth rate year over year on credentialing? I think you got it right, Bobby. Yeah, I think it's 56% and Shiptwitter was 30 something percent. So, yeah, I think overall I hope that answers the question. We feel it's very competitive, finalists in every deal we look at and we believe we win more than we lose.

Sanction screening as well and so.

Really excited about the long term implications of that and it's great to see the base users search path to half a million now.

Speaker 4: And a quick one for Scotty, what was the percentage contribution to growth from acquisitions? I know it was small. Yeah, that percentage is probably going to be around half a percent maybe of the growth rate. It was just under half a million of the revenue in the quarter. Okay. Thanks, guys. Sure.

And quick one for Scott.

What was the percentage contribution to growth from acquisitions I know it was small.

Yes that percentage is primarily around.

Jared Haase: So I'm really excited about how well positioned that that application is. You know, we acquired several companies over a decade and rebuilt the core applications set and you know, we have over 700 agreements. It's on that core new application set and expanding obviously rapidly, so we're excited.

A percent maybe the growth rate and it was just under half a million of the.

Robert Frist: Okay, great. Thank you for that.

Revenue in the quarter Okay.

Thanks, guys sure. Thanks Vince.

Speaker 1: Thank you. I'm showing no further questions at this time. I'll let you turn the call back over to Robert A. Fritz, CEO for any closing remarks.

Thank you I'm showing no further questions at this time I'd like to turn the call back over to Robert a frist CEO for any closing remarks, alright. Thank you everyone in the house streamers that made this all happened and a great quarter looking forward to wrapping up a strong year end.

Speaker 3: All right. Thank you, everyone, the health streamers that made this all happen. A great quarter. Looking forward to wrapping up a strong year end. The analysts that cover us, thank you for telling our story. And potential investors out there, we hope you take a look. We're trying to get good shareholder returns here with this dividend and deliver strong operating leverage, particularly in our cash flows, free cash flows, and EBITDA metrics. So excited and look forward to next quarter. Thank you, everyone, for participating.

Robert Frist: And then just as a follow up, wanted to talk about staffing. It sounded like you mentioned labor costs were down a bit year over year. Can you just remind us where you're at kind of relative to your broader hiring needs? I think last quarter you talked about having a handful of open decisions that you're expecting to fill. You're in the second half of the year, so maybe just a quick update of where we're at and how we should sort of think about kind of a run rate for operating expenses going into 2024.

That cover us. Thank you for telling our story and potential investors out there. We hope you take a look where we're trying to get good shareholder returns here with this dividend and deliver strong operating leverage, particularly at our cash flows free cash flows and EBITDA metrics. So excited and look forward to next quarter. Thank you everyone for participating.

Speaker 1: Thank you. Ladies and gentlemen, this is concludes today's conference. Thank you all for participating and have a great day. You may all disconnect.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all participating and have a great day you may all disconnect.

Robert Frist: Yeah, I think we have about 50 open positions. I think we're recruiting for about 20 of them. We have some new hiring models which are exciting, where we hire kind of cohorts together and bring them in as a team on some, for example, we just hired a development cohort for one of our applications, a shift wizard application, which allowed us to move the development of that from an offshore team to a health stream team.

Speaker 9: Thanks for watching!

Okay.

[music].

Okay.

Okay.

[music].

Robert Frist: So we do have open positions and with the natural turn, we're also using, you know, departures and opportunity to reshape the business. And so we've got all of our managers thinking about that as if people do elect to leave where we're using that opportunity to think about our structure and where our emphasis is, we're trying to put more emphasis on the customer and connectivity and on development. And so those are two areas of a relevant investment.

Robert Frist: Overall, I'd say our employment numbers are fairly stable with the kind of puts and calls of natural turn performance based terming and and also the hiring that's going on. So I think overall around this 1100 number is a good way to think about the scale of our workforce and the coming quarters. Okay, great. Appreciate the color. Thanks. Thank you. One moment, please.

Richard Close: Our next question comes from the line of Richard close.

Richard Close: Of can a cordy line is open. Great. Thank you. Can you hear me? Okay. Yes, Richard. Yeah. Okay. Excellent.

Richard Close: Well, first of all, congratulations on the success here. A great quarter, which is curious on you just mentioned the credential stream and, you know, revenues grew 56% in the quarter shift wizard. I believe you said 33% over the prior quarter and then just, you know, looking at those growth numbers, your revenue growth overall was like 5%. So just curious there is some of the growth in credential stream and shift wizard that you reference is that some cannibalization of the legacy products.

Richard Close: I just thought with the numbers total would be greater. Yeah, yeah. So there's definitely some of that. You know, as we know, we acquired a lot of applications and some of those we classify as legacy applications. And our goal is to move those customers. So that is true. Some of that comes from migration as we talked about. And some of it comes from new ones out in the market. And it's probably around for credential anyway around 50, 50, I believe I may be a little off on that.

Richard Close: But just historically, I think, you know, any given quarter is a little bit of, I guess you would call it cannibalization, but we call them successful migrations to a SaaS subscription application suite. So, but some of that growth number is the migration from the legacy applications over. And again, we celebrate those migrations and they're definitely new business on the newer application. And we think on credential stream, it's probably about half. I'll see if anybody texts me one of my officers anything different than that but I'm going to say ballpark the last few quarters is probably around half Okay, so the lower growth rate overall for total revenue doesn't you know doesn't imply like you know customer churn the learning platform or anything significant like that well there's always a little that you know it's we've got a lot of market share and so there's always a little coming and going I think what we're trying to highlight most recently though is where you know once we get a customer in for three or four of our products they seem more likely to go from three or four to eight to ten then they do to leave now when we have just one product maybe we got a toe in the door a few years ago and maybe they change they make the different business decision on that product that's where we lose them on that product and we also lose them on the htreme platform and so and I think a couple quarter go that happened on a few accounts we don't consider them like real ecosystem partners so we're really excited this quarter to see the change in a couple of our key big renewals this quarter went the other way and so we're really excited to watch them go from you know five products to eleven products and double in their subscriber revenue per person per year and you know obviously that's more typical because overall we have growth and we have growth in our new product categories I know you're probably not going to want to answer this question but is there any way to sort of size as a percentage of overall revenues like the learning versus credential and shift withered in terms of you know well thank you you're you're you're you're right because we're really we're trying to get Richard and we're just not there what we have this I'll call it a very immature metric this htreme subscription in fact we're still a lot a lot of work to do to clarify everything the subscriber and a subscription to we've broken down this platform htreme into htreme for learning almost think of it as a membership in our learning network htreme for credentialing and htreme for scheduling so we've created these value bundles that are kind of infrastructure that are bundled with the sale of each core application and where we're trying to get obviously is to sort out how many unique individual professionals are in our entire network and I think you know our goal is to get to a place where we can say you know that bobby the nurse on credentialing is the same bobby the nurse on nurse grid is the same bobby the nurse on on our learning application and they spend three hours here and one hour here and 10 minutes there each week and this htreme ID technology that we're rolling out now will help us reconcile all that and we'll get to a better numerator denominator around this these of the subscriber number versus the subscription sold to these kind of applications sweets and their supporting infrastructure so at the long way of saying we're trying to move this single platform metric kind of goal where we can get to this revenue per person per year and then you know we may or may not break it down by categories like learning and scheduling but you can see our extreme focus on at the account level to grow the revenue per person per year and we're just not quite there yet the metric itself isn't mature enough and it's not wired to all our applications so it can't be used yet like a cable company would where you can say revenue per person per year company wide per product category.

Richard Close: But that's where we're headed and we've launched new scorecards internally so our product managers can start to know like well my product adds two dollars per person per year to the overall metric. So my hope is the next year so we can we can refine these metrics further so there'll be a little bit more correlated to the growth trajectory we'll get them connected technologically to more of the applications so that all applications are contributing to the denominator of that measure adding htreme subscribers.

Richard Close: And also we've got a team of people working hard to reconcile the unique subscribers so that we know that bobby on htreme per learning is the same bobby on htreme per scheduling so that's a long way of saying you're right we don't want to be segmented into these three application suites. Instead we want to be thought of a single platform almost the way you think you know Apple issues a billion Apple IDs and that's the way they think of a billion users of their ecos, and then they start to think about where they're getting them to invest and spend money across that ecosystem.

Richard Close: So, we're trying to be a single platform company and we're working hard at structuring our application suites and our infrastructure to support that form of metric instead of breaking out per product. Because, you know, sometimes they have so many products in the ecosystem that it makes a little less sense, maybe the product managers might come to you. They'll know that I have, you know, I have 300,000 subscribers at $2 per person per year on my product, but we already have over 50 products that generate a million a year.

Richard Close: And so, you know, we're thinking much more portfolio-like and then aggregating it around the users. And that's where we want to get with the H3 metrics someday. But right now it's a little bit of a disconnected metric. We've been reporting it for a while. Definitely better up and down. But in the coming quarters and years, it's going to be much more meaningful.

Scott Roberts: Okay, that's very helpful.

Richard Close: And then Scotty, I was going to ask, you know, with the subscription model, I thought the guidance range for revenue seemed a little bit wide, but just wanted to go back in terms of your added commentary. So you're expecting to be roughly at the, you know, trending towards the midpoint of the revenue range. Yeah, Richard, that's, yeah, that's where we are forecasting. That's the remarks that I made. Okay, I just wanted to clarify that. That's really helpful. Thanks.

Scott Roberts: And then Scotty, maybe on the product expenses, I was curious. It declined sequentially. Was there, you know, if I go back to the last quarter, I thought, you know, you said you're going to continue to invest and whatnot. But I was just curious if there was anything specific from, you know, call it second quarter to third quarter. That led to that, you know, sequential step down from not mistaken. Yeah, no, I think relative to last year, it was down.

Scott Roberts: I have to go check my numbers on sequential. But, you know, I think my remarks, you know, just pointing out that capital, I software development continues to increase for us. We're, you know, obviously putting more emphasis on your product development and just the mix of projects that are ongoing and how that translated into what was capital versus expents. In points year over year, I'll go back and look at sequential activity. But I think, you know, as we mentioned, as Bobby mentioned, just a few moments ago about staffing and, you know, it was fairly flat in the quarter.

Scott Roberts: And so from a cost perspective, not a lot of movement in the cost structure. And as, you know, as Bobby also mentioned, as we have departures, you know, we're looking strategically at how to, you know, reinvest those freed up dollars to put back into the company and may not be an equal. Trade off on, you know, one position, leaving another one coming in that we're seeing more strategic about how we deploy those funds back into the business as well. Okay.

Richard Close: I guess my final question is thought it was interesting on the 3 million of revenue year to date. I believe that's my clinical exchange. And Bobby, can you just remind me like who's paying you guys that 3 million? Is that the nursing schools or the nursing students themselves? Yeah, yeah. That's a great question. It's a really fascinating model. We're excited about it. Here's how it works. It's the software, the hospital gets some software as part of the solution set allows them to pick through the students and choose who gets a rotation and also take their preliminary application in for the rotation to the hospital has some software.

Richard Close: The nursing school gets some software so they can see the profile of their students that they're pushing forward into the hospital network. And the student also has software access. They get access to build their profile, essentially a little bit like LinkedIn so they can kind of profile themselves. And the model is set up so that along that chain almost anyone can choose to pay for it. And so it's about I believe it's about $30 per person per applicant essentially.

Richard Close: And about half of the market lets the student pay. And so when the student enters their credit card and they pay the $29 they get access to this network and that helps them find a rotation. In some cases about the other half I'd say the hospitals choose to pay as part of almost recruiting the future talent. And so it's about 50 50 of the 3 million I believe half paid by hospitals and half paid by by the student.

Richard Close: And in some cases, they make it kind of part of the program at the nursing school so it would be almost like the school pays and gets reimbursed. But the easiest way to think about is about 50% is paid self paid by the student and about 50% percent by the hospital and the hospitals largely the ones that decide which model to adopt they can say you'll push the application to the applicant or they can choose to pay for it for their network. Mark.

Robert Frist: And then, is there any tie-in to like my clinical exchange and the nursing app that what was a nurse nurse? Is there any integration between these two things? Not yet, but we have concepts that they might apply for. My clinical exchange through the nurse grid app, we have concepts that we're working on that would allow, well, as you know, I think we're working on offering learning to the nurse grid network and offering learning to the my clinical exchange network.

Robert Frist: So our new platform gives us commerce capabilities now that we didn't have before that allows us to make products available in both of those networks. And of course, my vision would be to have those work together. I know the teams are working on lots of ideas to make them more interoperable, but right now we essentially are going to infuse commerce into both of those channels by your end in fact. So we're excited that those will become opportunities in the next really 60 days.

Richard Close: Okay, well, thank you. I've taken up a lot of time, so I'll turn it back over. Thanks, Richard. Thank you.

Vincent Colicchio: One moment, please. Our next question comes from the line of Vincent Khalitio, a Barrington Research, a line of open.

Vincent Colicchio: Yes, good morning, Bobby. Morning. You have a very healthy growth and average revenue per employee, nice to see. I'm wondering if you have a growth, a comparable data point for the renewals. Maybe that would provide some sort of anecdotal indicator as to where the overall metric may be headed. Oh, great. You mean at the account level. So we did give two examples. Obviously there are really good examples. And, but they were larger and so it's great to see one account almost double from 16 to 30 plus dollars per person. And the other go from I think is around 80 to 108.

Robert Frist: So, but we don't have that metric wide. Of course, we have about 60 people and account management that manage our top hundreds of accounts. And their goal is to grow revenue per subscriber. And of course, my goal is, as I've mentioned in the coming quarters and years to get to a place where we can share those numbers globally, where averages will start to mean things across our htream for learning subscription or htream for insulin and htream for scheduling, which should launch this quarter.

Robert Frist: So, I don't have an answer for you now. We have a couple of exciting examples and it's directly where we're going fence. And we have teams of people, account management in particular focused on growing the revenue per person per year. But right now, we can kind of only cite samples instead of reporting kind of averages across the product sets.

Robert Frist: But, but we'll get there. I think that you've hit the nail in the head about where we're trying to get. So, it'll be even much easier for you guys to model our growth. So, you're on the right track. You're a little in front of us.

Robert Frist: I need a few more quarters. And then the identity management and laces management that products on the htream platform. Are they meeting expectations? Really exciting. You know, we've taken that license verification service, which is a data driven service. We bundled it in with your htream for learning subscriptions. So, there's kind of a included kind of concept. That's almost like Amazon Prime comes with quote free movies and we all know they're not really free, but they are included.

Robert Frist: And so, yes, we've just surpassed a half a million subscriptions to the license service, which is being activated on behalf of our customers that have the htream for learning in their contracts. So, we're really excited. And then we're converting some of those to upsell to add the other forms of sanction screening screening. And so, and meanwhile, because of an API driven service, we're infusing those same services into other application sets. And so, we're really excited overall about these new data driven services.

Robert Frist: And I don't have the conversion rate in front of me, but we do have upselling happening. It's probably less than 10% now, but we do have it where they get quote the license service included with their htream for learning subscription in their contract. Again, like Amazon includes movies. And then there's a buy-ups. We have a sales team that calls and offers them the other forms of sanction screening as a additional purchase.

Robert Frist: And we do have a closure rate on that as well. And we're beginning to see revenues come out of those data driven license verification, office inspector general of sanction screening as well. And so, really excited about the long-term implications that. And it's great to see the base users surge past to half a million now. What was the percentage contribution to growth from acquisitions, and it was small? Yeah, that percentage is probably around half a percent, maybe, of the growth rate.

Scott Roberts: It was just under half a million of the revenue in the quarter. Okay.

Vincent Colicchio: Thanks, guys. Sure. Thanks, Vince. Thank you.

Operator: I'm showing no further questions at this time.

Robert Frist: Let's turn the call back over to Robert A.

Robert Frist: Frist, CEO for any closing remarks. All right. Thank you, everyone. The health streamers have made this all happen. A great quarter looking forward to wrapping up a strong year end. The analysts that cover us. Thank you for telling our story and potential investors out there. We hope you take a look. We're trying to get good shoulder returns here with this dividend and delivers strong operating leverage, particularly in our cash flows, free cash flows, and EBITDA on metrics. So excited and look forward to next quarter.

Operator: Thank you, everyone, for participating. Thank you. Ladies and gentlemen, this doesn't include place conference. Thank you all for participating. Have a great day. You may all disconnect.

Operator: Thank you.