Q4 2025 HealthStream Inc Earnings Call [BACKUP]

February 24, 2026

Bobby Frist: the data services of the platform. The interoperability they can enjoy between the different applications creates more of an ecology effect instead of just standalone kind of workflows that we're excited about. You know, for example, one of the core elements of the platform is the hStream ID, which, you know, is a fundamental building block needed to drive interoperability and innovation in the healthcare workforce technology we're building. What we observe is the number of APIs from the platform, their utilization by customers and industry partners.

Operator: Give us 1 moment. We're having some technical difficulties. I'm sorry, participants. We're having some technical difficulties. If you just give us a few seconds while we try to sort this out.

Mollie Condra: Okay, this is Mollie Condra. I'm going to pick up and finish off this section for Bobby while we figure out what's going on. Apologize for that. We were leading up to the fourth category, which is our ecosystem. For that, you know, you can have a great business vertical, a great data profile, or a great platform. You can even have all three, but if you don't bring them together at scale to form an ecosystem, then it really doesn't create durable value. There are many dimensions to HealthStream's business, all of which work together to form a whole that is greater than its individual parts.

<unk> not include any acquisitions, we may complete during the year, though our strong cash balance of $57 million untapped line of credit and no long term debt position us well to take advantage of M&A opportunities as they arise.

Later in the call today I'm going to describe some of the exciting developments on our application suites, which we've talked about for years and are rather newer career networks, which will cover in a little bit of detail. The newest at the end of the call, but first I want to talk a little bit about how health trimas positioned relative to the emerging context of AI.

And which trends we think are categories have trends, we think helped favorably positioned in that landscape.

Mollie Condra: You know, something that AI cannot create is an ecosystem of millions of individual caregivers, like those choosing NurseGrid or myCNAjobs, the thousands of healthcare organizations like those using our SaaS application suites, and dozens of industry partners like the American Red Cross and world-class healthcare organizations. Combining those elements with our 30 plus years of experience and our hStream platform architecture, you have something that's difficult to replicate. The organic life of such a thriving ecosystem is not something that AI can simply code, but it's something that AI can enhance and something that can turn, and enhance AI. At least, that's our strong belief. Now, before we go further in the call, I want to briefly summarize our business for the benefit of anyone who's new to the HealthStream story. This is something we do every quarter.

There's four categories I'm going to kind of discuss that are really more broadly positioning categories. So we talk about relative strength to us.

Others as we enter this massive period of change first.

First category because there is this concept of this SaaS armageddon or SaaS Apocalypse.

Is to think about how AI might affect our end users.

And so this first category is talking about the expansion of the health care user base I think unlike companies that fear seek compression due to AI agents minimizing the number of their human subscribers. Our user base of healthcare providers is expanding in fact, the number of health care providers is projected to increase significantly in the coming.

Years, particularly in the nursing workforce, which is our greatest strength as a company in January 2026 alone health care accounted for approximately 82000 of the 130000, new jobs added in the U S.

Mollie Condra: First and foremost, keep in mind that HealthStream is a healthcare technology company dedicated to developing, credentialing, and scheduling the healthcare workforce through SaaS-based applications, each of which are becoming more valuable because of the interoperability they're achieving through our hStream technology platform. We've also started to open our sales channels directly to healthcare professionals and nursing students through our three career networks for helping nurses, CNAs, and students throughout their career journey. The company holds 20 patents for its innovative products, which have been awarded over 40 Brandon Hall Awards. 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, 96% of our revenues are subscription-based.

According to the Bureau of Labor Statistics that trend will continue was roughly one quarter of all new jobs in the U S economy over the next decade being in health care on average hospitals hired 13600 net new personnel each month in 2025 and nurses continue to be a strong component of this growth from 2002.

'twenty to 'twenty 'twenty four registered nurses increased nine 4% overall, while nurse practitioners increased 38, 5% according to BLS.

This first trend translate into expanded opportunities for growth in our user base and I just think fundamentally you know theres lots of areas of the market.

Mollie Condra: We are profitable, we have no interest-bearing debt, and we report a strong cash balance of $57 million at the end of Q4 2025. This strong cash balance allows us to allocate capital to product development, to M&A, share repurchases, and dividends, all of which we've done in Q4. We are solely focused on healthcare, and more specifically, the healthcare workforce and those preparing to enter it. The 12.6 million healthcare professionals and nursing students in the United States comprise the core total addressable market for our solutions.

Where theres lots of white papers projections futurists are saying those jobs may be eliminated and I think in our market. We're just not seeing those kind of projections, what we're seeing our projections of shortages and projections of increasing demand and so on.

At our core.

Health care workforce and at its core is the nursing workforce and so we think that with our acute focus on that workforce pool.

We have a relatively strong position as we enter the projections of how change how dynamic of change will AI will impose on our marketplace.

Mollie Condra: At this time, right now, we're going to turn our attention back to our results in this call, and Scotty Roberts, our CFO, will provide a more detailed discussion of the financial metrics in Q4 and full year 2025, along with further comments about how we view our financial outlook for 2026. I'll turn it over to you, Scotty.

In fact, when we think about the positive dimension of AI in our in our workspace is I believe that AI will enhance the roles of nurses it will make them more human and have more contact with patients some of their paperwork and other functions get automated and so.

Bobby Frist: Hey, Scotty. Molly, by the way, sorry, I didn't realize I had dropped, so I was beautifully ad-libbing on the script. Thank goodness we had such a solid script, Molly, you jumped right in as needed. Fantastic. I just caught the last minute of your presentation. Nice job. We're fine. I did do a lot of great ad-libbing, which maybe people are grateful I didn't go off script, at least those that helped develop it. Thank you, Molly. Scotty, we'll turn it over to you. I'll try to keep my iPad live so I don't get cut off again. I'm not really sure where I dropped off. Sorry for that. I'll be available in the QA. I'll pick it up in the last third as well. Scotty, you're on.

So kind of an a and a.

The great irony, because this is one of the skills jobs.

Survives the Apocalypse and in fact is enhanced by allowing the millions of nurses in our country to spend more time by the bedside with patients instead of less so.

That's the first trend I wanted to talk about the second is our data profile and I think everybody has to get a grip around.

Companies and organizations data profile and.

I think that that can be broken into two categories. The first is thinking about.

Scott A. Roberts: All right, sounds good. Thanks, Mollie, and thanks, Bobby. Good morning, everyone. Before going over the financial results, I want to first point out several exciting events that took place during Q4. We completed two acquisitions, Virsys12 in October and MissionCare Collective in December. Our board of directors authorized a $10 million share repurchase program in November, with $5 million of the repurchases made in Q4. The remainder was purchased in January. In December, our CEO contributed $3.8 million of his personally owned stock to the company in order to facilitate the grant of equity to company employees in recognition of their contributions to the company and to further align the interests of those employees with our shareholders.

Scott Roberts: All right, sounds good. Thanks, Mollie, and thanks, Bobby. Good morning, everyone. Before going over the financial results, I want to first point out several exciting events that took place during Q4. We completed two acquisitions, Virsys12 in October and MissionCare Collective in December. Our board of directors authorized a $10 million share repurchase program in November, with $5 million of the repurchases made in Q4. The remainder was purchased in January. In December, our CEO contributed $3.8 million of his personally owned stock to the company in order to facilitate the grant of equity to company employees in recognition of their contributions to the company and to further align the interests of those employees with our shareholders.

The role of the software plays for the organization's it serves and I think for several of our solutions our systems serve as the system of record.

A foundational source of truth for example in the learning space, we are have an authoritative position.

Maintaining the learnt that the horizontal and longitudinal learning records of millions of health care workers over decades, and that strength of position as a system of record.

Positions us well for the future of AI.

Ah is increasingly used to drive efficiencies and develop inside the systems of record on which Ara lives are becoming increasingly important in terms of learning and compliance I feel confident that we serve as the system of record for more health care organizations than any other company.

Scott A. Roberts: The accounting treatment of this stock grant resulted in $3.5 million of non-cash compensation expense and $0.3 million of employer taxes and administrative costs, which negatively impacted our financial results for the quarter. It's also worth noting that this stock grant resulted in no dilution of shares to any existing shareholders of the company other than our CEO. Now, with that backdrop, let me go over the financial results for Q4. Unless otherwise noted, the comparisons will be against the same period of last year. Additionally, I'll reference certain non-GAAP comparisons to adjust for the impact of the CEO's stock grant. Revenues were a record of $79.7 million and were up 7.4%. Operating income was $2.4 million and was down 48.8%. Net income was $2.5 million, down 48.1%.

Scott Roberts: The accounting treatment of this stock grant resulted in $3.5 million of non-cash compensation expense and $0.3 million of employer taxes and administrative costs, which negatively impacted our financial results for the quarter. It's also worth noting that this stock grant resulted in no dilution of shares to any existing shareholders of the company other than our CEO. Now, with that backdrop, let me go over the financial results for Q4. Unless otherwise noted, the comparisons will be against the same period of last year. Additionally, I'll reference certain non-GAAP comparisons to adjust for the impact of the CEO's stock grant. Revenues were a record of $79.7 million and were up 7.4%. Operating income was $2.4 million and was down 48.8%. Net income was $2.5 million, down 48.1%.

Customers value, having a single system of record for the whole of their learning program because it allows them to easily store report and gain actual insights into the development and assessment of their workforce, whether that is in the form of the use of AI or other tools.

Traditionally the data feeding into the learning system of record was generated solely from the use of one of our SaaS applications.

Good morning, Scott.

Yes.

Learning Center.

We're also seeing customers push.

That continues to be the case, but encouragingly. We're also seeing customers push other learning records they have into their health stream system of record.

<unk> right.

Hum.

Alright.

We're accomplishing this through our learning API, which of course is included in our eight stream subscription.

Included.

<unk>.

All of that space or is it some of our calls.

So all that to say just to reinforce that some of our core systems do serve as a system of record on behalf of our customers and I think in a relative positioning world I'd, rather be there than just be a point solution.

Do serve.

On behalf of <unk>.

I think more relevant.

I'd rather be.

The point solutions.

In terms of finished physician credentialing.

Scott A. Roberts: Earnings per share was $0.09 per share, down from $0.16 per share. Adjusted EBITDA was $18.8 million and was up 16.4%. On a non-GAAP basis, our non-GAAP operating income was $6.2 million and was up 31.7%. Non-GAAP net income was $5.4 million and was up 9.5%. Non-GAAP EPS was $0.18 per share, and it was up $0.02 per share. Our revenues increased by $5.5 million, or 7.4%, and were $79.7 million, compared to $74.2 million in last year's Q4. Revenues from subscription products were up $5.8 million, or 8.2%, while professional service revenues were down $0.3 million, or 11.6%.

Scott Roberts: Earnings per share was $0.09 per share, down from $0.16 per share. Adjusted EBITDA was $18.8 million and was up 16.4%. On a non-GAAP basis, our non-GAAP operating income was $6.2 million and was up 31.7%. Non-GAAP net income was $5.4 million and was up 9.5%. Non-GAAP EPS was $0.18 per share, and it was up $0.02 per share. Our revenues increased by $5.5 million, or 7.4%, and were $79.7 million, compared to $74.2 million in last year's Q4. Revenues from subscription products were up $5.8 million, or 8.2%, while professional service revenues were down $0.3 million, or 11.6%.

In terms of finished physician credentialing, our customers often referred to as the single source of truth and this means that we maintain the system of record status of which key functions such as physician enrollment and privilege granting.

Referred to.

Okay.

We maintained a record status.

Okay.

Enrollment in <unk>.

Woods Grant.

Those functions originate.

Those functions originate and are maintained and spin off of our system of record. So whether it is for learning or Credentialing health streams customers Trust us to maintain secure reliable and organized systems of record on their behalf. If AI is to make a true impact in health care. We believe in our company believes and I believe they it will need to rely on.

Spinoff.

Whether it is running more production upstream customers.

Yeah.

Sure.

Record on their behalf.

Yes.

Okay.

I believe they.

We'll need to rely on.

Go on.

Okay.

These systems of record going forward the.

If you think about a data profile.

The second component of data if you think about a data profile. When you enter this world of change is trying to determine whether an organization as an aggregator of kind of publicly available data or the originator of unique data about.

The world changes.

I remember.

Organizations as an aggregator.

Peter.

Of unique data.

Their customers customers.

Scott A. Roberts: Our subscription revenue growth was supported by continued strong performance from our core solutions, with CredentialStream growing by 21%, ShiftWizard growing by 31%, and Competency Suite growing by 27%. Now, while a portion of the strong revenue growth in CredentialStream and ShiftWizard are from conversions from our legacy credentialing and scheduling applications, revenues from those legacy applications declined by 27% compared to last year. Revenues from the 2 acquisitions that we recently completed were $1.6 million in the quarter. In addition, revenue increases from the annual pricing escalators that we began introducing into new contracts last year also benefited the year-over-year growth.

Scott Roberts: Our subscription revenue growth was supported by continued strong performance from our core solutions, with CredentialStream growing by 21%, ShiftWizard growing by 31%, and Competency Suite growing by 27%. Now, while a portion of the strong revenue growth in CredentialStream and ShiftWizard are from conversions from our legacy credentialing and scheduling applications, revenues from those legacy applications declined by 27% compared to last year. Revenues from the 2 acquisitions that we recently completed were $1.6 million in the quarter. In addition, revenue increases from the annual pricing escalators that we began introducing into new contracts last year also benefited the year-over-year growth.

Is there no.

Are there customers and customer organizations and what is their relative data position and I would say through our career networks, which we'll talk more about the yen students professionals like nurses CNA that interface directly with health stream for a variety of reasons.

Yes.

Professionals.

CNA interface directly with Gulfstream for a variety.

Just on the first patient in a hospital.

Whether it is define their first clinical rotation in our hospital as they are graduating or find their next shift are there socializing with colleagues.

Congratulations.

I'm there next year.

Asthma colleagues.

These interactions.

Yes.

These interactions create that access to this proprietary data that I would call original data do you take are virally growing nurse grid career network. For example, it's adding about 2000, new nurses are weak and now has over 670000 monthly active users at the staggering one out of five nurses in the U S.

Proprietary data I would call original date.

Our filings.

Rear network for example.

Adding about 2000 feet nurses week.

Monthly active.

Wow.

Using there.

Scott A. Roberts: Moving on, our sales team finished the year with strong contract bookings, which led to an 11.2% increase in our remaining performance obligations, which were $691 million as of the end of Q4, and that compares to $621 million for the same period of last year. We expect that approximately 39% of the remaining performance obligations will be converted to revenue over the next 12 months, and that 67% will be converted over the next 24 months. Gross margin was 63.8%, compared to 66.2% in the prior year quarter. Gross margin was impacted by an increase in our cloud hosting costs and software licensing costs, which primarily come from the CredentialStream application and the hStream platform.

Scott Roberts: Moving on, our sales team finished the year with strong contract bookings, which led to an 11.2% increase in our remaining performance obligations, which were $691 million as of the end of Q4, and that compares to $621 million for the same period of last year. We expect that approximately 39% of the remaining performance obligations will be converted to revenue over the next 12 months, and that 67% will be converted over the next 24 months. Gross margin was 63.8%, compared to 66.2% in the prior year quarter. Gross margin was impacted by an increase in our cloud hosting costs and software licensing costs, which primarily come from the CredentialStream application and the hStream platform.

And they tell us who they like to work with.

Using nurse grid, and they tell us who they like to work with who they like to work for when they want to work how much monetary incentive will perceive them to pick up an extra shift.

Like to work for one.

<unk> work.

Monetary incentive.

An extra shift.

How soon is originating this.

More importantly.

<unk> is originating this proprietary data and more importantly, we are using it to the mutual benefit of the individuals who provided and the organizations that want to employ them by.

Sure.

Individuals.

The organizations that want to deploy.

By connecting.

Lawyers helped both realized.

By connecting individuals' with employers to help both realize their goals health care health care itself improves everyone knows that <unk> requires data to be effective and we believe that the data. We are originating can be among the most valuable and beneficial for managing the health care workforce.

Okay.

Everyone knows that Ara.

And we believe.

Yeah.

Among the most beneficial managing health care.

That brings me to this first category, which is our platform.

That brings me to the third category, which is our platform and our platform strategy, we call it our <unk> stream platform.

R H.

Yeah.

No.

Essentially over five years, we've been working diligently.

Essentially for over five years, we've been working diligently on.

Scott A. Roberts: The gross margin was also impacted by the non-cash compensation expense associated with the CEO's stock grant. This grant reduced gross margin by $1.3 million, or approximately 170 basis points. Our operating expenses, excluding cost to revenues, increased by 9% or $4 million, of which approximately $2.5 million of the increase was associated with the CEO's stock grant. We also incurred over $600,000 in transaction costs associated with the 2 acquisitions that we completed in Q4. Net income was $2.5 million and was down from $4.9 million last year. Again, this decline was significantly influenced by the non-cash compensation expense from the CEO's stock grant.

Scott Roberts: The gross margin was also impacted by the non-cash compensation expense associated with the CEO's stock grant. This grant reduced gross margin by $1.3 million, or approximately 170 basis points. Our operating expenses, excluding cost to revenues, increased by 9% or $4 million, of which approximately $2.5 million of the increase was associated with the CEO's stock grant. We also incurred over $600,000 in transaction costs associated with the 2 acquisitions that we completed in Q4. Net income was $2.5 million and was down from $4.9 million last year. Again, this decline was significantly influenced by the non-cash compensation expense from the CEO's stock grant.

So behind the scenes investing in the creation of our platform.

Underneath the scenes and behind the scenes investing in the creation of our platform. This is distinguished from our group of SaaS applications the platform.

Yeah.

Group.

Locations platform.

Theories abilities.

A series of capabilities.

Which by the way.

And core element.

Which by the way AI is one of the 10 core elements of the <unk> platform that allows interoperability and <unk>.

Hi.

It allows interoperability and miles are SaaS application to behave more like.

Scott A. Roberts: On a non-GAAP basis, net income was $5.4 million and was up 9.5% from the $4.9 million last year. Finally, adjusted EBITDA came in at $18.8 million, which was up 16.4%, and our adjusted EBITDA margin was 23.6%, compared to 21.8% last year. Switching to the balance sheet, we ended the quarter with cash and investment balances at $57 million, which compares to $92.6 million last quarter. During the quarter, we deployed $35.1 million for acquisitions. We paid $6.8 million for capital expenditures. We returned $0.9 million to shareholders through our dividend program, and we repurchased $5 million of our common stock under the share repurchase program that we announced in November.

Scott Roberts: On a non-GAAP basis, net income was $5.4 million and was up 9.5% from the $4.9 million last year. Finally, adjusted EBITDA came in at $18.8 million, which was up 16.4%, and our adjusted EBITDA margin was 23.6%, compared to 21.8% last year. Switching to the balance sheet, we ended the quarter with cash and investment balances at $57 million, which compares to $92.6 million last quarter. During the quarter, we deployed $35.1 million for acquisitions. We paid $6.8 million for capital expenditures. We returned $0.9 million to shareholders through our dividend program, and we repurchased $5 million of our common stock under the share repurchase program that we announced in November.

Again, the different applications creates more of an ecology effect instead of just standalone kind of workflows that we're excited about and so you know.

For example, one of the core elements of the platform as the H stream I D.

Which is a fundamental building blocks needed to drive interoperability and innovation in the health care workforce technology, We're building.

So what we observe is the number of AP eyes from the platform their utilization by customers and industry problem.

Scott A. Roberts: Our day sales outstanding remained steady at 35 days for the quarter, which marks the sixth consecutive quarter that DSO is at or below 40 days. For the year, our cash flows from operations were $63.3 million, compared to $57.7 million in the prior year, which is an increase of 9.8%. Free cash flows were $31.1 million, compared to twenty-nine and a half million last year, an increase of 5.5%, and our capital expenditures were $32.2 million, compared to $28.1 million last year, an increase of 14.3%. Ending the quarter with $57 million of cash and investments, free cash flows, and no debt, we are well positioned to deploy capital to improve shareholder value. We maintain a disciplined approach to capital allocation and how we prioritize our use of capital.

Scott Roberts: Our day sales outstanding remained steady at 35 days for the quarter, which marks the sixth consecutive quarter that DSO is at or below 40 days. For the year, our cash flows from operations were $63.3 million, compared to $57.7 million in the prior year, which is an increase of 9.8%. Free cash flows were $31.1 million, compared to twenty-nine and a half million last year, an increase of 5.5%, and our capital expenditures were $32.2 million, compared to $28.1 million last year, an increase of 14.3%. Ending the quarter with $57 million of cash and investments, free cash flows, and no debt, we are well positioned to deploy capital to improve shareholder value. We maintain a disciplined approach to capital allocation and how we prioritize our use of capital.

Okay.

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Scott A. Roberts: 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. The third is returning a portion of profits back to shareholders in the form of cash dividends, and our fourth priority is that our board may authorize share repurchase programs. In regard to M&A investments, on 8 October, we announced the acquisition of Virsys12, a healthcare technology company focused on payer credentialing. The consideration paid for Virsys12 consisted of $11.4 million in cash, taking into effect customary purchase price adjustments and a post-closing working capital adjustment. Up to an additional $4 million of cash consideration may be paid over a three-year period following closing, contingent upon achievement of certain financial targets.

Scott Roberts: 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. The third is returning a portion of profits back to shareholders in the form of cash dividends, and our fourth priority is that our board may authorize share repurchase programs. In regard to M&A investments, on 8 October, we announced the acquisition of Virsys12, a healthcare technology company focused on payer credentialing. The consideration paid for Virsys12 consisted of $11.4 million in cash, taking into effect customary purchase price adjustments and a post-closing working capital adjustment. Up to an additional $4 million of cash consideration may be paid over a three-year period following closing, contingent upon achievement of certain financial targets.

Scott A. Roberts: On December 15, we announced the acquisition of MissionCare Collective, a healthcare workforce company primarily focused on connecting non-medical caregivers and CNAs with job placement and numerous job-related programs. The consideration paid for MissionCare consisted of $24.6 million in cash and $4 million in our common stock, which also takes into effect customary purchase price adjustments and is subject to a post-closing working capital adjustment. Up to an additional $10 million of cash consideration may be paid over a 3-year period following closing, which is also contingent upon achievement of certain financial targets. In respect to our dividend program, yesterday, our board of directors declared a quarterly cash dividend of $0.035 per share to be paid on 20 March to holders of record on 9 March.

Scott Roberts: On December 15, we announced the acquisition of MissionCare Collective, a healthcare workforce company primarily focused on connecting non-medical caregivers and CNAs with job placement and numerous job-related programs. The consideration paid for MissionCare consisted of $24.6 million in cash and $4 million in our common stock, which also takes into effect customary purchase price adjustments and is subject to a post-closing working capital adjustment. Up to an additional $10 million of cash consideration may be paid over a 3-year period following closing, which is also contingent upon achievement of certain financial targets. In respect to our dividend program, yesterday, our board of directors declared a quarterly cash dividend of $0.035 per share to be paid on 20 March to holders of record on 9 March.

Okay. This is mollie condra I'm going to pick up.

And finished off this section for Bobby while we figure out what's going on I apologize for that.

Scott A. Roberts: This represents a 12.9% increase over the previous quarterly cash dividend. In November 2025, our board of directors authorized a $10 million share repurchase program, of which $5 million of share repurchases were made in Q4 2025, and the remaining $5 million were made in January 2026. In May 2025, the board authorized a $25 million share repurchase program that was completed in Q3 2025. To recap, the full year, we achieved $304.1 million of revenue, $18.3 million of net income, $21.2 million of non-GAAP net income, and adjusted EBITDA of $71.8 million. We made $30 million in share repurchases.

Scott Roberts: This represents a 12.9% increase over the previous quarterly cash dividend. In November 2025, our board of directors authorized a $10 million share repurchase program, of which $5 million of share repurchases were made in Q4 2025, and the remaining $5 million were made in January 2026. In May 2025, the board authorized a $25 million share repurchase program that was completed in Q3 2025. To recap, the full year, we achieved $304.1 million of revenue, $18.3 million of net income, $21.2 million of non-GAAP net income, and adjusted EBITDA of $71.8 million. We made $30 million in share repurchases.

We were leading up to the fourth category, which is our ecosystem.

And then that you know you can have a great business vertical of great data profile or a great platform you could even have all three but if you don't bring them together at scale to form an ecosystem then it really doesn't create durable value.

There are many dimensions to <unk> business, all of which work together to form a hole that is greater than its individual parts.

You know something that I cannot create is an ecosystem of millions of individual caregivers like those choosing nurse grid are my CNA jobs, the thousands of health care organizations like those using our SaaS application suites and dozens of industry partners like the American Red Cross and World Class Health care organizations.

Those elements with our 30 plus years of experience and our H stream platform architecture, and you have something that's difficult to replicate.

Scott A. Roberts: We paid $3.7 million in dividends to shareholders, deployed $39.1 million of capital on M&A, and $32.2 million of capital expenditures. We remain focused on consistently growing the business, both organically and inorganically, while remaining disciplined with our capital allocation strategy. I'll go ahead and wrap up my portion of the call this morning by going over our financial outlook for 2026. We expect that consolidated revenues will range between $323 million and $330 million, which equates to a growth rate range of 6.2% to 8.55%. To begin the year, we estimate that the Q1 revenue growth rate will be approximately 8%.

Scott Roberts: We paid $3.7 million in dividends to shareholders, deployed $39.1 million of capital on M&A, and $32.2 million of capital expenditures. We remain focused on consistently growing the business, both organically and inorganically, while remaining disciplined with our capital allocation strategy. I'll go ahead and wrap up my portion of the call this morning by going over our financial outlook for 2026. We expect that consolidated revenues will range between $323 million and $330 million, which equates to a growth rate range of 6.2% to 8.55%. To begin the year, we estimate that the Q1 revenue growth rate will be approximately 8%.

The organic life of such a thriving ecosystem is not something that AI can simply code, but it's something that AI can enhance and something that can turn.

And enhance AI at least that's our strong belief.

Now before we go further in the call I want to briefly summarize our business for the benefit of anyone who's new to the health stream story and this is something we do every quarter first and foremost keep in mind that he'll stream is a health care technology company dedicated to developing credentialing and scheduling the health care workforce through sacks based.

<unk> each of which are becoming more valuable because of the interoperability there are achieving through our H stream technology platform.

We've also started to open our sales channels directly to health care professionals and nursing students through our three career networks for helping nurses cna's and students throughout their career journey.

Scott A. Roberts: We expect quarterly revenues to improve sequentially across the year, with higher growth rates in the first half of the year than in the second half, which is primarily due to the timing of the 2025 acquisition. We expect that inorganic revenues will be approximately $13 million for the year. We expect that net income will range between $20.4 and 22.8 million, that adjusted EBITDA will range between $73 and 77 million, that capital expenditures will range between $31 and 34 million, and we expect that our effective tax rate will be approximately 22%. This guidance does not include the impact of any acquisitions or dispositions that we may complete during the year, any gains or losses from changes in the fair value of non-marketable equity investments or contingent consideration or impairment of long-lived assets.

Scott Roberts: We expect quarterly revenues to improve sequentially across the year, with higher growth rates in the first half of the year than in the second half, which is primarily due to the timing of the 2025 acquisition. We expect that inorganic revenues will be approximately $13 million for the year. We expect that net income will range between $20.4 and 22.8 million, that adjusted EBITDA will range between $73 and 77 million, that capital expenditures will range between $31 and 34 million, and we expect that our effective tax rate will be approximately 22%. This guidance does not include the impact of any acquisitions or dispositions that we may complete during the year, any gains or losses from changes in the fair value of non-marketable equity investments or contingent consideration or impairment of long-lived assets.

The company holds 20 patents for its innovative products, which have been awarded over 40, Brandon Hall Awards.

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 so we are profitable we have no interest bearing debt and we reported a strong cash balance of $57 million at the end of the fourth quarter of 'twenty.

25.

This strong cash balance allows us to allocate capital to product development to M&A share repurchases and dividends all of which we've done in the fourth quarter.

We are solely focused on health care and more specifically the <unk>.

Health care workforce of those preparing to enter at the $12 6 million health care professionals and nursing students in the United States comprised the core total addressable market our solutions.

Scott A. Roberts: In closing, I'm excited about the opportunities we have in front of us and have confidence in our ability to deliver on another solid year of financial performance, while continuing to create value for our stakeholders. Thanks for your time again this morning. I'll now turn the call back over to you, Bobby.

Scott Roberts: In closing, I'm excited about the opportunities we have in front of us and have confidence in our ability to deliver on another solid year of financial performance, while continuing to create value for our stakeholders. Thanks for your time again this morning. I'll now turn the call back over to you, Bobby.

So at this time right now we're going to turn our attention back to our results in this call and Scottie Roberts, our CFO will provide a more detailed discussion of the financial metrics in the fourth quarter and full year 2025, along with further comments about how we view our financial outlook for 2026, So I'll turn it over to you Scotty.

Bobby Frist: Thanks, Scotty. Well, let's see. Let's pick up here with the business updates at the last third here. I'll start off, as I usually do, with some core business updates that cover our learning, credentialing, and scheduling application suites. We'll talk about the newest career network, myCNAjobs. Let's start with the learning product family, which includes kind of a subset of what we call our Competency Suite. Many customers are increasingly taking advantage of the opportunity to purchase a bundle of several of our most popular workforce applications and content libraries, which we call the Competency Suite. The customers purchase a subscription to the Competency Suite for all of their employees, which comes in an unlimited use format.

Hi, Molly.

Sorry, I didn't realize that drops all is beautifully add living on the script, but thank goodness, we had such a solid script in Mali jumped Friday on as needed. So fantastic I just call. It the last minute of your presentation nice job were fine, but I did do a lot of great add living which maybe maybe people are grateful I didn't go off script, a at least those that helped.

Develop it so thank you Mollie and Scott, who will turn it over to you I'll try to keep my iPad lives. So I don't get cut off again, I'm, not really sure where I dropped off sharply that I'll be available in the QA and I'll pick it up in the last third as well so Scotty you're on alright sounds good thanks, Marley and thanks, Bobby and good morning, everyone before going over the financial results on the first point out.

Bobby Frist: Key sales of the Competency Suite during Q4 include some of the nation's top healthcare organizations, like Intermountain Health, Northside Hospital, and Dartmouth Health. We think about our credentialing area, where our flagship product, CredentialStream, also finished the year strong in terms of new sales, expansion sales, and importantly, conversions from legacy products. Revenues from sales of CredentialStream in Q4 were up approximately 21% over the same quarter last year. We saw growth of approximately 23% year-over-year. Our largest sale in the quarter was a result of our winning a highly competitive RFP.

Several exciting event.

That took place during the fourth quarter, we completed two acquisitions versus 12 in October and mission care collective in December.

Our board of directors authorized a $10 million share repurchase program in November.

$5 million of the repurchases made in the fourth quarter and the remainder was purchased in January.

In December our CEO contributed $3 $8 million of US personally owned stock to the company in order to facilitate the grant of equity to company employees in recognition of their contributions to the company and to further align the interest of those employees with our shareholders.

Bobby Frist: Our next largest sale came from a referral from our partner, Veronis, and represented a competitive takeout because the customer loves our comprehensive solution, API integration capabilities from our platform, and the use of cutting-edge data infrastructure that allows them to get greater insights faster, things their previous system could not deliver. Additionally, we are pleased that an existing health system customer decided to expand their CredentialStream access as they standardized on the CredentialStream across all their facilities and also invested in our case review and performance metrics products. The quarter for CredentialStream was not only about sales success. As a result of infrastructure enhancements we made earlier in the year, CredentialStream delivered excellent system performance and high reliability, both of which were recognized and lauded by our customers.

The accounting treatment of the stock grant resulted in $3 5 million of noncash compensation expense and.

<unk> $3 million of employer taxes.

And administrative costs, which negatively impacted our financial results for the quarter.

Also worth noting that this stock grant resulted in no dilution of shares to any existing shareholders of the company other than our CEO.

Now with that backdrop, let me go over the financial results for the fourth quarter unless otherwise noted the comparisons will be against the same period of last year.

Additionally, I'll reference certain non-GAAP comparisons to adjust for the impact of the CEO stock Grant.

Bobby Frist: We are also pleased that some of our large legacy credentialing customers completed their conversion from EchoCredentialing and MSOW. For example, UPMC Health System, a major health system, and Sutter Health, being notable among those that successfully transitioned to our CredentialStream application. Through CredentialStream, we're committed to helping those customers speed time to revenue for the physicians they onboard, which will improve their financial performance and ability to provide quality care. To conclude my update on our credentialing business, I will say that 2025 saw total revenue contribution from CredentialStream edge out total revenue contribution from all of our legacy credentialing products combined. As customers continue to see the value of CredentialStream, we expect this trend to continue and accelerate in 2026.

Revenues were a record of $79 7 million and were up seven 4% operating income was $2 4 million was down 48, 8%.

Net income was $2 5 million down 48, 1%, earning.

Earnings per share was nine cents per share down from 16 cents per share and adjusted EBITDA was $18 8 million and was up 16, 4%.

On a non-GAAP basis, our non-GAAP operating income was $6 2 million and was up 31, 7%.

non-GAAP net income was $5 4 million and was up nine 5% and.

And non-GAAP EPS was <unk> 18 per share and it was up two cents per share.

Bobby Frist: Now, let's move to scheduling, where our core product, ShiftWizard, continues to deliver strong revenue growth, with Q4 revenues from sales up approximately 31% versus the Q4 of the previous year and up 24% year-over-year. It continues to be our top-performing product in our scheduling application suite. In 2025, revenue contribution from ShiftWizard was greater than revenue contribution from all legacy scheduling products combined. This, too, is a trend we expect to continue in 2026. ShiftWizard is a good example of how vertically focused, healthcare-specific applications benefit customers in ways that generic, horizontally focused solutions simply cannot. In fact, our 2 largest sales last quarter were takeouts of a major provider, and both customers selected ShiftWizard because of the healthcare-specific advantages that it offers.

Our revenues increased by $5 5 million or seven 4% and were $79 7 million compared to $74 2 million in last year's fourth quarter.

Revenues from subscription products were up $5 8 million or eight 2%.

Professional service revenues were down <unk> 3 million or 11, 6%.

Our subscription revenue growth was supported by continued strong performance from our core solutions.

With credential strained growing by 21% shift wizard growing by 31% and competency suite growing by 27%.

Now while a portion of the strong revenue growth and credential Scream and shift Wizard are from conversions from our legacy Credentialing scheduling applications revenues from those legacy applications declined by 27% compared to last year.

Bobby Frist: For example, both customers identified the ability to gain greater visibility into and control over managing and engaging their clinical workforce as something that differentiated ShiftWizard over and above even the best horizontal solutions. Scheduling staffing clinicians is simply different than scheduling a labor pool for retail or factory shifts. Increasingly, the market is realizing this fact and choosing ShiftWizard as a result. On our last call, I introduced an exciting new area of focus for the company, our emerging career networks, like NurseGrid for nurses and myClinicalExchange for students. Remember, career networks provide value directly to the individuals who deliver care. You can contrast that with our enterprise application suites, which provide value to healthcare organizations. I also made an important point on the last call that bears reiterating.

Revenues from the two acquisitions that we recently completed for $1 6 million in the quarter. In addition revenue increases from the annual pricing escalators that we began introducing into new contracts last year also benefited the year over year growth.

Moving on our sales team finished the year with strong contract bookings, which led to an 11, 2% increase in our remaining performance obligations, which.

Which were $691 million as of the end of the fourth quarter and that compares to $621 million for the same period of last year.

We expect that approximately 39% of the remaining performance obligations will be converted to revenue over the next 12 months and at 67% will be converted over the next 24 months.

Gross margin was 63, 8% compared to 66, 2% in the prior year quarter and.

Bobby Frist: To really address the complex issues of today's healthcare workforce, we think that you have to have solutions for both individuals and for organizations. Here's the more important part: To really change the game, you have to connect both of them together through a common platform. That's exactly what we're beginning to do at HealthStream. On 15 December 2025, we acquired MissionCare Collective, whose primary offering is myCNAjobs.com, which we're introducing as our newest career network. myCNAjobs helps recruit and retain a large set of providers that includes home health aides, home care providers, and CNAs, which are also incredibly in high demand. We also expect, for example, in the CNAs, the demand for them to increase, particularly in the post and pre-acute markets.

Gross margin was impacted by an increase in our cloud hosting costs and software licensing costs.

Which primarily come from the credential stream application in the midstream platform.

The gross margin was also impacted by the noncash compensation expense associated with the CEO stock Grant.

This grant reduced gross margin by $1.3 million or approximately 170 basis points.

Our operating expenses, excluding cost of revenues increased by 9% or $4 million of which approximately $2 5 million of the increase was associated with the CEO stock Grant.

We also incurred over 600000 and transaction costs associated with the two acquisitions that we completed in the fourth quarter.

Bobby Frist: myCNAjobs originates data directly from individual caregivers, enriches that data through proprietary technology, and then utilizes that data to help pair those caregivers with healthcare organizations that want and need to hire them. Both the individual and the organization benefit as a result. As we get the individuals using myCNAjobs issued an hStream ID, they're better able to help manage their data and longitudinal record across both applications and employers. I want to close by giving you an example of how our customers are increasingly turning to HealthStream as they manage the entirety of a clinician's journey, from nursing school to retirement and everything in between. It's my view that many of the smartest health systems, and I'll name a few, like HCA and Intermountain Healthcare, are putting nurses at a center of their workforce strategy.

Net income was $2 5 million and was down four from <unk> nine.

9 million last year again, this decline was significantly influenced by the noncash compensation expense from the CEO stock Grant.

On a non-GAAP basis net income was $5 4 million and was up nine 5% from the $4 9 million last year.

And finally, adjusted EBITDA came in at $18 8 million, which was up 16, 4% and our adjusted EBITDA margin was 23, 6% compared to 21, 8% last year.

Switching to the balance sheet, we ended the quarter with cash and investment balances of 57 million, which compares to $92 6 million last quarter.

And during the quarter, we deployed $35 1 million for acquisitions repaid $6 8 million for capital expenditures.

Bobby Frist: In some cases, these health systems are doing things like launching their own nursing schools. That's how much demand there is for these nurses, and how much they realize the need to develop their competence and upskill them. They're actually getting into the nursing schools themselves. They're also purchasing our Competency Suite at scale, and they're engaging with our career network so they can be efficient in the recruitment, the development, and that transitional onboarding that they do between the career network and to full-time employment. They use our software then to recruit, retain, develop, and onboard that professional staff.

We returned $9 million to shareholders through our dividend program, and we repurchased 5 million of our common stock under the share repurchase program that we announced in November.

Our days sales outstanding remained steady at 35 days for the quarter, which marks the sixth consecutive quarter DSO was at or below 40 days.

For the year, our cash flows from operations were $63.3 million compared to $57 7 million in the prior year.

Which is an increase of nine 8%.

Free cash flows were $31 1 million compared to 29, and a half million dollars last year, an increase of five 5%.

Bobby Frist: It's my belief that other hospitals and health systems will look at these market leaders and see their extreme focus on this nursing workforce and their investment in it, and they'll see that it's generating a competitive advantage for these thought-leading and market-leading health systems, like HCA and Intermountain Health. That HealthStream's solutions are a central part of helping them achieve that strategic focus. I want to remind everyone that if you're interested in a profitable, recurring revenue, healthcare technology company that expects to deliver growth, then, you know, maybe HealthStream is the right investment for you. If you're interested in a company whose core user base, the clinical healthcare workforce, is expanding faster than any other sector in the job market, then maybe HealthStream is the right investment for you.

And our capital expenditures were $32 2 million compared to $28 1 million last year, an increase of 14, 3%.

Ending the quarter with $57 million of cash and investments free cash flows and no debt, we are well positioned to deploy capital to improve shareholder value.

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

Atmos 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.

The third is returning a portion of profits back to shareholders in the form of cash dividends and our fourth priority is that our board may authorize share repurchase program.

Bobby Frist: If you like a company whose software serves as a system of record on behalf of healthcare customers, then maybe HealthStream is the right company for you to invest in. If you favor ecosystems over point solutions, then maybe HealthStream is the right investment for you. For all of these reasons, I believe HealthStream is positioned for another exciting year, helping the nation's top health systems find, develop, credential, schedule, onboard efficiently, and then retain this growing healthcare workforce. I think that maybe if those are traits that you value in an emerging healthcare technology company, then HealthStream is the right investment for you. I'll now put it back over to the operator so we can begin our question and answer.

In regard to M&A investments on October eight we announced the acquisition of versus 12.

The health care Technology company focused on payer credentialing.

The consideration paid for versus 12 consisted of $11 4 million in cash taking into effect customary purchase price adjustments and the point in a post closing working capital adjustments.

And up to an additional $4 million of cash consideration may be paid over a three year period following closing.

Contingent upon achievement of certain financial targets.

And then on December 15th we announced the acquisition of mission care collective health care workforce company, primarily focused on connecting nonmedical caregiver to caregivers and C N as with job placement and numerous job related programs.

Operator: Thank you. At this time, we will conduct a question-and-answer session. To ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while I compile the Q&A roster. Our first question comes from Matthew Hewitt from Craig-Hallum Capital Group. Please go ahead.

The consideration paid for mission care consisted of $24 6 million in cash and $4 million in our common stock.

Which also takes into affect customary purchase price adjustments and are subject to post closing working capital adjustment.

And up to an additional $10 million of cash consideration maybe paid over a three year period. Following closing, which is also contingent upon achievement of certain financial targets.

Matthew Hewitt: Good morning. Thanks for taking the questions. maybe first up, MissionCare, I think you noted that the inorganic contribution to revenues this year is roughly $13 million. I'm just curious what the MissionCare margins look like. Were those similar, or is there an opportunity there to maybe get those in line with the corporate average, and so we could see some incremental margin lift over the course of the year and into next year?

In respect to our dividend program yesterday, our board of directors declared a quarterly cash dividend of three and a half cent per share to be paid on March 20th to holders of record on March. The night. This represents a 12, 9% increase over the previous quarterly cash dividend.

Bobby Frist: That's a fair question, Matt, we don't report margins on a per product line basis. We talk about our blended gross margins, you could see a little bit of compression of that. I don't think that was due to the acquisitions, though. It's just due to how we're investing. Some of our cost of goods are going up on some of our application suites, which we're working on right now. In fact, we're conducting an RFP to consolidate some of our growing expense for our hosting services, where we keep our content and our highly engaged applications. We generally only comment on margins, not at a product level.

In November of 2025, our board of directors directors authorized a $10 million share repurchase program.

Which $5 million of share repurchases were made in the fourth quarter of 2025, and the remaining $5 million were made in January of 2026.

Also in May of 2025, the board authorized a $25 million share repurchase program that was completed in the third quarter of 2025.

To recap the full year, we achieved 304.

Bobby Frist: But look, I think all of our products are trying to push for higher margins in our legacy applications or our legacy business, I'll say, which includes, you know, the high cost of goods of royalties. In general, all these software businesses, I think, have the potential to pull our blended gross margin up over time. Even though right now we're experiencing a bit of a surge in costs and things like our hosting costs as we expand the utilization of our applications, which is great news, but we probably need to negotiate a little better on some of these core services, the cost of goods underneath them as well.

$1 million of revenue $18 3 million of net income.

$21 2 million and non-GAAP net income and adjusted EBITDA 71 8 million.

We made $30 million in share repurchases and paid $3 7 million in dividends to shareholders.

<unk> $39 1 million of capital on M&A.

And $32 2 million of capital expenditures.

We remain focused on consistently growing the business, both organically and inorganically, while remaining disciplined with our capital allocation strategy.

Matthew Hewitt: Got it. Maybe a second question. Thank you. Press release and on, you know, in your prepared remarks, talking quite a bit about AI and the impact that that can have on the market, how you're more sticky. I think during your prepared remarks, in particular, you talked about how some of your customers are actually pushing other records into the HealthStream platform. I'm just curious, one, is that, are there some M&A opportunities there, with those other platforms that are now being pulled into your platform?

I'll go ahead and wrap up my portion of the call. This morning by going over our financial outlook for 2026.

We expect the consolidated revenues will range between 323, and $330 million, which equates to a growth rate range of six 2% to eight points of one 5% and.

To begin the year, we estimate that the fourth or the first quarter revenue growth rate will be approximately 8%.

We expect quarterly revenues to improve sequentially across the year with higher growth rates in the first half of the year than in the second half, which is primarily due to the timing of the 2025 acquisition.

Matthew Hewitt: Two, does that further highlight the stickiness of HealthStream, meaning that AI isn't going to displace HealthStream or your platforms, but rather it's a contributing factor, and you should be able to not only weather any potential storm in the future, but, quite frankly, survive better because of it. Thank you.

We expect the inorganic revenues will be approximately $13 million for the year.

I expect that net income will range between 24.

<unk> and $22 8 million.

That adjusted EBITDA will range between 73 and $77 million at.

Bobby Frist: Sure. Well, what I try to do is just give these categories where, you know, I mean, the world is changing, jobs are changing, business models are gonna have to adapt, and there's definitely something real here to how AI changes everything. We first, we wouldn't say there's no threat that everything is in my view, at risk of change and impact. That said, on many key dimensions, you kind of have to think about how well a company is positioned in each of those types of positions. I think this idea of being a system of record is an important concept to differentiate kind of long-term winners from losers.

Capital expenditures will range between 31% and $34 million and we expect that our effective tax rate will be approximately 22%.

This guidance does not include the impact of any acquisitions or dispositions that we may complete during the year any gains or losses from changes in the fair value of norm or non marketable marketable equity investments.

Or contingent consideration or impairment of long lived assets.

In closing I'm excited about the opportunities we have in front of us and have confidence in our ability to deliver on another solid year of financial performance, while continuing to create value for our stakeholders.

Bobby Frist: It's really encouraging for us to see our API libraries that are part of our hStream platform, that our customers get access to. They're starting to use those APIs to push data from other third-party providers that's relevant to the system of record into our core datasets, which shows, again, it kind of emphasizes the difference between being a system of record and not being a system of record, being a point solution whose data is sucked into other systems of record.

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

Yeah.

Thanks Scotty.

Well, let's see let's pick up here with the business update.

Last third year, so I'll start off as I, usually do with some some core business updates that cover our learning credentialing scheduling application suites.

And then we'll talk about the newest career network Mancini jobs. So let's start with the learning product family, which includes kind of a subset of what we call. Our competency suite. Many customers are increasingly take advantage of the opportunity to purchase a bundle of several of our most popular workforce applications and content libraries, which we call the competency suite customer purchases.

Bobby Frist: In several cases, like in our learning network, we see growing use of those import APIs, which means that they're saying, Look, we would rather have our data on the learning journey about our workforce consolidated at the hStream platform level, than spread across multiple systems or multiple point solutions. It's just one indicator of a relative strength of our company as we enter this ever-changing world. It's changing at a really rapid pace. We can't say that we're gonna conquer everything, but, you know, AI is a fundamental component of our 10 components of our hStream platform, so it's well in development. We are huge utilizers of the emerging AI tools ourselves and how we build our products more efficiently.

Is the.

The customers purchase a subscription.

<unk> suite for all of their employees, which comes and unlimited use format Keith.

T cells are the competency suite during the fourth quarter include some of the nation's top health Coordinations like Intermountain Health Northside Hospital in Dartmouth itself.

We think about our Credentialing area, where our flagship product credential stream also finished the year strong in terms of new sales expansion sales and importantly conversions from legacy products revenues from sales of credential stream in the fourth quarter were up approximately 21% over the same quarter last year and we saw growth of approximately <unk>.

Bobby Frist: Then on this one dimension, and we covered others, on this one dimension of whether your software is a system of record or a point solution, we tend to lean towards being the system of record. Which, by the way, is also true, for example, in our credentialing system, I think we made that point in the script as well. Although I'm not exactly sure where I got cut off on the script, so apologize for that. It looks like my device timed out and cut me out of the conference, and I was waxing poetic about these ideas and didn't catch that until the end. Anyway, I think thanks for the question.

23% year over year, our largest sale in the quarter was a result.

Of our winning a highly competitive RFP. Our next largest cell came from referrals from our partner <unk> and represented a competitive take out because the customer loves our comprehensive solution API integration capabilities from our platform and the use of cutting edge data infrastructure that allows them to get greater insights faster things that our previous system could not.

Deliver additionally.

Additionally, we're pleased that an existing health system customer decided to expand.

Bobby Frist: On that one dimension, I just would say companies should, when you evaluate companies for their viability and strength as they enter this change, that being a system of record is one characteristic of a long-term survivor and grower, instead of one under assault.

Their credential stream.

Access.

Yeah.

As they standardized on the on the credential stream across all of their facilities and also invested in our case review and performance metrics products.

Constantine Davies: That's great. Thank you.

The quarter for Progressive stream was not only about sales success as a result of infrastructure enhancements. We made earlier in the year credentials team delivered excellent system performance and high reliability, both of which were recognized in lauded by our customers.

Operator: Thank you. Our next question comes from Constantine Davies from Citizens. Please go ahead.

Constantine Davies: Thanks. Maybe Bobby, just a question on career network, that strategy. With something like myClinical Exchange that you've owned now for five years or so, just give me a sense for what interoperability features are resonating most with customers and prospects in terms of integration between that legacy type of solution and the rest of the platform?

We're also pleased that some of our large legacy credentialing customers completed their conversion from Echo Credentialing and M. S. O. W. For example, you PMC health system, a major health system, and Sutter health being notable among those that.

Successfully transitioned to our credential stream application.

Through credential stream, we're committed to helping those customers speed time to revenue for the physicians, they onboard which will improve their financial performance and ability to provide quality care to.

Bobby Frist: Yeah, sure. First of all, it's not a legacy application. It's a growing, the business has tripled since we bought it in terms of just absolute revenue. I think it was around $2 million when we bought it, pushing over $6 or $7 million now. The myClinicalExchange has grown its revenue contribution and margins to the company, so it's an exciting growth area for the company. The second is exactly what you pointed out is, you know, what is the idea of the link between this career network for students in this case, and say, HR at a health system using, say, our learning record?

To conclude my update on our Credentialing business I will say that 2025 saw total revenue contribution from credential stream edge out total revenue contribution from all of our legacy Credentialing products combined as customers continue to see the value of credential stream. We expect this trend to continue and accelerate in 2026.

Now, let's move to scheduling where our core products shipped Wizard continues to deliver strong revenue growth with fourth quarter revenues from sales up approximately 31% versus the fourth quarter of the previous year and up 24% year over year. It continues to be our top performing product and our scheduling application suite in 2025 revenue contribution.

Bobby Frist: One little example of interoperability, which is happening today, we found when we surveyed those students that very few of them, less than 25% or 30%, felt that the hospitals where they were doing their rotations were properly addressing their career opportunities. Saying, Hey, you know, we see you're doing your rotation at our hospital. We'd love for you to take a full-time job with us when you graduate. In other words, there's this huge disconnect between the hospital operations and the clinical student doing a rotation at that hospital. What we did was we built a little widget that goes on a product called MyTeam, where all the managers are in our network.

Shift Wizard was greater than revenue contribution from all legacy scheduling products combine this too is a trend we expect to continue in 2026.

<unk> is a good example of how vertically focused health care specific applications benefit customers in ways that generic horizontally focused solutions simply cannot.

In fact, our two largest sales last quarter were takeouts of a major provider in both the horizontal provider in both customer selected ship measure because of the health care specific advantages that it offers.

Bobby Frist: We have this application that's broadly used by managers, and we're able to tell them that today, 3 students were doing rotations on the second floor of their hospital. They'll be there the next 5 hours, and here's their names and their backgrounds. Go say hi to them. We're able to directly connect these clinical rotating students, who's kind of there as a previously, almost a side thought, hospitals kind of put that under their operations, but now we've turned it into a recruiting opportunity. We're giving the information that Bobby Frist is on the floor as a doing their clinical rotation today. Maybe go say hi to them.

For example, both customers and have the ability to gain greater visibility into and control over managing and engaging their clinical workforce, there's something that differentiated shift wizard over and above even the best horizontal solutions.

Scheduling and staffing clinicians is simply different in scheduling our labor pool for retail or factory chefs increase.

Increasingly the market is realizing this fact in choosing ship lizard as a result.

On our last call introducing exciting new area of focus for the company our emerging career networks like nurse grid for nurses and my clinical exchange for students remember career networks provide value directly to the individuals who deliver care.

Bobby Frist: We found that large health systems are attributing that simple flow of information across the transom, from the student who enrolled in that rotation, using the myClinicalExchange software, to their arrival on the hospital, where then kind of the resume pops up in the application, MyTeam, on a little widget and says, Hey, there are three students today at the hospital. Go say hi to them. It'll improve our odds of hiring them when they actually graduate and become a professional. That's an example of using the data as a tool, and it's just a simple data flow, but that reminder, we see health systems taking advantage of that function, feeling they have a competitive advantage on recruiting those students when they graduate.

Contrast that with our enterprise application suites, which provides value to health care organizations.

Also made an important point on our last call that bears reiterating to really address the complex issues of today's health care workforce. We think that you have to have solutions for both individuals and for organizations.

And here's a more important part it's really changed the game you have to connect both of them together through a common platform and that's exactly what we're beginning to do at <unk>.

On December 15th of last year, we acquired mission care collective, whose primary offering is my CNA jobs Dot com, which we're introducing as our newest career network. My CNA jobs helps recruit and retain a large set of providers that includes home health aides homecare providers in Cna's, which are also incur.

Bobby Frist: That's one example of the workflows that expand and become more ecology-like. Like, there you're crossing from the SaaS world through the platform to the student enrollment world on myClinical Exchange. I hope that one little example gives you an insight to how we're thinking, but it's just a manifestation of the data across this platform transom, which gives a competitive advantage to recruiting that student in the future.

Credibly in high demand.

And we also expect for example in the scene as the demand for them to increase particularly in the post and pre acute markets.

CNA jobs written it originates data directly from individual caregivers enrich that data through proprietary technology, and then utilize that data to health care, those caregivers with health care organizations that want or need to hire them, both the individual and the organization benefit as a result.

Constantine Davies: Well, that's great color. Just shifting gears a little bit to legacy product headwinds. I think you said legacy revenue was down 27% from the prior year in the quarter. How much legacy revenue is still left on the platform? I guess, at what point do you start considering a sunsetting strategy is something that's viable? Like, how low does revenue have to get for that to be in focus for you?

As we get the individuals' using my CNA jobs issued and eight stream I E. They are better able to help manage their data and longitudinal record across across both applications and employers.

Want to close by giving you. An example of how our customers are increasingly turning to health stream as they manage the entirety of the clinicians journey from nursing school to retirement and everything in between.

Bobby Frist: Yeah, when we look at classifying legacy revenues that are true legacy revenues, meaning they're on applications that we're no longer selling. They're maintained, and we allow customers to renew on them, they, you know, but we don't, we don't carry a quote on them. We don't sell them. They're effectively, they maintain that legacy status. They're supported, they're beloved applications. We do our best to keep customers happy on them until they decide to transition or, you know, our worst-case scenario, they leave for another solution in the market. That business, we were able to report the totality of the legacy portfolio in credentialing has been surpassed by the go-forward CredentialStream application.

It's my view that many of the smartest health systems and I'll name, a few like HCA and Intermountain health are putting nurses at a center of their workforce strategy.

In some cases these health systems are doing things like launching their own nursing schools. That's how much demand. There is for these nurses and how much they realize the need to develop their competence and upskill them.

They are actually getting into the nursing schools themselves.

They're also purchasing our competency suite at scale they are engaging with our career network. So they can officially recruit.

Be efficient in the recruitment the development in that transitional onboarding that they do between the career network and to full time employment.

Bobby Frist: At least in the credentialing space, if you take the total of all of our software tools, and the legacy revenues are combined across all the legacy applications, which there are two or three, they're now less than the revenue from CredentialStream. That is also true in our scheduling business, where all the legacy businesses combined are less than the go-forward growing ShiftWizard revenue stream. We now have the majority of our work and the, and growth is now on the go-forward application in both of those circumstances. Overall, and this is a little tricky to provide this, but I'm gonna go ahead and do it. Overall, our legacy revenues across the company. And remember, these are good revenues. Legacy doesn't mean we don't want them.

And they use our software then to recruit retain and develop and onboard that professional staff.

I believe that other hospitals and health systems will look at these market leaders and see their extreme focus on this nursing workforce and their investment in it and they'll see that it's generating a competitive advantage for these thought leading and market leading health systems.

Like HCA and inner mountain health and the <unk>.

<unk> solutions are a central part of helping them achieve that strategic focus.

I want to remind everyone that if you're interested in a profitable recurring revenue health care technology company that expect to deliver growth then maybe health stream is the right investment for you if you're interested in a company, whose core user base clinical health care workforce.

<unk> is expanding faster than any other sector in the job market. Then maybe health stream is the right investment for you. If you like a common use software serves as a system of record on behalf of health care customers than maybe how stream is the right company for you to invest in.

Bobby Frist: It just means that we're not selling any more of those products, and there's a good probability that those renew year to year and year. This revenue stream could continue for a long time until it's either transitioned or lost. But approximately, little less, around about 10% of our total revenues are in that bucket across the company. We've now kind of scoped the size of that. Remember, it's important to remember that that, you know, approximately, we'll just say a little bit over $30 million, is desired revenue. Because we're calling it legacy doesn't mean it's not desired. It has a margin, and in most cases, it has an EBITDA contribution. It's just not growing anymore, and we're waiting to encourage those customers to transition.

If you favour ecosystems over point solutions, then maybe health stream is the right investment for you.

All of these reasons I believe <unk> position for another exciting year, helping the nation's top health systems.

<unk> develop credential schedule onboard efficiently and then retain this growing health care workforce.

I think that maybe if those are trades that you value in an emerging health care technology company than health stream is the right investment for you I will now put it back over the operator. So we can begin our question and answer.

Bobby Frist: Excitingly, in this quarter, we were able to talk about two very large credentialing customers that made that move, and we believe they're happy customers on CredentialStream, for example. We identified Sutter and I believe UPMC were successful migrations from that legacy category to, in that case, CredentialStream. Now we've kind of quantified it, but it's a tricky thing to quantify because, again, it doesn't mean that revenue is going away. It just means those products, we're not selling them anymore. Then you brought up the final question is, well, when do you start to force the decision? We call that a sunset product.

Thank you at this time, we will conduct a question and answer session to ask a question you will need to press star one on one of your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again please.

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

Our first question comes from Matt Hewitt from Craig Hallum Capital Group. Please go ahead.

Good morning, Thanks for taking the questions maybe first up.

<unk> I think you noted that the inorganic contribution to revenues. This year is roughly $13 million I'm just curious what the mission care margins looked like or where those similar or is there an opportunity there to maybe get those in line with the corporate average and so we could see some incremental margin lift over the course of the year and into next year.

Bobby Frist: In that bucket of revenue that's a little over $30 million, we have not told those customers, and we have not picked a date to officially change it from legacy to a sunset product. I would say over the next few years, we'll evaluate that, and certain of those products will achieve what I'll call sunset status. At that point, customers have been notified of an end date when that technology will not be supported. They need to start to plan and make a decision to move off of that legacy application. Again, we haven't done that yet, except in a few cases. That's something we'll consider as the overall bucket of legacy becomes smaller and smaller.

It's a fair question, Matt, but we don't report margins on a per product line basis, we talk about our blended gross margins and you could see a little bit of compression of that I don't think that was due to the acquisitions, though.

Due to how we're investing some of our cost of goods are going up on some of our application suites, which we're working on right now backward conducting a.

An RFP to consolidate some of our growing expense of our hosting services, where we keep our content and our highly engaged application. So we generally don't comment on margins not at a product level.

Bobby Frist: By the way, it's getting much more compelling to move to the newer applications every day for reasons like we talked about, that little widget, for example, that makes one application even more powerful. You know, if you're on a legacy product, you're not getting the advances of the ecosystem that we're building, that we mentioned in the earlier case. I hope that helps kind of quantify it overall, scale it and scope it, and tell our ambition with it. Again, that bucket of revenue is a generally a happy set of customers that we're trying to maintain. We do product releases. We and the customers there are in a good spot, but we want them to be in a better spot.

But look I think all of our products are trying to push for higher margins than our legacy applications or our legacy business I'll say, which include the high cost of goods of royalties and so in general all of the software businesses I think have the potential to pull our blended gross margin up over time, even though right now we're experiencing a bit of a surge in costs and things like.

Our hosting costs as we expand the utilization of our applications, which is great news, but we probably need to negotiate a little better on these some of these core services the cost of goods underneath them as well.

Bobby Frist: We want them to migrate or transition or convert to the go-forward applications that are all plugged into the platform.

Got it and then maybe a second question.

Constantine Davies: Thanks, Bobby. Appreciate it.

Our press release and in your prepared remarks talking quite a bit about AI and the impact that that can have on the market how youre more sticky and I think during your prepared remarks, and particularly you talked about how some of your customers are actually pushing other records into the health stream platform.

Operator: Thank you. Our next question comes from Ryan Daniels from William Blair. Please go ahead.

Ryan Daniels: Yeah, good morning. Thanks for taking the question. Bobby, thanks for all the conversation on AI. Really appreciate that. A question for you in regards to that and a bit of a follow-up from an earlier one. You mentioned data origination is kind of a key competitive advantage 'cause you can create that proprietary data. I'm curious if that changes your capital deployment mentality at all, whether it's either via internal product development or how you look at the M&A markets to kind of go forward and create more of that proprietary data such that you can withstand any future AI headwinds.

And I'm just curious one is that there are.

Some M&A opportunities there with those other platforms that are now being pulled into your platform and two does that further highlight the stickiness of <unk>, meaning.

AI isn't going to displace health stream or your platform, but rather it is a contributing factor and you should be able to not only weather any potential storm in the future, but quite frankly, you survive better because of it. Thank you.

Bobby Frist: Oh, it certainly does. Super exciting. As I mentioned, AI is one of the 10 core elements of our platform that we're developing. There's capital already going into that to make it a fundamental kind of capability set, a framework for deploying AI into our product sets. Several exciting products, enhancements, extensions, where we're deploying capital, are underway now. We'll have to wait to reveal some of those directly, but I couldn't be more excited about some of the advances we're seeing. Specifically, as it relates to data, we really are focused on trying to identify, catalog, manage,... Investments are increasing in the area of kind of data management, data classification, data rights management.

What I tried to do is just give these categories, where I mean.

The world is changing jobs or changing business models are going to have to adapt and theres definitely something real here too how AI changes everything and so we first we wouldnt say there is no threat to any everything is.

I view at risk of change and impact that said on many key dimensions.

You kind of have to think about how well our company is positioned in each of those types of positions and I think this idea of being a system of record is an important concept to differentiate kind of long term winners from losers.

Ryan Daniels: Mm-hmm.

Bobby Frist: Across all of our network. Yes, capital is flowing into that area. Yes, organizing our data. For example, one of our core tenets of our platform is to get all of our data from all of our 27 applications updated nightly into Snowflake. You know, getting that organized and then, of course, getting all that data relevant to each other through the hStream ID, another core tenet of the platform, is critical. Yes, capital is flowing to this area. Yes, we're trying to distinguish which data is kind of aggregated data, which data is proprietary data, which data can lend competitive advantage in the long run, which data might train AI, for example. I think, in all cases, there's an increased emphasis and awareness of that, from our board to our operators.

And so it's really encouraging for us to see our API libraries that are part of our H stream platform that our customers get access to they're starting to use those apis to push data from other third party providers thats relevant to the system of record into our core datasets.

Which shows again it kind of emphasizes the difference between being a system of record and not being a system of record being a point solution, whose data is sucked into other systems of record and so in several cases like in our learning network, we see growing use of those imports.

Which means that they're saying look we would rather have our data on the learning journey about our workforce consolidated at the health stream platform level.

Ryan Daniels: Great. Thank you for that color. Then maybe another one just on the AI marketplace. Again, very rational conversation of why you're relatively well-positioned. I'm curious, if you talk to your sales team, are they seeing any hesitation in the market, either with, you know, longer-term contracts, with the elevated pricing each year, the inflationary pricing, or any pause in buying decisions as the market CTOs kind of look at all the potential AI solutions out there? Is it generally still business as usual on your sales cadence? Thanks.

Then spread across multiple systems or multiple point solutions and so it's just one indicator of a relative strength of our company as we enter this ever changing world is changing at a really rapid pace and so we can't say that we're going to conquer everything but.

<unk> is a fundamental component of our 10 components of our H stream platform. So as well in development. We are huge utilizes of the emerging AI tools ourselves and how we build our products more efficiently.

Bobby Frist: Well, let's see. I would characterize our Q4 as exceptionally strong. In some areas it was just fantastic. Just remember, there are product sets in there that are just incredibly unique as they blend technology, content, data analysis together to solve a real problem. For example, our partnership with the American Red Cross is thriving. We think we have a really great partner there and a great product set. It's an interesting solution set that meets essentially a compliance-oriented need. You know, there are several of our products that are doing really well that they're a complicated blend of SaaS technology, data and benchmarking, reporting capabilities. Physical, in this case, the internet connects to these physical mannequins that evaluate the skill, and then branded, high-quality, scientifically valid content.

And and then on this one dimension that we covered others, but on this one dimension of whether your software is a system of record or a point solution, we tend to lean towards being a system of record which by the way is also true for example in our Credentialing system. I think we made that point in the script as well, although I'm not exactly sure where I got cut off on the script. So upon.

After that Mike It looks like my device timed out and coming out of the conference and I was waxing poetic about these ideas and didn't catch that until the end but.

Anyway, I think thanks for the question on that one dimension I just would say companies should when you evaluate companies for their viability and strength as they enter this change.

That being a system of record is one characteristic of a long term survivor and grower.

Instead of a.

One under assault.

Bobby Frist: In, in that case, we're seeing, you know, that product growing very nicely and well positioned for continued growth. In Q4, we saw wins in each of these areas, including things like our American Red Cross Resuscitation Suite. We also saw some system wins on our Competency Suite at scale. Some of our largest deals, I guess I'd say in our history, were closed in Q4. You know, I think there's hesitancy in thinking through all this, CIOs and CTOs. We're doing our best to educate the market about the emergence of our platform this year and make us more relevant as a consolidator of services, not just a point solution here and a point solution there.

That's great. Thank you.

Thank you.

Our next question comes from constant.

Davies from citizens. Please go ahead.

Thanks, maybe Bob just a question on career network that strategy with with something like my clinical exchange that you've owned now for five years or so.

Just give me a sense for what interoperability features are resonating most with customers and prospects in terms of integration between.

That legacy type of solution and the rest of the platform yes.

Yeah sure. So first of all it's not a legacy application it is.

Growing the business has tripled since we bought it in terms of just absolute revenue I think is around two men, we bought it's pushing over six or $7 million now and so the.

Bobby Frist: I think there's more and more potential every quarter for us to position as a core consolidation platform. Yes, it has SaaS capabilities, and yes, those can be more rapidly built by competitors. I think it is this interesting dynamic that we talked about, of more ecology-like behavior than the point solution or SaaS workflow behavior that we're seeing. I hope that gives a little bit more color on it. You know, overall, I believe there's a tremendous amount of change coming to all businesses, to almost all workforces. On these four or five dimensions we talked about today, I think we're relatively well positioned to learn, iterate, provide value, and capitalize on the value people expect to get from AI as it advances.

The.

The my clinical exchange has grown its revenue contribution and margins of the company. So its exciting growth area for the company. The second is exactly what you pointed out is what is the idea of the link between this career network.

For students in this case and say HR at health system, using say are running record and so one little example of interoperability which is happening today.

We found when we surveyed those students that very few of them.

Less than 25, or 30% felt that the hospitals, where they were doing the rotations were properly.

Addressing their current opportunities and saying hey.

Ryan Daniels: Yeah, absolutely. Thank you so much.

We see Youre doing your rotation or hospital, we'd love for you to take a full time job with us when you graduate and so in other words is a huge disconnect between the hospital operations and the clinical students doing a rotation at that hospital.

Operator: Thank you. Our next question comes from John Penney from Canaccord Genuity. Please go ahead.

Richard Close: Yes, this is Richard Close. Just a quick question, maybe housekeeping, Scotty, to begin with. We jumped on late and just curious whether you gave the acquisition contribution versus 12 in MissionCare for Q4. Just to clarify, you said $13 million from the acquisitions in the 2026 guidance?

And so what we did was we built a little widget that goes on on a product called my team where all the managers are in our network and so we have this application. It's broadly used by managers and we were able to tell them that today three students were doing rotations on the second floor of the hospital and they'll be there in the next five hours and use their name.

And her background go say hi to them and so we're able to directly connect these clinical rotating students. It was kind of there is a previously almost aside thought.

Scott A. Roberts: Yeah. The, I guess, the Q4 impact for both acquisitions combined was $1.6 million. You're correct on the full year guide was $13 million.

Scott Roberts: Yeah. The, I guess, the Q4 impact for both acquisitions combined was $1.6 million. You're correct on the full year guide was $13 million.

Hospitals kind of put that under their operations, but now we've turned it into recruiting opportunity, we're giving them information that Bobby Frist is on the floor.

Richard Close: Okay, thanks for that. Bobby, maybe just, you know, on the AI front, you know, continue to go down that rabbit hole. I'm just curious if you can provide some examples in terms of, you know, how you guys are, you know, integrating GenAI, agentic AI, and into various offerings that you have? Again, apologize, we got on late, if we missed that.

Doing their clinical rotation today, maybe go say hi to them and we found that large health systems are attributing that simple flow of information across the transom from the from the students who enrolled in that rotation.

Using the my clinical seeing software.

To their arrival on the hospital, where then kind of the resume pops up in the application of my team a little widget and says Hey, there are three students today at the hospital go say hi to them it'll prove our odds of hiring on them when they actually gratulate and become a professional and so that's an example of using the data as a tool and it's just a simple data flow.

Bobby Frist: I think that roadmap will unfold in more detail over the course of the year. Needless to say, every one of our products has an AI roadmap. Really interesting and fascinating projects underway to take advantage of the benefits that we would expect from AI. The workflows are being, you know, automated. We have an agentic framework around some of our learning capabilities that we're working on. We have this concept of the quantification of self, you know, using a vector analysis for some of the individual profiles in our system, making it kind of a tokenizable unit. There's just so many interesting things happening. I think we'll let that roadmap unfold over the course of the year.

But that that reminder, we see health system, taking advantage of that function.

They have a competitive advantage on recruiting those students when they graduate. That's one example of the workflows that expand and become more ecology like like there you are crossing from SaaS world through the platform to the student enrollment World My clinical exchange. So I hope that that one Little example gives you an insight in how we're thinking but it's just a manifestation of.

The data across this platform transom, which gives a competitive advantage to recruiting that student in the future.

That's great color.

Just shifting gears a little bit too.

Legacy product headwinds I think you said legacy revenue was down two.

Bobby Frist: You know, every product manager is required to have an AI framework and an AI roadmap. All of our developers are now using AI. You've probably followed this in the last 30 days, there's been significant enhancements in the tool sets people are using to build applications. Which just gets us more excited because we can get to more of our vision faster, if we use these tools properly. Like everybody, we're learning to use the tools. So there's the internal application of them, there's the external extension of them. I think what I can say today is that of the 10 elements that we use to define the hStream platform, AI is one of the 10, and it has been for some time now.

27% from the prior year in the quarter, how much how much legacy revenue is still left on the platform and I guess.

At what point do you start.

Considering the sunsetting strategy is something that's viable like how low does revenue have to get for that to be in focus for you.

Yeah, when we look at classifying legacy revenues that are true legacy revenues, meaning they're on applications that we're no longer selling and they're maintained and we allow a customer to renew on them.

And they they.

Bobby Frist: We're also not new to the idea of AI and how it's going to impact workflows and applications. I don't know, I just have to give a generic answer now that it's in our roadmaps, it's part of our, kind of our DNA, it's part of how we're thinking, and we're doing our best to learn and stay on the curve with everyone else. We've talked about, of course, these categories of impacts, kind of are we better positioned or less better positioned to take advantage of the changes coming?

But we don't we don't care quote on them, we don't sell them and so they're effectively.

They maintain that legacy status, but theyre supported their beloved applications, we do our best to keep customers happy on them until they decide the transition or.

Our worst case scenario they leave for another solution in the market and so that business, we were able to report.

The totality of the legacy portfolio and Credentialing.

Richard Close: Okay. Then, you know, maybe just to expand on the AI front, just, you know, I'm sure you're out in the market talking with various, you know, health system executives. I'm just curious what their, you know, their conversations with you is gleaning with respect to, you know, separate AI budgets versus looking for AI in, you know, you said the systems of record and whatnot. I'm just curious if you have any, you know, experiences that you can share on the conversations you're having with clients and potential clients.

It has been surpassed by the go forward credential stream applications. So at least in the Credentialing space. If you take the total of all of our software tools and the legacy revenues are.

Combined across all the legacy applications, which they are two or three.

They are now less than than the revenue from credential stream and that is also true in our scheduling business, where all the legacy businesses combined are less than the go for growing.

Ship lizard revenue stream and so we now have the majority of our work and the growth is now on the go forward application in both of those circumstances.

Overall.

And this is a little tricky to provide this but I'm going to go ahead and do it.

Overall, our legacy revenues across the company and remember.

Bobby Frist: Yeah, there's a lot of dimension to that. One is, the CIOs of the country, these health systems are tired of having 400 point solutions. In that regard, if you're just a point solution and you're not a platform, I think there is a definite, high degree of interest in moving to fewer platforms that work together than, say, as many as 400 point solutions. This is true, if you ask a CIO of a health system, you know, their software profile, I think they'll tell you they have 2 or 3 platform choices. EHR would be one choice where they pick between one of the 3 big ones, ERP would be another, and then they have 500 point solutions.

These are good revenues. These are not legacy doesn't mean, we don't want them. It just means that we're not selling any more of those products and there's a good probability that those renew year to year on year. So this revenue stream could continue for a long time until it's either transition or lost.

But approximately little last round about 10% of our total revenues are in that bucket across the company. So we've now kind of scope the size of that and remember it's important to remember that that approximately we will just say a little bit over $30 million is.

Is desired revenue because we're calling on legacy doesn't mean, it's not desired it hasnt margin.

Most cases is the EBITDA contribution, it's just not growing anymore, and we're waiting to encourage those customer to transition and excitingly. In this quarter, we were able to talk about two very large credentialing customers that made that move and we believe they are happy customers on credential stream for example.

Bobby Frist: The first point of dialogue with, say, the executive suite, particularly the CIOs, is, Look, we need to make sense of these 500 point solutions. I think that's exactly what HealthStream is trying to do with our hStream platform, is take 3 or 4 of them that are core, that are point, that are point solutions, like scheduling, credentialing, and learning, and make them interoperable. We're bringing this other dimension, which is the second point, is, you know, which problems are you solving for me? If I have a nursing shortage, how are you helping me more efficiently onboard these nurses? How are you helping me move costs from those nurses from when they're employed to when they're pre-employed?

We identified Sutter and I believe you PMC, we're successful migrations from that legacy category. Two two in that case credential stream. So now we've kind of quantified it but it is a tricky thing to quantify because again it doesn't mean that revenue is going away. It just means those products, we're not selling them.

Bobby Frist: I think it's our theory of connecting this through the platform to these career networks that lets us have a business dialogue, not an AI dialogue, but a business dialogue about shortening the onboarding cycles and improving the value proposition of moving the cost from the health system, say, to the student period, or getting the ready to work, this ready to work concept. We're able to talk about business value propositions that are kind of universally the problems they're trying to solve, like with their labor pool size and their recruiting of nurses. Our dialogue isn't so much about just, whether your, you know, your budget of AI is going to shift.

And then you brought the final question is when do you start to force the decision and we call that a sunset product.

And in that bucket of revenue that little over $30 million, we have not told those customers and we've not picked a date officially changed it from legacy to a sunset product and I would say over the next few years, we'll evaluate that and certain of those products will achieve what I'll call sunset status and at that point customers have been notified of an end date.

When those that technology will not be supported so they need to start to plan and make a decision to move off of that legacy application again, we havent done that yet except in a few cases and that's something we'll consider as the overall bucket of legacy becomes smaller and smaller and by the way is getting much more compelling to move to the new applications every day for a reason.

Bobby Frist: It's about how you're going to consolidate point solutions and about whether the vendor standing in front of you, in this case, HealthStream, can help solve a value proposition and do something more effectively. I tend to lean into those. You know, we can help onboard physicians more efficiently. We can help recruit nurses and find the future high-quality employees, the students that are going to be the best in your environment and help you match them. Again, we just stick to the fundamentals of providing value to our customers on that journey. Then we can show how AI will facilitate those workflows.

Like we talked about that little widget for example, it makes one application even more powerful if you're on a legacy product youre not getting the advances of the ecosystem that we're building.

Mentioned in the earlier case, so I hope that helps kind of quantify overall scale and scope it until our ambition with it again that bucket of revenue is a is a generally a happy set of customers that we're trying to maintain we do product releases, we the customers they're in a good spot, but we want them to be in a better spot we want them to migrate or.

Richard Close: Would you characterize the environment as not necessarily clients or potential clients being distracted by AI, that they're still focused on these, you know, key areas of business improvement?

Transition or convert to the go forward applications that are all plugged into the platform.

Okay.

Thanks, Bob I appreciate it.

Thank you.

Bobby Frist: I think the smart ones are. I don't know how to say it the other way. I mean, yeah, I mean, obviously, even just through this call, everyone is trying to understand the implications and impact of AI. HealthStream is in that group, all the CIOs we talk to are in that group. Yeah, there is a lot of discussion on it. At the end of the day, I think the leading health systems are focused on the fundamentals of providing better patient care. Then they come back to the fundamental questions like, Well, what is our cost of finding and developing a talented workforce and retaining them at the expense of our competitors?

Our next question comes from Ryan Daniels from William Blair. Please go ahead.

Yes. Good morning, Thanks for taking the question and Bobby Thanks for all the conversation on AI really appreciate that.

Question for you in regards to that in a bit of a follow up from an earlier. One you mentioned data origination is kind of a key competitive advantage because you can create that proprietary data and I'm curious if that changes your capital deployment mentality at all whether it's either via internal product development or how you look at the M&A markets to kind of go forward and create.

Of that proprietary data such that you can withstand any future AI headwinds.

Bobby Frist: How do we have a better, higher quality workforce?" We keep trying to steer the conversation there and then show how all of the tools of HealthStream, including our unique dimensions, like our career networks, bring value to that equation. You know, just doubling down on the fundamental values that we provide is what we need to do. It doesn't mean that the dialogue isn't all-consuming about the future, the impact of AI. You know, like I said, healthcare is a local business. It's a service provision business. It's a hands-on, nurses and doctors on patients business, as is surgery. Here, I think, AI is kind of an augmentation process instead of an automation or replacement.

Oh, it's certainly does super exciting as I mentioned AI is one of the 10 core elements of our platform that we're developing and so theres capital already going into that make it a fundamental kind of capability set a framework for deploying AI into our product sets and several exciting products.

Extensions, where we're deploying capital are underway now and well have to wait to reveal some of those are directly but.

I couldnt be more excited about some of the events we're seeing.

As it relates to data.

We're really our focus on trying to <unk>.

Bobby Frist: There are plenty of back-office functions and efficiencies that can be gained with AI, and there are certain roles that we expect fewer of them. At its core, as I mentioned earlier, the nursing workforce is expected to grow, and I think they're gonna grow and be more human through the use of AI. Those are the things that we talk to our customers about.

Identify catalog manage.

And so investments are increasing in the area of kind of data management data classification and data rights management.

Across all of our network and so yes capital is flowing into that area, yes, organizing our data for example, one of our core tenants of our platform is to get all of our data from all of our 27 applications updated nightly into snowflake and getting that organized and then of course getting all that done data relevant to each other.

Matthew Hewitt: All right. Thank you.

Richard Close: All right. Thank you.

Operator: Thank you. Our next question comes from Vincent Colicchio from Barrington Research. Please go ahead.

The extreme idea another core tenet of the platform is critical so yes capital is flowing into this area. Yes. We are trying to distinguish which data is kind of aggregated data, which data is proprietary data, which data command competitive advantage in long run, which data Mike train AI for example.

Vincent Colicchio: Yeah, most of mine have been asked, Bobby. Just, perhaps if you could just talk about the price accelerators. It was nice to see the contribution for the year. Has this mechanism played out as expected? What are your thoughts there?

And in all cases, there is an increased emphasis in awareness of that from our board to our operators.

Bobby Frist: Vince, it's so good that it took us about 3 years to put escalators in place. We know it was kind of an industry norm. We had always focused on our negotiation around volume, commitment, and term, we didn't have these built-in escalators. It took us a while to design the contractual infrastructure, the deployment, train the sales organizations. Now it is the norm, and it is the norm across software to include, you know, inflationary level price escalators in contracts. It helps everybody, strangely. It helps the customers because if you're on a contract for 4 or 5 years with those small escalators, you don't get hit with a big price increase necessarily when you renew. The escalators are kind of a smoothing function for budget planning. They're negotiated but generally accepted.

Great. Thank you for that color and then maybe another one just on the AI marketplace again, very rational conversation of why you're relatively well positioned but I am curious if you talk to your sales team or are they seeing any hesitation in the market either with.

Longer term contracts with the elevated pricing each year, the inflationary pricing or any pause in buying decisions as the market CTO is kind of look at all the potential AI solutions out there or is it generally still business as usual on your sales cadence.

Well lets see I would characterize our fourth quarter is exceptionally strong in some areas. It was it was just fantastic you should remember.

Their product sets in there that are just incredibly unique they blend technology content data analysis together to solve a real problem. For example, our partnership with the American Red Cross is thriving.

Bobby Frist: I would say that every renewal and every contract now in all three of our major application suites include escalators in the contract. Yes, we were excited to see that it started to impact us financially. It is a slow roll because, you know, if we do 3 to 5-year contracts, that means, let's say on average, you know, every 4 years, a contract, every 3 and a half years, a contract comes up for renewal. Then the escalator takes effect on the second year of the renewal, right? Because it comes in, you know, year 1 and then year 2. As we go through renewals and as we include escalators, it's having kind of an impact, but it's a slow movement through these thousands of customers.

We think we have a really great partner, there and a great product set it's an interesting solution set that meets a essentially a compliance oriented need.

And there are several of our products that are doing really well that there are a complicated blend of SaaS technology data and benchmarking reporting capabilities physical in this case it.

Internet connects to these physical mannequins that evaluate the skill.

And then branded high quality scientifically valid content and so.

Bobby Frist: It's underway, and every renewal includes an escalator.

In that case, we are seeing that product growing very nicely and well positioned for continued growth so in the fourth quarter.

Vincent Colicchio: Thanks, Bobby.

Operator: Thank you. This concludes the question-and-answer session. I will now turn it back over to Robert Frist for closing remarks.

We saw wins in each of these areas, including things like our American Red Cross resuscitation suite.

Bobby Frist: Thank you, everyone. I apologize for, I was kind of head down and thinking about what I wanted to say, I was telling this big story about AI, and I realized I looked up, and my iPad had timed out. I think Mollie Condra stepped in. Molly, I know you did a great job. I hope we got all the questions done in Q&A. Thanks for listening. I look forward to reporting the next report. I'm proud of the contribution of 1,100 HealthStreamers in achieving these results. We've got another tough year in front of us with full of opportunity and challenges, and we're ready to take it on. Thanks, all. We'll see you on the next earnings call.

But we also saw some some system wins on our comp C suite at scale.

Some of our largest deals.

I guess I'd say in our history were closed in the fourth quarter.

So I think there is hesitancy and thinking through all of this <unk>, we're doing our best to educate the market about the emergence of our platform this year.

And make us more relevant as a consolidator of services not just a point solution here and point solution. There I think there is more and more potential every quarter for us to position as a core consolidation platform.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

And yes, it has SaaS capabilities and yes, those can be more rapidly built by competitors, but I think it is this interesting dynamic that we talked about more ecology like behavior than the point solution or SaaS workflow behavior that we're seeing so I hope that gives a little bit more color on it.

Overall I am I believe there's a tremendous amount of change coming to all businesses to almost all workforces, but on these four or five dimensions, we talked about today I think we're relatively well positioned to learn iterate provide value and capitalize on the value people expect to get from AI.

As it advances.

Yeah, absolutely. Thank you so much.

Thank you.

Our next question comes from John <unk> from Canaccord Genuity. Please go ahead.

Yes. This is Richard close.

Just a quick question, maybe housekeeping Scotty to begin with.

We jumped on late and just curious whether you gave the acquisition contribution.

Versus 12 emission care for the fourth quarter, and then just to clarify you said $13 million from the acquisitions and the 2006 guidance.

Yes, so the.

So I guess, the fourth quarter impact for both acquisitions combined with $1 6 million.

Then youre correct on the full year guide was $13 million.

Okay.

Thanks for that.

And then Bobby maybe just.

On the AI front.

Continue to go down that.

A rabbit hole I am just curious if you can provide some examples in terms of.

How are you guys are kind of.

Integrating <unk> into various offerings that you have again apologize we got on late.

If we miss that yeah.

Yeah, I think that roadmap will unfold in more detail over the course of the year, but needless to say every one of our products has an AI roadmap.

And.

Interesting and fascinating projects underway to to take advantage of the benefits that we would expect from AI and so the workflows are being automated.

We have an agenda framework around some of our learning capabilities that we're working on.

We have this concept of the quantification of self using our vector analysis for some of the individual profiles and in our system, making it kind of a token audible unit there.

There's just so many interesting things happening and I think we'll let that roadmap unfold over the course of the year.

But but.

Every product managers required to have.

And AI framework, and an AI roadmap and all of our developers are now using AI and then you've probably followed this for the last 30 days have been significant enhancements in the tool sets people are using to build applications, which just gets us more excited because we can get to more of our vision faster.

If we use these tools properly but.

Like everybody, we're learning to use the tool. So there is the internal application of them, there's the external extension of them.

And I think what I can say today is that of the 10 elements that we use to define the midstream platform AI is one of the pen and it has been for some time now. So we're not we're also not new to the idea of AI and how it can impact workflows and applications.

And so I hope I don't know I just have to give a generic answer now that it's been our roadmaps. It's part of our kind of our DNA. It's part of how we're thinking and we're doing our best to learn and stay on the curve with everyone else.

And then we've talked about of course. These these categories of impacts kind of or are we better positioned or less better positioned to take advantage of the changes comment.

Okay, and then maybe just.

Expand.

On the AI front just.

I'm sure you're in the market talking with various.

<unk> health system executives.

And I'm just curious whether there.

Their conversations with you is gleaning with respect to.

A separate AI budgets versus looking for AI, and you said the systems of record and whatnot.

And I'm just curious if you have any.

Your answers that you can share on your Congress the conversations you're having with.

With clients and potential clients.

Yes.

There's a lot of dimension to that.

One is the <unk> of the country. These health systems are tired of having 400 point solutions and so in that regard if youre just the point solution and you're not a platform.

There is a definite.

High degree of interest in moving to fewer platforms that work together, then say as many as 400 point solutions and this is true if you ask the CIO of a health system.

Software profile I think they'll tell you they have two or three platform choices.

EHR E.

B, one choice, where they pick between one of the three big ones.

ERP will be another and then they have 500 point solutions. So the first point of dialogue with say the executive suite, particularly the CIO is is look we need to make sense of these 500 point solutions and I think that's exactly what <unk> is trying to do with our upstream platform. It takes three or four of them that are core that are that are point solutions like scheduling credentialing learning.

Make them interoperable and then we're bringing this other dimension, which is the second point is is whats problems are you solving for me and if I have a nursing shortage. How are you helping me more efficiently onboard. These nurses how're you helped me move costs.

Those nurses from when they are employed to win their pre employed.

And I think it's our theory of connecting this through the platform. These career networks that lets us have a business dialogue not an AI dialogue, but a business dialogue about shortening the onboarding cycles and improving the value proposition of.

Moving to costs from the health system say to the student period.

Or are getting the ready to work.

Ready to wear concept, so we're able to talk about business value propositions.

That are kind of universally.

The problems, they're trying to solve like with their labor pool size and they're recruiting of nurses and so our dialog isn't so much about.

Whether your budget of AI is going to ship. It's about how are you going to consolidate point solutions and about whether the vendor standing in front of you. In this case <unk> can help solve a value proposition and do something more effectively so I tend to lean in to those you know we can help onboard physicians more efficiently. We can help recruit nurses and find the few.

<unk> high quality employees. The students are going to be the best in your environment and help you match them and so again, we just stick to the fundamentals of providing value to our customers on that journey and then and then we can show how AI will facilitate those those workflows.

So would you characterize the environment is not necessarily.

Clients or potential clients being distracted by AI that they are still focused on these.

Key areas of business improvement.

I think the smart ones are I I don't know how to say it another way I mean, yeah. I mean, obviously, even just through this call everyone is trying to understand the implications and impact of AI in health stream isn't that group all the CIO as we talked to you in that group.

There are a lot of discussion on it at the end of the day I think the leading health systems are focused on the fundamentals of providing better patient care and then they come back to the fundamental questions like what is our cost of finding and developing a talented workforce and retaining them at the expense of our competitors how do we.

We have a better higher quality workforce and so we keep trying to steer the conversation there and then show how all of the tools of health stream, including the unique dimensions like our career networks bring value to that equation. So.

No.

Double down on the fundamental value that we provide is what we need to do it doesn't mean that the dialogue is an all consuming about the future the impact of of of AI.

But like I said health care is a local business. It's a service provision business, it's a hands on nurses and doctors on patient business as a surgery and here I think AI is kind of an augmentation process. Instead of an automation of replacement now there are plenty of back office functions and efficiencies that can be gained with AI.

And there are certain roles that where we expect fewer of them, but at its core as I mentioned earlier, the nursing workforce is expected to grow.

I think theyre going to grow and be more human through the use of AI and those are the things that we talked to our customers about.

Alright, thank you.

Thank you.

Our next question comes from Vincent Colicchio from Barrington Research. Please go ahead.

Yes, most of mine have been asked Bobby just.

Perhaps if you could just talk about the <unk>.

Nice accelerators it was nice to see the contribution for the year.

Is this a Mac.

Mechanism played out as expected or what are your thoughts there.

Vince it's so good that it.

It took us about three years to put escalators in place.

And we know it was kind of an industry norm, we had always focused on a negotiation around volume.

<unk> and term and.

And we didn't have these built in escalators. So it took us a while to design the contractual infrastructure the deployment train the sales organizations, but now it is the norm and it is the norm across software to include inflationary level.

Price escalators in contracts and it helps everybody strangely it helps the customers because if you're on a contract for four or five years with those small escalators you don't get hit with a big price increase necessarily when you renew and so the escalators are kind of a smoothing function for budget planning.

They're negotiated but generally accepted and I would say that every renewal and every contract now in all three of our major application suites include escalators in the contract and so yes, we were excited to see that it started to impact us financially.

And it is a slow roll because if we do three to five year contracts.

That means let's say on average every four years of contract every two and a half years of contract comes up for renewal and then the Isolator takes effect on the second year of the renewal right because it comes in.

One that you are too so as we go through renewals and as we include escalators as having kind of.

An impact, but it's a slow movement through these thousands of customers, but it's underway and every renewal includes an escalator.

Thanks Ravi.

Thank you. This concludes the question and answer session I will now turn it back over to Robert Foods.

For closing remarks.

Thank you everyone I apologize for I was kind of heads down and thinking about what I wanted to say and I was telling is big.

The worry about AI and I realize I looked up my iPad had timed out and I think Mollie condra stepped in Mali I know you did a great job I hope we got all the questions done in Q&A. Thanks for listening I.

Look forward to reporting next report I am proud of the contribution of 1100 health streamers in achieving these results and we got another tough year in front of us with full of opportunity and challenges and we're ready to take it on thanks, All we'll see on the next earnings call.

Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Yes.

[music].

Yes.

Yeah.

[music].

Q4 2025 HealthStream Inc Earnings Call [BACKUP]

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