Q2 2025 Healthstream Inc Earnings Call

Good morning and welcome to healthstream's second quarter 2025 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. At the request of the company, we will open the conference up for questions and answers. After the presentation, I will now turn the conference over to Molly, kandra head of investor relations and Communications. Please go ahead. Miss condra.

Thank you and good morning. Thank you for joining us today to discuss our second quarter 2025 results.

Also, in the conference call with me today is Robert africe, Junior, CEO, and chairman of hillstream, and Scotty Roberts, CFO, and Senior, Vice President of Finance and Accounting.

I would like to remind you that this conference call may contain forward-looking statements regarding future events in the future performance of Health stream. That could 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 containing the company's filings with the SEC. These include forms, 10K, 10 q and our earnings release.

Additionally, we may reference measures such as adjusted debit de which is a non-gaap financial measure.

A table, providing supplemental information on adjusted Ava, and reconciling uh to net income attributable. To HealthStream is included in the earnings release that we issued yesterday. And that we may refer to in this call

So with that start and that opening, I'll now turn the call over to CEO Bobby fist.

About the about the quarter and and the results will be reporting. Um, the uh, in the second quarter, we achieved record quarterly Revenue, which is, uh, always an exciting Milestone shows. We're moving up and to the right. I like that which is up 4% from the second quarter of last year operating income was up. 33.4% and net income was up. 29.3% while adjusted Eva dial was up 11.3%. All those are over the same quarter last year.

We increased our expectations for net income for full year 2025 and our financial guidance and reiterated. Our expectations for Revenue, adjusted Ava, and capital expenditures. And so later in the call, Scotty, of course will expand on each of those.

Uh, and there's some exciting developments in all of our core application. Suites learning credentialing and scheduling which will provide in the back half of of this presentation.

And those are the things we're most excited about to help driving our business results.

First, let's look back to our prior quarterly, call, and our last call we mentioned, we were tracking a handful of well, we characterize them as medium or large-sized deals that were originally expected to close in the first quarter. And I'm pleased to report that 4 of the 5 deals that we were tracking were signed during the second quarter and the average newer contract value of, of of those was 2.2 million across each of the 4 deals that's closed. And uh, also in good news the fifth

Deal is expected to be signed here early in the third quarter. So I feel like that's a, a positive update on the 5 deals that we, you know, while the timing wasn't as we expected the business outcome was solid in that, it looks like we've landed 4 of the 5 and the 5th. Uh, it, it seems imminently will be executed. So, uh, the market conditions, uh, you know, we'll talk more about that here in a bit but uh, we're excited to have that. Be our follow-up on the 4 deals that we talked specifically referenced last quarter, you know? Also, I think it's positive that

Those 5 deals were really nice balanced across. Our broad portfolio of applications and Suites 1 of the deals closed. For example was a multi-million dollar multi-year contract, from a very prestigious health system for our American Red Cross for substation program. That's 1 of our leading, uh, Partnerships, uh, and content offerings in our, our whole e ecosystems or very pleased to see a big win up in the Northeast, uh, for that product. Again, multi-year multi-million dollar contract, uh, and now that they're a customer Health stream, we're pleased to have them in the network, and we hope to continuously grow that account over time. As they drive more and more value from uh, of growing library of our Solutions. Another deal included a wide range of our products including our competency Suite, which is demonstrating the success of our new bundling strategy, and how our customers value, our ability to handle the end.

Needs of their competency program. Uh, so, you know, I really like that this new bundling strategy around, uh, staff development here, competency assessment, and development, which includes a broad swatch of our, um, competency-oriented products. Uh, 1 a multi-million dollar deal during the second quarter.

The uh the third deal kind of rounding them out was a credential stream deal. So again exciting to see progress from credential stream as well, is another large health system and that selected credential stream to go Enterprise wide. And our scheduling application was the fourth that's already been signed for shift, wizard contracted by another top Health Organization as well. So these are 4 Enterprise deals balanced across Learning and Development and our content offerings, our scheduling application and our credential stream application. So again, I think the diversity of the Winds was uh as important uh as the size of the Winds and it was nice to see them all come through here uh uh 4 of the 5 come through again with the 5th still expected.

You know, I think, uh, another topic that's probably on the top of mind for everybody is, is AI, and it seems like no earnings call is complete without talking, about Ai and AI strategies. And I think this call should be no exception at HealthStream, you know. There are multiple dimensions of of AI its impact. And we're focused on utilizing at a manage, our business, more efficiently of course. And so they were looking at

Future road maps.

So, both those dimensions are well underway. Um, and you know it's it's not like this is new for us, HealthStream has an established history of utilizing, AI to improve health care. And in fact, beginning with the launch of our Jane AI program over 5 years ago, our Jane AI was 1 of the first solutions to use AI to assess the clinical competency and we'd say the clinical reasoning ability of nurses and so it's a little different than a Knowledge Test. It was using AI natural language processing and machine learning, uh, to suck out. The clinical reasoning ability that kind of the quality of the clinical decisions being made, uh, from nurses. And so we think as a pioneering product, and it's just getting smarter and more effective over the years.

In fact, we were just awarded another patent in connection with our Jane Ai and its use of natural language processing and deep learning to facilitate competency assessment of clinical staff, particularly nurses. So we're excited to have earned yet another patent related to our Jane AI technology. Uh, as it continues to be kind of foundational for our moves in and towards AI.

AI is playing an important role in our new learning application. Uh, that application is called the Health Training learning experience. And actually, at the, in the back half of this presentation, we're going to give an update on the business associated with this new Advanced, but the Health Training learning experience application or the hlx as we call it was announced last.

Quarter. Uh, the hlx is a modern Healthcare specific application. That offers the workforce personalized and this is key, self-directed intelligent Learning and Development Pathways, and those incorporate a wide range of learning modalities. So we kind of expanded the dimensions of content available. While we build these self-directed intelligent learning Pathways for healthcare professionals, using the hlx

And, of course, it's engaging, uh, the individuals and a new way of Thoroughly Modern user experience. Uh, also incorporated into the, hlx is open, ai's chat, or GPT, 4o, llm, and that's powering faster, and more precise search capability for hlx users and helping establish the foundation for power and smarter more relevant recommendations. Based on the learner's profile experience it's kind of the more the hlx knows about you. The better recommendations it can make for your career development skill, development composite and testing and evaluations.

Uh, and sort of, super excited about the hlx and its Advanced uh, incorporation of of openai GPT 40 uh, llm and and so uh, just want to give another example of our advances with AI.

We think that these together Jane Jane Ai and the hlx are are just a few of these examples of health streams, uh, movement towards Ai and getting our customers equipped to the latest Tools. In this case in uh, employee development and competency assessment.

You know, I think central the successful implementation of AI is building a culture focused on AI and we're working, really hard to get all of our officers on board with, uh, you know, everything from collecting the data. They'll ultimately need to potentially train, agentic AI, uh, to uh, you know, envisioning pilot programs, and equipping our teams with, with tools, for example, uh, during this quarter, all of our developers will have a choice of being equipped with either cursor, AI or uh, uh, co-pilot. And so we're excited to get, you know, that out of the pilot mode and into some kind of full production mode. Uh, and we're, we're excited to make those tools available to, uh, to the, our developer, our in-house developer capabilities.

Um,

Let's see, you know, I I think, you know, I think every company is going to have to go on a journey of working to Define how all the roles in the company will be augmented with the uh with the power of AI and HealthStream as deep into that Journey setting up a really nice governance structure over our AI projects and uh and beginning to fund, uh, the use of these Technologies.

And pilots and product development. So really excited about my team's advances there and the leadership of our Tech, our Tech leaders in the company. Helping us lead us forward and building a culture of incorporating AI into our business strategies and operations.

The healthcare Workforce through sas-based Solutions in each of, those are becoming, we believe more valuable because as the interoperability that we're achieving through our hstream technology platform. We're kind of in this transition of trying to move from SAS applications to a pass, a platform as a service, architecture to power up and make those SAS applications. Interoperable, the company holds 20 patents for its innovative products. And I just announced a new 1 in our Jane AI

We've been awarded over 40, Brandon Hall Awards in in the recent years, uh, showing our excellence in our learning instruction and development programs. Historically, we sell our Solutions on a subscription basis under contracts that average 3 to 5 years in length, which makes our revenues recurring and predictable, in fact, about 97% of our revenues are subscription-based.

So you're solely focused on Healthcare and more specifically, the healthcare Workforce and those preparing to enter it.

The 12.6 million Healthcare Professionals in nursing nursing students in the United States comprise, the core total addressable market for our SAS Solutions. And now our course our path-based Ecology of applications

At this time, I will turn it over to Scotty. Uh Roberts our CFO for more detailed. Look at our financial performance uh here in the quarter with a forward, look as well.

All right. Thanks, Bobby. And good morning. Let's go over the financial results for the second quarter.

Unless otherwise noted the comparisons will be against the same period of last year.

Revenues were a record $74.4 million, up 4%. Operating income was $5.9 million, up 333.4%.

Net income was 5.4 million of 29.3%.

Earnings per share was 18, cents per share up, from 14, cents per share and adjusted divided by 17.6 million and was up 11.3%.

Revenues increased by 2.8 million or 4% and were 74.4 million compared to 71.6 million in last year's. Second quarter,

Revenues from subscription products we're up 2.9 Million or 4.2%. While Professional Service revenues were down, 0.1 million or 3.5%?

Our core Solutions continued to deliver strong subscription Revenue growth.

With credential stream growing by 26% shipped wizard, growing by 21%.

And competency Suite growing by 18% offsetting the strong growth. In these Solutions were to decline from Legacy products and credentialing and scheduling totaling 1.8 million compared to last year.

Excluding the impact of the Legacy products from The Core Business. The Core Business grew over 8% in the quarter.

Our remaining performance obligations were 618 million as of the end of the second quarter.

We expect approximately 39% of the remaining performance obligations, will be converted to revenue over the next 12 months. And at 68% will be converted over the next 24 months.

Press margin came in at 64.6%.

Compared to 66.8% in the prior year quarter.

Gross margin was impacted by an increase in our Cloud hosting costs, which are primarily for the credential stream application and the hstream platform.

As noted on the last earnings call to improve the scalability and performance of credential stream, we added more capacity in our Azure hosting environment.

In addition, changes in product, mix resulted in higher royalty costs in the quarter,

Operating expenses excluding cost to revenues declined by 2.9%.

Sales and marketing expenses were up 3.5%, and was primarily from additions to our staffing.

Depreciation and amortization was up 4.8% and that was primarily from capitalized software amortization.

Our general and administrative expenses were down 22.6% and that's due to lower bad debt charges and lower rent. Resulting from the commencement of the sub Leafs for a portion of our Nashville Office Space.

And finally product development expenses were flat compared to last year.

Margin was 23.7% and that compares to 22.1% last year.

now moving on to the balance sheet, we ended the quarter with cash and investment balances of 90.6 million compared to 113.3%

And during the second quarter, we deployed 9 million for Capital expenditures. We paid 0.9 million to shareholders through our dividend program.

And we repurchased 18.1 million of our common stock under the share repurchase program that we announced in May.

Our Day sales outstanding improved to 35 days, compared to 45 days last year.

And this Improvement resulted from more timely customer payments compared to the prior year.

As I mentioned just a moment ago, our bad debt charges were lower compared to last year.

Although we did have a mid-size customer file, bankruptcy, resulting in an increase to our allowance for doubtful accounts in the quarter of approximately 150,000.

On a year-to-date basis. Cash flows from operations were 32.1 million compared to 27.4 million in the prior year and increase of 17.2%.

Also want to hear to date basis. Free cash flows improved by 1.3 million or 10.1% and were 14.2 million compared to 1 2. 9 0.

This Improvement is a result of a growth in our Billings and improved cash collections, but was partially offset by 3.4 million increase in payments for Capital expenditures.

With 90.6 million of cash and Investments. Free cash flows and no debt. We are well positioned to the point Capital to improve shareholder value.

We maintain a disciplined approach to capital allocation and how we prioritize our use of capital.

Our utmost priority is making organic Investments back into the business, which is evident by our annual capital expenditure and R&D plans.

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

Third, we are returning a portion of our profits back to shareholders in the form of cash dividends.

And the fourth priority is that our board May authorize share repurchase programs which they did last quarter.

In May, our board of directors authorized a 25 million share repurchase program.

And during the second quarter, we repurchased 18.1 million of our common stock.

And we've made $6.9 million of share repurchases during the month of July, completing the full program.

From an m&a perspective, we maintain an active Pipeline and continue to evaluate opportunities that may align with our product.

And platform strategy.

In respect to our dividend program yesterday, our board of directors declared a quarterly cash dividend of 3.1 cents per share to be paid on, August 29th, to Holders of record on August 18th.

Now wrap up my comments this morning with a recap of our financial outlook for the year, which is mostly unchanged. Except for a refinement to our net income Outlook.

We continue to expect the Consolidated. Revenues will range between 297.5 and 303.5 million.

We now expect that net income will range between 19.5 and 22.4 million, mainly because we now expect lower depreciation and amortization, we continue to expect that adjusted. Evida will arrange between 68.5 and 72.5 million.

And continue to expect, Capital expenditures to range between 31 and 34 million.

This guidance does not include assumptions for any Acquisitions that. We may complete during the year.

And that concludes my comments for this quarter's call. As always, thanks for your time and I'll now turn the call back over to Bobby for further updates.

Thank you, Scotty.

Um, I think then this section will jump into the business updates, uh, highlighting the successes we've achieved in our learning, particularly in scheduling applications, during the second quarter.

Uh, as many of you know, our learning business includes our Flagship application, the HealthStream Learning Center along with many other applications assessment tools and content libraries including our clinical content products.

The HealthStream Learning Center continues to grow as do many of the solutions that are delivered through it today. However, I want to focus on our brand new learning application, HealthStream learning experience. And we brought that up in the first half of the call, we call it the hlx,

Organized, uh, compliance oriented training, where you push a content to individuals. Hlx helps, uh, shape, uh, educational Pathways for individuals and it's more self-directed in nature. So, the 2 together, uh, give a really rounded approach to Learning and Development.

Uh, you know, and it's it's a, a completely modernized, uh, built. Uh, and 1 thing that is is very excited about it. Well, there's 2 things, first, last month. Uh the healthcare learning experience went uh, went live with 47,000 users at a large health system. So it's moved clearly, it's graduated from the pilot phase to a revenue generating product in the quarter. So it's very exciting to go live with 47,000 users at a large health system. In response to the Early Access, an executive at that organization said to utilization, we are seeing thus far is incredible and so we're excited to see it kind of move from the R&D labs and the pilot phase to go live a billable product and we look forward to building out a strong pipeline for this application. It's important to note that the application is bought uh, alongside or in conjunction with bellring Learning Center. So it extends the capabilities and the learning models and the forms of content that can be delivered instead of replacing it.

And they work together through their apis, which are available in our platform services, to create a really powerful set of Enterprise class learning tools, for large organizations, specifically in healthcare.

You know, the other thing about the hlx, it's our really our first hstream platform native application. And that means it was built directly on and is fully integrated with our hstream platform. And we've been talking about this for a long time, you know, 1 of the benefits, you'd expect from becoming a platform company is more rapid development of of, uh, scaled in Enterprise class applications. And this, of course, is a case in point, uh, from Concepts to now, billable launchable product Enterprise class product was about 18 months and this is from whiteboard design, uh, to, uh, get a go live billable event with a new customer, uh, it was about 18 months and, uh, I know that that can seem like a long time, but it is really is quite incredible to get that to happen. So again, we look forward to launching it into the broader Market, as an upsell opportunity to our our large customer base and a new customer acquisition.

Let's move to the Credentialing Suite. It's a broad suite of applications that empowers healthcare organizations to credential, privilege, and enroll mostly their physician population.

And last quarter we did share with you, we experienced some technology scaling issues with our credential stream product, and it is a happy report here, that those issues have been resolved and we're back on track with improved processes and expanded capacity. And Scotty mentioned that hitting our gross margins a little bit, but we've ramped up our capacity to handle what was then. I think we're crossing over about 1 million subscriptions to the credential stream application suite. And so, uh, you know, we had a capacity issue, we talked about it last quarter, we put our best and brightest Minds on it, in addition to scaling, out our Azure infrastructure. And we believe that those issues are resolved and we're back on track with both improved processes and expanded capacity that will facilitate, uh, ample future growth.

In fact of our 3 primary application Suites critical stream was the strongest Revenue grower versus the same period last year. So we're already benefiting from the extra capacity as we continue to add customers.

I should note that the rapid and comprehensive measures we deployed to eliminate our scaling issues did result in some unplanned operating costs in the quarter, which did have a drag on Ava and gross margin and again, Scotty covered that. But I think they were, uh, wise Investments. And of course I wish we had been in front of it, a little more and not have this, this response needed. Uh, but our response was excellent, our teams responded and we feel like we've uh tamped down and eliminated the capacity related issues with credential stream.

Uh, you know, we believe that credentialing is a key area where we are. Well positioned to innovate in ways that will drive profits and productivity for our customers, specifically, for enhancing our credential stream.

Suite to help Healthcare organizations. Reduce the time it takes between a physician starting, work or being hired or offered a role and actually, generating Revenue by providing reimbursable care to patients on average. We estimate based on our research, it takes about 120 days or more to onboard enroll credential and privilege of physician,

And of course if that's a an important surgeon uh every day that they're not uh uh doing surgery is a day of lost Revenue. Uh we call it time to revenue for these Hospital organizations, Healthcare organizations.

And a car from a caregiver standpoint and from a business standpoint, that's lost time and lost opportunity. And we're working with our customers and intent on collapsing that 120 days. So, the positions can get to work faster. And we think that our Suites of software particularly as they're more integrated, um, uh, for example, between our learning applications credentialing. We're in a really good position to actually have an impact on a metric like that. 120 days, time to revenue. Uh, whereas non-integrated with learning functions like onboarding and HR, separated from credentialing, uh, we're less in a position. And so, as the features of the platform manifest and interoperability, uh, we think will be able to help our customers achieve true business outcomes like shortening, the time to revenue on newly hired Physicians which is a little hint of the future of the power of becoming a platform company instead of just separate applications. And uh, and we're well underway and and, and developing and delivering on those capabilities.

Finally, I do want to touch on scheduling a bit. Our core product in scheduling is Shift Wizard. We continue to deliver strong revenue growth from Shift Wizard. In terms of quarterly revenue contribution, we are pleased that Shift Wizard eclipsed our legacy and soft suite of products in the second quarter and continues to be our top-performing product in scheduling.

we thank the growth trajectory of shift lizard, really speaks to the market, doing it as best-in-class solution for clinical staff scheduling

Like previous quarters our sails of ships with shift, wizard came both from competitive takeouts as well as growth within within existing customers.

Uh, and then the backside of that is, unfortunately the rate of decline in our Legacy and soft Suite of products is still dragging down the overall growth rate. And our scheduling Suite of applications, we've talked about this Legacy dragged before. Part of the positive news, is that the tale of the ANS sauce Legacy product. Suite Revenue has diminished such that next year. We expect to start seeing Less in terms of negative offset to shift Wizards strong growth performance. So just a few quarters away, we feel we'll have made material progress in in this, this particular challenge with the Legacy products,

Switching gears. I want to briefly address the signing of the 1. Big beautiful bill.

Which is a landmark event in healthcare policy. Uh, exactly how the bill will shape Health Care is something that will continue to unfold and something will present various opportunities and challenges to our customers over time.

Fortunately, we believe the health stream is uniquely well positioned to help customers more efficiently and effectively accomplish their workflow needs at a time when doing so is the top focus for CEOs across the nation.

Regardless of the relative advantages or disadvantages customers are expecting from the new healthcare policies, they have been preparing for several months. We believe that this is one of the main reasons that the handful of deals I mentioned at the first of the call took a little longer to close than we originally expected. Customers are taking a little more time to make the right purchasing decisions. We believe that HealthStream's innovative solutions are the right solutions, and we're pleased that four of our five customers, hopefully the fifth will soon follow, came to that same conclusion and decision.

We also believe that our hstream technology platform is beginning to produce results just in time. Meaning the customers can begin to experience the benefits of interoperability, this is the year as I've declared, it's the year of the platform. And what we mean by that is not necessarily a platform, delivering incremental revenues just yet, but that the benefits of interoperability are beginning to manifest visibly to our customers, which again, I think represents kind of a fundamental shift from Individual applications to really an Ecology of interoperable SAS applications. So we're excited. We've kind of declared. This is the year of the platform and we expect to spend the rest of this year, educating and demonstrating to our customers, the benefits of that emerging interoperability.

I'd like to remind everyone that, uh, in our calls that, you know, if you think of the profile of our company, we're obviously looking to appeal to the investor community and we're profitable. We're highly recurring Revenue, we're a SAS with an emerging path, Healthcare technology, and we're focused on the healthcare Workforce industry.

We expect to deliver a steady growth and we've determined to share some of the gains directly shelters in the form of a small dividend. Uh, and we think maybe Health stream, if that's the kind of profile, you're looking for, uh, kind of a conservatively run but uh, Visionary aggressively on our Visionary. And what we're trying to build, uh, maybe a good company in stock for you to look at.

Uh, I'd like to conclude with those comments and now turn it back over to the operator to begin the question-and-answer session.

Telephone and wait for your name to be announced to withdraw your question. Please. Press star 1 1 again.

Please stand by while we compile the Q&A roster.

The first call comes from the line of Matthew. Hewitt of Craig Holland. Matthew please go ahead.

Good morning and thanks for taking the questions. Maybe first up on the gross margins, uh Scotty, you kind of explained what the the headwinds were there in the quarter, should you? Or should we anticipate? Um, the gross margins kind of bouncing back up here in Q3 or is going to take a few quarters to kind of get those back up the the, you know, couple hundred basis points that they were down.

Finally we'll still can see it to have around the 65% Mark uh for the remainder of the year. We still will see those ongoing costs related to the scale and performance improvements that we put in place. But we're also trying to take measures to

To manage that cost line item for us overall. So we'll take a few quarters to get there but we'll we'll kind of see it, hover around 65%. It's kind of still in line with our you know kind of midterm objectives that we set forth several years back. So we're kind of falling to the bottom of that range but we're still kind of in the 65 to you know 66% range.

Got it. And then regarding the hlx platform you know congratulations on some of the early success that you're seeing there. Um, Bobby I think you mentioned 47,000 users are now live. You got some positive feedback from that account, maybe a little bit of color on. What does the pipeline look for for, uh, look like for that? Um, application. And what, you know, how should we be thinking about a ramp for that as we get into the back half of this year and and look at 26. Thank you.

Well, and the first is that the, the ramp, uh, is forecasted in all of our guidance. So there's no exceptional change. You know, subscription businesses that the the steady incremental Improvement is the way to grow a subscription business. I think the hlx gives us yet another opportunity to add that it is an incremental add uh, for bass customers or a new entry point for new customers and we've begun, you know, in the piloting phase for the last say, 6 months, we've begun to tease it out with our sales team to see the market with some educational materials about it. So I'm not I think now the the pipeline building begins and now that we have a a live customer that that in fact billing has begun for. So does it Revenue generating product now is an incremental add-on. It is a subscription product and The Business of building a interest and pipeline for it begins now.

As we go, uh, to the live product and equipping the sales team with the tools they need to promote its availability. Uh, I think it's an important product. It's a kind of a paradigm shift that uh, Progressive organizations are more likely to adopt earlier. Uh, the ones that have a great interest in retaining and developing the workforce and giving them the tools for self-development.

Again, which is different different than uh, kind of a command and control uh, model of of Regulatory Compliance training. This is more oriented towards uh, development and retention and uh, uh, maybe cross training and so people can gain new skills and new areas. And so I think it's a very relevant for today's Workforce and to our customer base and the serious business of building a pipeline uh, is now beginning. We'll report on that in the coming quarters but again, I think it is an incremental opportunity. It's not uh it's not something where we're changing our guidance based on the launch of the products. I just want to want to be careful. It's an exciting new subscription product that will we hope to see incremental gains from

Understood, thank you.

1 moment for our next question.

The next question comes from the line of John Penny of kic genuity John, please go ahead.

Hi. This is, uh, Richard Close. Um, I had a question. Bob, Bobby, can you talk a little bit more about the comments with respect to ShiftWizard and the legacy products offsetting, you know, some of that growth? And just maybe a little bit more detail in terms of, like, the timing? You said next year essentially.

That offset is essentially going away. Just walk me through that. We got on a little late here, so I just want to go over that again. Make sure I understand.

And growth rates the uh the revenue of the Legacy applications from which we're trying to migrate. So in both cases and we're kind of achieving the Milestones where you know, each quarter of the Legacy applications, get a little smaller and a little less material to the overall Financial Outlook. While the subscription products, uh, are as you heard have good growth rates and and are now the majority of the revenue in that category. So, um, I think that we, we did mention the offset this quarter. I think Scotty mentioned, Scotty was about 1.8 million was the kind of the, the declines from the family of Legacy products across credentialing and scheduling, we didn't break it out by specific line. But um, those declines, you know, or pull our overall growth rate, down relative to the growth rates, you're seeing on the subscription products,

Um, so we just again, characterize it a lot. I think in, in shifts with we gave a little bit more color, just that the, uh, the growth that shifts Wizard and the decline of ANS sauce is hitting rates where in a couple more quarters, it'll be even less material overall. Uh and so maybe we can see a little more of the organic growth rate of shift. Wizards start to contribute as opposed to kind of almost a fully offset. Uh, growth when when the loss is 1.8 and the gains are are uh across the subscription cost from 2.9. You can see that the, you know, really affects growth

Okay, that's helpful. And

Were you going to add something there?

No, I was just going to say Scotty wanted to add more but I think those are the highlights. And, you know, each quarter will try to give a little more clarity as we progress.

Okay, that's helpful. And then on the credential stream, you know, and I guess you threw some costs at that, um, to get back on track, as you said. Was there, you know, any reputational damage or anything to call out with respect to?

Retention or any, you know, anything like that, based on what happened in the first quarter.

Well, certainly when your services aren't as you would expect, you know, at the level of Excellence, you, you demand of yourself and your customers demand. There's frustration. Uh, we we continue to remain in high level of contacts, our account management programs, and our executive leadership with all of our key customers. And, you know, of course, there's some frustration in their, uh, we, we think we can get through it all with, you know, minimal impact. Uh, there's always some consequence to, to it, but that's, of course, factored in to how we think about our overall guidance. So I don't think there'll be any major surprises. It would change how we change our outlook on the year. Um, you know, it's hard to go through uh 25 years of History like this and occasional bumps in in the process.

Process. As you expand. In this case, an expansion related growth problem, caught us a bit off guard, uh, but I feel really good about how it responded and, uh, and and are working with all of our customers to get them, all through it as well. And on the back side, just more capacity, more speed, uh, more Focus to do even better, uh, and to avoid this kind of problem in the future. So, uh, overall uh, nothing that would change our, our outlook for the year,

Okay, that's helpful. And then, um, I guess my final question, or final two. Um, you know, I, I just following all the, you know, healthcare-related, uh, news sources and all that, there's been a decent amount, you know, not huge in terms of employment cuts by various hospitals and, um, you know, a hundred here, a hundred there, that type of thing. Um, I guess I'm curious how you think about that in terms of, you know, an overall subscriptions. I mean, you're, you know, you have such a deep penetration, and you know, maybe that's just modest cuts here and there, but I how you're thinking about the whole healthcare employment market and, um, any impact to HealthStream.

Those are relatively small to the overall demand for healthcare services. The new types of roles being created and grown rapidly like nurse practitioners uh and and and the supply of new nurses uh I think the capitalistic Market is responding to try to fill the demands for for skilled competent, Healthcare givers, and we think we're part of that Journey. So I don't see material changes, certainly not downward in the employment numbers. You know, certain sub-segments of the market are particularly challenged financially right now, uh like the skilled nursing Market. It it kind of has a good years and bad years. I'd say these are more challenging years in that market, we're present in that market. So as they change both ownership models, private equity and experience a, a potentially less access to uh uh federally funded patient insured, insured patients. You know there there's going to be pockets of challenges that the small rural Hospital.

May face challenges but that almost depends on things. We can't tell yet which is like the state's response to the new legislation.

Uh, for us these, these macro conditions, I think employment will go up and so that was the root of your questions around the number of people. I think I think over time they'll be more Health Care Providers. Um, the the way we would relate most closely to the macro uncertainty in the macroeconomic visuals are definitely. Uh, you know, the, the legislation is known, the impact is unknown, and kind of Downstream and depends on a lot of interactions that

Are yet to be seen like State responses to the federal funding changes.

Uh, you know, for us, that would manifest in how we think about the sales pipeline. And right now, we're seeing.

Record sized pipelines, but as you as we clearly noted, um, you know, expected, close dates were getting pushed. It seems that customers maybe have more, um, uh, you know, committees deciding the wisdom and timing of purchases. Uh, and so what we'll be watching, most and probably be more of a next year. Phenomenon is the impact of potentially slower purchasing, so I don't think it'll be an an, uh, lack of number of people or, uh,

Lack of demand for healthcare services. Uh, you know, for us, we'll have to see the downstream impact in in the purchasing patterns, and, and we clearly experienced a little that in q1, uh, as deals moved into Q2. And even part of that pipeline, that was expected in q1 delivered. And it was, we think will now deliver an early Q3. So that's, that's a little bit of a lag effect. And that's the way we're most thinking about these macro conditions.

Okay, thank you.

As a reminder to ask a question. Please press star 1, 1 on your telephone, and wait, for your name to be announced. 1 moment for your next question.

The next question comes from the line of Vincent Kikio of Bington Research. Vincent, please go ahead.

Yeah, Bobby, um, curious, uh, how are the, uh, price accelerators playing out, and, uh, were they included in the four large deals you just landed?

uh,

This is, uh, I, I need to check specifically those, but I, I believe we're now officially working them into every, uh, new and renewed contract. Uh, and generally being accepted, uh, uh, as as a, you know, as more an established pattern across all Healthcare it. So we're glad to have that model in place and and and credentialing learning and scheduling as contracts are are gained and renewed. We're working in price escalators uh and they're of course negotiated but we're actually finding it's a a reasonable negotiation to you know, we're trying to get essentially as best, we can close the cost of living level adjustments on on an annual basis. So, uh, you know, this will take 3 3 and a half more years to play out fully. Uh, but it's exciting to be layering it in, with every single renewal and new contract. I, in fact, I, I think it would be an exception to not have them at this point.

And uh, could you provide an update on Nurse Grid in particular? I'm interested in the e-commerce uh, performance.

Uh, student debt and save money. And so it's, uh, not not really an advertising relationship. It's a business relationship. But their services are highly valued by uh, by our nurses. And we're beginning to refer business to them and share and that business outcome, but while while importantly, saving money for nurses, so it's really a fantastic, kind of value ad.

Uh we launched a uh a jobs function on the site which is not yet generating Revenue, but generating lots of interest and so, watch for that in the coming quarters as we we learn to uh to help our nurses see opportunities in front of them. Uh, and

And so, and then finally, the audience for Nurse Grid continues to grow organically, passing, I believe, it's.

Uh, oh shoot. I hope someone will text me, 600. I think it's 640,000 monthly active users on Nurse head and I watch my texts and correct that if I'm off a little bit, but I think it's growing around 1500 to 2,000 a week. 1 other important point about Nurse grid is, uh, We've now shifted the app to use our platform identity management service. So all the nurse on Nurse kid are logging in with an hream ID, which is an identity, uh, capability issued by our platform as a service capabilities, and that's going to allow us to bring even more value to the nurses on Nurse grid, as we're able to bring forward things, like some of their credentials. Like, for example, if they'd earned an American Red Cross certificate, they can now show up in their portfolio on Nurse grid. So I think it'll be even more useful to the nurses.

Uh, to be able to use and benefit from the platform identity service. Um, and so watch for more announcements in that area as well. Lots of advances with nurse grid and more to come.

Thank you, Bobby.

This does conclude the question and answer portion of our call. I would now like to hand it back over to Robert Fritz for CE or excuse me for closing remarks,

Well, thank you everyone for participating this earnings call. We look forward to the next quarter. Thanks to all Health streamers, you made this all possible. I love being the spokesperson for your excellent work uh and and look forward to reporting out on the next quarter learnings call. Thank you everyone and see you next time.

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