Q3 2024 HealthStream Inc Earnings Call

October 22, 2024

Speaker Change: Good morning and welcome to Hellstream's third quarter, 2024 earnings conference call. At this time, I would like to inform you that this conference is being recorded and it all participants are in a listen-only mode. At the request of the company, we will open the conference up for questions and answers after the presentation.

Speaker Change: Hi, we'll now turn the conference over to Molly Condra, Vice President and the Vest Relations and Communications. Please go ahead, Ms. Condra.

Molly Condra: Thank you and good morning. Thank you for joining us today to disturb our quarter 2024 results. Also on the conference call with is Robert A. Frist Jr. CEO and Chairman of HealthStream and Scott Roberts, CEO and Senior Vice President of Finance and Accounting.

Molly Condra: I would also like to remind you that this conference call may contain forward-looking statements regarding future events and the future performance of L-Stream that involve risk and uncertainties that could cause the actual results to differ materially from those projected in the forward-looking statements.

Molly Condra: Information concerning these risks and other factors that could cause the results to differ.

Molly Condra: from those who offer us messages, are paid as a expilings with the SEC, including forms Junke, Tinku, and our earnings release.

Molly Condra: Joseph David Daw, which is a non-gap financial measure.

Molly Condra: A table providing supplemental information on a justice debate, 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. So at this time, I'll turn the call over to CEO Bobby Frist.

Bobby Frist: Good morning everyone and welcome to our third quarter 2020 for earnings call. We have a lot to cover today and I'll just jump right in. We'll start with some basic financials. And please report in the third quarter, our financial performance showed you over your increases in each of the major categories we highlight in our earnings release.

Bobby Frist: We delivered record-cory revenues of 73.1 million and record quarterly and jocative of 17.7 million. Moreover, we're seeing strong sales pipelines on credential stream in our credentialing.

Bobby Frist: in credentialing, shift wizard in scheduling, and on our new reporting analytics and API related products that bolster our market leading health stream learning center. And so in that third one there I'll talk a little bit about an exciting product roll out that's happening right now.

Bobby Frist: We're also gaining traction in new markets, including the nursing school market, which is, we talk about these two communities that we're operating now that are growing, want us for students and want us for nurses.

Bobby Frist: and we'll talk a little bit about both of those here in a few minutes. So in addition to the three core applications, we're operating and growing two growing communities. One for students and one for nurses, we'll talk about those a bit later.

Bobby Frist: I'm excited about our ongoing progress towards the key development milestones in our extreme platforms, this underlying technology that's...

Bobby Frist: We put quite a bit of time in capital into starting a manifest, which ensures interoperability between and among our three primary application suite and now our two communities and one of the two communities actually thriving social networks. We'll talk about that as well.

Bobby Frist: As we kick off the call, I do want to go back to the basics and summarize the basic business model for the benefit of anyone who's new to the health streams to worry.

Bobby Frist: First and foremost, HealthStream is a healthcare technology company dedicated to developing, credentialing and scheduling the healthcare workforce through SaaS-based solutions, each of which are becoming more viable, we believe, because of the interoperability they are achieving through the HStream technology platform that we've been talking about now for a few years.

Bobby Frist: Historically, we sell our solutions on a subscription basis under contract that averaged three to five years in length, which makes our revenues recurring and predictable. In fact, 96% of our revenues are subscription based.

Bobby Frist: As I just mentioned, we have also started to open our sales channels directly to help care professionals and nursing students across the continuum of healthcare training.

Bobby Frist: We are profitable. We have no intersparing debt and a strong cash balance of 94.9 million. We are solely focused on healthcare and more specifically to healthcare workforce. The 12.3 million healthcare professionals and nursing students in the United States comprise the core total dressable market for our SaaS solutions.

Bobby Frist: Before turning it over to Scottie, our CFO , and having a more detailed financial discussion, I do want to highlight some of the successes we've achieved in each of our learning, credentialing and scheduling application suites during the quarter. Let's start with the learning application suite first, where our HealthStream Learning Center is the application that is the flagship product of this suite.

Bobby Frist: and I want to highlight a key product loss that's happening, as I mentioned, as we speak in the last few weeks, we started to roll it out.

Bobby Frist: and that the name of that application is our insights plus solution.

Bobby Frist: We have rebuilt our data reporting and analytics technology stack on leading technologies, including snowflake and sigma.

Bobby Frist: We have used those technologies to build insights plus which is an upgrade to our base reporting tool for learning data.

Bobby Frist: In the learning data is one of the most critical assets we provide back to our customers and our aging architecture on reporting was something that we needed to refresh. So today we're announcing, after nearly two years of development, the launch of our insights plus reporting and new technology stacks were really excited about it as they roll out today.

Bobby Frist: In fact, plus provides customers with an expanded and enhanced experience, including an analytics tool, focused on measuring the impact of the underlying initiatives.

Bobby Frist: Insights Plus has now replaced two legacy solutions, learning analytics and initiative management dashboard.

Bobby Frist: Our customers are spot the insights plus has been very positive.

Bobby Frist: with just over two million in bookings in the first three-quarters of the year. So we are obviously advanced positioning it and dimming along the way, and now we're in the rollout phase. Customers are receiving the applications suite of the Insights Plus applications as we speak.

Bobby Frist: And so this pipeline I mentioned is nearly six times the bookings for the predecessor products that we just talked about in the same period last year and four times our bookings budget for the FY 2024 so you know an area of highlight it's exciting.

Bobby Frist: We've talked a lot about how the development of A-stream platform could.

Bobby Frist: Play into growth opportunities. In the last three weeks, we're now able to start executing on a pipeline for our brand new analytics and reporting tool sets, which is an area that we're exciting to now announce is cutting edge for the market, market leading, and it helps modernize our suite of learning tool sets. So we're really excited about watching that roll out.

Bobby Frist: And somewhat related, I want to talk about an update on customer adoption of our developer portal and APIs, specifically in this case, our learning API, which is a very robust and deep learning API, which essentially is able to emulate all the functions or many of the key functions of our learning management systems, the HealthStream Learning Center. So this API, we're excited to say our customers are increasingly using our learning API to integrate our learning tools with their mission critical workflows.

Bobby Frist: The number of customer organizations accessing the developer portal more than doubled of the last 12 months and the number of third party developers nearly doubled as well.

Bobby Frist: More importantly, the number of integrations customers have built and put into production has nearly tripled.

Bobby Frist: and so again we've talked a lot about this H-Train platform and the front door of the platform is the developer portal.

Bobby Frist: and activity in the developer portal as I just reported continues to surge and this means that the integration capabilities and the interoperability we've been talking about is as a key kind of strategic development for us.

Bobby Frist: A great example that kind of pulls both of these things together is a large East Coast customer which was renewing its health stream learning center contract in the last few quarters.

Bobby Frist: and during that renewal, they add actually the third quarter. They add an insight plus to the contractor rule, as well as some other digital products. The same customer has also built integrations to their ERP, their EHR.

Bobby Frist: and Antel stream using the learning API we talked about. So this customer is kind of going deep using the tool sets of the H-frame platform through accessing the developer portal.

Bobby Frist: Financially, one of the integrations that they've done is involved in automating training on and activation on their EHR, and so we're beginning to see that the workflows of our learning system now kind of integrate with and interoperate with, in their case, their own EHR.

Bobby Frist: Financial, the annual current revenue from this renewal increased 29% from approximately 1.76 million.

Bobby Frist: to approximately 2.27 million. So the renewal was very effective, not only did the renew the base products.

Bobby Frist: They added the Insights Plus and a few other products on renewal and of course extended the term and so excited to see a 29% growth in that customer and that some of that growth is a contributor to this brand new product announcement Insights Plus.

Bobby Frist: And so, you know, this is just a good measure of expanding wallet share and an existing customer base on our learning application suite. So we're really excited and watching a customer dive in a little deeper and access the integration tool sets of the HStream platform.

Bobby Frist: So the insights that they're gaining into their applications and into their learning initiatives are really exciting to us.

Bobby Frist: Now along the way of course they grew so they added approximately 13,000 users to their base contract which puts them well over 100,000 subscribers on our network which is again super exciting. It's a five-year agreement and importantly for those who listen closely.

Bobby Frist: We're beginning to roll out pricing escalators.

Bobby Frist: and you'll enter our contracts to build it a little bit of base growth over time and historically I think you know the analyst on the call and the way that that wasn't a strength of ours we had always kind of kept pricing relatively flat but in the last couple of quarters on renewals.

Bobby Frist: We've been inserting pricing escalators in the contracts, like most software companies do. And so in this five-year agreement, it includes an annual 2.5% pricing escalator. And I know, again, I think we reported we were 1 or 2% deployed on pricing escalators. You know, as the year rolls on, every renewal, we were trying to insert them with great success. But watch for that impact over a three-year period, as we add this kind of base type of growth into our agreements, which is exciting.

Bobby Frist: Let's move on to the credential application suite because there are equally exciting things happening there. Revenues from sales of credential stream grew 34% over the third quarter last year. So, again, the GoFord SaaS application that we're so excited about is it grew 34% over the third quarter last year. And that included sales from new customers and customers who are migrating from the legacy application. Some of the acquired companies that help us build our credential stream application suite and our customer base.

Bobby Frist: Some of the health organizations who contracted a credential stream for their entire enterprise and the third quarter include UPMC, Sutter Health, University of Virginia Health System. So three really recognizable systems either upgrading from legacy systems are new to health stream on the credential stream application suite.

Bobby Frist: really excited to see that motion.

Bobby Frist: and all during a third quarter. On September 30th, we issued a press release announcing three new and exciting developments in credentialing. So, again, we talk a lot about CAPAC's efficiency and deployment. It's just fun to be in this period now throughout the fourth quarter and Q1, where we're launching a lot of the capital expenditure we made to build products we're beginning to launch those capabilities into the market. So it's rewarding time for us because a lot of these are law and arm investments that have taken 24 months to build up and launch.

Bobby Frist: of the announcements that were in the program, I'm going to have rattle through those real quick.

Bobby Frist: In recognition of our innovative and differentiator approach to privileging our privilege solution recently received a noteworthy patent. So we're kind of excited to see our intellectual property and our insights into the industry.

Bobby Frist: No pun intended, but our insights begin to manifest in unique products, in this case, in other additional Patemen. I think we have over a dozen patents now, and a growing library, because we feel we're delivering unique value into the market.

Bobby Frist: Second, we announced that our H-Train Provincialing Package, remember each time a customer buys the application suite.

Bobby Frist: They also purchased a subscription to the platform value bundle that we call it.

Bobby Frist: H string for credentialing.

Bobby Frist: And that package now includes a wallet, a pre-validated provider data called Provider Portfolio. More on that later, but that means basically that providers who use credential stream, the longer have to inter or validate a number of their credentials as those credentials are already pre-populated when the provider access is his or her provider portfolio. So this new provider portfolio capability is kind of new to our network and it's going to reduce the credentialing processing workflows by having this pre-populated, pre-validated data on every provider in the country. So really excited about Provider Portfolio. Again, another one of those things that we're bringing to market now and just announced recently in the press release.

Bobby Frist: Now this saves time and effort for the provider and the credentialing department alike, it just works both ways, we're really excited how it brings benefit.

Bobby Frist: Finally, we introduced the integration that's called my learning feature in credential stream.

Bobby Frist: and that now integrates with a health-stream learning center and so we just open this discussion talking about our enterprise application, the health-stream learning center and now we're seeing some actual, you know, benefit between learning and credentialing application sweet, which is really great. So this is my learning feature.

Bobby Frist: This is a prime example of our ecosystem at work and we plan to begin offering in to the Provider credentialing workflow in order to meet them where they are. This allows us to notify physicians for example when they're in the position hub that they have required learning that used to exist solely over in the learning application suite.

Bobby Frist: Let's see, in the third quarter, I was going to jump over now to the shift wizard application.

Bobby Frist: and I'll wrap up this portion by kind of highlighting some activity and ship lizard area.

Bobby Frist: in the third quarter of revenue from Schifflesard grew 17% over the prior year quarter.

Bobby Frist: Examples of new healthcare organizations that contract a British-Wizard in the third quarter include Grady Health System and Memorial Health, which were both competitive takeouts. We're excited to see again competitive takeouts, meaning we're being chosen in the competitive landscape over the available options in the market.

Bobby Frist: Excited and Outfit in Q3, SHIFT was recognized by Workday as the first and only health care scheduling solution that has certified integration partner and a gold tier innovation partner of Workday. So excited to have that announcement in the market. It shows how our applications sit alongside some of the bigger ERPs and how we are, again, working on capabilities like interoperability. In this case, just a really good partnership to take these unique solutions to market.

Bobby Frist: So excited to further our relationship with work days through the Certified Integration Partner at Gold Tier Innovation Partner that we now have standing for.

Bobby Frist: Finally in Q3, we saw unprecedented growth in customer reviews for shift lizard on the CAPTARA site. So, if you want to know what people think about shift lizard or product, you can go to CAPTARA and check it out. And if you take the time to review some of these, you'll quickly understand why we're so excited about the future of shift lizard. So, the consumer and customer reviews of our shift lizard application are rolling in and they're exciting to see the feedback on these advances in our products and technologies.

Speaker Change: I think I hit everything I wanted to in the opening here, my skip a little bit around in the plan script, so I hope that was still useful. I'll turn it over to Scottie Roberts now to go into a deep dive on the financial. All right, thanks Bobby and good morning everybody. So let's begin with the financial highlights for the third quarter, then after that I'll go over the updated financial expectations as we head into the final quarter of the year.

Speaker Change: and my side-of-wise noted the comparisons will be against the same period of last year.

Scottie Roberts: Revenees for the quarter were 73.1 million and they were up 3.9 percent. Operating income was 6.5 million, which was up 33.6 percent. Net income was 5.7 million and it was up 48 percent. Our earnings per share was 19 cents per share, which was up from 13 cents per share.

Speaker Change: and adjusted a date with I was 17.7 million and it was up 9%.

Speaker Change: Revenue is increased by 2.8 million or 3.9% coming in at 73.1 million compared to 70.3 million in last year's third quarter.

Speaker Change: Revenue is from our subscription products accounted for 96% of total revenues and we're 69.9 million, increasing by 2.5 million or 3.6% and professional services revenues were 3.2 million and increased by 0.3 million or 10.8%.

Speaker Change: Subscription revenue growth is led by variety of our innovative solutions such as credential string with 34% growth.

Speaker Change: shift wizard with 17% growth, our stable solution with 38% growth, and the DEA-Mate course a new solution that we launched in Q4 of last year.

Speaker Change: Gross and these products among others helped overcome some declines of our legacy products, such as the Ansox product suite, Echo and MSO-Devya, which are often on-premises as opposed to fast solutions.

Speaker Change: Taking together the products I just mentioned, along with quality manager, resulted in third-quarter revenue declines of approximately $2 million compared to the prior year, third quarter.

Speaker Change: Finally, revenues from professional services included approximately 0.4 million from a one-time payment associated with a customer acquisition.

Speaker Change: Our remaining performance obligations were 549 million as of the end of the quarter, compared to 511 million for the same period of last year, and we expect approximately 43% of the revenue backlog to be converted over the next 12 months.

Speaker Change: Grist margin was 66.5% for best of current, quarter and prior to your quarter.

Speaker Change: Our cloud hosting and software costs contributed most of the increase in cost of revenues over the prior year quarter and growth in these two areas reflect investments in our technology infrastructure, including the H-string platform, as well as some other solutions that we're moving from data centers to the cloud.

Speaker Change: Operating expenses excluding cost revenues increased by 0.6%, and most of this year-by-year increase was from product development, which was up 11% and sales and marketing, which was up 1.8%.

Speaker Change: GNA coughed the climb by 9% and depreciation in amazation declined by 3.2%.

Speaker Change: In both of these declines primarily resulted from the recovery of sales taxes that we paid in prior years.

Speaker Change: The impact on G&A was the reduction of expense of approximately 0.4 million and a reduction of depreciation and amortization expense of approximately 0.2 million.

Speaker Change: These are non-recaring transactions that positively benefited the third quarter.

Speaker Change: Adjusted EBDA, as I mentioned earlier, came in at 17.7 million, which was up 9%. And Adjusted EBDA margin was 24.2%, compared to 23.1% last year.

Speaker Change: Now let's move over to our balance sheet metrics. We ended the quarter with cash and investment balances of 94.9 million, which is up from 83 million last quarter.

Speaker Change: During the quarter we deployed 6.8 million for capital expenditures and paid 0.9 million to shareholders through our dividend program. We also made one and a half million of income tax payments in the quarter.

Speaker Change: Our day sells outstanding and proved 37 days compared to 43 days last year.

Speaker Change: You're today our cash flows from operations were down 7.3% or 3.7 million from the prior year coming in at 46 and a half million compared to 50.2 million last year.

Speaker Change: And free cash was around 12.4% or 3.6 million and we're 25.2 million compared to 28.8 million last year. And the primary reason for the decline in cash was from operations and free cash was.

Speaker Change: Resulted from about 3.6 million more of income tax payments compared to the prior year.

Speaker Change: Our balance sheet remains strong with a 94.9 million of cash and no debt, providing us with several options to strategically deploy available capital to improve shareholder value.

Speaker Change: So let me take a moment here to describe our capital allocation approach and how we prioritize our use of capital.

Speaker Change: Our utmost priority is making organic investment back into the business which is evident by our annual capital expenditure and R&D plans.

Speaker Change: The second is pursuing acquisition opportunities, which we have a long track record of executing.

Speaker Change: The third is returning a portion of our profits back to shareholders in the form of cash dividend.

Speaker Change: and our fourth priority is that our board may offer us share repurchase programs, which we've also have a successful track record of executing.

Speaker Change: from an MNA perspective, we maintain an active pipeline, and we continue to evaluate opportunities that fit our criteria, which include industry product and financial among others.

Speaker Change: Now while our M&A markets and healthcare technology have been slower than usual over the past 18 months.

Speaker Change: We expect to see them begin to pick back up in the next 12 months.

Speaker Change: In respect to our dividend program yesterday, our Board of Directors to clear the quarterly cash dividend.

Speaker Change: A 0.28% to 8 cents per share to be paid in November. We currently do not have an active share repurchase program in place. There are board continues to evaluate such programs as it deems appropriate.

Speaker Change: I'm moving on to guidance, and our earnings release yesterday, we provided updates to the natural expectations for revenues, net income, and adjusted EBITDA.

Speaker Change: We now expect can file data revenues to range between 290 and 292 million.

Speaker Change: with expect net income to range between 18.5 and 19.5 million and for adjusted to be about a range between 66 and 67.5 million.

Speaker Change: and we still expect capital expenditures to range between 28 and 30 million.

Speaker Change: As a reminder, this guidance does not include assumptions for any acquisitions that we may complete during the remainder of the year.

Speaker Change: As noted during our call last quarter, we expected revenues to be around the lower end of the range or about 292 million for the year, but we've revised our fully arranged potentially come in a little lower than that, probably about around a million dollars or so lower.

Speaker Change: One of the primary reasons influencing a revised forecast is one that we discussed last quarter as well. We have a larger customer that is billed based on consumption of certain content.

Speaker Change: This customer had a lag in consumption during the second quarter, and we expected that they would not only return to their normal rate of consumption in the second half of the year, but the customer would accelerate beyond their normal consumption rate in order to catch up from the second quarter lag.

Speaker Change: And while we're pleased that the customer's consumption rate has now returned to a more normal level, the consumption did not accelerate above the normal level as we had been expecting. And for this reason, we're now estimating revenue to come in a little lower than we previously projected for the year.

Speaker Change: We also believe it will well-positioned for adjusted EBITDA to come in favorably, which is while we've raised the midpoint and narrowed the range to now be between 66 and 67.5 million.

Speaker Change: Well guys, that concludes my comments for this quarter's call, thanks for your time as usual, and I'll now turn it over to Bobby for some additional updates.

Bobby Frist: Thank you, Scotty. I'm going to dive into a few more areas and turn it over to questions. I want to start by reminding everyone that our Htreme Technology Platform is the center of our platform of the service strategy.

Bobby Frist: Increasingly our own application suite are being powered at the platform level by H-Stream.

Bobby Frist: and Third Party's are beginning to use our platform and it's growing set of APIs to build or enhance their own solutions.

Bobby Frist: E.G.R. subscription-based co-application and learning, credentialing, and scheduling is provided to customers via the A-string platform. Additionally, an A-string membership package that comes in the form of a subscription, and is tailored to each of the three co-application suites is concurrently purchased.

Bobby Frist: with the respective products, and we talked about earlier. We call each of these packages, for example, A-stream for learning, A-stream for credentialing, and A-stream for scheduling.

Bobby Frist: Each of these subscription products provide customers access to the HStream platform, and it's a defined access, which APIs they get, for example, an exclusive application services, content, and other benefits that comes with that value package.

Bobby Frist: and I think each quarter we're just getting a little better at putting value in to those value bundles.

Bobby Frist: Last quarter we shared the news that our credentialing business is expanding to address the health plan market. I'm proud to share that our growing momentum and positive market receptivity in that area. First, we officially announced our solution, Network by HealthStream, at the NAMS conference in late September . Our news, plus our marketing efforts at NAMS, helped us quickly generate a pipeline of opportunities at more than three dozen organizations. We expected several of the opportunities we'll convert at the sale in the next few months.

Bobby Frist: Secondly, we formally partnered with the Variousis Corporation, the large footprint and health plan market segment. The rationale behind this exciting partnership is to bring to market an innovative solution that is specifically tailored for health plans. Many health plans want a fast solution to manage their network provider data, but they also want to outsource the actual credentialing work. We believe that only the combined network by health streams that we talked about plus the various solution can seamlessly fulfill both of these needs for health plans with 25,000, 50,000 or more network members. So again, we think we're really well positioned with our new network by HealthStream product set, and our new partnership announced recently with Variousis.

Bobby Frist: Third, we built industry's first marketplace of CBO Services.

Bobby Frist: Service Providers for Health Plans. Our CVO Marketplace is launching with two initial members. The HealthStream CVO, we have a very small built-in CVO, Credential Verification Organization and Varuses for Large Health Plans, and so we have built-in to our Marketplace the first two members are our own CVO and Varuses. We expect this Marketplace to grow by adding both CVO members as well as customers in the quarters ahead.

Bobby Frist: I also want to note that we've built a data portability feature within Network by HealthStream, which from which health plans can send providers out via one click to the marketplace and the applicable marketplace member can send the verified information back to the health plans credential-streamed systems.

Bobby Frist: This unique data exchange is enabled by the extreme platform.

Bobby Frist: Now let's move to our director professional and pre-professional markets. I mentioned that we're managing these growing communities. One is actually a true social network and the other is semi-social, but it's a more of a community of students and a community of nurses.

Bobby Frist: and so I want to talk a little bit about each of those.

Bobby Frist: Our Market Expand Australia, the last 18 months has included selling directly to end users, like nurses, positions, or nursing students.

Bobby Frist: and so that's an expansion of our selling model.

Bobby Frist: One of the ways we reach into individual nurses is through our nurse grid app, which has the nurse grid learn capabilities.

Bobby Frist: and again, this is a great example of using our platform technology to learn API that we talked about.

Bobby Frist: to power essentially a little learning store in Nurse Grid, the app.

Bobby Frist: And so the learning nurse grid app is now linked to a commerce enabled learning store called nurse grid learn. And as a reminder, nurse grid is the number one most popular app for nurses based on ratings and downloads in the Apple store period. It now has over 600,000 monthly active users. And it is truly a growing and thriving social network. We think it's the largest social network for nurses on the planet, or at least the United States. And it's growing at a very good clip since we acquired it where we started with about 180,000 monthly active users. It's grown to 600,000 monthly active users.

Bobby Frist: Look for some exciting announcements around nurse grid.

Bobby Frist: But nurse Pitt Larn was on the first efforts to provide value to those nurses in that growing social network.

Bobby Frist: is doing quite well. In fact,

Bobby Frist: To the Nurse Grid Learn Channel, we've started to monetize the Nurse Grid audience in a way that we think helps the nurses.

Bobby Frist: and also helps us generate financial opportunity. So we're excited about that. In third quarter of 2024, e-commerce sales through the nurse-good learn channel, increase approximately 170% over the prior year quarter. Now, giving an example product that is being provided through the nurse-good learn channel, that historically was only sold B to B.

Bobby Frist: So an example of this is our expanded ability to sell the stable program. The program is a name stable, it sold the individual nurses and it's a neonatal education program created by our partner, Dr. Chris Carlson, and it's a world-renowned program for neonatal care.

Bobby Frist: Prior to this year, our sales and marketing efforts for the stable program were focused on business to business sales and health organizations, essentially directly and only. The Nurse Good Learn and Nurse Good App, we now have expanded our reach by marketing stable to individual nurses whose area of specialty aligns with those critical life-saving knowledge and skills for sick infants. We believe it's a good example of how content we previously sold only through B2B channels is now finding an individual audience of purchasers as well.

Bobby Frist: In the later part of 2023, we watched an instance that began selling directly to nursing students and nursing schools. Our application called My Clinical Exchange provides particularly useful gateway within HealthStream's ecosystem to reach nursing students as they seek to fulfill their clinical rotation requirements to graduate from nursing school. You can think of My Clinical Exchange as a bridge between students, their schools, and the hospitals that host them for the rotation.

Bobby Frist: EAT of these groups uses my clinical exchange application to identify schedule and manage clinical rotations.

Bobby Frist: Including facilitating important credentialing and onboarding functions for those students.

Bobby Frist: Here today, my clinical exchange students have either completed or scheduled over 285,000 clinical rotations. Every student who takes rotations through my clinical exchange becomes an individual member with an health-streams ecosystem. Third, 24 revenues from my clinical exchange were about 11% of the same period last year.

Bobby Frist: We believe that both sets of health care professionals and nursing students will read many benefits from accessing health stream directly throughout their careers, which is now made possible with our e-commerce enable, a-stream platform, enabling capabilities like we've just talked about inside of my clinical exchange and nurse grid, the social phenomena app.

Bobby Frist: So kind of will summarize by saying that if you're interested as an investor in a profitable, highly recurring revenue, SaaS, past, healthcare technology company that expect to deliver steady growth.

Bobby Frist: And it's determined to share some of those games directly to Shelvers with form of a dividend.

Bobby Frist: Maybe HealthStream is a company for you guys to look at. That's my sales pitch. I'm sticking to it. We're excited about the accomplishments of our team. And I want to tell you just a little bit about our culture here by telling about our streaming good value that we so much work into our fabric of our company. [inaudible]

Bobby Frist: Both in our attempts to assist in education during COVID nationally are attempts to facilitate learning and development during the horrible hurricanes where we provide ongoing access to materials and information.

Bobby Frist: We're living our streaming good value throughout our employee base.

Bobby Frist: In fact, each year we select a charitable organization to support as a company and right now 1100 employees are supporting the Alzheimer's Association for this year and our recent HealthStream Olympics challenge is raised over 22,000 dollars to fight Alzheimer's and other forms of dementia

Bobby Frist: We're honored to join thousands of others nationwide or committed to this worthy goal.

Bobby Frist: and I'm really proud of our 1100 health streamers for living that value of the stream and good. So we work into our fabric, both our innovation.

Bobby Frist: and the New Market releases our customer service and our focus on the charitable effort to help make everything a little bit better, I'm really proud of our accomplishments during the quarter. Thank you to Health Streamers listening. Our analysts will now turn over for a Q&A to get that Q&A session started.

Speaker Change: And our first question is going to come from the line of Matt Hewitt with Craig Halum. Your line is open, please go ahead.

Matt Hewitt: Good morning and thank you for taking the questions. Maybe first up on the top line with revenue growth particularly. You know, you're three-year kind of objectives that you've rolled out previously have talked about getting the 7 to 10% growth with the new accelerators on the pricing side that's going to add a little bit of a boost to the top line but what else could you do or what else do you see that could drive a little bit faster growth on the revenue side?

Speaker Change: Yeah, let me break down those objectives first and then comment on each of them so the first was in that three-year objective when we disclose that as an objective and I think November 22 and a investor day and by the way, we're going to try to target another investor day early next year probably late January early February, but we'll work on that announcement later. But in that meeting in November 22, we did announce growth targeting 7-10%. But here's the breakdown.

Speaker Change: was 5% to 7% organic, and it looks like this year we're going to come in around 4%. So we're right within striking distance is the 5th, the bottom of that range, and of course we'd love to be at the top of the range but if you think of the organic growth profile we've been able to deliver, it looks like we'll wrap up this year around 4% factoring in our new guides we just issued. And so we're right within striking distance that goal we haven't quite hit it we've hit it a couple of times in a few quarters since that announcement but blended again this year we're looking at right about 4%.

Speaker Change: and you know, you can hear all the excitement about the new product so the answer is how can we do better is continue gaining traction with all these new products and some of these are brand new products like Insights Plus application that we just talked about generating new revenue and so it's exciting how those all those are is like well why isn't it growth rate higher and the answer is when you look inside a lot of the ways we built our market share is through acquisitions and sometimes we inherit legacy application suites

Speaker Change: and we would dress some of these that are more material.

Speaker Change: like the Ancesthoff Legacy Application Suite. And in general, we need to preserve those customers as customers and migrate them to our newer applications as we can, but occasionally we struggle with that, and we have to work through it. And so, and then offset this, Scottie just mentioned about two million of our growth was negative growth from loss and attrition in some of those legacy applications to the markets, from two competitors. Look, this is a ferociously competitive environment. [inaudible]

Speaker Change: We have dozens of competitors and talk about them and everyone's fighting for share and we think on our new products we're getting more than our fair share of our share and there's many new products to come.

Speaker Change: But we also work through these legacy issues. So, you know, we'll work on both side of this equation, which is to reduce the attrition in these legacy applications if we could reduce it by a little bit. Our growth rate would pop up.

Speaker Change: and continue launching new products as you've heard today and working in pricing escalators as we've heard today and you hear that the core and the most important thing is the core go for applications.

Speaker Change: Credentials, Stream, Shift Wizard, the health stream learning center powered by things like insights, plus, and its family of products are picking up share and had really good year over year, a coldly growth rate, so we'll hold that, we'll try to reduce the nutrition, and then hopefully that'll bleed through a little better growth rate in the future, but we'll look like we'll wrap this year to about 4% and kick off some really good free caseloads and caseloads for the year.

Speaker Change: That's super helpful, thanks Bobby, and then maybe shifting gears here a little bit.

Speaker Change: The macro environment, you know, the customer spending environment was pretty challenging last year. I think you noted it on several calls. It sounds like that starting to show signs of improvement is that, in fact, what's happening, or you see some improvement on the customer spending side, and is it your expectations that that will continue, maybe even accelerate as we get into 25?

Speaker Change: Well, we did open this call by talking about our pipelines and we feel good about our pipelines in credentialing and scheduling and with the new products and learning as well. So, you know, we feel good about the pipes. Now, they need to materialize in the closed deals in both in Q4. We have really good expectations and in Q1 and Q2. But the pipelines are strong. So, you know, the way, again, to work on this growth rate is to focus on retention and these legs, the applications and being more successful in what I'll call retention and migration strategies.

Speaker Change: and we'll turn our attention to that next year and see if we can do better in those areas.

Speaker Change: Yes, I mean, we open the call by talking about our confidence in the pipelines. I don't know if those are pipelines or not closed deals, but they look good. You know, we measure pipeline as a multiple of your objectives and typically what you want to hear from measured pipeline is two and three and four times coverage of the quotas you're setting essentially and and in those pipelines in both cases, we see, you know, three X coverage, which is kind of for those that are in sales, I know that's a kind of a healthy sign of the opportunity. Again, they do need to matriculate and turn into actual contracts, but it feels good on the pipeline side.

Speaker Change: That's helpful. Alright, thank you.

Speaker Change: Thank you and one moment for our next question.

Speaker Change: And our next question is going to come from the line of Stephanie Davis with Barclays. Your line is open. Please go ahead.

Stephanie Davis: Hey guys, thank you so much for taking the questions. First one I have, you've been really bullish on expansion on the health plan channel, and I believe you mentioned the paragraph marks. So I was wondering, just given some of the NTO earnings that we've been seeing lately, is there could be maybe a step back and spend as they kind of focus more internally?

Speaker Change: Yeah, I'm not stepping quite as close to that. We have teams focused on that and they're really excited about our positioning in that market.

Speaker Change: from a cost standpoint, you did hear about some of the things like the interoperability between our credential stream application, we used on the on the hospital side and then used on the provider on the payer side and on the insurer side and I think I think those will provide efficiencies and so we think we're a competitively positioned to gain share and maybe be the more efficient provider in those areas so even if they have some kind of pressure on them.

Speaker Change: You know, my goal has always been take take regulatory training, if it's a mandate and regulatory training, be the lowest cost, highest quality provider in the industry, and then you'll be selected even in a down market.

Speaker Change: and so maybe there's a little of that, but again, I'm much more at the overall pressures on that space. It's new one for us. We have a team of people that are very familiar with that and they're excited about their pipelines. So I can't really characterize it. I can just say that I think that pipelines look good in that vertical for us. And we think we have some synergies to offer them. We mentioned the wall up today as well that that will provide them more efficient technologies than their current strategies use.

Speaker Change: I'll play color. Another one on the sales channel.

Speaker Change: You're rolling out of a ton of new products recently, but another one we not throw in a call. How are you thinking about kind of having a cohesive messaging to your clients as you have so many new products that you're coming out with?

Speaker Change: and how does that kind of play into the sunset in two of some of these?

Speaker Change: and maybe we could date in some setting of keeping some of these legacy platforms on board.

Speaker Change: Right, it was a great point.

Speaker Change: We're trying to create some cohesive understanding of the HStream platform with capabilities first, so I'd say the first half of next year before we do any kind of global repositioning of our capabilities, we're kind of repositioning at the product level now to show the enhanced capabilities and you're right about the new product. So we have been working for many years and it's fun to be able to announce something like we've been working on insights plus for I'd say about 18 months with

Speaker Change: I don't know 15 or more developers at least.

Speaker Change: and the watch is start to roll out and be in customer's hands in the last two weeks is super exciting and both as you pointed out, we're essentially able to retire old reporting engines, some of which were sold and some of which were included in our base subscriptions, but watching those get, you know, be sunset and replace the new one that generates higher NOV, which is new order value or contract value is exciting and we do have another announcement, I'll just kind of tease a snap by hopefully by year end that we'll be announcing yet another new part in.

Speaker Change: A Tier Point, the platform strategy enables more rapid.

Speaker Change: Development of products and generally a lower internal cost because you're using platform level services to build and piece together new capabilities that then turn into products and so I kind of obviously I'm excited that we're at that era where we're going to be able to more rapidly introduce more capabilities to our customers and then as far as positioning and selling I think in the second half of next year. Thank you.

Speaker Change: We have the opportunity to really present maybe what we call a sweet of sweet.

Speaker Change: You know, we'll go a little slow walk this a little bit, but as you can really show.

Speaker Change: the Strategic and Tactical and Operational Benefits of...

Speaker Change: Three applications we've said truly weren't together.

Speaker Change: Then you can begin to position a little bit more like the big guy's position, you know, more like an EHR and ERP, like where you kind of have a sweet of sleep that works together and you know a lot of times [inaudible]

Speaker Change: CEO of the Health Assistance Pick.

Speaker Change: They're ERP based on the breadth of their offerings and how they work together. They don't always deliver on that interoperability promise, so it's being a little careful and as we see these new capabilities, Massachusetts.

Speaker Change: before we market them, overly market them. But I'd say certainly about a second half of next year will be attempting the position and more robustly to the C-sweets of our customers. Our capability sets go beyond the areas they are originally intended to serve. You know, just learning, serving HR and the cheek medical officer buying credentialing. I think in each area, I think we have the opportunity to demonstrate more capabilities in the second half of next year.

Speaker Change: Welcome forward to hearing more of the analysts. Thank you.

Speaker Change: Thank you one moment for our next question.

Speaker Change: and our next question comes from the line of Jared Hawesville, William Blair, your line is open, please go ahead.

Speaker Change: Good morning and thanks for taking the questions. If you'll ask one on the new reporting tool sets for the learning application suite, you know, nicely here about the positive role out there. And we're just hoping to hear a little bit more about any incremental functionality that's now available with this sort of next gen version of the reporting tool. I think you referred to the legacy tech stack as kind of aging architecture. And then just to clarify, is this something you'll push out is contracts come up for renewal over the next couple of years? Or can you actually go to clients a bit more proactively? It sounds like it's a pretty meaningful upgrade. So it's kind of wondering what the cadence of that looks like.

Speaker Change: Yeah, great. I'm glad to comment on as much of that as I can, of course there are teams that are really detailed here, but I will say this.

Speaker Change: The Requisited for many reasons, one, the architecture of this new reporting capability for learning will be the same architecture where used for enhancing reporting data analytics for all of our products across the company. Again, when you talk about a platform strategy, you expect leverage.

Speaker Change: and so this is the first rollout of new enterprise-class reporting capabilities and let us capabilities benchmarking capabilities.

Speaker Change: and you're also right to know that it's built on much more modern, faster, scalable technologies and we mentioned, it's not like, for example, the performance benchmarks are multiples better than our older engines.

Speaker Change: and so, secondly, on the economics, if you take a look at its impact on learning, I'll say.

Speaker Change: Not the oversimple vibe, but the older methods were...

Speaker Change: You know, slow getting people their data, harder to extract, less configurable, less able to integrate multiple data sources, essentially the old data we're having, technologies, we're just concierer. And now we can pull data in from other applications and the reporting capability, so the flexibility is just much, much greater as we release.

Speaker Change: the basic insights that comes with the HLC replace of the old kind of reporting capabilities. And then insights plus provide the new level of analytics, helping measure learning effectiveness, for example, and there's minimal benchmarking service now, but that'll come soon. And so yes, there's an upgrade economic pathway as well. So not only is it faster, better, smarter, more flexible, and based on newer tech stack. And I think our customers, one of the biggest things you do in learning is you pull data and you make sure you're compliant and you make sure you're on track and how you compare into others in industry.

Speaker Change: How are you benchmarking your scores? What is your workforce know with the competency profile? So that use of data is critical and it's so great to be able to replace a you know 15-year-old architecture with a modern one and the last 30 days start to really deploy it into our top accounts and and get great feedback. So and and again we did mention it has incremental new order by incremental contract by so when you buy the insights plus

Speaker Change: It's a biop and results in incremental revenue growth for us. So, for all those reasons we're excited and don't forget.

Speaker Change: You know, you can expect an ounce and so on over the next three quarters on new reporting capabilities for other products.

Speaker Change: Built on the same new technical architecture.

Speaker Change: So, you know, watch for that as well, you know, by the middle of next year, we expect a really lever of these capabilities across our whole ecosystem, which, again, is reflective of the platform strategy. Thanks for the question.

Speaker Change: That's great to hear. And maybe as a follow up, I'll switch gears a little bit just on capital allocation and specifically the M&A environment, thinking about the commoner, the expectation that we could see that, you know, there's anything you'll share in terms of areas of the solution set today that you think would make sense to bolster through M&A versus organic investment.

Speaker Change: Next. Great question. Lots to that question. I do think the macro-creditions are improving for strategic buyers like us, meaning a little bit of a price recalibration for targets that that...

Speaker Change: You know, maybe he's got a little frothy that said there's, you know, anywhere there's a really hot really great company. There's also a lot of active bidding. That was a lot of private equity money on the side that

Speaker Change: but I would say this overall the macro conditions for us.

Speaker Change: the way I view them through our limbs.

Speaker Change: are we thinking for moving and so.

Speaker Change: We're working hard to try to make that a reality and you know to finish the discussion earlier when we talked about the 7th and 10th in growth.

Speaker Change: I broke it down into two pieces, I failed to talk about the second piece, so the first piece was five to seven organic which we're going to deliver for this year. It looks like the other was one to three organic but remember that was spread over multiple years and so while we've been very quiet on the M&A front for.

Speaker Change: I'd say 24 months now, somewhat intentionally.

Speaker Change: but also some of the trigger of the macro conditions.

Speaker Change: We've teed up some deals, aside they weren't the right fit, we've decided to focus on the core three apps and the platform technology for 24 months but now we're getting to where we fully can fold things in and I think the first thing you'll see for us and hopefully in the next two quarters are small immaterial tuck-ins but they support existing lines of business. Yes, like categorically what will we launch?

Speaker Change: I think over the next couple of quarters you'll see things that you will understand that fully be supportive of the businesses that we're currently in.

Speaker Change: So learning, current management, scheduling, predominantly, and our two social networks that we talked about, our two communities, one for students.

Speaker Change: and one for nurses, and so I think you'll see investments early the next set of M&A we do the next couple quarters would be related relatable to those pots, and then we might consider you know later the second half of next year of things we expanded our model, but we'll kind of slow walk around this in 24 months of inactivity followed by a couple of quarters and hopefully

Speaker Change: For example, we did just complete a minority investment.

Speaker Change: First one in quite some time, a few weeks ago, and it's about a million dollars, but it's in material small, but it's into a company that will bolster our business opportunities with NurseGrid and learn the app we talked about, so we're super excited about that, watch for that announcement, but it's a little million dollar capital deployment into a company that will improve our ability to service nurses on the NurseGrid network.

Speaker Change: We believe until we're super excited about that, we'll work on that later, but smaller deals, probably anything done in the next quarter or two would be immaterial, technically.

Speaker Change: Measureably material, but supportive of current lines, and then maybe later next year as we get where we want to be with our platform, we would expand the definition of our business by expanding the types of packages we look at.

Speaker Change: Hope that helps characterize our M&A program, but we wanted to be actively, obviously we have 95 men of cash, we're almost 95 men of cash.

Speaker Change: We have an untapped line of credit currently, it's 50 million and probably have much more access to that if we needed it.

Speaker Change: and our next question is going to come from the line of Richard Kostwif, can the cordgenuity? Your line of open, please go ahead.

Richard Kostwif: Yes, thanks. Congratulations on this success. Bobby, you know, I think it's been two quarters in a row now. You've given some examples of pretty significant growth in a customer on renewal.

Richard Kostwif: but you were, you know, I mean, I guess last quarter.

Richard Kostwif: Sort of warning us, not warning, but saying, hey, you know, that's not necessarily

Richard Kostwif: You're out.

Richard Kostwif: Completely normal in all cases.

Richard Kostwif: But if you're getting the escalators and now you have these new products, do you think that these larger renewals or expansions are going to become more prevalent?

Speaker Change: Well, of course, it's our focus and we have 60 account managers that look at blending new products into every renewal so we're getting a little better, I'd say it.

Speaker Change: Showing, showcasing more products at renewal, and they're getting more logical because they feel like more extensions when they're interoperable, or there's a case we made for interoperability in the near future, and so I hope, I mean, if you look at our sales organization, let's say it's a 200-plus people, it's roughly 130 or so a quoted-caring specialist, meaning they represent specific products.

Speaker Change: and Sikthier So are account managers that work on what you just talked about, creating a better blend and they really watch the renewals.

Speaker Change: and focus on the ARR, the account management group, focus on the annual recurring revenue and account. And usually, if an account has 10 products, they drop two and add three or four who are trying to drive the ARR up. And so they're looking at changing the blend and mix of products and the accounts. And hopefully they continue to get better and better at that. The case as I gave today, which show grows.

Speaker Change: were crackle because...

Speaker Change: They feature the adoption of the platform technology, the APIs, and the other pull-through products. So for that reason, it's side, but you're right, we need to be more typical than a typical, and we do have 60 people focused on making that happen.

Speaker Change: Okay, that's helpful. And then Scotty, maybe just a little bit more on the consumption contract or customer, you know, that led to the lowering of the revenue. Was there anything specific that, you know?

Speaker Change: The levels did in accelerate as you expected, you know, for the second half, I'm using the call-out.

Scottie Roberts: Yeah, I mean, I think that's kind of what I explained on the call was that they did pick up in the third quarter versus the second quarter, but just don't see the pathway to get to the, I guess, recruitment of the, of the deficit that we saw in the second quarter. So they didn't like over over, you know, consume in a, in a manner that we felt like it was going to push through to get to the, to the deficit that we saw. So we're going to. [inaudible]

Speaker Change: Y'all want to?

Speaker Change: Kind of forecasting that to be a little bit off again.

Speaker Change: Okay, and then just really quick, on the product declines.

Speaker Change: You know, when does that sort of move to the rear view mirror?

Speaker Change: is such as, like, as things come up for renewal, the harsh, is there any timeline we can sort of set in terms of that?

Speaker Change: Not yet Richard, but I'll work on that. Here's what I would say.

Speaker Change: Right now, we've very carefully kind of classified our many lines of revenue by whether they're growth products, new products.

Speaker Change: We call them legacy products, which means they're supported and encouraged and maintained, like if you look at

Speaker Change: Even Han sauce right now, we call legacy part, but it's not a sunset product yet.

Speaker Change: We're not in the active phase of saying, look, we're actively sun setting, we're changing the support models, we're not there yet. I think next year we'll get a little closer to the life cycles and trajectories of some of these core legacy products.

Speaker Change: You know, if you think about how we built credentialing, we bought a company called Morris, the Company called Helpline, and they stuff a lot of legacy customers and they're profitable customers.

Speaker Change: They're also the highest risk customers because our competitors try to convert them just like we do to newer software.

Speaker Change: and so if you think of Morrissey and Helpline and Antsauce as three examples of legacy.

Speaker Change: What we need to do in the coming year is...

Speaker Change: Figure out when legacy becomes sunsetting, and none of those are sunsetting right now. We're still supporting them again. They contribute to our Ewood dot and our overall cash flows.

Speaker Change: but they're definitely not growing. They're either streaking by converting up to the, say, in this case, cortisol streamership lizard, or we're losing them to the market as they're also targets for our competitors. But we're supporting them, we're having our quarterly updates to them, we're having webinars, those customers, we're trying to maintain them because they are profit contributors to our business.

Speaker Change: and so right now I would say, at least three major ones we just talked about Morrissey Healthline and Ancest.

Speaker Change: We class out them as legacy customers, and we service them really well, or we try to improve our service to them. We do a little less frequent patching in updates, but we still maintain and make current of their basic infrastructure, and hold them to the day when they'll be ready, or we'll be ready to ask them to make a firm migration.

Speaker Change: That's kind of where I'd say next year we'll get more clarity on on quantifying those and kind of having a path for them. And once they're officially declared to be some setting products, then you know that would still probably be a multi-year journey where people have choices on migration strategies and things like that. So I think it's going to take us some time to work through it. But I think we're getting better at stabilizing them in the last few quarters instead of losing them to the market. But again, it is the single biggest challenge we face in our total growth profile is attrition in those legacy customers.

Speaker Change: Okay, thank you very much. Congratulations.

Speaker Change: Thank you, and one moment for our next question.

Speaker Change: And our next question comes from the line of Constantine Cain Davies with Citizens, the JP, JP, MP, security, Here's your line of open, please go ahead.

Speaker Change: Thanks Bobby, just a couple of platforming questions first. I can expect a couple quarters since you've been with them just wondering, how many users have claimed it, and each stream might be at this point? And then second, I guess more of a bigger picture question, just when you're on the other side of this platform initiative.

Speaker Change: Do you see it helping more in terms of accelerating the top line growth trial of the business, profile of the business, or is the impact more going to be just in terms of the margin profile of health care?

Speaker Change: Well, we wouldn't have undertaken this nearly four-year journey, and actually in many ways goes back before that, where we started changing our strategies around data, accumulations and things like that. So, we wouldn't have undertaken this if we didn't think it would provide a growth trajectory to the company, both hopefully operating leverage, shorter time to develop new products.

Speaker Change: and better across selling a products and so I think we hope at the end of this rainbow is not just better core technologies, but better growth rate as well.

Speaker Change: So I just want to make sure...

Speaker Change: We don't just talk about it as a text stack. It's a text stack that we think drives growth and allows to think about growing and new and exciting ways.

Speaker Change: Someone related that, when we integrated a partner, I mentioned we made a minority investment, and I'm going to go ahead and tell more about it because I misspoke, I just got texted to correct it. So we put a quarter of a million in, so again, very small investment into a small, thin tech startup called Plenary.

Speaker Change: and now some announcing that. And it'll be using our platform technologies to integrate their services, which we think their services will bring value to the 600,000 nurses in our nurse grid network. In some time before your end, we'll announce the integration of their capabilities in the nurse grid and generate new financial opportunities for the company, leveraging our platform strategies, our platform technologies to achieve that rapidly.

Speaker Change: So check out Plenary, it's a fintech that provides money saving strategy to nurses and we think we'll be beloved as much as nurse grid for helping nurses save money when they're...

Speaker Change: with the eliminating student dad and paying off loans and so.

Speaker Change: When you think of an ecosystem powered by a platform, you think of new ways to generate growth.

Speaker Change: and this little minority investment we just made of about a quarter of my dollars in planery.

Speaker Change: That is a good example of the kind of thinking that a true ecosystem of two platform company can think about that wouldn't have been possible even thought of.

Speaker Change: as a revenue growth opportunity before the platform was built and executed on. As far as the end of the rainbow, when you're a platform company, it's...

Speaker Change: An endless pursuit and so you have to have discipline and how much capital you put in, how fast you build it.

Speaker Change: But there won't be a coughing in the calves and mirror, or the flat forms are done.

Speaker Change: You know, it just creates new opportunities.

Speaker Change: to build and therefore, and then, but the new opportunities can create new types of data monetization strategies or growth strategies. And so, again, overall, super excited. You know, we're three or four years into development, but the fun part is this year. We started seeing real tactical operational benefit. And as Evans fire ability, quickly in a greater partner like Planary, and or launch a revolutionary new reporting in analytics framework that we charge for, called Inside Plus.

Speaker Change: Thanks, then, just the first part of the question on how many users have claimed their IDs at this point?

Speaker Change: We haven't released claimed ID numbers. Maybe that's something we could consider for our investor conference, which again, we'll target that late January , early February before our next year report probably, but certainly next early next year, we'll try to get an investor day. That'd be a good topic to talk about. Because as you know, it's a complicated topic. There's there's a number of IDs issued. And then there's those that are claimed. And then there's those that have what we call multiple keys. So having a unique idea is one thing, but having a unique idea for each of our 27 different applications is another thing. And so the whole we call keys on key chains initiative. Maybe that's something we can address in our investor day.

Speaker Change: Great, and then one last one for me on scheduling, are we at the point where...

Speaker Change: Equentially the growth and shift wizard is starting to eclipse the attrition of the legacy product.

Speaker Change: Um...

Speaker Change: So, in our investor today, that would be another great opportunity to look at these crossover opportunities when you look at, because the same question maybe exists and look at credential stream against the acquired companies, Morrissey and HealthLine, which again have installed customer bases. It might be a good discussion to take a few of these cases and talk about that crosswalk. I mean, we're excited to be able to show net growth of 4% even during the crosswalk, but obviously we've had more of a drag on overall growth from from these legacy applications than we wanted, but nevertheless feel that, you know, we have good plans in place and do our best to manage through those migrations over the coming years.

Speaker Change: Thank you, and one moment for our next question.

Speaker Change: and our next question is going to come from the line of Vincent Collicchio with a very content researcher and line of open please go ahead.

Vincent Collicchio: Yeah, thanks, Bobby. Most of my questions have been answered. Just curious. Could you update us on ship wizard as far as...

Vincent Collicchio: How far along it is in terms of being where you want to be in the for the large organization market.

Speaker Change: Yes, I did just cannot date on that.

Speaker Change: The other day, and our recent board meeting actually yesterday, and here's what I would say about that. I think by the end of Q2 next year.

Speaker Change: will be better than feature parity.

Speaker Change: And that's at all levels of scalability, reporting and data, because we just mentioned, for example, we launched insights plus for learning, we'll turn our attention to data management on

Speaker Change: We're already at the place where the ship wizard, Revenue Runrate, is higher than the Antsauce, Revenue Runrate, I believe that's an accurate statement. So we've begun the crossover and the feature pair that we think is necessary to improve our attention rates, I would say Q2 of next year.

Speaker Change: Thank you.

Speaker Change: Thank you, and I would like to hand the conference back over to Robert Frist, Mollie Condra for any further closing remarks.

Bobby Frist: Well, thank you, I think we've covered everything I want to cover today, so we'll look forward to reporting our next quarterly earnings call, our year end results, which will be later early next year, I think end of February. It's going to be a while since we talked to you guys, that's we'll probably work to insert an investor day in there somewhere between and we'll focus on wrapping up the years song. So thank you everyone for participating in our earnings call, and we look forward to continue dialogue with investors in the coming days. Thanks, bye.

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Bobby Frist: Yes.

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Speaker Change: Good morning, and welcome to <unk> third quarter 2020 earnings conference call. At this time I would like to inform you that this conference is being recorded and that all participants are in a listen only mode.

Speaker Change: I had three questions. The company, we will open the conference up for questions and answers. After the presentation I will now turn the conference over to Mollie Condra, Vice President Investor Relations and Communications. Please go ahead with contracts.

Thank you and good morning, Thank you for joining us today to discuss third quarter 2024 results also on the conference call is Robert a Frist, Jr. CEO and chairman of Gulfstream, and Scotty Roberts, CFO and senior Vice President of Finance and accounting.

Speaker Change: I would also like to remind you that this conference call may contain forward looking statements regarding future events and the future performance of downstream that involve risks and uncertainties that could cause the actual results to differ materially from those projected in the forward looking statements.

Speaker Change: Information concerning these risks and other factors that could cause the results to differ.

Speaker Change: It's one of those.

Our filings with the SEC, including forms 10-K, 10-Q, and our earnings release.

Speaker Change: So as.

Speaker Change: Adjusted EBITDA, which is a non-GAAP financial measure.

Speaker Change: 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 they referred to in this call.

Speaker Change: So at this time I will turn the call over to CEO Bobby Frist.

Thank you Molly good morning, everyone and welcome to our third quarter 2024 earnings call.

Speaker Change: Have a lot to cover today and I'll just jump right in and will start with some basic financials I'm pleased to report in the third quarter.

Speaker Change: Financial performance showed year over year increases in each of the major categories. We highlight in our earnings release.

Speaker Change: We delivered record quarterly revenues of $73 1 million and record quarterly adjusted EBITDA of $17 seven.

Speaker Change: Million. Moreover, we are seeing strong sales pipelines on Prudential stream in our Credentialing.

Speaker Change: In Credentialing shift Wizard and scheduling and on our new reporting and analytics and API related products that bolster our market leading health stream learning center.

Speaker Change: So in that third one there I'll talk a little bit about an exciting product rollout is happening right now.

Speaker Change: We are also gaining traction in new markets, including the nursing school market, which is when we talk about these two communities that were operating now that are growing one is for students and want us for nurses.

And we will talk a little bit about both of those here in a few minutes. So in addition to the three core applications. We're operating in growing to growing communities. One for students and one for nurses will talk about those a bit later.

Speaker Change: I'm excited about our ongoing progress towards key development milestones in our <unk> platform. So this underlying technology that we put on quite a bit of time and capital into is starting to manifest which ensures interoperability between and among our three primary application suites and now our two communities in but one of the two communities actually.

Speaker Change: A thriving social network, so we'll talk about that as well.

Speaker Change: As we kick off the call, though I do want to go kind of back to the basics and summarize the basic business model for the benefit of anyone who's new to the <unk> story first and foremost health stream as a healthcare technology company dedicated to developing credentialing and scheduling the healthcare workforce through SaaS based solutions each of which are becoming more valuable we bill.

Speaker Change: Please.

Speaker Change: Of the interoperability there achieving through the H stream technology platform that we've been talking about now for a few years.

Speaker Change: Historically, we sell our solutions on a subscription basis under contracts that average three to five years in length, which makes our revenue is recurring and predictable in fact, 96% of our revenues are subscription based.

Speaker Change: As I just mentioned we have also started to open our sales channel directly to health care professionals and nursing students across the continuum of healthcare training.

Speaker Change: We are profitable we have no interest bearing debt and a strong cash balance of $94 9 million.

Speaker Change: We are solely focused on health care and more specifically the health care workforce, the $12 3 million health care professionals and nursing students in the United States comprised of the core total addressable market for our SaaS solutions.

Speaker Change: Before turning it over to Scott <unk> our CFO.

Speaker Change: And having a more detailed financial discussion I do want to highlight some of the successes we've achieved in each of our learning credentialing and scheduling application suites during the quarter, let's start with the learning application suite first where our health stream learning Center is the application that is the flagship product of the suite.

Speaker Change: And I want to highlight a key product launch that's happening as I mentioned right kind of as we speak in the last few weeks, we've started to roll it out.

Speaker Change: And that the name of that application is our insights plus solution, we have rebuilt our data reporting and analytics technology stack on leading technologies, including Snowflake and Sigma we've used those technologies to build insights plus which is an upgrade to our base reporting tool for learning data.

Speaker Change: Learning data is one of the most critical assets, we provide back to our customers and our aging architecture on reporting was something that was we needed to refresh. So today, we're announcing after.

Nearly two years of development the launch of our insights plus reporting and new technology stacks, we're really excited about it as they rollout today.

Speaker Change: <unk> plus provides customers with an expanded and enhanced experience, including analytics tools focused on measuring the impact of the hiring initiatives.

Speaker Change: <unk> plus has now replaced two legacy solutions learning analytics and initiative management dashboard, our customers' response to insights plus has been very positive with just over $2 million in bookings in the first three quarters of the year. So we are obviously advanced positioning it and demo and along the way and now we are in the rollout phase customers at risk.

Speaker Change: Seeding the application suite.

Speaker Change: <unk> plus applications as we speak.

Speaker Change: And so this pipeline I mentioned is nearly six times the bookings for the predecessor products that we just talked about in the same period last year and four times, our bookings budget for FY 2020 for it so.

Speaker Change: An area to highlight its exciting we've talked a lot about how the development of the eighth stream platform could play into growth opportunities and in the last three weeks were enabled now able to start executing on our pipeline for our brand new analytics and reporting tool sets, which is an area that we're excited to now announce as cutting edge for the market.

Speaker Change: Leading and helps modernize our suite of learning tool sets. So we're really excited about watching that rollout.

Speaker Change: And somewhat related I want to talk about an update on customer adoption of our developer portal and Apr's specifically in this case, our learning API, which is a very robust and deep learning pilots essentially API, which essentially is able to emulate all of the functions or many of the key functions of our learning management system <unk> Morningstar.

Speaker Change: So this API or excited to say our customers are increasingly using our learning API to integrate our learning tools with their mission critical workflows.

Speaker Change: Number of customer organizations accessing the developer portal more than doubled over the last 12 months and a number of third party developers nearly doubled as well more importantly, the number of integrations customers have built and put into production has nearly tripled.

Speaker Change: So again, we've talked a lot about this H stream platform.

Speaker Change: The front door to the platform is the developer portal and activity in the developer portal as I just reported continues to surge and this means that the integration capabilities and the interoperability we have been talking about is a key kind of strategic development for us.

Speaker Change: Great example, that kind of pulls both of these things together is a large east coast customer, which was renewing its health stream learning center contract in the last few quarters and during that renewal they actually the third quarter.

Speaker Change: Added insights plus to the contract renewal as well as some other additional products. The same customer has also built integrations to their ERP their EHR.

Speaker Change: And to Hell stream using the learning API, we talked about so this customer is kind of going deep using the tool sets of the H stream platform through accessing the developer portal.

Speaker Change: Financially.

Speaker Change: One of the integrations that they've done involves in automating training on and activation on their EHR and so we're beginning to see the workflows of our learning system now kind of integrate with and inter operate with in their case that their own EHR.

Speaker Change: Actually the annual recurring revenue from this renewal increased 29% from approximately $1 $76 million to approximately $2 $2 7 million. So the renewal was very effective not only do they renew the base products.

Speaker Change: <unk> added the insights plus a few other products on renewal.

Speaker Change: And of course extended the term and so we're excited to see a 29% growth in that customer.

Some of that growth is attributable to this brand new product announcements insights plus.

Speaker Change: And so this is just a good measure of expanding wallet share and an existing customer base on our learning application suites. So we're really excited and watching our customer dive in a little deeper and access the integration tool sets of the H Dream platform.

Q3 2024 HealthStream Inc Earnings Call

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