Good morning, and welcome to HealthStream’s First Quarter 2025 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded [Operator Instructions]. I will now turn the conference over to Mollie Condra, Head of Investor Relations and Communications. Please go ahead, Ms. Condra.

Thank you. Good morning and thank you for joining us today to discuss our first quarter 2025 results. Also on the conference call with me today is Robert A. Frist, Jr., CEO and Chairman of HealthStream; and Scotty Roberts, CFO and Senior Vice President of Finance and Accounting. I would also like to remind you that this conference call may contain forward-looking statements regarding future events and the future performance of HealthStream that involve risks and uncertainties that could cause the actual results to differ materially from those projected in the forward-looking statements. Information concerning these risks and other factors that could cause the results to differ materially from those forward-looking statements are contained in the company’s filings with the SEC, including Forms 10-K, 10-Q and our earnings release. Additionally, we may reference measures such as adjusted EBITDA, which is a non-GAAP financial measure. A table providing supplemental information of adjusted EBITDA and reconciling net income attributable to HealthStream is included in the earnings release that we issued yesterday and may refer to, in this call. And with that start, I’ll now turn the call over to CEO, Bobby Frist.

Thank you, Mollie. Good morning, everyone. Welcome to our first quarter 2025 earnings call. There is certainly a lot to talk about here on the call for the quarter. And before I hand it off to Scotty Roberts, our CFO, who’s going to give us detail on the financial results, I want to do a couple of key things. First, as I want to talk a little bit about the company’s strengths, as we enter a time of uncertainty, I think a company with an experienced management team that knows what they’re building, that build incrementally strong and understands the market environment they’re operating in, and knows how to create value for customers, its customer base during these times, is the kind of company that people should want to invest in. And so I want to talk a little bit about those strengths in our growth trajectory. And then, I also want to acknowledge a couple of items that are kind of hitching our step, some challenges that are, we think, temporary that we’re going to work our way through, that have resulted in us trimming our guidance – our in-year guidance a little bit. And we’re going to talk about both those things in detail. It’s an interesting period of kind of irony, but probably opportunity, and we’re going to talk through that a little bit. I’ve seen a lot of cycles in health care, and I can tell you why HealthStream generates growth and profitability throughout those cycles, been doing this quite a long time. And the experience of our team that knows how to bundle and create value for customers in times of uncertainty, it’s really a good time to rise and shine. The value of our core application suites and learning, credentialing and scheduling as well…

Alright. Thank you, Bobby, and good morning, everyone. I have several topics to cover today, and I’ll begin with our financial results for the first quarter. Unless otherwise noted, the comparisons will be against the same period of last year. Our revenues were $73.5 million. They were up 1%. Operating income was $4.4 million and was down 23.1%. Net income was $4.3 million, and it was down 17.1%. EPS was $0.14 per share, down from $0.17 per share and adjusted EBITDA was $16.2 million and was down 5%. We indicated on our last earnings call that we expected more of our revenue growth for the year will be concentrated in the second half of the year versus the first half, and this was reflected in the 1% growth for the first quarter. I want to reiterate that our revised revenue forecast is still second half weighted and is expected to build from quarter to quarter. I also want to call out some items that impacted the first quarter according to expectations. The first one is a large perpetual license sale of approximately $0.9 million in our legacy Scheduling business that occurred in the first quarter of 2024. We’ve not actively been selling perpetual licenses for several years, but occasionally an existing customer will purchase an expansion license, which is what happened last year. Given our focus on selling subscriptions to our SaaS application, ShiftWizard as opposed to licenses to our legacy Scheduling applications, we do not expect any license revenue in the first quarter of 2025, which was the case. The second one was caused by a large healthcare system bankruptcy during the second quarter of last year, which we’ve talked about on several calls in the past and which was well publicized. We had approximately $600,000 of revenue from…

Thanks, Scotty. We do have kind of now the normal business updates. We’ve talked about some of the challenges in the quarter, a little bit of delay in the implementation pipeline, so time to revenue was deferred. We talked about some delays we saw in the sales pipeline, but the irony of landing on our biggest deals in history, but the net effect of that is a lengthening of the average time to revenue to implement and then to close those sales and so pushing things a little bit out. And therefore, we have discussed the revised downward guidance. Although, again, I think on the whole, it’s a little over 1.5 points change in the big picture. We think it’s a wise adjustment based on all the things we talked about and the macro conditions. That said, I think we should for through our core businesses real quick and talk about what’s normal and what we’re also excited about. So let’s go through each of Scheduling, Credential and Learning briefly and talk about some of the developments during Q1. First, we’ll talk about ShiftWizard, which is our core product in Scheduling. It continues to deliver strong revenue growth. As Scotty just announced that revenues for ShiftWizard have eclipse the legacy product ANSOS in the second quarter of 2024, has continued to be our top-performing product in Scheduling. So ShiftWizard revenues grew 19% over the first quarter of last year. In the first quarter, sales were both from competitive takeouts like St. Tammany Parish Hospital and from growth within existing customers like Children’s Wisconsin and Hospital for Special Care, among others. This revenue growth was offset in the overall Scheduling application suite by an unexpected non-renewal of an ANSOS customer. So some continued challenges in the legacy application ANSOS, which we’ve…

[Operator Instructions] Our first question comes from Matt Hewitt of Craig-Hallum Capital Group. Your line is now open.

Good morning and thank you for taking the questions. I apologize in advance if this has been answered. I have been hopping between a couple of calls. But maybe first up, you noted in the press release that you are seeing a little bit of hesitancy by customers to purchase elective type applications. If you look at your portfolio of – across the board, how much of your portfolio would you quantify or qualify as being required or government mandated versus elective? And I assume it’s over 50%, it falls in the prior bucket that mandated versus and required. Is that a safe assessment?

We do. We think most – the majority of our products are tied to some kind of theme of requirement. They are not always legal requirements, but I will give you two examples, and some are requirements. But some are requirements to achieve certain quality standards. So, for example, credentialing is a requirement to maintain accreditation. And you need to be an accredited hospital to be a credible hospital. And so the credentialing process is mandatory. Of course, our product is not mandatory, but the credentialing process and privileging process is an essential part of operations. So, broadly speaking, we are meeting a need that is considered mandatory. Another one that’s not quite legislated, but is one of our top products from a revenue generation standpoint would be our resuscitation suite. And so again, while it’s not a legal requirement to train your staff on accreditation, I don’t think you could achieve accreditation. And in fact, it’s become essentially a gold standard. I don’t think you can get a job at a hospital as a physician or a nurse, without having demonstrated confidence in resuscitation. And the demonstration accomplishment is achieved through a couple of different programs in the industry that are the most high-quality programs and of course, one of them is the American Red Cross, the one that we represent to the market most locally. And so while again, it’s not a mandatory, it kind of has become a gold standard, and I really don’t think you can get a job without flashing a current credential in resuscitation skills and confidence. So – and that being one of our largest single revenue lines within our content selling universe. So, probably our biggest singular product across the – content selling we do is that resuscitation product, and it is…

That’s incredibly helpful, Bobby. Thank you. And then, maybe just a follow-up and I apologize if I missed this, but regarding the noted, the largest or one of the largest contracts in your industry, was that a renewal, or was that a greenfield win? And if it was, in fact, a renewal, I am assuming you saw an increase versus the last time they signed. What all was added, that’s obviously an opportunity to cross-sell and up-sell. And what else was included if, in fact that was a renewal?

Yes. In great news, and I probably – I can’t believe I didn’t say this. That was new business. And so this was a big health system where we didn’t really have a footprint. By way of example, they did not use our Learning Management System at all. And of course, our learning system is infrastructure for the competency suite. And so effectively, with this bundle, tens of thousands of their employees are now going to be using our learning system. But the central theme was our competency suite, which is a bundle of a lot of products that focus on developing clinical staff competence, and they found it being exactly the right time. Effectively, though, because of the way we bundled, they are – be displacing half a dozen competitors that have this product or that product, but we put it together as a suite. And so again, a highly effective bundling of products to create good share and it does represent an exciting new customer to HealthStream. And through kind of coming through slightly different door than would be traditional like leading with the primary software sell like learning, we sold the competency suite with learning bundled into it.

Congratulations on that. And thank you very much for taking the questions.

Somewhat related to your question, I will just add a little color because we did talk about a handful of deals. I think there is about five, that we considered important deals that were medium sized and shorter term to revenue did push – but the nice thing about those five, and so they are kind of bellwether, we are going to watch them this quarter and hope and expect they come in. But right off the front end and we talked about whether it was mandatory or not was a very large pending win in resuscitation. And where a health system is of good size is, we believe in contracting or we know they are in contracting phase to switch their vendor to American Red Cross. And so – of the five deals, we hope that, that is the first one to resolve itself and come in. And so we will watch these five deals to see if these are related to macroeconomic additions, these delays where we pushed out of Q1 into Q2. But it also comes to that theme is that, we believe that by switching that institution will save money. So, our program is, we believe, both stronger clinically and less expensive operationally. And so there is a good incentive for them to sign that deal and execute on it. So, building on the theme that we were just asked by Craig-Hallum, Matt Hewitt, one of these five deals has that kind of feel of compliance, but it also is focused on the workforce, and it also, we think will save money for hospitals, so the message is well timed as well. So, we will see what happens in report on that next quarter.

It sounds like a plan. Alright. Thank you.

Thank you. Our next question comes from John Pinney of Canaccord Genuity. Your line is now open.

Good morning. This is Richard Close. I had – Bobby, just can you talk a little bit about the legacy. And you mentioned, I guess ShiftWizard is more revenue than ANSOS now? And just talk a little bit about what is left on the legacy products? And what do you expect the timeline is for that just sort of run off?

Yes. Fair enough. There is definitely a category on our tracking sheet of legacy products. They include ANSOS, Morrissey and Healthline. And by definition, when we say legacy, we mean their supported products. So, we are still adding features and capabilities, although not quite as fast a pace as a growth product or a mature product in our classification system. So, legacy means they are still expected to generate revenue. However, we are not selling any new ones, except we note occasional exceptions when a customer that is not a legacy product expands, we will accommodate the expansion by selling them more of the legacy. But in general, our sales teams over 200 people are not selling legacy products. So, obviously, we do not expect growth from legacy products. And in fact, as you pointed out, there are kind of three outcomes for legacy products. And they are the biggest ones are ANSOS, which we talked about a lot, Morrissey and Healthline. And I want for the customers to hear those are supported products where we do quarterly releases of enhancements. And so then that points out some of the complexity, in talking about this. As they exist, they are great customers, and some of these products are beloved products, meaning they like their legacy product and they are both supported and we are passing them and fixing them and making them better, not at the same rate as the end products, the SaaS products like CredentialStream and ShiftWizard. But some of the difficulty in reporting around this is there is kind of three outcomes for legacy products, and maybe this changes someday. But the first is the customers can choose to stay where they are. In which case, we expect to service them. Generate some profits and EBITDA from…

Yes. I guess my concern is that you are seeing really good growth in those newer products like you just said. But one of the attractiveness of the newer products and the core Learning Management System is a platform play, you have good visibility. And then with this legacy, it’s just – it reduces the visibility, or how do you think about visibility going forward that’s just sort of hard?

Yes, it does create obviously confusion. It lowers our overall blended growth rate when we have those losses. We did report 6% if you factor out those. So, we gave a little visibility into kind of the organic growth of each of the three core go-forward applications. We have reported that in all cases, the go-forward applications are larger in scope, size and revenue than the legacy applications. So, you know that we – the legacy business are not bigger than the go-forward. And it’s our hope that this is the year of the platform. So, the ability to demonstrate the value of interoperability will be even a more compelling reason to choose to migrate. And so we are working hard on making that reality, particularly in the second half of the year, where we expect things like feature parity of all these systems with the go-forward applications having feature, they exceed in features actually the capabilities of the legacy platform. So, we are getting closer, Richard, a time where we could make the decision to quantify it and essentially force the decision by re-classing the products as sunset products. Since we haven’t done that, it makes guidance on a little confusing and I apologize for that, but I think it’s still the right decision because, we love our legacy applications. Customers – some customers love them and staying on them is just fine with us until it’s so compelling that they move to the full suite – the suite of suites. There should be so much benefit to learning, credentialing and scheduling that you buy them together someday. And that’s our goal as we enter the second half of this year and next year. I am sorry that it’s vague, we did try to – we will talk about…

Alright. Appreciate that. Thank you.

Thank you. Our next question comes from Vincent Colicchio of Barrington Research. Your line is now open.

Yes. Bobby, are you seeing any pushback on pricing in the current environment?

We always have, we think good pricing. And I think, Vince, we are getting better at what I would call bundling. I mean we are realizing that our portfolio is really nice and broad, and that selling – instead of selling content against content providers, selling content plus applications plus the secondary application and bundling is a better strategy. We see that with the competency suite. We will emulate that more. And so that allows us to get more breadth and penetration and adoption in more competitive displacement – displacing competitors by bundling. And so I feel good about our pricing. Another thing related to pricing is in the last, really, 18 months, we have been able to make it a normal due course process to add contract escalators and renewals. And so another element of pricing and it’s a change for our company, is to include pricing escalators. They are not quite CPI level, kind of we target, 3% to 5% on annual price escalators on our products. And so all three of our core products, all the contracts we have been signing on now all of them and we stated that we first released escalators in learning about a year ago. We released escalators in credentialing and now in scheduling. So, all three primary products as of really a couple of months ago, all contracts go out with pricing escalators. Ironically, that gives the customer something to negotiate and allows us to maintain a little bit more pricing control of the base of the product prices. So, that’s been an interesting dynamic. Most software vendors in healthcare and maybe across industries already had price escalators. So, adding those have helped us. So, another part of our future growth is just a little bit of built-in inflationary offset with small pricing escalators built into our contracts.

And I know you are looking to get more active in the acquisition market. Are you seeing any impact from the economic uncertainty in valuations?

I am not sure of that yet. I would say this. We – in the last quarter or two quarters, we did bid on a couple of deals. We were not the prevailing bidder. We have a management team that is willing to pay a nice sum for a good business that we think fits, but not a ridiculous sum. And so I don’t know if that’s the dynamic. We think things are still overpriced, but we did make a couple of bids that were not successful and didn’t chase them. And so – we are seeing more deal flow. We are getting more books to look at. And when we find a management team that wants to be a part of HealthStream that wants to be part of our growth story that is a nice premium. We want those owners to do well. They built good companies, but not – we are not going to chase things. There is just too much still cash on the sidelines and too much chasing. And I think some of our competitors did that for a while and take really high multiples and sitting on a lot of debt, and we are debt free with $113 million in cash with the strongest free cash flow generation in our history in the last quarter. And so yes, we are going to be active, but we are still the same, somewhat conservative management team, so we have to hunt a little longer to find deals that we think both fit strategically and have the right economic return opportunities. So, our discipline and – now we are more active looking. We have – there are definitely bigger pipelines to look at, but our consistent either diligence or a conservative approach as we haven’t been successful in two of the competitions. But more to come, we are teeing up lots of opportunities, and we will find the right ones here in the coming quarters.

Thanks Bobby.

Thank you. I am showing no further questions at this time. I would now like to turn it back to Robert Frist for closing remarks.

Thank you to all of our HealthStreamers. Welcome to our new Board member, Charles Beard. Thank you to Bill Stead for his 27 years of service and excellent strategic guidance. 1,100 employees are working hard in one boat rowing in the same direction through troubled waters. We are going to get there. So, thank you to those. And then shareholders, you are thinking about investing, I think sometimes in tough economic times, finding a good consistent management team that knows where they are going and what they are building is a good debt. And so maybe these times investing opportunities for those of you that think HealthStream is one of those, which I do believe myself. So, thank you all. See you on the next earnings call, and we will keep our chins up and keep making incremental progress. Thank you.

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